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Digirad Corporation Reports Fourth Quarter and Full Year 2008 Financial Results
Posted by: gurufocus (IP Logged)
Date: February 5, 2009 06:01AM

Press Release: Digirad Corporation Reports Fourth Quarter and Full Year 2008 Financial Results

Board of Directors Approves Share Buyback Program

POWAY, Calif., Feb. 5 /PRNewswire-FirstCall/ -- Digirad Corporation (Nasdaq: DRAD), a leading provider of diagnostic imaging products, and personnel and equipment leasing services, today reported that robust camera sales, combined with company-wide efficiency measures, resulted in 17 percent growth in total sales, improved gross margin, and generated strong cash flow in its fourth-quarter ended December 31, 2008.

Digirad CEO Todd Clyde said that steps taken in 2008 allowed the Company's product division to achieve profitability in the quarter and for the full year. The focus is now on reshaping a more powerful DIS core footprint from which we will further penetrate our markets and expand our Centers of Influence locations, which pair leading academic institutions with physicians in those communities.

"Progress toward consistent profitability and positive cash flow are the priority at Digirad today," Clyde said. "Achieving that stable financial and operating platform allows us to make investments to drive product evolution, establish new service initiatives, increase market share, and ultimately make growth possible in 2010 and beyond."

Fourth-Quarter Highlights:

  • Total revenue rose to a record $22.0 million, compared to $18.8 million in fourth-quarter 2007. Product sales grew to $7.8 million from $5.4 million in fourth-quarter 2007, and DIS revenues increased to $14.2 million from $13.4 million in fourth-quarter 2007.

  • Gross profit was $6.3 million, or 29 percent of revenue, compared to $4.5 million, or 24 percent, in fourth-quarter 2007.

  • Net loss was $3.4 million, or $(0.18) per share, including $3.8 million in restructuring charges and goodwill impairment that are not expected to recur in coming periods, compared to net loss of $1.1 million, or $(0.06) per share, in fourth-quarter 2007.

  • Cash and cash equivalents and securities available-for-sale totaled $28.3 million, or $1.50 per share, on December 31, 2008. Cash and cash equivalents and securities available-for-sale were $31.7 million on December 31, 2007 and $25.6 million on September 30, 2008. The increase during the 2008 fourth quarter resulted primarily from strong camera sales coupled with consistent cash collections of accounts receivables in both the product business and the personnel and equipment leasing services business.

  • DIS asset utilization was 56 percent on 160 systems (nuclear and ultrasound), compared to 61 percent on 136 systems (nuclear and ultrasound) during fourth-quarter 2007.

Full Year 2008 Summary:

  • Total revenue rose to $80.4 million, compared to $73.9 million in 2007. Product sales were $24.2 million, compared to $21.5 million for 2007, and DIS revenues were $56.2 million compared to $52.4 million for 2007.

  • Gross profit was $20.1 million, or 25 percent of revenue, compared to $20.5 million, or 28 percent, for 2007. The decline in gross margin was largely the result of costs related to initiatives to reduce turnover of mobile imaging services personnel and upgrading the Company's fleet of mobile imaging systems.

  • Net loss was $6.9 million, or $(0.36) per share, including the restructuring and goodwill impairment costs noted above, compared to a net loss of $1.4 million, or $(0.07) per share, for twelve-months 2007. The increase in net loss reflected costs associated with the restructuring and goodwill impairment charge and lower gross margins in the first three quarters of 2008 and lower interest income, compared to 2007.

Clyde continued, "The financial and operational performance in the fourth quarter was a strong indication that a leaner Digirad organization is adopting the changes necessary to move the company forward and generate greater value for our customers and shareholders."

Corporate Goals in 2009

  • Creating greater efficiency as we sell or close additional underperforming hub operations;
  • Continually improving our approach to launching and growing Centers of Influence;
  • Introducing new imaging technologies during the year;
  • Moving forward with the development of a longer-term technology platform designed to attract new customer segments and take market share from our competitors; and,
  • Progressing toward consistent profitability and positive cash flow.

Share Buyback Approved

The Company also announced that its board of directors has authorized a stock buyback program to repurchase up to an aggregate of $2 million of its issued and outstanding common shares. Digirad had approximately 19 million shares outstanding as of December 31, 2008. At current valuations, this repurchase plan would authorize the buyback of approximately 2.1 million shares, or approximately 11 percent of the company's outstanding shares.

Chairman of the Digirad Board of Directors R. King Nelson said, "The board believes the Company's direction and goals towards generating positive cash flow and earnings coupled with an undervalued stock price present a unique investment opportunity. We are confident this will provide a solid return to our shareholders."

The timing of stock repurchases and the number of shares of common stock to be repurchased will be made in compliance with Rule 10b-18 under the Securities Exchange Act of 1934. The timing and extent of the repurchase will depend upon market conditions, applicable legal and contractual requirements, and other factors.

Conference Call Information

A conference call is scheduled for 11:00 a.m. EST today to discuss the results and management's outlook. The call may be accessed by dialing 800-762-8795 five minutes prior to the scheduled start time and referencing Digirad. For callers outside the United States, dial 480-248-5085. A simultaneous webcast of the call may be accessed online from the Events & Presentations link on the Investor Relations page at; an archived replay of the webcast will be available within 15 minutes of the end of the conference call.

About Digirad Corporation

Digirad provides medical diagnostic imaging systems and personnel and equipment leasing services to physicians' offices, hospitals and imaging centers for cardiac, vascular, and general imaging applications. Digirad's Cardius XPO line of nuclear imaging cameras use patented solid-state technology and unique multi (single, dual, triple) head design for superior performance and advanced features for sharper digital images, faster processing, compact size, lighter weight for portability, ability to handle patients up to 500 pounds, and improved patient comfort compared to standard nuclear cameras. Digirad's 2020tc general-purpose nuclear imager has a small footprint and may also be configured for fixed or mobile use to supplement primary imaging. Digirad's installed base of equipment exceeds 600 systems; in addition, a mobile fleet of more than 145 nuclear and ultrasound imaging systems is being used in 21 states, primarily in the eastern, midwestern and southwestern United States. For more information, please visit Digirad(R), Digirad Imaging Solutions(R), and Cardius(R) are registered trademarks of Digirad Corporation.

Forward-Looking Statements

This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding the efficacy of Digirad's centers of influence model, the status of the negotiation of the sale or closure of underperforming hub locations, and the ability to achieve positive cash flow and profitability, drive technology progress and improve services utilization to grow market share. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made, including the risks associated with changes in business conditions, technology, customers' business conditions, work force, suppliers, business prospects, economic outlook, operational policy or structure, acceptance and use of Digirad's camera systems and services, reliability, recalls, and other risks detailed in Digirad's filings with the U.S. Securities and Exchange Commission, including 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.

Investor Contact:          Company Contact:
    Matt Clawson               Todd Clyde, CEO
    Allen & Caron              858-726-1600

Digirad Corporation
                        Condensed Consolidated Statements of Operations
                           (In thousands, except per share amounts)

                                 Three Months Ended       Twelve Months Ended
                                    December 31,              December 31,
                                  2008      2007            2008      2007
                                   (unaudited)           (unaudited)

      DIS                        $14,172    $13,420      $56,204    $52,440
      Product                      7,815      5,403       24,154     21,507

    Total revenues                21,987     18,823       80,358     73,947

    Cost of revenues:
      DIS                         11,162     10,749       44,697     39,520
      Product                      4,543      3,582       15,590     13,909

    Total cost of revenues        15,705     14,331       60,287     53,429

    Gross profit                   6,282      4,492       20,071     20,518

      Operating expenses:
      Research and development       805        631        2,764      3,072
      Sales and marketing          2,121      2,009        8,554      7,670
      General and administrative   2,853      2,794       11,805     11,920
      Amortization and impairment
       of intangible assets          256        371          798        697
      Goodwill impairment loss     2,466         --        2,466         --
      Restructuring loss           1,308         --        1,308         --

    Total operating expenses       9,809      5,805       27,695     23,359

    Loss from operations          (3,527)    (1,313)      (7,624)    (2,841)

    Interest income, net             212        343          819      1,566
    Other expense                   (128)      (130)         (60)      (101)

    Net loss                     $(3,443)   $(1,100)     $(6,865)   $(1,376)

    Net loss per share -
     basic and diluted            $(0.18)    $(0.06)      $(0.36)    $(0.07)

    Weighted average shares
      Basic and diluted           18,986     18,916       18,955     18,845

    Stock-based compensation
     expense is included in the
     above as follows:

      Cost of DIS revenue            $11        $10          $55        $71
      Cost of Product revenue         15        (11)          53         49
      Research and development        11         15           47         77
      Sales and marketing             29         35          115        102
      General and administrative      20         32          446        606
Digirad Corporation
                         Condensed Consolidated Balance Sheets(1)
                                     (in thousands)

                                                             December 31,
                                                          2008          2007

         Cash and cash equivalents                     $13,525       $14,922
         Securities available-for-sale                  14,759        16,740
         Accounts receivable, net                        9,324         8,536
         Inventories, net                                4,978         5,455
         Property and equipment held for sale            1,122            --
         Other current assets                            1,982         1,786

    Total current assets                                45,690        47,439

    Property and equipment, net                         13,428        16,235
    Other intangible assets, net                         1,833         2,631
    Goodwill                                               184         2,650
    Restricted cash                                         60            60

    Total assets                                       $61,195       $69,015

    Liabilities and stockholders' equity

         Accounts payable                               $2,197        $2,650
         Accrued compensation                            3,457         3,547
         Accrued warranty                                  906           930
         Other accrued liabilities                       2,705         3,285
         Deferred revenue                                2,723         2,909
         Current portion of long-term debt                  52           213

    Total current liabilities                           12,040        13,534

    Long-term debt, net of current portion                  54            --
    Deferred rent                                          142           234
                                                                             Total stockholders' equity                          48,959        55,247

    Total liabilities and stockholders' equity         $61,195       $69,015

    (1)  The condensed consolidated balance sheet as of December 31, 2007,
    has been derived from the audited financial statements as of that

Source: PRNewsWire

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