A.D.A.M., Inc. Reports 64% Increase in Revenue and 33% in Adjusted EBITDA for the Third Quarter
biz.yahoo.com
Thursday November 9, 7:30 am ET
ATLANTA--(BUSINESS WIRE)--A.D.A.M., Inc. (Nasdaq: ADAM) today reported revenue of $4,473,000 which generated Adjusted EBITDA of $1,238,000 for its third quarter ended September 30, 2006. Net Income for the third quarter ended September 30, 2006 was $486,000, or $0.05 per fully diluted share. The increase in revenues and Adjusted EBITDA are primarily a result of A.D.A.M.'s acquisition of Online Benefits, Inc. that was completed during the third quarter of 2006.
"The marketplace continues to advance towards increased self-empowerment regarding healthcare and benefits management," said Kevin Noland, A.D.A.M.'s President and Chief Executive Officer. "Across the spectrum of the consumer directed healthcare movement, from healthcare payers to employers, there is need for high-quality, trusted information and tools to enable consumers to manage and make informed decisions about their health and personal benefits. A.D.A.M.'s health information and decision support tools, now combined with Online Benefits' robust benefit management platform, couples two exceptional product solutions that can meet the needs of tomorrow's healthcare and benefits consumer."
"We believe that A.D.A.M.'s breadth of products and wide distribution will allow us to respond favorably to the needs of our customers. We are well positioned to take advantage of the trends in the small to mid-size employer market as well as those in the traditional areas of healthcare, such as healthcare payers and providers," Noland added.
Revenue
Revenue for the third quarter ended September 30, 2006 totaled $4,473,000 as compared to $2,720,000 in the third quarter of 2005. The increase in revenue during third quarter 2006 included $1,767,000 attributable to Online Benefits. A.D.A.M.'s healthcare licensing revenues for third quarter 2006 grew 15% over third quarter 2005 as a result of strong renewal rates and the addition of new licensing contracts. A.D.A.M.'s products related revenue, excluding Online Benefits, decreased 37% over third quarter 2005. The decrease in product revenues was due primarily to a large, one-time shipment to an educational distributor in the third quarter of 2005 and increased sales during 2005 related to a new educational product.
Profitability
Net income for the third quarter ended September 30, 2006 was $486,000, or $0.05 per fully diluted share, as compared to net income of $6,412,000, or $0.67 per share on a fully diluted basis, for the third quarter of 2005. Third quarter 2005 included a $5,600,000 income tax benefit related to A.D.A.M.'s realization of a portion of its deferred tax assets. Third quarter 2006 net income was negatively impacted by increased non-cash amortization expense and reduced interest income related to the acquisition of Online Benefits. Also included in third quarter 2006 net income is an increase of $253,000 over the prior year in non-cash stock compensation expense related to variably priced stock options and the adoption of Financial Accounting Standards No. 123R, which requires all companies to expense stock-based compensation.
Adjusted EBITDA (which we define as earnings before interest, taxes, depreciation, amortization and non-cash stock compensation expense) was $1,238,000 for the third quarter ended September 30, 2006. Adjusted EBITDA margins for third quarter 2006 were 28% of revenues. Adjusted EBITDA is a non-GAAP measure and is provided as additional information for investors to evaluate the financial performance of the company. See "Non-GAAP Measure" below for a discussion of our use of Adjusted EBITDA.
Gross margins (which we define as revenues less the cost of revenues, including amortization of capitalized software development costs, divided by revenues) were 81% and consistent with prior years' results.
Acquisition Summary
During the third quarter of 2006, A.D.A.M. completed its acquisition of Online Benefits, Inc. The total consideration paid was $33,901,000, which included $31,000,000 paid to the sellers, assumption of $1,500,000 of debt and transaction costs of $1,401,000. Online Benefits reported revenues of $13,116,000 in the calendar year ended December 31, 2005 and $6,670,000 for the six months ended June 30, 2006.
To finance the acquisition, A.D.A.M. issued $3,000,000 of restricted common stock and arranged for a credit facility of $27,000,000. A.D.A.M. paid the balance of the purchase price in cash. Cash and short-term investments as of September 30, 2006 were $7,028,000. |
