- Announces year over year quarterly revenue and adjusted EBITDA growth of 14% and 30% respectively
- Confirms financial guidance for 2015
- Provides an update on the DMS Health Technologies acquisition
- Positive profitability history prompts recognition of previously reserved tax benefits
- Announces regular quarterly cash dividend of $0.05 cents per share
SUWANEE, Ga., Oct. 30, 2015 (GLOBE NEWSWIRE) — Digirad Corporation (Nasdaq:DRAD) today reported its financial results for the third quarter and nine months ended September 30, 2015.
Total revenues for the 2015 third quarter were $15.9 million, an increase of 14 percent compared to the prior year’s third quarter revenues of $13.9 million.
Adjusted net income for the 2015 third quarter was $1.5 million, or $0.08 per diluted share, compared to $1.2 million, or $0.06 per diluted share in the prior year third quarter. Adjusted EBITDA for the 2015 third quarter was $2.2 million, compared to $1.7 million in the prior year third quarter.
Total revenues for the nine months ended September 30, 2015 were $45.2 million, an increase of 9 percent compared to the prior year’s revenues for the first nine months of $41.5 million.
Adjusted net income for the nine months ended September 30, 2015 was $3.2 million, or $0.16 per diluted share, compared to adjusted net income of $2.6 million, or $0.14 per diluted share in same period in the prior year. Adjusted EBITDA for the nine months ended September 30, 2015 was $5.0 million, compared to $4.0 million in the same period in the prior year.
Excluded from adjusted net income and adjusted EBITDA for the third quarter and nine months ended September 30, 2015 are transaction costs associated with the previously announced planned acquisition of DMS Health Technologies (“DMS Health”). A reconciliation of adjusted net income, adjusted net income per diluted share, and adjusted EBITDA is provided later in this release.
Digirad President and CEO Matt Molchan said, “I am pleased with our performance this quarter. Our Diagnostic Services business is performing well; in particular we are seeing growing revenues from our Telerhythmics business. In addition, our MD Office Solutions acquisition is performing in line with our expectations. The Diagnostic Imaging business had a great quarter, closing on several cameras deals, and generating 27% higher revenues than last year. Based on our continued progress and results, we expect to fall within our previously announced financial guidance range.”
Molchan continued, “Though we just announced our intent to acquire DMS Health two weeks ago, we are making solid progress on moving toward a close. We still expect to close the acquisition by the end of the year.”
During the quarter ended September 30, 2015, the Company conducted a detailed analysis of its existing tax net operating loss (“NOL”) carry forwards which were previously 100% reserved. This NOL analysis was conducted as a result of the positive history of profitability since the Company’s restructuring efforts undertaken in early 2013. Based on this analysis, it was determined it was appropriate to release a portion of these reserved NOLs, resulting in an increase in net income of $18.2 million in the third quarter of 2015.
As previously announced, the Company’s 2015 financial guidance is to generate revenues between $61.0 million and $63.0 million; non-GAAP adjusted diluted earnings per share between $0.19 and $0.21; and non-GAAP adjusted EBITDA between $6.5 million and $6.9 million.
The Company also announced a cash dividend of $0.05 cents per share that will be paid on November 27, 2015, to shareholders of record on November 16, 2015.
Conference Call Information
A conference call is scheduled for 11:00 a.m. EDT on October 30, 2015 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/events.cfm; 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 in this release unaudited adjusted financial information, which presents the Company’s results of operations after excluding restructuring charges, acquired intangible asset amortization, acquisition related contingent consideration valuation adjustments, 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 October 30, 2015.
About Digirad Corporation
Digirad delivers convenient, effective, and efficient diagnostic solutions on an as needed, when needed, and where needed basis. Digirad is one of the largest national providers of in-office nuclear cardiology and ultrasound imaging services, and also provides cardiac event monitoring services. These services are provided to physician practices, hospitals and imaging centers through its Diagnostic Services business. Digirad also sells medical diagnostic imaging systems, including solid-state gamma cameras, for nuclear cardiology and general nuclear medicine applications, as well as provides service on the products sold through its Diagnostic Imaging business. For more information, please visit www.digirad.com. Digirad® and Cardius® are registered trademarks of Digirad Corporation.
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 close and execute on 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
Condensed Consolidated Statements of Income
(Unaudited)
| Three Months Ended | Nine Months Ended | ||||||||||||||
| September 30, | September 30, | ||||||||||||||
| (in thousands, except per share amounts) | 2015 | 2014 | 2015 | 2014 | |||||||||||
| Revenues: | |||||||||||||||
| Diagnostic Services | $ | 11,982 | $ | 10,821 | $ | 34,724 | $ | 31,716 | |||||||
| Diagnostic Imaging | 3,880 | 3,060 | 10,525 | 9,749 | |||||||||||
| Total revenues | 15,862 | 13,881 | 45,249 | 41,465 | |||||||||||
| Cost of revenues: | |||||||||||||||
| Diagnostic Services | 9,201 | 8,063 | 26,920 | 23,801 | |||||||||||
| Diagnostic Imaging | 1,859 | 1,409 | 5,112 | 5,308 | |||||||||||
| Total cost of revenues | 11,060 | 9,472 | 32,032 | 29,109 | |||||||||||
| Gross profit | 4,802 | 4,409 | 13,217 | 12,356 | |||||||||||
| Total gross profit percentage | 30.3 | % | 31.8 | % | 29.2 | % | 29.8 | % | |||||||
| Diagnostic Services gross profit percentage | 23.2 | % | 25.5 | % | 22.5 | % | 25.0 | % | |||||||
| Diagnostic Imaging gross profit percentage | 52.1 | % | 54.0 | % | 51.4 | % | 45.6 | % | |||||||
| Operating expenses: | |||||||||||||||
| Marketing and sales | 1,212 | 1,157 | 3,689 | 3,497 | |||||||||||
| General and administrative | 2,508 | 2,047 | 6,880 | 6,235 | |||||||||||
| Amortization of intangible assets | 134 | 93 | 372 | 263 | |||||||||||
| Restructuring charges | — | 80 | — | 659 | |||||||||||
| Total operating expenses | 3,854 | 3,377 | 10,941 | 10,654 | |||||||||||
| Income from operations | 948 | 1,032 | 2,276 | 1,702 | |||||||||||
| Other income (expense): | |||||||||||||||
| Interest and other income, net | 10 | 14 | 32 | 46 | |||||||||||
| Interest expense | (21 | ) | (10 | ) | (44 | ) | (27 | ) | |||||||
| Total other income (expense) | (11 | ) | 4 | (12 | ) | 19 | |||||||||
| Income before income taxes | 937 | 1,036 | 2,264 | 1,721 | |||||||||||
| Income tax benefit (expense) | 18,183 | (8 | ) | 18,698 | (18 | ) | |||||||||
| Net income | $ | 19,120 | $ | 1,028 | $ | 20,962 | $ | 1,703 | |||||||
| Net income per share: | |||||||||||||||
| Basic | $ | 0.99 | $ | 0.06 | $ | 1.09 | $ | 0.09 | |||||||
| Diluted | $ | 0.97 | $ | 0.05 | $ | 1.07 | $ | 0.09 | |||||||
| Dividends declared per common share | $ | 0.05 | $ | 0.05 | $ | 0.15 | $ | 0.15 | |||||||
| Weighted average shares outstanding – basic | 19,356 | 18,601 | 19,145 | 18,558 | |||||||||||
| Weighted average shares outstanding – diluted | 19,798 | 18,895 | 19,608 | 18,853 | |||||||||||
Digirad Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
| (in thousands, except share data) | September 30, 2015 |
December 31, 2014 |
|||||
| Assets | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 13,895 | $ | 14,051 | |||
| Securities available-for-sale | 5,986 | 7,935 | |||||
| Accounts receivable, net | 8,313 | 5,989 | |||||
| Inventories, net | 4,325 | 3,644 | |||||
| Other current assets | 1,993 | 856 | |||||
| Restricted cash | 233 | 477 | |||||
| Total current assets | 34,745 | 32,952 | |||||
| Property and equipment, net | 6,614 | 4,766 | |||||
| Intangible assets, net | 3,213 | 2,577 | |||||
| Goodwill | 2,897 | 1,337 | |||||
| Long-term deferred tax assets | 16,791 | — | |||||
| Other assets | 1,298 | 269 | |||||
| Total assets | $ | 65,558 | $ | 41,901 | |||
| Liabilities and stockholders’ equity | |||||||
| Accounts payable | $ | 2,797 | $ | 1,423 | |||
| Accrued compensation | 2,872 | 3,261 | |||||
| Accrued warranty | 214 | 176 | |||||
| Deferred revenue | 1,478 | 1,644 | |||||
| Other accrued liabilities | 2,543 | 1,789 | |||||
| Total current liabilities | 9,904 | 8,293 | |||||
| Other liabilities | 1,327 | 963 | |||||
| Total liabilities | 11,231 | 9,256 | |||||
| Stockholders’ equity: | |||||||
| Preferred stock | — | — | |||||
| Common stock | 2 | 2 | |||||
| Treasury stock | (5,728 | ) | (5,728 | ) | |||
| Additional paid-in capital | 154,472 | 153,769 | |||||
| Accumulated other comprehensive loss | (3 | ) | (19 | ) | |||
| Accumulated deficit | (94,416 | ) | (115,379 | ) | |||
| Total stockholders’ equity | 54,327 | 32,645 | |||||
| Total liabilities and stockholders’ equity | $ | 65,558 | $ | 41,901 | |||
Digirad Corporation
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| (in thousands, except per share amounts) | 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Net income | $ | 19,120 | $ | 1,028 | $ | 20,962 | $ | 1,703 | |||||||||
| Restructuring charges(1) | — | 80 | — | 659 | |||||||||||||
| Acquired intangible amortization | 131 | 90 | 365 | 256 | |||||||||||||
| Acquisition related contingent consideration valuation adjustment(2) | — | — | (173 | ) | — | ||||||||||||
| Transaction and integration costs of DMS Health Technologies(3) | 435 | — | 743 | — | |||||||||||||
| Income tax items(4) | (18,163 | ) | (1 | ) | (18,699 | ) | (7 | ) | |||||||||
| Non-GAAP Adjusted net income | $ | 1,523 | $ | 1,197 | $ | 3,198 | $ | 2,611 | |||||||||
| Net income per share – diluted | 0.97 | 0.05 | 1.07 | 0.09 | |||||||||||||
| Restructuring charges(1)(5) | — | — | — | 0.03 | |||||||||||||
| Acquired intangible amortization(5) | 0.01 | — | 0.02 | 0.01 | |||||||||||||
| Acquisition related contingent consideration valuation adjustment(2)(5) | — | — | (0.01 | ) | — | ||||||||||||
| Transaction and integration costs of DMS Health Technologies(5) | 0.02 | — | 0.04 | — | |||||||||||||
| Income tax items(4)(5) | (0.92 | ) | — | (0.95 | ) | — | |||||||||||
| Non-GAAP Adjusted net income per share – diluted(5) | $ | 0.08 | $ | 0.06 | $ | 0.16 | $ | 0.14 | |||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||||||||
| (in thousands) | 2015 | 2014 | 2015 | 2014 | |||||||||||||
| Net income | $ | 19,120 | $ | 1,028 | $ | 20,962 | $ | 1,703 | |||||||||
| Restructuring charges(1) | — | 80 | — | 659 | |||||||||||||
| Acquisition related contingent consideration valuation adjustment(2) | — | — | (173 | ) | — | ||||||||||||
| Transaction and integration costs of DMS Health Technologies(3) | 435 | — | 743 | — | |||||||||||||
| Depreciation and amortization | 665 | 497 | 1,751 | 1,441 | |||||||||||||
| Stock-based compensation | 165 | 96 | 450 | 207 | |||||||||||||
| Interest and other income, net | (10 | ) | (14 | ) | (32 | ) | (46 | ) | |||||||||
| Interest expense | 21 | 10 | 44 | 27 | |||||||||||||
| Income tax expense (benefit) | (18,183 | ) | 8 | (18,698 | ) | 18 | |||||||||||
| Non-GAAP Adjusted EBITDA | $ | 2,213 | $ | 1,705 | $ | 5,047 | $ | 4,009 | |||||||||
(1) Reflects nonrecurring charges primarily related to the lease termination of the Poway, CA facility.
(2) Reflects fair value adjustment to estimate of contingent consideration related to acquisitions.
(3) Reflects diligence, transaction, and integration costs related to the acquisition of DMS Health Technologies. Nine months ended September 30, 2015 has been reclassified from previously reported amounts to reflect this adjustment.
(4) Reflects income tax effect for adjusted financial data, acquisition related income tax adjustments, and release of previously reserved net operating loss carry forwards.
(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) | September 30, 2014 | December 31, 2014 | March 31, 2015 | June 30, 2015 | September 30, 2015 | ||||||||||||||||
| Net income | $ | 1,028 | 772 | 745 | $ | 1,097 | $ | 19,120 | |||||||||||||
| Restructuring charges(1) | 80 | 33 | — | — | — | ||||||||||||||||
| Acquired intangible amortization | 90 | 90 | 103 | 130 | 131 | ||||||||||||||||
| Acquisition related contingent consideration valuation adjustment(2) | — | — | — | (173 | ) | — | |||||||||||||||
| Transaction and integration costs of DMS Health Technologies(3) | — | — | 25 | 283 | 435 | ||||||||||||||||
| Income tax items(4) | (1 | ) | (3 | ) | (587 | ) | 51 | (18,163 | ) | ||||||||||||
| Non-GAAP Adjusted net income | $ | 1,197 | $ | 892 | $ | 286 | $ | 1,388 | $ | 1,523 | |||||||||||
| Net income per share – diluted(5) | $ | 0.05 | 0.04 | 0.04 | $ | 0.06 | 0.97 | ||||||||||||||
| Restructuring charges(1)(5) | — | — | — | — | — | ||||||||||||||||
| Acquired intangible amortization(5) | — | — | 0.01 | 0.01 | 0.01 | ||||||||||||||||
| Acquisition related contingent consideration valuation adjustment(2)(5) | — | — | — | (0.01 | ) | — | |||||||||||||||
| Transaction and integration costs of DMS Health Technologies(5) | — | — | — | 0.01 | 0.02 | ||||||||||||||||
| Income tax items(4)(5) | — | — | (0.03 | ) | — | (0.92 | ) | ||||||||||||||
| Non-GAAP Adjusted net income per share – diluted(5) | $ | 0.06 | $ | 0.05 | $ | 0.02 | $ | 0.07 | $ | 0.08 | |||||||||||
| Three Months Ended | |||||||||||||||||||||
| (in thousands) | September 30, 2014 | December 31, 2014 | March 31, 2015 | June 30, 2015 | September 30, 2015 | ||||||||||||||||
| Net income | $ | 1,028 | $ | 772 | $ | 745 | $ | 1,097 | $ | 19,120 | |||||||||||
| Restructuring charges(1) | 80 | 33 | — | — | — | ||||||||||||||||
| Acquisition related contingent consideration valuation adjustment(2) | — | — | — | (173 | ) | — | |||||||||||||||
| Transaction and integration costs of DMS Health Technologies(3) | — | — | 25 | 283 | 435 | ||||||||||||||||
| Depreciation and amortization | 497 | 494 | 488 | 598 | 665 | ||||||||||||||||
| Stock-based compensation | 96 | 119 | 144 | 141 | 165 | ||||||||||||||||
| Interest and other income, net | (14 | ) | (12 | ) | (11 | ) | (11 | ) | (10 | ) | |||||||||||
| Interest expense | 10 | 12 | 11 | 12 | 21 | ||||||||||||||||
| Income tax expense (benefit) | 8 | 44 | (580 | ) | 65 | (18,183 | ) | ||||||||||||||
| Non-GAAP Adjusted EBITDA | $ | 1,705 | $ | 1,462 | $ | 822 | $ | 2,012 | $ | 2,213 | |||||||||||
(1) Reflects nonrecurring charges primarily related to the lease termination of the Poway, CA facility.
(2) Reflects fair value adjustment to estimate of contingent consideration related to acquisitions.
(3) Reflects diligence, transaction, and integration costs related to the acquisition of DMS Health Technologies. The three months ended March 31, 2015 and June 30, 2015 has been reclassified from previously reported amounts to reflect this adjustment.
(4) Reflects income tax effect for adjusted financial data, acquisition related income tax adjustments, and release of previously reserved net operating loss carry forwards.
(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.
CONTACT: Jeffry Keyes Chief Financial Officer 858-726-1600 [email protected]