Digirad Corporation (Nasdaq:DRAD) today reported its financial
results for the first quarter ended March 31, 2018.
Total revenues from continuing operations for
the first quarter were $25.5 million, compared to $25.8 million in
the first quarter of the prior year.
Net loss from continuing operations for the
first quarter was $1.4 million, or $0.07 net loss per diluted share
from continuing operations, compared to net loss of $2.3 million,
or $0.11 net loss per diluted share in the same period in the prior
year. Non-GAAP adjusted net loss from continuing operations for the
first quarter was $1.4 million, or $0.07 adjusted net loss from
continuing operations per diluted share, compared to $1.3 million,
or $0.06 adjusted net loss per diluted share in the same period in
the prior year.
Non-GAAP adjusted EBITDA from continuing
operations for the first quarter was $1.0 million, compared to $1.1
million in the same period in the prior year.
Digirad President and CEO Matt Molchan said,
“Overall, our business performed within our expectations. Despite
some harsh weather conditions in the Midwest and the Northeast, our
service businesses, Diagnostic Services and Mobile Healthcare,
continued to deliver convenient, effective and efficient healthcare
solutions on an as needed, when needed, and where needed basis
across the country during the quarter." Molchan continued, “Our
Diagnostic Imaging business continued to see improvements,
exceeding revenue for the quarter on a year over year basis. Also,
in the quarter, as previously announced - we sold our service
contracts in our MDSS business unit to Philips - effectively
discontinuing operations in this unit. We also completed some
operational and personnel changes in our core business areas as a
result of the divestiture of the MDSS business. Finally, we were
able to pay down our debt from $19.5 million at the beginning of
the quarter to $13.0 million at the end of the quarter. We expect
our business to continue to generate free cash flow, which we will
use to pay down debt and fund our ongoing dividend, both of which
we believe deliver value to our shareholders.”
The Company also announces a cash dividend of
$0.055 cents per share that will be paid on May 30, 2018, to
shareholders of record on May 15, 2018.
2018 Financial Guidance
The Company announced its financial guidance for
2018, 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 May 1, 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 May 1st, 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 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
CorporationConsolidated Statements of
Operations(Unaudited)
|
Three Months Ended |
|
March 31, |
(in thousands,
except per share amounts) |
2018 |
|
2017 |
Revenues |
|
|
|
Services |
$ |
22,623 |
|
|
$ |
23,057 |
|
Product
and product-related |
2,842 |
|
|
2,783 |
|
Total
revenues |
25,465 |
|
|
25,840 |
|
Cost of revenues: |
|
|
|
Services |
19,261 |
|
|
18,583 |
|
Product
and product-related |
1,597 |
|
|
1,655 |
|
Total
cost of revenues |
20,858 |
|
|
20,238 |
|
|
|
|
|
Gross profit |
4,607 |
|
|
5,602 |
|
Total gross profit percentage |
18.1 |
% |
|
21.7 |
% |
Services gross profit percentage |
14.9 |
% |
|
19.4 |
% |
Product and product-related gross profit
percentage |
43.8 |
% |
|
40.5 |
% |
|
|
|
|
Operating
expenses: |
|
|
|
Marketing
and sales |
1,467 |
|
|
1,783 |
|
General
and administrative |
4,392 |
|
|
4,896 |
|
Amortization of intangible assets |
357 |
|
|
374 |
|
Total
operating expenses |
6,216 |
|
|
7,053 |
|
|
|
|
|
Loss income from
operations |
(1,609 |
) |
|
(1,451 |
) |
|
|
|
|
Other expense: |
|
|
|
Other
expense, net |
(17 |
) |
|
— |
|
Interest
expense, net |
(217 |
) |
|
(193 |
) |
Total other
expense |
(234 |
) |
|
(193 |
) |
|
|
|
|
Loss from continuing
operations before income taxes |
(1,843 |
) |
|
(1,644 |
) |
Income
tax benefit (expense) |
455 |
|
|
(607 |
) |
Net loss
from continuing operations |
(1,388 |
) |
|
(2,251 |
) |
Income
from discontinued operations |
5,494 |
|
|
175 |
|
Net income (loss) |
$ |
4,106 |
|
|
$ |
(2,076 |
) |
|
|
|
|
Net income (loss) per
share - basic and diluted |
|
|
|
Continuing operations |
$ |
(0.07 |
) |
|
$ |
(0.11 |
) |
Discontinued operations |
$ |
0.27 |
|
|
$ |
0.01 |
|
Net income (loss) per
share - basic and diluted |
$ |
0.20 |
|
|
$ |
(0.10 |
) |
Dividends
declared per common share |
$ |
0.055 |
|
|
$ |
0.05 |
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding – basic and diluted |
|
20,092 |
|
|
|
19,933 |
|
Digirad
CorporationConsolidated Balance
Sheets(Unaudited)
|
|
|
|
(in thousands,
except share data) |
March 31, 2018 |
|
December 31, 2017 |
Assets: |
|
|
|
Current assets: |
|
|
|
Cash and
cash equivalents |
$ |
1,033 |
|
|
$ |
1,877 |
|
Securities available-for-sale |
116 |
|
|
97 |
|
Accounts
receivable, net |
12,752 |
|
|
15,887 |
|
Inventories, net |
5,755 |
|
|
5,501 |
|
Restricted cash |
243 |
|
|
242 |
|
Other
current assets |
2,287 |
|
|
1,972 |
|
Total current assets |
22,186 |
|
|
25,576 |
|
Property and equipment,
net |
27,176 |
|
|
28,365 |
|
Intangible assets,
net |
7,473 |
|
|
7,830 |
|
Goodwill |
2,392 |
|
|
2,392 |
|
Restricted cash |
101 |
|
|
101 |
|
Non-current assets held
for sale |
— |
|
|
1,736 |
|
Other assets |
634 |
|
|
703 |
|
Total
assets |
$ |
59,962 |
|
|
$ |
66,703 |
|
|
|
|
|
Liabilities: |
|
|
|
Current
liabilities: |
|
|
|
Accounts
payable |
$ |
5,712 |
|
|
$ |
5,207 |
|
Accrued
compensation |
3,208 |
|
|
5,507 |
|
Accrued
warranty |
182 |
|
|
204 |
|
Deferred
revenue |
1,922 |
|
|
2,302 |
|
Current
liabilities held for sale |
— |
|
|
835 |
|
Other
current liabilities |
2,666 |
|
|
2,915 |
|
Total
current liabilities |
13,690 |
|
|
16,970 |
|
Long-term debt |
13,001 |
|
|
19,500 |
|
Deferred tax
liabilities |
361 |
|
|
254 |
|
Other liabilities |
1,979 |
|
|
2,180 |
|
Total
liabilities |
29,031 |
|
|
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;
20,118,336 and 20,060,311 shares issued and outstanding (net of
treasury shares) at March 31, 2018 and December 31, 2017,
respectively |
2 |
|
|
2 |
|
Treasury stock, at cost; 2,588,484 shares at March 31, 2018 and
December 31, 2017 |
(5,728 |
) |
|
(5,728 |
) |
Additional paid-in capital |
147,189 |
|
|
148,163 |
|
Accumulated other comprehensive loss |
(22 |
) |
|
(5 |
) |
Accumulated deficit |
(110,510 |
) |
|
(114,633 |
) |
Total
stockholders’ equity |
30,931 |
|
|
27,799 |
|
Total
liabilities and stockholders’ equity |
$ |
59,962 |
|
|
$ |
66,703 |
|
|
|
|
|
|
|
|
|
Digirad
CorporationReconciliation of Non-GAAP Financial
Measures(Unaudited)
|
|
|
Three Months Ended March
31, |
(in thousands,
except per share amounts) |
2018 |
|
2017 |
|
|
|
|
Net loss from
continuing operations |
$ |
(1,388 |
) |
|
$ |
(2,251 |
) |
Acquired
intangible amortization |
357 |
|
|
374 |
|
Acquisition related contingent consideration valuation adjustment
(1) |
— |
|
|
(57 |
) |
Unrealized loss on available-for-sale securities (2) |
17 |
|
|
— |
|
Restructuring costs (3) |
97 |
|
|
— |
|
Income
tax items (4) |
(455 |
) |
|
607 |
|
Non-GAAP
adjusted net loss from continuing operations |
$ |
(1,372 |
) |
|
$ |
(1,327 |
) |
|
|
|
|
Net loss per
diluted share from continuing operations (5) |
$ |
(0.07 |
) |
|
$ |
(0.11 |
) |
Acquired
intangible amortization |
0.02 |
|
|
0.02 |
|
Unrealized loss on available-for-sale securities (2) |
— |
|
|
— |
|
Acquisition related contingent consideration valuation adjustment
(1) |
— |
|
|
— |
|
Restructuring costs (3) |
— |
|
|
— |
|
Income
tax items (4) |
(0.02 |
) |
|
0.03 |
|
Non-GAAP
adjusted net loss per diluted share from continuing operations
(5) |
$ |
(0.07 |
) |
|
$ |
(0.06 |
) |
|
|
|
|
|
|
|
Three Months Ended March
31, |
(in
thousands) |
2018 |
|
2017 |
|
|
|
|
Net loss from
continuing operations |
$ |
(1,388 |
) |
|
$ |
(2,251 |
) |
Acquisition related contingent consideration valuation
adjustment(1) |
— |
|
|
(57 |
) |
Unrealized loss on available-for-sale securities (2) |
17 |
|
|
— |
|
Restructuring costs(3) |
97 |
|
|
— |
|
Depreciation and amortization |
2,265 |
|
|
2,366 |
|
Stock-based compensation |
201 |
|
|
255 |
|
Interest
expense, net |
217 |
|
|
193 |
|
Income
tax expense (benefit) |
(455 |
) |
|
607 |
|
Non-GAAP
adjusted EBITDA from continuing operations |
$ |
954 |
|
|
$ |
1,113 |
|
|
|
|
|
(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) |
Reflects
severance related costs. |
(4) |
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. |
(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
CorporationReconciliation of Operating Cash Flow
to Free Cash Flow(Unaudited)
|
|
|
Three Months Ended March 31, |
(in
thousands) |
2018 |
|
2017 |
Net cash
provided by operating activities |
$ |
420 |
|
|
$ |
1,924 |
|
Purchases of property
and equipment, net of dispositions |
(161 |
) |
|
(485 |
) |
Free cash
flow |
$ |
259 |
|
|
$ |
1,439 |
|
|
|
|
|
|
|
|
|
Digirad
CorporationSupplemental Debt
Information(Unaudited)
The following table reflects outstanding
principal balances and interest rates for the Company's debt at
March 31, 2018 and December 31, 2017:
|
|
|
|
|
March 31, 2018 |
|
December 31, 2017 |
(in
thousands) |
Balance |
Interest Rate |
|
Balance |
Interest Rate |
Revolving Credit
Facility (1) |
$ |
13,001 |
4.25 |
% |
|
$ |
19,500 |
3.90 |
% |
Total borrowings |
$ |
13,001 |
|
|
$ |
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
CorporationSupplemental Segment
Information(Unaudited)
|
|
|
Three Months Ended March
31, |
(in
thousands) |
2018 |
|
2017 (1) |
Revenue by
segment: |
|
|
|
Diagnostic Services |
$ |
12,025 |
|
|
$ |
12,202 |
|
Diagnostic Imaging |
2,842 |
|
|
2,783 |
|
Mobile
Healthcare |
10,598 |
|
|
10,855 |
|
Condensed consolidated
revenue |
$ |
25,465 |
|
|
$ |
25,840 |
|
Gross profit by
segment: |
|
|
|
Diagnostic Services |
$ |
2,247 |
|
|
$ |
2,836 |
|
Diagnostic Imaging |
1,245 |
|
|
1,128 |
|
Mobile
Healthcare |
1,115 |
|
|
1,638 |
|
Condensed consolidated
gross profit |
$ |
4,607 |
|
|
$ |
5,602 |
|
Income (loss) from
continuing operations by segment: |
|
|
|
Diagnostic Services |
$ |
(290 |
) |
|
$ |
16 |
|
Diagnostic Imaging |
(204 |
) |
|
(437 |
) |
Mobile
Healthcare |
(1,115 |
) |
|
(1,030 |
) |
Condensed consolidated
loss from continuing operations |
$ |
(1,609 |
) |
|
$ |
(1,451 |
) |
(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.
For more information
contact: Matthew G. MolchanChief Executive
Officer858-726-1600ir@digirad.com
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