A.D.A.M., Inc. Announces Financial Results for Third Quarter 2008

"We are very pleased with the growth we are experiencing in our health content licensing and encouraged by the level of activity and number of new contracts we secured in the third quarter," said Kevin Noland, A.D.A.M.'s president and chief executive officer. "We more than doubled the amount of new enrollment contracts during the quarter, a direct result of our investments in our recently expanded sales force. We also believe that the market for Benergy and our health content products will continue to grow even with today's challenging economic climate as our products are uniquely positioned to help our clients drive awareness for their services and reduce administrative costs."

Third Quarter Financial Highlights

Licensing revenues, which include health content and Benergy products, for the third quarter ended September 30, 2008 were $6,270,000 as compared to $5,822,000 for the same period of 2007, an increase of 8%. The increase in revenues is primarily attributable to additional contracts for health content products that were sold in previous quarters.

Total revenues for the third quarter ended September 30, 2008 were $7,139,000 as compared to $6,676,000 for the same period of 2007, an increase of 7%. A.D.A.M. experienced solid growth for its health content products during the third quarter as a result of increased investment in sales, marketing and client management functions. Overall revenue growth was impacted by the Company's education product sales. The Company is currently transitioning its line of CD ROM-based educational products to a Web-based subscription model. The Company is expected to release its first Web-based product for education during 2009. Benergy revenues experienced a modest decline in the third quarter. During the first three quarters of 2008, the Company enhanced its support services for its broker channel and expanded its sales force to address a growing market opportunity for its Benergy and enrollment solutions for larger employers. These efforts resulted in a number of new Benergy and enrollment contracts sold during the third quarter. Revenues from these new contracts will begin in the fourth quarter of 2008 and will be generally realized during the 2009 enrollment year.

Net income for the third quarter ended September 30, 2008 was $688,000 or $0.06 per share on a fully diluted basis as compared to $788,000 or $0.07 per share on a fully diluted basis for the same period of 2007.

Adjusted non-GAAP operating income for the third quarter ended September 30, 2008 was $1,323,000, or 19% of revenues, compared to $1,600,000 for the same period in 2007. Investment in expansion of the Company's sales force and client management functions contributed to the reduction in operating income. The Company believes these investments are essential in realizing its long-term growth opportunity.

Adjusted EBITDA was $1,909,000, or 27% of revenues, for the third quarter ended September 30, 2008 as compared to $2,085,000 for the same period of 2007.

Due in part to its strong cashflow, the Company made an early prepayment of $2,000,000 (in advance of the required repayment schedule) on its long-term note payable during the third quarter in order to reduce future interest expenses.

September Year-to-Date Results

For the nine-month period ended September 30, 2008, revenues were $21,451,000, up 6% from $20,245,000 in the same period last year. Net income for the nine-month period ended September 30, 2008 was $2,046,000, as compared to $2,115,000, for the same period last year. Increases in revenues are primarily attributable to increased sales of the Company's health content products. Net income for the nine-month period ended September 30, 2008 was reduced by the increased investments in sales, marketing and client management functions, as compared to the same period in 2007. In 2008, net income results included a benefit or reduction of $810,000 in interest expense due to the payments made by the Company to reduce its long-term debt.

During the first nine months of 2008, A.D.A.M. generated $5,521,000 in cash flow from operations and the Company's cash on hand was $2,388,000 at September 30, 2008.

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

The 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 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 revenue, net income, 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 the acquisition, 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., Inc. (Nasdaq: ADAM), will conduct its third quarter 2008 earnings conference call on November 6, 2008 at 10:00AM 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 21397710. The telephone replay will be available until November 20, 2008. To listen to the call online, visit www.adam.com.

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

A.D.A.M. (Nasdaq: ADAM | Quote | Chart | News | PowerRating) is a leading provider of health information and benefits management solutions to healthcare organizations, employers, consumers, and educational institutions. With an industry-leading employee and benefits management platform and one of the largest consumer health information libraries in the world, A.D.A.M. empowers consumers to get smart about their health and wellness, while reducing the costs of healthcare and benefits administration. For more information, visit www.adam.com or call 1-800-408-ADAM.

Contact: A.D.A.M., Inc. Investor Relations Victor Thompson 770-321-4326

A.D.A.M., Inc. Consolidated Statements of Operations Third Quarter, 2008 and 2007 (numbers in thousands, except per share data) Three Months Ended September 30, % of % of % Increase 2008 Revenues 2007 Revenues (Decrease) Revenues, net: Licensing $ 6,270 88 % $ 5,822 87 % 8% Product 368 5 % 390 6 % -6% Professional services and other 501 7 % 464 7 % 8% Total revenues, net 7,139 100 % 6,676 100 % 7% Cost of Revenues: Cost of revenues 1,116 16 % 900 13 % 24% Cost of revenues - amortization 491 7 % 371 6 % 32% Total cost of revenues 1,607 23 % 1,271 19 % 26% Gross Profit 5,532 77 % 5,405 81 % 2% Operating expenses: Product and content development 899 13 % 1,026 15 % -12% Sales and marketing 2,368 33 % 1,533 23 % 54% General and administrative 1,245 17 % 1,501 22 % -17% Total operating expenses 4,512 63 % 4,060 61 % 11% Operating income 1,020 14 % 1,345 20 % -24% Interest expense 318 4 % 626 9 % -49% Interest income (4 ) 0 % (69 ) -1 % (a) Loss on sale of investments - 0 % - 0 % (a) Loss on sale of assets 18 0 % - 0 % (a) Income before income taxes 688 10 % 788 12 % -13% Income tax expense - 0 % - 0 % (a) Net Income $ 688 10 % $ 788 12 % -13% Earnings Per Share Basic $ 0.07 $ 0.08 Diluted $ 0.06 $ 0.07 Weighted Average Common Shares Outstanding Basic 9,867 9,575 Diluted 10,705 10,587 (a) not meaningful

A.D.A.M., Inc. Consolidated Statements of Operations Year-to-Date, 2008 and 2007 (numbers in thousands, except per share data) Nine Months Ended September 30, % of % of % Increase 2008 Revenues 2007 Revenues (Decrease) Revenues, net: Licensing $ 19,028 89 % $ 17,380 86 % 9% Product 925 4 % 1,312 6 % -29% Professional services and other 1,498 7 % 1,553 8 % -4% Total revenues, net 21,451 100 % 20,245 100 % 6% Cost of Revenues: Cost of revenues 2,983 14 % 3,607 18 % -17% Cost of revenues- amortization 1,438 7 % 1,006 5 % 43% Total cost of revenues 4,421 21 % 4,613 23 % -4% Gross Profit 17,030 79 % 15,632 77 % 9% Operating expenses: Product and content development 3,088 14 % 3,225 16 % -4% Sales and marketing 6,642 31 % 4,352 21 % 53% General and administrative 3,838 18 % 4,123 20 % -7% Total operating expenses 13,568 63 % 11,700 58 % 16% Operating income 3,462 16 % 3,932 19 % -12% Interest expense 1,128 5 % 1,938 10 % -42% Interest income (26 ) 0 % (125 ) -1 % -79% Loss on sale of investments 296 1 % - 0 % (a) Loss on sale of assets 18 0 % 4 0 % (a) Income before income taxes 2,046 10 % 2,115 10 % -3% Income tax expense - 0 % - 0 % (a) Net Income $ 2,046 10 % $ 2,115 10 % -3% Earnings Per Share Basic $ 0.21 $ 0.22 Diluted $ 0.19 $ 0.20 Weighted Average Common Shares Outstanding Basic 9,792 9,404 Diluted 10,730 10,326 (a) not meaningful

A.D.A.M., Inc. Reconciliation of Selected GAAP Measures to Non-GAAP Measures (1) Third Quarter, 2008 and 2007 (numbers in thousands, except per share data) Three Months Ended September 30, 2008 2008 2007 2007 % Increase/ GAAP Non-GAAP GAAP Non-GAAP Decrease Reconciliation of GAAP Operating Income, Net Income and EPS to Non-GAAP measures. GAAP Operating Income $ 1,020 $ 1,020 $ 1,345 $ 1,345 -24% Stock-based compensation (2) 303 255 Non-GAAP Operating Income $ 1,323 $ 1,600 -17% GAAP Net Income $ 688 $ 688 $ 788 $ 788 -13% Stock-based compensation (2) 303 255 Amortization of purchased intangibles (3) 188 188 Non-GAAP Net Income $ 1,179 $ 1,231 -4% Diluted Earnings Per Share $ 0.06 $ 0.11 $ 0.07 $ 0.12 Diluted common shares outstanding 10,705 10,705 10,587 10,587 Reconciliation of GAAP Net Income to Adjusted EBITDA is as follows: GAAP Net Income $ 688 $ 788 Depreciation 113 114 Amortization of software development 303 183 Stock-based compensation (2) 303 255 Amortization of purchase intangibles (3) 188 188 Interest expense 314 557 Adjusted EBITDA $ 1,909 $ 2,085 -8% (1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered as a substitute for comparable GAAP measures and should be read only in conjunction with our financial statements prepared in accordance with GAAP and our press release, which explains our use of non-GAAP measures. (2) Stock-based compensation related to non-cash charges for stock options and variable stock compensation expense. (3) Amortization of customer list and purchased software acquired with Online Benefits.

A.D.A.M., Inc. Reconciliation of Selected GAAP Measures to Non-GAAP Measures (1) Year-to-Date, 2008 and 2007 (numbers in thousands, except per share data) Nine Months Ended September 30, 2008 2008 2007 2007 % Increase/ GAAP Non-GAAP GAAP Non-GAAP Decrease Reconciliation of GAAP Operating Income, Net Income and EPS to Non-GAAP measures. GAAP Operating Income $ 3,462 $ 3,462 $ 3,932 $ 3,932 -12% Stock-based compensation (2) 624 495 Non-GAAP Operating Income $ 4,086 $ 4,427 -8% GAAP Net Income $ 2,046 $ 2,046 $ 2,115 $ 2,115 -3% Stock-based compensation (2) 624 495 Amortization of purchased intangibles (3) 565 565 Non-GAAP Net Income $ 3,235 $ 3,175 2% Diluted Earnings Per Share $ 0.19 $ 0.30 $ 0.20 $ 0.31 Diluted common shares outstanding 10,730 10,730 10,326 10,326 Reconciliation of GAAP Net Income to Adjusted EBITDA is as follows: GAAP Net Income $ 2,046 $ 2,115 Depreciation 329 330 Amortization of software development 874 441 Stock-based compensation (2) 624 495 Amortization of purchase intangibles (3) 565 565 Interest expense (income) 1,102 1,813 Loss on sale of investments (4) 296 - Adjusted EBITDA $ 5,836 $ 5,759 1% (1) This presentation includes non-GAAP measures. Our non-GAAP measures are not meant to be considered as a substitute for comparable GAAP measures and should be read only in conjunction with our financial statements prepared in accordance with GAAP and our press release, which explains our use of non-GAAP measures. (2) Stock-based compensation related to non-cash charges for stock options and variable stock compensation expense. (3) Amortization of customer list and purchased software acquired with Online Benefits. (4) Recognition of loss from sale of interest bearing short term investments.

A.D.A.M., Inc. Consolidated Balance Sheets September 30, 2008 and December 31, 2007 (numbers in thousands) September 30, December 31, 2008 2007 Assets Current assets Cash and cash equivalents $ 2,388 $ 5,425 Short term investments - 2,809 Accounts receivable, net 2,302 3,940 Restricted cash 46 46 Inventories, net 20 65 Prepaids and other current assets 855 839 Deferred income tax asset 793 793 Total current assets 6,404 13,917 Non-current assets Property and equipment, net 1,756 801 Intangible assets, net 10,091 9,953 Goodwill 27,546 27,468 Other assets 152 152 Deferred financing costs, net 513 852 Deferred income tax asset 6,827 6,827 Total non-current assets 46,885 46,053 Total Assets $ 53,289 $ 59,970 Liabilities and Shareholders' Equity Current liabilities Accounts payables and accrued expenses $ 2,999 $ 3,658 Deferred revenue 5,203 5,676 Current portion of long-term debt 11,000 3,250 Current portion of capital lease obligations 64 105 Total current liabilities 19,266 12,689 Non-current liabilities Capital lease obligations, net of current portion 43 85 Other liabilities 795 899 Long-term debt, net of current portion - 16,750 Total non-current liabilities 838 17,734 Stockholders' equity Common stock 101 100 Treasury stock (1,088 ) (1,088 ) Additional paid-in capital 57,831 56,406 Unrealized loss on investments - (166 ) Accumulated deficit (23,659 ) (25,705 ) Total stockholders' equity 33,185 29,547 Total Liabilities and Stockholders' Equity $ 53,289 $ 59,970

A.D.A.M., Inc. Consolidated Statements of Cash Flows Year-to-Date, 2008 and 2007 (numbers in thousands) Nine Months Ended Nine Months Ended September 30, September 30, 2008 2007 Cash flows from operating activities Net income $ 2,046 $ 2,115 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 1,767 1,336 Deferred financing cost amortization 339 258 Loss on sale of assets 18 4 Loss on sale of investments 296 - Stock-based compensation expense 624 495 Changes in assets and liabilities: Accounts receivable 1,638 507 Inventories 45 (18 ) Prepaids and other assets (16 ) 667 Accounts payable and accrued liabilities (659 ) (950 ) Deferred revenue (473 ) 1,028 Other liabilities (104 ) (327 ) Net cash provided by operating activities 5,521 5,115 Cash flows from investing activities Purchases of property and equipment (1,305 ) (354 ) Proceeds from sale of property and equipment 2 7 Additional cost of previous acquisition (77 ) (139 ) Net change in restricted cash - 2,148 Software product and content development costs (1,577 ) (971 ) Proceeds from sale of investments 2,716 - Purchase of investments (37 ) (132 ) Net cash provided by (used in) investing activities (278 ) 559 Cash flows from financing activities Payment on note payable - (1,500 ) Payment on long-term debt (9,000 ) (2,000 ) Proceeds from exercise of common stock options 802 1,089 Repayments on capital leases (82 ) (100 ) Net cash used in financing activities (8,280 ) (2,511 ) Increase (Decrease) in cash and cash equivalents (3,037 ) 3,163 Cash and cash equivalents, beginning of period 5,425 4,446 Cash and cash equivalents, end of period $ 2,388 $ 7,609

SOURCE: A.D.A.M., Inc.

A.D.A.M., Inc. Investor Relations: Victor Thompson, 770-321-4326