Digirad Corporation (NASDAQ:DRAD), a leading provider of
cardiovascular imaging services and solid-state nuclear medicine
imaging products to physician offices, hospitals and imaging
centers, today announced net income of $74,000 for the first
quarter of 2007 compared to a net loss of $2.8 million for the
first quarter of 2006. "Gross margin for this year's first quarter
increased in both the Company's DIS and product businesses and
operating expenses declined versus the prior year, extending the
positive trends established during 2006. We are pleased with these
gains and believe further improvements are achievable," said Chief
Executive Officer Mark Casner. "Contributing to our optimism is our
recent acquisition of Ultrascan, Inc., a leading provider of mobile
ultrasound and nuclear medicine services primarily in Georgia.
Ultrasound is a natural complement to the cardiac nuclear imaging
services we offer in our DIS business. We believe this transaction
is a significant step forward in our commitment to diversifying our
mobile service offerings and creating new opportunities for future
growth. We expect Ultrascan to make a positive contribution to DIS'
financial performance beginning this year." First Quarter Results
For the three months ended March 31, 2007, consolidated revenues
decreased 7.5% to $17.5 million compared to $19.0 million for the
first quarter of 2006. DIS revenue for this year's first quarter
was $12.2 million, which included no revenue from stress agents.
This compares to DIS revenue for the first quarter of 2006 of $13.2
million, which included stress agent revenue of $1.1 million.
Digirad upgraded eight additional units in its 82-unit DIS fleet to
the Company's most advanced Cardius�-3 XPO mobile cameras during
the first quarter, and now has 27 multi-head mobile cameras
operating in its mobile imaging service business. "In addition to
providing a more comfortable experience for the patient and
excellent image quality for the physician-user, we have long
believed that the more rapid throughput and enhanced reliability of
our XPO platform will help us improve employee retention and reduce
labor costs. We are beginning to see evidence that this program can
deliver the cost benefits we anticipated," Casner said. Product
segment revenue, which includes gamma camera sales and maintenance
revenue, decreased 6.9% to $5.3 million for the first quarter of
2007 compared to $5.7 million for the first quarter of 2006, the
result of a change in the mix of cameras sold and a decrease in
average selling prices. Digirad sold 19 cameras in this year's
first quarter compared to 18 in the first quarter of 2006.
Consolidated gross profit for the three months ended March 31, 2007
increased 23.9% to $5.4 million, or 31.0% of revenues, from $4.4
million, or 23.2% of revenues, for the first quarter of 2006. DIS
gross margin increased to 26.7% of revenue for this year's first
quarter compared to 21.1% for the first quarter of 2006. "The
positive effect of cost-reduction efforts in our imaging services
business is evident in this year's first quarter results," Casner
said. Product segment gross margin improved to 40.9% for the first
quarter of 2007 compared to 28.0% for last year's first quarter.
"We attribute the increase in gross margin versus the prior year
period to our cost reduction and outsourcing initiatives, and saw
this improvement despite continued pressure on average selling
prices in what remains a difficult market environment," Casner
noted. Operating expenses declined 23.9% to $5.9 million for the
first quarter of 2007 compared to $7.7 million for the first
quarter of 2006. "Cost control remains one of our highest
priorities," Casner said. Net income for the first quarter of 2007
was $74,000, or $0.00 per share, which included stock-based
compensation expense of $274,000. This compares to a net loss of
$2.8 million, or $0.15 per share, for the first quarter of 2006,
which included stock-based compensation expense of $471,000. Cash
and equivalents and securities available for sale at March 31, 2007
were $39.8 million compared to $44.3 million at December 31, 2006.
Net receivables were $8.8 million at March 31, 2007 compared to
$7.5 million at December 31, 2006. Net inventories were $6.8
million at March 31, 2007 compared to $5.9 million at December 31,
2006. Management Increases 2007 Guidance Reflecting the results for
the first quarter and the acquisition of Ultrascan, Digirad
currently anticipates consolidated revenues for 2007 in the range
of $77 million to $80 million, consisting of DIS revenue between
$54 million and $56 million and product revenue between $23 million
and $24 million; and a bottom line ranging from a consolidated net
loss of $500,000 to $2.5 million, including estimated stock-based
compensation expense of $1.1 million. Digirad anticipates no stress
agent revenue for 2007 versus stress agent revenue of $2.0 million
for 2006. Conference Call Digirad has scheduled a conference call
at 11:00 a.m. ET today. A simultaneous web cast of the call may be
accessed from the Events and Presentations link on the Investor
Relations page of www.digirad.com. A replay will be available for
one year at this same Internet address. A telephone replay will be
available for 48 hours after the call by dialing (800) 642-1687,
reservation #2037699. About Digirad Digirad Corporation develops,
manufactures and markets solid-state, digital gamma cameras to
hospitals, imaging centers and physician offices. Digirad offers a
comprehensive line of solid-state nuclear gamma cameras that
produce high-quality images for use in the detection of many
medical conditions, including cardiovascular disease. Digirad's
cameras are unique as their lightweight and compact design allows
them to fit easily into small office spaces. Digirad's wholly owned
subsidiary, Digirad Imaging Solutions (DIS), offers a comprehensive
mobile imaging leasing and services program for physicians who wish
to perform in-office nuclear cardiology and ultrasound procedures
without purchasing the equipment. For more information, please
visit www.digirad.com. Digirad�, Digirad Imaging Solutions�, and
Cardius� are registered trademarks of Digirad Corporation.
Forward-Looking Statements Digirad cautions that statements
included in this press release that are not a description of
historical facts are forward-looking statements. You can identify
these statements by the fact that they do not relate strictly to
historical or current facts and use words such as "anticipate,"
"estimate," "expect," "project," "intend," "plan," "believe" and
other words and terms of similar meaning in connection with a
discussion of future operating or financial performance or events.
Examples of such statements include the statements regarding our
expectations of gross margin improvements and declining operating
expenses in both DIS and the product business; our belief that the
Utlrascan acquisition is complementary to and will make a positive
contribution to the financial results of our DIS business and
provides opportunities for diversification and the creation of
future growth; our expectations of improved performance, employee
retention and lower costs from our upgrade of the DIS fleet to the
mobile version of the Cardius 3 XPO system; our expectations of
achieving reduced operating costs as a result of cost cutting
measures; and, in general, our anticipated financial results for
2007. The inclusion of these and other forward-looking statements
should not be regarded as a representation by Digirad that any of
its plans will be achieved. Actual results may differ materially
from those set forth in this press release due to the risks and
uncertainties inherent in Digirad's business including, without
limitation: the degree to which personnel changes and related
disruptions in our business activities may affect Digirad's
products, customers, work force, suppliers, and our overall
business prospects and operations; the degree to which Digirad's
camera systems and related services will be accepted by physicians
and hospitals some of whom may experience reliability issues or
technical problems; the ability of Digirad effectively to market,
sell and distribute its medical devices, and related services given
its limited capabilities in these areas; Digirad's ability to
manage risks relating to product liability, warranty claims,
recalls, property damage and personal injury with respect to its
imaging systems; and other risks detailed in Digirad's Securities
and Exchange Commission filings, including its Annual Report on
Form 10-K and other reports filed with the Securities and Exchange
Commission. Given these uncertainties, readers are cautioned not to
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 this press
release including the forward-looking statements contained herein
to reflect events or circumstances after the date hereof or to
update the reasons actual results could differ materially from
those anticipated in these forward-looking statements, even if new
information becomes available in the future. Digirad Corporation
Condensed Consolidated Statements of Operations (In thousands,
except per share amounts) � � Three Months Ended March 31, � 2007�
� 2006� (unaudited) Revenues: DIS $ 12,197� $ 13,217� Product �
5,341� � 5,738� � Total revenues 17,538� 18,955� � Cost of
revenues: DIS 8,938� 10,432� Product � 3,158� � 4,130� � Total cost
or revenues � 12,096� � 14,562� � Gross profit 5,442� 4,393� �
Operating expenses: Research and development 782� 1,096� Sales and
marketing 2,098� 2,459� General and administrative � 2,978� �
4,138� � Total operating expenses � 5,858� � 7,693� � Loss from
operations (416) (3,300) � Interest and other, net � 490� � 496� �
Net income (loss) $ 74� $ (2,804) � Net income (loss) per share:
Basic and diluted $ 0.00� $ (0.15) � Weighted average shares
outstanding: Basic � 18,815� � 18,710� Diluted � 19,200� � �
18,710� � Stock-based compensation expense is included in the above
as follows: Cost of DIS revenue $ 25� $ 20� Cost of Product revenue
26� 18� Research and development 23� 42� Sales and marketing 50�
75� General and administrative 150� 316� Digirad Corporation
Condensed Consolidated Balance Sheets(1) (in thousands) � � � � � �
� � � � � � March 31, � December 31, � � 2007� � 2006� � �
(unaudited) � � Assets � � � � � � � � � Cash and cash equivalents
$ 9,711� � $ 10,070� � Securities available-for-sale 30,054� �
34,256� � Accounts receivable, net 8,836� � 7,534� � Inventories,
net 6,801� � 5,860� � Other current assets � 1,505� � � 1,499� � �
� � � Total current assets 56,907� � 59,219� � � � � � Property and
equipment, net 10,689� � 9,570� Intangibles, net 422� � 428�
Restricted cash � 60� � � 60� � � � � � Total assets $ 68,078� � $
69,277� � � � � � � � � � � Liabilities and stockholders' equity �
� � � � � � � � Accounts payable $ 2,029� � $ 2,643� � Accrued
compensation 2,497� � 3,650� � Accrued warranty 993� � 788� � Other
accrued liabilities 3,351� � 3,306� � Deferred revenue 2,721� �
2,775� � Current portion of long-term debt � 294� � � 269� � � � �
� Total current liabilities 11,885� � 13,431� � � � � � Long-term
debt, net of current portion 41� � 99� Deferred rent 285� � 302� �
� � � � Total stockholders' equity � 55,867� � � 55,445� � � � � �
Total liabilities and stockholders' equity $ 68,078� � $ 69,277� �
(1) The condensed consolidated balance sheet as of December 31,
2006 has been derived from the audited financial statements as of
that date.
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