Cross Country Healthcare, Inc.

Good afternoon, ladies and gentlemen, and welcome to Cross Country Healthcare's fourth quarter and full year 2020 earnings conference call. A replay of this call will also be available through March 11, 2021 and can be accessed either on the company's website or by dialing 800-510-0118 for domestic calls and 203 369-3808 for international calls and by entering the passcode 2021. At the conclusion of the prepared remarks, I will open the lines for questions. I will now turn the call over to Bill Burns, Cross Country Health Care's Chief Financial Officer. Please go ahead, sir.

Good afternoon, everyone, and welcome to Cross Country Healthcare's fourth quarter and full year 2020 earnings call. I'm joined today by our co-founder and chief executive officer, Kevin Clark, as well as Buffy White, group president of Workforce Solutions and Services, and Steve Saville, group president of Locums and Education, as well as our newest member of our executive team, John Martins, group president of Nurse and Allied. Welcome, John. Today's call will include a discussion of our financial results for the fourth quarter and full year of 2020 and our outlook for the first quarter of 2021. A copy of our earnings press release is available on our website at crosscountryhealthcare.com. Before we begin, we need to remind everyone that certain statements made on this call may constitute forward-looking statements. As noted in our press release, forward-looking statements can vary materially from actual results and are subject to known and unknown risks, uncertainties, and other factors, including those contained in the company's 2019 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC. The company undertakes no obligation to update any of its forward-looking statements. Also, comments made during this teleconference reference non-GAAP financial measures such as adjusted EBITDA and adjusted earnings per share. Such non-GAAP financial measures are provided as additional information and should not be considered substitutes for or superior to financial measures calculated in accordance with the U.S. GAAP. More information related to these non-GAAP financial measures is contained in our press release. With that, I will now turn the call over to our co-founder and chief executive officer, Kevin Clark.

Thanks, Bill, and thank you to everyone for joining us this afternoon. I'd like to begin by welcoming John Martins to Cross Country. John brings a wealth of expertise and deep industry knowledge, having served in very senior positions for several large healthcare staffing firms during the course of his successful career. This call marks the second anniversary of my return to this amazing company, and I am incredibly proud of everything we've accomplished in that short time. Having reinvigorated the company culture, embraced technology that is transforming our company, and harnessed the power of the cross-country brand, we've demonstrated our ability to meet our clients' needs and have once again exceeded guidance for revenue and profitability. Our success is made possible by the exceptional cross-country team and our talented professionals who work tirelessly and passionately to deliver on our mission of providing the most clinically excellent healthcare professionals to the bedside while adhering to our core values. Throughout 2020, we moved diligently and purposefully to execute on our turnaround strategy by realigning and optimizing our teams, investing in revenue-producing capacity, reducing overhead by more than $20 million, permanently closing more than 50 offices, implementing and successfully deploying our new applicant tracking software, or ATFs, across all of Travel Nurse and Allied, as well as launching cross-country marketplace for the local staffing market. Together with the actions we completed in 2019 to streamline our go-to-market strategy, aligning around one brand and the concept of one cross-country, I feel confident saying we have successfully completed the turnaround for cross-country. And as we move into 2021, we continue to expand our vision of one, with one purpose to deliver exceptional clinical professionals and serving as one partner to our clients with a flexible, comprehensive suite of solutions. Before I speak to our results, I wanted to highlight that in 2020, we also continue to expand our environmental, social, and governance initiatives. With a 35-year history, we are proud of our commitment to diversity, equality, and inclusion, and in 2020, More than three-quarters of our internal workforce was female, and approximately one-third were from historically underrepresented groups. In addition, our newest board member, Dr. Janice Nevin, was named as one of modern healthcare's most 50 influential clinical executives in the United States and was elected to the Board of Trustees of the American Hospital Association. We are thrilled to have her on our team. During the year, we also made further investments in social initiatives, including the sponsorship of a nursing scholarship program through Florida Atlantic University, and we were the presenting sponsor of the Leukemia and Lymphoma Society Light the Night Walk. Our commitment to improve the environment and support our communities is reflective of our value-based culture and is in direct alignment with our business strategy. So let me spend a few minutes on our fourth quarter performance. With consolidated revenue of $215.6 million and adjusted EBITDA of $11.5 million, we far exceeded our expectations, as our largest segment, nurse and allied, grew sequentially by 12%. The sequential growth was fueled by a continued acceleration in demand, especially for the travel nurse division, where average weekly orders were up more than 30% relative to the third quarter. The rise in demand was seen nationally with states like Massachusetts, California, New York, Florida, and Texas experiencing the biggest increases. From a specialty perspective, the largest increases have been in med-surg, ICU, and emergency room nurses. As a consequence of the rise in demand in an already tight labor market, our average travel bill rates were up nearly 10% relative to the third quarter. The sequential rise in the bill rates is a function of the increases in pay rates required to attract the thousands of healthcare professionals needed by our clients, as the average travel pay rate was up approximately 17%. As we discussed on prior calls, it has been our philosophy throughout the pandemic to be flexible and work collaboratively with our clients, making recommendations on adjusting bill rates both up and down as necessary to deliver the critical healthcare professionals needed. In general, this has resulted in gross margins on COVID-19 assignments to be below our consolidated average. In addition to the strong growth in the travel nurse business, both our local and travel allied businesses were up in the high single to low double digit range, with most of the increase attributable to growth in the number of billable hours. Revenues for physician staffing continue to experience an impact from COVID-19 and were essentially flat sequentially with a modest increase in the number of hours for advanced practice specialties. Within physician staffing, revenue from advanced practices remains up year over year and is offset by the declines in other physician specialties such as anesthesiology and primary care. From an MSP perspective, Spend-under management rose sequentially to a run rate of more than $500 million. Additionally, our capture rate at MSPs increased to 71% as we focused on ensuring we could deliver the critical staff to the clients with the highest needs. Along with solid execution on fulfillment and delivery, we continued on our path of digital innovation with the expansion of our new ATS to our entire travel business for both nurse and allied, as well as the deployment of our proprietary tool cross-country marketplace to all of our local markets. And we are already starting to see positive results. For example, our recruiters with between one and three years of tenure have experienced a 36% increase in the number of travelers on assignment in the fourth quarter alone. And we expect to see continued productivity improvements, especially with the ramp of new employees. As a result of continued strong demand, as well as our proven ability to execute and our new advanced cloud-based ATS platform, we invested throughout the fourth quarter in additional revenue generating capacity. As we look out to 2021 and beyond, our strategic IT roadmap continues to take shape, and we are proceeding with further investments across our enterprise. The next phase of our digital transformation will further enhance the functionality for both our marketplace tool and the ATS, as well as replace our middle office payroll and billing system and ultimately deploy these new tools across our local per diem business. With speed being essential to both our healthcare clients and professionals, we believe these investments will best position the company for growth in both revenue and profitability through better operational execution, enhanced employee productivity, and a world-class client and candidate experience. Looking ahead, we expect that COVID-19 will continue to have a mixed impact on our business, with rapid changes possible in both demand and bill rates. Demand, especially for travel orders, rose steadily throughout the fourth quarter, peaking in mid-December. As hospitalizations for COVID cases have declined following a peak in early 2021, and with vaccinations rolling out in larger numbers, we have seen orders for COVID-related clinicians decline as well. Though it's difficult to predict the timing for the decline for COVID-related assignments throughout 2021, we expect to see ongoing needs related to the pandemic, such as vaccine administration and the resumption of elective and the restart for in-classroom learning for our education business. For the first quarter, we expect revenue to be between $280 and $295 million, representing the single largest revenue quarter in our company's history. And while that is certainly an achievement worth noting, we are cognizant that it is partially driven by sequentially higher bill rates related to COVID assignments that will likely trend down throughout 2021. I am very encouraged by the fact we are also seeing volume increases in billable hours and the number of professionals on assignment, as well as a growing number of first-time professionals further validating that cross-country brand is again resonating as the go-to company in our industry for healthcare professionals who seek a partner they can rely on and trust to find their next job. Our performance and ability to adapt throughout the pandemic in many ways has reinforced our value proposition in the market for offering flexible, rapid, and cost-effective means for delivering critical care to millions of Americans across thousands of facilities. This was confirmed recently with five of our cross-country businesses being recognized with multiple Best of Staffing Awards for superior customer service for both our professionals and our clients. And just before I turn the call over to Bill, I would just like to share how incredibly proud I am of our entire organization as they have worked tirelessly to deliver exceptional results for our clients, candidates, and shareholders. Their ability to innovate and embrace change has made our organization more agile and to operate more smoothly and effectively. I strongly believe that we are on a positive trajectory and we have the right team and the right vision of one purpose, one partner, one cross-country. I am also so appreciative of the unwavering commitment of our healthcare professionals to serve on the front line of the pandemic. Their dedication and that of the thousands of professionals across the nation led to staffing industry analysts recently announcing the person of the year for 2021 is the travel nurse. To our travelers and the thousands of professionals we work with, we thank you. So now let me turn the call over to Bill to walk us through the results in more detail. Bill?