Digirad Corporation (Nasdaq: DRAD; DRADP) (“Digirad” or the
“Company”) announced today updates on its growth and value
enhancement initiatives. These initiatives include expansion
of commercial projects in its “Building & Construction”
division, an improved environment for acquisitions, and potential
divestitures of non-strategic assets.
Building & Construction Division Growth
Initiatives
As announced previously, the Company’s 2020
growth strategy for its Building & Construction division is
primarily to expand its commercial construction business in New
England. KBS Builders, Inc. (“KBS”), the modular building
manufacturing business of the Company’s Building & Construction
division based in Maine, is currently involved in multiple
discussions for various large commercial construction projects for
the New England market. Even if just a few of these are
awarded, we believe that they will require a significantly higher
utilization rate for KBS’s manufacturing plant in South Paris,
Maine and an increased investment in working capital. Three
of these projects are in the advanced stages of negotiation and are
expected to start in the coming months. Each of these
projects involve construction of additional multi-family housing
units in the Greater Boston area. These three projects alone
would generate revenue of over $10 million for KBS and result in
the production of nearly 250 building modules. For
comparison, in 2019, KBS generated approximately $12 million of
revenue and produced approximately 230 building modules, entirely
for the residential market. We believe KBS’s South Paris,
Maine plant is capable of producing between 500 and 600 building
modules per year at full capacity. KBS’s current potential
sales pipeline totals more than $50 million, representing
production of approximately 1,000 building modules. If KBS
grows as expected in 2020, it will explore re-opening its Oxford,
Maine plant, which we believe is capable of producing an additional
500 to 600 building modules per year at full capacity. KBS
will also explore other add-on revenue streams such as
manufacturing structural wall panels for the New England market, as
we are currently doing in the Minneapolis area. Our goal with
these growth initiatives is to generate significantly higher
revenue, cash flow, and earnings for the Company’s Building &
Construction division, creating new jobs and supporting local
economic activity, in addition to creating shareholder value.
HoldCo Strategy: Acquisition of Faster Growing / Higher
Margin Businesses and Divestiture of Non-Strategic
Assets
We believe the current economic environment
offers significant opportunities for strategic acquisitions which
can be either bolt-ons for existing platform businesses, or new
core businesses complementary to the Company’s new holding company
structure. The Company intends to take a disciplined approach
for making any potential acquisitions and will focus on faster
growing and higher margin businesses. Additionally, as part of this
strategy, the Company is considering the divestiture of
non-strategic assets, including the potential sale of a business
unit. The Company intends to use a significant portion of the
proceeds of any such sale to repay indebtedness, with the remainder
to be used for working capital purposes, and potentially the
acquisition of complementary businesses as discussed above.
There is no assurance that any such divestiture will occur.
If a divestiture does occur, there is no assurance that we will be
able to use the proceeds in the acquisition of a complementary
business, or if such acquisition will be successful.
S-1 Registration Statement for Common Stock
Offering
Digirad has filed a registration statement with
the Securities and Exchange Commission relating to a public
offering of the Company’s common stock for potential gross proceeds
of up to $5 million, before fees and expenses. We
intend to use the proceeds of the offering to fund the KBS projects
described above (three modular housing projects to be constructed
in New England pursuant to federal and state governmental
contracts), and the remainder (if any) for working capital and for
other general corporate purposes.
We have engaged Maxim Group LLC to act as sole
underwriter with respect to the proposed offering, there can be no
assurance that the offering will be successfully
completed.
The registration statement relating to the sale
of Digirad common stock has been filed with the Securities and
Exchange Commission (Registration No. 333-237928), but has not yet
become effective. Such securities may not be sold, nor may
offers to buy be accepted, prior to the time the registration
statement becomes effective. This press release shall not
constitute an offer to sell or the solicitation of an offer to buy,
nor shall there be any sale of such securities in any state in
which such offer, solicitation or sale would be unlawful prior to
registration or qualification under applicable securities laws.
About Digirad Corporation
Digirad Corporation is a diversified holding
company operating with three business divisions: Healthcare,
Building & Construction, and Real Estate & Investments.
Digirad Healthcare Division
Digirad Healthcare designs, manufactures, and
distributes diagnostic medical imaging products. Digirad
Healthcare 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.
Building & Construction Division
(ATRM)
ATRM Holdings, Inc. (“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., 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,
EdgeBuilder, and Glenbrook are wholly-owned subsidiaries of ATRM,
which is a wholly-owned subsidiary of Digirad.
Real Estate & Investments
Division
This business division manages the Company’s
real estate assets 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 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’s
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’s
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 of ATRM, 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 |
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