Q4 2019 Earnings Call
Good evening, ladies and gentlemen, and welcome to the cross country Healthcare earnings Conference call, a fourth quarter and full year of 2019.
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This call is being recorded if you have any objections you may disconnect. At this time I will now turn the call over to Bill Burns Cross country Healthcares Chief Financial Officer. Please go ahead Sir.
[music].
Thank you good afternoon, everyone Im joined today by our President Chief Executive Officer, Ken Clarke, as well as Bobby Vice President of workforce solutions and services and need to build executive Vice President of operations today's call discussion of our financial results for the fourth quarter and full year results for 2019 as well as hurdle for the first quarter of 2012.
A copy of the press release is available at Www Cross country healthcare Dot com.
We began to remind everyone that certain statements made on this call may constitute forward looking statements as noted our press release.
Very concerned actual results.
No no risks uncertainties and other factors.
In the company 2018 annual report on form 10-K, and other quarterly filings on form 10-Q, as well as other from.
The company undertakes no obligation to update.
Statements also comments made on the telecom as far as non-GAAP financial measures such as adjusted EBITDA for adjusted earnings per share such non-GAAP financial measures and provides additional information.
This does to score was superior to measures calculated in accordance with you as.
More information related to these non-GAAP financial measure is contained in our press release with that I'll now turn the call into our President and Chief Executive Officer.
Thank you Bill and thank you to everyone for joining us. This afternoon. This call marks my first full year since having returned across country and I'm incredibly proud of the progress. We have made 2019 was clearly a successful turnaround year for the company as we gain momentum throughout the year we may.
Met or exceeded guidance for all four quarters and thanks to the strong performance, especially in the fourth quarter, we reported modest full year organic revenue growth on a consolidated basis.
None of this would be possible without or more than 1700 employees, who have fostered a cultural change in embraced our core values I am grateful to our outstanding team.
Let me just touch on some of our accomplishments for me. It all starts with our people not only have we hired an aligned the right leadership across the organization, but we have continued to attract top talent from across our industry. The reason we have been successful in this regard it simple it's the culture, we are building across key.
Country that inspires people to want to join our team we give our team the tools and training they need to be successful and we celebrate their success.
Another significant accomplishment has been the consolidation in total refresh to our brand by consolidating for more than 20 disparate brands down to one core brand cross country healthcare, we've strengthened our go to market approach and our better position to deliver the full depth and breadth of our services too.
New clients and professionals alike.
Let me just add that to change has been well received both internally and externally.
Throughout the year it was necessary to make some difficult decisions to reduce costs in order to fund.
Much needed investments in our revenue generating capacity.
Overall, we cut nearly $15 million the majority of which we invested back into the business boosting our revenue producing capacity and other support.
I'm thrilled that how quickly we are seeing the return on that investment.
From a liquidity perspective, we refinanced into a more flexible cost effective $120 million credit facility that scales with our business and from a technology perspective, we successfully implemented the first phase of our new applicant tracking software system to a division within our travel nurse business as.
We previously shared we expect that when fully implemented. These investments will result in improved employee productivity and shorten the ramp up time or new hires.
This new sales of our implementation went very well with minimal disruption to the business and with the software now alive, we expect to gain valuable insights that will inform our efforts to deploy the platform across the rest of the travel nurse business in mid 2020.
I am confident we have selected the right technology partner to provide a scalable platform as one component of our larger technology ecosystem that we expect will drive continued growth across our business.
Of course, our efforts don't stop there we are truly re imagining delivery in the digital age. There are so many exciting technology initiatives underway here at cross country and I'm very pleased to announce the very first of those efforts. Later this month, we will be launching cross country marketplace and on demand.
Dan staffing platform for our per Diem Division.
Marketplace is the first proprietary intellectual property. The company has created an introduced to the market in many years. We're piloting this new application in several of our largest local markets connecting our local health care professionals and hospitals.
One of the goals I stated when I returned to cross country is that we needed to simplify and improve the candidate experience and make it easier and more intuitive for eye health care professionals, who are mostly millennials to connect with their ideal job. We look forward to sharing more about this new offering and other innovations.
As we progressed through 2020.
After a year of driving successful change it's important to celebrate these and many other accomplishments, including the five recent best of staffing Awards. We received from clearly rated for both clients and candidates I think it is a testament to the strength of our brand our market position in the outstanding service.
We deliver every single day.
Next let me spend just a moment discussing the trends we are seeing demand for our services continued to rise throughout the fourth quarter, especially in our travel nurse business, where orders were up 17% sequentially and up more than 50% over the prior year orders related to our.
Managed service program clients or Msps account for a portion of the increase but we continue to see strength in the broader market.
Another good indication that the market remains strong was growth in spend under management from our Msps, which was up 18% over the prior year and 2% sequentially.
As new accounts continue to ramp we saw our capture rate at Msps also increased to 61%.
The increase in the capture rate was due in part to the investments we made throughout the year in revenue producers and equated to about $5 million in revenue during the quarter.
We continue to believe that improving our capture rate remains an opportunity to continue to grow faster than the market.
And lastly, our physician staffing business also reported stronger than expected performance as Dave filled were up 8% compared to our expectations.
Well the market remains strong and we're seeing traction from our investments in 2019, we understand that we must continue to execute and we build upon the early success from this turned around this team will continue to work hard and evolve our strategy to become the leading total talent management provider.
And before I turn the call over to build to walk us through the numbers in more detail I'd like to make a few comments regarding the corona virus.
As widely reported this is a very serious illness with a growing number of people in the United States being inspected our concern is and always will be the safety and protection of our employees healthcare professionals their families and the patients we serve.
With that mine, we have been closely monitoring all reports and guidelines from the CDC and we have opened lines of communication with our employees, including establishing a hotline for their inquiries. Additionally, we have established protocols for employees returning from outside the United States, We're carefully reviewing all non.
Essential corporate travel.
We have also had many conversations with clients regarding both our business continuity plans as well as potential staffing challenges.
Similar to other spikes in flu seasons or labor disruptions, we could see an increase in demand for health care professionals, but at present, there has been little to no impact on our business.
At this point, we are uncertain, how our supply of healthcare professionals may be affected as we continue to navigate through this uncertain an unfortunate circumstance.
Regarding our first quarter guidance well the normal seasonal trend is for revenue to decline sequentially in both nurse and allied as well as physician staffing. We are expecting continued year over year mid single digit consolidated revenue growth I am optimistic about the prospect for continued growth in all.
Our lines of business and expect to continue to drive improved profitability throughout 2020.
We began the year with one brand one vision as one cross country and with that let me hand, the call back over to Bill.
Thanks, Kevin as Kevin mentioned, we exited 2018 very positive trends have exceeded our guidance both revenue and adjusted EBITDA turning to the quarter consolidated revenue was $115.1 million up 7% over the prior year and 3% sequentially.
I know by strong performance in our largest segment nurse and Allied.
Additional driver.
This was a double digit revenue growth experienced by our physician staffing business.
Revenue for personnel it was $191.4 million up 7% from the prior year and up 3% sequentially.
For the prior quarter the primary driver for the year over year growth was an increasing number of that.
Simon.
Additionally, we experienced a 2% increase in the average bill rate driven by favorable price and mix. So our clients continue to be very focused on their contingent makes sense. We are seeing modest increases in certain geographies certain specialties, considering the robust demand.
Our supply pricing remains a focus for us as we enter 2020.
I mentioned, a moment ago, our physician staffing segment had a strong quarter far exceeding expectations revenue for the segment was $20 million, representing a 10% increase over the prior year at a modest sequential decline due mostly to seasonality.
Your growth was due to double digit growth in advanced practice specialty and mid single digit those positions.
Gross profit margin for the quarter was 24.7% representing a 50 basis points declines in the prior year 30 basis point improvement sequentially.
Year decline was primarily driven by a lower bill pay spreads within nurse Allied as average day rates rose by 3% compared to the building increased 2%.
A question improvement was due partially to favorable mix as our education business, which offerings at higher margins through following their celebrate.
Also contributing to the sequential increase was a favorable experienced workers compensation and professional liability.
So as June eight was $45.6 million for the quarter of 1% over the prior year and 3% sequentially. The sequential increase was primarily due to higher employee related expenses as well as professional fees throughout the year. We continue to pursue cost reductions in order to fund investments that could drive organic revenue growth.
The net result was realized savings of approximately $2 million in 2019.
As we look into 2020, we expect to continue identified additional cost saving opportunities.
Realizations automation as well as potential benefits.
Our new applicant tracking system across the rest of the travel business.
Adjusted EBITDA for the quarter was $8.3 million above the high end of our guidance range driven largely by the Overachievement on revenue mentioned earlier.
Below adjusted EBITDA. There are few items to call out we continue to recognize restructuring costs, primarily associated with severance expenses. In addition, we recognized $1.5 million, but since the refinance of our credit facility earlier in the quarter and final depreciation amortization was $2 million higher stemming from our rebranding efforts from us.
Algae perspective, we ended the quarter $1 million in cash, which was down versus the prior year prior quarter. Since we have moved to an asset based revolving credit facility, which can be redrawn.
Cash from operations was negative during the quarter, principally due to the investment working capital on a sequential growth in the business as well as the timing of at least for payments at year end, our day sales outstanding remain unchanged from the prior quarter at 58 days.
For the full year, we generated cash from operations of $5.5 million, which was lower than the prior year. The drivers included approximately $4.5 million.
Throughout the year that related items, such as the termination of our hedge legal settlements previously reported higher assumption costs as well operating expenses pertaining to the new applicant tracking system.
In addition to time for the year end result in pre funding an estimated $4 million towards 2020 payroll.
Finally, while the DSO improvement year sequential revenue growth results networking capital investment of approximately $3 million.
Second we closed the quarter was $71 million principal outstanding and $19.9 million Undrawn credit.
For 2021st quarter guidance.
Outlook is for revenues between 207 in $212 million, reflecting a your consolidated growth rate.
9%.
This guidance assumes nurse and allied.
Single digit revenue growth.
Physician staffing to support low double digit growth.
Actually the range assumes a normal seasonal decline.
He is on assignment following the holiday season, as well as a normal seasonal decline position SaaS.
Also for the first quarter, we're seeing increased demand for certain such.
As a result and worsening.
Yes, maybe impacting the first quarter between one and $2 million on a related note. We continue to monitor the current Lars situation with our clients professional.
I'm not expecting any impacts for the first quarter.
From a profitability expected gross margin is expected to be between 23.
Which is down sequentially, primarily due to the impact from annual payroll tax reset in our nurse and Allied business.
Adjusted EBITDA is projected to be between four and $5 million, which represents a 25, 52% increase over the prior year and adjusted earnings per share projects. You lost three cents to zero cents also implied in this guidance is $3 million as depreciation amortization expense, excluding approximately 700.
$50000 accelerated amortization due to the rebranding $1 million of interest expense $1 million the stock compensation expense $200000 for income taxes, and a diluted share count was 36.4 million shares. This concludes our prepared remarks at this point I'd like to open up the lines for questions operator.
Operator for you there if you could please open the lines for questions.
Absolutely.
We will now begin the question answer session. If you want to ask a question.
All right.
Please record your name when prompted to Kansas Star in into one moment. Please ask your questions.
At this time, we have three questions in queue.
Our first question.
Coming from Asia.
Or.
Credit Suisse.
Right.
Hi, everybody first I was wondering on your.
And allied business.
When you described those growth trends is there a divergence between what you're saying that the branch business level versus the travel level.
Yes, I mean were seeing kind of.
We're seeing all lines of business are up.
Quarter over quarter year over year. So we're seeing kind of a consistent increase in demand across travel nursing Allied health as well as our local per diem branches and Jay. This is bill just a modest difference.
Travel nurse grew slightly faster both in that mid single digits, just north of five 6%. So travel nurse grew a little bit faster about 8% and the rest of the business was kind of up in that 6%.
Okay.
And then prepared remarks with reference to Cobalts hospitals will ensue.
Look at modest increases to.
Rates due to demand.
Modest increases in pricing I.
I guess I would just quite as I.
I know this has been a topic of discussion for a while now.
Our hospital seeing the tightening to the point where that these increases are now if you think to drive.
Incremental supply into the market or is it still.
We're edging up but we haven't yet sort of hit that tripwire, where we'll see.
A meaningful uptick in the number of nurses that put themselves up for these types of assignments. Yeah. It's a great question, we are seeing some higher bill rates, especially in our kind of premium specialties.
But there is resistance on these health systems, they are pushing back as much as they possibly can.
If you look at the overall macro trends admissions are up 3% nationally there revenues are up 6%.
And.
It's certainly.
Area, where we're partnering with our clients in terms of kind of walking them through the scarcity of supply buffer you might want to add yes, absolutely. Thank you. So I definitely think the conversations are increasing as far as what the.
Tightness in the supply is driving we're having more conversations with healthcare facilities on what the market.
Intelligence is telling us on where market rates are going I think we have made some strides as you can hear on some bill rate increases I think would that can do is potentially impact where nurses want to go versus this influx of nurses into the supply market and also we can maintain.
Nurses within the profession to.
Over time, we've seen some full fleet the progression or the profession and to other industry.
Okay, and maybe one last question I know a.
This is mostly just a lot of speculation at this point, what we talk about the CRADA virus and try to compare that to other examples of either really severe flu seasons or other.
Unusual disease outbreaks.
I do recall that there were times, where the demand spikes very quickly for hospitals wanting to.
Make sure they have adequate staffing and also the will to pay a premium price, but the one thing I Didnt remember was does it affect the supply.
And many significant way to nurses.
The increase rates in step up and take the assignments or or is there a fear.
Traveling in an environment.
Where there's some uncertainty about.
They're going to encounter I'd, just your perspective on that'd be helpful. Yeah, No. So that I mean, it's an outstanding question I think.
The color there as you know if bill rates increase we will definitely I think in our judgment, we will see the supply.
Enter the marketplace Corona is a little different in that it's a fluid situation.
It's just impact the United States. There is a lot of fear at the moment in terms of kind of population health.
But I think we take the all touristic view of our health care professionals.
Nurses doctors Allied health professionals joined us profession.
To take care of sick people and the the professionals that work for US I mean, just in chatter amongst them.
We think are.
Year to serve bucket and if you want to add to that yes, I would agree very fluid situation, but we're already in discussions with many healthcare facilities looking a business continuity plans rapid ramp plans to make sure that we can careful help them care for the patients.
We are in discussions with them on rate considerations and what is going to drive supply in the areas. Most impacted by this especially as our sense is potentially goes up or they are impacted by quarantine. So.
So we are revising that there is going to be potentially some rate impacts, which will allow us to drive supply to them, we're spending a significant amount of time through.
Our definitions, especially our chief clinical officer monitoring the situation.
Everyone informed including our colleagues, our health care professionals as well as our healthcare facilities.
And continue to work through our plans that were ready no matter what phones as Corona virus.
Yeah. So that'd be my last let me just you'd probably to mail. One other is the nurse that would get sent into a environment, where there is an outbreak.
What's happening in Washington state or something or those.
Just a standard registered nurse or do they have to have special trading to go.
Before you send them into that situation any thoughts on that yeah. At this point it depends upon whether we're spending a nurse into replace somebody who potentially has been impacted or where they are seeing their sense is going up.
So the hospital facilities have not been able to define specifically the specialties that they are in need of potentially you'll see respiratory potentially you'll see some.
Some of the E R. But unfortunately, it's a little too early to tell.
Okay, alright, thanks, a lot. Thank you.
Our next question is coming from Jason Plagman Jefferies.
Hey, good afternoon.
Good afternoon.
Just wanted to.
As a follow up on you mentioned, a little bit compression and bill pay spreads in the nurse and Allied segment.
Are you expecting that to persist.
Throughout 2020, or there are signs that bouncing back as you move through the year.
Yes, I mean, it's hard to say.
So so far we see it just as I mentioned earlier in terms of kind of premium rate increases.
Around certain specialties.
We'll see how corona virus impacts bill rates.
Some of arc and.
Discussions with some of our customers in partnership with them we're discussing.
You know crisis rates, and what higher bill rates might need to look at to attract the supply that.
That they'll need to kind of in terms of meet their impact.
Jason This is bill I'll just add that.
Just to clarify the bill pay spreads still expanded a 2% increase on the bill rates at 3% increase on the pay rates still means more gross profit. So we just had margin compression not not gross profit compression as a result of that just to clarify.
Got it.
Thanks and.
And as far as you know the percentage of.
Premium rate assignments, I know you don't want to get in specifics, but it sounds like that's been trend trending higher for the last couple quarters any any color you can provide on trajectory and kind of where we are relative to where that kind of peaked out.
Couple of years ago that would be helpful.
Yeah, I mean, I'll, let bill answer to that in a minute, but I would just say look overall with for example, our MSP spend under management rose by $50 million over the course of the year, 18%.
Our consolidated growth is up 7.1% year over year, we had sequential growth.
No the as Bill pointed out the gross margin is basically flat other than this paid a bill compression.
But I wasn't here two years ago Bill.
As you know, Jason we saw that trend declining I would say that it's probably bottomed out and it's starting to move forward, but theres always a mix component. So just as an example, if you compare our third quarter two our fourth quarter, our third quarter had some favorability from large EMR projects that garner a much higher bill rate that that tapered off so despite.
That that project type EMR business going away in the fourth quarter, we still managed to grow.
Year over year at a nice clip. So it's I guess, we'll always bounce a little bit depending on what the mix of underlying businesses.
Okay. That's helpful. And then last one from me just.
I appreciate the updates on you know you're on the MSP business driving the capture rate higher but can you just comment on.
What you're seeing in as far as marketplace activity for for Hot Health systems looking exploring MSP partnerships are moving in that direction are you seeing.
Are those number of conversations in your pipeline for potential MSP contracts picking up or how's that trending.
I'll start that one Jason in terms of our pipeline. It's solid it is definitely picked up from earlier.
Last year and so we actually are pretty pleased with where a pipeline as I mean, we finished the year.
Onboarding, a number of new contracts, especially in the northeast and southeast a with a number of large systems come aboard and bucket I want to add some color. There I do yes. So we're seeing some nice growth. There I'm also very encouraged by the pipeline I think what we're hearing from clients new clients looking in this area is.
Looking at more of the programs moving from Gen. Two even gen three they're looking for more maturity in client delivery model.
Seeking enhanced services kind of across their continuum.
Theres nothing new stakeholders at the table during these.
Elections, who will be there next provider.
Beyond nursing supply chain, HR finance et cetera. So.
We're really eager to offer the full suite of services inclusive of people processes and technology. The total talent management forward.
That makes up and and that those discussions you're having with us Pfizer. So it sounds like some of those are moving from.
Vendor neutral situation or.
Is it more.
Witching MSP providers or that people.
Adopting a strategic partnership for the first time.
I would say, yes to all of those so we're still seeing what I call. Gen. One which is the first the first to adopt for them of the MSP definitely there is some vendor neutral.
He is out there whether client is now looking at that staffing component being.
Really a potential win for them given the supply constraint and then definitely those looking at Msps and what more can they get from from a different provider and the MSC model is the dominant market model versus CMS.
And as Buffy pointed out our total talent management approach. Our go to market strategy is really working our ability to bring all of our services to customers lets us.
Broaden the set of services that we provide.
Great. Thanks.
Our next question is coming from Jeff Silber BMO capital markets. Please go ahead.
Thanks, So much wanted to start focusing a little bit more long term, Kevin I believe when you came on board.
You talked about targeting I think it was an 8% EBITDA margin target one year into it you've made a lot of progress can you talk about what you need to get there and maybe give us on sort of timeframe. When you think you'll get there. Thanks.
Yeah, So what we called out we implemented a strategic plan with the board and the management team in the second quarter last year, and we kind of walk through a scenario, where we can get to high single digits by the end of 2021.
And I'll get to kind of that seven 8% by 2022.
On a run rate basis, and the way we get there is largely from the capital investment that we're making across our digital transformation and the tools that we are implementing leveraging more automation and efficiency and driving greater employee productivity for example, our revenue producing.
Employees recruiters account managers account managers to the extent that.
We can see the average book of business the number of health care professionals that they manage.
On a daily weekly monthly basis increase because.
They are using technology, let let some work and kind of an innovative modern real time environment, We think will.
The well on our way too.
Getting to those.
You know aspirationally goals of high single digits EBITDA margin over that time period.
And obviously, we also as we pointed out in the script, we took $15 million a cost out we're investing in the front end of the business in terms of revenue producing employees.
We reinvigorated the culture leadership the management team here.
We feel we're a whole new different business than we were 14 months ago when I came in.
The management team has done a spectacular job getting momentum building and getting all lines of business turned around.
One of the things we've also talked about.
But we are very excited about is our M&A process of looking at accretive tuck in strategic opportunities in really principally four to five areas. We'll continue to look at the adjacent lines of business that have higher growth rates and higher gross margins such as Allied health.
Locums and our education and RPL business and will also be looking at technology.
Technology businesses that complement.
The world that we're going into if you look at the hospital the hospital marketplace that trend is towards.
Virtual healthcare I read a report this week that talked about last 10 years for hospital systems was focusing on readmission risk. The next 10 years is focused on preventing admissions and really focusing on how to treat patients.
And treat them right in their home and our ability to be innovative and invest in technology and deliver those type of services that can deliver our talent, where they need to be I think we'll all factor into our ability to drive greater profitability.
Great you actually yes answered my second question before I had a chance to asking about the acquisition, but let me go focus back more near term and started go back the current of Iris, but I'm actually had some clients ask me this.
Given the timing others to and I know, there's a lot but still unknown.
Since it seems to be happening more in the spring time as opposed to the winter do you think it might be a little bit easier to find ourselves where to find health care professionals to handle. This obviously, we don't know what the extremes are going to be but because of the timing might hospitals being able to do this a little bit more on their own using staffing firms.
I don't think so I think we're actually more important than we've ever been to our clients they need us they need the investment that we're making in talent acquisition, we have the most latest.
Strategies around things like programmatic advertising and other ways that we applied talent online and we're making investments that largely these health systems may not have significant investment and I think the average hospital system spends 1% in HR.
And that obviously, a big part of what we provide so I think that were very very much needed right. Now we have a lot of conversations going on we've had a lot of this just in the last two weeks our activity has picked up.
In terms of the dialogue amongst our especially our MSP partners.
Okay, great. Thanks.
We have the next question coming from Tobey Sommer Suntrust. Please go ahead.
Hey, good afternoon, Mrs. Jasper Viv on for Tobey I wanted to ask about winter needs and what you're seeing in orders for the fourth quarter. Thank you.
As we mentioned earlier you know orders are up.
Sequentially, 17% up 50% year over year. This time of year, we typically see a seasonal decline in overall orders, but orders are up.
Double digits. So it's a backdrop continues to be very.
Very strong Jasper from.
Ex the Corona virus, which is a new item.
The whole world to deal with.
The backdrop economically is very strong the dynamics in our industry all the segments that we are in our growing.
You know, 3% to 5%, it's an 18 billion dollar industry, that's expecting growth. This year, so we'd like we'd like our position in the marketplace. We like the fact.
Our theme this year as one vision one brand one cross country the ability to bring all of our services to bear for our customers and helping him address their needs, but in within the travel nurse industry. There is definitely a seasonality.
At the Sunbelt hospitals tend to higher up and put their orders in in the fall and then those travel nurses go to work, especially in January and we see our orders declined but proportionately year over year were up.
Thanks, and then it looks like a good quarter for physician staffing could you touch on where you are in the turnaround for that business and any additional investment or operational improvements you're anticipating there.
Sure I'll add a few highlights I will turn it over to Steve.
We are really really proud of cross country Locums, we've rebranded our division we turned the whole business around I got a lot of questions a year ago as are we going to sell the business is a core part of our portfolio and statically. We said, yes. It is it's very important to total talent management and our ability to bring all our services to bear.
We continue seeing strong demand across not just the physician segment, but advanced practice and like a call out a few areas like anesthesiology and hospital medicine, but Steve you want to provide some more color sure. Thanks, Kevin Hi, Jesper.
We backs, we exited 2019, obviously on a different trajectory than we entered 2019, it's been a really good year the turnaround as Kevin mentioned has been pretty measurable the leadership at the at the.
Within the office as well as teams commitment to excellence has been outstanding excellent execution and so our revenue in the fourth quarter was very strong as bill reported earlier was up over 10% almost 10% year over year gain.
What we had a nominal step back sequentially, which is typical for the season still above expectations. This team continues to execute exceptionally well and we're moving into.
This this quarter with continued high demand and continued execution across the business.
I appreciate the detail thanks, guys.
Our next question is from Kevin.
Barrington Research. Please go ahead.
Hey, good afternoon, everyone.
One of the talk a little bit more about the capture rate you mentioned that got up to 61% and added about 5 million in revenues I think you linked directly to your investment in revenue producers. So can you maybe just talk a little bit more about the dynamic and what you see the opportunity for Ah increasing the capture rate.
Going forward.
Yeah.
Ill start that'll at both the also add.
So first and foremost.
The across country, we reorganized restructured the business and I'll say in terms of capture rate. It was one of our.
The performance initiatives to improve our cap to improve it over the course of the year and I'd say one of the key.
Intangibles.
His focus management had a relentless focus on working with in particular, our MSP clients and customers and ensuring that we were able to meet their delivery needs.
I'm very encouraged about our capture and are focused on our MSP customers. So growth is really coming from rebounding volume within our existing customers as well as our new MSP wins that continue to ramp up.
And really this is part of when we go into the turnaround we focused on a restructuring we did invest in new.
Recruiter teams to complement our volumes, we restructured compensation plans that were driving the right behaviors. The right focus areas organizationally aligning people to making sure they're focused on those orders, but again it comes down to giving them the right visibility and being just laser focused on those customers and I that is.
Really making a difference.
Okay that sounds great and then.
Just on the gross margin guidance for the first quarter I know you mentioned the typical.
Annual payroll.
Text reset but.
Looking back historically, the sequential decline that you're guiding to is maybe a little larger than historically sort of thing there or any other factors Ah we should be thinking about there, yes, just as you start the year off.
We're looking at other increases in some of the cost items that are in our numbers just things like health insurance.
We've had some lumpiness with that throughout 2019 in prior years. So we're looking at.
Lightly how to run rate there, but the majority the vast majority to step back and margin is the payroll tax reset it's about 75 basis points step back just from that alone.
And I could just one other one other point just the fourth quarter sequentially as we called out also did have some some favorability from workers' comp.
There was about $1 million in the quarter from workers comp and health insurance off net benefit to the quarter.
So we're not okay right okay.
Yeah that makes sense. Okay. Thank you and then lastly, I guess.
You mentioned.
Your cross country marketplace initiative for the per diem market still sounds like early days, there, but maybe can you just talk a little bit more about.
How you envision that working and the opportunity that you see there.
Sure we're rolling out.
This new technology later this month across six regions to pilot the technology and essentially what this is an on demand application that lifts, our health care professionals with a most especially in mobile device look for.
Select in real time open jobs based on the employers that we have.
Partnered with.
Local or regional marketplace.
Today, 60% or so of our health care professionals, our millennials and the.
Device of choice is a mobile device as opposed to.
And texting I might add versus.
Even getting on the phone talking to a recruiter today. So we want to have a streamlined easy candidate experience that lets them find their next job with the.
The most efficient process possible the fastest.
You know delivery of that job for their consideration and on the client side. It's just important for their clients our ability to expedite our talent to open jobs and fill needs faster is a big important.
Part of the strategy, so well pilot the well pilot this technology in the six regions and then we'll roll it out nationally over the next 12 to 18 months.
And longer term.
We believe that the marketplace.
Yep will be something will deliver across all of our divisions.
Okay. That's a that's helpful color. Thank you everyone.
Thanks, Kevin Thank you.
And last question comes from Bill Sutherland Benchmark Company. Please go ahead.
Hi, Thanks.
Hello, everybody.
Just a follow up on the cross country marketplace. So what.
As you think about what it can do.
As far as the percentage of jobs that it can make themselves and they can take care.
Any thoughts would be something.
You know into double digits.
Well Bill that's a great question I look forward to answering it.
In future earnings calls I'll tell you I'll be happy to provide.
What we're seeing in terms of traction in the marketplace and our success.
And what the uptake is by our health care professionals, but we're very optimistic first of all.
On demand staffing software.
As a platform that's emerging in many segments.
Throughout the staffing industry.
In this particular segment healthcare, we want to be the pioneer we want to be the most innovative company. We think we're using the latest technology available and Ah, but it's exciting for us to kind of bring to the market at cross country, where I think the first time it probably too.
Five years or so our on proprietary technology. So we're very proud of that.
And then.
When you look at what you're doing this year to drive revenue.
Will there be additional revenue producers as well as increase productivity, we're maybe want to wait the too as far as what we should think about.
Yeah, that's a great question.
I'm, hoping for both because what we plan on doing in terms of adding revenue producers. This year is throughout the year to optimize the work force that we have based on the demand, we're seeing and the number of jobs that were able to fill for our customers.
So we last year had kind of a catch up year, where we right sized the recruitment staff by.
Increasing number of recruiters and account managers and salespeople.
Now, it's more about just optimizing that workforce and then.
We firmly believe that the technology investment that we're making which is considerable as we mentioned earlier willing will lead to employee productivity gains and we'll see the book of business with our revenue producers increase.
Due to the automation and efficiency of the tools.
The tools, probably will really start to impact so next year.
I think thats, a I think thats a fair summation.
We rolled out our applicant tracking software system to one of our divisions in November it went very smoothly.
From that we're able to.
Have lessons learned in terms of Onboarding the balance of our organization in mid 2020.
But I think it's fair to assume that the productivity gains would be very late this year and into next year.
And I guess this is for Bill are you additional plans this year as far as expense reductions and then what would you and if so where would you directed.
Absolutely.
Our job is never done in that regard we're not at the margins we want to be at and we recognize that there's still some efficiencies to to be had.
If you recall last quarter, we talked a little bit about as an example, credentialing just being one of our focus areas.
Within the nurse and Allied business, we've got multiple teams, we're aligning those on common proxies and looking at new technologies, there as well to mid to automate and help streamline that make as efficient as possible but.
That's that's certainly not the end all be all we're going to continue to look at all overhead all corporate functions to continue to try to drive as much out of the cost out.
Okay. So you know theres not like a targeted number so we haven't called out a a specific target for this year I can just say it as a priority for us we're going to continue I would expect that we'll continue to see restructuring charges as we move throughout 2020, as we continue to identify new opportunities, but we havent size, a new plan as we did last year.
If you recall last year, we continued to upsize that plan all throughout the year and ultimately close the year with realizing $15 million an annualized savings.
And I believe I, just want to make sure it's clear because.
In your prepared remarks, Bill you said 13 of that was reinvested that's correct. The realized number into we remember we invested ahead of the savings. So yes, we got the savings we over drove on that but we ultimately realized $2 million last year. Okay.
And last from me.
Just commentary on celebrates for both businesses kind of.
I guess I'm, mostly interested directionally fits.
I know you're doing a lot to improve it.
Company level, but just wondering about the demands of the marketplace. That's.
Just how that's trending.
Yeah, I mean look fill rates important to us. It's a challenge there is a scarcity of supply of health care professionals. So.
So we're deploying all of our.
Innovation and strategy and brainpower.
The the most agile in terms of reaching healthcare professionals, where they are in the cycle.
But within a an increasing demand.
I think we're optimistic that bill rates will continue to improve over the course of the year and that will attract a bigger supply.
But it's a challenge for US Yeah, I would agree I think it's very much about handed engagement how quickly we can get them through the cycle is it and nurturing cycle.
Is that attractive for them on on the other side we are.
Relentless and having discussions with healthcare facilities around making fast decision, making an easy onboarding process.
And allowing us to get the supply their fast the shelf life. Obviously is very short. So we believe we have to work both sides in order to get that fill rate.
That makes a lot of sense.
Thanks, everybody.
Thanks, Bill Thanks, Phil.
This concludes the question answer session.
Well I just want to thank everybody for taking the time Tonight with cross country healthcare. We appreciate your confidence in the team and we look forward to.
Informing you up our success throughout 2020.
Thank you for joining you may now disconnect.