Digirad Corporation 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 ofDecember 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.