Cross Country Healthcare, Inc.

Welcome to Cross Country Healthcare's earnings conference call for the first quarter 2024. 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 prepared remarks, I will open the lines for questions. I would now like to turn the call over to Josh Vogel, Cross Country Healthcare's Vice President of Investor Relations. Thank you, and please go ahead, sir.

Thank you, and good afternoon, everyone. I'm joined today by our President and Chief Executive Officer, John Martins, as well as Bill Burns, our Chief Financial Officer, and Mark Hoog, Hoog President of Delivery. Today's call will include a discussion of our financial results for the first quarter of 2024, as well as our outlook for the second quarter. A copy of our earnings press release is available on our website at crosscountry.com. Please note that certain statements made on this call may constitute forward-looking statements. These statements reflect the company's 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 2023 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 those 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 when normalized numbers pertain to our most recent acquisitions as though the results were included or excluded from the periods presented. With that, I will now turn the call over to our Chief Executive Officer, John Martins. Thanks, Josh, and thank you everyone for joining us this afternoon.

As you can see in today's press release, our first quarter 2024 revenue and adjusted EBITDA were in line with expectations. I am pleased that our team continued to perform well in this difficult environment as demand for travel assignments softened further since the end of last year. And while the market for nurse and allied remains challenging, our focus is on growth opportunities across all of our portfolio, including our locums, education, home care staffing, search, and recruitment process outsourcing businesses. With our pipeline for new business and continued investments in technology, as well as our strong balance sheet, I believe that Cross Country is well positioned for future growth. Looking more closely at our travel business, while demand is down across the market in the high double digits since we exited 2023, our weekly production is only down in the mid to high single digits, indicating our ability to execute. Open order rates for travel have been fairly stable for several quarters, although average bill rates continue to decline as we blend down towards the current market rates. Accordingly, travel rates in the first quarter were down roughly 2% sequentially and are expected to decline in the low single digits for the next couple of quarters as the market finds its floor. Similar to travel, our local or per diem business has faced market headwinds. In the first quarter, we saw a double-digit sequential decline in volume and a mid to high single-digit decline in rates. We are focused on expanding our local services deeper into non-acute care settings, including within our own offerings. The local business remains a key part of our value proposition, and we will continue to offer these services in the markets where it makes sense based on client needs and opportunities. Shifting gears, we continue to see strong performance in several of our other lines of business. Position staffing, for example, reported first quarter revenue up double digits year over year. Driving this was a combination of higher billable days and revenue per day filled, tied to a growing mix of higher bill rate specialties. Contribution income increased both year over year and sequentially. and as a percent of revenue, was up more than 250 basis points, reflecting the improved mix and our efforts to proactively manage costs. Our home care business was up mid-single digits, both sequentially and year-over-year in the first quarter, on the heels of the recent wins and program implementations that we highlighted on the February call. I'm pleased to note that this division now staffs over 1,700 FTEs, of high single digits year over year. We believe that this business is poised for robust growth in 2024. Lastly, our education business continued to perform well, up low double digits sequentially. This business continued to expand nationwide as we are now in more than 20 states. I'd like to take a moment to talk about what we are seeing in the market. And more importantly, what we are doing to remain competitive while also being mindful of preserving shareholder value and profitability. It is clear that health systems have reduced their reliance on continued leave. Yet there remain structural staffing shortages and high turnover within these settings. Accordingly, we believe that a stronger travel environment could emerge sometime in the back half of this year. Having said that, given the current market headwinds, we have taken actions to better align our core structure to the demand environment. As of today, our US headcount is now down more than 20% since the beginning of the year. While these decisions are never easy, I am confident that we have sufficient capacity to capitalize when the market rebounds. It's also important to note that part of the catalyst behind these reductions is the fact that we've been able to further leverage our operations in India, which will yield millions of dollars in annualized cost savings. Additionally, we expect to drive further efficiencies company-wide by leveraging our technology, such as artificial intelligence and robotic process automation. Lastly, we will see additional savings as the remainder of our legacy clients are migrated onto Intellify, our vendor-neutral technology platform. Looking forward, we will continue to make targeted investments in technology and businesses that serve to enhance our competitive positioning and operational excellence. As we discussed on our last earnings call, the line between MSP and VMS continues to blur as clients seemingly want to have the best of both worlds. This is where IntelliFi has become a critical component of our value proposition, since it can be deployed both as utilized as both a VMS and MST. Overall, we continue to see strong interest in the market today for this technology, and we are confident that IntelliFi's value proposition will drive additional business opportunities across country. In fact, we are excited to share that yet another IntelliFi client was signed last month. Now, turning to our outlook for the second quarter, given the current demand backdrop and travel, we anticipate that second quarter revenue will be between $330 and $340 million, with adjusted EBITDA coming in at $10 to $15 million. Our goal remains to achieve a high single-digit adjusted EBITDA margin. And as we navigate the headwinds from the pullback in nurse and allied demand, We expect to see mid single digit adjusted even margins near term while maintaining capacity when the market rebounds. We remain confident in our ability to capture market share by leveraging both our leading client and candidate facing technologies, as well as our expertise in delivering high quality clinical and non-clinical professionals. Coupled with our diversified platform that includes locums, home care, and education, we expect to emerge a stronger, more agile, and profitable organization once the current travel market pressures dissipate. We're also focused on putting our healthy balance sheet to work through ongoing strategic technology investments, share repurchases, and potential M&A. On the M&A front in particular, our goal has not changed. We look to close on several accretive acquisitions that we believe will further diversify our platform, enhance our value proposition, and improve our margin profile. In closing, I am encouraged by our prospects for growth and improved profitability. As we execute our strategy as a tech-enabled workforce solutions provider, we are seeing strong momentum in many of our business lines outside of travel. and we continue to execute on our initiatives across the organization. I am impressed by the dedication and hard work of all of our employees, and I am very proud to announce that we were recently named as one of Newsweek's greatest workplaces for diversity in 2024. A recognition like this is a testament to our workplace culture and the reason why we have such a deep pool of talent that has made Crush Country They are employer destination of choice. I want to thank all of our employees and our healthcare professionals for your continued hard work and contributions, as well as our shareholders for believing in the company. With that, let me turn the call over to Bill.