Star Equity Holdings Inc (STRR) 2009 Q3 法說會逐字稿

Welcome to the Digirad Corporation 2009 third quarter and nine-months results conference call of October 2009. (Operator Instructions.)

I will now hand the conference over to Mr. Matt Clawson. Please go ahead, sir.

Thank you, Cheri.

Thank you all -- thank all of you very much for joining us this morning. If you did not receive a copy of today's press release and would like a copy, please contact our office at (949) 474-4300 after the call, and we'll be happy to send you one.

This call is being broadcast live over the Internet and may be accessed at Digirad's Web site at www.digirad.com. Shortly after the call, a replay will also be available on the company's Web site.

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 about -- include statements about the company's revenues, costs, expenses, margins, operations, portable imaging services hub, centers of influence, product divisions, financial results, estimated market share, and other topics related to Digirad's business strategy and outlook.

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

The information discussed on this morning's conference call should be used in conjunction with the consolidated financial statements and notes 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 from Digirad is Todd Clyde, President and CEO, and Richard Slansky, Chief Financial Officer. Management will discuss the third quarter results, update us on the company's new strategies, and comment on the company's outlook for the current year. A question-and-answer period will then follow.

And with that, I'd like to turn the call over to Todd Clyde. Good morning, Todd.

Thank you, Matt, and good morning, everyone. I would like to thank you all for being on today's call and for your interest in Digirad.

We continue to make important progress in the third quarter and for the first nine months of 2009. Despite what we all know has been a difficult and uncertain business climate and for the economy overall and the health-care industry specifically, we are not backing down from our focus on making money and generating cash on a consistent basis.

We have grown revenues from our existing DIS business hubs, improved gross margins by initiating companywide cost control and efficiency measures, introduced new and important technologies into the market, and we have grown our total cash and investments position to more than $31 million. In other words, thanks to the combined efforts of our entire team, we are navigating these difficult waters very well, holding onto the gains we made early in 2009, and are positioning our company to grow our market share when the economy recovery begins.

Our focus throughout the quarter and much of the year was to use this temporary slowdown in the health-care business to invest in the technology platforms that will shape our future while still remaining focused on our 2009 goals. Again, those goals are to create efficiency by selling or closing underperforming hubs, improve our approach to launching greater centers of influence, introduce new technologies, develop a new technology platform, and to make progress toward consistent profitability and positive cash flow. Again, thanks to the work of the entire team, we have completed or are making progress on all these goals.

Our services business, in general, have been a bright spot. Our DIS business continues to be profitable. Revenues have grown during the first nine months of 2009 compared to the prior year, and gross margins are improving. I remind you that the third quarter is usually the slowest quarter in DIS due to summer vacations and holidays taken by our physician customers and their patients. This year was no different.

We also recently introduced another new product, as promised, our c.pax imaging management solutions product for our camera customers. This product provides cardiology clients instant Web access to their patients' imaging studies and reports, which, until now, due to cost, was limited primarily to large practices and hospitals. c.pax is a good example of innovations we can introduce during these weaker economic times that add value to our customers. The ability to access and interpret images easily at anytime from anywhere adds to both workflow and quality of life for the doctor. It is also a great example of how, strategically, we can leverage our existing distribution network to fold in new product categories that can be sold by our existing team to existing customers that will provide a significant benefit to them.

Camera sales continue to be slower than last year so we did some additional restructuring in the third quarter to align our cost structure to our camera business. Again, this is the kind of preparation and restructuring we need to be doing during a downturn to be sure we are financially strong and positioned properly to grow when the economy turns around.

I'm very pleased with this continued progress in our core DIS business and our emerging leadership in the nuclear cardiology product segment, and I continue to be encouraged by and grateful for the creativity and commitment of our employees as we face challenges and go after new opportunities.

One of the key challenges facing diagnostic imaging today are the proposed cuts in reimbursement and the potential challenges that -- or changes that will come in that area during 2010. Our focus and strategy here is to prepare for whatever may happen. Quite frankly, we don't know how this will all shake out, but we want to be in the best position possible to help our physician customers navigate through the changes while still providing excellent care and diagnostic capabilities to their patients.

The proposed regulatory and reimbursement modifications continue to change, sometimes on a daily basis. Our job is to be prepared the best we can to help our physicians while ensuring our business models continue to be profitable. To that end, we are currently working on plans to address a number of eventualities, from only slight changes to more impactual reductions. We will continue to do this and be a proactive partner with our physicians in the days and weeks ahead.

One quick update on the radio isotope shortage. The Chalk River reactor is still scheduled to come back online sometime during the first quarter of 2010. Our suppliers have been under tremendous pressure and have experienced increasing costs. Effective the first of October, they have passed on additional costs to us that will probably result to about 1.5 points in margin in our DIS business. We look at this as a temporary change and expect that to come back in line once the Chalk River reactor and -- brings additional supply back into the market.

cutting costs where possible, investing time and effort in research and development, launching new innovative products, and adjusting our business plan for a changing economic climate and volatile health-care market. It's been all about navigating through this economy, preparation, and using this time to create the technology platform for growth. We have done all that very well, as evidenced by our improved margins, and expect to continue to do so. And we have also been successful in continuing to generate cash, maintaining a robust cash and investment position, and keeping Digirad on a financial firm platform.

I'll now turn the call over to Richard Slansky, who will review some of the financial results more specifically.

Richard?

Thank you, Todd, and good morning, everyone.

I'd like to take a few minutes to provide you with some detail and color on our third quarter and nine-month financial results. As was mentioned earlier, we have time allocated for questions at the conclusion of our opening comments so, if we don't cover everything or something that you're interested in, please keep track of your questions, and we'll get to them shortly.

During this year's third quarter, as Todd discussed, we continued to make significant progress in our business despite the relatively weak economic environment and continued low camera sales in our product segment.

While total revenues declined from last year's third quarter, we achieved significant year-over-year increases in gross margins overall. And in our DIS business during the 2009 third quarter, we continued to generate cash, and even though we invested nearly $500,000 in our stock repurchase program during the quarter, we maintained our total cash and cash equivalent and investment position of more than $31 million.

Total revenue for the 2009 third quarter was $16.9 million. This is compared to $20.2 million in the third quarter of 2008, which was due primarily to fewer nuclear gamma camera sales, the disposition of certain DIS hubs earlier this year, and, generally, a weaker economic climate.

DIS revenue in the 2009 third quarter declined slightly to $12.9 million, compared to $14 million in last year's third quarter, and product revenues also declined. Product revenues were $4 million in the quarter, down from $6.2 million in the third quarter of 2008. We expect DIS revenues to continue to represent the larger percentage of our consolidated revenue in the future.

Consolidated gross profit decreased slightly from $4.5 million, compared to $4.8 million in the third quarter of 2008. However, overall gross margins as a percentage of sales improved to 27% from 24% in last year's third quarter, and gross margins in our DIS business specifically improved from just under 20% a year ago to about 26% in this year's third quarter. This was due both to our restructuring efforts and the sale of our underperforming hubs.

Net loss for the quarter was about half that of last year's third quarter loss. Our net loss was $414,000, or $0.02 per share, compared to a net loss of $869,000, or $0.05 per share, in the third quarter of 2008.

Although we are striving to not lose money in any quarter, we did expect to generate a loss in the third quarter due to the third quarter of this year being -- historically being a weak quarter. This year was no exception to our weak-quarter history.

As Todd stated many times, our mission in 2009 has been and continues to be for Digirad to make money and generate cash. However, given the very low level of camera sales that has now continued for the third straight quarter, primarily due to the sluggish economy, we decided to respond with an additional restructuring effort to align our camera business and allow us the opportunity to make money for the year. The costs associated with this restructuring effort were approximately $250,000 and included severance from a reduction in force which was expensed in the third quarter of 2009.

Throughout the 2009 third quarter, we continued to focus on fundamentals, including a strong focus on collections. As mentioned earlier, cash and cash equivalents and securities available for sale totaled $31.1 million, or approximately $1.64 per share, at December -- at September 30, 2009. This can be compared to our cash and cash equivalents and securities available for sale balances of $28.3 million at December 31, 2008, and $31.5 million at June 30, 2009. So our cash was slightly up from last quarter if you take into account the investment that we made by buying our own stock back during the quarter.

Going forward, we will continue to work on increasing collections and reducing our DSO's while we also focus on reducing inventory. We believe these ongoing efforts will positively impact our ability to increase liquidity and generate incremental cash in the fourth quarter of 2009.

DIS asset utilization was 63% on 147 nuclear and ultrasound systems in the third quarter, compared to 57% on 158 nuclear and ultrasound systems during the third quarter of 2008. So utilization was up, and the number of systems were down due to the sale of certain hubs.

Cost of DIS revenue consists primarily of labor, radio pharmaceuticals, equipment depreciation, and other costs associated with providing services to our customers. The cost of DIS revenue was $9.6 million for the third quarter of 2009, representing a decrease of $1.7 million, or 14.9%, compared to the prior year comparable quarter. The decrease in costs of DIS revenue is primarily a result of decreased labor, radio pharmaceuticals, and depreciation costs.

More significantly, DIS gross profit was $3.3 million for the third quarter of 2009, which represents an increase of $600,000, or 22.8% from the same period in 2008. As mentioned earlier, DIS gross profit as a percentage of revenue increased to about 26% for the 2009 third quarter from 20% for the same period in 2008.

The improvement in operational performance is primarily associated with the alignment of our services business, which included the sale or closure of underperforming hub locations, as mentioned earlier, along with improved DIS asset and team utilization.

Now, cost of product revenue primarily consists of materials, labor, and overhead associated with manufacturing and warrantying of our products. Cost of goods sold for the product segment was $2.9 million for the third quarter of 2009, representing a decrease of $1.3 million, or 31.2% compared to the prior year quarter, as fewer gamma cameras were sold.

Camera sales continued to be lower than anticipated so some additional restructuring was required in the third quarter to align costs -- our cost structure to our camera business. Product gross profit was $1.2 million for the third quarter of 2009, which represents a decrease of $900,000, or 44.2%, compared to the prior year 2008 period. Product gross profit as a percentage of revenue decreased to 29.1% for the 2009 third quarter from 33.7% for the same period in 2008.

I'd like to now briefly review our financial results for the nine months ended September 30, 2009.

Total revenue for the year's first nine months is $53.2 million, compared to $58.4 million for the first nine months of 2008, down slightly due to the reasons that I've already mentioned.

DIS revenue is $40.3 million, compared to $42 million for the first nine months of 2008, and product revenues were $12.9 million, compared to $16.3 million for the last year's first nine-month period.

Product revenues include gamma camera revenues and customer service, or what we might call "field service" revenues.

Gross profit for the 2009 first nine months was $15.5 million, or 29% of revenue, up from $13.8 million, or 24% of revenue, for the first nine months of 2008 -- a significant improvement.

Despite a difficult quarter, this year's first nine-month net income was $414,000, or $0.02 per share, compared to a net loss of $3.4 million, or $0.18 per share, for the first nine months of 2008.

So please allow me to repeat that. Despite a difficult quarter, Digirad's first nine months' net income was $414,000, or $0.02 per share, compared to a net loss of $3.4 million, or $0.18 per share lost, for the first nine months of 2008. That represents a $3.8 million swing from a $3.4 million loss to a $400,000 profit -- a very significant improvement.

DIS asset utilization in the first nine months of 2009 was 63% on 149 nuclear and ultrasound systems, compared to 59% on 150 nuclear and ultrasound systems during the first nine months of 2008.

Now, by way of an update, we announced in February that our board of directors had authorized the stock buy-back program to repurchase up to an aggregate of $2 million of our outstanding common stock. In the third quarter, we successfully repurchased 240,000 shares of our common stock. Our intent is to continue to repurchase shares in the open market each quarter as allowed under our 10b-18 plan and as directed by our board of directors.

So in conclusion, we're building a solid foundation on which to continue to execute our 2009 plan. Our focus is to continue to increase profits and generate cash. The impact of the economic downturn and the timing and strength of any future recovery, however, remain variables that create uncertainty for many health-care companies, and we are not insulated from those uncertainties. We do believe our strong balance sheet and our progress to date toward generating consistent and increased profitability and positive cash flows are advantages during these uncertain times and will be real value drivers in the months and quarters ahead.

We did record a third quarter loss, but we maintained a nine-month operating profit and a nine-month net profit. Our DIS revenues were strong but not quite strong enough to compensate for the shortfall in camera sales. Our balance sheet remains very healthy, and our working capital ratio grew again in the third quarter. Our cash and cash equivalent balances remains above $31 million despite our investment of $500,000 in our own stock, which is, by the way, now recorded as treasury stock in the equity section of our balance sheet. Finally, we remain on track to make money and generate cash for the year ended December 31, 2009.

With that, I'll turn it over to the operator for questions.

Cheri?

(Operator instructions.)

Okay. We don't have any questions in the queue at this time.

Cheri, this is Matt Clawson. Why don't we take a couple of the e-mail questions that we've received, and then, if people want to queue up at that point, they can.

Okay.

Firstly, we received a couple e-mail questions just this morning when the release went out, and we thought they were worthwhile questions for everyone to hear in the public setting.

So the first one is is there the potential for any geographic expansion in 2010 in either, for instance, Europe or Japan?

It's a good question, Matt. This is Todd, and thanks for lobbing that question out this morning.

We have historically not had a proactive international initiative. We have a couple of modest distributors in a few locations around the globe; no one in Europe, and no one in Japan currently. We've looked at the nuclear cardiology market as being primarily in the US so we've always pushed our efforts there. We appreciate that there could be some opportunities in some of these developing locations around the world and also in some of these economies that are maybe a little bit more robust than the US. Currently, though, we do not have something specific, but we'll look into that as we go forward.

Great. It looks like we've had a couple of live callers line up for questions so why don't we go to those, and then we'll wrap up our last e-mail questions following them.

Great.

Okay. Our first question is -- comes from Adam Peck with Heartland Advisors. He should be with us in just a moment.

Hi, guys.

Hey, Adam. How are you?

Good. How you doing?

Good.

How many cameras were sold in the quarter?

Eight.

Eight. And is restructuring -- was it done because you think like -- you think that the current run rate in product sales is something we will see the next year or two or, given that CapEx budgets have been slashed, that we might see a bounce back?

Well, the timing of when that bounce back may happen is still a guess -- right? -- and we look at that as a pretty volatile-type question and answer. So we do expect the camera sales to remain sluggish for some portion of the foreseeable future. I don't know if that's two quarters, if it's four quarters, and, hopefully, it's certainly not 24 months, but that's a guess on our part. So at the very end of the third quarter, we made the decision to try to pull more cost out of that business unit and then also some other G&A-type costs. We stripped costs really out of, kind of, indirect and direct cost-of-goods-sold-type lines and closed out positions, and it's always a tough decision to make and both employees were really great members of our team, and we hated to see them go. But at this point, we're -- we've really trimmed the direct labor down to a real pretty modest level, and we've cut out some even indirect initiatives that we were working on because you wouldn't get the resulted impact because there's no volume coming through the shop; right?

So, ultimately, to kind of come back a little bit higher level of your question, how long does it last? Are we prepared for that? We tried to cut this back so that we could certainly burn a lot less cash in that business unit at a much lower level. At the same time, we're trying to push our sales initiatives to see if we can capture a little bit more share or do a little bit better than we've done, but this has been something that's been plaguing us for the last three quarters, and we felt like we needed to respond to it.

Adam, this is Richard. There's no doubt that capital budgets have been restricted and that hospitals have virtually no capital available, but we're also proactively putting a few programs in place to see if we can help both the physicians and the larger practices. We put something called a DigiLease program in place and a DigiFi program in place. One of them is sort of a rent-to-own program, which would allow them to start operating with our equipment without a big capital expenditure on the front side. The DigiLease program, if they're having difficulty obtaining financing for whatever reason, under the right circumstances, we might provide that as long as there's a reasonable down payment and assurance that we're going to receive payment down the road. So we're trying to come up with new programs to provide to our sales force that will actually help bolster the movement of cameras into the marketplace, even if it's not a traditional direct sale.

Okay. With the last restructuring at a $4 million run rate, is -- are camera sales now at breakeven at the EBIT level, and what was operating income for DIS and product this quarter?

Part of it's -- so the question that you have around -- is is the product business breakeven with the adjustments that we have taken? We would expect that to be -- at breakeven we'd probably have to do a little bit better than we did in the third quarter so we certainly hope that that doesn't continue to plague us. Is that 10 units? Is that 12 units? It kind of depends on if their used and new, and there's some mix activity there. And, obviously, the majority of the revenues that are now dropping true to that segment are actually out of the customer service maintenance line. So we appreciate that we need to maintain some level in that range in order to be profitable. So that'll give you at least some viewpoint that we don't have to be at 20 cameras to be profitable.

Okay.

Yeah. One of the things that we look at, Adam, is -- we call it our "product business," but it's a combination of camera and customer service or field service revenue, and customer service revenue has been going up, DIS revenue has been going up -- even the US revenue has been going up. So there is some ability to compensate for the lower product sales, but the actual product revenue at those kind of levels -- it's very difficult to maintain profitability at those levels. So there is some level of subsidy from the other three parts of the business, if you will.

Okay. And then on the isotope increase, would you expect that to continue through 2010?

You're talking about the cost -- yeah -- I would certainly hope not. I would hope that, once that Chalk River reactor comes back online and brings much more availability of isotopes into the market that we're able to return back to our key suppliers and get an adjustment. They did a good job of not passing that on for a handful of months when they were incurring additional costs, and we'll continue to work with them. Our primary goal has been to make sure that there aren't shortages, that we're not having to cancel days, and although at times we've had to shift to different isotopic protocols, such as using a thallium-technetium protocol versus a technetium-technetium protocol, which we would have normally done, that overall we've done a pretty good job of not losing too many days based on the isotope. So short term, a little increase in the cost; longer term, we believe that the major reactor problem that's on the market today will be resolved.

Okay. I'll hop back in the queue. Thank you.

Thanks, Adam.

Okay. Our next question comes from Kevin Kotler from BroadFin. He'll be with us in just a moment.

Hello?

Good morning, Kevin.

Hi. Just -- I got on late but the -- just in terms of new products, this new, I guess, service that you're providing -- just any expectations, and can you maybe walk through the revenue model a little bit so we get a flavor for it, and maybe just talk briefly just about, again, new technologies, new cameras, etc., anything else on that front.

Okay. Sure. Sure. Let me dive into -- kind of stepping back a little of what was our key objective during 2009. Obviously, we didn't expect the impact on camera sales to be as dramatic as it has turned out so we've tried to be reactive to that. But we essentially said we've always played in a mobile market and in the smaller cardiology market. How do we broaden that, open up the hospital market more and the large practice market? So we launched our X-ACT camera at the first part of 2009, which is this attenuation correction device. It's actually receiving very good reviews. The folks that have the camera installed love the camera, are providing great feedback, and are being good reference accounts. And it's also allowing us to get into a lot of really good discussions with very well-known hospital names and large practice names around the country. The challenge that we're facing is currently those are conversations rather than translating all the way into orders. But we believe that we're getting ourselves into the queues and would hope that the outcome is that, as these budgets start to loosen up and spending comes back into play, that we'll certainly be a considered camera in that process.

When we also look at what are the needs of the cardiologist, historically, the hospitals always had these great information technology systems, and they had PAC systems, which are the picture archival retrieval-type systems that they use to manage the images, and they move them between the departments so that radiology can do the reads, and you'll see a lot of hospital clinics even, where you'll go get imaged today, and then you wait for some radiologist in a different location to actually do the read. Well, when you look at the primary -- or the physician office plays, they have some of the same needs, but they have not invested in those technologies because they were well over $100,000 on average a few years ago to install even a basic package. But if you look at where technology goes, you need to be able to read images anytime, anywhere and make it very simple, and so that's kind of been our overall vision is to facilitate what the physician is trying to accomplish.

So why did we enter into a relationship with a partner that would allow us to provide this almost on a per-click basis? It's because that's where we believe that these -- that the software applications are really heading, and the physicians just don't need to deal with the whole IT infrastructure to manage this as well as their EMR and everything else, but they certainly need to make it very easy to read so that, when they're on vacation in Hawaii, they can go to the Internet, pull them down, read them, do the reports, and shoot it back -- right? --

Right.

-- make it very simple. And today in some practices that can happen, and in most it does not.

Right.

So that's the vision of what we're trying to do.

And, Kevin, just briefly on the actual revenue model. You might think of it similar to a cell phone model. There's an upfront payment to get the service started, and then it's really volume driven. It's based on the number of images that they have out there, the amount of data storage that they need, and so there's an ongoing fee, as they utilize the system, the more volume, the more revenue.

Right. But just in terms of expectations, is there any -- you going to roll this out -- just going over like how many accounts that you currently have your camera in and then -- okay -- then you have -- we'll get 10% of them, and they should be generating $500 a month. Anything that we could -- help us build a model on that?

I would tell you to model it to -- close to almost nothing during the balance of the year. And the reason I say that is because just our entire equipment experience right now is very, very low; right?

Right.

And when you lob in and you -- and there's some charge that is not really significant upfront, that's not going to really matter, and it's going to take time to build, kind of, this recurring revenue stream. Okay? So, normally, I would give you a little different answer, but based on all that volatility, I think I would look at it in a very modest way. Give us a quarter or two to kind of get a -- get our hands around it, get more traction out there, and then we'll start to provide some input on how you can model it in the future.

And using your cameras in terms of new indications, such as mammography, is that something that's on the horizon?

You know, it's an interesting comment. I mean, I know there's been some news. I think [Dillon] and Philips have put out a press release where Philips will be distributing the camera in some of the Eastern Bloc countries, and you certainly can see that, not as a primary screening tool, but as a form of screening for breast cancer that you're seeing a little bit of a resurgence in nuclear imaging. [Dillon's] probably one of those players with that type of a product. So there are opportunities like that for us, and we don't have anything specific today, but the original camera that we actually launched was actually a (inaudible) of a mammography camera, which is exactly what you're talking about so --

Uh-huh.

-- there are actually some groups that utilize our camera for that, it just isn't be used maybe in the same way that you might think about the way that a mammogram happens, where the breast is being compressed and then images being taken. It would be more where you bring the camera head up close to the breast and image that way.

Gotcha.

Okay?

Well, thank you.

Yes. Thanks, Kevin.

Okay. Our next question comes from Anthony Chiarenza with Key Equity Investment, Inc. -- Investors, Inc.

Good morning.

Good morning.

We've talked quite a bit about the camera business. Can you give us a little bit more of an update on the DIS business going into the fourth quarter and 2010 in terms of does the strategy continue to be to really continue to develop the centers of influence you have now, or is there some thought of expansion at some point in 2010?

Yes. Good question. Let me maybe talk higher level, and then I'll drill into kind of what usually happens in the fourth quarter and then as we go into the first quarter of next year.

We absolutely see that in our centers-of-influence markets we have the ability to utilize the partners name, their help, their assistance, and it would appear that it's a pretty good sell strategy in order to get into more doors at a little quicker clip; right? So we have higher growth in those markets than we do in other markets. That doesn't mean that every COI market is working at a really high-performing level like we would like to see, and so we continue to look at ways to think about the relationships in those specific communities and how to make each community very, very effective. Sometimes that can be with a very large institution. Sometimes it can be with a very aggressive cardiology group in a smaller community that's really growing. We have some examples of those things.

And so, as we look forward into 2010, we continue to look at how do we develop the right, effective strategy for all of our key markets? You asked a question about expansion. Well, my current viewpoint is that I still believe that we're significantly underpenetrated in many of the key markets that we're in. Because we're already there, we already have infrastructure, we have personnel, we already have some market knowledge. I believe that the best plan is to continue to penetrate much deeper and broaden what we're providing in those specific markets first and foremost. It doesn't mean that we may not -- wouldn't see maybe some modest expansion. That's possible.

Historically, when you look at the fourth quarter -- the third quarter's usually the slowest because of vacations and things like that, and then the fourth quarter has kind of these holidays all built in; right? So you run like heck in order to do as well as you can in the fourth quarter, and you get through the year, and then you start over again in the first quarter, and then your second quarter's always your best quarter; right? That's always been the historical trends how the quarters align.

Now, what is so different about the environment in which we find ourselves today are all around these modifications of the health-care delivery platform that the Obama Administration is trying to push through, and what it creates for all of these health-care providers -- either those that would utilize a service, those that would buy a camera, hospitals -- is a mass amount of uncertainty, and to some degree it's created some paralysis. We've seen progress in selling into the primary-care and smaller cardiology markets, but we also appreciate that everybody's concerned about what's going to happen with reimbursement.

And so that's what we'll be focusing on a great deal in the next 90, 120 days, 180 days -- whatever it takes to really get through that and make sure that the model is effective, that the position is still economically incented in the process and they -- that they can provide great diagnostic images for their patients, which, ultimately, in our view, is to improve patient care, and I think that that will continue to be the case. They'll be some uncertainty, there's going to be a lot of volatility, but I think what you'll see is you'll see streams of sunlight that will part through the clouds, and those that kind of had a -- have a good vision can taken advantage of those opportunities, and we hope to be that type of group so that we're actually shepherding the positions through these challenging times and help them essentially provide great diagnostic imaging to their patients and make money.

Okay. Thank you very much.

You bet.

Okay. I'm going to hand this back to Matt. We don't have any other questions in the queue at this time.

Okay, Cheri. Thank you very much.

Actually, the second e-mail question that came through was, for all intents and purposes, answered already.

So, Todd, we're -- I think we're done with Q&A, and I'll hand it back over to you to close it up.

Okay. Thanks, Matt. Yes, I -- I appreciate that.

I think that, overall, those questions around cost cutting and expansion and everything like that, hopefully, we've given a pretty good flavor of where we are. We've definitely cut the indirect costs probably about as far as we possibly can. I mean, I'm sure that, when you look at other G&A-type initiatives and things like that there's always other things that you could possibly do, but we've cut into muscle the last few times, and so we appreciate that that can be challenging to do. And I hope you at least gained some insight that we're positioned to run the camera businesses at a much lower volume today than we would have been even 30 days ago. Okay?

So thanks again, Matt. Appreciate that.

I'd like to make just a final comment or two before we close.

The financial and operating performance in the third quarter reflects the progress and indicates that Digirad, as an organization, can make the tough decisions to really keep us headed in the right direction while making strategic progress. Those changes and those we will be rolling out in the final months of the year are aimed at moving the company forward and generating greater overall value for our customers and absolutely for our shareholders.

I look forward to updating you on our future progress on our next call. We appreciate you joining us today, and thank you very much.

Thank you, Matt, Todd, and Richard.

Ladies and gentlemen, that concludes the Digirad 2009 third quarter and nine-months results conference call. Thank you for joining us. You may now disconnect.