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spk02: And we really don't want to be too much higher than that because what we do is we take our excess supply and bring it to potential new clients to actually feed our pipeline of MSPs. But if we needed to, it's always a lever we could pull. But right now with our pipeline of MSPs that we have, there's really no reason we believe that we'll continue to really accelerate our wins in MSPs. The other exciting thing is, as we mentioned with the launch of Intellify, We're also going to be able now to enter into the VMS vendor neutral space, which we have never participated before. And with that, that is a multi-billion dollar space where we offer clients currently or prior to Intellify just an MSP accountable model, which many clients do want that service. but there is a segment of clients out there, again, in a multibillion-dollar segment, that want a vendor-choice program or a vendor-neutral program. And for us allowing to now have that offering, we feel that it will help continue to diversify our business, and those, of course, are on a higher-margin business. So we're very excited about that new offering and really being able to take some market share in that vendor-neutral space.
spk04: That makes sense. Thank you. With respect to that, In terms of just transferring your own book from third-party vendor to your own platform, what is the – can you quantify the cost savings associated with that and the time period over which the transition might take place?
spk05: Yeah, Toby, it's Bill. I guess I'll just give you the context on the cost. I mean, for us – You can imagine that the spend under management for today attracts a fee for us, right? Because almost all the technology that's used there is third party. So that cost is anywhere from 75 bits to a 1%. So round numbers, you're talking north of 10 million in annualized savings on a normalized basis. And I think the deployment or the rollout schedule, I don't know, Dan, if you want to speak to that a little bit.
spk03: Yeah. Hi, Toby. How are you? We currently have 10 clients in implementation that are expected to go live throughout Q3, and a similar number already scheduled for Q4, which includes some of these new signings. And so we feel really good about the ability to not only convert some, but add some new ones and build the capacity to actually grow faster than that as we get into next year. We're building some new muscles in that regard. And so I feel really good about where we are right now. I mean, some of that has to do with the fact that we've been able to continue to add really strong, experienced talent to our already energized team. And for me, that goes all the way from sort of sales through you know, client management, implementation, ongoing optimization of our accounts. So I'm just feeling really good about our ability to continue to deliver value to our customers.
spk05: And Toby, I thought we were going to just throw it with you. There's a couple factors that dictate the speed at which we could convert active MSPs. One has to do with the level of wins and the number of new accounts that we have coming on. Obviously, those accounts will want to make sure that they get deployed on the technology side. you know, more rapidly than we convert some of the old ones, so there's not as much disruption. But we are moving with haste to, you know, move our programs over to this technology, but some will also be, you know, the clients, they're mixing their needs.
spk02: Yeah, and this is John, Toby. I think, you know, realistically, over a 12- to 18-month period, you'll see us, you know, go and wean off other technologies. But again, we're in, we want to be thoughtful about how we go and do this. We want to make sure we take care of the clients first and foremost and the patients first. to make sure they have the staff there. And as we develop and build our software, it's a very iterative process. And so some hospitals are more complex and will go on a little slower, and some hospitals a little bit easier that will go a little faster. So it'll be an overtime period that we continue to do. And as we keep, as Bill noted, I think it's important, as we keep winning new MSPs and accelerate VAT, as well as moving into the vendor-neutral space and winning clients there, those clients will also move on quicker, which will slow us down a little bit to bring on the older clients.
spk04: Thanks. Last question for me, and I'll get back in the queue. The multiple stock has come under pressure, even as results have surged. And we're hearing that private company M&A transactions, relative to your own, might still be... you know, pretty respectable and in some cases higher. Are you receiving any sort of outreach and any inquiries into interested parties in acquiring the company and the business?
spk02: No, no, no. where we think we're well undervalued as most people out there. And I think if you look where the analysts and you guys have us at our target prices, we're well below where those are. But we're continuing to focus on showing people what we're doing. We're making the right moves and really continuing to look forward to keeping growing the business. And if we look at where we were pre-COVID as an organization, we were a $30 million EBITDA company. Our trailing 12 months is nearly $300 million. And as we've stated, as we look to exit the era at north of $500 million revenue run rate in a high single, low double-digit EBITDA, you look at 2023, that puts us north of $2 billion and pick your number between $160 million to $240 million of EBITDA, we think the story's out there and our stock will get lifted fairly quickly as people see that we've moved from the pandemic to the endemic and that this company has been turned around from every aspect of that business. When Kevin Clark came back three and a half years ago, We started taking and looking at cross-country, which had a good foundation, but we needed to shore up those foundations. And we shored up those foundations starting with people, process, and technology and culture. And we hit every one of those marks. And if you look at what we've done over the last three years, we came through and we've proven and we've delivered that. We've turned, starting from the inside out of this company, we've turned it around and shored up the foundation. Now, as we launch cross-country, an accelerated, dynamic MSP sales team and workforce solutions team that are winning deals and will continue to win deals. Couple that with our external-facing technology of Intellify for our clients and our internal portal, which we launched this year for a greater, more efficient candidate experience. We see there's no reason to be talking to anybody other than us where the shareholders will have greater value as we keep continuously delivering shareable value.
spk01: And does that conclude your questions?
spk04: It does, yes.
spk01: Thank you. And just a reminder, if you would like to ask a question, please press star followed by 1. Our next question is from Bill Sutherland with The Benchmark Company. You may go ahead.
spk06: Hello, everybody. John, or Bill. Discuss your capital priorities going forward, you know, particularly given the fact that the cash is going to turn positive and probably very strongly for the foreseeable future.
spk04: Yeah. Hey, Billy.
spk05: We both can answer here. I think, first of all, it's a topic of conversation, you know, across country more so than it ever has been, predominantly because we have more options. I think, you know, you look back to cross country pre the turnaround and, you know, we were generating, you know, $20, $30 million of cash in a year, it's a whole other ballgame when you're looking at north of $100 million in positive cash flows on a continuing basis. So options are more available to us now. I think we've always been opportunistic at looking at what returns the most value, but I think a more dedicated strategy around that is what we're working on right this minute. I'd say that the predominant use of cash will continue to be funded growth. So that's both organic, the investments in products like Intellify. I wouldn't be surprised if in the future we continue to ramp our spend on technology that we've already announced for this year. And then, of course, the opportunity for M&A to tuck in to build scale in some of our other businesses that have higher margins is certainly a play for us. You know, servicing debt, we did just pay down $50 million optional on our term loan because, you know, the interest cost on that is pretty significant. I would not say that the next best thing is to continue to pay down debt. There's some amount of debt that's healthy for a company like Cross Country to have on its books. And so share repurchases are certainly something that's in our line of sight that we're evaluating internally. And I think that that'll be something that we'll look to do in the second half. If I fast forward the clock and we were sitting on all the cash collections that we know are coming in, I think you would see more concerted effort on the share repurchase side.
spk06: Great. I just want a little clarification, John. When you were discussing the puts and takes on bill rates and pay rates, looking out six months and how that could move the gross margin a little up or down, I just want to understand a little more clearly what you're thinking in terms of those lead and lags, I guess, is better put than puts and takes.
spk02: Sure. So as we start looking to go from the crisis rate assignments that we had, where we were working on a little bit lower margin on some of those rates, on some of those assignments to the more normal travel assignments, we anticipate that we'll be able to pick up some margin. Now, what we were saying in our prepared remarks is during the third quarter, we've had some mid-assignment rate changes where an assignment is had changed over from a crisis assignment to the hospital didn't need the crisis clinician and really had a normal travel rate assignment. And in that case, when those clinicians turn over and agree to take the travel rate assignment, we try to keep those clinicians as whole as we can and take even a lower margin. So we would anticipate have a little bit of a lower margin hit, have a margin hit in the third quarter because we want to retain the clinicians and keep the hospitals whole, making sure that we have care at the bedside from the hospitals. And then as we go into the fourth quarter and those mid-assignment rates, once we have a new assignment, we're able to then increase the gross margin. The other opportunity we have in our margin is as we look at the whole portfolio of our businesses. So as we start going and rolling out our vendor-neutral platform, that's a much higher margin business that will also increase margins overall for the business. And then as we look at our home health business, that's a higher margin business, and that's growing at a double-digit growth rate. Our education business, which was interesting in Q2, we were up over 20% in revenue for our education business, and that's up against 2018 and 2019 pre-COVID numbers. So not only are we back to the revenue of pre-COVID in education, but we're actually growing fairly rapidly overall. The education segment in this country has experienced the same severe shortages and crisis that we saw in healthcare. as during the pandemic, many of the healthcare professionals and education professionals and teachers had the same fatigue and burnout because they had distance learning and had to go into schools with not enough PPE as we had in healthcare. So we're seeing a great crisis and education professional shortage that is not anticipated to be alleviated for the next several years. So we have invested heavily in that business to also help grow that business, but that will also help us To increase our margins, which will help our overall portfolio margins. But to answer your question, yes, we do expect in fourth quarter to see normalized, increased margins for the normalized travel assignments.
spk06: And then remind me, what's the size of the education platform now? I would think that would be one where bolt-ons would be very attractive given the dynamics you just discussed.
spk05: You're spot on, Bill. You know, the education business for us, aside from the summer months where you lose that revenue stream, but it's on track for, you know, like a $60 million run rate business for us on an annual basis, and that's excluding the summer months. So it's definitely a place that we are looking at intensely for opportunities to find the right play to have the tuck-ins. It is a heavily diversified market, so, you know, some of the companies are a bit smaller out there that we're looking at, but You know, there's opportunities there. Okay. Thanks, everybody. Thank you.
spk01: Thank you. And again, as a reminder, if you'd like to ask a question, please press star followed by one. Our next question is from Toby Summer with Truist Securities. You may go ahead.
spk04: Thanks. I was wondering if you could describe the complexion of new – travel nurse applicants that kind of aren't in your database and you think are new to the market. We do get quits from the BLS, but that's kind of imprecise and directional, and your data would be perhaps a little bit more timely.
spk05: Yeah, Toby, I mean, are you asking when you say the Demographics like, you know, the age brackets, I mean, two-thirds are millennials or younger. We've seen an eight-fold increase in Gen Z applicants. But we've had increases across all age spectrum, the entire age spectrum, but I'm not sure if that answers the question you were looking for.
spk04: And I missed part of the – it's a few minutes ago, but – I heard you talk about the balance sheet and cash flow. Do you intend to stick with the current kind of capital structure, or are there ways that that can be optimized given the improved margins and cash flow outlook?
spk05: Yeah, absolutely, Toby. I think we are evaluating the debt structure right now. Today we're in an ABL and we have a subordinated term loan. We're of a size and scale now that it opens up more options for us, whether that is looking at the pro rata market or looking at term loan Bs. So there's opportunities to put in a more permanent, flexible, scalable piece of debt on the business. So that's something that's on the line of sight. I do think the ABL for us has fit historically, given the peaks and valleys that we've seen in our business, and it scales with the size of the receivables, but at some point, you know, an ABL gets outstripped by your ability to borrow off your multiple of your EBITDA, your profitability. So it's definitely on the table right now. The markets, you know, I'm sure you're aware the markets have not been the most open from the debt capital markets debt perspective. Seems to be that things are easing a bit. So as we inch into the back half, I think that that'll be something we'll be evaluating more closely.
spk04: Okay. Thank you very much for entertaining the additional questions.
spk05: You're welcome. Thanks, Toby.
spk01: Thank you. And again, as a reminder, if you would like to ask a question, please press star followed by one. One moment to see if there's any further questions. There are no further questions. Ladies and gentlemen, this does conclude the Q&A period. I'll now turn it back over to John Martins for closing remarks.
spk02: Before signing off, I'd like to take a moment to recognize the life and achievements of one of our board members, Darryl Friedman, who sadly passed in late June. Darryl had been a director and an audit committee member since 2018, as well as a compensation committee member since mid-2020. He was a unique and inspiring soul, a highly recognized entrepreneur and executive, as well as an accomplished triathlete. He will be greatly missed and our thoughts and prayers are with his family during this difficult time. In closing, I'd like to thank everyone for participating in today's call. We look forward to updating you on our progress on the next call.
spk01: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.
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