A.D.A.M. Announces Financial Results for Second Quarter 2007
Adjusted EBITDA increases 102%; Content licensing revenues up 17%; Net income of $0.08 per share
A.D.A.M., Inc. (NasdaqCM: ADAM) today announced financial results for its second quarter ended June 30, 2007:
Kevin Noland, President and Chief Executive Officer of A.D.A.M., commented: "Second quarter results demonstrate favorably the progress we are making in expanding our licensing relationships and growing our market share. I am enthusiastic that the efforts we have put into Benergy(TM) 2G!, and the opportunities we have to capitalize on employers' needs and the growing consumer driven trends positions us well for long-term revenue growth and margin expansion."
Second Quarter Financial and Operating Highlights:
- Revenues for the second quarter were $7,024,000 as compared to $2,715,000 in the same period last year, an increase of 159%. The increase is primarily attributable to A.D.A.M.'s acquisition of OnlineBenefits, Inc. in August, 2006.
- Revenues for the second quarter grew 7% sequentially from the first quarter ended March 31, 2007, as license, product and professional service components all increased during the second quarter.
- A.D.A.M.'s health content licensing revenues for the second quarter grew to $2,473,000 as compared to $2,114,000 in the same period last year. Strong renewal rates and increased distribution into the hospital and internet portal markets contributed to the growth.
- Adjusted EBITDA was $1,822,000 for the second quarter as compared to $903,000 in the same period last year, an increase of 102%. Adjusted EBITDA margins for the second quarter were 26% of revenues.
- Operating income for the second quarter was $1,437,000 as compared to $800,000 in the same period last year. Adjusted operating income for the second quarter, which excludes non-cash stock-based compensation and amortization expense from purchased intangibles associated with the acquisition of OnlineBenefits, was $1,582,000 as compared to $676,000 for the same period last year, an increase of 134%.
- Net income for the second quarter was $861,000, or $0.08 per share, on a fully diluted basis as compared to $951,000 or $0.10 per share on a fully diluted basis for the year ago period. Net income included a $0.05 per share favorable impact from a higher non-cash stock-based compensation benefit of $43,000 and interest charges from debt associated with the acquisition of OnlineBenefits of $576,000.
First-Half 2007 Results
For the six-month period ended June 30, 2007, revenues were $13,570,000, up 161% from $5,197,000 in the same period last year. Net income for the six-month period ended June 30, 2007 was $1,327,000, or $0.13 per share on a fully diluted basis, as compared to $1,679,000, or $0.17 per share on a fully diluted basis for the same period last year. Increases in revenues and operating income are primarily attributable to the acquisition of OnlineBenefits. Net income for the first-half of 2007 was impacted by the increased operating income, which was offset by interest charges of $576,000 associated with the debt used to acquire OnlineBenefits.
During the first six months of 2007, A.D.A.M. generated $1,897,000 in cash flow from operations. As of June 30, 2007, A.D.A.M.'s cash and investments increased to $7,749,000 from $7,240,000 as of December 31, 2006 from the increased cash flow from operations, which was offset by principal payments on debt.
A.D.A.M. Introduces New Employee Portal
A.D.A.M. also announced today that it has introduced Benergy 2G!, its next generation employee portal. The new product builds on Benergy's success with employee benefits management by integrating A.D.A.M.'s consumer-friendly health and wellness education tools and a human resources center for policies and communications into one completely redesigned, highly personalized portal.
Anticipating the needs of employers and their employees, A.D.A.M. bolstered its suite of products with several new tools. A.D.A.M.'s new Personal Health Record allows employees to securely store and track their medical history online. A.D.A.M.'s new Synergy newsletter offers featured health stories, health tips, benefits information and other timely communications. In addition, a new integrated proprietary search engine assists employees in finding the most relevant health information they need across thousands of articles on disease, treatments, symptoms, alternative medicine, and lifestyle issues. These features, along with a number of decision support tools, health risk assessments and interactive learning programs, are all designed to help employees become more proactive in their health and benefits management.
"We have seen a growing interest from our clients for the need to incorporate integrated health, wellness and decision support tools into Benergy. These areas represent important opportunities for us to extend the value of the Benergy system to our broker clients and to our users," said Mr. Noland.
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
The press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Act of 1934, as amended. The forward-looking statements are based on A.D.A.M.'s current intent, belief and expectations. These statements, especially revenue, net income, cash flow, 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
A.D.A.M. will be conducting a conference call to discuss its second quarter 2007 financial results on August 7, 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 21344433.
About A.D.A.M., Inc.
A.D.A.M. (NasdaqCM: ADAM) 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
Second Quarter, 2007 and 2006
(numbers in thousands, except per share data)
------------------------------------------------------------------
Three Months Ended June 30, % Increase
--------------------------------
% of % of (Decrease)
2007 Revenues 2006 Revenues in US $
------------------------------------------------------------------
Revenues, net:
Licensing $ 5,860 83.4% $2,114 77.9% 177.2%
Product 548 7.8% 506 18.6% 8.3%
Professional services and
other 616 8.8% 95 3.5% 548.4%
--------------------------------
Total revenues, net 7,024 100.0% 2,715 100.0% 158.7%
--------------------------------
Cost of Revenues:
Cost of revenues 1,717 24.4% 319 11.7% 438.2%
Cost of revenues-
amortization 320 4.6% 190 7.0% 68.4%
--------------------------------
Total cost of revenues 2,037 29.0% 509 18.7% 300.2%
--------------------------------
--------------------------------
Gross Profit 4,987 71.0% 2,206 81.3% 126.1%
--------------------------------
Operating expenses:
Product & content
development 1,042 14.8% 350 12.9% 197.7%
Sales & marketing 1,355 19.3% 454 16.7% 198.5%
General & administrative 1,153 16.4% 602 22.2% 91.5%
--------------------------------
Total operating expenses 3,550 50.5% 1,406 51.8% 152.5%
--------------------------------
Operating income 1,437 20.5% 800 29.5% 79.6%
--------------------------------
Interest expense 622 8.9% 2 0.1% (a)
Interest income (46) -0.7% (153) -5.6% -69.9%
--------------------------------
Income before income taxes 861 12.3% 951 35.0% -9.5%
--------------------------------
Income tax expense (benefit) - 0.0% - 0.0% (a)
Net Income $ 861 12.3% $ 951 35.0% -9.5%
================================
Earnings Per Share
Basic $ 0.09 $ 0.11
Diluted $ 0.08 $ 0.10
Weighted Average Common
Shares Outstanding
Basic 9,514 8,430
Diluted 10,376 9,755
(a) not meaningful
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------------------------------------------------------------------
A.D.A.M., Inc.
Condensed Consolidated Statement of Operations
Second Quarter, 2007 and 2006
(numbers in thousands, except per share data)
------------------------------------------------------------------
Six Months Ended June 30, % Increase
--------------------------------
% of % of (Decrease)
2007 Revenues 2006 Revenues in US $
------------------------------------------
Revenues, net:
Licensing $11,559 85.2% $4,236 81.5% 172.9%
Product 922 6.8% 742 14.3% 24.3%
Professional services and
other 1,089 8.0% 219 4.2% 397.3%
--------------------------------
Total revenues, net 13,570 100.0% 5,197 100.0% 161.1%
--------------------------------
Cost of Revenues:
Cost of revenues 3,049 22.5% 620 11.9% 391.8%
Cost of revenues-
amortization 635 4.7% 377 7.3% 68.4%
--------------------------------
Total cost of revenues 3,684 27.1% 997 19.2% 269.5%
--------------------------------
---------------- ---------------
Gross Profit 9,886 72.9% 4,200 80.8% 135.4%
--------------------------------
Operating expenses:
Product & content
development 2,199 16.2% 710 13.7% 209.7%
Sales & marketing 2,477 18.3% 889 17.1% 178.6%
General & administrative 2,622 19.3% 1,200 23.1% 118.5%
--------------------------------
Total operating expenses 7,298 53.8% 2,799 53.9% 160.7%
--------------------------------
Operating income 2,588 19.1% 1,401 27.0% 84.7%
--------------------------------
Interest expense 1,313 9.7% 5 0.1% (a)
Interest income (56) -0.4% (283) -5.4% -80.2%
Realized (gain) loss on
investments - 0.0% - 0.0% (a)
Loss on sale of assets 4 0.0% - 0.0% (a)
--------------------------------
Income bef. income taxes 1,327 9.8% 1,679 32.3% -21.0%
--------------------------------
Income tax expense (benefit) - 0.0% - 0.0% (a)
Net Income $ 1,327 9.8% $1,679 32.3% -21.0%
================================
Earnings Per Share
Basic $ 0.14 $ 0.20
Diluted $ 0.13 $ 0.17
Weighted Average Common
Shares Outstanding
Basic 9,317 8,374
Diluted 10,182 9,822
(a) not meaningful
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A.D.A.M., Inc.
Non-GAAP Condensed Financial Results
Second Quarter, 2007 and 2006
(numbers in thousands)
------------------------------------------------------------------
% Increase
Three Months Ended June 30, (Decrease)
------------------------------------------------------
2007 2007 2006 2006
GAAP Adj. Non-GAAP GAAP Adj. Non- GAAP Non-
GAAP GAAP
------------------------------------------------------------------
Total rev. $ 7,024 $ - $ 7,024 $2,715 $ - $2,715 158.7% 158.7%
Total operating
expenses 5,587 (145) 5,442 1,915 124 2,039 191.7% 166.9%
Stock-based
compensation
(1) (43) 43 - (124) 124 - -65.3% (a)
Amortization
of purchased
intangibles
(2) 188 (188) - - - - (a) (a)
Operating
income 1,437 145 1,582 800 (124) 676 79.6% 134.0%
Operating
margin % 20.5% 22.5% 29.5% 24.9%
Income before
income taxes 861 145 1,006 951 (124) 827 -9.5% 21.6%
Income tax
expense
(benefit) - - - - - - (a) (a)
Net Income 861 145 1,006 951 (124) 827 -9.5% 21.6%
Diluted
earnings per
share $ 0.08 $ 0.10 $ 0.10 $ 0.08 -14.9% 14.4%
Diluted shares
outstand. 10,376 10,376 9,755 9,755
------------------------------------------------------------------
Income before
income taxes 861 145 1,006 951 (124) 827
Depreciation 108 - 108 37 - 37
Amortization
of software
development 132 - 132 190 - 190
Amortization
of purchase
intangibles
(2) 188 (188) - - - -
Interest
expense
(income) 576 - 576 (151) - (151)
------------------------------------------
EBITDA $ 1,865 $ (43)$ 1,822 $1,027 $(124)$ 903 81.6% 101.8%
==========================================
(a) not
meaningful
------------------------------------------------------------------
(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.
Non-GAAP Condensed Financial Results
Second Quarter, 2007 and 2006
(numbers in thousands)
------------------------------------------------------------------
Six Months Ended June 30,
---------------------------------------
2007 2007 2006 2006
Non- Non-
GAAP Adj. GAAP GAAP Adj. GAAP
------------------------------------------------------------------
Total revenues $13,570 $ - $13,570 $5,197 $ - $5,197
Total operating exp. 10,982 (616) 10,366 3,796 135 3,931
Stock-based compensation
(1) 239 (239) - (135) 135 -
Amortization of purchase
intangibles (2) 377 (377) - - - -
Operating income 2,588 616 3,204 1,401 (135) 1,266
Operating margin % 19.1% 23.6% 27.0% 24.4%
Income before inc. taxes 1,327 616 1,943 1,679 (135) 1,544
Income tax expense
(benefit) - - - - - -
Net Income 1,327 616 1,943 1,679 (135) 1,544
Diluted net income (loss)
per share $ 0.13 $ 0.19 $ 0.17 $ 0.16
Diluted shares outst. 10,182 10,182 9,822 9,822
-----------------------------------------------------------------
Income before inc. taxes 1,327 616 1,943 1,679 (135) 1,544
Depreciation 215 - 215 75 - 75
Amortization of software
development 258 - 258 377 - 377
Amortization of purchase
intangibles (2) 377 (377) - - - -
Interest expense (inc.)1,257 - 1,257 (278) - (278)
-------------------------------------------
EBITDA $ 3,434 $ 239 $ 3,673 $1,853 $(135) $1,718
===========================================
(a) not meaningful
------------------------------------------------------------------
------------------------------------------------------------------
% Increase
(Decrease)
------------------
Non-
GAAP GAAP
------------------------------------------------------------------
Total revenues 161.1% 161.1%
Total operating expenses 189.3% 163.7%
Stock-based compensation (1) -277.0% (a)
Amortization of purchase intangibles (2) (a) (a)
Operating income 84.7% 153.1%
Operating margin %
Income before income taxes -21.0% 25.8%
Income tax expense (benefit) (a) (a)
Net Income -21.0% 25.8%
Diluted net income (loss) per share -23.8% 21.4%
Diluted shares outstanding
------------------------------------------------------------------
Income before income taxes
Depreciation
Amortization of software development
Amortization of purchase intangibles (2)
Interest expense (income)
EBITDA 85.3% 113.8%
(a) not meaningful
------------------------------------------------------------------
(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
June 30, 2007 and December 31, 2006
(numbers in thousands)
------------------------------------------------------------------
June 30, December 31,
2007 2006
----------------------
ASSETS
Current assets
Cash and cash equivalents $ 7,749 $ 6,382
Short term investments - 858
Accounts receivable, net 4,033 3,082
Restricted cash 45 2,192
Inventories 129 74
Prepaids and other current assets 1,095 1,673
----------------------
Total current assets 13,051 14,261
----------------------
Non-current assets
Property and equipment, net 842 876
Intangible assets, net 10,251 10,276
Goodwill 27,951 27,883
Other assets 158 158
Deferred financing costs, net 1,014 1,184
Deferred tax asset, net of current portion 5,500 5,500
----------------------
Total non-current assets 45,716 45,877
----------------------
TOTAL ASSETS $ 58,767 $ 60,138
======================
Liabilities and Shareholders' Equity
Current liabilities
Accounts payables and accrued expenses $ 3,034 $ 4,075
Deferred revenue 5,377 4,447
Note payable - 1,500
Current portion of long term debt 1,000 1,000
Current portion of capital lease
obligations 131 155
----------------------
Total current liabilities 9,542 11,177
----------------------
Non-current liabilities
Capital lease obligations, net of current
portion 128 178
Other liabilities 1,158 1,314
Long term debt, net of current portion 22,000 24,000
----------------------
Total non-current liabilities 23,286 25,492
----------------------
Stockholders' equity
Common stock 98 94
Treasury stock (1,088) (1,088)
Additional paid-in capital 55,251 54,109
Unrealized gain (loss) on investments (5) (2)
Accumulated deficit (28,317) (29,644)
----------------------
Total stockholders' equity 25,939 23,469
----------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 58,767 $ 60,138
======================
A.D.A.M., Inc.
Condensed Consolidated Statements of Cash Flows
Second Quarter, 2007 and 2006
(numbers in thousands)
------------------------------------------------------------------
Six Months Six Months
Ended Ended
June 30, June 30,
------------- ----------
Cash flows from operating activities
Net income $ 1,327 $ 1,679
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 851 452
Deferred financing cost amortization 74 -
Gain on sale of assets 4 -
Stock-based compensation expense 239 (135)
Changes in assets and liabilities:
Accounts receivable (951) (806)
Inventories (54) (8)
Prepaids and other assets 573 98
Accounts payable and accrued liabilities (1,041) (201)
Deferred revenue 931 80
Other liabilities (156) -
------------- ----------
Net cash provided by operating activities 1,897 1,159
------------- ----------
Cash flows from investing activities
Purchases of property and equipment (193) (48)
Proceeds from sale of property and equipment 7 -
Additional costs of previous acquisition 68)
Net change in restricted cash 2,148 25
Software product and content development costs (610) (359)
Maturities and reclassifications of
investments 845 2,055
Proceeds of investments 104 -
Purchase of investments (95) (967)
------------- ----------
Net cash provided by investing activities 2,138 706
------------- ----------
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 907 476
Repayments on capital leases (75) (9)
------------- ----------
Net cash (used in) provided by financing
activities (2,668) 467
------------- ----------
------------- ----------
Increase (decrease) in cash and cash
equivalents 1,367 2,332
------------- ----------
Cash and cash equivalents, beginning of the
period 6,382 2,816
------------- ----------
Cash and cash equivalents, end of the period $ 7,749 $ 5,148
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