Digirad Corporation (Nasdaq: DRAD; DRADP) (“Digirad” or the
“Company”) reported today its financial results for the third
quarter (Q3) and nine months (9M) ended September 30, 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. The acquisition of ATRM was completed by way of
a merger between ATRM and a newly formed wholly owned subsidiary of
the Company, with ATRM surviving the merger as a wholly owned
subsidiary of the Company.
Q3 2019 Financial Highlights vs. Q3 2018 *
- Total revenue increased to $28.3 million from $25.7
million
- Gross profit increased to $5.2 million from $4.4 million
- Net loss from continuing operations was $1.5 million and
included $1.1 million of merger related expenses; this compared to
a net loss from continuing operations of $1.2 million
- Non-GAAP adjusted EBITDA from continuing operations increased
to $2.0 million from $1.6 million
*Digirad’s Q3 2019 results include financial and
operational data of the two newly created divisions - Building
& Construction and Real Estate & Investments from September
11, 2019 to September 30, 2019. There were no operational or
financial data recorded in the 2018 period from these two
divisions.
Jeff Eberwein, Chairman of Digirad, noted,
“Following the acquisition of ATRM we are now operating as a
HoldCo, the mandate of which is to maximize long-term shareholder
value through high-return internal investments that promote revenue
growth, operating efficiencies, and cash flow generation. In that
regard, we have established a Shared Services Center (“SSC”) which,
once fully operational, should provide cost savings throughout the
Company and its subsidiaries that will likely grow over time with
additional acquisitions.”
“Our two-fold growth strategy is to:
- Organically grow our existing business divisions by focusing on
higher margin segments such as camera sales and mobile scanning
services in our Healthcare division, and increasing the utilization
rate at existing factories and opening idle facilities to fully
take advantage of the significant market opportunities available in
our Building & Construction division.
- Seek attractive acquisition opportunities in two categories:
bolt-on acquisitions for our existing platform companies, and
acquisitions that create new platform companies for the
Company.”
Revenues
The Company’s total Q3 2019 revenues increased
by 10% to $28.3 million from $25.7 million in the third quarter of
the prior year. 9M 2019 total revenues of $78.0 million slightly
decreased from 9M 2018 revenues of $78.3 million.
|
Revenue in $ million |
Q3 2019 |
|
Q3 2018 |
|
% change |
|
9M 2019 |
|
9M 2018 |
|
% change |
|
Healthcare |
$ |
25,596 |
|
|
$ |
25,707 |
|
|
(0.4 |
)% |
|
$ |
75,306 |
|
|
$ |
78,252 |
|
|
(3.8 |
)% |
|
Building & Construction |
2,729 |
|
|
— |
|
|
100.0 |
% |
|
2,729 |
|
|
— |
|
|
100 |
% |
| Real Estate &
Investments |
8 |
|
|
— |
|
|
100.0 |
% |
|
8 |
|
|
— |
|
|
100 |
% |
|
Total Revenue |
$ |
28,333 |
|
|
$ |
25,707 |
|
|
10.2 |
% |
|
$ |
78,043 |
|
|
$ |
78,252 |
|
|
(0.3 |
)% |
Revenues for the Healthcare division for both Q3
and 9M periods of 2019 slightly decreased from respective periods
of 2018 due to the sale of our Telerhythmics business in October
2018. Telerhythmics’ revenues for Q3 2018 and 9M 2018, were $0.9
million and $3.1 million, respectively. This division’s core
business remains strong with higher revenues from the sale of
cameras and scanning services.
Gross Profit
|
Gross profit in $ million |
Q3 2019 |
|
Q3 2018 |
|
% change |
|
9M 2019 |
|
9M 2018 |
|
% change |
|
Healthcare |
$ |
4,777 |
|
|
$ |
4,358 |
|
|
9.6 |
% |
|
$ |
13,939 |
|
|
$ |
14,532 |
|
|
(4.1 |
)% |
|
Building & Construction |
477 |
|
|
— |
|
|
100.0 |
% |
|
477 |
|
|
— |
|
|
100 |
% |
|
Real Estate & Investments |
(58 |
) |
|
— |
|
|
100.0 |
% |
|
(235 |
) |
|
— |
|
|
100 |
% |
|
Total Gross Profit |
$ |
5,196 |
|
|
$ |
4,358 |
|
|
19.2 |
% |
|
$ |
14,181 |
|
|
$ |
14,532 |
|
|
(2.4 |
)% |
Q3 2019 gross profit of our Healthcare division
increased by 9.6% from prior year’s same quarter, driven by higher
scan volume and higher utilization rate of our imaging systems.
Gross profit for the 9M 2019 period was lower due to higher
material variance costs from scrapped equipment in the Diagnostic
Imaging business.
Operating Expenses
Q3 2019 marketing, sales, general and
administrative (MSG&A) expenses slightly increased by 3.4% or
$0.2 million from the same period of 2018, mainly due to increased
expenses from the Building & Construction Division and offset
by lower headcount and reduced costs for contracted outside
services particularly in the information technology (IT) and human
resources (HR) areas from the Healthcare division. Our 9M 2019
MSG&A expenses decreased by 6.3% to $14.6 million, compared to
the same period of 2018 due to lower salaries and benefits
resulting from lower headcount following the sale of our
Telerhythmics business in October 2018 and reduced costs for
contracted outside services particularly in IT and HR areas as a
result of steps we took to streamline our internal operations.
Furthermore, the HoldCo structure will enable
Digirad to reduce corporate overhead costs by consolidating certain
marketing, sales and administrative functions thus generating cost
savings and improved earnings. The Company expects to begin
realizing meaningful benefits of the HoldCo structure in 2020.
Non-GAAP adjusted EBITDA
Q3 2019 non-GAAP adjusted EBITDA from continuing
operations rose to $2.0 million from $1.6 million in the same
quarter of the prior year due to higher revenues from sale of
cameras and from our high-margin mobile scanning services. 9M 2019
non-GAAP adjusted EBITDA from continuing operations decreased to
$4.9 million, compared to $5.2 million in the same period in the
prior year, reflecting higher equipment material costs.
Net loss
Q3 2019 net loss from continuing operations for
the third quarter was $1.5 million, or $0.74 per basic and diluted
share, compared to net loss from continuing operations of $1.2
million, or $0.59 per basic and diluted share in the same period in
the prior year. Q3 2019 non-GAAP adjusted net income from
continuing operations was $14 thousand, or $0.01 per basic and
diluted share, compared to adjusted net loss of $0.6 million, or
$0.31 per basic and diluted share in the same period in the prior
year.
9M 2019 net loss from continuing operations was
$4.6 million, or $2.27 per basic and diluted share, compared to net
loss from continuing operations of $2.9 million, or $1.45 per basic
and diluted share in the same period in the prior year. 9M 2019
non-GAAP adjusted net loss from continuing operations decreased to
$0.9 million, or $0.46 per basic and diluted share, compared to
adjusted net loss of $1.6 million, or $0.78 per basic and diluted
share in the same period in the prior year.
The increase in net loss from continuing
operations in both Q3 2019 and 9M 2019 periods was mainly due to
non-recurring legal costs, other expenses, totaling $1.1 million
and $2.1 million, respectively, related to the acquisition of ATRM
and establishment of HoldCo.
Operating cash flow
Q3 2019 cash flow from operation was an outflow
of $1.1 million, compared to an outflow of $0.8 million for the
same period in the prior year. 9M 2019 cash flow from operations
was an outflow of $0.8 million, compared to an inflow of $2.2
million for the same period in the prior year.
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.
Q3 2019 non-GAAP free cash flow was an inflow of
$0.4 million for the third quarter, compared to an outflow of $0.4
million in the same quarter in the prior year. 9M 2019 non-GAAP
free cash flow was an inflow of $1.6 million, compared to an inflow
of $2.1 million in the same period in the prior year.
Net operating loss (NOL)
Finally, Digirad Corporation has approximately
$83.7 million of usable net operating losses (“NOL”) in the U.S. as
of yearend 2018, 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 2019 due to operating results.
Conference Call Information
A conference call is scheduled for 10:00 a.m.
EDT on November 14, 2019 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 November 14, 2019.
About Digirad Corporation
Digirad Corporation is a diversified holding
company with three operating division: Healthcare Imaging, Building
& Construction and Real Estate & Investments.
Digirad: 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
ATRM manufactures modular housing units for
commercial and residential applications. ATRM 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”), 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”). KBS
Builders, EdgeBuilder and Glenbrook are wholly-owned subsidiaries
of ATRM.
Real Estate & Investments
Division
This business division manages the real estate
assets and investments of HoldCo.
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 in 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 in 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 |
The Equity Group |
|
| 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 Ended September 30, |
|
Nine Months Ended September 30, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
| Revenues: |
|
|
|
|
|
|
|
|
Healthcare |
$ |
25,596 |
|
|
$ |
25,707 |
|
|
$ |
75,306 |
|
|
$ |
78,252 |
|
|
Building and Construction |
2,729 |
|
|
— |
|
|
2,729 |
|
|
— |
|
|
Real Estate and Investments |
8 |
|
|
— |
|
|
8 |
|
|
— |
|
|
Total revenues |
28,333 |
|
|
25,707 |
|
|
78,043 |
|
|
78,252 |
|
| Cost of revenues: |
|
|
|
|
|
|
|
|
Healthcare |
20,819 |
|
|
21,349 |
|
|
61,367 |
|
|
63,720 |
|
|
Building and Construction |
2,252 |
|
|
— |
|
|
2,252 |
|
|
— |
|
|
Real Estate and Investments |
66 |
|
|
— |
|
|
243 |
|
|
— |
|
|
Total cost of revenues |
23,137 |
|
|
21,349 |
|
|
63,862 |
|
|
63,720 |
|
| Gross profit |
5,196 |
|
|
4,358 |
|
|
14,181 |
|
|
14,532 |
|
|
Total gross profit percentage |
18.3 |
% |
|
17.0 |
% |
|
18.2 |
% |
|
18.6 |
% |
|
Healthcare percentage |
18.7 |
% |
|
17.0 |
% |
|
18.5 |
% |
|
18.6 |
% |
|
Building and Construction gross profit
percentage |
17.5 |
% |
|
— |
% |
|
17.5 |
% |
|
— |
% |
|
Real Estate and Investments |
(725 |
)% |
|
— |
% |
|
(2,938 |
)% |
|
— |
% |
| Operating expenses: |
|
|
|
|
|
|
|
|
Marketing, sales and general and administrative expenses |
4,948 |
|
|
4,785 |
|
|
14,648 |
|
|
15,627 |
|
|
Amortization of intangible assets |
399 |
|
|
356 |
|
|
965 |
|
|
1,069 |
|
|
Merger and finance costs |
1,058 |
|
|
— |
|
|
2,058 |
|
|
— |
|
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
476 |
|
|
Total operating expenses |
6,405 |
|
|
5,141 |
|
|
17,671 |
|
|
17,172 |
|
| Loss from operations |
(1,209 |
) |
|
(783 |
) |
|
(3,490 |
) |
|
(2,640 |
) |
| Other expense: |
|
|
|
|
|
|
|
|
Other income (expense), net |
3 |
|
|
(76 |
) |
|
(200 |
) |
|
(112 |
) |
|
Interest expense, net |
(292 |
) |
|
(200 |
) |
|
(727 |
) |
|
(563 |
) |
|
Loss on sale of building |
(4 |
) |
|
(507 |
) |
|
(236 |
) |
|
(507 |
) |
|
Loss on extinguishment of debt |
— |
|
|
— |
|
|
(151 |
) |
|
(43 |
) |
| Total other expense |
(293 |
) |
|
(783 |
) |
|
(1,314 |
) |
|
(1,225 |
) |
| Loss before income taxes |
(1,502 |
) |
|
(1,566 |
) |
|
(4,804 |
) |
|
(3,865 |
) |
|
Income tax (expense) benefit |
(2 |
) |
|
379 |
|
|
168 |
|
|
940 |
|
|
Net loss from continuing operations |
(1,504 |
) |
|
(1,187 |
) |
|
(4,636 |
) |
|
(2,925 |
) |
|
Net (loss) income from discontinued operations |
— |
|
|
(239 |
) |
|
266 |
|
|
5,255 |
|
| Net (loss) income |
$ |
(1,504 |
) |
|
$ |
(1,426 |
) |
|
$ |
(4,370 |
) |
|
$ |
2,330 |
|
| |
|
|
|
|
|
|
|
| Net (loss) income per share -
basic and diluted |
|
|
|
|
|
|
|
| Continuing operations |
$ |
(0.74 |
) |
|
$ |
(0.59 |
) |
|
$ |
(2.27 |
) |
|
$ |
(1.45 |
) |
| Discontinued operations |
— |
|
|
(0.12 |
) |
|
0.13 |
|
|
2.61 |
|
| Net (loss) income per share -
basic and diluted |
$ |
(0.74 |
) |
|
$ |
(0.71 |
) |
|
$ |
(2.14 |
) |
|
$ |
1.16 |
|
| Dividends declared per common
share |
$ |
— |
|
|
$ |
0.06 |
|
|
$ |
— |
|
|
$ |
0.17 |
|
| Weighted-average shares
outstanding – basic and diluted |
2,046 |
|
|
2,018 |
|
|
2,038 |
|
|
2,013 |
|
| |
|
|
|
|
|
|
|
| Net (loss) income |
$ |
(1,504 |
) |
|
$ |
(1,426 |
) |
|
$ |
(4,370 |
) |
|
$ |
2,330 |
|
| 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 |
$ |
(1,504 |
) |
|
$ |
(1,426 |
) |
|
$ |
(4,348 |
) |
|
$ |
2,313 |
|
Digirad
CorporationCondensed Consolidated Balance
Sheets(Unaudited)(In
thousands)
| |
September 30, 2019 |
|
December 31, 2018 |
| Assets: |
|
|
|
| Current assets: |
|
|
|
|
Cash and cash equivalents |
$ |
1,479 |
|
|
$ |
1,545 |
|
|
Restricted cash |
194 |
|
|
167 |
|
|
Equity securities |
21 |
|
|
153 |
|
|
Accounts receivable, net |
16,643 |
|
|
12,642 |
|
|
Inventories, net |
8,179 |
|
|
5,402 |
|
|
Other current assets |
1,805 |
|
|
1,285 |
|
|
Total current assets |
28,321 |
|
|
21,194 |
|
| Property and equipment, net |
23,401 |
|
|
21,645 |
|
| Operating lease right-of-use
assets |
5,015 |
|
|
— |
|
| Intangible assets, net |
23,723 |
|
|
5,228 |
|
| Goodwill |
9,975 |
|
|
1,745 |
|
| Restricted cash |
— |
|
|
101 |
|
| Deferred tax assets |
75 |
|
|
— |
|
| Investments in and receivables
from related parties |
— |
|
|
275 |
|
| Other assets |
851 |
|
|
406 |
|
|
Total assets |
$ |
91,361 |
|
|
$ |
50,594 |
|
| |
|
|
|
| Liabilities, Mezzanine
Equity and Stockholders’ Equity |
|
|
|
| Current liabilities: |
|
|
|
|
Accounts payable |
$ |
9,480 |
|
|
$ |
5,206 |
|
|
Accrued compensation |
4,101 |
|
|
3,862 |
|
|
Accrued warranty |
342 |
|
|
197 |
|
|
Deferred revenue |
1,756 |
|
|
1,687 |
|
|
Short-term debt |
3,988 |
|
|
— |
|
|
Operating lease liabilities, current portion |
1,790 |
|
|
— |
|
|
Other current liabilities |
4,708 |
|
|
2,265 |
|
|
Total current liabilities |
26,165 |
|
|
13,217 |
|
| Long-term debt |
17,217 |
|
|
9,500 |
|
| Long-term payable from related
parties |
1,925 |
|
|
— |
|
| Deferred tax liabilities |
121 |
|
|
121 |
|
| Operating lease liabilities, net
of current portion |
3,356 |
|
|
— |
|
| Other liabilities |
1,749 |
|
|
1,956 |
|
|
Total liabilities |
50,533 |
|
|
24,794 |
|
| |
|
|
|
| Preferred stock, $0.0001 par
value: 10,000,000 shares authorized: 10% Series A Cumulative
Redeemable preferred stock, 8,000,000 shares liquidation preference
($10.00 per share), 1,915,637 shares issued or outstanding at
September 30, 2019 |
19,156 |
|
|
— |
|
| |
|
|
|
| Stockholders’ equity: |
|
|
|
| Common stock, $0.0001 par value:
30,000,000 shares authorized; 2,048,743 and 2,024,979 shares issued
and outstanding (net of treasury shares) at September 30, 2019 and
December 31, 2018, respectively |
— |
|
|
— |
|
| Treasury stock, at cost; 258,849
shares at September 30, 2019 and December 31, 2018 |
(5,728 |
) |
|
(5,728 |
) |
| Additional paid-in capital |
145,672 |
|
|
145,430 |
|
| Accumulated other comprehensive
loss |
— |
|
|
(22 |
) |
| Accumulated deficit |
(118,272 |
) |
|
(113,880 |
) |
|
Total stockholders’ equity |
21,672 |
|
|
25,800 |
|
|
Total liabilities, mezzanine equity and stockholders’ equity |
$ |
91,361 |
|
|
$ |
50,594 |
|
Digirad
CorporationReconciliation of Non-GAAP Financial
Measures(Unaudited)(In
thousands)
| |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
| |
|
|
|
|
|
|
|
|
Net loss from continuing operations |
$ |
(1,504 |
) |
|
$ |
(1,187 |
) |
|
$ |
(4,636 |
) |
|
$ |
(2,925 |
) |
|
Acquired intangible amortization |
399 |
|
|
356 |
|
|
965 |
|
|
1,069 |
|
|
Unrealized (gain) loss on equity securities (1) |
(6 |
) |
|
76 |
|
|
(29 |
) |
|
112 |
|
|
Restructuring costs (2) |
60 |
|
|
— |
|
|
122 |
|
|
97 |
|
|
Loss on extinguishment of debt (3) |
— |
|
|
— |
|
|
151 |
|
|
43 |
|
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
476 |
|
|
Loss on sale of buildings |
4 |
|
|
507 |
|
|
236 |
|
|
507 |
|
|
Write-off of Star Real Estate Holding Assets |
— |
|
|
— |
|
|
143 |
|
|
— |
|
|
Transaction cost (4) |
1,059 |
|
|
— |
|
|
2,015 |
|
|
— |
|
|
Write-off of preferred stock issuance cost (5) |
— |
|
|
— |
|
|
273 |
|
|
— |
|
|
Income tax benefit |
2 |
|
|
(379 |
) |
|
(168 |
) |
|
(940 |
) |
| Non-GAAP adjusted net
income (loss) from continuing operations |
$ |
14 |
|
|
$ |
(627 |
) |
|
$ |
(928 |
) |
|
$ |
(1,561 |
) |
| |
|
|
|
|
|
|
|
| Net loss per diluted
share from continuing operations |
$ |
(0.74 |
) |
|
$ |
(0.59 |
) |
|
$ |
(2.27 |
) |
|
$ |
(1.45 |
) |
|
Acquired intangible amortization |
0.20 |
|
|
0.18 |
|
|
0.47 |
|
|
0.53 |
|
|
Unrealized (gain) loss on equity securities (1) |
— |
|
|
0.04 |
|
|
(0.01 |
) |
|
0.06 |
|
|
Restructuring costs (2) |
0.03 |
|
|
— |
|
|
0.06 |
|
|
0.05 |
|
|
Loss on extinguishment of debt (3) |
— |
|
|
— |
|
|
0.07 |
|
|
0.02 |
|
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
0.24 |
|
|
Loss on sale of buildings |
— |
|
|
0.25 |
|
|
0.12 |
|
|
0.25 |
|
|
Write-off of Star Real Estate Holding Assets |
— |
|
|
0.25 |
|
|
0.07 |
|
|
0.25 |
|
|
Transaction cost (4) |
0.52 |
|
|
— |
|
|
0.99 |
|
|
— |
|
|
Write-off of preferred stock issuance cost (5) |
— |
|
|
— |
|
|
0.13 |
|
|
— |
|
|
Income tax benefit |
— |
|
|
(0.19 |
) |
|
(0.08 |
) |
|
(0.47 |
) |
| Non-GAAP adjusted net
income (loss) per basic and diluted share from continuing
operations (6) |
$ |
0.01 |
|
|
$ |
(0.31 |
) |
|
$ |
(0.46 |
) |
|
$ |
(0.78 |
) |
Digirad
CorporationReconciliation of Non-GAAP Financial
Measures(Unaudited)(In
thousands)
| |
Three Months Ended September 30, |
|
Nine Months Ended September 30, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Net loss from continuing operations |
$ |
(1,504 |
) |
|
$ |
(1,187 |
) |
|
$ |
(4,636 |
) |
|
$ |
(2,925 |
) |
|
Unrealized (gain) loss on equity securities (1) |
(6 |
) |
|
76 |
|
|
(29 |
) |
|
112 |
|
|
Restructuring costs (2) |
60 |
|
|
— |
|
|
122 |
|
|
97 |
|
|
Loss on extinguishment of debt (3) |
— |
|
|
— |
|
|
151 |
|
|
43 |
|
|
Depreciation and amortization |
1,975 |
|
|
2,165 |
|
|
5,635 |
|
|
6,718 |
|
|
Stock-based compensation |
114 |
|
|
174 |
|
|
416 |
|
|
546 |
|
|
Loss on sale of building |
4 |
|
|
507 |
|
|
236 |
|
|
507 |
|
|
Interest expense, net |
292 |
|
|
200 |
|
|
727 |
|
|
563 |
|
|
Goodwill impairment |
— |
|
|
— |
|
|
— |
|
|
476 |
|
|
Write-off of Star Real Estate Holding Assets |
— |
|
|
— |
|
|
143 |
|
|
— |
|
|
Transaction cost (4) |
1,059 |
|
|
— |
|
|
2,015 |
|
|
— |
|
|
Write-off of preferred stock issuance cost (5) |
— |
|
|
— |
|
|
273 |
|
|
— |
|
|
Income tax benefit |
2 |
|
|
(379 |
) |
|
(168 |
) |
|
(940 |
) |
| Non-GAAP adjusted
EBITDA from continuing operations |
$ |
1,996 |
|
|
$ |
1,556 |
|
|
$ |
4,885 |
|
|
$ |
5,197 |
|
(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 Ended September 30, |
|
Nine Months Ended September 30, |
| |
2019 |
|
2018 |
|
2019 |
|
2018 |
|
Net cash (used in) provided by operating
activities |
$ |
(1,133 |
) |
|
$ |
(823 |
) |
|
$ |
(765 |
) |
|
$ |
2,218 |
|
| Less Purchases of Property and
Equipment |
— |
|
|
(1,000 |
) |
|
(1,182 |
) |
|
(1,919 |
) |
| Gross Free Cash Flow |
(1,133 |
) |
|
(1,823 |
) |
|
(1,947 |
) |
|
299 |
|
| Plus Net Dispositions |
440 |
|
|
1,455 |
|
|
1,496 |
|
|
1,780 |
|
| Plus Merger related net
working capital adjustment |
1,058 |
|
|
— |
|
|
2,058 |
|
|
— |
|
| Free cash
flow |
$ |
365 |
|
|
$ |
(368 |
) |
|
$ |
1,607 |
|
|
$ |
2,079 |
|
Digirad
CorporationSupplemental Debt
Information(Unaudited)(In
thousands)
The following table reflects outstanding principal balances and
interest rates for the Company’s debt:
| |
September 30, 2019 |
|
December 31, 2018 |
| |
Amount |
|
Interest Rate |
|
Amount |
|
Interest Rate |
|
Revolving Credit Facility - SNB (1) |
$ |
17,217 |
|
|
4.52 |
% |
|
$ |
— |
|
|
— |
% |
| Revolving Credit Facility -
Comerica (2) |
$ |
— |
|
|
— |
% |
|
$ |
9,500 |
|
|
4.87 |
% |
| Revolving Credit Facility -
Gerber (3) |
$ |
1,349 |
|
|
7.75 |
% |
|
$ |
— |
|
|
— |
% |
| Revolving Credit Facility -
Premier (4) |
$ |
2,639 |
|
|
6.75 |
% |
|
$ |
— |
|
|
— |
% |
(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 September 30, |
|
Nine Months Ended September 30, |
| |
2019 |
|
2018 (1) |
|
2019 |
|
2018 (1) |
| Revenue by segment |
|
|
|
|
|
|
|
|
Diagnostic Services |
$ |
11,670 |
|
|
$ |
12,412 |
|
|
$ |
35,714 |
|
|
$ |
37,704 |
|
|
Diagnostic Imaging |
3,351 |
|
|
2,803 |
|
|
8,923 |
|
|
8,401 |
|
|
Mobile Healthcare |
10,575 |
|
|
10,492 |
|
|
30,669 |
|
|
32,147 |
|
|
Building and Construction |
2,729 |
|
|
— |
|
|
2,729 |
|
|
— |
|
|
Real Estate and Investments |
43 |
|
|
— |
|
|
43 |
|
|
— |
|
|
Corporate, eliminations and other |
(35 |
) |
|
— |
|
|
(35 |
) |
|
— |
|
| Consolidated revenue |
$ |
28,333 |
|
|
$ |
25,707 |
|
|
$ |
78,043 |
|
|
$ |
78,252 |
|
| |
|
|
|
|
|
|
|
| Gross profit by segment: |
|
|
|
|
|
|
|
|
Diagnostic Services |
$ |
2,162 |
|
|
$ |
2,404 |
|
|
$ |
7,548 |
|
|
$ |
7,620 |
|
|
Diagnostic Imaging |
1,174 |
|
|
1,154 |
|
|
3,040 |
|
|
3,665 |
|
|
Mobile Healthcare |
1,441 |
|
|
800 |
|
|
3,351 |
|
|
3,247 |
|
|
Building and Construction |
477 |
|
|
— |
|
|
477 |
|
|
— |
|
|
Real Estate and Investments |
(23 |
) |
|
— |
|
|
(200 |
) |
|
— |
|
|
Corporate, eliminations and other |
(35 |
) |
|
— |
|
|
(35 |
) |
|
— |
|
| Consolidated gross profit |
$ |
5,196 |
|
|
$ |
4,358 |
|
|
$ |
14,181 |
|
|
$ |
14,532 |
|
| |
|
|
|
|
|
|
|
| Income (loss) from continuing
operations by segment: |
|
|
|
|
|
|
|
|
Diagnostic Services |
$ |
1,344 |
|
|
$ |
1,761 |
|
|
$ |
5,037 |
|
|
$ |
3,850 |
|
|
Diagnostic Imaging |
755 |
|
|
160 |
|
|
1,663 |
|
|
1,814 |
|
|
Mobile Healthcare |
551 |
|
|
(192 |
) |
|
367 |
|
|
(171 |
) |
|
Building and Construction |
26 |
|
|
— |
|
|
26 |
|
|
— |
|
|
Real Estate and Investments |
(61 |
) |
|
— |
|
|
(260 |
) |
|
— |
|
|
Corporate, eliminations and other |
(35 |
) |
|
— |
|
|
(35 |
) |
|
— |
|
|
Unallocated corporate and other expenses |
(2,731 |
) |
|
(2,512 |
) |
|
(8,230 |
) |
|
(7,657 |
) |
| Segment income from
operations |
(151 |
) |
|
(783 |
) |
|
(1,432 |
) |
|
(2,164 |
) |
|
Goodwill impairment (2) |
— |
|
|
— |
|
|
— |
|
|
(476 |
) |
|
Merger and finance costs (3) |
(1,058 |
) |
|
— |
|
|
(2,058 |
) |
|
— |
|
| Consolidated loss from
operations |
$ |
(1,209 |
) |
|
$ |
(783 |
) |
|
$ |
(3,490 |
) |
|
$ |
(2,640 |
) |
| |
|
|
|
|
|
|
|
| Depreciation and amortization by
segment: |
|
|
|
|
|
|
|
|
Diagnostic Services |
$ |
333 |
|
|
$ |
510 |
|
|
$ |
942 |
|
|
$ |
1,750 |
|
|
Diagnostic Imaging |
64 |
|
|
70 |
|
|
215 |
|
|
221 |
|
|
Mobile Healthcare |
1,272 |
|
|
1,322 |
|
|
4,137 |
|
|
4,500 |
|
|
Building and Construction |
124 |
|
|
— |
|
|
124 |
|
|
— |
|
|
Real Estate and Investments |
208 |
|
|
— |
|
|
243 |
|
|
— |
|
| Total depreciation and
amortization |
$ |
2,001 |
|
|
$ |
1,902 |
|
|
$ |
5,661 |
|
|
$ |
6,471 |
|
(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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