Exhibit 99.1
Fourth Quarter DIS Revenues Up 23% in Digirad's First Full Year of
Profitability; Annual Revenues Increase by 21% to $68.1 Million; Company
Delivers First Two Cardius-3 Systems
POWAY, Calif.--(BUSINESS WIRE)--Feb. 28, 2005--Digirad Corporation
(Nasdaq:DRAD), a leader in providing solid-state medical imaging
products and services to physician offices, hospitals and imaging
centers, today reported financial results for the three months and
year ended December 31, 2004.
Fourth Quarter 2004 Results
For the fourth quarter of 2004, total revenues rose 17% to $17.8
million, compared with $15.2 million in the fourth quarter of 2003.
Digirad Imaging Solutions' (DIS) mobile leasing services revenues rose
23% to $11.8 million, compared with $9.6 million for the fourth
quarter of the prior year. Product revenues, which include sales of
gamma cameras, upgrades, accessories and maintenance contract
revenues, were $6.0 million, up 6% from $5.7 million a year ago.
"The fourth quarter of 2004 marked a number of significant
accomplishments. We achieved solid growth in our DIS business segment,
launched our Cardius-3, triple-head, dedicated cardiac camera, and
sold the first two of these systems, receiving very positive initial
customer feedback. DIS expansion plans continued as we entered new
geographies during the quarter and saw an increase in new contracts in
expansion geographies," said David Sheehan, President and CEO of
Digirad.
Gross profit for the quarter ended December 31, 2004 increased 11%
to $5.5 million, or 30.9% of revenue, from $5.0 million, or 32.6% of
revenue in the prior year period. The decline in gross margin reflects
lower DIS margin resulting primarily from lower priced DigiTech(SM)
contracts signed in the second and third quarters. DigiTech was
launched in May 2004 and is offered to physicians who have bought a
Digirad camera but wish to lease DIS personnel and licensure. The
Company re-priced the DigiTech program in January 2005 to reflect the
value it brings to customers, and believes this action will result in
higher per day revenue and margin to the overall DIS business. Product
gross margins increased to 38.2% in the fourth quarter of 2004 from
32.8% in the prior year period due to lower production costs and
improved field reliability, resulting in lower warranty costs.
Operating expenses were $5.7 million for the 2004 fourth quarter,
compared with $4.6 million for the comparable 2003 period, due to
higher research and development costs related to new products,
additional sales headcount in conjunction with the DIS expansion
efforts, and various general and administrative costs required to
operate as a public company.
Net income for the fourth quarter of 2004 was $22,000, or $0.00
per share on a diluted basis, compared with a net loss of $5,000 for
the fourth quarter of 2003.
During the fourth quarter, Digirad paid off $566,000 of principal
of capital lease obligations, and in the first quarter of 2005, the
Company paid off a further $2 million. This debt reduction eliminates
approximately $300,000 of interest expense that would have been due
over the life of the lease obligations, with the majority of the
leases expiring by end of December 2006. The Company paid
approximately $20,000 and $55,000 in the fourth quarter of 2004 and
first quarter of 2005, respectively, in prepayment penalties.
2004 Full Year Financial Results
For the year ended December 31, 2004, total revenues rose 21% to
$68.1 million, and reflected a 28% increase in DIS revenues to $44.5
million and a 10% increase in product revenues to $23.6 million. Gross
margin increased to 31.9%, up from 29.5% last year and operating
expenses rose 26% to $21.2 million. For 2004, net income was $245,000,
compared with a net loss of $1.7 million in 2003. When calculated on a
pro forma basis to account for the conversion of all preferred stock
into common stock in connection with Digirad's initial public
offering, net income per diluted share for 2004 was $0.01, compared
with the pro forma net loss per share of $0.13 for 2003.
Sheehan further commented, "We are delighted to report our first
full year of profitability. We have entered 2005 with a commitment to
DIS expansion as well as to margin improvement throughout the year.
Our focus will be on funding research and development initiatives that
lower manufacturing costs and enhance reliability and system
sensitivity. We believe that we will be able to achieve continued
top-line growth and gross margin improvements, both accelerating as
2005 progresses."
Cash and cash equivalents and short-term investments as of
December 31, 2004 totaled $55.6 million, compared with $7.7 million as
of December 31, 2003.
Conference Call Information
Management will be hosting an investment community conference call
beginning at 4:45 p.m. Eastern Time (1:45 p.m. Pacific Time) today to
discuss this announcement and to answer questions.
Individuals interested in listening to the conference call may do
so by dialing 877-815-7177 for domestic callers or 706-634-1178 for
international callers. A telephone replay will be available for 48
hours following the conclusion of the call by dialing 800-642-1687 for
domestic callers, or 706-645-9291 for international callers and
entering reservation code 3861907.
The live conference call also will be available via the Internet
on the investor relations section of the Company's Web site at
www.digirad.com. A recording of the call will be available on the
Company's Web site for one year following the completion of the call.
About Digirad
Digirad Corporation develops, manufactures and markets
solid-state, digital gamma cameras to hospitals, imaging centers and
physician offices. Digirad offers a comprehensive line of solid-state
nuclear gamma cameras that produce a high-quality image for use in the
detection of many medical conditions including cardiovascular disease.
Digirad's cameras are unique as their lightweight and compact design
allows them to fit easily into small office spaces.
Through its wholly owned subsidiaries, Digirad Imaging Solutions
and Digirad Imaging Systems, Digirad also offers a comprehensive and
mobile imaging leasing and services program for physicians who wish to
perform nuclear cardiology procedures in their offices but do not have
the patient volume, capital or resources to justify purchasing a gamma
camera. Digirad Corporation and subsidiaries are headquartered in
Poway, California. For more information, please visit www.digirad.com.
Digirad(R) and Digirad Imaging Solutions(R) are registered trademarks
of Digirad Corporation. Cardius(TM) and DigiTech(SM) are trade and
service marks of Digirad Corporation.
Forward-Looking Statements
Digirad cautions that statements included in this press release
that are not a description of historical facts (including, without
limitation, statements regarding Digirad's plans to increase its
revenues, improve its margins, lower its costs and improve the
reliability of its products) are forward-looking statements.
Forward-looking statements give expectations or forecasts of future
events. You can identify these statements by the fact that they do not
relate strictly to historical or current facts. They 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. In particular, these include statements relating to future
actions, prospective products, services or market opportunities,
future performance or results of current and anticipated products or
services, sales efforts, expenses, the outcome of contingencies such
as legal proceedings, and financial results. The inclusion of
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 Digirad's existing imaging
systems and services will be accepted by physicians and hospitals;
Digirad's ability to compete against large, well-established
competitors with significantly greater resources; any unforeseen
changes in domestic and international legislation, regulation or
coverage and reimbursement policies of third-party payors; Digirad's
ability to timely develop new products, product enhancements and
services that are accepted by the market; Digirad's lack of a
diversified line of products and services; any technical problems that
may develop with respect to Digirad's imaging systems, including the
Cardius-3, or any manufacturing or supply problems or price
fluctuations that may affect Digirad's third-party suppliers; the
ability of Digirad to effectively market, sell and distribute its
imaging systems, including the Cardius-3, and services given its
limited capabilities in these areas; Digirad's ability to retain and
attract key executives, qualified managers, engineers and imaging
technologists; Digirad's ability to manage risks relating to product
liability, warranty claims, recalls, property damage and personal
injury with respect to its imaging systems, including the Cardius-3;
Digirad's reliance on a limited number of customers for its products
and imaging services; Digirad's compliance with extensive and complex
product service and reimbursement regulations, licensure and reporting
requirements of the Food and Drug Administration and other state and
federal agencies, including with respect to the DIS business, those
that are subject to variable interpretations; Digirad's ability to
protect its intellectual property and proprietary technology through
patents and other means and defend against claims by third parties;
and other risks detailed in Digirad's Securities and Exchange
Commission filings, including its Prospectus filed pursuant to Rule
424(b) under the Securities Act of 1933, as amended, with the
Securities and Exchange Commission on June 10, 2004.
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.
Digirad Corporation
Consolidated Statements of Operations
(In thousands, except per share amounts)
Three Months Ended Years Ended
December 31, December 31,
---------------------- ------------------
(unaudited)(unaudited) (unaudited)
2004 2003 2004 2003
---- ---- ---- ----
Revenues:
DIS $11,781 $9,561 $44,505 $34,848
Product 5,975 5,662 23,632 21,388
Total revenues 17,756 15,223 68,137 56,236
Cost of revenues:
DIS 8,529 6,438 31,005 24,463
Product 3,696 3,773 14,992 15,091
Stock-based compensation 39 47 381 114
Total cost of revenues 12,264 10,258 46,378 39,668
Gross profit 5,492 4,965 21,759 16,568
Operating expenses:
Research and development 785 532 2,982 2,191
Sales and marketing 2,135 1,620 7,626 6,008
General and administrative 2,604 2,336 9,769 8,097
Amortization and impairment
of intangible assets 16 88 64 444
Stock-based compensation 126 49 736 112
Total operating expenses 5,666 4,625 21,177 16,852
Income (loss) from operations (174) 340 582 (284)
Other income (expense):
Interest income 297 7 576 36
Interest expense (100) (352) (888) (1,432)
Other expense (1) -- (25) --
Total other income (expense) 196 (345) (337) (1,396)
Net income (loss) 22 (5) 245 (1,680)
Accretion of deferred issuance
costs on preferred stock -- (78) (161) (326)
Net income (loss) applicable
to common stockholders $22 $(83) $84 $(2,006)
Historical - basic and diluted
net income (loss) per share (1) $0.00 $(4.16) $0.01 $(127.62)
Pro forma - basic net income
(loss) per share $0.00 $(0.00) $0.02 $(0.13)
Pro forma - diluted net income
(loss) per share $0.00 $(0.00) $0.01 $(0.13)
Shares used in historical
per share computations:
Basic (1) 18,048 20 10,095 16
Diluted (1) 19,398 20 16,963 16
Shares used in pro forma
per share computations:
Basic 18,048 12,464 15,584 12,460
Diluted 19,398 12,464 16,963 12,460
(1) As a result of the conversion of our preferred stock into 12.4
million shares of our common stock upon completion of our initial
public offering in June 2004, there is a lack of comparability in
the historical basic and diluted net income (loss) per share
amounts for the periods presented above. Accordingly, the pro
forma per share information presented assumes the conversion of
all the shares of preferred stock into common stock as of the
beginning of each period presented or the date of issuance, if
later.
Digirad Corporation
Consolidated Balance Sheets
(In thousands, except par value amounts)
December 31,
-----------------
(unaudited)
2004 2003
---- ----
Assets
Current assets:
Cash and cash equivalents $11,348 $7,681
Securities available-for-sale 44,215 --
Accounts receivable, net 10,017 12,195
Inventories, net 6,980 3,709
Other current assets 1,620 855
Total current assets 74,180 24,440
Property and equipment, net 11,182 10,087
Intangibles, net 542 512
Restricted cash 120 120
Total assets $86,024 $35,159
Liabilities and stockholders' equity (deficit)
Current liabilities:
Accounts payable $4,313 $3,036
Accrued compensation 2,410 1,893
Accrued warranty 1,219 1,051
Other accrued liabilities 2,651 2,649
Deferred revenue 2,344 1,514
Current portion of notes
payable to stockholders -- 245
Current portion of debt 2,228 11,474
Total current liabilities 15,165 21,862
Deferred rent 371 --
Notes payable to stockholders,
net of current portion -- 490
Long-term debt, net of current portion 1,754 4,232
Commitments and contingencies
Redeemable convertible preferred stock,
$0.0001 par value: no shares and 46,023 shares
authorized at December 31, 2004 and 2003, respectively;
no shares and 43,555 shares issued and outstanding
at December 31, 2004 and 2003, respectively -- 84,278
Stockholders' equity (deficit):
Preferred stock, $0.0001 par value:
10,000 and no shares authorized at December 31, 2004
and December 31, 2003, respectively;
no shares issued and outstanding
at December 31, 2004 and 2003 -- --
Common stock, $0.0001 par value: 150,000 shares
authorized at December 31, 2004 and 2003;
18,075 and 24 shares issued and outstanding
at December 31, 2004 and 2003, respectively 2 --
Additional paid-in capital 149,845 5,032
Accumulated other comprehensive loss (97) --
Deferred compensation (920) (555)
Accumulated deficit (80,096) (80,180)
Total stockholders' equity (deficit) 68,734 (75,703)
Total liabilities and
stockholders' equity (deficit) $86,024 $35,159
DRADG
CONTACT: Digirad Corporation
Todd Clyde, 858-726-1600
ir@digirad.com
or
Lippert/Heilshorn & Associates
Ina McGuinness or Bruce Voss, 310-691-7100
imcguinness@lhai.com