Digirad Buys Telerhythmics - Analyst Blog

The healthcare sector has been witnessing acquisitions since the beginning of 2014. Stryker Corporation SYK closed the acquisition of Pivot Medical, Inc. in March while ThermoFisher Scientific, Inc. TMO completed that of Life Technologies Corporation in February.

Late last week, Digirad Corporation's DRAD wholly-owned subsidiary, Digirad Imaging Solutions, Inc. acquired Telerhythmics, LLC.

The acquisition was done with an upfront payment of about $3.6 million – this includes a $3.47 million cash payment and the assumption of approximately $131,000 in debt. Additionally, Digirad may be liable to pay up to $501,000 more, contingent upon meeting certain financial targets like EBITDA over a three-year horizon. The EBITDA targets would be measured at the end of each fiscal year, Dec 31, 2014 onwards.

Memphis, TN-based, privately-held Telerhythmics is a 24-hour cardiac event monitoring service that caters to the eastern region of the U.S. It provides monitoring services on an outsourced basis to hospitals and physician offices. Telerhythmics had an annual turnover of approximately $5.6 million in 2013.

The deal is expected to be accretive to Digirad on an EBITDA basis. It is expected to generate approximately $350,000 of EBITDA in the first twelve months after the acquisition followed by approximately $800,000 of EBITDA annually.

Digirad Imaging Solutions forms an integral part of Digirad contributing 75.3% to total revenues in 2013.

The acquisition will allow Digirad to expand its geographical presence besides diversifying the services offered by Digirad Imaging Solutions.

A stock that warrants a look in the medical information systems space is Computer Programs & Systems Inc. CPSI with a Zacks Rank #1 (Strong Buy).