Digirad Corporation (Nasdaq:DRAD) today reported its financial
results for the first quarter ended March 31, 2017.
Total revenues for the first quarter were $29.1
million, compared to $31.2 million in the first quarter of the
prior year.
Net loss for the first quarter was $2.1 million,
or $0.10 net loss per diluted share, compared to net income of
$11.6 million, or $0.58 net income per diluted share in the same
period in the prior year. Non-GAAP adjusted net loss for the first
quarter was $0.2 million, or $0.01 adjusted net loss per diluted
share, compared to adjusted net income of $1.3 million, or $0.07
adjusted net income per diluted share in the same period in the
prior year. Non-GAAP adjusted EBITDA for the first quarter was $1.8
million, compared to $3.7 million in the same period in the prior
year.
Operating cash flow for the first quarter was
$1.9 million, compared to $0.7 million in the prior year. Non-GAAP
free cash flow was $1.4 million for the first quarter, compared to
negative $0.3 million in the same period in the prior year.
Digirad President and CEO Matt Molchan said,
“Overall, our core businesses are performing well and within our
expectations. Seasonality impacts us each year in the first
quarter, with a little more impact this year than in the prior
year.” Molchan continued, “We have had some challenges
recently in our Mobile Healthcare services business, but believe
these problems to be confined to the provisional service offering
of this business segment. We have addressed these challenges by
changing our leadership, operations and sales approach in our
Mobile Healthcare services business, focusing on our core customers
and improving delivery of our high-quality healthcare
services. With these changes, we are very confident that we
will improve on the recent results, and expect to resume growth in
2018. We continue to expect more cash generation in 2017 than in
2016, which we will use to pay down debt and fund our ongoing
dividend, both of which we believe deliver value to
shareholders.”
The Company also announced a cash dividend of
$0.05 cents per share that will be paid on May 30, 2017, to
shareholders of record on May 15, 2017.
2017 Financial Guidance
The Company announced its financial guidance for 2017, which is
to generate revenues of approximately $125 million, non-GAAP
adjusted EBITDA of between $14 and $15 million, adjusted net income
per diluted share of between $0.10 and $0.15, and free cash flow of
between $9 and $10 million.
Conference Call Information
A conference call is scheduled for 11:00 a.m.
EDT on April 28, 2017 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, 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 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 April 28, 2017.
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 |
Condensed Consolidated Statements of
Operations |
(Unaudited) |
|
|
Three Months Ended |
|
March 31, |
(in thousands,
except per share amounts) |
2017 |
|
2016 |
|
|
|
|
Revenues: |
|
|
|
Services |
$ |
22,874 |
|
|
$ |
24,005 |
|
Product
and product-related |
6,206 |
|
|
7,152 |
|
Total
revenues |
29,080 |
|
|
31,157 |
|
Cost of revenues: |
|
|
|
Services |
18,455 |
|
|
18,506 |
|
Product
and product-related |
3,518 |
|
|
3,586 |
|
Total
cost of revenues |
21,973 |
|
|
22,092 |
|
|
|
|
|
Gross profit |
7,107 |
|
|
9,065 |
|
Total gross profit percentage |
24.4 |
% |
|
29.1 |
% |
Services gross profit percentage |
19.3 |
% |
|
22.9 |
% |
Product and product-related gross profit
percentage |
43.3 |
% |
|
49.9 |
% |
|
|
|
|
Operating
expenses: |
|
|
|
Marketing
and sales |
2,400 |
|
|
2,625 |
|
General
and administrative |
5,104 |
|
|
6,414 |
|
Amortization of intangible assets |
578 |
|
|
579 |
|
Total
operating expenses |
8,082 |
|
|
9,618 |
|
|
|
|
|
Loss from
operations |
(975 |
) |
|
(553 |
) |
|
|
|
|
Other expense: |
|
|
|
Other
income, net |
— |
|
|
71 |
|
Interest
expense, net |
(315 |
) |
|
(370 |
) |
Total other
expense |
(315 |
) |
|
(299 |
) |
|
|
|
|
Loss before income
taxes |
(1,290 |
) |
|
(852 |
) |
Income tax (expense)
benefit |
(786 |
) |
|
12,461 |
|
Net (loss) income |
$ |
(2,076 |
) |
|
$ |
11,609 |
|
|
|
|
|
Net (loss) income per
share: |
|
|
|
Basic |
$ |
(0.10 |
) |
|
$ |
0.60 |
|
Diluted |
$ |
(0.10 |
) |
|
$ |
0.58 |
|
Dividends declared per
common share |
$ |
0.05 |
|
|
$ |
0.05 |
|
|
|
|
|
Weighted average shares
outstanding – basic |
19,933 |
|
|
19,448 |
|
Weighted average shares
outstanding – diluted |
19,933 |
|
|
19,943 |
|
Digirad Corporation |
Condensed Consolidated Balance
Sheets |
(Unaudited) |
|
(in
thousands) |
March 31, 2017 |
|
December 31, 2016 |
Assets: |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
1,913 |
|
|
$ |
2,203 |
|
Securities available-for-sale |
17 |
|
|
917 |
|
Accounts
receivable, net |
13,633 |
|
|
14,503 |
|
Inventories, net |
5,942 |
|
|
5,987 |
|
Restricted cash |
3,283 |
|
|
1,376 |
|
Other
current assets |
1,771 |
|
|
2,093 |
|
Total current assets |
26,559 |
|
|
27,079 |
|
Property and equipment,
net |
31,250 |
|
|
31,407 |
|
Intangible assets,
net |
11,050 |
|
|
11,628 |
|
Goodwill |
6,237 |
|
|
6,237 |
|
Deferred tax
assets |
26,831 |
|
|
27,019 |
|
Restricted cash |
100 |
|
|
2,100 |
|
Other assets |
799 |
|
|
793 |
|
Total
assets |
$ |
102,826 |
|
|
$ |
106,263 |
|
|
|
|
|
Liabilities: |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
6,110 |
|
|
$ |
6,514 |
|
Accrued
compensation |
3,920 |
|
|
3,962 |
|
Accrued
warranty |
170 |
|
|
196 |
|
Deferred
revenue |
3,314 |
|
|
3,123 |
|
Current
portion of long-term debt |
5,358 |
|
|
5,358 |
|
Other
current liabilities |
3,070 |
|
|
3,520 |
|
Total
current liabilities |
21,942 |
|
|
22,673 |
|
Long-term debt, net of
current portion |
14,793 |
|
|
16,070 |
|
Other liabilities |
2,036 |
|
|
1,039 |
|
Total
liabilities |
38,771 |
|
|
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;
19,977,984 and 19,892,557 shares issued and outstanding (net of
treasury shares) at March 31, 2017 and December 31, 2016,
respectively |
2 |
|
|
2 |
|
Treasury stock, at cost; 2,588,484 shares at March 31, 2017 and
December 31, 2016 |
(5,728 |
) |
|
(5,728 |
) |
Additional paid-in capital |
150,773 |
|
|
151,696 |
|
Accumulated other comprehensive loss |
(14 |
) |
|
(52 |
) |
Accumulated deficit |
(80,978 |
) |
|
(79,437 |
) |
Total
stockholders’ equity |
64,055 |
|
|
66,481 |
|
Total
liabilities and stockholders’ equity |
$ |
102,826 |
|
|
$ |
106,263 |
|
Digirad Corporation |
Reconciliation of Non-GAAP Financial
Measures |
(Unaudited) |
|
|
|
|
Three Months Ended March
31, |
(in
thousands, except per share amounts) |
|
2017 |
|
2016 |
|
|
|
|
|
|
Net
(loss) income |
|
$ |
(2,076 |
) |
|
$ |
11,609 |
|
|
Acquired intangible
amortization |
|
578 |
|
|
577 |
|
|
Acquisition related
contingent consideration valuation adjustment(1) |
|
(57 |
) |
|
— |
|
|
Transaction and
integration costs of DMS Health Technologies(2) |
|
— |
|
|
1,450 |
|
|
Income tax
items(3) |
|
1,348 |
|
|
(12,333 |
) |
Non-GAAP Adjusted net (loss) income |
|
$ |
(207 |
) |
|
$ |
1,303 |
|
|
|
|
|
|
|
Net
(loss) income per share - diluted(4) |
|
$ |
(0.10 |
) |
|
$ |
0.58 |
|
|
Acquired intangible
amortization |
|
0.03 |
|
|
0.03 |
|
|
Acquisition related
contingent consideration valuation adjustment(1) |
|
— |
|
|
— |
|
|
Transaction and
integration costs of DMS Health Technologies(2) |
|
— |
|
|
0.07 |
|
|
Income tax
items(3) |
|
0.07 |
|
|
(0.62 |
) |
Non-GAAP Adjusted net (loss) income per share -
diluted(4) |
|
$ |
(0.01 |
) |
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
Three Months Ended March
31, |
(in
thousands) |
|
2017 |
|
2016 |
|
|
|
|
|
|
Net
(loss) income |
|
$ |
(2,076 |
) |
|
$ |
11,609 |
|
|
Acquisition related
contingent consideration valuation adjustment(1) |
|
(57 |
) |
|
— |
|
|
Transaction and
integration costs of DMS Health Technologies(2) |
|
— |
|
|
1,450 |
|
|
Depreciation and
amortization |
|
2,579 |
|
|
2,465 |
|
|
Stock-based
compensation |
|
263 |
|
|
223 |
|
|
Interest income |
|
(1 |
) |
|
(5 |
) |
|
Interest expense |
|
316 |
|
|
375 |
|
|
Income tax expense
(benefit) |
|
786 |
|
|
(12,461 |
) |
Non-GAAP Adjusted EBITDA |
|
$ |
1,810 |
|
|
$ |
3,656 |
|
|
|
|
|
|
|
(1) Reflects fair value adjustment to
estimate of contingent consideration related to
acquisitions.(2) Reflects diligence, transaction, and
integration costs related to the acquisition of DMS Health
Technologies.(3) Reflects income tax effect for adjusted
financial data and acquisition related income tax adjustments, and
adjustment to net operating loss carryforwards.(4) 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.
|
|
|
Three Months Ended March 31, |
(in
thousands) |
2017 |
|
2016 |
Net cash
provided by operating activities |
$ |
1,924 |
|
|
$ |
736 |
|
Purchases of property
and equipment |
(492 |
) |
|
(1,016 |
) |
Free cash
flow |
$ |
1,432 |
|
|
$ |
(280 |
) |
Digirad Corporation |
Reconciliation of Non-GAAP Financial
Measures |
(Unaudited) |
|
|
|
|
Three Months Ended |
(in
thousands, except per share amounts) |
|
March 31, 2016 |
|
June 30, 2016 |
|
September 30, 2016 |
|
December 31, 2016 |
|
March 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) |
|
$ |
11,609 |
|
|
$ |
998 |
|
|
$ |
(283 |
) |
|
$ |
1,978 |
|
|
$ |
(2,076 |
) |
|
Acquired intangible
amortization |
|
577 |
|
|
578 |
|
|
578 |
|
|
578 |
|
|
578 |
|
|
Acquisition related
contingent consideration valuation adjustment(1) |
|
— |
|
|
(3 |
) |
|
(5 |
) |
|
(56 |
) |
|
(57 |
) |
|
Investment impairment
loss(2) |
|
— |
|
|
— |
|
|
414 |
|
|
— |
|
|
— |
|
|
Transaction and
integration costs of DMS Health Technologies(3) |
|
1,450 |
|
|
171 |
|
|
127 |
|
|
173 |
|
|
— |
|
|
Goodwill
impairment |
|
— |
|
|
— |
|
|
— |
|
|
338 |
|
|
— |
|
|
Income tax
items(4) |
|
(12,333 |
) |
|
67 |
|
|
170 |
|
|
25 |
|
|
1,348 |
|
Non-GAAP Adjusted net income (loss) |
|
$ |
1,303 |
|
|
$ |
1,811 |
|
|
$ |
1,001 |
|
|
$ |
3,036 |
|
|
$ |
(207 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) per share - diluted(5) |
|
$ |
0.58 |
|
|
$ |
0.05 |
|
|
$ |
(0.01 |
) |
|
$ |
0.10 |
|
|
$ |
(0.10 |
) |
|
Acquired intangible
amortization |
|
0.03 |
|
|
0.03 |
|
|
0.03 |
|
|
0.03 |
|
|
0.03 |
|
|
Acquisition related
contingent consideration valuation adjustment(1) |
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
— |
|
|
Investment impairment
loss(2) |
|
— |
|
|
— |
|
|
0.02 |
|
|
— |
|
|
— |
|
|
Transaction and
integration costs of DMS Health Technologies(3) |
|
0.07 |
|
|
0.01 |
|
|
0.01 |
|
|
0.01 |
|
|
— |
|
|
Goodwill
impairment |
|
— |
|
|
— |
|
|
— |
|
|
0.02 |
|
|
— |
|
|
Income tax
items(4) |
|
(0.62 |
) |
|
— |
|
|
0.01 |
|
|
— |
|
|
0.07 |
|
Non-GAAP Adjusted net income (loss) per share -
diluted(5) |
|
$ |
0.07 |
|
|
$ |
0.09 |
|
|
$ |
0.05 |
|
|
$ |
0.15 |
|
|
$ |
(0.01 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three Months Ended |
(in
thousands) |
|
March 31, 2016 |
|
June 30, 2016 |
|
September 30, 2016 |
|
December 31, 2016 |
|
March 31, 2017 |
|
|
|
|
|
|
|
|
|
|
|
|
Net
income (loss) |
|
$ |
11,609 |
|
|
$ |
998 |
|
|
$ |
(283 |
) |
|
$ |
1,978 |
|
|
$ |
(2,076 |
) |
|
Acquisition related
contingent consideration valuation adjustment(1) |
|
— |
|
|
(3 |
) |
|
(5 |
) |
|
(56 |
) |
|
(57 |
) |
|
Investment impairment
loss(2) |
|
— |
|
|
— |
|
|
414 |
|
|
— |
|
|
— |
|
|
Transaction and
integration costs of DMS Health Technologies(3) |
|
1,450 |
|
|
171 |
|
|
127 |
|
|
173 |
|
|
— |
|
|
Goodwill
impairment |
|
— |
|
|
— |
|
|
— |
|
|
338 |
|
|
— |
|
|
Depreciation and
amortization |
|
2,465 |
|
|
2,383 |
|
|
2,489 |
|
|
2,552 |
|
|
2,579 |
|
|
Stock-based
compensation |
|
223 |
|
|
257 |
|
|
274 |
|
|
270 |
|
|
263 |
|
|
Interest income |
|
(5 |
) |
|
(4 |
) |
|
(3 |
) |
|
(2 |
) |
|
(1 |
) |
|
Interest expense |
|
375 |
|
|
383 |
|
|
345 |
|
|
322 |
|
|
316 |
|
|
Income tax (benefit)
expense |
|
(12,461 |
) |
|
37 |
|
|
202 |
|
|
(194 |
) |
|
786 |
|
Non-GAAP Adjusted EBITDA |
|
$ |
3,656 |
|
|
$ |
4,222 |
|
|
$ |
3,560 |
|
|
$ |
5,381 |
|
|
$ |
1,810 |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Reflects fair value adjustment to
estimate of contingent consideration related to
acquisitions.(2) Reflects impairment losses related to
investment in Perma-Fix Medical. Amounts consist of
impairment of a Supply Agreement entered into between the two
parties, a loss related to the initial excess of the transaction
price over fair value and a write-down of the investment to its
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 income tax effect for adjusted
financial data and acquisition related income tax adjustments, and
adjustment to net operating loss carryforwards.(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 |
Supplemental Debt Information |
(Unaudited) |
|
The
following table reflects outstanding principal balances and
interest rates under the Company's credit facility at March 31,
2017 and December 31, 2016: |
|
|
March 31, 2017 |
|
December 31, 2016 |
(in
thousands) |
Balance |
Interest Rate |
|
Balance |
Interest Rate |
Term A(1) |
$ |
16,668 |
|
3.33 |
% |
|
$ |
17,382 |
|
3.15 |
% |
Term B(2) |
3,956 |
|
5.83 |
% |
|
4,581 |
|
5.65 |
% |
Revolver |
— |
|
2.81 |
% |
|
— |
|
2.69 |
% |
Total borrowing |
$ |
20,624 |
|
|
|
$ |
21,963 |
|
|
|
(1) Term A amortizes over a 7-year period
with scheduled amortization ending in January 2021, with the
remaining amount due in a balloon payment.(2) Term B amortizes
over a 3-year period with scheduled amortization ending in January
2019. Through March 31, 2017, the Company has made three extra
payments in the same amount as the scheduled payments.
|
Digirad Corporation |
Supplemental Segment Information |
(Unaudited) |
|
|
Three Months Ended March
31, |
(in
thousands) |
2017 |
|
2016 (2) |
Revenue by
segment: |
|
|
|
Diagnostic Services |
$ |
12,202 |
|
|
$ |
12,012 |
|
Diagnostic Imaging |
2,782 |
|
|
3,582 |
|
Mobile
Healthcare |
10,672 |
|
|
11,993 |
|
Medical
Device Sales and Service |
3,424 |
|
|
3,570 |
|
Condensed consolidated
revenue |
$ |
29,080 |
|
|
$ |
31,157 |
|
Gross profit by
segment: |
|
|
|
Diagnostic Services |
$ |
2,836 |
|
|
$ |
2,548 |
|
Diagnostic Imaging |
1,127 |
|
|
1,715 |
|
Mobile
Healthcare |
1,583 |
|
|
2,951 |
|
Medical
Device Sales and Service |
1,561 |
|
|
1,851 |
|
Condensed consolidated
gross profit |
$ |
7,107 |
|
|
$ |
9,065 |
|
Income (loss) from
operations by segment: |
|
|
|
Diagnostic Services |
$ |
336 |
|
|
$ |
(19 |
) |
Diagnostic Imaging |
(202 |
) |
|
381 |
|
Mobile
Healthcare |
(814 |
) |
|
422 |
|
Medical
Device Sales and Service |
(295 |
) |
|
113 |
|
Segment (loss) income
from operations |
(975 |
) |
|
897 |
|
Unallocated items
(1) |
— |
|
|
(1,450 |
) |
Condensed consolidated
loss from operations |
$ |
(975 |
) |
|
$ |
(553 |
) |
|
(1) Includes transaction and integration costs associated with
the DMS Health acquisition.(2) 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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