SEC Filings Details

Digirad Corporation Reports Financial Results for the First Quarter Ended March 31, 2018

Press Release

May 1, 2018

Digirad Corporation Reports Financial Results for the First Quarter Ended March 31, 2018

  • Debt paydown of $6.5 million during the quarter
  • Announces 2018 financial guidance
  • Company to pay regular quarterly cash dividend of $0.055 cents per share

SUWANEE, Ga., May 01, 2018 (GLOBE NEWSWIRE) -- Digirad Corporation (Nasdaq:DRAD) today reported its financial results for the first quarter ended March 31, 2018.

Total revenues from continuing operations for the first quarter were $25.5 million, compared to $25.8 million in the first quarter of the prior year.

Net loss from continuing operations for the first quarter was $1.4 million, or $0.07 net loss per diluted share from continuing operations, compared to net loss of $2.3 million, or $0.11 net loss per diluted share in the same period in the prior year. Non-GAAP adjusted net loss from continuing operations for the first quarter was $1.4 million, or $0.07 adjusted net loss from continuing operations per diluted share, compared to $1.3 million, or $0.06 adjusted net loss per diluted share in the same period in the prior year.

Non-GAAP adjusted EBITDA from continuing operations for the first quarter was $1.0 million, compared to $1.1 million in the same period in the prior year.

Digirad President and CEO Matt Molchan said, “Overall, our business performed within our expectations. Despite some harsh weather conditions in the Midwest and the Northeast, our service businesses, Diagnostic Services and Mobile Healthcare, continued to deliver convenient, effective and efficient healthcare solutions on an as needed, when needed, and where needed basis across the country during the quarter." Molchan continued, “Our Diagnostic Imaging business continued to see improvements, exceeding revenue for the quarter on a year over year basis. Also, in the quarter, as previously announced - we sold our service contracts in our MDSS business unit to Philips - effectively discontinuing operations in this unit. We also completed some operational and personnel changes in our core business areas as a result of the divestiture of the MDSS business. Finally, we were able to pay down our debt from $19.5 million at the beginning of the quarter to $13.0 million at the end of the quarter. We expect our business to continue to generate free cash flow, which we will use to pay down debt and fund our ongoing dividend, both of which we believe deliver value to our shareholders.”

The Company also announces a cash dividend of $0.055 cents per share that will be paid on May 30, 2018, to shareholders of record on May 15, 2018.

2018 Financial Guidance

The Company announced its financial guidance for 2018, which is to generate revenues from continuing operations of between $100 and $105 million, non-GAAP adjusted EBITDA of between $8.5 and $9.5 million, and free cash flow between $4 and $5 million.

Conference Call Information

A conference call is scheduled for 11:00 a.m. EDT on May 1, 2018 to discuss the results and management's outlook. The call may be accessed by dialing 1-877-407-9039 (international callers: +1-201-689-8470) five minutes prior to the scheduled start time and referencing Digirad. A simultaneous webcast of the call may be accessed online from the Events & Presentations link on the Investor Relations page at http://drad.client.shareholder.com; an archived replay of the webcast will be available within 15 minutes of the end of the conference call.

Use of Non-GAAP Financial Measures by Digirad Corporation

This Digirad news release presents the non-GAAP financial measures “adjusted net income(loss),” “adjusted net income(loss) per diluted share,” “free cash flow”, and “adjusted EBITDA.” The most directly comparable measure for these non-GAAP financial measures are net income and diluted net income per share. The Company has included below unaudited adjusted financial information, which presents the Company's results of operations after excluding acquired intangible asset amortization, acquisition related contingent consideration adjustments, unrealized gain(loss) on available-for-sale securities, and non-recurring related income tax adjustments. Further excluded in the measure of adjusted EBITDA are interest, taxes, depreciation, amortization and stock-based compensation.

A discussion of the reasons why management believes that the presentation of non-GAAP financial measures provides useful information to investors regarding Digirad's financial condition and results of operations is included as Exhibit 99.2 to Digirad's report on Form 8-K filed with the Securities and Exchange Commission on May 1st, 2018.

About Digirad Corporation

Digirad delivers convenient, effective, and efficient healthcare solutions on an as needed, when needed, and where needed basis.  Digirad’s diverse portfolio of mobile healthcare solutions and medical equipment and services, including diagnostic imaging and patient monitoring, provides hospitals, physician practices, and imaging centers through the United States access to technology and services necessary to provide exceptional patient care in the rapidly changing healthcare environment. For more information, please visit www.digirad.com

Forward-Looking Statements

This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. Some of these forward-looking statements can be identified by the use of forward-looking words such as “believes,” “expects,” “may,” “will,” “should,” “seek,” “approximately,” “intends,” “plans,” “estimates,” or “anticipates,” or the negative of those words or other comparable terminology, or in specific statements such as the Company's ability to deliver value to customers, the ability to grow and generate positive cash flow, the ability to execute on restructuring activities, and ability to successfully execute acquisitions. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made. These risks are detailed in Digirad's filings with the U.S. Securities and Exchange Commission, including the Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and other reports. Readers are cautioned to not place undue reliance on these forward-looking statements, which speak only as of the date hereof. All forward-looking statements are qualified in their entirety by this cautionary statement, and Digirad undertakes no obligation to revise or update the forward-looking statements contained herein.

(Financial tables follow)

Digirad Corporation
Consolidated Statements of Operations
(Unaudited)

  Three Months Ended
  March 31,
(in thousands, except per share amounts) 2018   2017
Revenues      
Services $ 22,623     $ 23,057  
Product and product-related 2,842     2,783  
Total revenues 25,465     25,840  
Cost of revenues:      
Services 19,261     18,583  
Product and product-related 1,597     1,655  
Total cost of revenues 20,858     20,238  
       
Gross profit 4,607     5,602  
Total gross profit percentage 18.1 %   21.7 %
Services gross profit percentage 14.9 %   19.4 %
Product and product-related gross profit percentage 43.8 %   40.5 %
       
Operating expenses:      
Marketing and sales 1,467     1,783  
General and administrative 4,392     4,896  
Amortization of intangible assets 357     374  
Total operating expenses 6,216     7,053  
       
Loss income from operations (1,609 )   (1,451 )
       
Other expense:      
Other expense, net (17 )    
Interest expense, net (217 )   (193 )
Total other expense (234 )   (193 )
       
Loss from continuing operations before income taxes (1,843 )   (1,644 )
Income tax benefit (expense) 455     (607 )
Net loss from continuing operations (1,388 )   (2,251 )
Income from discontinued operations 5,494     175  
Net income (loss) $ 4,106     $ (2,076 )
       
Net income (loss) per share - basic and diluted      
Continuing operations $ (0.07 )   $ (0.11 )
Discontinued operations $ 0.27     $ 0.01  
Net income (loss) per share - basic and diluted $ 0.20     $ (0.10 )
 Dividends declared per common share $ 0.055      $ 0.05   
               
Weighted average shares outstanding – basic and diluted   20,092       19,933  

Digirad Corporation
Consolidated Balance Sheets
(Unaudited)

       
(in thousands, except share data) March 31,
 2018
  December 31,
 2017
Assets:      
Current assets:      
Cash and cash equivalents $ 1,033     $ 1,877  
Securities available-for-sale 116     97  
Accounts receivable, net 12,752     15,887  
Inventories, net 5,755     5,501  
Restricted cash 243     242  
Other current assets 2,287     1,972  
 Total current assets 22,186     25,576  
Property and equipment, net 27,176     28,365  
Intangible assets, net 7,473     7,830  
Goodwill 2,392     2,392  
Restricted cash 101     101  
Non-current assets held for sale     1,736  
Other assets 634     703  
Total assets $ 59,962     $ 66,703  
       
Liabilities:      
Current liabilities:      
Accounts payable $ 5,712     $ 5,207  
Accrued compensation 3,208     5,507  
Accrued warranty 182     204  
Deferred revenue 1,922     2,302  
Current liabilities held for sale     835  
Other current liabilities 2,666     2,915  
Total current liabilities 13,690     16,970  
Long-term debt 13,001     19,500  
Deferred tax liabilities 361     254  
Other liabilities 1,979     2,180  
Total liabilities 29,031     38,904  
       
Stockholders’ equity:      
Preferred stock, $0.0001 par value: 10,000,000 shares authorized; no shares issued or outstanding      
Common stock, $0.0001 par value: 80,000,000 shares authorized; 20,118,336 and 20,060,311
shares issued and outstanding (net of treasury shares) at March 31, 2018 and December 31, 2017, respectively
2     2  
Treasury stock, at cost; 2,588,484 shares at March 31, 2018 and December 31, 2017 (5,728 )   (5,728 )
Additional paid-in capital 147,189     148,163  
Accumulated other comprehensive loss (22 )   (5 )
Accumulated deficit (110,510 )   (114,633 )
Total stockholders’ equity 30,931     27,799  
Total liabilities and stockholders’ equity $ 59,962     $ 66,703  
               

Digirad Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

   
  Three Months Ended March 31,
(in thousands, except per share amounts) 2018   2017
       
Net loss from continuing operations $ (1,388 )   $ (2,251 )
Acquired intangible amortization 357     374  
Acquisition related contingent consideration valuation adjustment (1)     (57 )
Unrealized loss on available-for-sale securities (2) 17      
Restructuring costs (3) 97      
Income tax items (4) (455 )   607  
Non-GAAP adjusted net loss from continuing operations $ (1,372 )   $ (1,327 )
       
Net loss per diluted share from continuing operations (5) $ (0.07 )   $ (0.11 )
Acquired intangible amortization 0.02     0.02  
Unrealized loss on available-for-sale securities (2)      
Acquisition related contingent consideration valuation adjustment (1)      
Restructuring costs (3)      
Income tax items (4) (0.02 )   0.03  
Non-GAAP adjusted net loss per diluted share from continuing operations (5) $ (0.07 )   $ (0.06 )
       


   
  Three Months Ended March 31,
(in thousands) 2018   2017
       
Net loss from continuing operations $ (1,388 )   $ (2,251 )
Acquisition related contingent consideration valuation adjustment(1)     (57 )
Unrealized loss on available-for-sale securities (2) 17      
Restructuring costs(3) 97      
Depreciation and amortization 2,265     2,366  
Stock-based compensation 201     255  
Interest expense, net 217     193  
Income tax expense (benefit) (455 )   607  
Non-GAAP adjusted EBITDA from continuing operations $ 954     $ 1,113  
       


(1) Reflects fair value adjustment to estimate of contingent consideration related to acquisitions.
(2) Reflects change in fair value on equity investments classified as available-for-sale.
(3)  Reflects severance related costs.
(4) The Company has a significant tax NOL that is offset by a full valuation allowance recorded in the fourth quarter of 2017 in the GAAP consolidated financial statements.  As a result, for purposes of non-GAAP measures, we utilized a 0% effective tax rate.
(5) Per share amounts are computed independently for each discrete item presented. Therefore, the sum of the quarterly per share amounts will not necessarily equal to the total for the year, and sum of individual items may not equal the total.
   

Digirad Corporation
Reconciliation of Operating Cash Flow to Free Cash Flow
(Unaudited)

   
  Three Months Ended
March 31,
(in thousands) 2018   2017
Net cash provided by operating activities $ 420     $ 1,924  
Purchases of property and equipment, net of dispositions (161 )   (485 )
Free cash flow $ 259     $ 1,439  
               

Digirad Corporation
Supplemental Debt Information
(Unaudited)

The following table reflects outstanding principal balances and interest rates for the Company's debt at March 31, 2018 and December 31, 2017:

       
  March 31, 2018   December 31, 2017
(in thousands) Balance Interest Rate   Balance Interest Rate
Revolving Credit Facility (1) $ 13,001 4.25 %   $ 19,500 3.90 %
Total borrowings $ 13,001     $ 19,500  
               

(1)  A Revolving Credit Agreement was entered into with Comerica Bank on June 21, 2017. The agreement consists of a revolving credit facility with a five-year term, maturing on June 21, 2022.

Digirad Corporation
Supplemental Segment Information
(Unaudited)

   
  Three Months Ended March 31,
(in thousands) 2018   2017 (1)
Revenue by segment:      
Diagnostic Services $ 12,025     $ 12,202  
Diagnostic Imaging 2,842     2,783  
Mobile Healthcare 10,598     10,855  
Condensed consolidated revenue $ 25,465     $ 25,840  
Gross profit by segment:      
Diagnostic Services $ 2,247     $ 2,836  
Diagnostic Imaging 1,245     1,128  
Mobile Healthcare 1,115     1,638  
Condensed consolidated gross profit $ 4,607     $ 5,602  
Income (loss) from continuing operations by segment:      
Diagnostic Services $ (290 )   $ 16  
Diagnostic Imaging (204 )   (437 )
Mobile Healthcare (1,115 )   (1,030 )
Condensed consolidated loss from continuing operations $ (1,609 )   $ (1,451 )

(1) Segment information has been recast for all periods presented to reflect the MDSS disposition as discontinued operations. As certain shared function costs previously allocated to MDSS are not allocable to discontinued operations, prior period corporate costs have been re-allocated amongst the continuing reportable segments.

For more information contact:
Matthew G. Molchan
Chief Executive Officer
858-726-1600
ir@digirad.com

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Source: Digirad Corporation

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