Digirad Reports 2006 Fourth Quarter and Full-Year Results.Achieves Further Progress Toward Profitability POWAY, Calif. -- Digirad Corporation (NASDAQ NASDAQ in full National Association of Securities Dealers Automated Quotations U.S. market for over-the-counter securities. Established in 1971 by the National Association of Securities Dealers (NASD), NASDAQ is an automated quotation system that reports on :DRAD), a leading provider of cardiovascular imaging services and solid-state nuclear medicine imaging nuclear medicine imaging, n the diagnostic imaging field that evaluates organ function by injecting isotopes into a structure and documenting the amount of radiation emanating from the tissues. products to physician offices, hospitals and imaging centers, today announced financial results for the 2006 fourth quarter and full year that exceeded guidance announced in a press release on January 11, 2007. "Comparing 2006 to 2005, revenue increased 5.5% to $71.9 million even though we no longer generated almost $2.5 million in stress agent revenue during the second half of 2006, gross profit increased 25.0%, and the net loss declined to $0.34 per share from $0.52 per share. For the fourth quarter of 2006 compared to the fourth quarter of 2005, revenue declined slightly to $17.2 million principally because we no longer generated approximately $1.1 million in stress agent revenue, while gross profit increased 50.2%, operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. decreased 15.1%, and the net loss declined to $0.01 per share from $0.15 per share. In addition, the Company produced about $320,000 of free cash flow in the fourth quarter instead of absorbing cash as it did a year ago," said Chief Executive Officer Mark Casner. Mr. Casner continued, "In DIS (Data Instrumentation Systems) See DST. Dis god of nether world; identified with Pluto. [Rom. Myth.: Leach, 315] See : Underworld , we recently signed our first contract to provide ultrasound ultrasound or sonography, in medicine, technique that uses sound waves to study and treat hard-to-reach body areas. In scanning with ultrasound, high-frequency sound waves are transmitted to the area of interest and the returning echoes recorded imaging services, the first step in our plan to diversify diversify To acquire a variety of assets that do not tend to change in value at the same time. To diversify a securities portfolio is to purchase different types of securities in different companies in unrelated industries. our mobile service offerings. We believe ultrasound is a natural complement to our existing cardiac imaging services, and a precursor precursor /pre·cur·sor/ (pre´kur-ser) something that precedes. In biological processes, a substance from which another, usually more active or mature, substance is formed. In clinical medicine, a sign or symptom that heralds another. to enhancing the growth opportunities for this business. We also are encouraged by the signing of new DIS service agreements with a number of large hospitals, multi-specialty practices, and Integrated Delivery Networks (IDNs), evidence that the targeted marketing approach we introduced in 2006 is beginning to meet with success. During the fourth quarter we upgraded 11 more cameras in our 83-unit DIS fleet to our most advanced Cardius[R]-3 XPO XPO Exportin XPO Executive Petty Officer (US Coast Guard) XPO Operations Plans Officer (Wing) XPO Express Persistent Objects camera, and ended the year with 19 triple-head cameras in our mobile imaging service business. This upgrade program will continue in 2007. "In our product business, we sold 17 cameras in the fourth quarter compared to 18 in the fourth quarter of 2005, with improved margins due to the success of our cost reduction and outsourcing (1) Contracting with outside consultants, software houses or service bureaus to perform systems analysis, programming and datacenter operations. Contrast with insourcing. See netsourcing, ASP, SSP and facilities management. initiatives. For 2006, we delivered 71 cameras compared to 55 in 2005, a strong performance in view of the continued pressure on the cardiac nuclear market. We believe that the improved image quality, throughput, reliability and serviceability (system) serviceability - The ease with which corrective maintenance or preventative maintenance can be performed on a system (e.g. by a hardware service technician). Higher serviceability improves availability and reduces service cost. Serviceability is one component of RAS. of our latest Cardius-3 XPO cameras contributed to the increase in our market share, and we plan to solidify so·lid·i·fy v. so·lid·i·fied, so·lid·i·fy·ing, so·lid·i·fies v.tr. 1. To make solid, compact, or hard. 2. To make strong or united. v.intr. our position by making the key XPO features available in our Cardius-1 and Cardius-2 cameras in the first half of 2007. During the past year we also saw increased interest in our 2020tc general purpose camera in the hospital market. "We remain focused on reducing costs, enhancing our operating platform, and building on the competitive advantages provided by our advanced technology for nuclear imaging. With our steady progress in recent quarters, we are increasingly confident that our goal of sustainable revenue and earnings growth is within reach." Fourth Quarter Results For the three months ended December 31, 2006, consolidated revenues decreased 0.9% to $17.2 million compared to $17.4 million for the fourth quarter of 2005. This decline primarily reflected a 3.5% decrease in DIS revenue to $11.6 million for the fourth quarter of 2006 compared to $12.0 million for the fourth quarter of 2005, the anticipated consequence of the Company's decision to phase out providing stress agents used in some imaging procedures beginning in June 2006. Instead, DIS' physician customers now provide these agents. Management estimates that the stress agent change reduced DIS revenue in the fourth quarter of 2006 by approximately $1.1 million compared to what it otherwise would have been under the original delivery model. DIS revenue for the fourth quarter of 2005 included stress agent revenue of approximately $1.0 million. Product segment revenue, which includes sales of gamma cameras gamma camera Nuclear medicine A device that evaluates the distribution of a radionuclide in the body post-injection , upgrades, accessories and maintenance revenue, increased 5.0% to $5.6 million for the fourth quarter of 2006 versus $5.4 million for the fourth quarter of 2005. Consolidated gross profit for the three months ended December 31, 2006 increased 50.2% to $4.9 million, or 28.5% of revenues, from $3.3 million, or 18.8% of revenues, for the fourth quarter of 2005. DIS gross margin increased to 25.9% of revenue for this year's fourth quarter compared to 14.7% for the fourth quarter of 2005. DIS gross margin for the fourth quarter of 2005 was 23.0% before the $1.0 million impact of a change in the depreciable depreciable Of, relating to, or being a long-term tangible asset that is subject to depreciation. life of the DIS fleet cameras. "The improvement in DIS gross margin for the fourth quarter of 2006 versus prior year is especially noteworthy in view of the shift we announced in the 2006 third quarter in the focus and responsibilities of some of our DIS personnel towards operational as opposed to administrative tasks, with the result that certain costs previously accounted for as general and administrative expense are now reported as cost of goods sold Cost of goods sold The total cost of buying raw materials, and paying for all the factors that go into producing finished goods. cost of goods sold . For the fourth quarter of 2006, this added approximately $500,000 to cost of goods sold compared to the prior year," Mr. Casner explained. Product segment gross margin improved to 33.7% for the fourth quarter of 2006 versus 27.9% for last year's fourth quarter, reflecting lower materials and maintenance costs. The net loss for the fourth quarter of 2006 was $149,000, or $0.01 per share, which included stock-based compensation expense of $177,000. This compares to a net loss of $2.8 million, or $0.15 per share, for the fourth quarter of 2005, which included stock-based compensation expense of $86,000. Cash and equivalents and securities available for sale at December 31, 2006 were $44.3 million compared to $49.5 million at December 31, 2005. Net receivables Net Receivables A company's accounts receivable (money owed to the company) minus bad debts. Notes: If a company estimates that 2% of its sales are never going to be paid, then net receivables equals 98% (100% - 2%) of the accounts receivable. were $7.5 million at December 31, 2006 compared to $8.1 million at December 31, 2005. Net inventories were $5.9 million at December 31, 2006 compared to $5.1 million at December 31, 2005. Twelve Months Results For the twelve months ended December 31, 2006, consolidated revenues increased 5.5% to $71.9 million compared to $68.2 million for 2005. DIS revenue decreased 1.2% to $49.6 million, including stress agent revenue of $2.0 million. This compares to DIS revenue for 2005 of $50.2 million, including stress agent revenue of $4.2 million. Product revenue increased 24.0% to $22.3 million from $18.0 million. Overall gross profit margin Gross profit margin Gross profit divided by sales, which is equal to each sales dollar left over after paying for the cost of goods sold. gross profit margin A measure calculated by dividing gross profit by net sales. for 2006 improved to 26.5% versus 22.4% for 2005. The net loss for 2006 was $6.3 million, or $0.34 per share, which included stock-based compensation expense of $1.6 million. This compares to a net loss for 2005 of $9.6 million, or $0.52 per share, which included stock-based compensation expense of $497,000. Management Reaffirms 2007 Guidance "In 2006, we made significant strides toward our goals in sales and marketing, operations and product development. Our 2007 goals include increasing our sales growth rate, continuing to lower operating costs operating costs npl → gastos mpl operacionales , approaching positive cash flow and driving to profitability. We intend to accomplish these objectives through diversification Diversification A risk management technique that mixes a wide variety of investments within a portfolio. It is designed to minimize the impact of any one security on overall portfolio performance. Notes: Diversification is possibly the greatest way to reduce the risk. of DIS, employee retention, operation efficiencies, DIS expansion, technology enhancements and development of new products," Mr. Casner said. Digirad reaffirmed previously communicated 2007 guidance. The Company anticipates consolidated revenues in the range of $73 million to $76 million, consisting of DIS revenue between $50 million and $52 million and product revenue between $23 million and $24 million; and a consolidated loss between $1.3 million and $3.3 million, including estimated stock-based compensation expense of $1.3 million. Digirad anticipates no stress agent revenue in 2007 versus stress agent revenue of $2.0 million for 2006. Conference Call Digirad has scheduled a conference call at 11:00 a.m. ET today. A simultaneous web cast of the call may be accessed from the Events and Presentations link on the Investor Relations Investor relations The process by which the corporation communicates with its investors. page of www.digirad.com. A replay will be available for one year at this same Internet address There are two kinds of addresses that are widely used on the Internet. One is a person's e-mail address, and the other is the address of a Web site, which is known as a URL. Following is an explanation of Internet e-mail addresses only. For more on URLs, see URL and Internet domain name. . A telephone replay will be available for 48 hours after the call by dialing (800) 642-1687, reservation #6678207. 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 high-quality images for use in the detection of many medical conditions See carpal tunnel syndrome, computer vision syndrome, dry eyes and deep vein thrombosis. , including cardiovascular disease Cardiovascular disease Disease that affects the heart and blood vessels. Mentioned in: Lipoproteins Test 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 subsidiary Wholly Owned Subsidiary A subsidiary whose parent company owns 100% of its common stock. Notes: In other words, the parent company owns the company outright and there are no minority owners. , Digirad Imaging Solutions (DIS), offers a comprehensive mobile imaging leasing and services program for physicians who wish to perform in-office nuclear cardiology nuclear cardiology Imaging The use of nuclear imaging techniques in the noninvasive study of cardiovascular disease–eg, myocardial perfusion imaging, planar imaging, SPECT–single-photon-emission computed tomography, infarction imaging. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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 our expectations of improved performance from our upgrade of the DIS fleet to the mobile version of the Cardius 3 XPO system; our expectations of achieving reduced operating costs as a result of cost cutting measures; our statements regarding increasing our market share in a declining market; statements regarding the expected financial impact of our decision to discontinue dis·con·tin·ue v. dis·con·tin·ued, dis·con·tin·u·ing, dis·con·tin·ues v.tr. 1. To stop doing or providing (something); end or abandon: offering stress agents; our belief that our product enhancements and our plans to diversify and grow our services business will bring us better financial performance; our anticipation of growing our nuclear and ultrasound product and service offerings; our belief that we may continue to sign contracts with large hospitals, multi-specialty practices and integrated delivery networks; our plans of integrating the XPO camera features into some of our other cameras; our anticipation of further success in selling our 2020tc camera to hospitals and, in general, our anticipated financial results for 2007. 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 personnel changes and related disruptions in our business activities may affect Digirad's products, customers, work force, suppliers, and our overall business prospects and operations; the degree to which Digirad's camera systems and related services will be accepted by physicians and hospitals some of whom may experience reliability issues or technical problems; the ability of Digirad effectively to market, sell and distribute its medical devices, and related services given its limited capabilities in these areas; Digirad's ability to manage risks relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc product liability, warranty claims, recalls, property damage and personal injury with respect to its imaging systems; and other risks detailed in Digirad's Securities and Exchange Commission filings, including its Annual Report on Form 10-K Form 10-K A report required by the SEC from exchange-listed companies that provides for annual disclosure of certain financial information. Form 10-K See 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 here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" . 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. [TABLE OMITTED] [TABLE OMITTED] |
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