Digirad revenues dip, net loss widens in Q3

Slower than expected sales of capital equipment led to an 8% drop in revenue and a significantly higher net loss for nuclear medicine firm Digirad in its third quarter.

For the period (end-September 30), Digirad had $28.6 million in revenues, down from $31.1 million reported in the third quarter of 2016. The company had a quarterly net loss of $8.9 million, compared with a net loss of $300,000 in the same period a year ago.

While Digirad's services businesses performed well and its mobile health platform met expectations in the third quarter, the company's capital equipment sales continue to be slower than expected. The firm believes that this trend has continued due to uncertainty about the future of the Affordable Care Act, according to President and CEO Matt Molchan. While the company still can't predict when this uncertainty around capital spending will lift, it continues to build an order pipeline that raises confidence in an eventual improvement in capital equipment sales, Molchan said in a statement.

Molchan noted that the previously announced cancellation of its partnership with Philips Healthcare will be effective on December 31. As a result, Philips will no longer operate as a manufacturer's sales representative in the upper Midwest region of the U.S., and it will also no longer install or provide warranties for products sold in the region. This cancellation has affected a portion of Digirad's MDSS business, which includes Philips product sales, as well as associated installation and warranty services. However, Digirad will continue to operate the postwarranty service side of this business.

Although Digirad will have to make some adjustments in the near term to unwind the Philips relationship, the company believes its overall business remains strong and that it will continue to generate cash and produce long-term growth, Molchan said.

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