UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
DC 20549
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)
October
25, 2007
DIGIRAD
CORPORATION
(Exact
name of registrant as specified in its charter)
|
Delaware
|
000-50789
|
33-0145723
|
||
|
(State
or other jurisdiction of
incorporation)
|
(Commission
File Number)
|
(IRS
Employer
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:
o
Written communications
pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
o
Soliciting material pursuant to Rule 14a-12 under the
Exchange Act (17 CFR 240.14a-12)
o
Pre-commencement communications pursuant to Rule
14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
o
Pre-commencement communications pursuant to Rule
13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Item
2.02. Results of Operations and Financial Condition
On
October 25, 2007, Digirad Corporation issued a press release announcing
financial results for the quarter ended September 30, 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
|
|
99.1
|
Press
Release dated October 25, 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: October
25, 2007
Exhibit
99.1
Digirad
Reports 2007 Third-Quarter, Nine-Month Financial Results
Net
Loss Narrows on Growth of Services Revenues, Higher Margins for Quarter,
Nine
Months;
Outlook
Improves for 2007 Net Results
POWAY,
Calif.—October 25, 2007—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-
MORE-MORE-MORE
Digirad
Reports 2007 Third-Quarter, Nine-Month Financial Results
Page
2-2-2
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 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.
MORE-MORE-MORE
Digirad
Reports 2007 Third-Quarter, Nine-Month Financial Results
Page
3-3-3
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 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 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.
|
Investor
Contact:
Dan
Matsui
Allen
& Caron
949-474-4300
d.matsui@allencaron.com
|
Company
Contact:
Todd
Clyde, CFO
858-726-1600
ir@digirad.com
|
[Financial
tables follow]
Digirad
Reports 2007 Third-Quarter, Nine-Month Financial Results
Page
4-4-4
Digirad Corporation
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts)
(Unaudited)
|
Three Months Ended
|
Nine Months 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
|
|||||||||
MORE-MORE-MORE
Digirad
Reports 2007 Third-Quarter, Nine-Month Financial Results
Page
5-5-5
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.
#
# #
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