Digirad Corporation Reports Second Quarter 2011 Financial Results

POWAY, CA--(Marketwire - July 27, 2011) - Digirad Corporation (NASDAQ: DRAD) today reported 2011 second quarter revenue of $14.2 million, 2011 six-month revenue of $28.4 million and an ending cash and available-for-sale securities balance of $31.1 million at June 30, 2011.

Digirad CEO Todd Clyde stated, “Positive progress continues at Digirad as we returned to year-over-year revenue growth. Our DIS business performed well as we continued to add new customers, generate additional revenue and expand margins. Our camera sales were flat compared to the first quarter of 2011, impacted by a generally weak capital equipment marketplace.”

Clyde continued, “Although we are disappointed our camera sales are not increasing at a higher rate, camera bookings were stronger in the second quarter as compared to the first quarter of 2011 and we continue to see customer interest in our ergo™ general purpose portable imaging system. We are strengthening our camera marketing initiatives and recently announced the hiring of Armando Jackson as Vice President of Product Sales. We are ahead of our plan to generate cash in 2011, due in part to our operational improvement in our DIS business and our continued management of the balance sheet.”

Second Quarter 2011 Summary

• Total revenue for the second quarter of 2011 was $14.2 million, compared to $13.2 million for the same period in the prior year and $14.2 million in the first quarter of 2011. DIS-only revenue for the second quarter of 2011 was $10.0 million, compared to $9.8 million for the same period of the prior year and $9.6 million in the prior quarter. Product revenue for the second quarter of 2011 was $4.3 million, compared to $3.4 million for the same period of the prior year and $4.6 million in the prior quarter.

• Gross profit for the second quarter of 2011 was $4.0 million, or 28.0 percent of revenue, compared to $1.9 million, or 14.5 percent of revenue, in the same period of the prior year and $3.5 million, or 24.8 percent of revenue, in the prior quarter.

• Net loss for the second quarter of 2011 was $0.2 million, or $0.01 loss per share, compared to net loss of $3.1 million, or $0.16 loss per share, in the same period of the prior year and a net loss of $0.4 million, or $0.02 loss per share, in the prior quarter.

• Cash and cash equivalents and available-for-sale securities totaled $31.1 million, or $1.67 per share as of June 30, 2011. Cash and cash equivalents and available-for-sale securities totaled $30.2 million, or $1.63 per share as of December 31, 2010.

• During the second quarter of 2011, DIS asset utilization was 58 percent on 133 systems (nuclear and ultrasound), compared to 62 percent on 131 systems (nuclear and ultrasound) in the prior year second quarter and 58 percent on 131 systems (nuclear and ultrasound) in the prior quarter.

Year-to-Date Financial Highlights:

• Total revenue for the first six months of 2011 was $28.4 million, compared to $28.2 million for the prior year period. DIS revenue for the first six months of 2011 was $19.5 million, compared to $20.5 million for the prior year period, and Product revenue for the first six months of 2011 was $8.9 million compared to $7.7 million for the prior year period.

• Gross profit for the first six months of 2011 was $7.5 million, or 26.4 percent of revenue, compared to $5.3 million, or 18.7 percent of revenue, for the prior year period.

• Net loss for the first six months of 2011 was $0.6 million, or $0.03 loss per share, compared to net loss of $4.3 million, or $0.23 loss per share, for the prior year period.

• During the first six months of 2011, DIS asset utilization was 58 percent on 132 systems (nuclear and ultrasound), compared to 62 percent on 133 systems (nuclear and ultrasound) in the prior year period.

Richard Slansky, CFO, added, “We generated positive cash from operations of approximately $0.8 million in the second quarter and ended the period with a total cash and investments position of $31.1 million. Total operating expenses continued to decline year-over-year as a function of cost reduction measures implemented in the past 2 years, and we anticipate maintaining strict controls on spending -- even as we invest in new opportunities for growth and expansion.”

“To repeat our goals for 2011,” Clyde concluded, “We expect to: 1) generate free cash flow for the full year 2011; 2) increase ergo sales by further driving imaging to the point of care; 3) expand margins in both our Product and DIS businesses; and 4) achieve consolidated top-line revenue growth in the second half of the year. We have some ground to make-up with our camera sales and are committed to driving improvements.”

Conference Call Information
A conference call is scheduled for 11:00 a.m. EDT today to discuss the results and management’s outlook. The call may be accessed by dialing 877-941-8416 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 our ability to deliver value to customers, our expanded product and service offerings, including, the addition of the first large-field-of-view, solid state portable camera to the hospital marketplace, and our ability to generate positive cash flow in 2011. 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 Consolidated Statements of Operations (Unaudited and in thousands, except per share data) Three Months Ended Six Months Ended June 30, June 30, -------------------- -------------------- 2011 2010 2011 2010 --------- --------- --------- --------- Revenues: DIS $ 9,950 $ 9,787 $ 19,546 $ 20,509 Product 4,299 3,372 8,878 7,718 --------- --------- --------- --------- Total revenues 14,249 13,159 28,424 28,227 Cost of revenues: DIS 7,772 8,172 15,534 16,974 Product 2,483 3,079 5,376 5,974 --------- --------- --------- --------- Total cost of revenues 10,255 11,251 20,910 22,948 --------- --------- --------- --------- Gross profit 3,994 1,908 7,514 5,279 Operating expenses: Research and development 714 870 1,422 1,595 Marketing and sales 1,617 1,551 3,041 3,181 General and administrative 1,866 2,139 3,970 4,400 Amortization of intangible assets 83 107 176 239 Restructuring loss (gain) -- 352 (164) 352 --------- --------- --------- --------- Total operating expenses 4,280 5,019 8,445 9,767 --------- --------- --------- --------- Loss from operations (286) (3,111) (931) (4,488) Other income (expense): Interest income 72 88 280 209 Interest expense (7) (2) (20) (3) Other income (expense) (7) (59) 57 (37) --------- --------- --------- --------- Total other income 58 27 317 169 --------- --------- --------- --------- Net loss $ (228) $ (3,084) $ (614) $ (4,319) ========= ========= ========= ========= Net loss per common share - basic and diluted $ (0.01) $ (0.16) $ (0.03) $ (0.23) ========= ========= ========= ========= Weighted average shares outstanding - basic and diluted 18,988 18,738 18,963 18,704 ========= ========= ========= ========= Stock-based compensation expense is included in the above as follows: Cost of DIS revenue $ 4 $ 10 $ 8 $ 18 Cost of Product revenue 24 16 53 27 Research and development 20 17 43 26 Marketing and sales 29 31 65 50 General and administrative 119 95 254 228 --------- --------- --------- --------- Total stock-based compensation expense $ 196 $ 169 $ 423 $ 349 --------- --------- --------- --------- Digirad Corporation Consolidated Balance Sheets (In thousands, except share amounts) June 30, December 31, 2011 2010 ------------ ------------ (Unaudited) Assets Current assets: Cash and cash equivalents $ 9,369 $ 20,459 Securities available-for-sale 21,771 9,788 Accounts receivable, net 8,077 7,527 Inventories, net 6,061 5,432 Other current assets 832 1,038 ------------ ------------ Total current assets 46,110 44,244 Property and equipment, net 5,860 7,185 Intangible assets, net 632 808 Goodwill 184 184 ------------ ------------ Total assets $ 52,786 $ 52,421 ============ ============ Liabilities and stockholders’ equity Accounts payable $ 2,332 $ 1,871 Accrued compensation 1,972 1,600 Accrued warranty 403 378 Deferred revenue 2,069 2,379 Other accrued liabilities 2,301 2,096 ------------ ------------ Total current liabilities 9,077 8,324 Deferred rent 134 138 ------------ ------------ Total liabilities 9,211 8,462 ------------ ------------ Commitments and contingencies Stockholders’ equity: Preferred stock, $0.0001 par value: 10,000,000 shares authorized; no shares issued or outstanding -- -- Common stock, $0.0001 par value: 80,000,000 shares authorized; 18,726,561 and 18,597,311 shares issued and outstanding (net of treasury shares) at June 30, 2011 and December 31, 2010, respectively 2 2 Treasury stock, at cost; 573,218 shares at June 30, 2011 and December 31, 2010 (1,039) (1,039) Additional paid-in capital 155,216 154,785 Accumulated other comprehensive income (137) 63 Accumulated deficit (110,467) (109,852) ------------ ------------ Total stockholders’ equity 43,575 43,959 ------------ ------------ Total liabilities and stockholders’ equity $ 52,786 $ 52,421 ============ ============