SOURCE: Digirad

Digirad

May 06, 2013 06:00 ET

Digirad Corporation Reports First Quarter Financial Results

Q1 2013 Highlights Include: The Beginning of Implementing the Company's New Strategy, Significant Restructuring Progress, Integration of Acquired Assets and Additional Increases to Share Buyback Program

POWAY, CA--(Marketwired - May 6, 2013) - Digirad Corporation (NASDAQ: DRAD) today reported revenue of $11.5 million for the first quarter and an ending cash, cash equivalents and available-for-sale securities balance of $25.8 million.

At the end of February, the Company announced that following a lengthy strategic review, management and the board of directors had determined a new strategic direction for the Company. That initiative included:

  • A significant restructuring, primarily of the Diagnostic Imaging camera operation to reduce costs by $3 million to $4 million, on an annual basis.

  • A go-forward focus on maximizing and growing cash flow from its DIS services business. This strategy will include executing on financially disciplined acquisitions that align to and expand cash flow from the DIS operations. The diagnostic imaging business will emphasize a streamlined camera selling effort and efficiency in generating cash flow from the service and maintenance business associated with its installed base of cameras.

  • The aggressive return of cash to shareholders via an increased stock repurchase program, for which the Board ultimately increased the stock repurchase program from its existing $4 million program ($2 million availability) to a $12 million program ($10 million availability).

Digirad CEO Todd Clyde commented on the progress made, "Commercial and corporate activity in the first quarter was brisk as the management team implemented major steps in the restructuring of the business and executed on the organizational changes that will result in a leaner, focused operation. Key recent moves included significant cuts in senior management and other positions that will not be required in the new corporate direction, a decrease in the size of the board of directors, and the acceleration in assessment of acquisition targets that might complement the DIS footprint."

Clyde continued, "Though these changes involved tough decisions and near term financial charges, we have already begun to decrease our ongoing expense levels in most key categories, and we should see a more significant impact of those reductions by the third quarter, with continued decreases in expenses through the end of fiscal year 2013."

Digirad President Matt Molchan said, "Run rates in the DIS business remained relatively stable in the first quarter. The year-over-year revenue and gross margin comparison were principally impacted by some pricing pressures and a favorable one-time workers compensation insurance credit of approximately $200,000 reflected in the Q1 2012 gross margin results. During the period, we also completed the integration of the operations of the business we acquired at the end of 2012 and that business began to contribute to our results in Q1 2013."

Molchan continued, "Though we experienced some large restructuring charges during the quarter and anticipate more charges in the second quarter, by the middle of the year we anticipate we will have the majority of those expenses behind us. In addition, since we announced our new focus, we have identified a growing number of potential "tuck-in" acquisition targets to assess in key DIS regions. The team is focused on implementing all aspects of our new strategy, and I am pleased with the progress we have made thus far. We should start to see the effects of our restructuring in the second half of 2013 as those efforts start translating into improved income and cash flow."

First Quarter 2013 Summary

  • Total revenue for the first quarter of 2013 was $11.5 million, compared to $13.0 million for the same period in the prior year. DIS revenue for the first quarter of 2013 was $8.9 million, compared to $9.3 million for the same period of the prior year, which included some pricing pressures experience during the 2013 first quarter. Diagnostic Imaging revenue for the first quarter of 2013 was $2.6 million, compared to $3.7 million for the same period of the prior year, reflecting a disruption as the Company deployed its restructuring plan.

  • Gross profit for the first quarter of 2013 was $2.8 million, or 24 percent of revenue, compared to $3.7 million, or 28 percent of revenue in the prior year quarter.

  • Net loss for the first quarter of 2013 was $2.4 million, or $0.13 loss per share, compared to a net loss of $1.3 million, or $0.07 loss per share, in the same period of the prior year. Adjusted net loss for the 2013 first quarter, excluding the $1.0 million in expenses incurred for nonrecurring items related to restructuring activities, was $1.4 million or $0.07 loss per share on an adjusted basis.

  • Operating expenses for the first quarter of 2013 was $5.2 million, compared to $5.0 million in the same period in the prior year. Adjusted operating expenses for the first quarter of 2013 was $4.2 million, compared to the $5.0 million in the same period of the prior year, which reflects the beginning of the restructuring expense reductions since the February 28, 2013 restructuring announcement.

  • Cash, cash equivalents and available-for-sale securities totaled $25.8 million as of March 31, 2013. Cash, cash equivalents and available-for-sale securities totaled $27.2 million as of December 31, 2012.

Conference Call Information
A conference call is scheduled for 10:00 a.m. EDT today to discuss the results and management's outlook. The call may be accessed by dialing 877-941-1427 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 www.digirad.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 operating expenses", "adjusted operating loss" and "adjusted loss per share" and "adjusted segment loss". The most directly comparable measure for these non-GAAP financial measures are operating expenses, operating loss, loss per share and segment loss. The company has included below unaudited adjusted financial information for the quarter ended March 31, 2013 and 2012, which present the Company's results of operations after excluding restructuring charges.

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 May 6, 2013.

Forward-Looking Statements
This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding the Company's ability to deliver value to customers, the Company's 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, including the risks associated with changes in business conditions, technology, customers' business conditions, reimbursement, radiopharmaceutical shortages, economic outlook, operational policy or structure, acceptance and use of Digirad's camera systems and services, reliability, recalls, analysis of potential impairment and restructuring charges, the conclusion of our audit and other risks 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 Loss  
(Unaudited)  
   
    Three Months Ended  
(in thousands, except per share data)   March 31,  
    2013     2012  
                 
Revenues:                
  DIS   $ 8,939     $ 9,289  
  Diagnostic Imaging     2,607       3,680  
    Total revenues     11,546       12,969  
                 
Cost of revenues:                
  DIS     6,825       6,976  
  Diagnostic Imaging     1,904       2,321  
    Total cost of revenues     8,729       9,297  
                 
Gross profit     2,817       3,672  
                 
                 
Operating expenses:                
  Research and development     818       897  
  Marketing and sales     1,236       1,715  
  General and administrative     2,102       2,265  
  Amortization of intangible assets     66       77  
  Restructuring charges     1,004       -  
Total operating expenses     5,226       4,954  
                 
Loss from operations     (2,409 )     (1,282 )
                 
Other income (expense):                
  Interest income     22       26  
  Other expense     (32 )     (12 )
Total other income (expense)     (10 )     14  
Net loss   $ (2,419 )   $ (1,268 )
                 
Net loss per share: Basic and diluted   $ (0.13 )   $ (0.07 )
                 
Shares used in per share computations:                
                 
Weighted average shares outstanding: Basic and diluted     19,322       19,242  
                 
                 
                 
Digirad Corporation  
Adjusted Financial Information  
(Unaudited)  
   
                   
(in thousands, except per share data)   Three Months Ended March 31, 2013  
          Nonrecurring        
    GAAP     Items 1     Adjusted 2  
                         
Revenues:                        
  DIS   $ 8,939     $ --     $ 8,939  
  Diagnostic Imaging     2,607       --       2,607  
    Total revenues     11,546       --       11,546  
                         
Cost of revenues:                        
  DIS     6,825       --       6,825  
  Diagnostic Imaging     1,904       --       1,904  
    Total cost of revenues     8,729       --       8,729  
                         
Gross profit     2,817       --       2,817  
                         
Operating expenses:                        
  Research and development     818       --       818  
  Marketing and sales     1,236       --       1,236  
  General and administrative     2,102       --       2,102  
  Amortization of intangible assets     66       --       66  
  Restructuring charges     1,004       (1,004 )     -  
Total operating expenses     5,226       (1,004 )     4,222  
                         
Loss from operations     (2,409 )     1,004       (1,405 )
                         
Other income (expense):                        
  Interest income     22       --       22  
  Other expense     (32 )     --       (32 )
Total other income (expense)     (10 )     --       (10 )
Net loss   $ (2,419 )   $ 1,004     $ (1,415 )
                         
Net loss per share: Basic and diluted 3   $ (0.13 )   $ 0.05     $ (0.07 )
                         
Shares used in per share computations:                        
                         
Weighted average shares outstanding: Basic and diluted     19,322       19,322       19,322  
 
1 Reflects nonrecurring charges primarily related to restructuring of the Diagnostic Imaging camera operating activities.
 
2 Adjusted financial information reflects GAAP results adjusted on a non-GAAP basis to exclude nonrecurring items noted.
 
3 Net loss per share calculations are performed separately for each component presented. Therefore, the sum of the per share components from the table may not equal the per share amounts presented.
 
 
 
Digirad Corporation  
Adjusted Financial Information  
(Unaudited)  
   
                 
(in thousands, except per share data)   Three Months Ended March 31, 2012  
          Nonrecurring      
    GAAP     Items 1   Adjusted 2  
                       
Revenues:                      
  DIS   $ 9,289     $ --   $ 9,289  
  Diagnostic Imaging     3,680       --     3,680  
    Total revenues     12,969       --     12,969  
                       
Cost of revenues:                      
  DIS     6,976       --     6,976  
  Diagnostic Imaging     2,321       --     2,321  
    Total cost of revenues     9,297       --     9,297  
                       
Gross profit     3,672       --     3,672  
                       
Operating expenses:                      
  Research and development     897       --     897  
  Marketing and sales     1,715       --     1,715  
  General and administrative     2,265       --     2,265  
  Amortization of intangible assets     77       --     77  
Total operating expenses     4,954       --     4,954  
                       
Loss from operations     (1,282 )     --     (1,282 )
                       
Other income (expense):                      
  Interest income     26       --     26  
  Other expense     (12 )     --     (12 )
Total other income (expense)     14       --     14  
Net loss   $ (1,268 )   $ --   $ (1,268 )
                       
Net loss per share: Basic and diluted   $ (0.07 )   $ --   $ (0.07 )
                       
Shares used in per share computations:                      
                       
Weighted average shares outstanding: Basic and diluted     19,242       19,242     19,242  
 
1 There were no nonrecurring restructuring charges during the quarter ended March 31, 2012.
 
2 Adjusted financial information reflects GAAP results adjusted on a non-GAAP basis to exclude nonrecurring items noted.
 
 
 
Digirad Corporation  
Adjusted Financial Information  
(Unaudited)  
   
    Three Months Ended March 31, 2013  
          Nonrecurring      
(in thousands)   GAAP     Items 1   Adjusted 2  
                       
DIS                      
Revenue   $ 8,939     $ --   $ 8,939  
Gross Profit     2,114       --     2,114  
Operating loss     (144 )     --     (144 )
                       
Diagnostic Imaging                      
Revenue   $ 2,607     $ --   $ 2,607  
Gross Profit     703       --     703  
Operating loss     (2,265 )     1,004     (1,261 )
                       
                       
                       
    Three Months Ended March 31, 2012  
          Nonrecurring      
(in thousands)   GAAP     Items 3   Adjusted 2  
                       
DIS                      
Revenue   $ 9,289     $ --   $ 9,289  
Gross Profit     2,313       --     2,313  
Operating loss     (168 )     --     (168 )
                       
Diagnostic Imaging                      
Revenue   $ 3,680     $ --   $ 3,680  
Gross Profit     1,359       --     1,359  
Operating loss     (1,114 )     --     (1,114 )
                       
1 Reflects nonrecurring charges related to restructuring of the Diagnostic Imaging segment.
 
2 Adjusted financial information reflects GAAP results adjusted on a non-GAAP basis to exclude nonrecurring items noted.
 
3 There were no nonrecurring restructuring charges during the quarter ended March 31, 2012.
 
 
 

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