SEC Filings Details

Digirad Corporation Reports Financial Results for the Fourth Quarter and Twelve Months Ended December 31, 2017

Press Release

Feb 23, 2018

Digirad Corporation Reports Financial Results for the Fourth Quarter and Twelve Months Ended December 31, 2017

  • Performs within guidance for Revenue and EBITDA for 2017
  • MDSS service contracts divestiture completed
  • Company continues to pay regular quarterly dividend of $0.055 cents per share

SUWANEE, Ga., Feb. 23, 2018 (GLOBE NEWSWIRE) -- Digirad Corporation (Nasdaq:DRAD) today reported its financial results for the fourth quarter and twelve months ended December 31, 2017.

Total revenues for the fourth quarter were $30.9 million, compared to $31.1 million in the fourth quarter of the prior year.

Net loss for the fourth quarter was $22.0 million, or $1.10 net loss per diluted share, compared to net income of $2.0 million, or $0.10 net income per diluted share in the same period in the prior year. Non-GAAP adjusted net loss for the fourth quarter was $2.7 million, or $0.14 adjusted net loss per diluted share, compared to adjusted net income of $3.0 million, or $0.15 adjusted net income per diluted share in the same period in the prior year. Non-GAAP adjusted EBITDA for the fourth quarter was $2.8 million, compared to $5.4 million in the same period in the prior year.

Total revenues for the twelve months ended December 31, 2017 were $118.3 million, compared to the prior year's revenues for the same period of $125.5 million.

Net loss for the twelve months ended December 31, 2017 was $35.7 million, or $1.79 net loss per diluted share, compared to net income of $14.3 million, or $0.71 net income per diluted share in the same period in the prior year. Non-GAAP adjusted net income for twelve months ended December 31, 2017 was $0.2 million, or $0.01 adjusted net income per diluted share, compared to adjusted net income of $7.2 million, or $0.36 adjusted net income per diluted share in the same period in the prior year. Non-GAAP adjusted EBITDA for the twelve months ended December 31, 2017 was $10.0 million, compared to $16.8 million in the same period in the prior year.

Operating cash flow for the twelve months ended December 31, 2017 was $6.2 million, compared to the prior year's operating cash flow for the same period of $10.8 million. Non-GAAP free cash flow was $3.8 million for the twelve months ended December 31, 2017 compared to $4.9 million in the same period in the prior year.

Digirad President and CEO Matt Molchan said, “Overall, we are pleased that we finished within our guidance range for revenue, and EBITDA; our free cash flow was slightly below our range mainly due to timing of activities.  From a business perspective, our Services businesses Diagnostic Services and Mobile Healthcare performed within our expectations, with Diagnostic Services showing revenue gains year over year for the quarter and year.  As we had discussed earlier in the year, our Diagnostic Imaging business has been experiencing slower capital equipment sales, which impacted our overall results.  Though we cannot predict exactly when capital spending will pick back up, we continue to build an order pipeline giving us confidence in eventual improvement in capital equipment sales.

Molchan continued, “Also, during the quarter we signed a purchase agreement to sell our service contracts in our MDSS business unit to Philips, and as previously announced that sale closed effective February 1.  With this business divested, as well as the previously announced MDSS products sales activity ending effective December 31st, we can now focus on our core mobile imaging services.  As we move forward with this focus, we have made some operational and personnel changes in our core business areas to right size the organization based on the divestiture of these MDSS activities.”

The Company has previously announced on February 1, 2018 its regular quarterly cash dividend of $0.055 cents per share, which will be paid on February 28, 2018, to shareholders of record on February 15, 2018.

The Company expects to release its 2018 financial guidance with its first quarter 2018 results at the end of April 2018.

Conference Call Information

A conference call is scheduled for 11:00 a.m. EST on February 23, 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,” “adjusted EBITDA”, and "free cash flow". The most directly comparable measure for these non-GAAP financial measures are net income (loss), net income (loss) per diluted share, and operating cash flow. The Company has included below unaudited adjusted financial information, which presents the Company's results of operations after excluding acquired intangible asset amortization, goodwill impairment, acquisition related contingent consideration adjustments, investment impairment loss, transaction and integration costs associated with DMS Health Technologies, litigation reserve, loss on extinguishment of debt and non-recurring related income tax adjustments.  Further excluded in the measure of adjusted EBITDA are interest, taxes, depreciation, amortization and stock-based compensation.  Free cash flow is calculated by subtracting cash paid for capital expenditures, net of dispositions from operating cash flow.

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 February 23, 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 diagnostic imaging equipment and services, provides hospitals, physician practices, and imaging centers throughout 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   Twelve Months Ended
  December 31,   December 31,
(in thousands, except per share amounts) 2017   2016   2017   2016
Revenues:              
Services $ 22,785     $ 23,015     $ 91,865     $ 95,511  
Product and product-related 8,133     8,119     26,474     29,956  
Total revenues 30,918     31,134     118,339     125,467  
Cost of revenues:              
Services 19,799     18,720     75,833     75,515  
Product and product-related 3,497     3,772     14,104     14,179  
Total cost of revenues 23,296     22,492     89,937     89,694  
               
Gross profit 7,622     8,642     28,402     35,773  
Total gross profit percentage 24.7 %   27.8 %   24.0 %   28.5 %
Services gross profit percentage 13.1 %   18.7 %   17.5 %   20.9 %
Product and product-related gross profit percentage 57.0 %   53.5 %   46.7 %   52.7 %
               
Operating expenses:              
Marketing and sales 2,493     2,161     9,154     10,049  
General and administrative 4,441     4,088     19,360     19,988  
Amortization of intangible assets 1,427     578     3,161     2,313  
Goodwill impairment 166     338     2,746     338  
Total operating expenses 8,527     7,165     34,421     32,688  
               
(Loss) income from operations (905 )   1,477     (6,019 )   3,085  
               
Other (expense) income:              
Other (expense) income, net (74 )   627     (311 )   212  
Interest expense, net (226 )   (320 )   (1,068 )   (1,412 )
Loss on extinguishment of debt         (709 )    
Total other expense (300 )   307     (2,088 )   (1,200 )
               
(Loss) income before income taxes (1,205 )   1,784     (8,107 )   1,885  
Income tax (expense) benefit (20,778 )   194     (27,623 )   12,417  
Net (loss) income $ (21,983 )   $ 1,978     $ (35,730 )   $ 14,302  
               
Net (loss) income per share:              
Basic $ (1.10 )   $ 0.10     $ (1.79 )   $ 0.73  
Diluted $ (1.10 )   $ 0.10     $ (1.79 )   $ 0.71  
Dividends declared per common share $ 0.055     $ 0.05     $ 0.21     $ 0.20  
               
Weighted average shares outstanding – basic 20,057     19,764     19,995     19,594  
Weighted average shares outstanding – diluted 20,057     20,173     19,995     20,067  
               


 
Digirad Corporation
Consolidated Balance Sheets
(Unaudited)
 
(in thousands, except share data) December 31,
 2017
  December 31,
 2016
Assets:      
Current assets:      
Cash and cash equivalents $ 1,877     $ 2,203  
Securities available-for-sale 97     917  
Accounts receivable, net 15,887     14,503  
Inventories, net 5,501     5,987  
Restricted cash 242     1,376  
Other current assets 1,972     2,093  
 Total current assets 25,576     27,079  
Property and equipment, net 28,365     31,407  
Intangible assets, net 8,467     11,628  
Goodwill 3,491     6,237  
Deferred tax assets     27,019  
Restricted cash 101     2,100  
Other assets 703     793  
Total assets $ 66,703     $ 106,263  
       
Liabilities:      
Current liabilities:      
Accounts payable $ 5,207     $ 6,514  
Accrued compensation 5,507     3,962  
Accrued warranty 204     196  
Deferred revenue 3,137     3,123  
Current portion of long-term debt     5,358  
Other current liabilities 2,915     3,520  
Total current liabilities 16,970     22,673  
Long-term debt, net of current portion 19,500     16,070  
Deferred tax liabilities 254      
Other liabilities 2,180     1,039  
Total liabilities 38,904     39,782  
       
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; 20,060,311 and 19,892,557 shares issued and outstanding (net of treasury shares) at December 31, 2017 and 2016, respectively 2     2  
Treasury stock, at cost; 2,588,484 shares at December 31, 2017 and 2016 (5,728 )   (5,728 )
Additional paid-in capital 148,163     151,696  
Accumulated other comprehensive loss (5 )   (52 )
Accumulated deficit (114,633 )   (79,437 )
Total stockholders’ equity 27,799     66,481  
Total liabilities and stockholders’ equity $ 66,703     $ 106,263  


   
  Digirad Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
   
      Three Months Ended December 31,   Twelve Months Ended December 31,
(in thousands, except per share amounts)   2017   2016   2017   2016
                   
Net (loss) income   $ (21,983 )   $ 1,978     $ (35,730 )   $ 14,302  
  Acquired intangible amortization   1,427     578     3,161     2,313  
  Acquisition related contingent consideration valuation adjustment(1)       (56 )   (57 )   (64 )
  Investment impairment loss(2)   74         311     414  
  Transaction and integration costs of DMS Health Technologies(3)       173         1,921  
  Goodwill impairment(4)   166     338     2,746     338  
  Litigation reserve(5)           1,339      
  Restructuring costs(6)   119         119      
  Loss on extinguishment of debt           709      
  Income tax items(7)   17,453     25     27,563     (12,071 )
Non-GAAP adjusted net (loss) income   $ (2,744 )   $ 3,036     $ 161     $ 7,153  
                   
Net (loss) income per share - diluted(8)   $ (1.10 )   $ 0.10     $ (1.79 )   $ 0.71  
  Acquired intangible amortization   0.07     0.03     0.16     0.12  
  Acquisition related contingent consideration valuation adjustment(1)                
  Investment impairment loss(2)           0.02     0.02  
  Transaction and integration costs of DMS Health Technologies(3)       0.01         0.10  
  Goodwill impairment(4)   0.01     0.02     0.14     0.02  
  Litigation reserve(5)           0.07      
  Restructuring costs(6)   0.01         0.01      
  Loss on extinguishment of debt           0.04      
  Income tax items(7)   0.87         1.38     (0.60 )
Non-GAAP adjusted net (loss) income per share - diluted(8)   $ (0.14 )   $ 0.15     $ 0.01     $ 0.36  
                   


      Three Months Ended December 31,   Twelve Months Ended December 31,
(in thousands)   2017   2016   2017   2016
                   
Net (loss) income   $ (21,983 )   $ 1,978     $ (35,730 )   $ 14,302  
  Acquisition related contingent consideration valuation adjustment(1)       (56 )   (57 )   (64 )
  Investment impairment loss(2)   74         311     414  
  Transaction and integration costs of DMS Health Technologies(3)       173         1,921  
  Goodwill impairment(4)   166     338     2,746     338  
  Litigation reserve(5)           1,339      
  Restructuring costs(6)   119         119      
  Loss on extinguishment of debt           709      
  Depreciation and amortization   3,402     2,552     11,064     9,889  
  Stock-based compensation   23     270     852     1,024  
  Interest expense, net   226     320     1,068     1,412  
  Income tax expense (benefit)   20,778     (194 )   27,623     (12,417 )
Non-GAAP adjusted EBITDA   $ 2,805     $ 5,381     $ 10,044     $ 16,819  
                   

(1)  Reflects fair value adjustment to estimate of contingent consideration related to acquisitions.
(2)  Reflects impairment loss related to write-down of available-for-sale securities to their fair market value that was considered other than temporary.
(3)  Reflects diligence, transaction, and integration costs related to the acquisition of DMS Health Technologies.
(4)  Reflects impairment of goodwill for our MDSS and Telerhythmics reporting units.
(5)  Reflects legal settlement reserve for wage and hour litigation.
(6)  Reflects severance related costs for our MDSS segment.
(7)   Reflects income tax effect for adjusted financial data and acquisition related income tax adjustments, adjustments to net operating loss carryforwards, and tax legislation changes.
(8)  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 Non-GAAP Financial Measures
(Unaudited)
   
      Three Months Ended
(in thousands, except per share amounts)   December 31, 2016   March 31, 2017   June 30, 2017   September 30, 2017   December 31, 2017
                       
Net income (loss)   $ 1,978     $ (2,076 )   $ (2,772 )   $ (8,899 )   $ (21,983 )
  Acquired intangible amortization   578     578     578     578     1,427  
  Acquisition related contingent consideration valuation adjustment(1)   (56 )   (57 )            
  Investment impairment loss(2)               237     74  
  Transaction and integration costs of DMS Health Technologies(3)   173                  
  Goodwill impairment(4)   338             2,580     166  
  Litigation reserve(5)           1,339          
  Restructuring costs(6)                   119  
  Loss on extinguishment of debt           709          
  Income tax items(7)   25     1,348     1,806     6,956     17,453  
Non-GAAP adjusted net income (loss)   $ 3,036     $ (207 )   $ 1,660     $ 1,452     $ (2,744 )
                       
Net income (loss) per share - diluted(8)   $ 0.10     $ (0.10 )   $ (0.14 )   $ (0.44 )   $ (1.10 )
  Acquired intangible amortization   0.03     0.03     0.03     0.03     0.07  
  Acquisition related contingent consideration valuation adjustment(1)                    
  Investment impairment loss(2)               0.01      
  Transaction and integration costs of DMS Health Technologies(3)   0.01                  
  Goodwill impairment(4)   0.02             0.13     0.01  
  Litigation reserve(5)           0.07          
  Restructuring costs(6)                   0.01  
  Loss on extinguishment of debt           0.04          
  Income tax items(7)       0.07     0.09     0.35     0.87  
Non-GAAP adjusted net income (loss) per share - diluted(8)   $ 0.15     $ (0.01 )   $ 0.08     $ 0.07     $ (0.14 )
                       


      Three Months Ended
(in thousands)   December 31, 2016   March 31, 2017   June 30, 2017   September 30, 2017   December 31, 2017
                       
Net income (loss)   $ 1,978     $ (2,076 )   $ (2,772 )   $ (8,899 )   $ (21,983 )
  Acquisition related contingent consideration valuation adjustment(1)   (56 )   (57 )            
  Investment impairment loss(2)               237     74  
  Transaction and integration costs of DMS Health Technologies(3)   173                  
  Goodwill impairment(4)   338             2,580     166  
  Litigation reserve(5)           1,339          
  Restructuring costs(6)

 
                  119  
  Loss on extinguishment of debt           709          
  Depreciation and amortization   2,552     2,579     2,588     2,495     3,402  
  Stock-based compensation   270     263     296     270     23  
  Interest expense, net   320     315     303     224     226  
  Income tax (benefit) expense   (194 )   786     9     6,050     20,778  
Non-GAAP adjusted EBITDA   $ 5,381     $ 1,810     $ 2,472     $ 2,957     $ 2,805  
                       

(1)  Reflects fair value adjustment to estimate of contingent consideration related to acquisitions.
(2)  Reflects impairment loss related to write-down of available-for-sale securities to their fair market value that was considered other than temporary.
(3)  Reflects diligence, transaction, and integration costs related to the acquisition of DMS Health Technologies.
(4)  Reflects impairment of goodwill for our Telerhythmics and MDSS reporting units.
(5)  Reflects legal settlement reserve for wage and hour litigation.
(6)  Reflects severance related costs for our MDSS segment.
(7)  Reflects income tax effect for adjusted financial data and acquisition related income tax adjustments, adjustment to net operating loss carryforwards and tax legislation changes.
(8)  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)
 
  Twelve Months Ended December 31,
(in thousands) 2017   2016
Net cash provided by operating activities 6,185     10,834  
Purchases of property and equipment, net of dispositions (2,364 )   (5,919 )
Free cash flow $ 3,821     $ 4,915  
               

Digirad Corporation
Supplemental Debt Information
(Unaudited)
                The following table reflects outstanding principal balances and interest rates for the Company's debt at December 31, 2017 and December 31, 2016:

  December 31, 2017   December 31, 2016
(in thousands) Balance Interest Rate   Balance Interest Rate
Comerica          
Revolving Line of Credit (1) $ 19,500   3.90 %   $    
Wells Fargo          
Term A (2)       17,382   3.15 %
Term B (2)       4,581   5.65 %
Revolving Line of Credit  (2)         2.69 %
Total borrowing $ 19,500       $ 21,963    

(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.
(2)  All tranches of the Wells Fargo Credit Facility were paid in full on June 21, 2017 upon entering into a Revolving Credit Agreement with Comerica Bank.


 
Digirad Corporation
Supplemental Segment Information
(Unaudited)
 
  Three Months Ended December 31, 2017   Twelve Months Ended December 31,
(in thousands) 2017   2016 (1)   2017   2016 (1)
Revenue by segment:              
Diagnostic Services $ 12,084     $ 11,754     $ 49,016     $ 48,305  
Diagnostic Imaging 3,380     4,167     12,081     13,870  
Mobile Healthcare 10,701     11,261     42,849     47,206  
Medical Device Sales and Service 4,753     3,952     14,393     16,086  
Consolidated revenue $ 30,918     $ 31,134     $ 118,339     $ 125,467  
Gross profit by segment:              
Diagnostic Services $ 1,790     $ 2,552     $ 9,942     $ 10,486  
Diagnostic Imaging 1,539     2,373     5,036     7,116  
Mobile Healthcare 1,196     1,742     6,090     9,510  
Medical Device Sales and Service 3,097     1,975     7,334     8,661  
Consolidated gross profit $ 7,622     $ 8,642     $ 28,402     $ 35,773  
Income (loss) from operations by segment:              
Diagnostic Services $ (277 )   $ 600     $ 972     $ 946  
Diagnostic Imaging 104     1,134     (210 )   2,116  
Mobile Healthcare (609 )   (108 )   (1,730 )   711  
Medical Device Sales and Service 43     362     (966 )   1,571  
Segment (loss) income from operations (739 )   1,988     (1,934 )   5,344  
Litigation reserve         (1,339 )    
Goodwill impairment (166 )   (338 )   (2,746 )   (338 )
Transaction and integration costs of DMS Health Technologies     (173 )       (1,921 )
Consolidated (loss) income from operations $ (905 )   $ 1,477     $ (6,019 )   $ 3,085  

(1) Segment information has been reclassified to conform to the current year presentation.

For more information contact:  
Jeff Keyes  
Chief Financial Officer  
858-726-1600  
ir@digirad.com 

 

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Source: Digirad Corporation

Digirad — Revolutionary solid-state nuclear cardiology equipment and services.

Digirad delivers diagnostic imaging expertise. As Needed. When Needed. Where Needed.