Digirad Corporation Reports 2009 Financial Results

POWAY, CA--(Marketwire - February 11, 2010) - Digirad Corporation (NASDAQ: DRAD) today reported that it generated net income and continued generating positive cash flow. The Company improved its total cash and investments position to $31.8 million at December 31, 2009, despite lower sales, from $28.3 million at December 31, 2008.

Digirad CEO Todd Clyde said, “We are pleased to have met each of our 2009 operating and strategic goals, while maintaining our overarching mandate of making progress towards consistent positive cash flow and profitability. Specifically, we streamlined our hub system in our Digirad Imaging Solutions business; launched our new Cardius® X-ACT attenuation correction camera that increases interpretive ease and accuracy; began selling c.pax™, our new web-based structured reporting and picture archiving and communication system (PACS); and, refined our Centers of Influence program. We met the challenge of an uncertain healthcare environment with a $7.7 million positive swing in operating profits from 2008, generating more than $4.8 million in cash flow from operations, and achieving positive net income for the year.”

2009 Full Year Financial Highlights:

-- Total revenue in 2009 was $69.6 million, compared to $80.4 million in 2008, mainly due to the sale and closure of certain DIS hubs and fewer nuclear gamma camera sales. DIS revenue was $52.3 million compared to $56.2 million for 2008, and Product revenues were $17.3 million compared to $24.2 for 2008. -- Gross profit was $20.2 million, or 29% of revenue, compared to $20.1 million, or 25%, for 2008. -- Net income was $0.6 million, or $0.03 per share, compared to net loss of $6.9 million, or $0.36 per share, for 2008. -- Cash and cash equivalents and available-for-sale securities totaled $31.8 million, or $1.67 per share at December 31, 2009, net of approximately $1.0 million invested in the Company’s stock as part of its 10b-18 buyback program. Cash and cash equivalents and available- for-sale securities were $28.3 million at December 31, 2008 and $31.1 million at September 30, 2009. -- DIS asset utilization was 64% on 148 systems (nuclear and ultrasound), compared to 58% on 153 systems (nuclear and ultrasound) during 2008. 

Fourth Quarter Financial Highlights:

-- Total revenue was $16.4 million, compared to $22.0 million in the fourth quarter of 2008, mainly due to a shortfall in DIS sales and fewer nuclear gamma camera sales that we believe resulted from economy-driven tightening of hospital budgets and debt availability. DIS revenue declined to $12.0 million compared to $14.2 million in the fourth quarter of 2008 and $12.9 million in the third quarter of 2009. Product revenues were $4.4 million in the fourth quarter of 2009 compared to $7.8 million in the comparable prior year quarter and $4.0 million in the third quarter of 2009. -- Gross profit was $4.7 million, or 29% of revenue, compared to $6.3 million, or 29%, in the fourth quarter of 2008. -- Net income was $0.2 million, or $0.01 per share, compared to a net loss of $3.4 million, or $0.18 per share, in the fourth quarter of 2008. -- DIS asset utilization was 66% on 137 systems (nuclear and ultrasound), compared to 56% on 160 systems (nuclear and ultrasound) during the fourth quarter of 2008. 

Clyde continued, “Our goal is to provide the best nuclear and ultrasound services available in the market, allowing our physician-customers to deliver needed diagnostic tests in their offices, while driving positive health care economics. Our two main goals for 2010 are to:

-- Generate positive cash flow in excess of $2 million; and, -- Achieve positive earnings. 

We expect to accomplish these two fundamental goals by:

-- Retaining our DIS customers, despite reimbursement reductions, and offering them new, expanded services; -- Managing our operating expenses to adjust to the changing healthcare environment; -- Continuing to focus on accounts receivable collections, inventory reduction and balance sheet management; and, -- Introducing, in the middle of 2010, the first large-field-of-view, solid-state portable camera to the hospital marketplace. 

Throughout the coming months, we intend to make additional changes to our DIS business model and to our physician-customer partnerships, as we continue to stabilize our business and absorb the impact of the 2010 reimbursement rate reduction of thirty-six percent in nuclear cardiology and ten percent in echocardiography. We plan on adding vascular and general imaging procedures to our ultrasound services in 2010 to expand our channel offerings. We anticipate the reimbursement reductions to impact our financials in the first part of 2010; however, the steps just mentioned, along with continued cost management, are expected to result in a stronger second half of 2010, as well as positive cash flow and profitability for the year.”

Conference Call Information

A conference call is scheduled for 11:00 a.m. EST today to discuss the results and management’s outlook. The call may be accessed by dialing 877-941-1428 five minutes prior to the scheduled start time and referencing Digirad. 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.

About Digirad Corporation

Digirad is a leading provider of diagnostic imaging products, and personnel and equipment leasing services. For more information, please visit www.digirad.com. Digirad®, Digirad Imaging Solutions®, and Cardius® are registered trademarks of Digirad Corporation.

Forward-Looking Statements

This press release contains statements that are forward-looking statements as defined within the Private Securities Litigation Reform Act of 1995. These include statements regarding proposed changes to our DIS business model and to our physician-customer partnerships, stabilization of our DIS business, the impact of the 2010 reimbursement rate changes, our ability to provide value in our service channel via strategic and technology initiatives, the addition of vascular and general imaging procedures to our ultrasound services, and our ability to generate positive cash flow in 2010 . These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from the statements made, including the risks associated with changes in business conditions, technology, customers’ business conditions, reimbursement, radiopharmaceutical shortages, 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, Current Reports on 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.

 Digirad Corporation Unaudited Condensed Consolidated Statements of Operations (In thousands, except per share amounts) Three Months Ended Year Ended December 31, December 31, --------------------- --------------------- 2009 2008 2009 2008 ---------- ---------- ---------- ---------- Revenues: DIS $ 11,999 $ 14,172 $ 52,318 $ 56,204 Product 4,400 7,815 17,278 24,154 ---------- ---------- ---------- ---------- Total revenues 16,399 21,987 69,596 80,358 Cost of revenues: DIS 9,191 11,162 38,476 44,697 Product 2,493 4,543 10,895 15,590 ---------- ---------- ---------- ---------- Total cost of revenues 11,684 15,705 49,371 60,287 ---------- ---------- ---------- ---------- Gross profit 4,715 6,282 20,225 20,071 Operating expenses: Research and development 870 805 3,360 2,764 Marketing and sales 1,555 2,121 6,977 8,554 General and administrative 2,138 2,853 8,921 11,805 Amortization of intangible assets 142 256 590 798 Restructuring (gain) loss (19) 1,308 319 1,308 Goodwill impairment loss -- 2,466 -- 2,466 ---------- ---------- ---------- ---------- Total operating expenses 4,686 9,809 20,167 27,695 ---------- ---------- ---------- ---------- Income (loss) from operations 29 (3,527) 58 (7,624) Interest and other, net 165 84 550 759 ---------- ---------- ---------- ---------- Net income (loss) $ 194 $ (3,443) $ 608 $ (6,865) ========== ========== ========== ========== Net income (loss) per share: Basic and Diluted $ 0.01 $ (0.18) $ 0.03 $ (0.36) ========== ========== ========== ========== Weighted average shares outstanding: Basic 19,147 18,986 19,073 18,955 ========== ========== ========== ========== Diluted 19,908 18,986 19,557 18,955 ========== ========== ========== ========== Stock-based compensation expense is included in the above as follows: Cost of DIS revenue $ 7 $ 11 $ 27 $ 56 Cost of Product revenue 13 15 56 53 Research and development 10 11 37 47 Marketing and sales 24 29 93 115 General and administrative 91 20 393 445 Digirad Corporation Unaudited Condensed Consolidated Balance Sheets(1) (in thousands) December December 31, 31, 2009 2008 ----------- ----------- Assets Cash and cash equivalents $ 13,560 $ 13,525 Securities available-for-sale 18,250 14,759 Accounts receivable, net 7,553 9,324 Inventories, net 6,402 4,978 Property and equipment held for sale -- 1,122 Other current assets 1,234 1,982 ----------- ----------- Total current assets 46,999 45,690 Property and equipment, net 10,263 13,428 Intangible assets, net 1,243 1,833 Goodwill 184 184 Restricted cash -- 60 ----------- ----------- Total assets $ 58,689 $ 61,195 =========== =========== Liabilities and stockholders’ equity Accounts payable $ 1,797 $ 2,197 Accrued compensation 2,344 3,457 Accrued warranty 332 906 Other accrued liabilities 2,106 2,811 Deferred revenue 2,594 2,723 ----------- ----------- Total current liabilities 9,173 12,094 Deferred rent 127 142 Total stockholders’ equity 49,389 48,959 ----------- ----------- Total liabilities and stockholders’ equity $ 58,689 $ 61,195 =========== =========== 

(1) The condensed consolidated balance sheet as of December 31, 2008, has been derived from the audited financial statements as of that date.