A.D.A.M. first-quarter license revenues increase 5% to $6.5 million

A.D.A.M., Inc. (Nasdaq: ADAM), a leading provider of health information and benefit technology solutions, today announced its financial results for the first quarter ended March 31, 2010.

“During the quarter we made considerable progress toward our goal of positioning the company for higher revenue growth in 2011”

Highlights

• License revenues for the first quarter of 2010 were $6.5 million, up 5% over the first quarter of 2009.
• Adjusted operating income margin for the first quarter of 2010 was 18% of revenues.
• Adjusted net income was a $1.2 million profit for the first quarter of 2010, GAAP net income was $1.0 million.
• Adjusted EBITDA was $1.8 million for the first quarter of 2010, up 2% from the first quarter of 2009.

"Our first quarter results demonstrate the cash-generating strengths of our SaaS business model. First quarter license revenues grew 5%, driven by an 11% increase in Health Solutions license revenue, and we continued to deliver an Adjusted operating margin within our target range," said Mark Adams, president and chief executive officer of A.D.A.M., Inc.

"During the quarter we made considerable progress toward our goal of positioning the company for higher revenue growth in 2011," added Adams. "First, we established Health Solutions and Broker/Employer Services into separate business units. With dedicated customer service, marketing, and product strategy functions, we are now sharpening our operational execution in each unit to optimize the customer experience. Second, we executed on our product enhancement strategy, making available a beta offering of additional enrollment tools and preparing to introduce the Benergy Help Line, which extends the Benergy Communications Platform. And third, we built out our customer relations team, establishing a customer service framework and making several key hires."

Adams concluded, "Throughout 2010, we will remain focused on making further operational improvements and enhancements in account management, marketing, client service delivery and product development across the organization. These initiatives will have a meaningful impact on the value we provide to our customers and helping them to achieve their business objectives."

Financial Results:

First Quarter Highlights

License revenues for the first quarter ended March 31, 2010 were $6.5 million, compared to $6.2 million in the first quarter of 2009, an increase of 5%. The increase from the prior year reflects an 11% increase in Health Solutions license revenue, the result of new client contracts, strong retention rates and solid results from distribution partners.

Total revenues were $6.7 million for the first quarter 2010, compared to $6.7 million in the first quarter of 2009. This reflects the previously mentioned 11% increase in Health Solutions license revenue, which was offset by lower revenues and utilization of Benergy services.

Non-GAAP adjusted operating income was $1.2 million, or 18% of revenues, compared to $1.2 million, or 18% of revenues for the first quarter of 2010 and 2009, respectively. Adjusted operating income reflected the company's strong operating model of profitability.

Cash flow, as measured by Adjusted EBITDA rose 2% to $1.8 million, or 26% of revenues, for the first quarter ended March 31, 2010, as compared to $1.7 million or 26% of revenues for the same period a year ago.

Net income for the first quarter ended March 31, 2010 was $1.0 million compared to net loss of $13.0 million for the first quarter of 2009. Included in the first quarter 2009 were goodwill impairment charges of $13.9 million. The impairment charge reduced the carrying value of goodwill from the Online Benefits acquisition to fair value.

Non-GAAP adjusted net income was $1.2 million, a decrease of 2% from the same period a year ago, and excludes charges for stock-based compensation, amortization of purchased intangibles, and the goodwill impairment charge in the first quarter 2009.

At March 31, 2010, the company had cash and cash equivalents of $4.7 million as compared to $5.4 million at December 31, 2009. Long-term debt was also reduced by $1.5 million during the first quarter, which included a $1.0 million payment in advance of the required repayment schedule.