Third-quarter fiscal 2009 results announced by Digirad

Digirad Corporation (NASDAQ: DRAD) today reported the Company continued to generate positive cash flow, improved gross margins in its DIS (Digirad Imaging Solutions) business, and maintained its total cash and investments position of more than $31 million in its third quarter ended September 30, 2009, staying on track to record positive net earnings for the year, despite lower camera sales in its product segment.

Digirad CEO Todd Clyde said, "We continue to drive toward our key 2009 goal of sustained profitability and positive cash flow, even in the midst of health care reimbursement uncertainty and a difficult economic environment. We are improving our revenues and margins in DIS. We are happy to report the introduction of our second of two new products this year, including our c.pax image management solution for our camera and DIS customers. Although capital equipment budgets at both the hospital and private practice remain low, we believe our new proprietary Cardius® X-ACT imaging system, introduced earlier this year, is ideally suited for large volume nuclear medicine departments and practices. We believe that we are well positioned to grow our revenues and market share when the economic recovery begins."

Third Quarter Financial Highlights:

-- Total revenue was $16.9 million, compared to $20.2 million in the third quarter of 2008, mainly due to the sale of fewer nuclear gamma cameras that resulted from economy-driven tightening of hospital budgets and debt availability. DIS revenue declined slightly to $12.9 million compared to $14.0 million in the third quarter of 2008 and the second quarter of 2009. Product revenues also declined to $4.0 million compared to $6.2 million in the third quarter 2008 and $5.0 million in the second quarter of 2009.

-- Gross profit was $4.5 million, or 27% of revenue, compared to $4.8 million, or 24%, in the third quarter of 2008.

-- Net loss was $(0.4) million, or $(0.02) per share, compared to net loss of $(0.9) million, or $(0.05) per share, in the third quarter of 2008.

-- Cash and cash equivalents and securities available-for-sale totaled $31.1 million, or $1.64 per share at September 30, 2009, net of approximately $500,000 invested in the Company's stock as part of its 10b-18 buyback program. Cash and cash equivalents and securities available-for-sale were $28.3 million at December 31, 2008 and $31.5 million at June 30, 2009.

-- DIS asset utilization was 63% on 147 systems (nuclear and ultrasound), compared to 57% on 158 systems (nuclear and ultrasound) during the third quarter of 2008.

Year-to-Date Financial Highlights:

-- Total revenue was $53.2 million, compared to $58.4 million for the first nine months of 2008, mainly due to the sale of certain DIS hubs earlier this year and fewer nuclear gamma camera sales. DIS revenue was $40.3 million for the first nine months of this year compared to $42.0 million for the first nine months of 2008, and Product revenues were $12.9 million compared to $16.3 million for the first nine months of 2008.

-- Gross profit was $15.5 million, or 29% of revenue, compared to $13.8 million, or 24%, for the first nine months of 2008.

-- Net income was $0.4 million, or $0.02 per share, compared to net loss of $3.4 million, or $(0.18) per share, for the first nine months of 2008.

-- DIS asset utilization was 63% on 149 systems (nuclear and ultrasound), compared to 59% on 150 systems (nuclear and ultrasound) during the first nine months of 2008.

Clyde continued, "Camera sales continue to be lower than we anticipated, requiring additional restructuring in the third quarter to align our cost structure to our camera business. We continue to make progress in stabilizing all areas of our business, despite the uncertainty in our current health care market. We are encouraged with the positive momentum in our DIS business, which is helping to offset our declining camera sales. I am very proud of our team, as they have shown great ability to navigate through this constantly changing economic and health care environment."