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Digirad Corporation Reports Financial Results for the Fourth Quarter and Twelve Months ended December 31, 2016

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  • Year over year fourth quarter revenue increases 100%
  • Year over year fourth quarter net income increases 192%
  • During 2016, Company pays down $11.7 million on its credit facility
  • Company continues to pay regular quarterly cash dividend of $0.05 cents per share

SUWANEE, Ga., Feb. 24, 2017 (GLOBE NEWSWIRE) -- Digirad Corporation (NASDAQ:DRAD) today reported its financial results for the fourth quarter and twelve months ended December 31, 2016.

Total revenues for the fourth quarter were $31.1 million, an increase of 100 percent compared to the prior year's fourth quarter revenues of $15.6 million.

Net income for the fourth quarter was $2.0 million, or $0.10 diluted earnings per share (EPS), compared to net income of $0.7 million, or $0.03 diluted EPS from the same period in the prior year.  Non-GAAP adjusted net income for the fourth quarter was $3.0 million, or $0.15 diluted EPS, compared to $1.3 million, or $0.07 diluted EPS from the same period in the prior year.

Non-GAAP adjusted EBITDA for the fourth quarter was $5.4 million, compared to $2.1 million in the same period in the prior year.

Total revenues for the twelve months ended December 31, 2016 were $125.5 million, an increase of 106 percent compared to the prior year's revenues of $60.8 million.

Net income for the twelve months ended December 31, 2016 was $14.3 million, or $0.71 diluted EPS, compared to net income of $21.6 million, or $1.10 diluted EPS in the same period in the prior year.  Non-GAAP adjusted net income for the twelve months ended December 31, 2016 was $7.2 million, or $0.36 diluted EPS, compared to non-GAAP adjusted net income of $4.5 million, or $0.23 diluted EPS in the same period in the prior year.

Non-GAAP adjusted EBITDA for the twelve months ended December 31, 2016 was $16.8 million, compared to $7.2 million in the same period in the prior year. A reconciliation of non-GAAP adjusted net income and non-GAAP adjusted EBITDA is provided later in this release.

The results for the fourth quarter and twelve months ended December 31, 2016 include the results of the recent acquisition of DMS Health, which closed on January 1, 2016.

Digirad President and CEO Matt Molchan said, "We are very pleased with our results for the quarter, where we experienced exceptional product sales performance, as well as great performance from our service businesses, capping off a transformational year for Digirad."

Molchan continued, "I am also pleased to report we have completed all of our operational integration activities related to the DMS Health acquisition, and will now be focusing our efforts on leveraging our combined resources as we move forward. Additionally, since entering our credit facility at the beginning of the year, we have paid down $11.7 million of the initial balance, including three extra principal payments. We continue to generate significant cash flow to maintain our stable dividend, fund organic growth and pursue accretive acquisitions."

The Company previously announced a cash dividend of $0.05 cents per share that will be paid on February 28, 2017, to shareholders of record on February 15, 2017.

Conference Call Information

A conference call is scheduled for 10:00 a.m. EST on February 24, 2017 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," "adjusted net income per diluted share," 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, goodwill impairment, acquisition related contingent consideration adjustments, investment impairment loss, transaction and integration costs associated with DMS Health Technologies, 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 February 24, 2017.

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 Corporation
 Consolidated Statements of Operations
(Unaudited)
 
  Three Months Ended   Twelve Months Ended
  December 31,   December 31,
(in thousands, except per share amounts) 2016   2015   2016   2015
               
Revenues:              
Services $ 23,015     $ 11,683     $ 95,511     $ 46,407  
Product and product-related 8,119     3,895     29,956     14,419  
Total revenues 31,134     15,578     125,467     60,826  
Cost of revenues:              
Services 18,720     9,048     75,515     35,968  
Product and product-related 3,772     1,838     14,179     6,949  
Total cost of revenues 22,492     10,886     89,694     42,917  
               
Gross profit 8,642     4,692     35,773     17,909  
Total gross profit percentage 27.8 %   30.1 %   28.5 %   29.4 %
Services gross profit percentage 18.7 %   22.6 %   20.9 %   22.5 %
Product and product-related gross profit percentage 53.5 %   52.8 %   52.7 %   51.8 %
               
Operating expenses:              
Marketing and sales 2,161     1,051     10,049     4,741  
General and administrative 4,088     3,009     19,988     9,888  
Amortization of intangible assets 578     134     2,313     506  
Goodwill impairment 338         338      
Total operating expenses 7,165     4,194     32,688     15,135  
               
Income from operations 1,477     498     3,085     2,774  
               
Other income (expense):              
Other income (expense), net 627     (233 )   212     (233 )
Interest expense, net (320 )   (12 )   (1,412 )   (24 )
Total other income (expense) 307     (245 )   (1,200 )   (257 )
               
Income before income taxes 1,784     253     1,885     2,517  
Income tax benefit 194     425     12,417     19,123  
Net income $ 1,978     $ 678     $ 14,302     $ 21,640  
               
Net income per share:              
Basic $ 0.10     $ 0.03     $ 0.73     $ 1.13  
Diluted $ 0.10     $ 0.03     $ 0.71     $ 1.10  
Dividends declared per common share $ 0.05     $ 0.05     $ 0.20     $ 0.20  
               
Weighted average shares outstanding – basic 19,764     19,404     19,594     19,210  
Weighted average shares outstanding – diluted 20,173     19,933     20,067     19,690  


Digirad Corporation
 Consolidated Balance Sheets
(Unaudited)
 
(in thousands) December 31,
 2016
  December 31,
 2015
Assets:      
Current assets:      
Cash and cash equivalents $ 2,203     $ 15,868  
Securities available-for-sale 917     3,227  
Accounts receivable, net 14,503     7,274  
Inventories, net 5,987     4,381  
Restricted cash 1,376     233  
Other current assets 2,093     764  
Total current assets 27,079     31,747  
Property and equipment, net 31,407     6,252  
Intangible assets, net 11,628     3,079  
Goodwill 6,237     2,897  
Deferred tax assets 27,019     18,578  
Restricted cash 2,100      
Other assets 793     1,560  
Total assets $ 106,263     $ 64,113  
       
Liabilities:      
Current liabilities:      
Accounts payable $ 6,514     $ 1,369  
Accrued compensation 3,962     2,453  
Accrued warranty 196     213  
Deferred revenue 3,123     1,673  
Current portion of long-term debt 5,358      
Other current liabilities 3,520     2,998  
Total current liabilities 22,673     8,706  
Long-term debt, net of current portion 16,070      
Other liabilities 1,039     1,252  
Total liabilities 39,782     9,958  
       
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; 19,892,557 and 19,416,070 shares issued and outstanding
(net of treasury shares) at December 31, 2016 and 2015, respectively
2     2  
Treasury stock, at cost; 2,588,484 shares at December 31, 2016 and 2015 (5,728 )   (5,728 )
Additional paid-in capital 151,696     153,860  
Accumulated other comprehensive loss (52 )   (240 )
Accumulated deficit (79,437 )   (93,739 )
Total stockholders' equity 66,481     54,155  
Total liabilities and stockholders' equity $ 106,263     $ 64,113  


  Digirad Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
   
      Three Months Ended
December 31,
  Twelve Months Ended
December 31,
(in thousands, except per share amounts)   2016   2015   2016   2015
                   
Net income   $ 1,978     $ 678     $ 14,302     $ 21,640  
  Acquired intangible amortization   578     131     2,313     496  
  Acquisition related contingent consideration valuation adjustment(1)   (56 )   113     (64 )   (60 )
  Investment impairment loss(2)       278     414     278  
  Transaction and integration costs of DMS Health Technologies(3)   173     595     1,921     1,338  
  Goodwill impairment   338         338      
  Income tax items(4)   25     (446 )   (12,071 )   (19,145 )
Non-GAAP Adjusted net income   $ 3,036     $ 1,349     $ 7,153     $ 4,547  
                   
Net income per share - diluted(5)   $ 0.10     $ 0.03     $ 0.71     $ 1.10  
  Acquired intangible amortization   0.03     0.01     0.12     0.03  
  Acquisition related contingent consideration valuation adjustment(1)       0.01          
  Investment impairment loss(2)       0.01     0.02     0.01  
  Transaction and integration costs of DMS Health Technologies(3)   0.01     0.03     0.10     0.07  
  Goodwill impairment   0.02         0.02      
  Income tax items(4)       (0.02 )   (0.60 )   (0.97 )
Non-GAAP Adjusted net income per share - diluted(5)   $ 0.15     $ 0.07     $ 0.36     $ 0.23  


      Three Months Ended
December 31,
  Twelve Months Ended
December 31,
(in thousands)   2016   2015   2016   2015
                   
Net income   $ 1,978     $ 678     $ 14,302     $ 21,640  
  Acquisition related contingent consideration valuation adjustment(1)   (56 )   113     (64 )   (60 )
  Investment impairment loss(2)       278     414     278  
  Transaction and integration costs of DMS Health Technologies(3)   173     595     1,921     1,338  
  Goodwill impairment   338         338      
  Depreciation and amortization   2,552     690     9,889     2,441  
  Stock-based compensation   270     166     1,024     616  
  Interest income   (2 )   (7 )   (14 )   (39 )
  Interest expense   322     19     1,426     63  
  Income tax benefit   (194 )   (425 )   (12,417 )   (19,123 )
Non-GAAP Adjusted EBITDA   $ 5,381     $ 2,107     $ 16,819     $ 7,154  


(1)  Reflects fair value adjustment to estimate of contingent consideration related to acquisitions.
(2)  Reflects impairment losses related to investment in Perma-Fix Medical.  Amount consists of a write-down of the investment to its fair market value that was considered other than temporary.
(3)  Reflects diligence, transaction, and integration costs related to the acquisition of DMS Health Technologies.
(4)  Reflects income tax effect for adjusted financial data and acquisition related income tax adjustments, and release of previously reserved net operating loss carryforwards.
(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 Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
   
      Three Months Ended
(in thousands, except per share amounts)   December 31,
2015
  March 31,
2016
  June 30,
2016
  September 30,
2016
  December 31,
2016
                       
Net income (loss)   $ 678     $ 11,609     $ 998     $ (283 )   $ 1,978  
  Acquired intangible amortization   131     577     578     578     578  
  Acquisition related contingent consideration valuation adjustment(1)   113         (3 )   (5 )   (56 )
  Investment impairment loss(2)   278             414      
  Transaction and integration costs of DMS Health Technologies(3)   595     1,450     171     127     173  
  Goodwill impairment                   338  
  Income tax items(4)   (446 )   (12,333 )   67     170     25  
Non-GAAP Adjusted net income   $ 1,349     $ 1,303     $ 1,811     $ 1,001     $ 3,036  
                       
Net income (loss) per share - diluted(5)   $ 0.03     $ 0.58     $ 0.05     $ (0.01 )   $ 0.10  
  Acquired intangible amortization   0.01     0.03     0.03     0.03     0.03  
  Acquisition related contingent consideration valuation adjustment(1)   0.01                  
  Investment impairment loss(2)   0.01             0.02      
  Transaction and integration costs of DMS Health Technologies(3)   0.03     0.07     0.01     0.01     0.01  
  Goodwill impairment                   0.02  
  Income tax items(4)   (0.02 )   (0.62 )       0.01      
Non-GAAP Adjusted net income per share - diluted(5)   $ 0.07     $ 0.07     $ 0.09     $ 0.05     $ 0.15  


      Three Months Ended
(in thousands)   December 31,
2015
  March 31,
2016
  June 30,
2016
  September 30,
2016
  December 31,
2016
                       
Net income (loss)   $ 678     $ 11,609     $ 998     $ (283 )   $ 1,978  
  Acquisition related contingent consideration valuation adjustment(1)   113         (3 )   (5 )   (56 )
  Investment impairment loss(2)   278             414      
  Transaction and integration costs of DMS Health Technologies(3)   595     1,450     171     127     173  
  Goodwill impairment                   338  
  Depreciation and amortization   690     2,465     2,383     2,489     2,552  
  Stock-based compensation   166     223     257     274     270  
  Interest income   (7 )   (5 )   (4 )   (3 )   (2 )
  Interest expense   19     375     383     345     322  
  Income tax expense (benefit)   (425 )   (12,461 )   37     202     (194 )
Non-GAAP Adjusted EBITDA   $ 2,107     $ 3,656     $ 4,222     $ 3,560     $ 5,381  


(1)  Reflects fair value adjustment to estimate of contingent consideration related to acquisitions.
(2)  Reflects impairment losses related to investment in Perma-Fix Medical.  Amounts consist of impairment of a Supply Agreement entered into between the two parties, a loss related to the initial excess of the transaction price over fair value and a write-down of the investment to its fair market value that was considered other than temporary.
(3)  Reflects diligence, transaction, and integration costs related to the acquisition of DMS Health Technologies.
(4)  Reflects income tax effect for adjusted financial data and acquisition related income tax adjustments, and release of previously reserved net operating loss carryforwards.
(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 Corporation
Supplemental Debt Information
(Unaudited)
 
The following table reflects outstanding principal balances and interest rates under the Company's credit facility at December 31, 2016:
 
(in thousands) Balance Interest Rate
Term A(1) $ 17,382   3.15 %
Term B(2) 4,581   5.65 %
Revolver   2.69 %
Total borrowing $ 21,963    


(1)  Term A amortizes over a 7-year period with scheduled amortization ending in January 2021, with the remaining amount due in a balloon payment.
(2)  Term B amortizes over a 3-year period with scheduled amortization ending in January 2019. Through December 31, 2016, the Company has made three extra payments in the same amount as the scheduled payments.


Digirad Corporation
Supplemental Cash Flow Information
(Unaudited)
 
  Twelve Months Ended December 31,
(in thousands) 2016 2015 2014
Net cash provided by operating activities $ 10,834   $ 3,720   $ 4,280  
       
Purchases of property and equipment $ 6,185   $ 1,424   $ 1,258  

 

For more information contact:
Jeff Keyes
Chief Financial Officer
858-726-1600
ir@digirad.com

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