Will Acquire ATRM Holdings as an Initial
“Kick-off” TransactionImmediately Hires David Noble as COO
Digirad Corporation (NASDAQ: DRAD) (“Digirad” or “DRAD”) announced
today that its Board of Directors has approved the conversion of
Digirad into a diversified holding company (“HoldCo”), and the
acquisition of ATRM Holdings, Inc. (OTC: ATRM) (“ATRM”) as an
initial “kick-off” transaction. In the transaction, ATRM
stockholders will receive consideration consisting of 0.4 shares of
Digirad common stock for each share of ATRM common stock, which is
the approximate price ratio between the two stocks over the past
year. This transaction represents an increase in DRAD’s share
count of less than 5%. The transaction is expected to close
in Q1 of 2019. Digirad will issue today a presentation
describing the anticipated benefits of the diversified holding
company structure, and the acquisition of ATRM, which will be
posted under the “Investors” tab of the Digirad website and filed
as an exhibit on Form 8-K with the SEC.
HoldCo’s team (after the ATRM acquisition) will
include Jeff Eberwein (Chairman), Matt Molchan (CEO of Healthcare
Imaging Division), Dan Koch (CEO of Modular Building Division),
David Noble (Chief Operating Officer), Steve Clark (Chief Financial
Officer), and Hannah Bible (General Counsel and Chief Compliance
Officer). Mr. Noble, who was appointed to the position of
Chief Operating Officer of Digirad on September 1, 2018, will
report directly to the Board of Directors of Digirad. A more
detailed description of Mr. Noble’s background is provided
below.
Digirad and ATRM have entered into a non-binding
letter of intent relating to Digirad’s acquisition of ATRM.
The transaction will be subject to, among other things, ATRM
becoming current with its SEC filings and the negotiation and
execution of definitive documentation. The transaction was
approved by Digirad and ATRM, respectively, by a special committee
of independent directors of each company. The Digirad Special
Committee was advised by Oberon Securities, LLC.
Digirad believes that converting into a
diversified holding company with a shared services center will
create tremendous value for Digirad stockholders, both immediately
and over the long-term, because the conversion is projected to: 1)
be immediately accretive, 2) improve future revenue, cash flow, and
earnings growth, and 3) create a platform for bolt-on acquisitions
and other growth opportunities.
Transaction
Highlights:*
- Growth and acquisition opportunities: HoldCo structure creates
a platform for future bolt-on acquisitions and additional growth
opportunities
- Management and operations: Improved operating and financial
performance due to operating CEOs focusing on the operating
businesses and growth opportunities
- Anticipated cost savings of $3 to $5 million or more from the
formation of HoldCo and the shared services center
- Anticipate up to 100% increase in Adjusted EBITDA and up to
142% increase in Free Cash Flow with less than a 5% increase in
DRAD’s share count
- Adjusted EBITDA to Net Debt ratio projected to stay constant at
1.1 – 1.3x
- Free Cash Flow per share of $0.20 to $0.25 projected to
increase to $0.43 to $0.66, representing a 115% to 164%
increase
- Dividend coverage ratio (defined as Free Cash Flow divided by
Dividend) of 91% to 114% projected to increase to 195% to 300%
- 2019 annualized year-end runrate: Revenue projected to be
between $145 and $155 million and Adjusted EBITDA projected to be
between $16 and $20 million versus $8.5 and $9.5 million in 2018
for Digirad stand-alone
*See statement below regarding Forward-Looking
Statements & Use of Non-GAAP Measures
Conference Call InformationA
conference call is scheduled for 11:00 a.m. EDT on September 10,
2018 to discuss the transaction. 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.
About David NoblePrior to being
named Chief Operating Officer of Digirad, Mr. Noble served as
Managing Member of Noble Point LLC, a business and financial
advisory firm. He engaged in M&A idea generation, as well
as advised medical practices around operations, growth
opportunities, and financing. He has more than 20 years of
experience in investment banking and most recently was Head of
Equity Capital Markets (ECM) for the Americas at HSBC, where he
established the Latin American franchise and grew regional revenues
to account for a significant portion of their global ECM business.
Beyond his direct P&L responsibility, he managed all
aspects of the ECM business, which involved strategy, forecasting
and budgeting, finance, legal and compliance, regulatory, HR, and
IT. Mr. Noble earned an MBA in Finance from MIT and a BA from
Yale University.
About DigiradDigirad designs,
manufactures, and distributes diagnostic medical imaging products.
Digirad operates in 3 segments: Diagnostic Services, Mobile
Healthcare, and Diagnostic Imaging. The Diagnostic Services
segment offers imaging and monitoring services to healthcare
providers as an alternative to purchasing the equipment or
outsourcing the job. The Mobile Healthcare segment 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 segment develops, sells, and maintains solid-state gamma
cameras.
About ATRM HoldingsATRM
manufactures modular housing units for commercial and residential
applications. ATRM operates in two segments: (i) modular
building manufacturing and (ii) structural wall panel and wood
foundation manufacturing, including building supply retail
operations. The modular building manufacturing segment is
operated by KBS Builders, and the structural wall panel and wood
foundation manufacturing segment is operated by EdgeBuilder.
Both KBS Builders and EdgeBuilder are wholly-owned
subsidiaries of ATRM. ATRM’s two segments have a combined
current backlog of approximately $9 million.
Forward-Looking Statements & Use of
Non-GAAP MeasuresThis press release contains
forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements in
this press 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 (referred to herein as the
“Company”) or acquisition targets and (iv) the assumptions
underlying or relating to any statement described above. 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 Company's inability to obtain adequate financing,
the length of time associated with servicing customers, accounts
receivable turnover, insufficient cash flows and resulting
illiquidity, the Company's inability to expand the Company's
business, government regulation, the underlying condition of the
technology support industry, the lack of product diversification,
existing or increased competition, stock volatility and
illiquidity, the Company's failure to implement the Company's
business plans or strategies, changes in macro or industry specific
business conditions, failure to keep pace with evolving
technologies and difficulties integrating technologies, unfavorable
changes in reimbursement practices, negative economic outlooks, the
Company’s inability to consummate successful acquisitions and
execute related integration, 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, the continued demand for and
market acceptance of its 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. This press 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.
The information provided herein includes certain
non-GAAP financial measures. These non-GAAP financial
measures are intended to supplement the GAAP financial information
by providing additional insight regarding results of operations of
the Company. The non-GAAP adjusted EBITDA financial measures
used by the Company are intended to provide an enhanced
understanding of our underlying operational measures to manage the
Company’s business, to evaluate performance compared to prior
periods and the marketplace, and to establish operational goals.
Certain items are excluded from these non-GAAP financial
measures to provide additional comparability measures from period
to period. These non-GAAP financial measures will not be
defined in the same manner by all companies and may not be
comparable to other companies.
Specifically, this press release presents the
non-GAAP financial measures “Adjusted EBITDA” (defined as “earnings
before interest, taxes, depreciation, and amortization, and
adjusted for stock-based compensation”) and “Free Cash Flow.”
The most directly comparable measures for these non-GAAP financial
measures are net income and diluted net income per share. All
figures based on DRAD guidance for 2018 and projected annualized
runrate by year-end 2019 for HoldCo.
For more
information contact: |
Jeffrey E.
Eberwein |
Chairman of the Board
of Directors |
203-489-9501 |
ir@digirad.com |
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