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Digirad Corp. Reports Operating Results (10-Q)
Posted by: gurufocus (IP Logged)
Date: July 29, 2010 06:15AM

Digirad Corp. (DRAD) filed Quarterly Report for the period ended 2010-06-30. Digirad Corp. has a market cap of $36.5 million; its shares were traded at around $1.91 with and P/S ratio of 0.5.

DRAD is in the portfolios of Chuck Royce of Royce& Associates, Jim Simons of Renaissance Technologies LLC.

Highlight of Business Operations:

Our consolidated revenues were $28.2 million during the six months ended June 30, 2010, which represented a decrease of $8.0 million, or 22.2%, over the comparable prior year period primarily due to a decrease in revenue from our DIS segment. DIS revenue decreased $6.9 million, or 25.2%, due to a reduction in our daily lease fee combined with a reduction in the number of scan days. We reduced our daily lease fee to provide more incentive to our physician customers. Our physician customers reduced their scan days in part due to the lack of availability of radiopharmaceutical supply. The worldwide shortage of radiopharmaceuticals is expected to end in August 2010, as the main reactor of medical isotopes comes back on-line. Additionally, Product revenues for the six months ended June 30, 2010 also decreased by $1.1 million, or 12.8%, compared to the prior year period, primarily due to a reduction in the number of cameras which were sold to cardiology practices and hospitals. The number of cameras sold decreased to 14 from 27 during the six months ended June 30, 2010 and 2009, respectively.

We realized a loss from operations and a net loss for the six months ended June 30, 2010 as a result of decreased DIS segment gross profits, despite reduction in our operating expenses. Our consolidated net loss for the six months ended June 30, 2010 was $4.3 million, compared to net income of $0.8 million during the same period in the prior year. The decline in profitability in our DIS segment was primarily attributable to a reduction in our daily lease fee combined with a reduction in the number of days that our physician customers scanned patients.

Consolidated. Consolidated revenue was $13.2 million for 2010, which represents a decrease of $5.4 million, or 29.1%, compared to the prior year quarter, primarily as a result of lower DIS and Product revenues. DIS revenue accounted for 74.4% of total revenues for 2010, compared to 73.1% for the prior year quarter. We expect DIS revenue to continue to represent the larger percentage of our consolidated revenue in future periods.

DIS. Our DIS revenue was $9.8 million for the three months ended June 30, 2010, which represents a decrease of $3.8 million, or 27.9%, compared to the prior year quarter. The decrease resulted from our decision to reduce our daily lease rate to physicians in response to the anticipated decline in nuclear reimbursements, along with our physician customers unwillingness to run patient service days during the periods where supplies of radiopharmaceuticals were not available or available in short supply. With the passage of the recent healthcare reform legislation, the deferment of the sustainable growth rate until at least November 30, 2010 and the expected increase in radiopharmaceutical supplies by August 2010, we are working with our current and new physician customers to engage or re-engage our services.

Consolidated. Consolidated gross profit was $1.9 million for the three months ended June 30, 2010, representing a decrease of $4.0 million, or 67.6%, compared to the prior year quarter. The decrease in consolidated gross profit is primarily the result of the decline in DIS and Product revenues as well as increased excess and obsolete reserves compared to the prior year period. Consolidated gross profit as a percentage of revenue decreased to 14.5% for the three months ended June 30, 2010 from 31.7% for the prior year quarter.

DIS. Cost of DIS revenue consists primarily of labor, radiopharmaceuticals, equipment depreciation, and other costs associated with the provision of services. Cost of DIS revenue was $8.2 million for the three months ended June 30, 2010, representing a decrease of $1.4 million, or 14.2%, compared to the prior year quarter. The decrease in cost of DIS revenue is primarily a result of decreased radiopharmaceutical expenses from fewer scans and so

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