Cross Country Healthcare, Inc.

afternoon, everyone. Welcome to Cross Country Healthcare's earnings conference call for the second 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 the 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 Krug, Group President of Delivery. Today's call will include a discussion of our financial results for the second quarter of 2024, as well as our outlook for the third 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 US 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 would now like to 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 second quarter 2024 revenue and adjusted EBITDA were near the high end of our guidance ranges. reflecting our continued ability to execute in what remains a challenging environment for coordinators and allies. Specific to travel, we have started to see some positive signs in the market. After troughing at the end of the first quarter, travel demand has been steadily rising for the last couple of months, and today is up more than 20% relative to the start of the second quarter. This increase in orders has been fueled in part by a bounce back in the markets, as well as the impact from recent MST wins that are starting to ramp. As a result, we are also starting to see weekly production improve. And though that will have a minimal impact on our third quarter, we believe that we are nearing an inflection point to begin regrowing our professionals on assignment as we enter the fourth quarter. With our sales pipeline remaining robust, we anticipate sequential revenue growth in the fourth quarter. We also continue to see strong momentum across the rest of our portfolio, notably in locums, education, and home care. Coupled with our strong balance sheet, I believe that cross-country is very well positioned for long-term, sustained, profitable growth. Bill will get into the numbers in a few minutes, but I'd like to take a moment to comment on our second quarter results. Travel revenue was on track with expectations for both rates and volumes. And as expected, our actual average bill rates declined modestly as we continue to blend down towards current market rates on open orders. Similar to the recent increase in demand, we've also seen a modest improvement in our open order rates. From a bill pay spread perspective, we remain in a very competitive environment for talent. And though open order rates are up slightly, lodging subsidies and insurance costs are continuing to pressure our margins. Regardless, we will remain competitive on both bill rates and pay rates to preserve our market share and ensure our clients have clinicians at the bedside. Turning to physician staffing, we once again delivered a strong top line, reporting a record $48 million in revenue for a single quarter, which was up 7% over the prior year and 3% sequentially. Contribution income also increased both year-over-year and sequentially. reflecting the improved mix and proactive cost management. Our home care business was up double digits year-over-year and mid-single-digit sequentially, driven in part by recent wins and program implementations that we've highlighted on prior calls. Since acquiring the business in 2021, we have doubled the number of PACE programs nationwide, while more than tripling the number of locations we serve. And as a result, we will continue to make investments in this business. Lastly, our education business continued to perform well, in line with expectations. Revenue was up modestly year over year in the second quarter, though down sequentially through the start of the summer vacation in June. We continue to believe this business can sustain organic growth as we expand our client base and geographical footprint. Shifting gears, I want to give an update on our cost actions. As noted in our last call, we are focused on remaining competitive while being mindful of preserving shareholder value and profitability. Accordingly, over the last 18 months, we have been proactively adjusting our cost structure to align with the demand environment. In 2024, we've reduced our U.S. headcount by more than 20%, with a portion of these reductions made possible by expanding our operations in India. Today, we believe we have the right level of capacity in place to fuel organic growth as market conditions improve. Though we've been very focused on driving costs out of the business, we continue to invest heavily in technology. The most impactful of these investments remains our client-facing workforce solutions platform, Intellify. Whether clients are managing their labor through VMS, MSP, or multiple programs across their enterprises, We're navigating per diem shifts, coordinating internal flow pools, arranging locum tenens placements. Intellify is streamlining their processes, saving them time and resources. As I like to say, we are never done investing in technology, and this is certainly the case with Intellify. We are focused on continually enhancing the platform with the latest features and functionality, including AI and predictive analytics. And we are collaborating with our clients to tailor solutions to meet their specific needs, showcasing the flexibility and agility that this technology brings to them. Since its launch nearly two years ago, Intellify has gained critical mass and wide adoption. We now have more than 40 clients across 500 facilities with more than 5,500 active users. Intellify also continues to fuel our pipeline with opportunities in various stages of the sales cycle. I'm pleased to announce that we have two new awards in contracting with a combined estimated annual spend under management of $70 million. While both programs will utilize Intellify, it's worth noting that one is a VMS program and the other is an MST, which is reflective of the more balanced demand environment we see in the market today. I'm also excited to announce that we have our first fast-paced subscription with a third party who is utilizing our IntelliFi technology for the delivery of their services. Additionally, I'm happy with the speed of execution and implementation from the team on all of our current programs in flight that we have highlighted last quarter. Now, turning to our outlook. Given that the travel demand backdrop that persisted through much of the second quarter, as well as the normal seasonal impact in our education business from the summer break, we anticipate that third quarter revenue will be between $305 and $315 million, with adjusted EBITDA coming in at $10 to $13 million. While our goal remains to achieve a high single-digit adjusted EBITDA margin, We still expect mid-single digits in the near term, while ensuring we have sufficient capacity in place to grow once the travel market reflects. We believe we can expand our market share by leveraging client and candidate-facing technologies, as well as our expertise in delivering high-quality clinical and non-clinical professions. We also envision a strong runway of growth for our other lines of business. notably locums, home care, and education. And of course, we are focused on putting our strong balance sheet to work. We have a comprehensive capital allocation strategy that emphasizes a balanced approach, including investing in key areas for growth, particularly in technology, as well as executing share repurchases. We bought back almost 1 million shares in the second quarter, bringing the total to 5 million shares repurchased since August of 2022. Additionally, we are actively exploring M&A opportunities that can help further diversify our business, complement existing lines of business, and augment our technological capabilities, all of which can enhance our value proposition and improve our margin profile. In closing, I am encouraged by the recent trends in travel, and I believe that the market is nearing an inflection. Coupled with the impact from recent wins and the momentum in many of our other lines of business, we have a solid foundation in place for long-term growth and improved profitability. None of this is possible without our dedicated employees. I want to thank all of you for your hard work. Last quarter, we won several Most Loved Workplace Awards, and it humbles me that we have such a deep pool of talent that has made cross-country their employer destination of choice. I also want to thank all of our healthcare professionals for your continued hard work and contributions. as well as our shareholders who believe in the company. With that, let me turn the call over to Bill.