Document


UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8‑K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Date of Report:
February 23, 2018
(Date of earliest event reported)

DIGIRAD CORPORATION
(Exact name of registrant as specified in its charter)

Delaware
 
001-35947
 
33-0145723
(State or other jurisdiction of incorporation)
 
(Commission File Number)
 
(IRS Employer
Identification No.)

1048 Industrial Court,
Suwanee, GA 30024
(Address of principal executive offices, including zip code)

(858) 726-1600
(Registrant’s telephone number, including area code)

Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§232.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company
o
 
 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨




Item 2.02.  Results of Operations and Financial Condition

On February 23, 2018, Digirad Corporation issued a press release announcing financial results for the three and twelve months ended December 31, 2017. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.

Item 9.01.  Financial Statements and Exhibits
 
(a) Financial statements:
None
(b) Pro forma financial information:
None
(c) Shell company transactions:
None
(d)  Exhibits:
99.1 Press Release of Digirad Corporation dated February 23, 2018
99.2 Information Related to the Use of Non-GAAP Financial Measures    

  





SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
 
DIGIRAD CORPORATION
 
 
 
 
By:
/s/ Jeffry R. Keyes
 
 
 
Jeffry R. Keyes
Chief Financial Officer

Date:     February 23, 2018




Exhibit Index

Exhibit No.
 
Description
 
 
 
 
Press Release of Digirad Corporation dated February 23, 2018

 
Information Related to the Use of Non-GAAP Financial Measures


Exhibit


Exhibit 99.1
News Release
For immediate release
For more information contact:
February 23, 2018
Jeff Keyes
 
Chief Financial Officer
 
858-726-1600
 
ir@digirad.com

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. - February 23, 2018 - 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.


Exhibit


Exhibit 99.2

Use of Non-GAAP Financial Measures

In addition to financial results calculated in accordance with U.S. generally accepted accounting principles (“GAAP”), information containing non-GAAP financial measures for Digirad Corporation (the “Company”) was disclosed in the Company's press release (the “Press Release”) dated February 23, 2018 announcing results for the three and twelve months ended December 31, 2017 that accompanied a conference call held by the Company on February 23, 2018. The non-GAAP financial measures disclosed by the Company should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations to those financial statements should be carefully evaluated. The non-GAAP financial measures used by the Company may be calculated differently from, and therefore may not be comparable to, similarly titled measures used by other companies. The Company has provided reconciliations of the non-GAAP financial measures to the most directly comparable GAAP financial measures. Management encourages readers to rely upon the GAAP numbers, but includes the non-GAAP financial measures as supplemental metrics to assist readers. Definitions of the non-GAAP financial measures are included in the Press Release.
In the Press Release, the Company presented the non-GAAP financial measures “adjusted net income (loss),” “adjusted net income (loss) per diluted share,” “adjusted EBITDA,” and "free cash flow." Company management uses these non-GAAP financial measures to evaluate the Company's performance. As the Company's core business is providing healthcare services and products to the healthcare industry, Company management finds it useful to use financial measures that do not include acquired intangible asset amortization, acquisition related contingent consideration adjustments, investment impairment loss, goodwill impairment, transaction and integration costs of DMS Health Technologies, litigation reserve, loss on extinguishment of debt and non-recurring related income tax adjustments. While we may have these types of items and charges in the future, Company management believes that they are not reflective of the day-to-day offering of its products and services and relate more to strategic, multi-year corporate actions, without predictable trends, and that may obscure the trends and financial performance of the Company's core business. In the case of “adjusted EBITDA,” Company management believes the exclusion of interest, taxes, depreciation, amortization, and stock-based compensation is a very common measure utilized in the investment community and it helps Company management benchmark its operations and results with the industry.
The limitation associated with using these non-GAAP financial measures is that these measures exclude items that impact the Company's current period operating results. This limitation is best addressed by using these non-GAAP financial measures in combination with “net income (loss),” “net income (loss) per diluted share,” and "operating cash flow" (the most comparable GAAP measures) because these non-GAAP financial measures do not reflect items that impact current period operating results and may be higher or lower than the most comparable GAAP measure.