Exhibit 99.1
Digirad Reports Second Quarter and First Half Results;
Management Provides Status of Business Review
POWAY, Calif.--(BUSINESS WIRE)--July 21, 2005--Digirad Corporation
(NASDAQ:DRAD), a leader in providing solid-state medical imaging
products and services to physician offices, hospitals and imaging
centers, today announced financial results for the second quarter and
first half of 2005 and updated investors on the status of management's
business review.
Second Quarter Results
For the three months ended June 30, 2005, consolidated revenue
declined 11% to $15.5 million from $17.3 million for the same period
of 2004. Digirad Imaging Solutions' (DIS) mobile leasing services
revenue increased 17% to $13.2 million from $11.3 million for the
second quarter of 2004, driven by a 22% increase in DIS service days
to 3,612 from 2,965 during the same period last year. Product segment
revenue, which includes sales of digital gamma cameras, upgrades,
accessories and maintenance revenue, declined to $2.2 million from
$6.0 million a year earlier. The company attributed this decline
primarily to vacancies in its sales organization and disruptions in
sales activities during the second quarter.
Consolidated gross margin for the three months ended June 30, 2005
was 22.1% versus 32.8% for the same period of 2004. DIS gross margin
was 30.1% for this year's second quarter compared to 32.9% for the
same period last year. The decline in DIS gross margin versus the
prior year period primarily reflected the impact of the mix of
services provided. Product segment gross margin was negative (26.1%)
for the second quarter of 2005 compared to 32.5% last year, due to the
lower number of camera sales and inventory-related charges of
$600,000.
The net loss for the second quarter of 2005 was $3.0 million, or
$0.17 per share. This compares to net income for the second quarter of
2004 of $103,000, or $0.01 per diluted share. This year's second
quarter results included, in addition to the inventory charge, costs
of approximately $200,000 related to the previously reported internal
investigation.
Cash and equivalents at June 30, 2005 amounted to $48.9 million.
First Half Results
For the six months ended June 30, 2005, total revenue was $33.4
million. This compares to total revenue of $33.2 million for last
year's first half. DIS revenue increased 18% to $25.6 million from
$21.7 million last year. Product revenue declined to $7.9 million from
$11.5 million. Overall gross margin was 25.6% versus 31.7% for last
year's first half. The net loss for the first six months of 2005 was
$4.0 million, or $0.22 per share. This compares to a net loss of
$163,000, or $0.01 per share, for the first six months of 2004, when
calculated on a pro forma basis to account for the conversion of all
preferred stock into common stock in Digirad's initial public
offering.
Business Review
"Since stepping in as CEO in April, my highest priority has been
to evaluate Digirad's operations and business strategy, and to develop
a plan of action to improve the company's revenue and earnings," said
Chief Executive Officer Gary Burbach. "I believe Digirad has
significant competitive advantages in the U.S. nuclear cardiac imaging
market that should enable superior long-term performance. These
advantages include the mobility, small size and light weight of our
products and a strong presence in providing mobile leasing services to
cardiology offices."
Mr. Burbach continued, "While we are confident of the benefits of
our solid-state technology, we have not yet been able to gain our
targeted position in the multi-head camera market with our dual-head
Cardius(R)-2 imager or our recently launched triple-head camera. We
also believe that the single-head camera market, in which Digirad
historically has been a strong participant, has experienced a moderate
decline.
"We are taking a number of steps to address these issues. We plan
to sharpen our competitive edge through software development and other
technical enhancements, including improvements to product reliability.
We believe these initiatives will enable us to increase our market
penetration in the multi-head nuclear camera market. To assist us in
these efforts, we are pleased to announce the addition to our team of
Randy Weatherhead, previously VP of Sales and Marketing at Siemens
Nuclear Medicine, as our VP of Marketing. Randy brings to Digirad a
wealth of relevant industry background and experience. We are also
upgrading our sales organization with key hires and further
improvements in training and execution. As we begin to execute on
these plans, we anticipate the product business to improve as compared
to the second quarter.
"In our DIS business, we have established a leadership position in
mobile nuclear cardiology imaging that has given us a growing stream
of revenue. To further progress this business, we are implementing
programs to increase the effectiveness of our sales efforts, including
addressing a lengthening sales cycle. In addition, to enable our
continued growth, we are working to improve employee retention in our
clinical operations. We will also begin clinical testing with the
first mobile Cardius-3M system in DIS within the next several weeks.
We believe that the Cardius-3M can provide significant value to our
DIS customers. Additionally, we are recruiting a president for DIS who
will focus exclusively on that business and its growth and
profitability initiatives. We believe that DIS will continue to grow,
although consistent with historical experience, summer seasonality may
affect our performance."
Mr. Burbach said that management currently expects the company to
report a loss for the quarter ending September 30, 2005.
Conference Call
Digirad has scheduled a conference call at 4:45 p.m. EDT today. A
simultaneous webcast of the call may be accessed at the Investor
Relations page of www.digirad.com. A replay will be available for one
year at this same Internet address. A telephone replay will be
available for 48 hours after the call by dialing (800) 642-1687,
reservation #7930777.
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. Digirad's
wholly owned subsidiaries Digirad Imaging Solutions and Digirad
Imaging Systems offer a comprehensive and mobile imaging leasing and
services program for physicians who wish to perform in-office nuclear
cardiology procedures but do not have the patient volume, capital or
resources to justify purchasing a gamma camera. For more information,
please visit www.digirad.com. Digirad(R), Digirad Imaging Solutions(R)
and Cardius(R) are registered trademarks of Digirad Corporation.
Forward-Looking Statements
Digirad cautions that statements included 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 in connection
with a discussion of future operating or financial performance or
events. Examples of such statements include the statements regarding
the anticipated charge relating to excess manufacturing capacity, and
our long term performance and plans for increasing market penetration
in the multi-head nuclear camera market and for improving sales
efforts and employee retention in our DIS business. The inclusion of
these and other 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 the
departure of employees and related disruptions in our sales activities
may affect Digirad's products, customers, work force, suppliers and
overall business prospects and operations; the degree to which
Digirad's imaging systems and services will be accepted by physicians
and hospitals some of whom may experience reliability issues or
technical problems; 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; the degree to
which recent changes in customer profiles may reduce the number of
days service initiated per new contract or otherwise impact Digirad's
business; 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; and other risks detailed
in Digirad's Securities and Exchange Commission filings, including its
Annual Report on Form 10-K and other reports filed with the Securities
and Exchange Commission. 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 Six Months
Ended Ended
June 30, June 30,
----------------- -----------------
2005 2004 2005 2004
-------- -------- -------- --------
Revenue:
DIS $13,240 $11,295 $25,562 $21,702
Product 2,222 5,995 7,870 11,456
-------- -------- -------- --------
Total revenue 15,462 17,290 33,432 33,158
Cost of revenue:
DIS 9,221 7,509 17,846 14,774
Product 2,792 3,984 6,921 7,623
Stock-based compensation 38 131 97 246
-------- -------- -------- --------
Total cost of revenue 12,051 11,624 24,864 22,643
-------- -------- -------- --------
Gross profit 3,411 5,666 8,568 10,515
Operating expenses:
Research and development 913 685 1,813 1,325
Sales and marketing 1,685 1,859 3,702 3,640
General and administrative 4,045 2,498 7,375 4,643
Amortization and impairment of
intangible assets 18 16 34 32
Stock-based compensation 92 250 211 438
-------- -------- -------- --------
Total operating expenses 6,753 5,308 13,135 10,078
-------- -------- -------- --------
Income (loss) from operations (3,342) 358 (4,567) 437
Other income (expense):
Interest Income (expense) 354 (255) 604 (570)
Other income (expense) (53) -- (59) (30)
-------- -------- -------- --------
Total other income (expense) 301 (255) 545 (600)
-------- -------- -------- --------
Net income (loss) (3,041) 103 (4,022) (163)
Accretion of deferred issuance
costs on preferred stock -- (73) -- (161)
-------- -------- -------- --------
Net income (loss) applicable to
common stockholders (3,041) 30 (4,022) (324)
======== ======== ======== ========
Net income (loss) per share
Historical - basic and diluted (0.17) 0.01 (0.22) (0.16)
======== ======== ======== ========
Pro-forma - basic and diluted (0.17) 0.01 (0.22) (0.01)
======== ======== ======== ========
Shares used in per share
calculations:
Historical weighted average shares
outstanding
Basic 18,367 4,003 18,237 2,018
======== ======== ======== ========
Diluted 18,367 15,132 18,237 2,018
======== ======== ======== ========
Pro-forma weighted average shares
outstanding (1)
Basic 18,367 13,712 18,237 13,094
======== ======== ======== ========
Diluted 18,367 15,132 18,237 13,094
======== ======== ======== ========
(1) As a result of the conversion of our preferred stock into 12.4
million shares of our common stock upon the completion of our
initial public offering in June 2004 of 5,500,000 shares of our
common stock, there is a lack of comparability in the basic and
diluted net loss per share amounts for the periods presented
above.
Digirad Corporation
Consolidated Balance Sheets
(in thousands, except par value amounts)
June December
30, 31,
2005 2004
-------- --------
Assets
Cash and cash equivalents $11,019 $11,348
Securities available-for-sale 37,873 44,215
Accounts receivable, net 8,978 10,017
Inventories, net 8,872 6,980
Other current assets 1,799 1,620
-------- --------
Total current assets 68,541 74,180
Property and equipment, net 11,454 11,182
Intangibles, net 512 542
Restricted cash 120 120
-------- --------
Total assets $80,627 $86,024
======== ========
Liabilities and stockholder's equity
Accounts payable $3,682 $4,313
Accrued compensation 2,534 2,410
Accrued warranty 930 1,219
Other accrued liabilities 3,361 2,651
Deferred revenue 2,879 2,344
Current portion of long-term debt 959 2,228
-------- --------
Total current liabilities 14,345 15,165
Long-term debt, net of current portion 643 1,754
Other long-term liabilities 359 371
Stockholder's equity:
Preferred stock, $0.0001 par value: 10,000 shares
authorized at June 30, 2005 and December 31, 2004;
no shares issued or outstanding at June 30, 2005
and December 31, 2004 -- --
Common stock, $0.0001 par value: 150,000 shares
authorized at June 30, 2005 and December 31, 2004;
18,657 and 18,075 shares issued and outstanding at
June 30, 2005 and December 31, 2004, respectively 2 2
Additional paid-in capital 150,059 149,845
Accumulated other comprehensive loss (149) (97)
Deferred compensation (514) (920)
Accumulated deficit (84,118) (80,096)
-------- --------
Total stockholder's equity 65,280 68,734
-------- --------
Total liabilities and stockholder's equity $80,627 $86,024
======== ========
CONTACT: Digirad Corporation
Todd Clyde, 858-726-1600
ir@digirad.com
or
Investor Contact:
Neil Berkman Associates
310-277-5162
info@BerkmanAssociates.com