SEC Filings Details

Digirad Corporation Reports Financial Results for the Second Quarter and Six Months Ended June 30, 2018

Press Release

Aug 2, 2018

Digirad Corporation Reports Financial Results for the Second Quarter and Six Months Ended June 30, 2018

  • Reaffirms 2018 financial guidance

  • Operating cash flows of $2.6 million in the quarter, a year over year quarterly increase of $1.0 million

  • Reduces debt by $0.5 million in the quarter and $7.0 million year to date

  • Company to pay regular quarterly cash dividend of $0.055 cents per share

SUWANEE, Ga., Aug. 02, 2018 (GLOBE NEWSWIRE) --  Digirad Corporation (Nasdaq: DRAD) today reported its financial results for the second quarter and six months ended June 30, 2018.

Total revenues from continuing operations for the second quarter were $27.1 million, compared to $26.7 million in the second quarter of the prior year.

Net loss from continuing operations for the second quarter was $0.4 million, or $0.02 net loss per diluted share from continuing operations, compared to net loss of $2.85 million or $0.14 net loss per diluted share in the same period in the prior year. Non-GAAP adjusted net income from continuing operations for the second quarter was $0.4 million, or $0.02 adjusted net income from continuing operations per diluted share, compared to adjusted net loss of $0.5 million, or $0.03 adjusted net loss per diluted share in the same period in the prior year.

Non-GAAP adjusted EBITDA from continuing operations for the second quarter was $2.7 million, compared to $2.0 million in the same period in the prior year.  Operating cash flow for the second quarter was $2.6 million, compared to the prior year's operating cash flow for the second quarter of $1.6 million. Non-GAAP free cash flow was $2.2 million for the second quarter, compared to $1.4 million in the same period in the prior year.

Total revenues for the six months ended June 30, 2018 were $52.5 million, compared to $52.5 million in the same period in the prior year.

Net loss from continuing operations for the six months ended June 30, 2018 was $1.7 million, or $0.09 net loss per diluted share, compared to net loss of $5.1 million, or $0.26 net loss per diluted share in the same period in the prior year. Non-GAAP adjusted net loss for the six months ended June 30, 2018 was $0.9 million, or $0.05 adjusted net loss per diluted share, compared to adjusted net loss of $1.8 million, or $0.09 adjusted net loss per diluted share in the same period in the prior year.

Non-GAAP adjusted EBITDA for the six months ended June 30, 2018 was $3.5 million, compared to $3.1 million in the same period in the prior year. Operating cash flow for the six months ended June 30, 2018 was $3.0 million, compared to the prior year's operating cash flow for the first six months of $3.5 million. Non-GAAP free cash flow was $2.4 million for the six months ended June 30, 2018, compared to $2.9 million in the same period in the prior year.

Digirad President and CEO Matt Molchan said, “Overall, our business performed well during the quarter. Total revenue and non-GAAP adjusted EBITDA were both up year over year for the quarter and we generated $2.6 million of operating cash flow during the quarter, which allowed us to reduce our overall net debt position by $0.5 million in the quarter. Diagnostic Services led the way with a great quarter showing gains year over year in revenue and gross profit. Our continued, focused efforts in our interim rental business within Mobile Healthcare have yielded significant gains as well, with quarterly interim sales increasing 14% year over year."  Molchan continued, “Timing of camera sales did impact our top line in Diagnostic Imaging, but a good mix of higher profit camera sales resulted in higher gross profit and gross margin in the quarter on a year over year basis.”

The Company also announces a cash dividend of $0.055 cents per share that will be paid on August 30, 2018, to shareholders of record on August 16, 2018.

2018 Financial Guidance

The Company reaffirms its previously announced fiscal year 2018 financial guidance, 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 August 2, 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 August 2, 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 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
Condensed Consolidated Statements of Operations
(Unaudited)
 
  Three Months Ended   Six Months Ended
  June 30,   June 30,
(in thousands, except per share amounts) 2018   2017   2018   2017
Revenues:              
Services $ 24,324     $ 23,742     $ 46,947     $ 46,799  
Product and product-related 2,756     2,943     5,598     5,726  
Total revenues 27,080     26,685     52,545     52,525  
Cost of revenues:              
Services 20,023     19,105     39,284     37,688  
Product and product-related 1,490     1,892     3,087     3,547  
Total cost of revenues 21,513     20,997     42,371     41,235  
Gross profit 5,567     5,688     10,174     11,290  
Total gross profit percentage 20.6 %   21.3 %   19.4 %   21.5 %
Services gross profit percentage 17.7 %   19.5 %   16.3 %   19.5 %
Product and product-related gross profit percentage 45.9 %   35.7 %   44.9 %   38.1 %
Operating expenses:              
Marketing and sales 1,461     1,596     2,928     3,379  
General and administrative 3,522     5,717     7,914     10,613  
Amortization of intangible assets 356     373     713     747  
Goodwill impairment 476         476      
Total operating expenses 5,815     7,686     12,031     14,739  
Loss from operations (248 )   (1,998 )   (1,857 )   (3,449 )
Other expense:              
Other expense, net (19 )       (36 )    
Interest expense, net (189 )   (227 )   (363 )   (420 )
Loss on extinguishment of debt     (709 )   (43 )   (709 )
Total other expense (208 )   (936 )   (442 )   (1,129 )
Loss before income taxes (456 )   (2,934 )   (2,299 )   (4,578 )
Income tax (expense) benefit 106     88     561     (519 )
Loss from continuing operations, net of tax (350 )   (2,846 )   (1,738 )   (5,097 )
Income from discontinued operations, net of tax     74     5,494     249  
Net (loss) income $ (350 )   $ (2,772 )   $ 3,756     $ (4,848 )
               
Net (loss) income per share - basic and diluted              
Continuing operations $ (0.02 )   $ (0.14 )   $ (0.09 )   $ (0.26 )
Discontinued operations $     $     $ 0.27     $ 0.01  
Net (loss) income per share - basic and diluted (1) $ (0.02 )   $ (0.14 )   $ 0.19     $ (0.24 )
Dividends declared per common share $ 0.055     $ 0.05     $ 0.11     $ 0.10  
Weighted average shares outstanding – basic and diluted 20,119     19,979     20,106     19,957  
                       

(1)  Earnings per share may not add due to rounding.

 
 
Digirad Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
 
 
 
  June 30,    December 31,
(in thousands, except share data) 2018   2017
Assets:      
Current assets:      
Cash and cash equivalents $ 1,410       1,877  
Securities available-for-sale 96     97  
Accounts receivable, net 12,581     15,887  
Inventories, net 5,992     5,501  
Restricted cash 243     242  
Other current assets 2,174     1,972  
Total current assets 22,496     25,576  
Property and equipment, net 25,664     28,365  
Intangible assets, net 7,116     7,830  
Goodwill 1,916     2,392  
Restricted cash 101     101  
Non-current assets held for sale     1,736  
Other assets 582     703  
Total assets $ 57,875     $   66,703  
       
Liabilities:      
Current liabilities:      
Accounts payable $ 5,313     $   5,207  
Accrued compensation 4,122     5,507  
Accrued warranty 157     204  
Deferred revenue 1,646     2,302  
Current liabilities held for sale     835  
Other current liabilities 2,342     2,915  
Total current liabilities 13,580     16,970  
Long-term debt 12,500     19,500  
Deferred tax liabilities 372     254  
Other liabilities 1,784     2,180  
Total liabilities 28,236     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; 20,119,318 and 20,060,311 shares issued and outstanding (net of treasury shares) at June 30, 2018 and December 31, 2017, respectively 2     2  
Treasury stock, at cost; 2,588,484 shares at June 30, 2018 and December 31, 2017 (5,728 )   (5,728 )
Additional paid-in capital 146,247     148,163  
Accumulated other comprehensive loss (22 )   (5 )
Accumulated deficit (110,860 )   (114,633 )
Total stockholders’ equity 29,639     27,799  
Total liabilities and stockholders’ equity $ 57,875     $   66,703  
                 
                 


Digirad Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
 
      Three Months Ended
June 30,
  Six Months Ended
June 30,
(in thousands, except per share amounts)   2018   2017   2018   2017
                   
Net loss from continuing operations   $ (350 )   $ (2,846 )   $ (1,738 )   $ (5,097 )
  Acquired intangible amortization   356     373     713     747  
  Acquisition related contingent consideration valuation adjustment (1)               (57 )
  Unrealized loss on available-for-sale securities (2)   19         36      
  Litigation reserve (3)       1,339         1,339  
  Restructuring costs (4)           97      
  Loss on extinguishment of debt       709     43     709  
  Goodwill impairment (5)   476         476      
  Income tax items (6)   (106 )   (88 )   (561 )   519  
Non-GAAP adjusted net income (loss) from continuing operations   $ 395     $ (513 )   $ (934 )   $ (1,840 )
                   
Net loss per diluted share from continuing operations (7)   $ (0.02 )   $ (0.14 )   $ (0.09 )   $ (0.26 )
  Acquired intangible amortization   0.02     0.02     0.04     0.04  
  Acquisition related contingent consideration valuation adjustment (1)                
  Unrealized loss on available-for-sale securities (2)                
  Litigation reserve (3)       0.07         0.07  
  Restructuring costs (4)                
  Loss on extinguishment of debt       0.04         0.04  
  Goodwill impairment (5)   0.02         0.02      
  Income tax items (6)   (0.01 )       (0.03 )   0.03  
Non-GAAP adjusted net income (loss) per diluted share from continuing operations (7)   $ 0.02     $ (0.03 )   $ (0.05 )   $ (0.09 )
                   
                   


      Three Months Ended
June 30,
  Six Months Ended
June 30,
(in thousands)   2018   2017   2018   2017
                   
Net loss from continuing operations   $ (350 )   $ (2,846 )   $ (1,738 )   $ (5,097 )
  Acquisition related contingent consideration valuation adjustment (1)               (57 )
  Unrealized loss on available-for-sale securities (2)   19         36      
  Goodwill impairment (5)   476         476      
  Litigation reserve (3)       1,339         1,339  
  Loss on extinguishment of debt       709     43     709  
  Depreciation and amortization   2,288     2,374     4,553     4,740  
  Stock-based compensation   171     293     372     548  
  Interest expense, net   189     227     363     420  
  Income tax expense (benefit)   (106 )   (88 )   (561 )   519  
Non-GAAP adjusted EBITDA from continuing operations   $ 2,687     $ 2,008     $ 3,544     $ 3,121  
                   

(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) Reflectslegal settlement for wage and hour litigation in 2017.
(4) Reflects severance related costs.
(5)Reflects impairment of goodwill for Telerhythmics reporting unit.
(6) 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 for both periods.
(7) 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
June 30,
  Six Months Ended
June 30,
(in thousands)   2018   2017   2018   2017
Net cash provided by operating activities   $ 2,621     $ 1,570     $ 3,041     $ 3,494  
Purchases of property and equipment, net of dispositions   (433 )   (130 )   (594 )   (615 )
Free cash flow   $ 2,188     $ 1,440     $ 2,447     $ 2,879  
                                 
                                 


Digirad Corporation
Supplemental Debt Information
(Unaudited)
 
The following table reflects outstanding principal balances and interest rates for the Company's debt at June 30, 2018 and December 31, 2017:
 
    June 30, 2018   December 31, 2017
(in thousands)   Balance   Interest
Rate
  Balance   Interest
Rate
Revolving Credit Facility (1)   $ 12,500     4.44 %   $ 19,500     3.90 %
Total borrowings   $ 12,500         $ 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
June 30,
  Six Months Ended
June 30,
(in thousands) 2018   2017 (1)   2018   2017 (1)
Diagnostic Services $ 13,267     $ 12,559     $ 25,292     $ 24,761  
Diagnostic Imaging 2,756     2,943     5,598     5,726  
Mobile Healthcare 11,057     11,183     21,655     22,038  
Condensed consolidated revenue $ 27,080     $ 26,685     $ 52,545     $ 52,525  
Diagnostic Services $ 2,969     $ 2,730     $ 5,216     $ 5,566  
Diagnostic Imaging 1,266     1,051     2,511     2,179  
Mobile Healthcare 1,332     1,907     2,447     3,545  
Condensed consolidated gross profit $ 5,567     $ 5,688     $ 10,174     $ 11,290  
Income (loss) from continuing operations by segment:              
Diagnostic Services $ 804     $ 139     $ 514     $ 155  
Diagnostic Imaging (132 )   (471 )   (336 )   (908 )
Mobile Healthcare (444 )   (327 )   (1,559 )   (1,357 )
Segment income (loss) from continuing operations

$ 228     $ (659 )   $ (1,381 )   $ (2,110 )
Litigation reserve (2)     (1,339 )       (1,339 )
Goodwill impairment (3) (476 )       (476 )    
Condensed consolidated loss from continuing operations $ (248 )   $ (1,998 )   $ (1,857 )   $ (3,449 )
                               

(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.

(2) Reflects legal settlement reserve for wage and hour litigation

(3) Reflects goodwill impairment adjustment for Telerhythmics reporting unit.

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

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Source: Digirad Corporation

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

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