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Digirad Corporation Reports Preliminary 2012 Fourth Quarter and Year-End Financial Results

POWAY, CA--(Marketwire - Feb 28, 2013) - Digirad Corporation ( NASDAQ : DRAD ) today reported preliminary 2012 fourth quarter revenue of $13.0 million, 2012 full-year revenue of $50.5 million and an ending cash, cash equivalents and available-for-sale securities balance of $27.2 million. The Company generated positive cash from operations during the fourth quarter ended December 31, 2012 and executed a small acquisition to complement its Digirad Imaging Solutions (DIS) division in the Southeastern U.S. Region.

Digirad CEO Todd Clyde commented, "We achieved solid commercial results in the 2012 fourth quarter. The DIS business continued to generate cash in the period. While camera sales were higher than anticipated, we continue to believe there is opportunity to improve the operating results of this business." 

Clyde continued, "Over the past year, our Board of Directors has explored an exhaustive range of strategic options for the Company and our two divisions going forward. Those options included partnerships, acquisitions, divestitures and new product development. We are today announcing that our Board has determined that our primary focus as we move forward will be to grow and maximize cash flow from our DIS services business and to restructure our unprofitable Diagnostic Imaging camera business and cut costs. Our Board also approved plans to aggressively repurchase shares."

New Strategic Direction and Planned Management Changes:

The more specific elements of the strategy include:

  • The Company will significantly restructure its diagnostic imaging camera operation to reduce costs by $3 million to $4 million, on an annual basis.

  • The Company will focus on maximizing and growing cash flow from its DIS services business and the service and maintenance business associated with its installed base of cameras. 

  • The Company will aggressively return cash to shareholders via an increased stock repurchase program, for which the Board increased the stock repurchase program from its existing $2 million availability to $5 million.

  • The Company will seek to increase cash flow further by executing on financially disciplined acquisitions that align to our DIS service business. As an example, the Company completed a tuck-in acquisition in December that increased our footprint and utilization in the Southeast. That transaction is expected to have very attractive cash returns as it was purchased for approximately 2.5 times cash flow at a cash cost of $475,000.

  • As part of the restructuring, the Company is also instituting a management transition. Matthew G. Molchan, the current President of the DIS division, will become President of Digirad and will become Digirad's CEO in six months. Todd Clyde will continue in the role of CEO during a six-month transition period. In addition, Digirad's Diagnostic Imaging business, which we have historically referred to as the Product business, will be led by Virgil Lott, who is being elevated to President of that group.

  • Digirad's headquarters will move to Atlanta, GA from Poway, CA in order to reduce costs and better align with the Company's new strategic focus going forward.

Chairman of the Board of Directors Jeffrey E. Eberwein said, "The go-forward strategy will better maximize shareholder value by eliminating investment in currently less-productive assets and right-sizing the organization to run the service business. After the operational restructuring and management transition, we believe that we can drive annualized free cash flow to approximately $3 million to $4 million with our current service footprint, and the Company will aggressively return cash to shareholders via share buybacks. I want to thank the members of the Board and management team for their diligence and thoughtful input towards these determinations as well as their efforts to unlock the value in the Company going forward."

Preliminary Fourth Quarter 2012 Summary

  • The Company is undergoing an analysis to determine if the results of its restructuring will create any impairment of any assets as of December 31, 2012, as well as an estimate of the restructuring charges to be recorded in the first quarter of 2013. All 2012 financial information in this press release is preliminary and subject to change based on the conclusion of that analysis. 

  • Total revenue for the fourth quarter of 2012 was $13.0 million, up almost 10 percent from $11.9 million for the same period in the prior year and up sequentially from $11.8 million in the third quarter of 2012. DIS revenue for the fourth quarter of 2012 was $8.5 million, compared to $9.0 million for the same period of the prior year and $8.9 million in the prior sequential quarter. Diagnostic Imaging revenue for the fourth quarter of 2012 was $4.5 million, compared to $2.9 million for the same period of the prior year and $3.0 million in the prior quarter.

  • Gross profit for the fourth quarter of 2012 was $3.8 million, or 29.1 percent of revenue, compared to $3.1 million, or 26.0 percent of revenue, in the same period of the prior year and $3.1 million, or 26.4 percent of revenue in the prior quarter.

  • Net loss for the fourth quarter of 2012 was $0.3 million, or $0.01 loss per share, compared to a net loss of $2.8 million, or $0.15 loss per share, in the same period of the prior year and a net loss of $0.9 million, or $0.05 loss per share, in the prior quarter.

  • Cash, cash equivalents and available-for-sale securities totaled $27.2 million, or $1.42 per share, as of December 31, 2012. Cash, cash equivalents and available-for-sale securities totaled $30.5 million, or $1.61 per share, as of December 31, 2011

Preliminary Year-to-Date Financial Highlights:

  • Total revenue for year ended December 31, 2012 was $50.5 million, compared to $53.7 million for the prior year period. DIS revenue for 2012 was $36.1 million, compared to $37.8 million for the prior year period, and Product revenue for 2012, was $14.4 million compared to $16.0 million for the prior year period.

  • Gross profit for 2012 was $14.3 million, or 28.3 percent of revenue, compared to $14.8 million, or 27.5 percent of revenue, for the prior year period.

  • Net loss for the year ended December 31, 2012 was $3.3 million, or $0.17 loss per share, compared to a net loss of $3.3 million, or $0.18 loss per share, for the prior year period. 

  • In total, the Company has used approximately $1.0 million to purchase Digirad Common Stock under the Company's stock repurchase program during the year ended December 31, 2012.

Conference Call Information
A conference call is scheduled for 10:00 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. Digirad also provides the ability for its physician customers to lease its qualified personnel, imaging systems and related items required to perform nuclear imaging in their own offices. For more information, please visit www.digirad.com. Digirad® 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 the Company's ability to deliver value to customers, the Company's ability to grow and generate positive cash flow, the ability to execute on restructuring activities, and ability to successfully execute acquisitions. 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, analysis of potential impairment and restructuring charges, the conclusion of our audit and other risks detailed in Digirad's filings with the U.S. Securities and Exchange Commission, including the 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 Comprehensive Loss
(In thousands, except per share data)
2012 Results Preliminary - Subject to Change
    Three Months Ended     Year Ended  
    December 31,     December 31,  
    2012     2011     2012     2011  
    (unaudited)     (unaudited)     (unaudited)     (audited)  
  DIS   $ 8,542     $ 8,955     $ 36,064     $ 37,794  
  Diagnostic Imaging     4,475       2,927       14,449       15,951  
    Total revenues     13,017       11,882       50,513       53,745  
Cost of revenues:                                
  DIS     6,529       7,090       27,293       29,672  
  Diagnostic Imaging     2,706       1,698       8,956       9,315  
    Total cost of revenues     9,235       8,788       36,249       38,987  
Gross profit     3,782       3,094       14,264       14,758  
Operating expenses:                                
  Research and development     690       613       3,688       2,738  
  Marketing and sales     1,667       3,007       6,402       7,622  
  General and administrative     1,634       1,923       7,454       7,741  
  Amortization of intangible assets     49       78       233       331  
  Restructuring gain     --       --       --       (164 )
    Total operating expenses     4,040       5,621       17,777       18,268  
Loss from operations     (258 )     (2,527 )     (3,513 )     (3,510 )
Other income (expense):                                
  Interest income (expense)     18       (200 )     97       165  
  Other income     (34 )     (100 )     77       3  
  Total other income (expense)     (16 )     (300 )     174       168  
Net loss   $ (274 )   $ (2,827 )   $ (3,339 )   $ (3,342 )
Net loss per common share - basic and diluted   $ (0.01 )   $ (0.15 )   $ (0.17 )   $ (0.18 )
Weighted average shares outstanding - basic     19,276       19,193       19,274       19,052  
Weighted average shares outstanding - diluted     19,276       19,193       19,274       19,052  
Net loss   $ (274 )   $ (2,827 )   $ (3,339 )   $ (3,342 )
Other comprehensive income (loss):                                
  Unrealized gain (loss) on marketable securities     (9 )     307       (16 )     (30 )
Total other comprehensive income (loss)     (9 )     307       (16 )     (30 )
Comprehensive loss   $ (283 )   $ (2,520 )   $ (3,355 )   $ (3,372 )
Stock-based compensation expense is included in the above as follows:                                
  Cost of DIS revenue   $ 2     $ 2     $ 7     $ 13  
  Cost of Product revenue     20       23       82       99  
  Research and development     19       20       78       84  
  Marketing and sales     27       24       127       110  
  General and administrative     91       119       336       494  
Total stock-based compensation expense   $ 159     $ 188     $ 630     $ 800  
Digirad Corporation
Consolidated Balance Sheets
(In thousands, except per share data)
2012 Results Preliminary - Subject to Change
    December 31,     December 31,  
    2012     2011  
    (unaudited)     (audited)  
Current assets:                
  Cash and cash equivalents   $ 19,514     $ 24,039  
  Securities available-for-sale     7,679       6,413  
  Accounts receivable, net     6,329       6,320  
  Inventories, net     6,150       6,178  
  Other current assets     732       855  
  Restricted cash     244       194  
Total current assets     40,648       43,999  
Property and equipment, net     4,693       5,367  
Intangible assets, net     584       477  
Goodwill     184       184  
  Total assets   $ 46,109     $ 50,027  
Accounts payable   $ 1,546     $ 1,330  
Accrued compensation     2,364       2,291  
Accrued warranty     326       297  
Deferred revenue     1,849       2,099  
Other accrued liabilities     1,814       2,397  
  Total current liabilities     7,899       8,414  
Other liabilities     176       126  
  Total liabilities     8,075       8,540  
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; 19,144,448 and 18,901,160 shares issued and outstanding (net of treasury shares) at December 31, 2012 and 2011, respectively     2       2  
Treasury stock, at cost; 1,073,641 shares and 582,825 shares at December 31, 2012 and 2011, respectively     (2,086 )     (1,058 )
Additional paid-in capital     156,634       155,704  
Accumulated other comprehensive income     17       33  
Accumulated deficit     (116,533 )     (113,194 )
  Total stockholders' equity     38,034       41,487  
  Total liabilities and stockholders' equity   $ 46,109     $ 50,027