Star Equity Holdings Inc (STRR) 2007 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the Digirad Corporation 2007 third quarter and nine months results conference call. At this time, all participants are in a listen-only mode. As a reminder, this conference is being recorded Thursday, October 25, 2007.

I'd now like to turn the call over to Dan Matsui, of Allen & Caron. Mr. Matsui, please go ahead.

Thank you. Good morning and thank you for joining us today. If you did not receive today's press release and would like a copy, please contact Nathan Abler in our California office at 949-474-4300 and he'll be happy to send you one. Also this call is being broadcast live over the Internet and may be accessed at Digirad's website at www.digirad.com. Shortly after the call, a replay will be available on their website.

I'd like to remind everyone that certain statements made during this conference call, including the question-and-answer period, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other federal securities laws. These forward-looking statements include statements about the Company's revenues; costs and expenses; margins; operations; mobile imaging services; equipment upgrades; the progress of the integration of UltraScan; the benefits we believe can be obtained from relationships with academic medical institutions; competitive advantages; the higher throughput and cost savings we expect to obtain from our camera fleet; upgrade; the potential for acquisitions; and financial results.

These forward-looking statements are based upon current assumptions and expectations, and involve risk and uncertainties that could cause actual events and financial performance to differ materially. Risks and uncertainties include but are not limited to technological change; industry trends; changes in the Company's markets; and competition. More information about risk and uncertainties is available in the Company's filings with the United States Securities and Exchange Commission, including annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and this morning's press release.

Information discussed during this conference call should be used in conjunction with the consolidated financial statements and those included in those reports, and speak only as of the date of this call. The Company undertakes no obligation to update these forward-looking statements.

On the call today for Digirad are Mark Casner, Chief Executive Officer, and Todd Clyde, Chief Financial Officer. Mark and Todd will discuss the Company's business activities and financial results, and comment on strategy and their outlook. Following their remarks, there will be a question-and-answer period.

I'd now like to turn the call over to Digirad Chief Executive, Mark Casner. Mark?

Thanks, Dan, and good morning, everyone. Before I begin my formal comments, I want to take a few moments to acknowledge the tough situation we have faced here in San Diego this week. To say that the fires have been disruptive is an extreme understatement. Many of us have had to evacuate, some more than once, as we dodge these capricious fires. Through it all however, has been a constant outpouring of care and concern for everyone impacted by this devastation.

To our friends around the country, we cannot express to you how touched we are by the tremendous support you have shown through your calls and emails. It means a lot. To those of us closer to home, we extend our sympathy to anyone who suffered a loss. Our thoughts and prayers are with you.

In May of 2006, during our Q1 conference call announcing our results and my first as CEO of Digirad, we began to outline a plan that over the next 18 to 24 months would address many of the issues confronting our Company. Fresh off the big loss in 2005 of approximately $11 million, we discussed a number of initiatives that would put us back on the road to profitability. I am pleased to report that we have achieved success in almost every way.

By the end of this year, we expect to report that gross revenues will have increased each year since 2005, and our bottom-line performance to be at breakeven or better, excluding stock-based compensation, which represents a huge turnaround from the losses of two years ago. We have returned to a modest degree of positive cash flow, excluding acquisitions, and have successfully integrated UltraScan, the mobile ultrasound company we bought earlier this year; thus expanding our portfolio of imaging services. Our cost structure has shown dramatic improvement and we continue to enhance efficiencies in all areas. Our mobile division remains the largest provider of nuclear imaging in the country.

The product division has been no less a contributor during this period. We believe that our market share in the dedicated cardiac nuclear arena has grown steadily, from selling 55 in 2005 to 71 in 2006. And we expect to exceed that number in 2007, even though we have been in an extreme down market as measured by NEMA, the National Electrical Manufacturer's Association. Last year we rolled out our Cardius line of cameras; the most technologically advanced yet -- lighter, faster, and with higher quality.

At the Association of Nuclear Cardiology meeting that was recently held here in San Diego, we unveiled a number of new features that continue to differentiate us from other companies. Of note was an update by our Medical Director, Dr. Jamshid Maddahi, on the progress of our trial with our nSPEED software, which enables acquiring studies at half the acquisition time, allowing for 3.5 minute studies. These results are very positive from a performance and efficiency standpoint. We also recently launched our Drive to Black program that will enhance our productivity, cost efficiency and profitability.

Our commitment to replacing and/or upgrading our mobile fleet remains on track, and fully two-thirds of our fleet will consist of our multi-headed camera by year-end. More than 70% of our scans are now performed on these newer units and we have seen a corresponding decrease in hours worked in a day contributing to lower costs, higher staff satisfaction, and lower turnover of personnel. Our customers are pleased that this has resulted in shorter scan times for their patients, resulting in increased satisfaction and most importantly, higher quality images. We will complete the fleet upgrade in 2008.

Perhaps one of the most exciting outcomes of our acquisition of UltraScan was our subsequent launch of our centers of influence strategy. Built largely around the model that defines UltraScan today, we have, in just the past few months, signed up three more prestigious institutions that are interested in this approach. Several more contract discussions are underway, which we expect to have in place by year-end. We will continue to keep you updated on our progress in this area.

Proof that this strategy is working and has great potential to fuel growth in our DIS services business, we are now generating revenue and an annual run rate in excess of $1 million in our Nashville, Tennessee hub associated with Vanderbilt University. This launch was coupled with a large cardiology outreach program. We expect that run rate to continue to increase each year, and under certain assumptions see the potential for annual revenues of $8 million. As a result of the progress we have made with this single alliance and indications from the others, we are confident this is the correct strategy.

We are pleased, as I noted earlier, that even in a very tough market we are able to increase our marketshare in the product business. Reimbursement trends on the service side have certainly had their impact as well. The Deficit Reduction Act and other payor pressures will pose ongoing challenges for us. Therefore, our ability to meet these challenges head-on will be the secret to our success. We believe that the strategy we have laid out will not only help us deal with today's challenges, but allow us to return to the growth levels we enjoyed just a few years ago. We have the necessary resources and talent to keep Digirad at the forefront of our industry.

An important resource at our disposal is a strong cash position. With improved operations, a better cash flow situation, and a clear focus on driving revenue growth, we are now in a position to consider the potential benefits of acquiring complementary or supplementary capabilities, product-wise or market coverage-wise. Our acquisition of UltraScan is just a small example of how finding the right partner can not only produce immediate financial benefits but also open up new strategic opportunities for growth.

You may have noticed that we issued a press release just a couple of days ago giving you an update on our office here in San Diego. And I'm pleased to say that we are fully operational today. Our staff is onboard. We've managed to find everybody who had to evacuate and account for them. And so far as we know, everybody is safe and sound.

So I will now turn the call over to Todd Clyde, our CFO, who will provide more specific detail regarding our performance. Todd?

Thanks, Mark, and good morning, everyone. Please note that all quarterly comparisons are for the third quarter of 2007 compared with the third quarter of 2006, and all nine month comparisons are for the nine months ended September 30, 2007 compared with the nine months ended September 30, 2006, unless otherwise stated.

For our third quarter of 2007, consolidated revenues rose 12.4% to $18.4 million from $16.7 million for the third quarter of 2006. DIS revenue for this year's third quarter was $13.5 million compared to DIS revenues for the third quarter of 2006 of $11.4 million. For the quarter, DIS operated 135 nuclear and ultrasound units with an overall asset utilization rate of 62% compared to 83 nuclear units at a utilization rate of 51% for the third quarter of 2006.

During the quarter, we replaced 13 mobile imaging units with our advanced CardiusXPO multi-headed cameras. We now have 55 multi-headed mobile units operating in our DIS fleet, which we believe has contributed to improve labor efficiency compared to last year.

Product-related revenues, which includes camera sales and maintenance revenues, was essentially unchanged at $5.3 million for the third quarter of 2007, and included sales of 17 cameras, also unchanged from the third quarter of last year. Consolidated gross profit for the quarter improved to $4.8 million or 25.4% of revenues from $4.1 million or 24.4% of revenues for the third quarter of 2006. DIS gross margin improved to 24.7%, compared to 23.8% for the third quarter of 2006. The improvement was attributable to higher asset utilization, lower depreciation and lower labor costs. Product related gross margin was 27.3% of revenue compared to 25.9% for the prior-year period.

Despite seasonally lower gross margins in the third quarter relative to first and second quarters, nine month gross margins improved this year to 29.1% from 25.9% last year. This year-over-year improvement is a result of higher production volumes due to our fleet upgrades and reduced costs through higher efficiencies and outsourcing initiatives, even though pressures on average selling prices and a difficult market environment have persisted. We expect production volumes to return to normal levels in the back half of 2007. As according to plan, fewer DIS units will be upgraded.

Operating expenses for the third quarter declined 15.1% or $1.1 million to $5.7 million from $6.8 million in the third quarter of 2006; the result of higher efficiencies allowing more streamlined operations and lower legal costs. Net loss for the third quarter was $588,000 or $0.03 per share after accounting for stock-based compensation expense of $199,000, compared to net losses of $2.1 million or $0.11 per share, including stock-based compensation expense of $344,000 for the prior-year period.

For the nine months ended September 30, 2007, consolidated revenues were $55.1 million compared to $54.7 million for the first nine months of 2006. DIS revenue for the nine month period was $39 million compared to $38 million for the nine months 2006, and product related revenues were $16.1 million compared to $16.7 million in the prior-year period. Consolidated gross margin for nine months 2007 improved to 29.1% from 25.9% for the same period last year.

Net loss for nine months was $276,000 or $0.01 per share, including stock-based compensation expense of $824,000 compared to net losses of $6.1 million or $0.33 per share, including stock-based compensation expense of $1.4 million for the same period in 2006.

Cash and equivalents and securities available for sale on September 30, 2007 totaled $30.8 million compared to $44.3 million on December 31, 2006. Net receivables were $10.5 million on September 30, 2007 compared to $9.7 million on June 30, 2007, and $7.5 million on December 31, 2006, due largely to the UltraScan acquisition on April 30, 2007. Net inventories were $5.1 million on September 30, 2007 compared to $6 million on June 30, 2007, and $5.9 million on December 31, 2006.

Reflecting the results for the first nine months of the year and the integration of UltraScan, we anticipate consolidated revenues for 2007 in the range of $74.5 million to $75.5 million consisting of DIS revenue between $53 million and $53.5 million, and product related revenues between $21.5 million and $22 million. Consolidated net results are expected to range from breakeven to a net loss of $1 million, including estimated stock-based compensation expense of $1.1 million. Digirad anticipates no stress agent revenue for 2007, whereas we generated $2 million of stress agent revenues in 2006.

We are now available for questions. Operator?

(OPERATOR INSTRUCTIONS). Tim Lee, Caris and Company.

Just in terms of your full year outlook, can you just reconcile for me how you get -- I mean, I think last quarter you were looking for 77 to 80 for the year. So looks like you took it down a couple million bucks, I guess. What was the reason for the downtick, given Q3 results -- at least relative to our thinking -- came in pretty much in line. So if you can just walk me through the lower outlook for the fourth quarter, please.

Just a couple of things, Tim. This is Todd. One, the revenues for Q3 came in a little bit lower than where we had anticipated, primarily on the product side with a little bit lower on the DIS services side. And then just based on our projections for Q4, we expect the revenues to be a little bit stronger in Q4 than we saw in Q3. We've seen some positive signs but they're not going to result in really a significant change in the revenue stream for the fourth quarter compared to what we saw in the third quarter. And therefore, we've pushed that range back to where we think we're going to land in total.

And I know, given the terrible fires in your area -- I mean, are there DIS routes that are getting negatively impacted? That could at least impact your fourth quarter results on a short term basis?

I'm pleased to report, Tim, that we probably lost eight to 10 days equivalent. But early indications are we'll be able to make all those days up before the end of the quarter. So we should have probably no impact and if it is, it's going to be very modest. So I think we managed to dodge this bullet pretty well.

That would be about $35,000 roughly, Tim, in revenue.

And then just one last one. I guess in recent memory this is probably the second big fire, I think, in that region. So do you have like backup manufacturing elsewhere? Or just any disaster -- do you have disaster contingency plans you've got built in?

We do. And as you know, more and more of our cameras are being outsourced anyways in other parts of the state. So I think we have a pretty good system in place now. And the good news to be in a decentralized company is that our ability to meet our customer's needs has pushed out into the community anyways. There was certainly a minor disruption over the last few days in terms of parts delivery. But I think we've got a pretty good handle on our whole disaster preparedness plan.

Thank you. I'll jump back in queue.

David Khtikian, JPMorgan.

I guess maybe if we could just -- perhaps, Mark, if you could talk a little bit more about the centers of influence and how you kind of look at the market? I mean, you said you're getting about a, I guess, a $1 million run rate from Vanderbilt and you see maybe upwards of $8 million total for this potential.

We do, yes.

Is this -- How do we think about -- so for instance, I guess if we look at Vanderbilt, is that $1 million incremental that you didn't have access before prior to going down this route? And can you say that would be the same for the $8 million? Or how do these customers break out?

Yes, your assumption is correct. This is incremental. So let me spend a few moments talking about this model. I think it's very important and it's something we starting talk about. As Todd and I have hit the road and some of the more recent conferences that we've been at, we've rolled this out and we will continue to. When we present at JPMorgan in San Francisco, for example, this will be a big part of that. So let me talk about what the model is and then -- and what our plan is.

If you look at the UltraScan acquisition, it was a great thing for us in so many different ways. It helped diversify our portfolio. It gave us a nice foothold in Georgia. But it really demonstrated to us the power of this model where there's an alignment between the primary care providers in the community, the professional cardiology staff on faculty at this academic institution in the case of UltraScan, Emory University, and the University itself.

And really what it is, is an opportunity for us to deliver the same kinds of services that we've been delivering, ultrasound and nuclear, to those primary care doctors. They in turn funnel the professional interpretations into the medical staff at that particular university. And the university benefits by doing all of the downstream interventional work, whether it's in the CAT lab or open heart surgeries or whatever.

So the revenue stream passes from Digirad to the internist, the cardiologist -- for those of you who are familiar with how that works. You know, most of the university staff do not earn the kind of salaries that their suburban counterparts earn. And so there's a fair amount of attrition away from the universities. And this is a great retention strategy for the universities as they generate revenues from the professional reads. And it's a great opportunity for the university to extend their reach out into the community.

And so what we've been able to do now is that the folks at Emory have been very gracious and have introduced us to other academic institutions around the country. Notably, Vanderbilt was the first one we signed up. And you have to understand that this incremental revenue all happened within the past six months. This is a brand-new model that we've rolled out. We've got three more in the queue. Michael Keenan, who is the president of DIS, is literally moving around the country, talking with these prestigious centers. We expect to sign a few more up in the fourth quarter.

And so, if you look at this and you say okay, if each one of these centers of influence could generate on average $8 million in revenue and it takes, let's say, three years to fully ramp up to that, and we introduce four a year, what might that look like in three to five years?

So, if we signed up four today and in three years -- so by the end of 2009, they'd each be producing on average $8 million. So that's $32 million from those four. And followed by four more in 2010 and four more in 2011. You can see that this very aggressively moves that revenue line up quite a bit. We really think in three to five years that a $100 million increase in our DIS business is very doable.

And the reception that Michael and his team have gotten in the country is, quite frankly, incredible. And I think for us it's how quickly can we get these contracts signed? How quickly can we ramp up these services? But we're -- if you can't tell from the passion in my voice, we're very excited about this opportunity.

Okay. So, I mean, so you're saying, just to clarify, that's all incremental. So when you talk about four centers at $32 million in '08, that would be on top of the core business?

Yes, well, they won't all do $8 million in '08. We -- go back to the comments that I made -- we do [usually] three year ramp up. But if Vanderbilt is running at $1 million run rate today, arguably they probably ought to be at $3 million next year, perhaps $6 million in year two, $8 million in year three. So there will be a ramp up period. But the point I was trying to make is if we ladder these things out over the next few years and simply did four a year -- and we think we can do more, but we don't want to get too carried away here -- if we simply did four a year and you looked out three years, those four would be generating the $8 million a piece is $32 million. And then the next year, four more come on, so now you've got 8 doing $8 million. And the next year you've got four more -- 12 and so on and so on. So, it's a very compelling strategy.

Okay. Thanks for that. And then on UltraScan, Todd, I don't think you guys shared this number last quarter, but I figure I'll try again. I mean, are you able to provide the revenue impact of UltraScan in the quarter?

We're still pleased with the progress that we've in UltraScan. The business continues to contribute at the levels that we had anticipated and it continues to contribute positively really to our nuclear revenue. We are going to continue to stand by our view of not necessarily breaking it out. We think that it's very complementary and it fits together. So we haven't really changed our guidance on that front. And based on that knowledge, you can probably back into a number that's pretty close to about where we had projected it to be on a quarterly basis. Some of the traction that we've got in that Nashville location is clearly from those guys.

I did want to add one kind of clarifying comment to Mark's comment about our backup redundancy. We don't have -- we have some things that are outsourced, but we don't have a lot of redundancy in some parts of the manufacturing floor. And if we really did lose this whole building, clearly we would have some challenges from a manufacturing standpoint. Those are things that we have improved each year and we'll continue to improve them. I just don't want you to walk away with the thought that we could be fully up and running, if this building burned down tomorrow, somewhere else.

Okay. And then I guess one last question on the fourth quarter. Can you maybe give us a little guidance on margins, Todd? Either gross margins or on the operating side, sort of (multiple speakers) --

Yes, I think in the DIS business, Q3 has historically been our more challenging quarter based on seasonality. So we would expect those margins to probably be slightly better than what we saw there in Q3.

The manufacturing kind of production side here has been impacted, as we've been talking about, really for the last two quarters that we saw real solid volumes in Q1, still pretty decent volumes in Q2, although lower, and then certainly lower in Q3. And we even anticipate lower in Q4 because we are now through with the majority of the upgrades that we plan on doing this year. We'll put six more units into the DIS fleet in Q4. But clearly that's less than half of what we did last quarter. So you have a lot less absorption.

We have done some adjustments in some of our cost base and we've continued to outsource some things to help offset that. But we understand that that's kind of part of the deal. The margins could be slightly better in Q4, even on product, because we did take some incremental service costs and maintain some cameras. It was a little bit unusual in the third quarter. But modestly, we're not quite at that 40% level that we saw in the first couple of quarters. We're probably closer to the mid-30 range. So we'll have to see exactly how Q4 lands. But that's roughly what our thinking is.

Okay. That's all I have. Stay safe out there. Thanks.

(OPERATOR INSTRUCTIONS). Tim Lee, Caris & Company.

Just a follow-up in terms of the fourth quarter outlook on DIS being a little lower than previously expected. What's driving that? Is it just some pricing pressures out there? Or you didn't convert more vehicles than you thought, the triple-head? Or just any type of color you can provide on that front would be much appreciated.

I guess I would say, Tim, that kind of the main thing that's kept some of the numbers at bay is we have experienced a little bit higher lost business rate. And that's kind of stayed up during the -- all of the three quarters during the year when historically we've seen it kind of stay up and then dip back down.

We do have some positive signs here going into Q4 that it will probably start to come down a little bit. Where we primarily saw the loss this year was actually more in the West than in any of other regions. In fact, we actually had 18% growth, for example, in one of the regions, whereas we saw some pretty solid depression in the West. That looks like it started to subside quite a bit. We just brought in a new RVP of Sales and a new RVP of Operations to manage the West. And we've started to see some real positive signs -- kind of in the last month. So we just know that it's not going to have a real sizable impact on the numbers in the fourth quarter. But we think it will position us to start to get that traction again as we head into 2008.

And just one last one, if I may. I mean, here, at this point, it doesn't look like you guys will hit your full year performance goals. I think you were looking for revenues north of $77 million. So, is there any short term incentives -- so, you know, some of the team members don't take the foot off the accelerator in terms of driving the business here on a short term basis?

Yes, I'll jump in here, Tim. We actually think we'll hit at least one of the metrics, which was the $1 million of profitability before the stock-based compensation. We're very confident that that number, despite the challenges on the top line revenues. This team really has done an outstanding job in managing the cost reductions. So we're very comfortable with that.

I think the Board feels very strongly about pay for performance. And you sign up and you live with the results and you take another swing at it the following term. So I think having said that, we obviously continue to evaluate what short-term and longer-term incentives we need to provide for the team.

What I can tell you -- and I can state this rather emphatically -- this team is very engaged and very motivated and I think quite excited, actually, about our longer-term prospects. We may not have hit our top line numbers this year. I feel very good, however, about the progress, as I'd stated earlier in the call, about all the progress we've made over the last two years in terms of essentially wiping out that $11 million loss.

Clearly -- and we talked about this at the last call as well -- we are particularly focused on our growth going forward. The center of influence strategy we really think is not only meaningful, it's -- we're ecstatic about what that really could mean for us. We continue to evaluate some opportunistic acquisitions like UltraScan; some smaller, some perhaps bigger. And so our expectation is that we will return to the growth patterns that you all have become comfortable with just a few years ago. And we ask -- you've been an extremely patient group -- and we ask you to be patient a tad longer and we think your patience will be rewarded.

Stephen Silk, C. Silk and Sons.

Good morning and good luck with the weather conditions and everything that you have to put up with. Todd, can you bring out what the depreciation was for the quarter?

Yes, hold on one second. I should have that number in my head but I don't.

I'm assuming that the increase in the property and equipment are the upgraded cameras?

Yes.

Yes, that's right. So we generated $3.2 million of depreciation for the nine months.

Can you talk about the daily rate of reimbursement -- or what you bill on a daily basis this year compared to last year? And how would that be in line with the number of days total that you had rentals as opposed to year to year?

It's about the same. It's actually slightly up, if you look at kind of our revenue per day on the nuclear side. And it's -- I mean, we've only got a handful of months here, just almost six months by the time we get through October on the UltraScan side of the business where the ultrasound procedures that are performed.

So overall, I think we're pretty happy there. The only reason why you would see any dip is because the historical numbers would have had that stress agent in it. But if you took the stress agent out, we're running a little bit higher than $3,500 per day build on the nuclear piece. And then the way that we run the UltraScan business is a little bit different. We look at it more on a monthly level. And we're generally billing a physician that runs one day a week, $3,900 for the month.

And finally, I'd like to also touch on the center of influence. It looks to me, the way it was explained, two beneficiaries. There was the primary care physician as a way to increase their revenue and then the readers or the doctors who are at the center of influence. How do you proceed your sales? Are you looking for the readers to go to the primary care physicians? Or are you looking to sell the basic premise directly to the primary care physicians and get them into the centers of influence?

Yes. Great question, Stephen. Actually there are four beneficiaries to this model -- Digirad, because we get to sell more business, obviously the primary care guys, the cardiologist, and the end user, the hospital, that's benefiting from all the downstream work.

Really what happens when we negotiate these contracts, if you will -- and contract may be a bit of an overstatement. It really is an opportunity for the University to give us a Good Housekeeping Seal of Approval, if you will, so that when we're out speaking with the primary care folks, we can say that we are in partnership with XYZ University, whether it's Emory or Vanderbilt or any of the other universities that we're talking with.

And that gives us that credibility, if you will, to talk to the primary care folks. But probably just as importantly, the faculty are out there with us meeting with the internists. Whether we're doing lunch and learns in their office or some other opportunity to meet with them, it's an opportunity to educate them about the benefits of providing ultrasound and nuclear services to their patients, what are the clinical indications for it, et cetera.

So, that truly has helped us in that regard. And being able to funnel some revenues into the faculty have, in the case of Emory, it's done an unbelievable job in terms of increasing their compensation on an annual basis and slowing down, if not totally eliminating, the attrition that the University typically saw with their cardiologist. So, they've got a much more stable staff. And then clearly the University is benefiting from all of the interventional work that's being performed there. So, it's one of those few opportunities where everybody gets something out of that.

Can you talk about the -- [would] the primary care physician be perhaps in a group of four or five doctors, where your market for cardiologists that had a practice of four or five doctors, there was always whether they could sustain one full day or two full days -- wouldn't this open up the opportunity for that much more sales because there are so many more primary care facilities? I mean, is that --?

Yes, there's no question, Stephen. There are 130,000 primary care providers in the country compared to 30,000 cardiologists. We've actually -- all of our business has migrated more and more towards the primary care arena over the last couple of years, anyways.

This particular model is solely focused on the primary care docs out in the community. So, yes, we think that this has huge runway. And again, when you can align yourselves with one of the luminary sites, we really think it's just a -- it's a model we're really very excited about.

And would it also open up to more than the nuclear cardiology that you're doing in that practice where you also perhaps accelerate the ultrasound?

There's no question. In fact, we're likely to lead with ultrasound, much as UltraScan did with their physicians, and then follow-up with nuclear. So a very compelling business model for them.

Thanks for the time. Best of luck with the weather conditions.

Thank you. And there are no further questions, so Mr. Casner, please continue with closing remarks.

Thank you. Thanks for being on the call with us today. We're pleased with our progress year-to-date and expect continued execution of our growth strategies in the coming quarters. We appreciate your interest in Digirad and we look forward to reporting progress on our next quarterly call. Thank you.

Ladies and gentlemen, that does conclude our conference for today. Thank you for your participation and for using ACT. You may now disconnect.