Digirad Corp. Reports Operating Results (10-Q)
Digirad Corp. has a market cap of $40 million; its shares were traded at around $2.1 with a P/E ratio of 42 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 $15.1 million during the three months ended March 31, 2010 (2010), which represented a decrease of $2.6 million, or 14.9%, over the comparable prior year period (2009) due to a decrease in revenue from our DIS segment, slightly offset by an increase from our Product segment. DIS revenue decreased $3.1 million, or 22.6%, due to a reduction in the number of scan days. Our physician customers reduced their scan days in part due to the reduction in reimbursements that went into effect on January 1, 2010 and in part due to the inclement weather experienced in January and February 2010. Product revenues increased $0.5 million, or 12.6%, over the same period in 2009, primarily due to an increase in the average selling price of our cameras and accessories, mainly our new Cardius® X-ACT camera, which were sold to larger cardiology practices and hospitals. The number of cameras sold in the three months ended March 31, 2010 was the same as the number of cameras sold in the same period in 2009.
March 31, 2010 was $1.2 million, compared to net income of $44,000 during the same period in 2009. The decline in profitability in our DIS segment, was primarily attributable to the significant reimbursement reduction on January 1, 2010, experienced by our physician customers, along with the severe winter weather in the east and Midwest, which reduced the number of scan days in the first quarter of 2010.
Consolidated. Consolidated gross profit was $3.4 million for 2010, representing a decrease of $1.7 million, or 34%, compared to the prior year quarter. The decrease in consolidated gross profit is principally the result of the decline in DIS revenue. Consolidated gross profit as a percentage of revenue decreased to 22.4% for 2010 from 28.8% for 2009.
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 $8.8 million for 2010, representing a decrease of $1.4 million, or 13.6%, compared to the prior year quarter. The decrease in cost of DIS revenue is primarily a result of decreased radiopharmaceutical expenses and some labor costs. DIS gross profit was $1.9 million for 2010, which represents a decrease of $1.7 million, or 47.5%, from a gross profit of $3.7 million in 2009. DIS gross profit as a percentage of revenue decreased to 17.9% for 2010 from 26.4% for 2009. The decline in operational performance is primarily associated with the sudden reduction in scan days without a corresponding and timely reduction in labor and overhead expenses.
Product. Cost of Product revenue primarily consists of materials, labor and overhead costs associated with the manufacturing and warranty of our products. Cost of goods sold for the Product segment was $2.9 million for 2010, representing an increase of $0.5 million, or 20.2%, compared to the prior year quarter as our product sales mix shifted and we incurred certain manufacturing variances due to lower production volumes. Product gross profit was $1.5 million for 2010 and 2009. Product gross profit as a percentage of revenue decreased to 33.4% for 2010 from 37.6% for 2009, primarily due to an increase in personnel and manufacturing overhead as a percentage of revenue.
Net cash used in operations totaled $0.8 million in 2010, primarily due to our net loss and the increase of accounts receivable and inventory. Net cash provided by investing activities amounted to $0.8 million in 2010 and is primarily due to maturities of securities available-for-sale, partially offset by net purchases of securities available-for-sale and property and equipment. Net cash used in financing activities amounted to approximately $0.04 million in 2010, which primarily represents the repurchase of our common stock under a Rule 10b-18 plan. On February 4, 2009, our board of directors authorized a stock buyback program to repurchase up to an aggregate of $2.0 million of our issued and outstanding common shares. The timing of stock repurchases and the number of shares of common stock to be repurchased has been, and will be made, in compliance with Rule 10b-18 under the Securities Exchange Act of 1934 and will depend upon market conditions, applicable legal and contractual requirements, and other factors. Purchases under this program to date totaled $1.05 million, including purchases of $1.0 million in 2009 and $0.05 million in the three months ended March 31, 2010.
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