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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)
May 7, 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:
[ ] 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 May 7, 2007, Digirad Corporation issued a press release announcing financial
results for the quarter ended March 31, 2007. 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
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99.1 Press Release dated May 7, 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
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Todd Clyde
Chief Financial Officer
Date: May 7, 2007
Exhibit 99.1
Digirad Reports First Quarter Profit
Net Income is $74,000 Versus Net Loss of $2.8 Million Last Year
Gross Margin Increased to 31% From 23.2% Last Year
Operating Expenses Decreased 23.9% Versus Prior Year
Management Raises 2007 Guidance
POWAY, Calif.--(BUSINESS WIRE)--May 7, 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 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(R)-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(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 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,
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2007 2006
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(unaudited)
Revenues:
DIS $ 12,197 $ 13,217
Product 5,341 5,738
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Total revenues 17,538 18,955
Cost of revenues:
DIS 8,938 10,432
Product 3,158 4,130
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Total cost or revenues 12,096 14,562
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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
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Total operating expenses 5,858 7,693
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Loss from operations (416) (3,300)
Interest and other, net 490 496
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Net income (loss) $ 74 $ (2,804)
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Net income (loss) per share:
Basic and diluted $ 0.00 $ (0.15)
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Weighted average shares outstanding:
Basic 18,815 18,710
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Diluted 19,200 18,710
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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
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(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
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Total current assets 56,907 59,219
Property and equipment, net 10,689 9,570
Intangibles, net 422 428
Restricted cash 60 60
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Total assets $ 68,078 $ 69,277
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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
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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
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Total liabilities and stockholders' equity $ 68,078 $ 69,277
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(1) The condensed consolidated balance sheet as of December 31, 2006
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