A.D.A.M., Inc. (Nasdaq: ADAM), a leading provider of health information and benefit technology solutions, announced financial results for the second quarter ended June 30, 2009.
“We experienced a noticeable increase in activity levels and contract volume in the second quarter primarily for Benergy and our online enrollment solution,” said Kevin Noland, A.D.A.M.’s president and chief executive officer. “This is reflective of a more receptive employer spending environment and the normal seasonality of our enrollment business. Also, we’ve seen good growth of our sales pipeline for new enrollment opportunities as a result of our expanded sales efforts, which should result in positive bookings for the last half of the year. In addition, we have an aggressive delivery schedule over the next two quarters of new products and product enhancements to drive Benergy growth and improve retention of our broker partners. Our health content business also continues to grow, a result of new product initiatives and new customers.”
Second Quarter Highlights
License revenues for the second quarter ended June 30, 2009 were $6.5 million, compared to $6.3 million in the second quarter of 2008, and $6.2 million in the first quarter of 2009. The increase from the prior year and sequentially primarily reflects an increase in health content license revenue of 7% and 5% respectively.
Total revenues for the second quarter ended June 30, 2009 were $7.1 million, compared to $7.2 million in the second quarter of 2008. The change reflects a lower level of Benergy professional services provided in 2009.
During the second quarter of 2009, the company recorded a restructuring charge of $1.4 million, which was an adjustment to its charge for its 2008 facility consolidation program. The charge reflects a loss of sub-lease receipts for its Uniondale, NY office facility. The Uniondale facilities are no longer being used by the company, and the company expects no further charges relating to this facility.
Non-GAAP operating income was $1.2 million, or 17% of revenues, compared to $1.3 million or 18% of revenues for the same period a year ago. Non-GAAP operating income excludes charges for stock-based compensation and the restructuring charge.
Cash flow, as measured by Adjusted EBITDA was $1.8 million, or 26% of revenues, for the second quarter ended June 30, 2009, as compared to $1.9 million or 26% of revenues for the same period a year ago. At June 30, 2009, the company had cash and cash equivalents of $2.2 million as compared to $1.4 million at December 31, 2008.
Net loss for the second quarter ended June 30, 2009, which included the $1.4 million restructuring charge, was $463,000 or $0.05 per share on a diluted basis as compared to a profit of $810,000 or $0.08 per share on a diluted basis for the second quarter of 2008.
Non-GAAP net income, which excludes charges for stock-based compensation, amortization of purchased intangibles and restructuring charges was $1.3 million, a 10% increase from the same period a year ago.
“We are encouraged by the number of new customer wins in the second quarter. A.D.A.M. continues to deliver solid profits from operations, and we believe we are well positioned to capitalize on our strengths in health content and employer and broker services. The value of our brands, the size of our distribution network and an aggressive product roadmap, will help us build long-term growth for our company,” said Mr. Noland.
Conference Call
A.D.A.M. will conduct its second quarter earnings conference call today, at 10:00 AM ET. To access the call in the U.S., please dial 866-900-2647 and for international callers, dial 706-758-3362 approximately 10 minutes prior to the start of the conference call. The conference call will also be broadcast live over the Internet and available for replay for 90 days at http://www.adam.com.
In addition, a replay of the call will be available via telephone for one week, beginning two hours after the call. To listen to the telephone replay in the U.S., please dial 800-642-1687 and for international callers, dial 706-645-9291. The pass code is 19709965.
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, facility consolidation charges, debt refinancing costs, the income tax benefits from valuation of future tax loss carryforwards and a goodwill impairment charge.
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, goodwill impairment charges 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, amortization of intangible assets, facility consolidation and the other listed items in the GAAP to Non-GAAP reconciliation schedules, 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.