Net Loss Narrows on Growth of Services Revenues, Higher Margins for
Quarter, Nine Months; Outlook Improves for 2007 Net Results POWAY,
Calif., Oct. 25 /PRNewswire-FirstCall/ -- Digirad Corporation
(NASDAQ:DRAD), a leading provider of medical diagnostic imaging
systems and services to physicians' offices, hospitals and imaging
centers, today reported narrowed losses for the third quarter and
nine months ended September 30, 2007, on higher revenues, improving
gross margins and lower operating expenses. Net loss for the
quarter was $588,000, or $(0.03), compared to a net loss of $2.1
million, or $(0.11) per share, for third-quarter 2006. The $588,000
net loss for the quarter included stock-based compensation expense
of $199,000; the net loss of $2.1 million for third-quarter 2006
included stock-based compensation expense of $344,000. For nine
months, the Company reported a net loss of $276,000, or $(0.01) per
share, including stock-based compensation expenses of $824,000,
compared to a net loss of $6.1 million, or $(0.33) per share,
including stock-based compensation expenses of $1.4 million, for
the same period a year ago. Chief Executive Mark Casner commented:
"We are pleased to report continuing improvement in year-over-year
net results due to higher gross margins, lower operating expenses,
and signs of returning to revenue growth driven by our nuclear and
ultrasound mobile imaging services operations. During the past
quarter, services revenues continued to benefit from a broader line
of imaging modalities, ongoing upgrades and higher utilization of
our mobile imaging fleet, which is also contributing to higher
gross margins through higher labor efficiencies and reduced
depreciation expenses. "In addition, we are starting to see initial
revenue from our centers of influence marketing strategy that has,
to date, resulted in active working relationships with three highly
respected academic medical institutions," Casner continued. "Based
on indications from these centers and our plan to add affiliations
with other centers of similar standing, this strategy holds the
potential to contribute incremental revenues in 2008." Consolidated
revenues for the quarter were $18.8 million, compared to $16.7
million for third-quarter 2006. DIS (Digirad Imaging Services)
revenue was $13.5 million, compared to $11.4 million in third
quarter 2006. For the quarter, DIS operated 135 units, both nuclear
and ultrasound, with an overall asset utilization rate of 62%,
compared to 83 units (all nuclear) and an asset utilization rate of
51% for third-quarter 2006. Third-quarter product-related revenues,
consisting of camera sales and maintenance fees, were $5.3 million
and included sales of 17 cameras for both the third-quarter 2007
and third-quarter 2006. Product-related gross margin was flat
compared to last year. Consolidated gross profit for the quarter
improved to $4.8 million, or 25.4% of revenues, from $4.1 million,
or 24.5% of revenues, for third-quarter 2006. DIS gross margin
improved to 24.7% of revenues, compared to 23.8% for third-quarter
2006. Product-related gross margin was 27.3%, compared to 25.9% for
third-quarter 2006. Casner added: "During the quarter we continued
to upgrade our DIS nuclear fleet by replacing 13 more single-head
cameras with our multi-headed Cardius XPO configuration. We now
have 55 multi-headed mobile cameras in operation and expect to
replace 6 of the 36 remaining single-headed cameras during the
fourth quarter of 2007. As in recent periods, we expect these
ongoing upgrades to lead to higher reliability and increased
throughput, which are expected to contribute to higher utilization
and lower labor costs, in subsequent quarters." Operating expenses
for the quarter declined approximately $1.1 million to $5.7 million
from $6.8 million in third quarter 2006; the decline being largely
attributable to reduced headcount as a result of streamlining
operations. Nine-month consolidated revenues were $55.1 million,
compared to $54.7 million for the first nine months of 2006. DIS
revenue was $39.0 million, compared to $38.0 million for
nine-months 2006. Product-related revenue was $16.1 million,
compared to $16.7 million for the same period last year.
Consolidated gross margin for nine months improved to 29.1%, or
$16.0 million, from 25.9%, or $14.1 million, for nine-months 2006.
Total operating expenses for nine months declined to $17.6 million,
or 31.9% of revenues, from $21.8 million, or 39.8% of revenues, for
the same period a year ago. "Looking forward, we will increase
focus on revenue growth and continue to keep expenses under
control, as we have during the last nine months," Casner stated.
"As our year-over-year improvement indicates, we are clearly on
track to achieve quarterly profitability. Furthermore, improved
cash flow and an already-strong balance sheet allow us to now
consider acquisitions and their potential to accelerate our
progress along that path." Cash and equivalents and securities
available for sale on September 30, 2007, totaled $30.8 million,
compared to $44.3 million on December 31, 2006. Cash usage for
nine-months 2007 included $8.8 million in payments toward the
acquisition of net assets from Ultrascan and $7.1 million for
capital expenditures primarily associated with the Company's DIS
operations, which were offset in part by positive cash flows from
operations of $2.4 million during the nine-month period. Net
receivables were $10.5 million compared to $7.5 million on December
31, 2006. The increase was due primarily to higher services
revenues during the quarter and acquiring Ultrascan receivables.
Net inventories were $5.1 million on September 30, 2007, compared
to $5.9 million on December 31, 2006. Management Updates 2007
Guidance Reflecting the results for the first nine months of the
year and the integration of Ultrascan, Digirad anticipates
consolidated revenues for 2007 in the range of $74.5 million to
$75.5 million, consisting of DIS revenue between $53.0 million and
$53.5 million and product revenue between $21.5 million and $22.0
million; and consolidated net results for 2007 ranging from
breakeven to a net loss of $1.0 million, including estimated
stock-based compensation expense of $1.1 million. Results for 2006
include $2.0 million in revenue from sales of stress agents.
Digirad discontinued sales of stress agents in June 2006.
Conference Call Information Digirad has scheduled a conference call
at 11:00 a.m. EDT today. A simultaneous webcast of the call may be
accessed online from the Events & Presentations link on the
Investor Relations page at http://www.digirad.com/; an archived
replay of the webcast will be available within 15 minutes of the
end of the conference call. A telephone replay of the call will be
available at (800) 406-7325 or (303) 590-3030, conference ID
#3793192 from approximately 2 p.m. EDT. The telephone replay will
be available until 11:59 pm EDT on October 27, 2007. About Digirad
Digirad Corporation provides diagnostic nuclear and ultrasound
imaging systems and services to physicians' offices, hospitals and
other medical services providers 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 450 systems; in addition, a mobile fleet
of more than 120 nuclear and ultrasound imaging systems is being
used in 22 states, primarily in the eastern, midwestern and
southwestern United States. For more information, please visit
http://www.digirad.com/. Digirad(R), Digirad Imaging Solutions(R),
and Cardius(R) 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 revenue growth, gross margin improvements and
declining operating expenses in both DIS and the product business;
our expectations of improved performance and lower costs associated
with the ongoing upgrade of the DIS fleet to the mobile version of
the Cardius 3 XPO system; anticipated incremental revenue in 2008
derived from our strategic centers of influence marketing strategy;
the potential for acquisitions; 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) (Unaudited)
Three Months Nine Months Ended Ended September 30, September 30,
2007 2006 2007 2006 Revenues: DIS $13,500 $11,388 $39,020 $38,008
Product 5,274 5,314 16,104 16,671 Total revenues 18,774 16,702
55,124 54,679 Cost of revenues: DIS 10,166 8,681 28,771 29,080
Product 3,834 3,937 10,327 11,450 Total cost of revenues 14,000
12,618 39,098 40,530 Gross profit 4,774 4,084 16,026 14,149
Operating expenses: Research and development 868 1,036 2,441 3,249
Sales and marketing 1,624 2,272 5,661 6,797 General and
administrative 3,037 3,455 9,126 11,689 Amortization of intangible
assets 217 6 326 35 Total operating expenses 5,746 6,769 17,554
21,770 Loss from operations (972) (2,685) (1,528) (7,621) Interest
and other, net 384 551 1,252 1,480 Net loss $(588) $(2,134) $(276)
$(6,141) Net loss per share - basic and diluted $(0.03) $(0.11)
$(0.01) $(0.33) Weighted average shares outstanding: Basic and
diluted 18,829 18,782 18,821 18,751 Stock-based compensation
expense is included in the above as follows: Cost of DIS revenue
$17 $33 $61 $125 Cost of Product revenue 17 24 60 66 Research and
development 18 41 62 129 Sales and marketing 2 89 67 237 General
and administrative 145 157 574 832 Digirad Corporation Condensed
Consolidated Balance Sheets (in thousands) Sept. 30, Dec. 31, 2007
2006(1) (Unaudited) Assets Cash and cash equivalents $9,364 $10,070
Securities available-for-sale 21,457 34,256 Accounts receivable,
net 10,539 7,534 Inventories, net 5,060 5,860 Other current assets
1,438 1,499 Total current assets 47,858 59,219 Property and
equipment, net 15,935 9,570 Other intangible assets, net 2,999 428
Goodwill 2,650 - Restricted cash 60 60 Total assets $69,502 $69,277
Liabilities and stockholders' equity Accounts payable $3,040 $2,643
Accrued compensation 2,936 3,650 Accrued warranty 930 788 Other
accrued liabilities 3,171 3,306 Deferred revenue 2,811 2,775
Current portion of long-term debt 204 269 Total current liabilities
13,092 13,431 Long-term debt, net of current portion 2 99 Deferred
rent 251 302 Total stockholders' equity 56,157 55,445 Total
liabilities and stockholders' equity $69,502 $69,277 (1) The
condensed consolidated balance sheet as of December 31, 2006, was
derived from the audited financial statements as of that date.
DATASOURCE: Digirad Corporation CONTACT: Investors, Dan Matsui of
Allen & Caron, +1-949-474-4300, , for Digirad Corporation; or
Todd Clyde, CFO of Digirad Corporation, +1-858-726-1600, Web site:
http://www.digirad.com/
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