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Q1 2013 Earnings Call
May 06, 2013 10:00 am ET
Matthew Clawson - Partner of Investor Relations Group
Todd P. Clyde - Chief Executive Officer
Matthew G. Molchan - President
Jeffry R. Keyes - Chief Financial Officer
Edward Augustine Schwartz - Gregory J. Schwartz & Co., Inc.
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Thank you, Alicia, and thank you all very much for joining us this morning. If you didn't receive a copy of today's press release and would like one, please contact our office at (949) 474-4300 after the call, and we'd be happy to get one to you. Also, this call is being broadcast live over the web and may be accessed at Digirad's website at www.digirad.com. Shortly after the call, a replay will also be available on the company's website.
I'd like to remind everyone that certain statements made during this conference call, including the question-and-answer period, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements include statements about the company’s revenues, costs and expenses, margin, operation, portable imaging services, product division, financial results, estimated market share and other topics related to Digirad’s business strategy and outlook. These forward-looking statements are based on current assumptions and expectations and involve risks and uncertainties that could cause actual events and financial performance to differ materially.
Risks or uncertainties include, but are not limited to, business and economic conditions, technological change, industry trends, changes in the company’s market and competition. More information about the risks and uncertainties is available in the company’s filings with the U.S. Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, as well as this morning’s press release.
The information discussed on this morning’s conference call should be used in conjunction with the consolidated financial statements and notes included in those reports and speak only as of the date of this call. The company undertakes no obligation to update these forward-looking statements.
Hosting the call today from Digirad is CEO, Todd Clyde. Joining Todd this morning are Jeff Keyes, Digirad's CFO; and Matt Molchan, President of the DIS Division and incoming President of Digirad. Todd, Matt and Jeff will discuss the 2013 first quarter results, update us on the company's strategy and comment on the company's outlook. A question-and-answer period will then follow.
With that, I'd like to turn the call over to Todd Clyde. Good morning, Todd.
Todd P. Clyde
Thank you, Matt, and I appreciate everyone joining us today for our first quarter 2013 results conference call. At our last results call in February, we announced the framework for a new strategic direction at Digirad. The new strategy was the result of literally months of market research, discussions among our Board of Directors and our shareholders and consultation from leading experts in today's healthcare marketplace. To recap briefly, we decided Digirad needed an operational and strategic restructuring. We need to be a leaner, more nimble but ultimately stronger company, more focused on generating cash flow, expanding EBITDA, with the goal of creating shareholder value.
Going forward, we will drive our Diagnostic Imaging business in a more focused and operating efficient manner, selling cameras and maximizing the value of our excellent customer service and maintenance business; our Digirad Imaging Services or DIS business, which we believe is scalable with growth and expansion in acquisition opportunities and is well suited for success in what we all know as a volatile healthcare market.
We also announced that Matt Molchan, who has been successfully running our DIS business, had been promoted to President of Digirad. Matt is here with us today and will talk more about DIS in a few minutes. Matt and I are currently working side-by-side during this restructuring and transition time for the next few months. At that time, Matt will take over as President and CEO of Digirad. Our headquarters will also move to Atlanta to further reduce costs and overhead, and I will step down from my current role as CEO.
We will continue to sell our cameras in the marketplace, but our goal now is to no longer burn cash in this business, a goal we are attaining by eliminating many of its associated costs. And we will continue our customer service organization and selling focus, which is now being run by Virgil Lott, who we promoted to President of Diagnostic Imaging a few months ago.
Again, the goal of this restructuring process is to maximize cash flow from operations and return value directly to our shareholders. Based on our analysis, we believe we'll be able to generate annualized free cash flow in the range of approximately $3 million to $4 million. At the same time, in line with our goal of returning value directly to our shareholders, we've launched a more aggressive stock repurchase program. Our board has voted to increase the allocation to our stock repurchase program to $12 million.
So today, about 2 months into this transition period, we are making great strides. We're well into our restructuring and have eliminated a lot of the investments costs we have committed to take out of the business. The cost-cutting we have done has already gotten us an annual savings, and at the end of the quarter, we have implemented approximately 35% of our total headcount reductions with further progress as of today and all planned reductions in force being completed by the end of Q4.