A.D.A.M., Inc. Reports Second Quarter 2006 Results

Company reports quarterly net income of $0.10 per share, licensing revenues up 15%

ATLANTA, GA - (BUSINESS WIRE) - August 14, 2006 - A.D.A.M., Inc. (Nasdaq: ADAM) today announced financial results for its second quarter ended June 30, 2006.

To finance the acquisition, Atlanta-based A.D.A.M. (NASDAQ: ADAM) issued $3 million of restricted common stock and arranged for a credit facility of $27 million from CapitalSource of Chevy Chase, Md.

- Revenues for the second quarter ended June 30, 2006 were $2,715,000, up 9% from $2,489,000 in the second quarter of 2005.

- Recurring license revenues, which accounted for 78% of the company's total revenue, grew 15% during the quarter ended June 30, 2006. This growth was the result of strong renewal rates, which continue to be approximately 90%, and new customer contracts. Especially strong growth was recognized in the payer market with a growth rate in excess of 30%. Growth in this market was a result of increased sales by our distribution partners. During the second quarter, the company signed 16 new licensing contracts.

- Net income for the second quarter ended June 30, 2006 was $951,000, or $0.10 per share on a fully diluted basis compared to net income of $647,000, or $0.07 on a fully diluted basis for the second quarter of 2005.

- Adjusted EBITDA (which we define as earnings before interest, taxes, depreciation, amortization and non-cash stock compensation expense) improved to $903,000 for the second quarter of 2006 as compared to $855,000 for the second quarter of 2005. Adjusted EBITDA margin for the second quarter of 2006 was 33%. Adjusted EBITDA is a non-GAAP measure. See "Non-GAAP Measure" below for a discussion of our use of Adjusted EBITDA.

For the six-month period ended June 30, 2006, revenues were $5,197,000, up 8% from $4,827,000 in the year-ago period. Net income for the six-month period ended June 30, 2006 was $1,679,000, or $0.17 per share on a fully diluted basis, as compared to $1,155,000, or $0.12 on a fully diluted basis, for the same period of 2005, an increase of 45%.

As of June 30, 2006, A.D.A.M.'s cash and investments totaled $11,924,000, an increase of $1,247,000 from December 31, 2005.

For the second quarter ended June 30, 2006, licensing revenues increased $275,000, or 15%, to $2,114,000 compared to $1,839,000 in the year-ago period. Revenues during the second quarter of 2006 from the education market improved to $506,000, or 7%, from $474,000 in the same period of 2005. The increase in educational sales for the second quarter of 2006 was the result of several large orders for A.D.A.M. Interactive Anatomy 4.0, A.D.A.M.'s flagship product for education.

Gross margins, which we define as revenues less the cost of revenues (which includes amortization of capitalized software development costs) divided by revenues was 81%, consistent with gross margins in the year-ago period.

"A.D.A.M. continues to grow its base of licensing customers within a diverse cross section of both traditional healthcare organizations and consumer focused portals," commented Kevin Noland, A.D.A.M.'s chief executive officer. "We are pleased with the 15% growth in our licensing revenues, continued strong renewal rates of our licensing customers through the first half of the year and improvement in our educational sales. Moreover, we are excited by the continued trends in consumer directed healthcare that we believe will create additional, long-term opportunities for revenue growth."

Adjusted EBITDA represents earnings before interest, taxes, depreciation, amortization and non-cash stock compensation expense. This financial measure is not a measure of financial performance in accordance with generally accepted accounting principles. We believe that this non-GAAP financial measure is useful because it is an appropriate measure for evaluating our operating performance. We present this non-GAAP financial measure to provide additional information regarding our performance and because it is a measure by which we gauge our profitability. You should not consider this non-GAAP financial measure as an alternative to net income. Our calculation of this financial measure may be different from the calculation used by other companies and, as a result, comparability may be limited. A reconciliation of this non-GAAP financial measure to the most directly comparable GAAP financial measure is set forth in the table below.

Kevin Noland, A.D.A.M.'s chief executive officer, and Mark Adams, A.D.A.M.'s chief financial officer will be conducting a conference to discuss second quarter results August 15, 2006, at 10:00 A.M. ET. To participate in the call, please dial (877) 829-1394 approximately five minutes prior to the start time. International callers may dial (706) 679-8134. A digital replay will be available at 12 noon ET on August 15, 2006 by dialing (800) 633-8284 or (402) 977-9140 with reservation number 21299743.

For more than a decade, A.D.A.M.'s unique, visually engaging health content, decision support tools and educational products have been helping millions of people "get smart" about their health and wellness. With one of the largest consumer-oriented medical information libraries in the world, A.D.A.M. markets its solutions to leading healthcare and pharmaceutical organizations, government, employers, and educational institutions. These innovative products empower consumers with the information they need to effectively participate in consumer directed health plans, make positive changes in behavior and improve overall health. To learn more about A.D.A.M., visit www.adam.com or call 1-800-408-ADAM.

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 and cash flow 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, and regulatory changes in laws and regulations that impact how the company conducts its business. A.D.A.M. disclaims any obligation or duty to update any of its forward-looking statements.

A.D.A.M., Inc., Atlanta
Victor Thompson
770-321-4326