Cross Country Healthcare, Inc.

Good afternoon, everyone. Welcome to the Cross Country Healthcare's Earnings Conference Call for the fourth quarter and full year 2021. Please be advised that this call is being recorded and a replay of this webcast will be available on the company's website. Details for accessing the audio replay can be found in the company's earnings release issued this afternoon. At the conclusion of the prepared remarks, I will open the lines for questions. A replay of this call will also be available through March 9th, 2022 and can be accessed either on the company's website or by calling 800-391-9853 in the United States, or 203-369-3269 outside the United States, and by entering the passcode 2022. At the conclusion of the prepared remarks, I will open the lines for questions. I would now like to turn the call over to Mr. Bill Burns, Cross Country Health Care's Chief Financial Officer. Thank you, and please go ahead, sir.

Thank you, and good afternoon, everyone. I'm joined today by our co-founder and chief executive officer, Kevin Clark, as well as our incoming CEO, John Martins, currently serving as Group President of Delivery and Buffy White, Group President of Workforce Solutions. Today's call will include a discussion of our financial results for the fourth quarter and full year of 2021, as well as our outlook for the first quarter of 2022. A copy of our earnings press release is available on our website at crosscountryhealthcare.com. Please note that certain statements made in this call may constitute forward-looking statements. These statements reflect the company's current beliefs based upon information currently available to it. 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 2020 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC. The company does not intend to update guidance or any of its forward-looking statements prior to the next earnings release. Additionally, we reference non-GAAP financial measures, such as adjusted EBITDA or 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 U.S. GAAP. More information related to these non-GAAP financial measures is contained in our press release. Also during this call, we may refer to pro forma or normalized numbers pertaining to our most recent acquisitions as though the results were included or excluded from periods presented. 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. As we reported today, our fourth quarter and full year results represented yet another historic milestone for both revenue and profitability. Fourth quarter revenue was nearly triple the prior year, and the full year was more than double. This performance was made possible by our amazing team of individuals and their unwavering commitment to our customers, clinicians, and professionals. For me, 2021 marks the end of three years since my return to this great company, and I am so incredibly proud of all that we have accomplished. It is clear to me that we are fundamentally a stronger, more financially sound company with a proven ability to execute and deliver across many fronts. And before I discuss the business, I'd like to just spend a moment on some of the ways we have transformed Cross Country into a growth company and with a double-digit adjusted EBITDA margin. When reimagining our go-to-market strategy, we truly left no stone unturned, from consolidating more than 20 disparate brands to significantly investing in hiring and training more than 1,000 employees to making significant investments in technologies. Our digital transformation has been bold, significantly improving our productivity and magnifying the return on investment from expanding our workforce. Throughout everything, I am especially proud that we have remained committed to our core values for integrity, quality, and clinical excellence. Turning to the market, we continue to see heightened demand for our services, driven by growing needs across virtually every specialty, including operating room, emergency, pediatrics, labor and delivery, and med-surg, which are not necessarily related to COVID. In addition to the nationwide patient demand for healthcare services, our order volume is also the result of turnover and shortages in core staff at many of our clients. As the results of our recent nursing survey completed in partnership with Florida Atlantic University's Christine E. Lynn College of Nursing revealed, 37% of nurses identified as being burned out and overworked. Since the outset of the pandemic, we have taken actions to assist clinicians to cope with these stresses, including providing access to a clinical social worker and establishing a hotline, which has received more than 20,000 calls since the start of the pandemic. Our compassionate approach to our professionals has strengthened our ability to attract and retain professionals, which has in turn helped fuel our historic growth. In the fourth quarter alone, we expanded the number of professionals on assignment by nearly 100% over the prior year, with more than two-thirds due solely to organic growth, thereby significantly improving our operating leverage. As we've discussed on previous calls, The historic demand combined with an incredibly tight labor market has resulted in rising wages and bill rates. Throughout the pandemic, though, cross-country has acted ethically and responsibly by being as transparent as possible and by being sensitive to the pressures placed on our clients. One of the ways we have sought to help our clients is by staffing the most critical position at lower margins, absorbing as much of the cost increase as possible. And as a result, our consolidated gross margin remains more than 200 basis points below pre-pandemic levels. Many of our clients have shared their deep appreciation for CrossCountry's ability to deliver clinicians and for providing industry insights and market analytics to guide their decisions on the rates necessary to attract clinicians. In a recent note from an executive at one of our largest MSPs, He highlighted that CrossCountry has been a true partner, helping them navigate complex challenges over the last several years. They especially appreciate our real-time market intelligence to facilitate critical decisions. I've said this before, but CrossCountry is committed to doing what is right for our nation, our clients, and the patients they treat, which we believe ultimately benefits our shareholders. We believe strongly that our partnership will be remembered long after the pandemic is over. By leading with a data-driven approach, our team of client-facing professionals are able to credibly provide market insights and develop solutions that address each client's unique needs and challenges. As a result, health systems are increasingly turning to cross-country as their trusted partner, and our pipeline for new business is growing rapidly. Throughout 2021, we continued to expand our services with existing clients as well as winning a significant number of new direct staff and customers. In addition, we also signed a record number of recruitment process outsourcing, or RPO, contracts this year, which augments our clients' hiring capabilities and helps them build up their core staff. And I'm thrilled to see our momentum continue to accelerate, having already won a couple managed service programs in just the first few weeks of the new year. Managed service programs, or MSPs, remain a significant part of our business, representing nearly 50% of our consolidated revenue. As of the fourth quarter, annualized spend under management was more than $1.5 billion, and our capture rate was over 70%, remaining well above pre-COVID levels. Let me next touch on our technology initiatives. Over the last three years, we have significantly ratcheted up tech investments as we work to build one of the most innovative talent platforms in our industry. Our projects have been extensive and far-reaching, impacting not only our employees but our candidates and our clients as well. The applicant tracking system that we deployed late last year across the travel business continues to deliver incremental productivity gains with a growing headcount on assignment per producer. We are making solid progress on deploying this technology to our other businesses. From a candidate-facing perspective, our proprietary tool marketplace continues to evolve with new features and functionality being deployed to improve the candidate experience across the entire engagement lifecycle. I am excited about our tech roadmap for the coming year and look forward to announcing even more robust tools for use by both clients and candidates. And given the success of our technology investments, we are doubling our CapEx budget for 2022. Another exciting technology development for cross-country has been the acquisition of Selected, completed in mid-December. Selected is a subscription-based SaaS model for schools to recruit permanent educators and special ed professionals. As teachers retire or leave the classroom in record numbers amidst the pandemic, schools face a severe shortage and millions of students lack certified teachers in the classroom. We believe this acquisition complements our ability to solve the workforce challenges faced by school systems across the country and will accelerate the growth potential for our education business. Turning to the businesses, our largest segment of nurse and allied again saw strong sequential and year-over-year revenue growth, with all lines of business reporting an increase in billable hours. The biggest driver was once again travel nurse and allied, with billable hours rising 46% sequentially. As expected, average bill rates rose approximately 30% from the third quarter, driven by the continued high demand for clinical positions, as well as the spike in cases from the Omicron variant. With tens of thousands of openings continuing into the new year, we anticipate average bill rates will rise modestly in the first quarter, though we believe rates will likely moderate throughout 2022. As we've called out before, Compensation costs are the primary determinant in bill rates, and with persistent industry-wide shortages, those costs are not expected to decline rapidly in the near term. We were also very pleased with the stronger-than-expected results from our recent acquisition of Cross-Country Workforce Solutions Group, reporting 15% sequential growth and on a pro-pharma basis, growing by 59% over the prior year. This business allows us to deliver critical support to some of the neediest populations by delivering professionals to the home, working with some of the nation's largest PACE providers, and contributing to nationwide health equity. That brings me to our outlook. Our first quarter guidance points to another record quarter in the company's history, with both sequential and year-over-year growth driven by our ability to attract, recruit, and place professionals on assignments. We expect consolidated revenue between $740 and $750 million, representing sequential growth of 16% to 17%. With minimal changes expected in bill rates, the growth is principally driven by continued strong execution and growing the number of professionals on assignment. The biggest driver of the volume growth continues to be travel nurse and allied. where we expect to reach yet another historic milestone for the number of travelers on assignment. From a profitability perspective, we anticipate adjusted EBITDA to be between $80 and $85 million, which represents an adjusted EBITDA margin of 11%. As we look beyond the first quarter, we expect to continue growing our market share by increasing the number of professionals on assignment. despite potential headwinds from changing bill rates or demand from certain specialties such as respiratory therapists. Though we don't give full-year guidance, we are operating at a much higher level, and we believe that our investments in people and technology are providing the foundation for full-year revenue growth. Looking ahead, we believe we will exit the year at a run rate that exceeds $2 billion in annualized revenues. and can expect adjusted EBITDA margins to remain in the high single to low double digit range, well above the 3% margin experienced in the fourth quarter of 2018 when I rejoined the company. Just before handing the call over to Bill to take us through the numbers in more detail, I'd like to say a few words. As this will be my last earnings call as CEO, I wanted to thank our shareholders for believing in cross country And I especially wanted to thank the talented team of leaders and professionals across country who have supported and embraced the changes we have made. It has been the honor of my lifetime to return as a CEO of the company I co-founded. And as I transitioned to the chairman of the board, I am thrilled to be leaving the company in John's very capable hands as the next CEO. As many of you know, I've worked with John for many years in my career, and I am confident that under his leadership, we will continue our path of sustained profitable growth. Though I won't be as heavily involved in the day-to-day activities of running Cross Country, I plan to be a very active chairman. Along with the rest of the board, we will continue to be focused on ensuring the strategic direction for this company and giving John the support that he needs to execute on our strategic vision. With that, let me turn the call over to Bill.

Thanks, Kevin. Once again, cross-country has achieved a historic level of performance, significantly exceeding our initial guidance for the quarter, driven by our strong execution across all lines of business. While the market dynamics of a tight labor supply amidst high demand has increased average fill rates, it's been our continued ability to organically grow the number of professionals on assignment across all of our businesses that has contributed the most to our performance. As a result, fourth quarter consolidated revenue was $640.7 million, representing a 71% sequential increase and a nearly 200% increase over the prior year. Turning to the segments, Nurse and Ally reported $620.4 million of revenue, driven by double-digit sequential growth from all major businesses, including travel, local, and WSG. As Kevin has already mentioned, the strongest growth was seen by Travel Nurse and Ally, where rates continued to rise as expected, with most of the growth coming from more than doubling the number of professionals on travel assignments. As we've discussed on previous calls, we have seen continued double-digit productivity gains for our producers, coupled with continued investments in new producers necessary to meet the rising demand. Looking ahead, we anticipate a further sequential increase in average travel rates in the low to mid-single digits, primarily as a result of mixed and regional spikes in demand related to the Omicron variant. In general, we anticipate rates will soften throughout 2022, starting in the second quarter, though with continued strong demand and persistent labor shortages, rates may remain well above pre-COVID rates for the foreseeable future. Also driving the sequential growth of the segment was the performance from our local business. Local was on a positive trajectory coming into the quarter and far surpassed our expectations by reporting strong double-digit growth, both sequentially and over the prior year, of nearly 30%. This performance was driven by a combination of higher rates and an increase in billable hours and improved mix. Our education business also reported stronger than expected results, with high double-digit growth. Education was significantly impacted by COVID and has been recovering steadily since the pandemic first appeared. I'm pleased to share that this business has returned to pre-COVID levels, and we are expecting continued strong growth as we integrate our most recent acquisition of Selected. Looking ahead, we see robust demand for our education business as professionals leave their permanent positions and record numbers due in part to burnout and fatigue over COVID. Physician staffing, our only other segment, also reported stronger than expected results, growing 23% over the prior year and 8% sequentially, bucking the usual seasonal trend for this business. We're pleased to see this business perform so well with the growth coming from an increase in days filled, which has surpassed the volume we saw prior to the pandemic. Relative to the prior year, the growth has been non-COVID specialty, such as primary care and hospitalists, obstetrics, and anesthesia. Gross profit for the quarter was $147.1 million, representing a gross margin of 23%, which was up 65 basis points sequentially and down 225 basis points from the prior year. Despite the increase in bill rates, gross margin continues to be impacted by higher compensation costs, driven by crisis needs and an overall tight labor market. It's worth noting that despite the margin decline, gross profit was up more than $92 million over the prior year, driven by the volume growth we've seen across our business. Looking ahead, gross margin will likely decline in the first quarter, driven by the annual payroll tax reset, as well as higher compensation costs pertaining to the spike in cases coming into the new year, not covered by increases in bill rates. Total SG&A was $65.8 million for the quarter, up 24% sequentially and 47% over the prior year. Excluding the impact from WSG, SG&A was up approximately 28% over the prior year. The primary driver of the year-over-year increase is related to the investments in revenue producers and variable compensation associated with the record performance of the company. Since the start of the year, we've steadily invested in our organization, expanding our total headcount by approximately 45 percent, with more than 90 percent of the increase supporting the rise in the number of professionals on assignment. With demand remaining strong, we expect to continue making investments in revenue producers to fuel continued organic revenue growth in the coming quarters. There are several items worth calling out on the income statement. Below operating income, interest expense was $2.8 million, primarily attributable to the carrying cost of our $175 million subordinated term loan. As a reminder, we initially entered the debt agreement in connection with the acquisition of WSG and subsequently increased the facility by $75 million to fund the increase in net working capital as we grow the business. And finally, our tax provision was a net credit due to discrete $24 million from the release of the valuation allowance on deferred tax assets and net operating losses. Excluding the impact from discrete items, our effective tax rate for the quarter was approximately 28%. From a balance sheet perspective, we ended the quarter with $1 million in cash and $184 million in debt outstanding, including $175 million in support-dated term loan and $9 million in borrowings under our ADL facilities. As of December 31st, the company was able to access the full line under our ABL, which we believe sufficient to fund continued organic growth. From a cash flow perspective, we had a use of cash from operations of $73 million due to the investment in networking capital associated with a $264 million in sequential revenue growth. Our day sales outstanding was 58 days, down three days over the prior quarter, and flat over the prior year. Capital expenditures were $2.3 million for the quarter, bringing the full year spend to $7 million. It's worth noting that only about half of our total IT project spend qualifies for capitalization under GAAP. In 2021, for example, we spent more than $9 million on IT projects to develop, enhance, and deploy the tools that are shaping our digital future. This brings me to our outlook. We expect consolidated revenue to be between $740 and $750 million, representing a 125 to 128% increase over the prior year, and between 16 and 17% sequentially. The majority of the sequential growth is expected to come from an increase in the number of professionals on assignment, with billable hours anticipated to rise more than 14%. We are guiding to a gross margin of between 21.5 and 22%, which represents a 100 to 150 basis point decline on a sequential basis. Overall, gross margin remains below pre-COVID levels, primarily as a result of margins realized on rapid response orders related to COVID and an incredibly tight labor market. As a result of the historic organic growth, our adjusted EBITDA for the quarter is expected to be between $80 and $85 million, reflecting a margin of 11 percent. And our adjusted earnings per share range is $1.38 to $1.48. Also assumed in this guidance are depreciation and amortization of $2.7 million, interest expense of $3.5 million, stock-based compensation expense of $1.6 million, and an effective tax rate of 30 percent and 37.7 million shares outstanding. This concludes our prepared remarks, and at this point, we'd like to open the line up for questions. Operator?

Absolutely. If you would like to ask a question at this time, please press star 1 on your phone and be sure your line is unmuted. Again, to ask a question, please press star 1. Our first question comes from AJ Rice with Credit Suisse. Go ahead, please. Your line is open.

Sure. Thanks. Hi, everybody. Best wishes to Kevin and John and the new roles and all. So let me just a couple different things here. I understand what you're doing with the gross margin and working with the customers that have these super high bill rates in this tight environment. Do you think as your bill rate expectations come down over the course of this year, you'll see that gross margin increase? recover or is any of this in your mind a permanent tightening of the bill pay spread?

Yeah. Hey, AJ, and thanks for the kind wishes. You know, we do think that we will see gross margin recover as the crisis staffing eases across our client base. And, you know, we, you know, are kind of forecasting, you know, call it, you know, a a bill rate assumption that is north of where we were pre-COVID, but is, you know, somewhere between 30% and 35%, you know, lower than where we are today. But over that period of time, we think that will be one factor that will improve our gross margin as we kind of get back to kind of historical norms. The other thing I want to point out is that we have all lines of business are growing and growing dynamically. So we have other lines of business that have higher margin, and we think that will help blend our margin into a better place. Bill?

Yeah, AJ, thanks for the question. So the gross margin, I think, over time will certainly start to come back as bill rates come down. I don't think it'll move in perfect harmony where bill rates and pay rates are going to align exactly that way. I think there's a possibility bill rates could come down a little bit faster than some of the compensation rates, but to Kevin's point, I think the mix improvement we expect to continue seeing from growth like in our education business, which is doing fantastic at this moment, back to its double-digit growth rate. So they've historically had a margin over 30%, so we expect that will continue. Growth in other lines like our RPO business is also seeing fantastic growth with high double-digit margins. So the long term is, yes, the margins we do anticipate, even within the travel business, will start to inch forward, though it's a little hard to see exactly how that plays out in the second and third quarters this year.

Okay. I just might ask you mentioned market share and I guess I would wonder on the one hand obviously I'm sure everyone's scrambling to meet the demand that's out there on the other hand you've improved your sourcing of candidates so do you believe across the board you've picked up market share are you having to skew more of your placements to your MSP accounts and some of the non MSP Is there an opening for other competitors to come in? And do you think that's permanent? Just give us some flavor for what's happening in the competitive landscape and how you think you've fared in the midst of all this.

Well, look, you know, we don't have visibility across our entire industry. There's so many private companies out there. You know, we do have visibility with the one other publicly traded competitor that we have. And if you look at our growth rate in the fourth quarter of 197%, you can compare that to theirs of 116%. So I'd say vis-a-vis that particular peer, we're growing at a faster clip. So we believe market share is improving. We've had a significant year, 2021, in terms of customer wins with national accounts, direct contracts, and MSPs. As we called out in our comments earlier, we now have over $1.5 billion in MSP under management. We think, look, the digital transformation, all of the steps that we've put in place across people, processes, and technology are accelerating our ability to win market share versus our competition. Maybe, John, you want to add some thoughts there as well.

Yeah, sure. Thank you, Kevin. And thank you, AJ, for the nice comments previously. But what I'd say in terms of how we are really expanding our capacity is a really important part of our story. So as Kevin mentioned, with all our technology investments that we've done over the last several years, we've really seen a larger productivity gain in our producers, which has given us more capacity. And that's only one part of the story. The other part of the story is we really revamped our partner network or our sub-vendor or supplier partner network that also helps us fill our MSPs. So we've added capacity internally with our own producers, and we've added capacity with our partner network and really engaging with strategic partnerships with these organizations to help fill our MSPs' needs. And so what this allows us to do is to have excess capacity beyond filling our MSPs, but to go out there and to use that capacity to win new accounts in the market.

Okay, great. Thanks so much.

Our next question comes from Toby Summer with Truist Securities. Go ahead, please. Your line is open.

Thanks. What revenue level do you think is required to sustain high single-digit or low double-digit EBITDA margin?

Hey, Toby. It's Bill. Well, as Kevin mentioned in his prepared remarks, we think we exit this year somewhere in that $2 billion run rate, so call it $500 million a quarter. And at that level of revenue, we think the high single, low double-digit margins are sustainable for what we've been seeing. And so that anticipates declines in bill rates, volume, continued growth on other parts of the business across education, across locums and our local business. So that's how we envision that playing out. That level of revenue at that run rate would support us being a 9% to call it 11% EBITDA company.

From that level in the fourth quarter, no one has perfect visibility. This dynamic seems like an understatement to describe the market trends and changes. But at this point, would you consider that to be a base level from which you could grow, or are you just kind of looking out into that fourth quarter and saying, hey, we can imagine this happening based on anticipated trends?

Yeah, we certainly do model out past the fourth quarter of this year, but it is hard to glimpse exactly how that's going to play out. I think there'll be certain lines of business that will continue growth. I think regardless of what bill rates do from that point forward, we would continue to expect volume growth across all the lines, including travel. Yeah, at those bill rates, they could potentially, on the travel side, see a small, another mid-single, low double-digit kind of decline from that point forward, but I think overall the marketplace is supporting the bill rate. The labor supply issues are just not going away, and so we anticipate that the compensation cost will remain, which is why we're doing all that we can to kind of support our clients with a comprehensive suite of solutions and helping them build up their core staff as well so they can reduce reliance on contingent.

Okay. If you look at your strategic positioning in the MSP market, it Are there opportunities for you to broaden the offering through partnerships to include sort of more than clinical professionals that would, I don't know, differentiate yourself versus other MSP providers?

Well, that's a great question, Toby. And I'll start and I'll have Buffy White also respond. But, you know, look, we... Our MSPs are growing across these large healthcare system enterprises, which now are much more complex than a single hospital, as you know. It covers everything from outpatient and ambulatory to even home healthcare. So we think there's a lot of opportunities across the spectrum of what our customer footprint is. And, you know, it's... In terms of total strategic positioning around non-clinical, we're seeing these large healthcare systems ask for our help and support around a variety of non-clinical jobs. For example, environmental, cafeteria, financial, project management in general. In the past, we have structurally looked at partnerships to help provide that non-clinical opportunity, but we believe that this is you know, an area of opportunity for cross-country. But, Buffy, maybe you want to expand on that, what you're seeing in the market.

Yeah, certainly, Kevin. And, Toby, thanks for the question. We're seeing an acceleration of conversations in this area, and our solutions are accelerating with them. So, first of all, clients are really focused on better planning, better forecasting for what their talent requirements are going to be, tighter protocols in place for when they use talent and what ways, right? We're in a unique position where we can get in there and help them look at their utilization models, help them with predictive analytics on what are they going to need in the future, and partner with them based upon market intel and diagnostics to kind of take a look at how they can help manage their total talent better, not just their clinical talent, not just their staffing talent, but their total talent across the whole house within the system. We're seeing a lot of accelerated conversations, and we do believe we're uniquely positioned not just by way of the different lines of business and staffing offerings that we have in addition to our PO search and advisory solutions, but also by this broader supplier network that John spoke of that we can bring as part of our solutions to them. And cross-selling within our MSPs is really critical across all those different aspects or all the different specialties even beyond clinical. As a matter of fact, in one of our large MSPs, just in the last month, I've signed six amendments that brings in additional offerings to them well beyond the clinical staffing that we've done historically. So I would say you're going to see a lot more of this moving forward.

Perfect. I'll just ask one other question. I'll get back in the queue. You've done a little bit of M&A, but it doesn't seem like you're spending large sums of money. What is the, and you're accumulating a lot of kind of latent cash in terms of receivables, so what does the optimal capital structure look like for the firm over time? Could you sort of define the M&A strategy that you're deploying to get there? Because it seems like they're, I'd love to find sort of the unifying thread among the activity that you've already had.

Yeah, Toby, it's a great question. Look, there's such opportunity. We have such a strong balance sheet to the points that you just made. You know, we targeted tuck-in acquisitions last year. We completed two tuck-in acquisitions. You know, Workforce Solutions Group positioned us in a whole new segment, you know, catering to senior and elder care, to pay centers and federally qualified health clinics. and then our subscription-based SAS business for education, our ability to electrify our education division by helping school systems find candidates. So we're very excited about what we did last year, but the question remains, what are we going to do going forward? And as we've called out before, the segments that we'd like to scale up, so to speak, are certainly our locums business, certainly areas like our education business, and now our home health care business. These are segments that are attractive to us. We look at technology, as we just pointed out. So we're in a very, very good position. I always like to say that when I came back to Cross Country three years ago, it was to transform the company. And if there's a transformational opportunity out there, we continue to seek that. We just haven't found the right one. But maybe to the financing side, Phil, I'll turn to you.

So Toby, as you can probably see, we're just about little north of one times levered right now. So we've got a fair amount of firepower, especially on the trailing 12-month EBITDA number we've got out there. I think as we look out at 2022, we'll certainly be revisiting what is the right capital debt structure for us right now. As you know, we have a subordinated debt piece that's there. It's a wonderful partner. We're happy to be paired up with them. And of course, we have our ABL sitting atop that. But I think looking ahead, we want to make sure that we're getting at the most liquidity that we have to be able to fund those acquisitions. But, you know, barring finding that next opportunity for acquisition, obviously servicing the debt would be an opportunity for us. And then, of course, continuing the tech investments that we talked about. Okay. Thank you.

Our next question comes from Kevin Fishbeck with Bank of America. Go ahead, please. Your line is open.

Hi, guys. This is actually Courtney Fonduce on for Kevin. Thanks for taking our question. I guess one of the first things is to really double down on this MSP strategy. Thanks for the color. I think you last told us in like Q2 that you had 80 to 85 customer relationships. Can you just give an update on where that number is trending today?

Sure. You know, we have approximately 100 facilities that represent that $1.5 billion MSP spend. As we called out in our prepared remarks earlier, you know, we've had, you know, two successful new customer acquisition, you know, opportunities so far this year. We have a very, very robust pipeline. You know, we have become in the last three years, once again, the trusted market leader in the marketplace. We've had, you know, near perfect client retention during this pandemic because we've done all the right things. We've stood by our clients with sensible advice around pricing, compensation, with market analytics and data analysis, all those things, including the fact that our brand is resonating again in the marketplace for nearly 36 years as the market leader in clinical excellence, which is what we've always been known for. But, Buffy, I don't know if you want to add to that at all.

No, I think, I mean, you hit on everything I was going to say. I think a couple of things is the retention is significant over the last two years. So they found that we were the ones that leaned in and we have very strong retention of our MSPs. I think the other thing around, I understand the count is very important, but I also think the expansion within the existing MSPs that we have is very, very important because it means that we have become the trusted advisor for them. They're allowing us to get wider and broader within their healthcare system. And we also count MSPs as a broader system versus individual facilities. So just to kind of call that out a little bit and put it into perspective.

Okay, thanks. That's super helpful. And then I guess one other one on, you know, one of your key operating metrics, it looks like revenue per physician day has been coming down since I think it surpassed, you know, 1.7 K in Q1 of 2021. But this actually looks like it's below where we saw it in, you know, the second half of 2019 and, So is it the mix of specialties that's driving that? And then along that lens, which specialties are lower unit economics?

Hey, Courtney, it's Bill. Maybe I'll just give you some color, and then I'll certainly see if John has anything to add. But it is a function of mix. The revenue per day build is, if you think about it, there's two big, large buckets. There's physicians, and then there's what we call advanced practice specialties, which includes physician assistants, CRNAs, and several other type of advanced specialties that are not truly physicians, but kind of operate like that. They have a different bill rate structure or a different, it's a lower bill rate, but that is also where we've seen the highest demand. So we've seen some of that mix happening, which has brought down the overall average. What's interesting, though, is that in the most recent quarter, the physician side is where we saw the strongest and most robust growth. But, you know, John, any color you want to give on perhaps where we're seeing the volume and demand?

Sure. Hi, Courtney, and thank you, Bill. Yeah, demand is definitely up significantly over last year and pre-pandemic levels. And as Bill was mentioning, position orders right now are up 92% compared to prior year. But our advanced practice orders, and this is where that bill rate comes in, is up 125% compared to prior year. If we look a little deeper, where if we look pre-COVID, physician orders are only up 14% over pre-COVID, but advanced practice are up 87% over pre-COVID. And so really what we're seeing is we're seeing more of this advanced practice orders coming in, and obviously more of our fills are coming in advanced practice, which is creating that lower average days dollars.

Okay, thanks, guys. That makes a lot of sense. And I guess just one last quick follow-up on that. I mean, I feel like generally in the industry, we're hearing about providers trying to decrease the burden on physicians and trying to rely more on, you know, CRNAs and advanced physicians. So do you think this would be like a long-term headwind to pricing? Or do you think it's safe?

You know, it actually, it kind of is twofold, right? Well, yes, with the physicians' burnouts and retirements, we are seeing more advanced practitioners coming on board, but we also have seen over the last year a slowdown in elective surgeries that are now coming back on board and a lot of other specialties. So I think as the surgeries start coming back on board, which then will have more demand for radiology, anesthesiology, and pathologists, we'll see those bill rates increase as well. So I think overall, we should see a balance.

Okay. Thanks, guys. Super helpful.

Thank you.

And our last question comes from Brian Tinkulit with Jefferies. Go ahead, please. Your line is open.

Hey, good afternoon and congrats. I guess just a quick question. You know, everyone's been focused on the demand side, but as we think about supply, are there any KPIs that you can share with us that gives you confidence in your ability to sustain supply levels and the attractiveness of cross-country versus some of the competitors that are in the markets?

Yeah, I mean, look, Brian, I think we've done a great job over the past three years in advancing the organization's brand and how it resonates in the marketplace, as I mentioned earlier. But also important is we now use very sophisticated candidate acquisition strategies that include things like leveraging data mining with artificial intelligence to do job matching to candidates. includes things like programmatic advertising where we use very specific geo-targeted algorithms to attract the exact experience and specialty for each of our customers. We've also, as we've also talked about, expanded significantly the number of revenue producers. We have, you know, triple probably the number of revenue producers that we had just a couple years ago. And then all of the employee productivity tools that we've called out, for example, our cloud-based applicant tracking software system where we've seen significant increase in the book of businesses of each of our recruiters. The other thing I want to just point out, too, is really interesting to us. We have 41% of the nurses and other healthcare clinicians that we're doing business with today are traveling or working for cross-country for the very first time. And that's really significant. Part of that is this fundamental shift towards the gig economy. Part of it is some of the comments I mentioned already in terms of the way we're resonating in the marketplace. But we think that's a you know, a fundamentally huge endorsement that we're doing things right across country. You know, we like to think about, you know, for example, you know, we've improved things including the speed at which a candidate can find a job. So we can have a job seeker come into our digital ecosystem. We have thousands of healthcare clinicians using, for example, Marketplace, and in a matter of minutes they can look at a shift, they can submit their credentials, and they can be interviewed the same day. That's a significant improvement in the ability for us to accelerate the conversion of the candidate flow that we have into working. And, you know, if you look at cross-country today, I mean, you know, we have to get that story across in a bigger way. You know, the company currently has a fairly low P.E. multiple relative to, you know, peers and others And we think that's partly that we need to prove quarter in and quarter out that we're a sustained growth company and that we can continue to have the type of results that we've been reporting on the last 12 to 18 months on a consistent basis going forward. And finally, I'll just kind of wrap and just say, look, one of the things that's driving a lot of the supply dynamics with our customers is certainly this pandemic hangover. The pandemic hangover is gonna lead to significant utilization in the healthcare system this year as people catch up with things like elective care and preventative medicine. People haven't gone to their doctors for fear of COVID. And these large healthcare systems equally have to prepare for the next pandemic. So they're making investments in people, and technology. They're investing in digital tools such as telehealth. And consumers are changing the way they embrace care, leaning into more low-cost sites of care, for example, with virtual means or retail clinics, etc., So there's, you know, a lot going on that's going to, you know, drive supply. Final comment is just I read something interesting the other day. 31% of healthcare clinicians can work remotely. So if you think about, you know, nurses, you can have triage nurses work locally. You can have medical writers work locally, utilization review. So, you know, the healthcare delivery system is changing. It's accommodating. There's big demand out there, as we know, and cross-country is at the forefront of attracting that supply.

Got it. And then last question for me, you know, we talked about here about home health and your expansion there. Is there anything that you need to do to strategize the growth there or any kind of infrastructure that you need to build to gain traction in the home health space?

Yeah, I mean, that's a great question. And the answer is yes. With a 59% year-over-year growth rate, You know, that is just such a magnificent opportunity for cross country. We are the market leader in providing senior and elder care to pay centers and federally qualified health clinics around the country. And we leverage the same model, this, you know, MSP model in that business. We refer to it as, you know, managed service outsource agreements, but where we provide all those services providing a variety of healthcare clinicians to brick-and-mortar locations, but then we follow those patients back to their home, and we have 1,700 caregivers that provide care into the home. So to absorb that type of opportunity, we are going to bring a lot of the technology that we've brought to the travel business and to other parts of our business to workforce solutions groups. And to the extent we haven't said it enough, we are doubling down around our investment in technology this year. We spent an order of magnitude about $9 million in 2021 around capital expenditure projects around IT and a product organization. We hope to double that spend this year because it will help accelerate our business. Awesome. Thank you, guys.

Ladies and gentlemen, this does conclude the Q&A period. I'll now turn it back over to Kevin Clark for closing remarks.

Yes, well, thank you very much. And I'd like to thank our shareholders, our healthcare clinicians, our providers, our professionals, our clients, our employees, our board for their passion, compassion, as we continue to deliver great results to not just our shareholders, but to the bedside and to the classrooms. So thank you all. We look forward to reporting next quarter on our continued success.