A.D.A.M., Inc. Reports Financial Results for First Quarter 2007
Adjusted EBITDA increases 127%; Net income of $0.04 per share
ATLANTA - (BUSINESS WIRE) - A.D.A.M., Inc. (Nasdaq: ADAM):
Financial and Operating Highlights:
- Revenues for the quarter ended March 31, 2007 were $6,546,000 as compared to $2,482,000 in the year ago period, an increase of 164%. The increase is primarily attributable to the Company's expansion into the employer and consumer directed healthcare market through its acquisition of OnlineBenefits, Inc. in August, 2006.
- Adjusted EBITDA was $1,851,000 for the quarter ended March 31, 2007 as compared to Adjusted EBITDA of $815,000 in the year ago period, an increase of 127%. Adjusted EBITDA margins for the first quarter of 2007 were 28% of revenues.
- Operating income for the quarter ended March 31, 2007 was $1,151,000 as compared to $601,000 in the year ago period. Adjusted operating income, which excludes non-cash stock-based compensation and amortization expense from purchased intangibles associated with the Company's acquisition of OnlineBenefits, Inc. was $1,622,000 as compared to $590,000 for the same period last year, an increase of 175%.
- Net income for the quarter ended March 31, 2007 was $466,000 or $0.04 per share on a fully diluted basis as compared to $728,000 or $0.07 per share on a fully diluted basis for the year ago period. First quarter net income included a ($0.09) negative impact from the Company recording a higher non-cash stock-based compensation expense of $283,000 and interest charges from debt associated with the Company's acquisition of OnlineBenefits, Inc. of $681,000.
- Cash and investments totaled $5,700,000 as of March 31, 2007, a decrease of $1,540,000 from $7,240,000 as of December 31, 2006. During the first quarter of 2007, the Company made a $2,000,000 advance principal payment in connection with its debt agreement with CapitalSource Finance, LLC and a $1,500,000 principal payment on debt acquired with Online Benefits, Inc.
"We are off to a great start towards meeting our objectives for 2007," said Kevin Noland, A.D.A.M.'s president and chief executive officer. "Our key business units, content licensing and OnlineBenefits, both delivered solid performance for the first quarter. OnlineBenefits has now been with A.D.A.M. for two full quarters, and over this time our focused integration efforts have paid off in both financial results and an improved operational synergy within the company. Our engineering and production teams are working closely together on Benergy 2G!, our next generation product that speaks directly to the needs of the burgeoning consumer-driven healthcare movement. Benergy 2G! brings together A.D.A.M.'s robust health and wellness assets with a full-service benefits management platform, to create an end-to-end solution for employers and employees alike. We anticipate the launch of Benergy 2G! in the late second to third quarter of 2007. Given our positive momentum, we are maintaining our 2007 guidance at $6,000,000 to $7,000,000 in Adjusted EBITDA and $26,000,000 to $28,000,000 in revenue."
Non-GAAP Measures
Adjusted operating income represents operating income before non-cash stock-based compensation expense and amortization of purchased intangibles. Adjusted net income represents net income before non-cash stock-based compensation expense and amortization of purchased intangibles. Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization and non-cash stock-based compensation expense. These financial measures are not measures of financial performance in accordance with generally accepted accounting principles. We believe these non-GAAP financial measures are useful because they are appropriate measures for evaluating our operating performance. We present these non-GAAP financial measures to provide additional information regarding our performance and because they are measures by which we gauge our profitability. You should not consider these non-GAAP financial measures as an alternative to net income. Our calculation of these financial measures may be different from the calculations used by other companies and, as a result, comparability may be limited.
Forward-Looking Statements
Except for historical information, all of the statements, expectations and assumptions contained in this press release are forward-looking statements. These statements, especially revenue, net income, cash flow and Adjusted EBITDA forecasts, involve a number of risks and uncertainties that could cause actual results, performance or developments to differ materially. Factors that could affect the company's actual results, performance or developments include general economic conditions, development of the Internet as a source of health information, pricing actions taken by competitors, demand for the company's health information, the ability to realize the anticipated benefits of the acquisition, regulatory changes in laws and regulations that impact how the company conducts its business and the other factors described in A.D.A.M.'s filings with the SEC. A.D.A.M. disclaims any obligation or duty to update any of its forward-looking statements.
Conference Call and Earnings Release Information
These financial results are preliminary and subject to adjustments during the Company's year-end close process. The Company will be conducting a conference call to discuss its first quarter 2007 earnings results on May 8, 2007, at 10:00 A.M. ET. To participate in the call, please dial (866) 624-3372 approximately five minutes prior to the start time. International callers may dial (706) 758-3874. A digital replay will be available the following day by dialing (800) 633-8284 or (402) 977-9140 with reservation number 21337222. The Company will issue its final results prior to the conference call.
About A.D.A.M., Inc.
A.D.A.M. (Nasdaq: ADAM - News) is a leading provider of health information services and benefits management solutions serving healthcare organizations, employers, insurance brokers, consumers, and educational institutions. With an industry-leading employee and HR benefits management platform and one of the largest consumer health information libraries in the world, A.D.A.M. engages consumers to learn about their health and manage their benefit choices while reducing the costs of healthcare and benefits administration. For more information, visit www.adam.com or call 1-800-408-ADAM.
A.D.A.M., Inc.
Condensed Consolidated Statements of Operations
First Quarter, 2007 and 2006
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Three Months Ended March 31,
--------------------------------% Increase
% of % of (Decrease)
2007 Revenues 2006 Revenues in US $
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Revenues, net:
Licensing $5,699 87.1%$2,122 85.5% 168.6%
Product 374 5.7% 236 9.5% 58.5%
Professional services &
other 473 7.2% 124 5.0% 281.5%
--------------------------------
Total revenues, net 6,546 100.0% 2,482 100.0% 163.7%
--------------------------------
Cost of Revenues:
Cost of revenues 1,331 20.3% 301 12.1% 342.2%
Cost of revenues-
amortization 315 4.8% 188 7.6% 67.6%
--------------------------------
Total cost of revenues 1,646 25.1% 489 19.7% 236.6%
--------------------------------
--------------------------------
Gross Profit 4,900 74.9% 1,993 80.3% 145.9%
--------------------------------
Operating expenses:
Product & content
development 1,152 17.6% 360 14.5% 220.0%
Sales & marketing 1,127 17.2% 435 17.5% 159.1%
General & admin. 1,470 22.5% 597 24.1% 146.2%
--------------------------------
Total operating exp. 3,749 57.3% 1,392 56.1% 169.3%
--------------------------------
Operating income 1,151 17.6% 601 24.2% 91.5%
--------------------------------
Interest expense 693 10.6% 3 0.1% (a)
Interest income (12) -0.2% (130) -5.2% -90.8%
(Gain) loss on sale of
assets 4 0.1% - 0.0% (a)
--------------------------------
Income bef. income taxes 466 7.1% 728 29.3% -36.0%
--------------------------------
Income tax expense
(benefit) - 0.0% - 0.0% (a)
Net Income $466 7.1% $728 29.3% -36.0%
================================
Earnings Per Share
Basic $0.05 $0.09
Diluted $0.04 $0.07
Weighted Average Common
Shares Outstanding
Basic 9,389 8,316
Diluted 10,654 9,896
(a) not meaningful
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A.D.A.M., Inc.
Non-GAAP Condensed Financial Results
First Quarter, 2007 and 2006
------------------------------------------------------------------
% Increase
Three Months Ended March 31, (Decrease)
--------------------------------------------------
2007 2006
2007 Non- 2006 Non- Non-
GAAP Adj. GAAP GAAP Adj. GAAP GAAP GAAP
------------------------------------------------------------------
Total revenues $6,546 $- $6,546 $2,482 $- $2,482 163.7% 163.7%
Total operating
expenses 5,395 (471) 4,924 1,881 11 1,892 186.8% 160.3%
Stock-based
compensation (1) 283 (283) - (11) 11 - (a) (a)
Amortization of
purchased
intangibles (2) 188 (188) - - - - (a) (a)
Operating inc. 1,151 471 1,622 601 (11) 590 91.5% 174.9%
Operating margin% 17.6% 24.8% 24.2% 23.8%
Income before
income taxes 466 471 937 728 (11) 717 -36.0% 30.7%
Income tax expense
(benefit) - - - - - - (a) (a)
Net Income 466 471 937 728 (11) 717 -36.0% 30.7%
Diluted earnings
per share $0.04 $0.09 $0.07 $0.07 -40.5% 21.4%
Diluted shares
outstanding 10,654 10,654 9,896 9,896
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Income before
income taxes 466 471 937 728 (11) 717
Depreciation 107 - 107 37 - 37
Amortization of
software
development 127 - 127 188 - 188
Amortization of
purchase
intangibles (2) 188 (188) - - - -
Interest expense
(income) 681 - 681 (127) - (127)
-------------------------------------
EBITDA 1,569 283 1,852 826 (11) 815 90.0% 127.2%
=====================================
(a) not meaningful
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(1) Stock-based compensation related to non-cash charges for
stock options and variable stock compensation expense.
(2) Amortization of customer list and purchased software
acquired with Online Benefits.
A.D.A.M., Inc.
Consolidated Balance Sheets
March 31, 2007 and December 31, 2006
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March 31, December 31,
2007 2006
------------------------
ASSETS
Current assets
Cash and cash equivalents $5,700 $6,382
Short term investments - 858
Accounts receivable, net 3,643 3,082
Restricted cash 45 2,192
Inventories 70 74
Prepaids and other current assets 1,508 1,673
--------------------
Total current assets 10,966 14,261
--------------------
Non-current assets
Property and equipment, net 848 876
Intangible assets, net 10,172 10,276
Goodwill 27,883 27,883
Other assets 158 158
Deferred financing costs, net 1,094 1,184
Deferred tax asset, net of current
portion 5,500 5,500
--------------------
Total non-current assets 45,655 45,877
--------------------
TOTAL ASSETS $56,621 $60,138
====================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payables and accrued expenses $2,789 $4,075
Deferred revenue 5,053 4,447
Note payable - 1,500
Current portion of long term debt - 1,000
Current portion of capital lease
obligations 146 155
--------------------
Total current liabilities 7,988 11,177
--------------------
Non-current liabilities
Capital lease obligations, net of current
portion 151 178
Other liabilities 1,237 1,314
Long term debt, net of current portion 23,000 24,000
--------------------
Total non-current liabilities 24,388 25,492
--------------------
Stockholders' equity
Common stock 94 94
Treasury stock (1,088) (1,088)
Additional paid-in capital 54,410 54,109
Unrealized gain (loss) on investments 7 (2)
Accumulated deficit (29,178) (29,644)
--------------------
Total stockholders' equity 24,245 23,469
--------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $56,621 $60,138
====================
A.D.A.M., Inc.
Condensed Consolidated Statements of Cash Flows
First Quarter, 2007 and 2006
------------------------------------------------------------------
Quarter Ended Quarter Ended
March 31, March 31,
2007 2006
------------------------
Cash flows from operating activities
Net income $466 $728
Adjustments to reconcile net income to
net cash provided by operating
activities:
Depreciation and amortization 423 224
Deferred financing cost amortization 96 -
Gain on sale of assets 4 -
Stock-based compensation expense 282 (11)
Changes in assets and liabilities:
Accounts receivable (562) 932
Inventories 5 (2)
Prepaids and other assets 158 (25)
Accounts payable and accrued
liabilities (1,286) (360)
Deferred revenue 606 (416)
Other liabilities (77) -
------------------------
Net cash provided by operating
activities 115 1,070
------------------------
Cash flows from investing activities
Purchases of property and equipment (91) (39)
Proceeds from sale of property and
equipment 7 -
Net change in restricted cash 2,148 (2)
Software product and content development
costs (212) (116)
Maturities and reclassifications of
investments 858 2,054
Proceeds of investments 52 -
Purchase of investments (43) (844)
------------------------
Net cash provided by investing
activities 2,719 1,053
------------------------
Cash flows from financing activities
Payment on note payable (1,500) -
Payment on long term debt (2,000) -
Proceeds from exercise of common stock
options 19 457
Repayments on capital leases (35) (5)
------------------------
Net cash (used in) provided by
financing activities (3,516) 452
------------------------
------------------------
Increase (decrease) in cash and cash
equivalents (682) 2,575
------------------------
Cash and cash equivalents, beginning of
the period 6,382 2,816
------------------------
Cash and cash equivalents, end of the
period $5,700 $5,391
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