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)
July
24, 2008
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
July
24, 2008, Digirad Corporation issued a press release announcing financial
results for the quarter ended June 30, 2008. 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.
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Exhibit
No.
|
|
Description
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99.1
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Press
Release dated July 24, 2008.
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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.
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DIGIRAD
CORPORATION
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|||
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By:
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/s/
Todd Clyde
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||
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Todd
Clyde
Chief
Financial Officer
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|||
Date: July
24,
2008
Exhibit
99.1
Digirad
Corporation Reports Financial Results for 2008 Second Quarter and Six
Months
Record
Revenues Driven by DIS Centers of Influence Strategy;
Product
Revenues Nearly Double First Quarter Levels;
Improved
Margins Expected in Future Quarters
POWAY,
Calif.— July 24, 2008—Digirad Corporation (Nasdaq: DRAD), a
leading
provider of medical diagnostic imaging systems and services to physicians’
offices, hospitals and imaging centers, today reported financial results
for
second quarter and six months ended June 30, 2008.
Consolidated
revenues rose to a record $19.9 million from $18.8 million in second-quarter
2007. Digirad Imaging Solutions’ (DIS) revenue grew 7 percent to $14.2 million,
from $13.3 million in second-quarter 2007, due to the addition of ultrasound
services last year and growth in both nuclear and ultrasound services in
areas
surrounding the Company’s centers of influence.
Although
difficult market conditions persisted throughout the quarter, the Company
believes it is gaining market share in its product business as evidenced
by
higher product revenue of $5.7 million, compared to $5.5 million in
second-quarter 2007 and $4.4 million in first-quarter 2008. Camera sales
increased to 20 cameras in second-quarter 2008, nearly double the 11 units
sold
in first-quarter 2008, and service and maintenance revenues were also higher
compared to second-quarter 2007. Based on financial results for the first-half
of 2008, DIS mobile imaging services now account for 74 percent of total
revenues, compared to 70 percent for the same period in 2007.
Chief
Executive Officer Mark Casner remarked, “We entered 2008 with specific goals to
drive DIS revenue growth through our centers of influence strategy, increase
the
utilization of our imaging fleet with the intention of achieving profit in
DIS,
finalize the DIS mobile camera fleet upgrade program, and reach profitability
for the first time in the history of our product business through increasing
product-related revenue, reducing cost and improving product reliability.
“At
the
mid-point of 2008 I am pleased with our progress with driving DIS revenue
growth, which was up over prior year and first-quarter 2008, specifically
around
four of our centers of influence locations. We completed the upgrade of our
DIS
mobile camera fleet and made significant strides in recovering from the
disappointing product revenue for the first-quarter 2008, as product bookings
reached a record high. We hit our mid-year product cost reduction and
reliability targets and expect these efforts to translate into improved product
margins for the second half of 2008.”
Gross
profit declined to $4.6 million, or 23 percent of revenue in the second-quarter
2008, from $5.8 million, or 31 percent of revenue, in second-quarter 2007.
Casner
continued: “DIS margins during the first half of 2008 were under pressure as we
consciously made a decision in late 2007 to put in place a guaranteed work-hour
program to reduce employee turnover and increase customer retention. This
had
been a major contributor to flat margins over the past three quarters. Although
we are pleased this and other initiatives have resulted in reduced employee
turnover, about 30 percent annualized, we are not content with the margin
result. We looked at this program and, beginning June 1, fine-tuned the program
to benefit employee and customer retention but at the same time, improve
margins. We expect DIS margins to increase during the second half of 2008,
returning to the mid-20 percent range. We still believe we can drive DIS
margins
close to 30 percent, as we increase our mobile camera utilization and improve
efficiencies with our DIS labor and fixed costs while we grow
revenues.”
Operational
expenses were flat, compared to second-quarter 2007, representing 30 percent
of
second-quarter 2008 revenue, compared to 32 percent of second-quarter 2007
revenue. Increases in marketing and sales expenses in 2008 were offset by
declines in general and administrative and research and development
expenses.
Net
loss
for the second-quarter 2008 was $1.2 million, or $(0.06) per basic and diluted
share, compared to net income of $238,000, or $0.01 per diluted share, in
second-quarter 2007. Stock-based compensation expense was $233,000, compared
to
$351,000 for second-quarter 2007.
“We
are
pleased by the increase in revenues, as a number of new initiatives begin
to
gain traction,” Casner stated. “It should also be noted that in addition to the
COI program, we have begun to implement a number of other revenue pilots
to
complement our suite of services. In first quarter this year we launched
in our
Georgia market Artery Age, a test that measures carotid intima media thickness,
which is a good prognostic tool for the diagnosis of atherosclerosis. During
the
current third quarter we will be launching our private label imaging services,
which are the same services we currently offer but under the banner of the
physician or practice. We are evaluating other services and marketing
initiatives and expect to roll them out in subsequent quarters. We believe
they
will enhance the value we provide our customers and have a positive impact
on
revenue growth.”
DIS
upgraded three cameras in its fleet with its multi-head Cardius XPO camera
during the quarter, completing the Company’s two-year upgrade of its fleet of 71
mobile nuclear imaging cameras. DIS
asset
utilization was 57 percent of 164 systems (nuclear and ultrasound), compared
to
60 percent of 130 systems (nuclear and ultrasound) for second-quarter
2007.
For
six-months ended June 30, 2008, consolidated revenues were $38.2 million,
compared to $36.4 million for the first six months of 2007. DIS revenue rose
to
$28.1 million from $25.5 million for six-months 2007 due primarily to the
addition of ultrasound imaging services. Product-related revenue was $10.1
million, compared to $10.8 million for six-months 2007, the decline being
attributable to pressures on reimbursements and slowing economic conditions,
primarily felt in first-quarter 2008.
Gross
profit for the six-months ended June 30, 2008 declined to $9.0 million, or
23
percent of revenue, from $11.3 million, or 31 percent of revenue, for the
first
six months of 2007. The decline was due to lower production volumes, higher
labor and other servicing costs related to DIS, and growth
initiatives.
Operating
expenses for the six-months ended June 30, 2008 were $12.1 million, or 32
percent of revenues, compared to $11.8 million, or 32 percent of revenues,
for
the same period in 2007. Amortization costs were higher due to the acquisition
of Ultrascan in second-quarter 2007.
Net
loss
for the six-months ended June 30, 2008 was $2.6 million, or $(0.13) per basic
and diluted share, compared to net income of $312,000, or $0.02 per diluted
share, in the six-months ended June 30, 2007. Stock-based compensation expense
was $413,000 for the first six months 2008, compared to $625,000 for the
same
period in 2007.
Cash
and
equivalents and securities available for sale on June 30, 2008, totaled $26.9
million, compared to $26.4 million on March 31, 2008, and $31.7 million on
December 31, 2007. Receivables on June 30, 2008, were $8.9 million, compared
to
$9.8 million on March 31, 2008, and $8.5 million on December 31, 2007. Inventory
on June 30, 2008, was $5.7 million, compared $5.8 million on March 31, 2008,
and
$5.5 million on December 31, 2007.
Management
Reaffirms Guidance for Full-Year 2008
Management
continues to anticipate consolidated revenues in a range of $75 million to
$81
million, consisting of DIS revenue of $56 million to $60 million and
product-related revenue of $19 million to $21 million. Management continues
to
expect a consolidated net loss in a range of $2.0 million to $4.5 million,
including estimated stock-based compensation expense of $1 million.
Conference
Call Information
A
conference call is scheduled for 11:00 a.m. EDT today to discuss the results
and
management’s outlook. 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.
2
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 (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 550 systems; in addition, a mobile fleet of 164 nuclear and ultrasound
imaging systems is being used in 22 states and the District of Columbia,
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
Statements
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. Examples of such forward looking
statements include statements regarding revenues, gross margins, operating
expenses, net results, stock-based compensation, anticipated revenue in 2008
and
revenue from the Company’s centers of influence, potential gains in market
share, and, in general, anticipated financial results for 2008. Actual
performance and benefits results may differ materially from those set forth
in
this press release due to risks and uncertainties inherent in Digirad's business
including, without limitation, changes in business conditions, technology,
customers’ business conditions, work force, suppliers, business prospects,
economic outlook, operational policy or structure, acceptance and use of
Digirad's camera systems and services, reliability, recalls, and other risks
detailed in Digirad's filings with the U.S. Securities and Exchange Commission,
including Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Form
8-K
and other reports. Readers are cautioned to not 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 the forward looking
statements contained herein.
|
Investor
Contact:
Dan
Matsui
Allen
& Caron
949-474-4300
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Company
Contact:
Todd
Clyde, CFO
858-726-1600
ir@digirad.com
|
|
(Financial
tables follow)
3
Digirad
Corporation
Condensed
Consolidated Statements of Operations
(In
thousands, except per share amounts)
(Unaudited)
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|
Three Months Ended
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Six Months Ended
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|||||||||||
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June 30,
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June
30,
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|||||||||||
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2008
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2007
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2008
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2007
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|||||||||
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Revenues:
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|
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|||||||||
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DIS
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$
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14,224
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$
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13,323
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$
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28,078
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$
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25,520
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|||||
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Product
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5,673
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5,489
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10,090
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10,830
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|||||||||
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|||||||||||||
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Total revenues
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19,897
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18,812
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38,168
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36,350
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|||||||||
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|||||||||||||
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Cost of revenues:
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|||||||||||||
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DIS
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11,387
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9,667
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22,299
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18,605
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|||||||||
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Product
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3,955
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3,335
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6,901
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6,493
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|||||||||
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|||||||||||||
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Total cost of revenues
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15,342
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13,002
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29,200
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25,098
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|||||||||
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|||||||||||||
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Gross profit
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4,555
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5,810
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8,968
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11,252
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|||||||||
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|||||||||||||
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Operating expenses:
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|||||||||||||
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Research and development
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661
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791
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1,305
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1,573
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|||||||||
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Sales and marketing
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2,277
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1,939
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4,397
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4,037
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|||||||||
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General and administrative
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2,852
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3,117
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6,011
|
6,089
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|||||||||
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Amortization
of intangible assets
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179
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103
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369
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109
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|||||||||
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|
|||||||||||||
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Total operating expenses
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5,969
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5,950
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12,082
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11,808
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|||||||||
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|
|||||||||||||
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Loss from operations
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(1,414
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)
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(140
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)
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(3,114
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)
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(556
|
)
|
|||||
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|
|||||||||||||
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Interest and other, net
|
258
|
378
|
563
|
868
|
|||||||||
|
|
|||||||||||||
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Net income
(loss)
|
$
|
(1,156
|
)
|
$
|
238
|
$
|
(2,551
|
)
|
$
|
312
|
|||
|
|
|||||||||||||
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Net income
(loss) per share - basic and diluted
|
$
|
(0.06
|
)
|
$
|
.01
|
$
|
(0.13
|
)
|
$
|
0.02
|
|||
|
|
|||||||||||||
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Weighted average shares outstanding:
|
|||||||||||||
|
Basic
|
18,936
|
18,821
|
18,940
|
18,818
|
|||||||||
|
Diluted
|
18,936
|
19,208
|
18,940
|
19,208
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|||||||||
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|
|||||||||||||
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Stock-based compensation expense
is included in the above as follows:
|
|||||||||||||
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Cost of DIS revenue
|
$
|
15
|
$
|
19
|
$
|
31
|
$
|
44
|
|||||
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Cost of Product revenue
|
14
|
17
|
25
|
43
|
|||||||||
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Research and development
|
12
|
21
|
26
|
44
|
|||||||||
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Sales and marketing
|
32
|
15
|
56
|
65
|
|||||||||
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General and administrative
|
160
|
279
|
275
|
429
|
|||||||||
4
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Digirad Corporation
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||||
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Condensed Consolidated Balance Sheets(1)
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||||
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(In thousands)
|
|
June
30,
|
December
31,
|
||||||
|
|
2008
|
2007
|
|||||
|
|
(unaudited)
|
|
|||||
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Assets
|
|
|
|||||
|
|
|
|
|||||
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Cash and cash equivalents
|
$
|
11,381
|
$
|
14,922
|
|||
|
Securities available-for-sale
|
13,235
|
16,740
|
|||||
|
Accounts receivable, net
|
8,862
|
8,536
|
|||||
|
Inventories, net
|
5,652
|
5,455
|
|||||
|
Other current assets
|
2,047
|
1,786
|
|||||
|
|
|||||||
|
Total current assets
|
41,177
|
47,439
|
|||||
|
|
|||||||
|
Property and equipment, net
|
17,138
|
16,235
|
|||||
|
Other
intangible assets, net
|
2,262
|
2,631
|
|||||
|
Goodwill
|
2,650
|
2,650
|
|||||
|
Securities available-for-sale
|
2,294
|
--
|
|||||
|
Restricted cash
|
60
|
60
|
|||||
|
|
|||||||
|
Total assets
|
$
|
68,581
|
$
|
69,015
|
|||
|
|
|||||||
|
|
|||||||
|
Liabilities and stockholders' equity
|
|||||||
|
|
|||||||
|
Accounts payable
|
$
|
2,353
|
$
|
2,650
|
|||
|
Accrued compensation
|
3,770
|
3,547
|
|||||
|
Accrued warranty
|
765
|
930
|
|||||
|
Other accrued liabilities
|
2,772
|
3,285
|
|||||
|
Deferred revenue
|
2,749
|
2,909
|
|||||
|
Current portion of long-term debt
|
90
|
213
|
|||||
|
|
|||||||
|
Total current liabilities
|
12,499
|
13,534
|
|||||
|
|
|||||||
|
Long-term debt, net of current portion
|
68
|
--
|
|||||
|
Deferred rent
|
187
|
234
|
|||||
|
|
|||||||
|
Total stockholders' equity
|
52,827
|
55,247
|
|||||
|
|
|||||||
|
Total liabilities and stockholders' equity
|
$
|
65,581
|
$
|
69,015
|
|||
(1) The
condensed consolidated balance
sheet as of December 31, 2007, has been
derived from the audited
financial
statements as of that date.
5