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A.D.A.M., Inc. Announces First Quarter 2008 Financial Results

License revenues increase 13%; Net income increases 17%

A.D.A.M., Inc. (Nasdaq: ADAM) today announced financial results for its first quarter ended March 31, 2008.

Kevin Noland, A.D.A.M.’s president and chief executive officer commented, “We made significant progress during the first quarter in expanding our sales, account management and customer service functions enabling A.D.A.M. to reach more customers and prospects with a higher degree of client service and support. These investments resulted in strong content license revenue growth of 13% while we maintained operating margins at 18% and Adjusted EBITDA margins at 28%. We believe that these expanded functions, along with a strong pipeline of new products and enhancements to Benergy 2G!, will lead to higher growth rates in 2009.”

First Quarter 2008 Financial Highlights

- License revenues for the first quarter ended March 31, 2008 were $6,429,000 as compared to $5,699,000 for the same period of 2007, an increase of 13%. The increase in revenues is primarily attributable to increased sales of the Company’s health content licenses and Benergy communications products.

- Total revenues for the first quarter ended March 31, 2008 were $7,123,000 as compared to $6,546,000 for the same period of 2007, an increase of 9%. The increase in revenues is primarily attributable to increased license sales.

- Operating income for the first quarter ended March 31, 2008 was $1,291,000 as compared to $1,151,000 for the same period of 2007. Operating income margin was 18% of revenues for the first quarters of 2008 and 2007.

- Net income for the first quarter ended March 31, 2008 was $547,000 or $0.05 per share on a fully diluted basis, as compared to $466,000 or $0.04 per share on a fully diluted basis, for the same period of 2007. Net income for the first quarter ended March 31, 2008 rose 17% compared to the same period in 2007.

- Adjusted EBITDA was $2,026,000 for the first quarter ended March 31, 2008 as compared to $1,851,000 for the same period of 2007, an increase of 9%. Adjusted EBITDA margin was 28% of revenues for the first quarters of 2008 and 2007.

“With the expansion of our sales and client support functions, we believe we are well positioned to capitalize on the large and growing market opportunities for both content and our Benergy 2G! communication system,” Mr. Noland continued. “Employers are seeking ways to automate more of their human resource functions and at the same time promote health and wellness initiatives. A.D.A.M. is uniquely positioned to help these organizations meet their business objectives and achieve a strong return on investment.”

Use of Non-GAAP Measures

To supplement our consolidated financial statements presented in accordance with GAAP, we present investors with certain non-GAAP operational measures, including adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA, all of which primarily exclude the effects of amortization of intangible assets, stock-based compensation, acquisition related expenses, restructuring charges and the income tax benefits from valuation of future tax loss carryforwards.

Our management considers the total return of an investment we have made in an acquisition (i.e., operating profit generated as compared to the purchase price paid) without taking into consideration any allocations made for accounting purposes. Thus, because the purchase price for an acquisition does not necessarily reflect the accounting value assigned to intangible assets, including customer lists and goodwill, when analyzing the return provided by the acquisition in subsequent periods, our management for planning and evaluation purposes excludes the GAAP impact of acquired intangible assets and other acquisition related expenses to our financial results. We believe that such an approach is useful in understanding the long-term return provided by an acquisition and that our investors benefit from a supplemental non-GAAP financial measure that adjusts for the accounting expense associated with acquired intangible assets.

Similarly, we believe that excluding stock-based compensation expense provides supplemental information and an alternative presentation useful to investors’ understanding of our operating results and trends, especially when comparing those results on a consistent basis to results for previous periods and anticipated results for future periods.

We also believe that, in excluding stock-based compensation expense and amortization of intangible assets, our non-GAAP financial measures provide investors with transparency into the information and basis used by management and our board of directors to measure and forecast our results of operations, to compare on a consistent basis our results of operations for the current period to that of prior periods, to compare our results of operations on a more consistent basis against that of other companies in making financial and operating decisions, and to establish targets for management incentive compensation.

We believe that the presentation of non-GAAP operational measures of adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA provide important supplemental information to management and investors regarding financial and business trends relating to the company’s financial condition and results of operations. These non-GAAP operational measures have historically been used as key performance metrics by our senior management as they evaluate the performance of the consolidated financial results. These non-GAAP operational measures are reviewed individually as well as in total in measuring our performance against internal and external expectations for the period. The expectations for such key non-GAAP operational measures are the basis for any financial guidance provided by management for future periods. Management believes that the use of each of these non-GAAP financial measures provides enhanced consistency and comparability with our past financial reports. We provide this information to investors to enable them to perform additional analyses of past, present and future operating performance.

We believe that each of these operational measures is useful to investors in their assessment of our operating performance and the valuation of our company. Adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA are significant measures used by management for:

- Reporting our financial results and forecasts to our board of directors;

- Evaluating the operating performance of our company;

- Managing and comparing performance internally and externally against our peers; and

- Establishing internal operating targets.

These non-GAAP operational measures, including adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA are used by us as broad measures of financial performance that encompass our operating performance, cash, capital structure, investment management, and income tax planning effectiveness. These operational measures are not calculated in accordance with GAAP, and should be considered supplemental to, and not as a substitute for, or superior to, financial measures calculated in accordance with GAAP. These operational measures have limitations in that they do not reflect all of the costs or reductions to revenues associated with the operations of our business as determined in accordance with GAAP. In addition, these operational measures may not be comparable to non-GAAP financial measures reported by other companies. As a result, one should not consider these measures in isolation or as a substitute for analysis of our results as reported under GAAP. We compensate for these limitations by analyzing current and future results on a GAAP basis as well as a non-GAAP basis, prominently disclosing GAAP results and providing reconciliations from GAAP results to operational measures. The limitations in relying on our non-GAAP financial measures include the fact that the adjusted operating income, adjusted net income, adjusted earnings per share and adjusted EBITDA operational measures do not include the impact of stock-based compensation expense or the effects of amortization of intangible assets, acquisition related expenses and restructuring charges. We expect to continue to incur expenses similar to the non-GAAP adjustments described above, and the exclusion or inclusion of these items from our non-GAAP financial measures should not be construed as an inference that these costs are unusual or infrequent.

Forward-Looking Statements

This 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 Exchange 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 with respect to growth rates, revenue, net income, and 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 acquisitions, 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 conduct its first quarter 2008 earnings conference call on Tuesday, May 13, 2008 at 10:00 AM Eastern Time (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 at 12:00 PM ET the same day by dialing (800) 633-8284 or (402) 977-9140 with reservation code 21381328. The digital replay will be available until May 27, 2008. To listen to the call online, visit www.adam.com.

About A.D.A.M., Inc.

A.D.A.M. (Nasdaq: ADAM) is a leading provider of health information and benefits technology solutions to healthcare organizations, employers, consumers, and educational institutions. With an industry-leading employee and human resources benefits technology platform and one of the largest consumer health information libraries in the world, A.D.A.M. empowers consumers to better understand their health, wellness and benefits, while helping employers reduce the cost of healthcare and benefits administration. For more information, visit www.adam.com or call 1-800-408-ADAM.

For further information, contact:

Victor Thompson
A.D.A.M., Inc.
770-541-5140