Digirad Corporation (Nasdaq: DRAD; DRADP) (“Digirad” or the
“Company”) reported today its financial results for the fourth
quarter (Q4) and year (FY) ended December 31, 2019.
As previously announced, on September 10, 2019
Digirad completed the acquisition of ATRM Holdings, Inc. (“ATRM”)
and transformed from a healthcare services provider into a
diversified holding company (“HoldCo”) with three business
divisions: Healthcare, Building & Construction, and Real Estate
& Investments.
Q4 2019 Financial Highlights vs. Q4 2018
*
- Total revenue increased by 39.4% to
$36.1 million from $25.9 million
- Gross profit increased by 112.2% to
$7.9 million from $3.7 million
- Net loss from continuing operations
was $0.3 million (or $0.13 per basic and diluted share) and
included $0.3 million of merger related expenses; excluding merger
related expenses, net income from continuing operations was $27
thousand, compared to a net loss from continuing operations of $0.9
million (or $0.45 per basic and diluted share)
- Non-GAAP adjusted EBITDA from
continuing operations increased by 262.3% to $2.8 million from $0.8
million
FY 2019 Financial Highlights vs. FY 2018
*
- Total revenue increased by 9.6% to
$114.2 million from $104.2 million
- Gross profit increased by 21.0% to
$22.1 million from $18.3 million
- Net loss from continuing operations
was $4.9 million (or $2.69 per basic and diluted share) and
included $2.3 million of merger related expenses; excluding merger
related expenses, net loss from continuing operations was $2.6
million as compared to a net loss from continuing operations of
$3.8 million (or $1.90 per basic and diluted share)
- Non-GAAP adjusted EBITDA from
continuing operations increased by 29.2% to $7.7 million from $6.0
million
*Digirad’s Q4 and FY 2019 results include
financial and operational data of the two newly created divisions -
Building & Construction and Real Estate & Investments,
following the acquisition of ATRM on September 10, 2019. There were
no operational or financial data recorded in the 2018 corresponding
periods from these two divisions.
Jeff Eberwein, Chairman of Digirad, noted, “FY
2019 was a transition year for Digirad. With the acquisition of
ATRM we are now operating and reporting financial results as a
HoldCo with three business divisions. For Q4 2019, which reflects a
full quarter of operations as a HoldCo, as compared to the same
period of 2018, we reported higher revenue and gross profit. These
improvements were mainly due to additional revenue and gross profit
generated by our recently established Building & Construction
division and the steps taken to increase sales of higher margin
products in our Healthcare division.
“For FY 2020, as previously announced, our focus
will be on growing our business organically by expanding higher
margin segments such as camera sales and mobile scanning services
in our Healthcare division, and increasing the utilization rate at
existing factories and potentially opening an idle facility in our
Building & Construction division. We will also seek bolt-on
acquisitions for our existing platform companies and attractive
acquisition opportunities to create new business for our HoldCo
structure.”
Revenue
The Company’s total Q4 2019 revenue increased by
39.4% to $36.1 million from $25.9 million in the fourth quarter of
the prior year. FY 2019 total revenue of $114.2 million increased
by 9.6% from FY 2018 revenue of $104.2 million.
|
Revenue in $ million |
|
Q4 2019 |
|
Q4 2018 |
|
% change |
|
FY 2019 |
|
FY 2018 |
|
% change |
|
Healthcare |
|
$ |
27,540 |
|
|
$ |
25,928 |
|
|
6.2 |
% |
|
$ |
102,846 |
|
|
$ |
104,180 |
|
|
(1.3 |
) |
% |
|
Building & Construction |
|
8,528 |
|
|
— |
|
|
— |
% |
|
11,257 |
|
|
— |
|
|
— |
|
% |
| Real Estate &
Investments |
|
74 |
|
|
— |
|
|
— |
% |
|
82 |
|
|
— |
|
|
— |
|
% |
|
Total Revenue |
|
$ |
36,142 |
|
|
$ |
25,928 |
|
|
39.4 |
% |
|
$ |
114,185 |
|
|
$ |
104,180 |
|
|
9.6 |
|
% |
Our Healthcare division’s business remains
strong. Revenue for Q4 2019 increased mainly due to higher camera
sales, while revenue for FY 2019 slightly decreased from FY 2018
due to the sale of our Telerhythmics business in October 2018.
Telerhythmics’ revenue for Q4 2018 and FY 2018, was $0.3 million
and $3.4 million, respectively.
Gross Profit
|
Gross profit in $ million |
|
Q4 2019 |
|
Q4 2018 |
|
% change |
|
FY 2019 |
|
FY 2018 |
|
% change |
|
Healthcare |
|
$ |
6,389 |
|
|
$ |
3,739 |
|
|
70.9 |
% |
|
$ |
20,328 |
|
|
$ |
18,271 |
|
|
11.3 |
% |
|
Building & Construction |
|
1,536 |
|
|
— |
|
|
— |
% |
|
2,013 |
|
|
— |
|
|
— |
% |
|
Real Estate & Investments |
|
9 |
|
|
— |
|
|
— |
% |
|
(226 |
) |
|
— |
|
|
— |
% |
|
Total Gross Profit |
|
$ |
7,934 |
|
|
$ |
3,739 |
|
|
112.2 |
% |
|
$ |
22,115 |
|
|
$ |
18,271 |
|
|
21.0 |
% |
Gross profit of our Healthcare division for Q4
2019 and FY 2019 increased by 70.9% and 11.3%, respectively, from
prior year’s same periods, driven by higher camera rental revenue,
lower health insurance costs, and the sale of the low margin
Telerhythmics business in October 2018.
Operating Expenses
Q4 2019 selling, general and administrative
(SG&A) expenses increased by 43.4% or $2.1 million from the
same period of 2018, mainly due to SG&A increased expenses from
the recently acquired Building & Construction Division (not
recorded in the same reported periods of 2018), offset by lower
headcount and reduced costs for contracted services particularly in
the information technology (IT) and human resources (HR) areas from
the Healthcare division. Our FY 2019 SG&A expenses increased by
5.5% or $1.1 million, compared to FY 2018 due to $2.0 million
expenses from Building and Construction Division, offset by lower
salaries and benefits resulting from lower headcount following the
sale of our Telerhythmics business in October 2018 and reduced
costs for contracted services particularly in IT and HR areas as a
result of steps we took to streamline our internal operations.
Non-GAAP adjusted EBITDA
Q4 2019 non-GAAP adjusted EBITDA from continuing
operations rose to $2.8 million from $0.8 million in the same
quarter of the prior year due to higher revenue from the sale of
cameras and high-margin mobile scanning services. FY 2019 non-GAAP
adjusted EBITDA from continuing operations increased to $7.7
million, compared to $6.0 million in FY 2018 also reflecting higher
revenue from the sale of cameras and high-margin mobile scanning
services.
Net loss
Q4 2019 net loss from continuing operations was
$0.3 million, or $0.13 per basic and diluted share, compared to a
net loss from continuing operations of $0.9 million, or $0.45 per
basic and diluted share in the same period of the prior year. Q4
2019 non-GAAP adjusted net income from continuing operations was
$0.6 million, or $0.30 per basic and diluted share, compared to an
adjusted net loss of $1.2 million, or $0.59 per basic and diluted
share in the same period of the prior year.
FY 2019 net loss from continuing operations was
$4.9 million, or $2.40 per basic and diluted share, compared to a
net loss from continuing operations of $3.8 million, or $1.90 per
basic and diluted share in FY 2018. FY 2019 non-GAAP adjusted net
loss from continuing operations was $0.3 million, or $0.13 per
basic and diluted share, compared to an adjusted net loss of $2.8
million, or $1.36 per basic and diluted share in the prior
year.
The improvement for both Q4 and FY 2019
reporting periods in non-GAAP measures was mainly due to higher
revenue and margin improvements despite higher intangible
amortization costs totaling $0.8 million and $1.8 million,
respectively, and non-recurring legal costs and other expenses
related to ATRM and establishment of HoldCo totaling $0.3 million
and $2.3 million, respectively, related to the acquisition of ATRM
and establishment of HoldCo.
Operating cash flow
Q4 2019 cash flow from operations was an inflow
of $1.2 million, compared to an inflow of $2.8 million for the same
period in the prior year. FY 2019 cash flow from operations was an
inflow of $0.4 million, compared to an inflow of $5.1 million for
FY 2018.
Free Cash Flow
The Company calculates a non-GAAP measure of
free cash flow. The Company defines free cash flow as net cash
provided by (used in) operating activities, less purchases of
property and equipment, plus net dispositions and estimated level
of one-time acquisition related net working capital adjustment at
the closing date. The Company believes that this measure of free
cash flow provides management and investors further useful
information on cash generation or use in our primary
operations.
Q4 2019 non-GAAP free cash flow was an inflow of
$1.4 million, compared to an inflow of $2.9 million of the same
quarter in the prior year. FY 2019 non-GAAP free cash flow was an
inflow of $3.0 million, compared to an inflow of $5.0 million in FY
2018.
Net operating loss (NOL)
Digirad Corporation has approximately $91.6
million of usable net operating losses (“NOL”) in the U.S. as of
year end 2019, which the Company considers to be a very valuable
asset for its stockholders. In order to protect the value of
the NOL for all stockholders, the Company has a charter amendment
in place that limits beneficial ownership of Digirad common stock
to 4.99%. Stockholders who wish to own more than 4.99% of
Digirad common stock, or who already own more than 4.99% of Digirad
common stock and wish to buy more, may only acquire additional
shares with the Board’s prior written approval. Digirad’s NOL is
expected to increase in 2020 due to operating results.
2020 Financial Guidance
For FY 2020, the Company expects to generate
revenue from continuing operations of between $125.0 million and
$145.0 million, non-GAAP adjusted EBITDA of between $7.0 million
and $9.0 million and free cash flow of between $4.0 million and
$5.0 million.
Conference Call Information
A conference call is scheduled for 10:00 a.m.
EST (7:00 a.m. PST) on March 6, 2020 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://ir.digirad.com/events-presentations; an archived replay of
the webcast will be available within 15 minutes of the end of the
conference call.
If you have any questions, either prior to or
after our scheduled Earnings Conference call, please e-mail
ir@digirad.com or lcati@equityny.com.
Use of Non-GAAP Financial Measures by
Digirad Corporation
This release presents the non-GAAP financial
measures “adjusted net income (loss),” “adjusted net income (loss)
per basic and diluted share,” “free cash flow”, and “adjusted
EBITDA.” The most directly comparable measure for these non-GAAP
financial measures are net income and basic 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 March 6, 2020.
About Digirad Corporation
Digirad Corporation is a diversified holding
company with three operating divisions: Healthcare, Building &
Construction and Real Estate & Investments.
Digirad: Healthcare
Division
Healthcare Division (Digirad Health) designs,
manufactures, and distributes diagnostic medical imaging products.
Digirad Health operates in three businesses: Diagnostic Services,
Mobile Healthcare, and Diagnostic Imaging. The Diagnostic Services
business offers imaging and monitoring services to healthcare
providers as an alternative to purchasing the equipment or
outsourcing the job. The Mobile Healthcare business provides
contract diagnostic imaging, including computerized tomography
(“CT”), magnetic resonance imaging (“MRI”), positron emission
tomography (“PET”), PET/CT, and nuclear medicine and healthcare
expertise through a convenient mobile service. The Diagnostic
Imaging business develops, sells, and maintains solid-state gamma
cameras.
ATRM Holdings: Building &
Construction Division
Building and Construction Division (ATRM)
services residential and commercial construction projects by
manufacturing modular housing units, structural wall panels,
permanent wood foundation systems, and other engineered wood
products, and supplies general contractors with building materials.
This division operates in two businesses: (i) modular building
manufacturing and (ii) structural wall panel and wood foundation
manufacturing, including building supply retail operations. The
modular building manufacturing business is operated by KBS
Builders, Inc. (“KBS”), and the structural wall panel and wood
foundation manufacturing segment is operated by EdgeBuilder, Inc.
(“EdgeBuilder”), and the retail building supplies are sold through
Glenbrook Building Supply, Inc. (“Glenbrook” and together with
EdgeBuilder, “EBGL”). KBS, EdgeBuilder and Glenbrook are
wholly-owned subsidiaries of ATRM.
Real Estate & Investments
Division
Real Estate & Investments Division manages
real estate assets (currently three manufacturing plants in Maine)
and investments.
Forward-Looking Statements
“Safe Harbor” Statement under the Private
Securities Litigation Reform Act of 1995: This release contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements in this
release that are not statements of historical fact are hereby
identified as “forward-looking statements” for the purpose of the
safe harbor provided by Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934,
as amended.
Forward-looking Statements include, without
limitation, statements regarding (i) the plans and objectives of
management for future operations, including plans or objectives
relating to acquisitions and related integration, development of
commercially viable products, novel technologies, and modern
applicable services, (ii) projections of income (including
income/loss), EBITDA, earnings (including earnings/loss) per share,
free cash flow (FCF), capital expenditures, cost reductions,
capital structure or other financial items, (iii) the future
financial performance of Digirad Corporation (“Digirad,” “DRAD” or
the “Company”) or acquisition targets and (iv) the assumptions
underlying or relating to any statement described above. Moreover,
forward-looking statements necessarily involve assumptions on the
Company’s part. These forward-looking statements generally are
identified by the words “believe”, “expect”, “anticipate”,
“estimate”, “project”, “intend”, “plan”, “should”, “may”, “will”,
“would”, “will be”, “will continue” or similar expressions. Such
forward-looking statements are not meant to predict or guarantee
actual results, performance, events or circumstances and may not be
realized because they are based upon the Company's current
projections, plans, objectives, beliefs, expectations, estimates
and assumptions and are subject to a number of risks and
uncertainties and other influences, many of which the Company has
no control over. Actual results and the timing of certain events
and circumstances may differ materially from those described above
as a result of these risks and uncertainties. Factors that may
influence or contribute to the inaccuracy of forward-looking
statements or cause actual results to differ materially from
expected or desired results may include, without limitation, the
substantial amount of debt of the Company and the Company’s ability
to repay or refinance it or incur additional debt in the future;
the Company’s need for a significant amount of cash to service and
repay the debt and to pay dividends on the Company Preferred Stock;
the restrictions contained in the debt agreements that limit the
discretion of management in operating the business; the length of
time associated with servicing customers; losses of significant
contracts; disruptions in the relationship with third party
vendors; accounts receivable turnover; insufficient cash flows and
resulting lack of liquidity; the Company's inability to expand the
Company's business; unfavorable changes in the extensive
governmental legislation and regulations governing healthcare
providers and the provision of healthcare services and the
competitive impact of such changes (including unfavorable changes
to reimbursement policies); high costs of regulatory compliance;
the liability and compliance costs regarding environmental
regulations; the underlying condition of the technology support
industry; the lack of product diversification; development and
introduction of new technologies and intense competition in the
healthcare industry; existing or increased competition; risks to
the price and volatility of the Company’s Common Stock and
Preferred Stock; stock volatility and liquidity; risks to preferred
stockholders of not receiving dividends and risks to the Company’s
ability to pursue growth opportunities if the Company continues to
pay dividends according to the terms of the Company Preferred
Stock; the Company’s ability to execute on its business strategy
(including any cost reduction plans); the Company’s failure to
realize expected benefits of restructuring and cost-cutting
actions; the Company’s ability to preserve and monetize its net
operating losses; risks associated with the Company’s possible
pursuit of acquisitions; the Company’s ability to consummate
successful acquisitions and execute related integration, including
to successfully integrate ATRM’s operations and realize the
synergies from the acquisition, as well as factors related to the
Company’s business (including ATRM) including economic and
financial market conditions generally and economic conditions in
the Company’s markets; failure to keep pace with evolving
technologies and difficulties integrating technologies; system
failures; losses of key management personnel and the inability to
attract and retain highly qualified management and personnel in the
future; and the continued demand for and market acceptance of the
Company’s services. For a detailed discussion of cautionary
statements and risks that may affect the Company’s future results
of operations and financial results, please refer to the Company’s
filings with the Securities and Exchange Commission, including, but
not limited to, the risk factors in the Company’s most recent
Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. This
release reflects management’s views as of the date presented. All
forward-looking statements are necessarily only estimates of future
results, and there can be no assurance that actual results will not
differ materially from expectations, and, therefore, you are
cautioned not to place undue reliance on such statements. Further,
any forward-looking statement speaks only as of the date on which
it is made, and we undertake no obligation to update any
forward-looking statement to reflect events or circumstances after
the date on which the statement is made or to reflect the
occurrence of unanticipated events.
|
For more information contact: |
|
| Digirad Corporation |
The Equity Group |
| Jeffrey E. Eberwein |
Lena Cati |
| Chairman of the Board |
Vice President |
| 203-489-9501 |
212-836-9611 |
| ir@digirad.com |
lcati@equityny.com |
(Financial tables follow)
Digirad
CorporationCondensed Consolidated Statements of
Operations(Unaudited)(In
thousands, except for per share amounts)
| |
|
Three Months EndedDecember
31, |
|
Twelve Months EndedDecember
31, |
| |
|
|
| |
|
2019 |
|
2018 |
|
|
2019 |
|
2018 |
| Revenues: |
|
|
|
|
|
|
|
|
|
Healthcare |
|
$ |
27,540 |
|
|
|
$ |
25,928 |
|
|
|
$ |
102,846 |
|
|
|
$ |
104,180 |
|
|
|
Building and Construction |
|
8,528 |
|
|
|
— |
|
|
|
|
11,257 |
|
|
|
— |
|
|
|
Real Estate and Investments |
|
74 |
|
|
|
— |
|
|
|
|
82 |
|
|
|
— |
|
|
|
Total revenues |
|
36,142 |
|
|
|
25,928 |
|
|
|
|
114,185 |
|
|
|
104,180 |
|
|
| Cost of revenues: |
|
|
|
|
|
|
|
|
|
Healthcare |
|
21,151 |
|
|
|
22,189 |
|
|
|
|
82,518 |
|
|
|
85,909 |
|
|
|
Building and Construction |
|
6,992 |
|
|
|
— |
|
|
|
|
9,244 |
|
|
|
— |
|
|
|
Real Estate and Investments |
|
65 |
|
|
|
— |
|
|
|
|
308 |
|
|
|
— |
|
|
|
Total cost of revenues |
|
28,208 |
|
|
|
22,189 |
|
|
|
|
92,070 |
|
|
|
85,909 |
|
|
| Gross profit |
|
7,934 |
|
|
|
3,739 |
|
|
|
|
22,115 |
|
|
|
18,271 |
|
|
|
Total gross profit percentage |
|
22.0 |
|
% |
|
14.4 |
|
% |
|
|
19.4 |
|
% |
|
17.5 |
|
% |
|
Healthcare |
|
23.2 |
|
% |
|
14.4 |
|
% |
|
|
19.8 |
|
% |
|
17.5 |
|
% |
|
Building and Construction |
|
18.0 |
|
% |
|
— |
|
% |
|
|
17.9 |
|
% |
|
— |
|
% |
|
Real Estate and Investments |
|
12.2 |
|
% |
|
— |
|
% |
|
|
(275.6 |
) |
% |
|
— |
|
% |
| Operating expenses: |
|
|
|
|
|
|
|
|
| Selling, general and
administrative |
|
6,927 |
|
|
|
4,829 |
|
|
|
|
21,575 |
|
|
|
20,456 |
|
|
|
Amortization of intangible assets |
|
829 |
|
|
|
308 |
|
|
|
|
1,794 |
|
|
|
1,377 |
|
|
|
Merger and financing costs |
|
284 |
|
|
|
— |
|
|
|
|
2,342 |
|
|
|
— |
|
|
|
Goodwill impairment |
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
476 |
|
|
|
Gain (loss) on sale of building |
|
(4 |
) |
|
|
— |
|
|
|
|
232 |
|
|
|
507 |
|
|
|
Total operating expenses |
|
8,036 |
|
|
|
5,137 |
|
|
|
|
25,943 |
|
|
|
22,816 |
|
|
| Loss from operations |
|
(102 |
) |
|
|
(1,398 |
) |
|
|
|
(3,828 |
) |
|
|
(4,545 |
) |
|
| Other expense: |
|
|
|
|
|
|
|
|
|
Other income (expense), net |
|
67 |
|
|
|
51 |
|
|
|
|
(133 |
) |
|
|
(61 |
) |
|
|
Interest expense, net |
|
(429 |
) |
|
|
(188 |
) |
|
|
|
(1,156 |
) |
|
|
(751 |
) |
|
|
Gain (loss) on extinguishment of debt |
|
— |
|
|
|
— |
|
|
|
|
(151 |
) |
|
|
(43 |
) |
|
| Total other expense |
|
(362 |
) |
|
|
(137 |
) |
|
|
|
(1,440 |
) |
|
|
(855 |
) |
|
| Loss before income taxes |
|
(464 |
) |
|
|
(1,535 |
) |
|
|
|
(5,268 |
) |
|
|
(5,400 |
) |
|
|
Income tax benefit |
|
207 |
|
|
|
621 |
|
|
|
|
375 |
|
|
|
1,561 |
|
|
|
Net loss from continuing operations |
|
(257 |
) |
|
|
(914 |
) |
|
|
|
(4,893 |
) |
|
|
(3,839 |
) |
|
|
Net (loss) income from discontinued operations |
|
— |
|
|
|
(680 |
) |
|
|
|
266 |
|
|
|
4,575 |
|
|
| Net (loss) income |
|
(257 |
) |
|
|
(1,594 |
) |
|
|
|
(4,627 |
) |
|
|
736 |
|
|
|
Deemed dividend on Series A redeemable preferred stock |
|
(596 |
) |
|
|
— |
|
|
|
|
(596 |
) |
|
|
— |
|
|
| Net (loss) income attributable
to common shareholders |
|
$ |
(853 |
) |
|
|
$ |
(1,594 |
) |
|
|
$ |
(5,223 |
) |
|
|
$ |
736 |
|
|
| |
|
|
|
|
|
|
|
|
| Net (loss) income per share -
basic and diluted |
|
|
|
|
|
|
|
|
| Net loss per share,
continuing operations attributable to common shareholders |
|
$ |
(0.42 |
) |
|
|
$ |
(0.45 |
) |
|
|
$ |
(2.69 |
) |
|
|
$ |
(1.90 |
) |
|
| Net (loss) income per
share, discontinued operations attributable to common
shareholders |
|
— |
|
|
|
(0.34 |
) |
|
|
|
0.13 |
|
|
|
2.27 |
|
|
| Net (loss) income per share
attributable to common shareholders - basic and diluted |
|
$ |
(0.42 |
) |
|
|
$ |
(0.79 |
) |
|
|
$ |
(2.56 |
) |
|
|
$ |
0.37 |
|
|
| Dividends declared per common
share |
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
— |
|
|
|
$ |
1.65 |
|
|
| Weighted-average shares
outstanding – basic and diluted |
|
2,050 |
|
|
|
2,024 |
|
|
|
|
2,041 |
|
|
|
2,016 |
|
|
| |
|
|
|
|
|
|
|
|
| Net (loss) income |
|
$ |
(257 |
) |
|
|
$ |
(1,594 |
) |
|
|
$ |
(4,627 |
) |
|
|
$ |
736 |
|
|
| Other comprehensive income
(loss): |
|
|
|
|
|
|
|
|
|
Reclassification of tax provision impact |
|
— |
|
|
|
— |
|
|
|
|
22 |
|
|
|
— |
|
|
|
Reclassification of unrealized gains on equity securities to
retained earnings |
|
— |
|
|
|
— |
|
|
|
|
— |
|
|
|
(17 |
) |
|
|
Total other comprehensive income (loss) |
|
— |
|
|
|
— |
|
|
|
|
22 |
|
|
|
(17 |
) |
|
| Comprehensive (loss)
income |
|
$ |
(257 |
) |
|
|
$ |
(1,594 |
) |
|
|
$ |
(4,605 |
) |
|
|
$ |
719 |
|
|
Digirad
CorporationCondensed Consolidated Balance
Sheets(Unaudited)(In
thousands)
| |
|
December 31, 2019 |
|
December 31, 2018 |
| Assets: |
|
|
|
|
| Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
1,821 |
|
|
$ |
1,545 |
|
|
Restricted cash |
|
240 |
|
|
167 |
|
|
Equity securities |
|
26 |
|
|
153 |
|
|
Accounts receivable, net |
|
18,571 |
|
|
12,642 |
|
|
Inventories, net |
|
7,097 |
|
|
5,402 |
|
|
Other current assets |
|
1,794 |
|
|
1,285 |
|
|
Total current assets |
|
29,549 |
|
|
21,194 |
|
| Property and equipment, net |
|
22,138 |
|
|
21,645 |
|
| Operating lease right-of-use
assets |
|
4,827 |
|
|
— |
|
| Intangible assets, net |
|
22,903 |
|
|
5,228 |
|
| Goodwill |
|
9,978 |
|
|
1,745 |
|
| Restricted cash |
|
— |
|
|
101 |
|
| Investments in and receivables
from related parties |
|
— |
|
|
275 |
|
| Other assets |
|
1,165 |
|
|
406 |
|
|
Total assets |
|
$ |
90,560 |
|
|
$ |
50,594 |
|
| |
|
|
|
|
| Liabilities, Mezzanine
Equity and Stockholders’ Equity: |
|
|
|
|
| Current liabilities: |
|
|
|
|
|
Accounts payable |
|
$ |
8,932 |
|
|
$ |
5,206 |
|
|
Accrued compensation |
|
4,579 |
|
|
3,862 |
|
|
Accrued warranty |
|
421 |
|
|
197 |
|
|
Deferred revenue |
|
1,786 |
|
|
1,687 |
|
|
Short-term debt |
|
4,036 |
|
|
— |
|
| Payable from related
parties |
|
1,920 |
|
|
— |
|
|
Operating lease liabilities |
|
1,866 |
|
|
— |
|
|
Other current liabilities |
|
4,638 |
|
|
2,265 |
|
|
Total current liabilities |
|
28,178 |
|
|
13,217 |
|
| Long-term debt, net of current
portion |
|
17,038 |
|
|
9,500 |
|
| Deferred tax liabilities |
|
23 |
|
|
121 |
|
| Operating lease liabilities, net
of current portion |
|
3,073 |
|
|
— |
|
| Other liabilities |
|
1,551 |
|
|
1,956 |
|
|
Total liabilities |
|
49,863 |
|
|
24,794 |
|
| |
|
|
|
|
| Preferred stock, $0.0001 par
value: 10,000,000 shares authorized: 10% Series A Cumulative
Perpetual Preferred Stock, 8,000,000 shares liquidation preference
($10.00 per share), 1,915,637 shares issued or outstanding at
December 31, 2019 |
|
19,602 |
|
|
— |
|
| |
|
|
|
|
| Stockholders’ equity: |
|
|
|
|
| Common stock, $0.0001 par value:
30,000,000 shares authorized; 2,050,659 and 2,024,979 shares issued
and outstanding (net of treasury shares) at December 31, 2019
and 2018, respectively |
|
— |
|
|
— |
|
| Treasury stock, at cost; 258,849
shares at December 31, 2019 and December 31, 2018 |
|
(5,728 |
) |
|
(5,728 |
) |
| Additional paid-in capital |
|
145,352 |
|
|
145,430 |
|
| Accumulated other comprehensive
loss |
|
— |
|
|
(22 |
) |
| Accumulated deficit |
|
(118,529 |
) |
|
(113,880 |
) |
|
Total stockholders’ equity |
|
21,095 |
|
|
25,800 |
|
|
Total liabilities, mezzanine equity and stockholders’ equity |
|
$ |
90,560 |
|
|
$ |
50,594 |
|
Digirad
CorporationReconciliation of Non-GAAP Financial
Measures(Unaudited)(In
thousands)
| |
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
| |
|
|
|
|
|
|
|
|
Net loss from continuing operations |
$ |
(257 |
) |
|
$ |
(914 |
) |
|
$ |
(4,893 |
) |
|
$ |
(3,839 |
) |
|
Acquired intangible amortization |
829 |
|
|
308 |
|
|
1,794 |
|
|
1,377 |
|
|
Unrealized (gain) loss on equity securities (1) |
(33 |
) |
|
(50 |
) |
|
(62 |
) |
|
62 |
|
|
Restructuring costs (2) |
(1 |
) |
|
(4 |
) |
|
121 |
|
|
93 |
|
|
Loss on extinguishment of debt (3) |
— |
|
|
— |
|
|
151 |
|
|
43 |
|
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
476 |
|
|
(Gain) loss on sale of buildings |
(4 |
) |
|
— |
|
|
232 |
|
|
507 |
|
|
Write-off of Star Real Estate Holding Assets |
— |
|
|
— |
|
|
143 |
|
|
— |
|
|
Transaction cost (4) |
284 |
|
|
91 |
|
|
2,342 |
|
|
91 |
|
|
Write-off of preferred stock issuance cost (5) |
— |
|
|
— |
|
|
273 |
|
|
— |
|
|
Income tax benefit |
(207 |
) |
|
(621 |
) |
|
(375 |
) |
|
(1,561 |
) |
| Non-GAAP adjusted net
income (loss) from continuing operations |
$ |
611 |
|
|
$ |
(1,190 |
) |
|
$ |
(274 |
) |
|
$ |
(2,751 |
) |
| |
|
|
|
|
|
|
|
| Net loss per diluted
share from continuing operations |
$ |
(0.13 |
) |
|
$ |
(0.45 |
) |
|
$ |
(2.40 |
) |
|
$ |
(1.90 |
) |
|
Acquired intangible amortization |
0.40 |
|
|
0.15 |
|
|
0.88 |
|
|
0.68 |
|
|
Unrealized (gain) loss on equity securities (1) |
(0.02 |
) |
|
(0.02 |
) |
|
(0.03 |
) |
|
0.03 |
|
|
Restructuring costs (2) |
— |
|
|
— |
|
|
0.06 |
|
|
0.05 |
|
|
Loss on extinguishment of debt (3) |
— |
|
|
— |
|
|
0.07 |
|
|
0.02 |
|
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
0.24 |
|
|
(Gain) loss on sale of buildings |
— |
|
|
— |
|
|
0.11 |
|
|
0.25 |
|
|
Write-off of Star Real Estate Holding Assets |
— |
|
|
— |
|
|
0.07 |
|
|
— |
|
|
Transaction cost (4) |
0.14 |
|
|
0.04 |
|
|
1.15 |
|
|
0.05 |
|
|
Write-off of preferred stock issuance cost (5) |
— |
|
|
— |
|
|
0.13 |
|
|
— |
|
|
Income tax benefit |
(0.10 |
) |
|
(0.31 |
) |
|
(0.18 |
) |
|
(0.77 |
) |
| Non-GAAP adjusted net
income (loss) per basic and diluted share from continuing
operations (6) |
$ |
0.30 |
|
|
$ |
(0.59 |
) |
|
$ |
(0.13 |
) |
|
$ |
(1.36 |
) |
Digirad
CorporationReconciliation of Non-GAAP Financial
Measures(Unaudited)(In
thousands)
| |
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
| |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Net loss from continuing operations |
|
$ |
(257 |
) |
|
$ |
(914 |
) |
|
$ |
(4,893 |
) |
|
$ |
(3,839 |
) |
|
Unrealized (gain) loss on equity securities (1) |
|
(33 |
) |
|
(50 |
) |
|
(62 |
) |
|
62 |
|
|
Restructuring costs (2) |
|
(1 |
) |
|
(4 |
) |
|
121 |
|
|
93 |
|
|
Loss on extinguishment of debt (3) |
|
— |
|
|
— |
|
|
151 |
|
|
43 |
|
|
Depreciation and amortization |
|
2,440 |
|
|
1,988 |
|
|
8,075 |
|
|
8,706 |
|
|
Stock-based compensation |
|
124 |
|
|
88 |
|
|
540 |
|
|
634 |
|
|
(Gain) loss on sale of building |
|
(4 |
) |
|
— |
|
|
232 |
|
|
507 |
|
|
Interest expense, net |
|
429 |
|
|
188 |
|
|
1,156 |
|
|
751 |
|
|
Goodwill impairment |
|
— |
|
|
— |
|
|
— |
|
|
476 |
|
|
Write-off of Star Real Estate Holding Assets |
|
— |
|
|
— |
|
|
143 |
|
|
— |
|
|
Transaction cost (4) |
|
284 |
|
|
91 |
|
|
2,342 |
|
|
91 |
|
|
Write-off of preferred stock issuance cost (5) |
|
— |
|
|
— |
|
|
273 |
|
|
— |
|
|
Income tax benefit |
|
(207 |
) |
|
(621 |
) |
|
(375 |
) |
|
(1,561 |
) |
| Non-GAAP adjusted
EBITDA from continuing operations |
|
$ |
2,775 |
|
|
$ |
766 |
|
|
$ |
7,703 |
|
|
$ |
5,963 |
|
|
(1) |
Reflects change in fair value of investments in equity
securities. |
|
|
|
|
(2) |
Reflects
severance related costs. |
|
|
|
|
(3) |
Reflects
write-off of unamortized deferred financing costs associated with
the Comerica Credit Agreement. |
|
|
|
|
(4) |
Reflects
legal and other costs related to the ATRM merger and HoldCo
establishment. |
|
|
|
|
(5) |
Reflects
write-off of costs related to a potential offering of preferred
stock the Company does not expect to complete. |
|
|
|
|
(6) |
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
CorporationReconciliation of Operating Cash Flow
to Free Cash Flow(Unaudited)(In
thousands)
| |
|
Three Months EndedDecember
31, |
|
Twelve Months Ended December 31, |
| |
|
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Net cash provided by operating activities |
|
$ |
1,165 |
|
|
$ |
2,846 |
|
|
$ |
400 |
|
|
$ |
5,064 |
|
| Less Purchases of Property and
Equipment |
|
(330 |
) |
|
(244 |
) |
|
(1,512 |
) |
|
(2,163 |
) |
| Gross Free Cash Flow |
|
835 |
|
|
2,602 |
|
|
(1,112 |
) |
|
2,901 |
|
| Plus Net Dispositions |
|
238 |
|
|
315 |
|
|
1,734 |
|
|
2,095 |
|
| Plus Merger related net
working capital adjustment |
|
284 |
|
|
— |
|
|
2,342 |
|
|
— |
|
| Free cash
flow |
|
$ |
1,357 |
|
|
$ |
2,917 |
|
|
$ |
2,964 |
|
|
$ |
4,996 |
|
Digirad
CorporationSupplemental Debt
Information(Unaudited)(In
thousands)
The following table reflects outstanding principal balances and
interest rates for the Company’s debt:
| |
December 31, 2019 |
|
December 31, 2018 |
| |
Amount |
|
Interest Rate |
|
Amount |
|
Interest Rate |
|
Revolving Credit Facility - SNB (1) |
$ |
17,038 |
|
4.26 |
% |
|
$ |
— |
|
— |
% |
| Revolving Credit Facility -
Comerica (2) |
$ |
— |
|
— |
% |
|
$ |
9,500 |
|
4.87 |
% |
| Revolving Credit Facility -
Gerber (3) |
$ |
1,111 |
|
7.50 |
% |
|
$ |
— |
|
— |
% |
| Revolving Credit Facility -
Premier (4) |
$ |
2,925 |
|
6.25 |
% |
|
$ |
— |
|
— |
% |
|
(1) |
Entered into with Sterling National Bank in March 2019 by Digirad.
The agreement consists of a revolving credit facility with a
five-year term, maturing in March 2024. |
| |
|
| (2) |
Entered
into with Comerica Bank in June 2017 by Digirad, which was
subsequently amended on January 30, 2018 and September 30, 2018.
The Company used a portion of the financing made available under
the SNB Credit Facility to refinance and terminate, effective as of
March 29, 2019, its credit facility with Comerica Bank. |
| |
|
| (3) |
Entered
into with Gerber Finance Inc. by KBS prior to the Company’s
acquisition of ATRM, and subsequently became Company debt upon
consummation of the ATRM acquisition. |
| |
|
| (4) |
Entered
into with Premier Bank by EdgeBuilder and Glenbrook prior to the
Company’s acquisition of ATRM, and subsequently became Company debt
upon consummation of the ATRM acquisition. |
Digirad
CorporationSupplemental Segment
Information(Unaudited)(In
thousands)
| |
|
Three Months Ended December 31, |
|
Twelve Months Ended December 31, |
| |
|
2019 |
|
2018 (1) |
|
2019 |
|
2018 (1) |
| Revenue by segment: |
|
|
|
|
|
|
|
|
|
Diagnostic Services |
|
$ |
12,009 |
|
|
$ |
11,552 |
|
|
$ |
47,723 |
|
|
$ |
49,256 |
|
|
Diagnostic Imaging |
|
4,949 |
|
|
3,582 |
|
|
13,872 |
|
|
11,983 |
|
|
Mobile Healthcare |
|
10,582 |
|
|
10,794 |
|
|
41,251 |
|
|
42,941 |
|
|
Building and Construction |
|
8,528 |
|
|
— |
|
|
11,257 |
|
|
— |
|
|
Real Estate and Investments |
|
232 |
|
|
— |
|
|
275 |
|
|
— |
|
|
Corporate, eliminations and other |
|
(158 |
) |
|
— |
|
|
(193 |
) |
|
— |
|
| Consolidated revenue |
|
$ |
36,142 |
|
|
$ |
25,928 |
|
|
$ |
114,185 |
|
|
$ |
104,180 |
|
| |
|
|
|
|
|
|
|
|
| Gross profit by segment: |
|
|
|
|
|
|
|
|
|
Diagnostic Services |
|
$ |
2,689 |
|
|
$ |
1,827 |
|
|
$ |
10,237 |
|
|
$ |
9,447 |
|
|
Diagnostic Imaging |
|
2,095 |
|
|
1,477 |
|
|
5,135 |
|
|
5,142 |
|
|
Mobile Healthcare |
|
1,605 |
|
|
435 |
|
|
4,956 |
|
|
3,682 |
|
|
Building and Construction |
|
1,536 |
|
|
— |
|
|
2,013 |
|
|
— |
|
|
Real Estate and Investments |
|
167 |
|
|
— |
|
|
(33 |
) |
|
— |
|
|
Corporate, eliminations and other |
|
(158 |
) |
|
— |
|
|
(193 |
) |
|
— |
|
| Consolidated gross profit |
|
$ |
7,934 |
|
|
$ |
3,739 |
|
|
$ |
22,115 |
|
|
$ |
18,271 |
|
| |
|
|
|
|
|
|
|
|
| Income (loss) from continuing
operations by segment: |
|
|
|
|
|
|
|
|
|
Diagnostic Services |
|
$ |
1,751 |
|
|
$ |
962 |
|
|
$ |
6,788 |
|
|
$ |
4,812 |
|
|
Diagnostic Imaging |
|
1,620 |
|
|
938 |
|
|
3,283 |
|
|
2,752 |
|
|
Mobile Healthcare |
|
727 |
|
|
(830 |
) |
|
1,094 |
|
|
(1,001 |
) |
|
Building and Construction |
|
281 |
|
|
— |
|
|
307 |
|
|
— |
|
|
Real Estate and Investments |
|
(52 |
) |
|
— |
|
|
(312 |
) |
|
— |
|
|
Corporate, eliminations and other |
|
(158 |
) |
|
— |
|
|
(193 |
) |
|
— |
|
|
Unallocated corporate and other expenses |
|
(3,991 |
) |
|
(2,468 |
) |
|
(12,221 |
) |
|
(10,125 |
) |
| Segment income from
operations |
|
178 |
|
|
(1,398 |
) |
|
(1,254 |
) |
|
(3,562 |
) |
|
Goodwill impairment (2) |
|
— |
|
|
— |
|
|
— |
|
|
(476 |
) |
| Merger and finance costs
(3) |
|
(284 |
) |
|
— |
|
|
(2,342 |
) |
|
— |
|
| Gain (loss) on sale of
buildings |
|
4 |
|
|
— |
|
|
(232 |
) |
|
(507 |
) |
| Consolidated loss from
operations |
|
$ |
(102 |
) |
|
$ |
(1,398 |
) |
|
$ |
(3,828 |
) |
|
$ |
(4,545 |
) |
| |
|
|
|
|
|
|
|
|
| Depreciation and amortization by
segment: |
|
|
|
|
|
|
|
|
|
Diagnostic Services |
|
$ |
335 |
|
|
$ |
377 |
|
|
$ |
1,277 |
|
|
$ |
2,127 |
|
|
Diagnostic Imaging |
|
63 |
|
|
92 |
|
|
278 |
|
|
313 |
|
|
Mobile Healthcare |
|
1,507 |
|
|
1,766 |
|
|
5,644 |
|
|
6,266 |
|
|
Building and Construction |
|
587 |
|
|
— |
|
|
711 |
|
|
— |
|
|
Real Estate and Investments |
|
(78 |
) |
|
— |
|
|
165 |
|
|
— |
|
| Total depreciation and
amortization |
|
$ |
2,414 |
|
|
$ |
2,235 |
|
|
$ |
8,075 |
|
|
$ |
8,706 |
|
(1) Segment information has been recast for all periods
presented to reflect the allocation of corporate and other
expenses.
(2) Reflects goodwill impairment adjustment for Telerhythmics
reporting unit.
(3) Reflects legal and other costs related to the ATRM merger
and HoldCo establishment.
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