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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
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FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
February 14, 2007
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DIGIRAD CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 000-50789 33-0145723
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(State or other jurisdiction (Commission File Number) (IRS Employer
of incorporation) Identification No.)
13950 Stowe Drive
Poway, California 92064
(Address of principal executive offices, including zip code)
(858) 726-1600
(Registrant's telephone number, including area code)
N/A
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to
simultaneously satisfy the filing obligation of the registrant under any of the
following provisions (see General Instruction A.2. below):
[ ] Written communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
[ ] Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
[ ] Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange
Act (17 CFR 240.14d-2(b))
[ ] Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange
Act (17 CFR 240.13e-4(c))
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Item 2.02. Results of Operations and Financial Condition
On February 14, 2007, Digirad Corporation issued a press release announcing
financial results for the quarter and year ended December 31, 2006. A copy of
this press release is attached hereto as Exhibit 99.1.
This information and the exhibits hereto are being furnished and shall not be
deemed to be "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), or otherwise subject to the liability
of that section, nor shall they be deemed incorporated by reference in any
filing under the Securities Act of 1933, as amended, or the Exchange Act, except
as expressly set forth by specific reference in such a filing.
Item 9.01. Financial Statements and Exhibits
(c) Exhibits.
Exhibit No. Description
- ------------ ----------------------------------------------------------------
99.1 Press Release dated February 14, 2007.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
DIGIRAD CORPORATION
By:/s/Todd Clyde
-----------------------------
Todd Clyde
Chief Financial Officer
Date: February 14, 2007
Exhibit 99.1
Digirad Reports 2006 Fourth Quarter and Full-Year Results
Achieves Further Progress Toward Profitability
POWAY, Calif.--(BUSINESS WIRE)--Feb. 14, 2007--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 financial
results for the 2006 fourth quarter and full year that exceeded
guidance announced in a press release on January 11, 2007.
"Comparing 2006 to 2005, revenue increased 5.5% to $71.9 million
even though we no longer generated almost $2.5 million in stress agent
revenue during the second half of 2006, gross profit increased 25.0%,
and the net loss declined to $0.34 per share from $0.52 per share. For
the fourth quarter of 2006 compared to the fourth quarter of 2005,
revenue declined slightly to $17.2 million principally because we no
longer generated approximately $1.1 million in stress agent revenue,
while gross profit increased 50.2%, operating expenses decreased
15.1%, and the net loss declined to $0.01 per share from $0.15 per
share. In addition, the Company produced about $320,000 of free cash
flow in the fourth quarter instead of absorbing cash as it did a year
ago," said Chief Executive Officer Mark Casner.
Mr. Casner continued, "In DIS, we recently signed our first
contract to provide ultrasound imaging services, the first step in our
plan to diversify our mobile service offerings. We believe ultrasound
is a natural complement to our existing cardiac imaging services, and
a precursor to enhancing the growth opportunities for this business.
We also are encouraged by the signing of new DIS service agreements
with a number of large hospitals, multi-specialty practices, and
Integrated Delivery Networks (IDNs), evidence that the targeted
marketing approach we introduced in 2006 is beginning to meet with
success. During the fourth quarter we upgraded 11 more cameras in our
83-unit DIS fleet to our most advanced Cardius(R)-3 XPO camera, and
ended the year with 19 triple-head cameras in our mobile imaging
service business. This upgrade program will continue in 2007.
"In our product business, we sold 17 cameras in the fourth quarter
compared to 18 in the fourth quarter of 2005, with improved margins
due to the success of our cost reduction and outsourcing initiatives.
For 2006, we delivered 71 cameras compared to 55 in 2005, a strong
performance in view of the continued pressure on the cardiac nuclear
market. We believe that the improved image quality, throughput,
reliability and serviceability of our latest Cardius-3 XPO cameras
contributed to the increase in our market share, and we plan to
solidify our position by making the key XPO features available in our
Cardius-1 and Cardius-2 cameras in the first half of 2007. During the
past year we also saw increased interest in our 2020tc general purpose
camera in the hospital market.
"We remain focused on reducing costs, enhancing our operating
platform, and building on the competitive advantages provided by our
advanced technology for nuclear imaging. With our steady progress in
recent quarters, we are increasingly confident that our goal of
sustainable revenue and earnings growth is within reach."
Fourth Quarter Results
For the three months ended December 31, 2006, consolidated
revenues decreased 0.9% to $17.2 million compared to $17.4 million for
the fourth quarter of 2005. This decline primarily reflected a 3.5%
decrease in DIS revenue to $11.6 million for the fourth quarter of
2006 compared to $12.0 million for the fourth quarter of 2005, the
anticipated consequence of the Company's decision to phase out
providing stress agents used in some imaging procedures beginning in
June 2006. Instead, DIS' physician customers now provide these agents.
Management estimates that the stress agent change reduced DIS
revenue in the fourth quarter of 2006 by approximately $1.1 million
compared to what it otherwise would have been under the original
delivery model. DIS revenue for the fourth quarter of 2005 included
stress agent revenue of approximately $1.0 million.
Product segment revenue, which includes sales of gamma cameras,
upgrades, accessories and maintenance revenue, increased 5.0% to $5.6
million for the fourth quarter of 2006 versus $5.4 million for the
fourth quarter of 2005.
Consolidated gross profit for the three months ended December 31,
2006 increased 50.2% to $4.9 million, or 28.5% of revenues, from $3.3
million, or 18.8% of revenues, for the fourth quarter of 2005.
DIS gross margin increased to 25.9% of revenue for this year's
fourth quarter compared to 14.7% for the fourth quarter of 2005. DIS
gross margin for the fourth quarter of 2005 was 23.0% before the $1.0
million impact of a change in the depreciable life of the DIS fleet
cameras. "The improvement in DIS gross margin for the fourth quarter
of 2006 versus prior year is especially noteworthy in view of the
shift we announced in the 2006 third quarter in the focus and
responsibilities of some of our DIS personnel towards operational as
opposed to administrative tasks, with the result that certain costs
previously accounted for as general and administrative expense are now
reported as cost of goods sold. For the fourth quarter of 2006, this
added approximately $500,000 to cost of goods sold compared to the
prior year," Mr. Casner explained.
Product segment gross margin improved to 33.7% for the fourth
quarter of 2006 versus 27.9% for last year's fourth quarter,
reflecting lower materials and maintenance costs.
The net loss for the fourth quarter of 2006 was $149,000, or $0.01
per share, which included stock-based compensation expense of
$177,000. This compares to a net loss of $2.8 million, or $0.15 per
share, for the fourth quarter of 2005, which included stock-based
compensation expense of $86,000.
Cash and equivalents and securities available for sale at December
31, 2006 were $44.3 million compared to $49.5 million at December 31,
2005. Net receivables were $7.5 million at December 31, 2006 compared
to $8.1 million at December 31, 2005. Net inventories were $5.9
million at December 31, 2006 compared to $5.1 million at December 31,
2005.
Twelve Months Results
For the twelve months ended December 31, 2006, consolidated
revenues increased 5.5% to $71.9 million compared to $68.2 million for
2005. DIS revenue decreased 1.2% to $49.6 million, including stress
agent revenue of $2.0 million. This compares to DIS revenue for 2005
of $50.2 million, including stress agent revenue of $4.2 million.
Product revenue increased 24.0% to $22.3 million from $18.0 million.
Overall gross profit margin for 2006 improved to 26.5% versus 22.4%
for 2005.
The net loss for 2006 was $6.3 million, or $0.34 per share, which
included stock-based compensation expense of $1.6 million. This
compares to a net loss for 2005 of $9.6 million, or $0.52 per share,
which included stock-based compensation expense of $497,000.
Management Reaffirms 2007 Guidance
"In 2006, we made significant strides toward our goals in sales
and marketing, operations and product development. Our 2007 goals
include increasing our sales growth rate, continuing to lower
operating costs, approaching positive cash flow and driving to
profitability. We intend to accomplish these objectives through
diversification of DIS, employee retention, operation efficiencies,
DIS expansion, technology enhancements and development of new
products," Mr. Casner said.
Digirad reaffirmed previously communicated 2007 guidance. The
Company anticipates consolidated revenues in the range of $73 million
to $76 million, consisting of DIS revenue between $50 million and $52
million and product revenue between $23 million and $24 million; and a
consolidated loss between $1.3 million and $3.3 million, including
estimated stock-based compensation expense of $1.3 million. Digirad
anticipates no stress agent revenue in 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 #6678207.
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 procedures
but do not have the patient volume, capital or resources to justify
purchasing a gamma camera. For more information, please visit
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 improved performance 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; our statements regarding increasing our market share
in a declining market; statements regarding the expected financial
impact of our decision to discontinue offering stress agents; our
belief that our product enhancements and our plans to diversify and
grow our services business will bring us better financial performance;
our anticipation of growing our nuclear and ultrasound product and
service offerings; our belief that we may continue to sign contracts
with large hospitals, multi-specialty practices and integrated
delivery networks; our plans of integrating the XPO camera features
into some of our other cameras; our anticipation of further success in
selling our 2020tc camera to hospitals 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 Twelve Months Ended
December 31, December 31,
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2006 2005 2006 2005
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(unaudited) (unaudited)
Revenues:
DIS $11,606 $12,028 $49,614 $50,194
Product 5,641 5,374 22,312 17,992
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Total revenues 17,247 17,402 71,926 68,186
Cost of revenues:
DIS 8,595 10,261 37,675 37,376
Product 3,742 3,872 15,192 15,564
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Total cost of revenues 12,337 14,133 52,867 52,940
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Gross profit 4,910 3,269 19,059 15,246
Operating expenses:
Research and development 645 980 3,894 3,747
Sales and marketing 2,030 1,860 8,827 7,420
General and administrative 2,838 3,654 14,562 15,082
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Total operating expenses 5,513 6,494 27,283 26,249
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Loss from operations (603) (3,225) (8,224) (11,003)
Interest and other, net 454 455 1,934 1,384
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Net loss $(149) $(2,770) $(6,290) $(9,619)
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Net loss per share - basic and
diluted $(0.01) $(0.15) $(0.34) $(0.52)
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Weighted average shares
outstanding:
Basic and diluted 18,791 18,701 18,761 18,468
========= ======== =========== ========
Stock-based compensation
expense is included in the
above as follows:
Cost of DIS revenue $17 $19 $141 $103
Cost of Product revenue 8 8 73 53
Research and development -- 12 130 67
Sales and marketing 42 6 280 46
General and administrative 110 41 942 228
Digirad Corporation
Condensed Consolidated Balance Sheets(1)
(in thousands)
December 31,
2006 2005
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(unaudited)
Assets
Cash and cash equivalents $10,070 $16,303
Securities available-for-sale 34,256 33,202
Accounts receivable, net 7,534 8,132
Inventories, net 5,860 5,136
Other current assets 1,499 1,687
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Total current assets 59,219 64,460
Property and equipment, net 9,570 9,582
Intangibles, net 428 402
Restricted cash 60 60
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Total assets $69,277 $74,504
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Liabilities and stockholders' equity
Accounts payable $2,643 $2,152
Accrued compensation 3,650 2,585
Accrued warranty 788 825
Other accrued liabilities 3,306 4,614
Deferred revenue 2,775 2,858
Current portion of long-term debt 269 766
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Total current liabilities 13,431 13,800
Long-term debt, net of current portion 99 368
Deferred rent 302 348
Total stockholders' equity 55,445 59,988
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Total liabilities and stockholders' equity $69,277 $74,504
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(1) The condensed consolidated balance sheet as of December 31, 2005
has been derived from the audited financial statements as of that
date.
CONTACT: Digirad Corporation
Todd Clyde, CFO, 858-726-1600
ir@digirad.com
or
Neil Berkman Associates (Investor Contact)
310-826-5051
info@BerkmanAssociates.com