OREANDA-NEWS.  Digirad Corporation (Nasdaq:DRAD) today reported its financial results for the second quarter and six months ended June 30, 2016.

Total revenues for the 2016 second quarter were $32.1 million, an increase of 106 percent compared to the prior year’s second quarter revenues of $15.5 million.

Net income for the 2016 second quarter was $1.0 million, or $0.05 per diluted share, or $0.06 per diluted share from the same period in the prior year. Adjusted net income for the 2016 second quarter was $1.8 million, or $0.09 per diluted share, compared to $1.4 million, or $0.07 per diluted share from the same period in the prior year.

Adjusted EBITDA for the 2016 second quarter was $4.2 million, compared to $2.0 million in the prior year second quarter.

Total revenues for the six months ended June 30, 2016 were $63.2 million, an increase of 115 percent compared to the prior year’s revenues for the first six months of $29.4 million.

Net income for the six months ended June 30, 2016 was $12.6 million, or $0.63 per diluted share, compared to net income of $1.8 million, or $0.09 per diluted share in same period in the prior year.  Adjusted net income for the six months ended June 30, 2016 was $3.2 million, or $0.16 per diluted share, compared to adjusted net income of $1.7 million, or $0.09 per diluted share in same period in the prior year.

Adjusted EBITDA for the six months ended June 30, 2016 was $7.9 million, compared to $2.8 million in the same period in the prior year. A reconciliation of adjusted net income and adjusted EBITDA is provided later in this release.

The results for the quarter and six months ended June 30, 2016 include the results of the recent acquisition of DMS Health, which closed on January 1, 2016.

Digirad President and CEO Matt Molchan said, “I am very pleased with our results this quarter.  With the recent acquisition of DMS Health, we have more than doubled our year over year revenues, and our bottom line results are right in line with our expectations.  We continue to believe that the acquisition of DMS Health is a very compelling and strategic acquisition for Digirad, adding scale, diversity and further services to Digirad as a premier provider of healthcare solutions.  In addition, all our existing core businesses are performing well and in line with our expectations, ending a very solid quarter.”

Molchan continued, “Our integration efforts for DMS Health are going well, and we are on track to complete most major integration activities by the end of the year.  Based on the performance of our businesses so far this year and the results of our integration efforts, we feel very confident we will achieve our full year guidance.”

The Company also announced a cash dividend of $0.05 cents per share that will be paid on August 29, 2016, to shareholders of record on August 17, 2016.

2016 Financial Guidance

The Company reaffirms its previously announced fiscal year 2016 financial guidance of revenues between $125 million and $130 million, non-GAAP adjusted EBTIDA between $17 million and $18 million, and adjusted diluted earnings per share of between $0.30 and $0.35.

Conference Call Information

A conference call is scheduled for 11:00 a.m. EDT on July 28, 2016 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 below unaudited adjusted financial information, which presents the Company's results of operations after excluding acquired intangible asset amortization, acquisition related contingent consideration 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 July 28, 2016.

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.  

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
Condensed Consolidated Statements of Income
(Unaudited)
 
  Three Months Ended   Six Months Ended
  June 30,   June 30,
(in thousands, except per share amounts) 2016   2015   2016   2015
               
Revenues:              
Services $ 24,666     $ 12,179     $ 48,671     $ 22,742  
Product and product-related 7,424     3,368     14,576     6,645  
Total revenues 32,090     15,547     63,247     29,387  
Cost of revenues:              
Services 19,179     9,213     37,685     17,719  
Product and product-related 3,146     1,567     6,732     3,253  
Total cost of revenues 22,325     10,780     44,417     20,972  
               
Gross profit 9,765     4,767     18,830     8,415  
Total gross profit percentage 30.4 %   30.7 %   29.8 %   28.6 %
Services gross profit percentage 22.2 %   24.4 %   22.6 %   22.1 %
Product and product-related gross profit percentage 57.6 %   53.5 %   53.8 %   51.0 %
               
Operating expenses:              
Marketing and sales 2,837     1,268     5,462     2,478  
General and administrative 4,878     2,203     11,292     4,371  
Amortization of intangible assets 578     133     1,157     238  
Total operating expenses 8,293     3,604     17,911     7,087  
               
Income from operations 1,472     1,163     919     1,328  
               
Other (expense) income:              
Other (expense) income, net (58 )   —     14     —  
Interest expense, net (379 )   (1 )   (750 )   (1 )
Total other expense (437 )   (1 )   (736 )   (1 )
               
Income before income taxes 1,035     1,162     183     1,327  
Income tax (expense) benefit (37 )   (65 )   12,424     515  
Net income $ 998     $ 1,097     $ 12,607     $ 1,842  
               
Net income per share:              
Basic $ 0.05     $ 0.06     $ 0.65     $ 0.10  
Diluted $ 0.05     $ 0.06     $ 0.63     $ 0.09  
Dividends declared per common share $ 0.05     $ 0.05     $ 0.10     $ 0.10  
               
Weighted average shares outstanding – basic 19,529     19,263     19,489     19,036  
Weighted average shares outstanding – diluted 20,038     19,726     19,991     19,511  
               
               
Digirad Corporation
Condensed Consolidated Balance Sheets
(Unaudited)
 
(in thousands, except share data) June 30,
2016		   December 31,
2015
Assets      
Current assets:      
Cash and cash equivalents $ 3,284     $ 15,868  
Securities available-for-sale 2,259     3,227  
Accounts receivable, net 14,067     7,274  
Inventories, net 5,806     4,381  
Restricted cash 233     233  
Other current assets 3,441     764  
 Total current assets 29,090     31,747  
Property and equipment, net 32,019     6,252  
Intangible assets, net 12,783     3,079  
Goodwill 6,819     2,897  
Deferred tax assets 26,804     18,578  
Restricted cash 1,892     —  
Other assets 1,131     1,560  
Total assets $ 110,538     $ 64,113  
       
Liabilities and stockholders’ equity      
Current liabilities:      
Accounts payable $ 5,480     $ 1,369  
Accrued compensation 4,875     2,453  
Accrued warranty 195     213  
Deferred revenue 3,583     1,673  
Current portion of long-term debt 5,358     —  
Other current liabilities 4,418     2,998  
Total current liabilities 23,909     8,706  
Long-term debt, net of current portion 19,240     —  
Other liabilities 2,038     1,252  
Total liabilities 45,187     9,958  
       
Stockholders’ equity:      
Preferred stock —     —  
Common stock 2     2  
Treasury stock (5,728 )   (5,728 )
Additional paid-in capital 152,472     153,860  
Accumulated other comprehensive loss (263 )   (240 )
Accumulated deficit (81,132 )   (93,739 )
Total stockholders’ equity 65,351     54,155  
Total liabilities and stockholders’ equity $ 110,538     $ 64,113