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spk01: before am I hearing that right and would you say that's mainly because what you're seeing with respect to patient volumes with respect to nurses retiring nurses trying to move away from the acute setting what would be the driver of that if that is true well I think what we're saying is we're actually going to see volume growth quarter over quarter into second quarter and right I
spk03: And AJ, I think if your question is about the rates, so you're right. I think that the rates, we called out what we're expecting for Q2 in that kind of high single-digit, I'll call it, range. And as the rates are coming down, it does take time, especially in travel with longer-term assignments, right? These are 13-week assignments. So the impact is not as significant in the second quarter, but we're still projecting them to come down. So I'd say if you were to seasonalizes throughout the year. Probably the third quarter is where we'll see the larger sequential drop and then a smaller drop in the fourth quarter, but all within the range we called out, that low double-digit kind of sequential declines into the balance of the year. So it's really about the sequencing and the timing of when the rates come down, and it's a function of whether the assignments that have the higher bill rates are canceling and or being replaced at new bill rates. So The bill rate on open orders is down. We have seen that already begin, but the rate at which it's bleeding into the revenue stream because of how it trends off, it takes a little bit more time for that to be seen.
spk01: Okay. And to the extent that you're a little more positive on the placement going into the second quarter, is that being driven by patient volumes or nurses at the facility level stepping back or what?
spk02: No, you know, look, it is demand that is, when we look at it, as we just, you know, mentioned, it's truly the deferred healthcare. It's surgeries coming back online. It is, you know, the fundamental shortages of clinicians. You know, there was a study at the end of last year where 83% of healthcare executives said they expect long-term shortages for clinicians. And so it's really the fundamental shortages is what's driving this demand and driving replacements.
spk01: Okay, I also had to ask if they could give us a little bit of an update on where fill rates are versus what you saw exiting the year versus now.
spk03: Sorry, AJ, could you repeat that question there?
spk01: Yeah, sorry. Any update on where you're at with respect to fill rates as you exited the first quarter compared to where you were in the fourth quarter, perhaps, or? some other metrics, are you filling a greater percentage of your open orders, or is it about the same as what you saw in the fourth quarter?
spk02: You know, I would say there are so many orders in the fourth quarter. When you look at fill rates, it's really not about fill rates as it is about filling the orders we need to fill to have growth. So we look at fill rates when we look at our MSPs and our exclusive orders that we need to fill because we have an obligation to our clients. But in Travel Nurse, because of the number of orders we have in Travel Nurse and Allied, it's hard to look at the overall fill rate because there's just too many orders. We can have high sequential growth and exponential growth on less orders than you would think we would need. We don't need 40,000, 50,000 orders to grow exponentially.
spk03: And AJ, I think I'd just give one more piece of data that might help you understand the sequential growth. We grew sequentially throughout the quarter. So our Travel is on assignment, continued to grow each and every month of the quarter. So we exit the quarter higher than we came into the first quarter. So that helps give the uplift into the second quarter. We're coming in stronger just because of the level of production that we had through the first quarter.
spk01: Okay, and just a final question. Any updated thoughts on capital deployment, deal pipeline, areas you might be interested in pursuing M&A?
spk02: Yeah, you know what, we're sticking very closely to our strategic plans on M&A. You know, we've said before, we're looking at, again, locums-type companies, allied-type companies, local staffing-type companies, technology-type companies. But we really take a very disciplined approach to M&A, making sure that it's a strategic fit and that it will be decretive to our businesses. But, you know, there's plenty of opportunities out there, and we'll be looking at those opportunities to really reinforce cross-country and our offerings.
spk01: Okay, great. Thanks a lot.
spk00: Our next question comes from Toby Sommer from Tuis Securities. Toby, your line is open.
spk04: Hey, good afternoon. This is Jasper Bibbon for Toby. I want to follow up on MSP fill rates. As the market starts to level off from an order perspective, Are you seeing recruiters able to capture more of that wallet share internally?
spk02: Hey, Jasper. This is John. We can, and it's incremental, but really what we do is and what the beauty about the MSP is we can go up or down to have higher capture rate as we need, but right now what we do is with our partner network that we use, our supplier network, we actually have them fill part of the needs. And what we do with our excess capacity is we're able to utilize that to bring in new clients and new MSPs. So at a certain point, yes, if we needed to, we could ratchet up our fill rate or our capture rate. But at this point, we want to keep it at that 70% that we're at so that the excess capacity we could utilize to bring in more clients.
spk04: Thanks. And then I was just hoping you could speak to how you're managing customer relationships as the hospitals are saying, you know, reducing the usage of contract labor from a mixed perspective is going to be a priority for them in the second half of the year.
spk02: Sure. Well, that seems to be a great opportunity to have Dan White, our new chief commercial officer, give a little comment on that.
spk05: Well, thanks, John. I really appreciate it. And, Josh, thanks for the question. Before I get into the answer, let me just first start by saying that now is a really exciting time to be here at Cross Country. You know, as we talked about in our prepared remarks, we've had, you know, a beautiful transformation of our delivery capability, which shows in all of these terrific results that we're achieving. And anybody who knows me very well realizes that my word is really everything to me, so that when I give my word to a client or a prospect about how we're going to perform, I have 100% confidence that we have best-in-class delivery, and that's truly table stakes for us now. But when I think about my expertise here, it really starts with transforming our client-facing teams and a focus on customer obsession. So one of the reasons I chose to join John and the team here is because of the way we serve our customers and our clinicians and how we help them through all of these very difficult times. You know, I've known John for a long time. I'm getting to know these team members here really well. And all of us share a focus on the customer in the very same way. So, you know, for example, partially answering your question, some of the things we heard at the Becker's conference last week were, you know, customers are looking for partners that are digital first, transparent, analytics and performance driven. focused on culture and other aspects that are going to help them with their whole workforce challenge. And for me, that company today is cross-country. So when I think about our client needs and the diversity of solutions that we have, I believe that we're ready to help them solve those problems.
spk04: No, that's great. Last question for me, I was hoping you could provide a bit more color on cash flow dynamics as revenue starts to come off that one Q peak. I mean, by my math, receivables are more than 70% of your enterprise value, which should give you some options from a capital deployment perspective.
spk03: Yeah, Jasper, it's a good point. I mean, look, as you know, our working capital model is, obviously, we're a payroll-driven company, so it really all is on the receivable side. So as revenue starts to level off and start to see sequential declines, we do anticipate seeing some significant cash flow generation with cash from operations. The second quarter being the hardest one to predict right now simply because we go into the quarter with revenue down somewhat, but we also start making some pretty large estimated tax payments for the first time. So I called out in my prepared remarks, we have a $40 million estimated tax payment. So that's That will be the first quarter we've ever had a cash tax payment of that magnitude, given the success of the company over the last two years. We've burned through our NOLs. And so that's going to hit us in Q2. But as we move through the back half of the year, as we also said in the prepared remarks, we do expect very positive cash flows to be coming off as the receivables start to wind their way down. And that will be largely off of the rate decline that we're talking about, because we do anticipate the volume will still be there, but if rates – don't decline as we anticipate, then the cash flow generation may not be as significant as what we call out. But the opportunity is if you just did simple math and said, okay, a 60-day ESO, you had $789 million of revenue in the first quarter, and we're saying something north of 500, you can pick your number. But that delta from those two numbers, and you kind of do the math and you say, okay, what's roughly two-thirds of that going to come in as cash flow? So it's a substantial amount of cash to be collected. I will say that I don't have any concerns around our portfolio. We're very active with our clients. We're working very closely with them. So from that perspective, you know, it all seems like it's going to come in, you know, as expected.
spk04: Thanks for taking the questions, guys. I'll take the rest offline. All right.
spk00: Just as a reminder, if you would like to ask a question, please dial star 1, unmute your phone, and record your name clearly. Our last question in queue comes from Bill Sutherland from the Benchmark Company. Bill, your line is open.
spk06: Thank you. Hey, everybody. So maybe give the mic back to Dan for a second because I'd just like to hear a little bit about kind of the size of your MSP operation at this point and kind of what the marketplace looks like as far as gaining new deals. Is it going to be mostly having to take share or is there a fair amount of greenfields still out there?
spk05: Well, first of all, I appreciate the question and nice to hear your voice again, Bill. I think in general, I'll go back to the opening remarks around the business run rate right now is a little north of $2 billion in terms of our spend under management run rate. And so what's nice about that is that the number of customers we have that don't have some of the services that we already deliver is a fairly significant percentage. So we can sell into the base that we already have that know and love and trust our brand and grow simply from there. On top of that, I would say there's at least 20%, 25% of the market that doesn't use any sort of MSP or VMS today, maybe more. And so there are certainly areas of opportunity for us to grow and help customers learn that they need to use programs like this. I think the pandemic really helped them understand that efficiencies of technology, process improvement, you know, augmenting their internal teams with expertise outside their organization really can help speed and value to the health system. Of course, there's opportunity always to gain share and grow from other people's share, but I don't think that's necessary here for us to achieve the kind of numbers that we're really trying to achieve, which really makes us a growth company. At the end of the day, that's why I'm here.
spk06: Understood. Thanks for that. And then... Bill, what's the rough size of education business right now, and kind of where are you focusing the growth in that sector?
spk03: Sorry, was that a question to myself? This is Bill. I'll answer it. I mean, look, the business is, because of the summer break, it's hard to give you, I can't just take the first quarter and annualize. You have to recognize that there's a couple of months in there where they don't have the revenue, but You know, they're doing probably between $15 and $20 million during the quarters when schools are in session, probably a little bit north, towards the north end of that, so rapidly growing. I'd say the growth in that area has really been predominantly in charter schools, although increasingly servicing public school districts and increasingly serving schools outside of the state of California as well. So California was the first market we really were in, and again, it goes back to the acquisition we did in 2015, but we've steadily increased expanded the school base outside of that state. And we offer a full range of services, everything from the clinical side to helping with the non-clinical, special education, and the like.
spk02: And Bill, this is John Martins. What I'd add to that is we're seeing tremendous demand in this education business. and we're making heavy investments in there. Because when we look at what's happening in education, it runs a very similar parallel to what happened in healthcare over the last two years with the nursing shortage and the clinician shortage. These educators have been fatigued and burned out and are seeing a high level of quits. And the reason why is they had online learning, then they had to go into schools, had to have PPE, had to really, a lot of teachers decided to leave the field. And right now there is a crisis of shortages of teachers, and they're saying which will be around for the next several years. So we think it's an opportunity for us to really help schools ramp up with their staffing, and we're making heavy investments to capture that market.
spk03: And it was one of the reasons behind the acquisition we completed in December for the cloud-based search tool that allows students educators and clinicians to find the jobs and for schools to, you know, be able to access a large candidate database for direct hire.
spk06: So you're really going to, you're really going to kind of push on the educator placements as well as the healthcare.
spk02: Um, yeah, as we, I'm sorry to get you off as we diversify our business. Yes. Uh, education and healthcare are the two main places that we'll be investing in.
spk06: And then, and then just one last one to get back to the core business. Um, so as the demand for contractors inevitably, uh, Do you think one offset will be increasing fill rate? Because right now, you know, the demand is so far in excess of supply, right? Will that be part of the equalizer for you guys?
spk02: Yeah, it will definitely be part of the equalizer to increase fill rate. But, you know, what also I think that's going to help us really is, We're investing, we talk a lot about how we invested internally, about producer productivity, but what we haven't spoken about a lot is how we're externally, we're investing externally in technologies to help our clinicians and our clients. And a matter of fact, we just launched in January our self-service job portal for clinicians. And what this self-service portal does is it helps professionals are able to view transparent pay packages They're able to submit interest in specific assignments. They're able to self-on-board to a submission rate. They're able to view their pay rates. They're able to update their credentials. And we see that there's a lot of promise that we'll be able to add this supply, bringing it, making it easier for us to have fill rates and have higher fill rates. And the success we've seen from this self-service portal in this slough launch that we had from the first quarter to today, We have several thousand daily active users who are logging in each day, and those daily users are looking at over 50,000 and having 50,000 job searches per week. And those daily users are having job interest submits of over 1,000 per day. So when we look at how we're going to increase the fill rate, it will be doing so through a self-service technology And we are just in the early innings of this technology, and we're so excited to be able to continue to invest in this technology, which will really change fundamentally how cross-country does business.
spk06: Do the other major firms have this self-service kind of portal?
spk02: You know, some do and some don't. And I'll tell you, how we're investing and what we're doing, whatever's out there, we'll be leapfrogging them in the next couple quarters, I'm sure. Okay.
spk06: Thanks a lot for the comments, and nice job on the quarter. Thank you, Bill.
spk00: Ladies and gentlemen, this does conclude the Q&A period. I will now turn it back over to John Martins for closing remarks.
spk02: Thank you, Madison. It's clear that we are a very different company from three years ago, and it's clear that we are a very different company than from just 18 months ago. As we look to the future, we're excited about our market opportunity, and I believe we are well positioned for sustained and profitable growth. Lastly, I want to recognize and celebrate National Nurses Month, and I personally want to thank every nurse out there for your hard work and dedication. Thank you, everyone, and I look forward to our next earnings call.
spk00: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.
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