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

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| Source: Digirad Corporation
  • 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-related8,119  3,895  29,956  14,419 
Total revenues31,134  15,578  125,467  60,826 
Cost of revenues:       
Services18,720  9,048  75,515  35,968 
Product and product-related3,772  1,838  14,179  6,949 
Total cost of revenues22,492  10,886  89,694  42,917 
        
Gross profit8,642  4,692  35,773  17,909 
Total gross profit percentage27.8% 30.1% 28.5% 29.4%
Services gross profit percentage18.7% 22.6% 20.9% 22.5%
Product and product-related gross profit percentage53.5% 52.8% 52.7% 51.8%
        
Operating expenses:       
Marketing and sales2,161  1,051  10,049  4,741 
General and administrative4,088  3,009  19,988  9,888 
Amortization of intangible assets578  134  2,313  506 
Goodwill impairment338    338   
Total operating expenses7,165  4,194  32,688  15,135 
        
Income from operations1,477  498  3,085  2,774 
        
Other income (expense):       
Other income (expense), net627  (233) 212  (233)
Interest expense, net(320) (12) (1,412) (24)
Total other income (expense)307  (245) (1,200) (257)
        
Income before income taxes1,784  253  1,885  2,517 
Income tax benefit194  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 – basic19,764  19,404  19,594  19,210 
Weighted average shares outstanding – diluted20,173  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-sale917  3,227 
Accounts receivable, net14,503  7,274 
Inventories, net5,987  4,381 
Restricted cash1,376  233 
Other current assets2,093  764 
Total current assets27,079  31,747 
Property and equipment, net31,407  6,252 
Intangible assets, net11,628  3,079 
Goodwill6,237  2,897 
Deferred tax assets27,019  18,578 
Restricted cash2,100   
Other assets793  1,560 
Total assets$106,263  $64,113 
    
Liabilities:   
Current liabilities:   
Accounts payable$6,514  $1,369 
Accrued compensation3,962  2,453 
Accrued warranty196  213 
Deferred revenue3,123  1,673 
Current portion of long-term debt5,358   
Other current liabilities3,520  2,998 
Total current liabilities22,673  8,706 
Long-term debt, net of current portion16,070   
Other liabilities1,039  1,252 
Total liabilities39,782  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 capital151,696  153,860 
Accumulated other comprehensive loss(52) (240)
Accumulated deficit(79,437) (93,739)
Total stockholders’ equity66,481  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)BalanceInterest 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)201620152014
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