Q1 2020 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to the A.M. and health care quarter, One 2020 earnings call.
This time, all participants are saying only mode. Later, we will conduct a question answer session instructions will be given at that time.
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Our knowledge during the conference over to our host Randy Reece Director of Investor Relations. Please go ahead.
Good afternoon, everyone welcome to human Health Care's first quarter 2020 earnings call.
A replay of this webcast will be available at <unk> am in health care Dot Investor room Dot com following the conclusion of this call.
Details for the audio replay of the conference call or in our earnings release issued this afternoon.
Various remarks, we made during this call about future expectations projections planned events or circumstances constitute forward looking statements. These statements reflect the company's current beliefs based upon information currently available to it.
Our actual results may differ materially from those indicated by these forward looking statements as a result of various factors, including those identified in our most recent form 10-K, our earnings release and subsequent filings with the FCC.
The company does not intend to update the guidance or any forward looking statements provided today.
Prior to its next earnings release.
This call contain certain non-GAAP financial information.
Information regarding and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and on our financial reports page at <unk> am in health care adopting best room Dot com.
On the call today, our Susan Salka, Chief Executive Officer.
Ryan Scott Chief Financial Officer.
Kelly Rakowski group, President and Chief operating officer of strategic talent solutions.
And Landry CJ group, President and Chief operating officer of nursing and Allied solutions I.
Ill now turn the call over to Susan.
Thank you Randy and welcome everyone. We appreciate you, making the time to join US today. The world has changed dramatically over the past two month, creating challenges and collaboration that might have been previously unimaginable, but by far the greatest impact and sacrifice.
Hi has been made by our country's health care heroes, our nurses physician Allied professionals leaders and every health care worker, that's what's themselves on the front lines, an at risk to care for patients.
Selfless perseverance of each year.
And the healthcare organizations, who enable lifesaving compassionate care deserve our eternal gratitude, they inspira, they give us confidence and they push us to go beyond what we ever thought possible to make our greatest contribution.
I'm always proud of the N. team and the passion and talent they pour into our responsibility to enable quality healthcare, but these last few weeks have given me and all of us and even greater sense upright purpose in gratitude.
And then team stepped up and collaborated in ways I think even surprised ourselves.
The spirit of the team combined with a solid business continuity plan and NATO enabled us to quickly move our team members to work from home within a matter of days.
We were then able to redeploy our talent to where they were needed most.
We always prioritized the safety and health of our team members and clinicians and provided them with support as day and we as a team navigated through the crisis.
19 has been highly disruptive to the health care community any effects on our business had been fast changing.
Soon after the crisis took hold in the U.S. in late March demand for nurses and respiratory therapist surged at hospitals prepared for anticipated cobot 19 demand.
Weve Cobot 19 patient census, elective surgeries and other health care services reduced across the country. Many of our businesses experienced cancellation and a decline in demand.
The M N team went through extraordinary linked to serve clients, while also supporting our team members.
In March our business leaders and I T Department did an amazing job transitioning over 3000 team members to remote work investments were previously made and equipping our team members with laptops and system enhancement, which paid off during this time.
We quickly redeployed and trained internal team members and added temporary resources to augment our nurse placement credentialing and support functions to ensure we had all hands on deck to get every clinician to where they were needed most.
In total since mid March we deployed over 10000 health care professionals through Amgen brands, our MSP and Vms affiliate partners and marketplace technology solution.
As the needs of our health care professionals clients and state organizations intensified. We also quickly brought new or expanded solutions to market.
We expanded our scalable Vms solution open Cowen marketplace, allowing a multitude of health care facilities to quickly staff and manage their entire range of contingent talent.
Answering the demand from local and state governments, we mobilized a rapid facility response, a full scale solution for the quick start up staffing and management of medical facilities.
We accelerated the launch of Amgen passport, our mobile App for health care professionals.
And then passport enables clinicians to access jobs submit credentials and enhance the health care professionals experience all through an easy to use and then branded that way.
We added functionality to our strategy platform, enabling clients to utilize our technology in hardware for a variety of other tele health in screening capabilities.
We launched and Karen Keller health platform that enables care teams <unk> interface with employees or patients at home.
And we expanded and created new relationships with pack retail and other organizations, who need talent and a solution for testing screening and other resources to enable a safe return to work environment.
And quite frankly been in all of how the entire Amgen organization evolved at a speed. Unlike anything I've seen in my 30 years with the company and we're hopeful that some of these changes we've achieved will create long lasting benefits.
And then was instrumental in helping educate state and federal officials on the importance of more streamlined and reciprocal licensing of clinicians.
We enabled more comprehensive 24, seven support of our health care professionals and our clients.
We collaborated with our clients to develop streamline credentialing and onboarding requirements to accelerate the placement process.
Our permanent placement services were able to rapidly gain client adoption of virtual interviewing which allow recruiting efforts should continue.
We were more quickly able to collaborate with existing and new clients to add vital solution in a matter of days instead of month.
More than anything this is a time when the values based culture of Amgen and the common purpose and passion, we share across the company enabled us to stand together and go far beyond what we ever dreamed possible. Many team members that hit with as if we had trained our entire careers for this moment and the.
I'd to serve and making impact and I couldn't agree more.
Well most of our discussion today will be on the second quarter trends in our road ahead I want to spend a few moments on the first quarter.
Before the Cobot 19 prices began we had a terrific start across the company to the year. The first two month showed great promise and strong results by most measures.
We were also very fortunate to welcome this strategy team into the and then family with that acquisition closing mid February of course everything changed in March.
Even with the turmoil that began in March our first quarter revenue still set another record high for the company at 602 million with adjusted EBITDA of 74 million.
Our nurse and Allied segment produced revenue of 424 million up 14% year over year with 3% organic growth.
Under our new segment reporting structure nurse and Allied includes our revenue cycle solutions business.
Our largest business travel nurse staffing grew 12% year over year Allied staffing revenue was up 41% year over year.
Year over year increase with a combination of organic growth and the acquisition of advanced Medical last June.
I like therapy, including our schools offering and revenue cycle solutions felt an immediate impact from the closing of schools and other health care setting and the relaxation of clinical documentation requirements.
The teams did an excellent job during April in pivoting, our allies sales resources to support higher demand for respiratory therapist, and transitioning over 90% of our school therapists onto our teller therapy platform.
Our second largest segment called physician and leadership solution recorded first quarter revenue of 138 million, which was up 1% year over year within this segment, our locum Tenens solution business started the year strong only to be disrupted by the pandemic and resulting cancel.
Relation.
Well previously on track for year over year growth. This business completed the quarter with a revenue decline of 2%.
The second largest part of this segment, our interim leadership business grew 3% year over year in the first quarter.
Well they felt some disruption in March from the crisis. They saw fewer cancellations and we were able to provide dozens of leaders to serve during the crisis.
Our permanent placement businesses were up 4% in the first quarter. Despite the slowdown in March.
Our third segment technology, and workforce solutions reported revenue of 40 million up 84% year over year, including the acquisitions Stratus video in February and be Fourhealth in December.
The segment was up 13% organically one of the standout performer as of this group was our Vms business, which grew revenue 26% year over year in the first quarter.
Our newly acquired language interpretation business strategy video contributed $14 million of revenue in the quarter slightly less than expected as its volumes were disrupted by clients reduced patient census in late March prior to that disruption they were performing better than expected.
Our predictive analytics business had strong revenue growth in the first quarter.
We've modified our formal guidance due to the uncertainties created by Cobot 19, and the economic environment. However, we want to still be as transparent as possible and provide you with some insights on recent trends and our outlook for the next few months.
When the crisis first hit the demand for clinicians who could care for cobot 19 patients spiked in our industry cast to call to action for nurses and other clinicians to come forward and help we were amazed and inspired by the response, many thousands of clinicians raise their hands to go where.
And when they were needed most.
No. There were also clinicians and physicians that were suddenly without work due to the decrease in elective procedures and the closure of other health care setting.
While we still have new demand for coated 19 related clinicians coming in it has declined which is very good news for our country.
Some clients, particularly in hot spots like New York are still in need of hundreds of existing and additional clinicians to serve the patients they have and expect across the country. Many clients are starting to resume services, including opening operating rooms rehab centers and physician offices.
We are receiving needs for clinicians to help ramp these services and expect more in the coming weeks.
We're also working with clients to ensure that we can all pivot again quickly should there be another surge of cases.
Some major health care systems view this as a real possibility we are incorporating lessons learned to ensure we can collaborate and work even more swiftly and efficiently together.
Some clients are also indicating that they're seeking to create a more flexible labor plan. This will enable them to respond to patient volumes and best match their workforce spending with the revenue ramp utilization of travelers and temporary clinicians will be a valuable tool for them. During this time.
We can also help clients to better manage their internal float pool through our technology offerings like before health.
And then revenue should ramp as hospitals resumed their more normal procedures and patient census, and they seek opportunities to optimize their workforce through the use of technology solutions.
In the meantime, our second quarter revenue is projected to be down sequentially, and we will exit the quarter at the lowest revenue trend year to date.
Fortunately, we have created a flexible cost structure, and we'll be able to respond to marketplace changes as necessary.
We have successfully navigated periods of demand decline before exiting these times as a stronger organization.
And Amgen is a more diversified company today than it was during the previous downturn. Our addition of multiple workforce solutions and more strategic partnerships.
Strengthens the resilience of our business and further differentiate.
To adjust our cost structure to the temporary decline in revenue we've already taken several steps to eliminate nonessential costs.
Such as travel events in professional services.
We also reduced staffing levels through attrition and a small lay off of our left tenured team members.
And suspended our retirement matching program.
These collective effort plus the natural reduction in variable spending that occurs with lower volumes enabled amen to reduce our SDMA by about 15% from our pre crisis run rate in February our cost structure is highly flexible and we will continue to make the needed investments.
To advance our total account strategy to ensure that Amgen is well positioned for the future.
We always Oh, a data gratitude to our health care professionals, but at this time that gratitude is more meaningful than ever.
As the industry leader and one of the world's most vocal supporters of nurses and other clinicians we feel an immense responsibility to ensure that we and others are doing the right things to care for and support our clinicians during this crisis I'm, so proud of how our team and quiet.
Partner to ensure we were rising to this responsibility.
And finally to our incredible and team members I am simply in all of you you have overcome barriers and found creative solutions for our clients in health care professionals and perhaps the most dynamic environment we've ever seen.
We ask a lot of each other and you more than delivered you inspire me everyday and I truly cannot thank you enough.
In a few minutes Kelly and Landry will join US for the question and answer session, but for now I would like to turn the call over to Brian who will provide more insight into our financial results Brian.
Thank you Susan and good afternoon, everyone. I would also like to express my sincere gratitude to that frontline healthcare workers across this country, who runs our lives to care for our families.
And I am also so proud of the aim and team for their passion and efforts to support our health care professionals clients and each other everyday.
Before I talk about the results and guidance I wanted to quickly recap our updated reportable segments effective this quarter.
Our nurse and Allied solution segment now includes our revenue cycle solutions business.
Our new physician and layers and solution segment includes our locum Tenens interim leadership and executive and physician permanent placement businesses.
Our technology and workforce solutions segment includes our language interpretation Vms predictive analytics, RPL and Credentialing businesses.
Historical financial information for these new segments is posted in the Investor Relations section of the Amazon Web site.
First quarter revenue of 602 million, whether the midpoint of our guidance range.
Our nurse and Allied solution segment performed inline with expectations.
Physician and later leadership solutions and technology and workforce solutions segments were modestly below our expectations due to the impact of covered 19.
Reported revenue grew 3% sequentially and 13% year over year.
On an organic basis revenue was flat sequentially and up 3% year over year.
Gross margin for the quarter was 33.5%.
30 basis points from the same quarter, a year ago, and down 10 basis points from last quarter.
Gross margin rose year over year due to a favorable segment mix shifts.
Consolidated operating expenses were 146 million for 24.3% of revenue.
Paired with a 120 million or 22.5% of revenue in the same quarter last year.
Year over year increase includes about $9 million of additional SNA from the acquisition. The Stratus video before health and advanced Medical 7 million at one time acquisition related expenses.
And 2 million higher integration and other nonrecurring expenses.
The increase also include and growth of about $5 million of employee related expenses and a 2 million dollar increase in bad debt expense as we took a conservative stance towards our reserves in light of the covered 19 impact.
First quarter nurse and Allied segment revenue was 424 million, 14% higher than prior year and flat sequentially.
On an organic basis segment revenue grew 3% over prior year with solid growth in travel nurse and allied partly offset by declines in revenue cycle solutions and local staffing.
Nurse and Allied gross margin of 28.5% was flat compared with prior year and down 50 basis points from prior quarter.
The sequential drop stem from a decline in labor disruption revenue.
Segment EBITDA margin was 14%.
Which was down 30 basis points from prior year end down 40 basis points sequentially.
First quarter physician and leadership solution segment revenue of 108 million was 1% below prior quarter and up 1% from prior year.
Gross margin of 36.7% was 10 basis points higher than the prior year, but down 50 basis points sequentially due to the decline in permanent placement revenue.
Segment, EBITDA margin was 10.6% down 100 basis points from last year and down 310 basis points sequentially driven in large part from an increase in bad debt reserves.
Technology and workforce solutions segment revenue was 40 million in the first quarter sub 84% year over year with organic growth of 13%.
Segment gross margin was 75.7% lower year over year end sequentially due to the February acquisition strategy video, which has a lower gross margin than the rest of the segment.
Segment EBITDA margin was 38% also down because of the Stratus acquisition.
Consolidated first quarter adjusted EBITDA of 74 million was 12% higher year over year.
Adjusted EBITDA margin of 12.3% was 10 basis points lower year over year and down 60 basis points sequentially.
We reported net income of 13 million and diluted earnings per share of 27 cents in the first quarter.
Adjusted earnings per share with 79 cents compared with 75 cents in a year ago quarter.
Our GAAP income tax rate in the quarter was 47% and was 32% on an adjusted basis.
Hi, GAAP tax rate was driven by the nondeductible effects of changes in the value of our deferred compensation plan.
Partly offset by excess tax benefits on the vesting of stock based compensation, which are both excluded from adjusted tax rate.
Days sales outstanding at quarter end was 57 days.
Five day improvement from the same quarter last year.
The two day increase from last quarter was entirely driven by the mid quarter acquisition of Stratus.
I also wanted to provide some color on aim and solid position as it relates to our balance sheet cash level liquidity.
As a reminder, in conjunction with our acquisition strategy video in February we amended our credit facility with a new five year tenor that included a 250 million to our term loan and $400 million revolving credit facility.
As of March 31st we had 175 million undrawn on the revolving credit facility and $98 million of cash on hand.
The remaining $625 million of our debt consist of unsecured notes that don't mature until 2024 and 2027.
The weighted average cost of our debt is currently I'd just below 4%.
Our leverage ratio at quarter end was 3.1 time to one well below our maximum leverage covenant.
For the quarter end, we pay down 50 million on the revolver, providing more than 200 million of current borrowing capacity.
First quarter operating cash flow was 51 million and free cash flow was 37 million, reflecting a strong EBITDA and cash conversion.
Although we are closely monitoring the financial challenges our clients face during this crisis and even with a few clients delaying payments and asking for extended terms our April cash collections exceeded our internal goal.
We are currently tracking for another quarter of strong free cash flow, which we will use to further reduce our debt balance.
Overall, we are confident that our cash flow is sufficient to fund our operations capital and strategic investments and continued reduction in our debt.
Turning to second quarter guidance travel nurse demand and placements were very strong until late April, but then decreased significantly from reduction in covert assignments, an overall healthcare utilization.
With the strong start to the quarter along with the prior year only including two weeks advanced nursing revenue for our travel nurse business is projected to be up from prior year by around 25%.
Overall, we expect the nurse and Allied solution segment to be above prior year by 7% to 10%.
With a higher travel nurse revenue, partly offset by declines in revenue cycle solutions and labor disruption.
For the segment the trajectory of volumes and revenue is declining during the quarter and we expect volumes for nurse Allied and revenue cycle to be below prior year in June.
For our position and leadership solutions and technology and workforce solutions segments April revenue for most service lines was below prior levels by about 10% to 30%.
Revenue has stabilized and in some case and starting to pick up.
With a more meaningful improvement in revenue expected as elective procedures is at overall healthcare utilization increases.
Based on the about trends, we're projecting second quarter revenue to be in a range of $550 million to $570 million.
This wide range reflects the uncertainty of business activity.
As Susan noted in response to this market environment, we have quickly made certain adjustments to our cost structure.
Thus far we've reduced our annualized SGN a by about 80 million.
As these actions were taken over the last couple of weeks about two thirds of this benefit we realized in the second quarter with the full impact achieved another quarter.
In consideration of these factors, we expect second quarter, adjusted EBITDA margin to be above 12% and.
And even when these cost adjustments, we will continue to invest and remain focused on our long term strategy to ensure we emerged from this situation as a stronger and more agile organization.
Other second quarter estimates include the following.
Depreciation expense of 7.5 million noncash amortization expense of 15.6 million.
Interest expense of 10.7 million.
Integration expenses of four to 5 million and adjusted tax rate of 32%.
Before I open the call for questions, we want to recognize Amen nurses and all nurses across the world as we come to the conclusion of nurses week.
We've been celebrating with a wide variety of events to recognize incredible impact they make every day.
Tomorrow and special recognition at the 200 birthday of Florence Nightingale fail and will be celebrating nurses through a virtual opening bell, bringing at the New York Stock Exchange. We hope you can turn into that event.
And with that we'd like to open the call for questions.
Thank you, ladies and gentlemen, if you wish to ask your question. Please press one and then zero on your telephone keypad you may withdraw your question at any time by repeating the one zero demand.
If you are using of speakerphone, please pick up the handset before pressing the numbers.
Once again, if you have a question that you May press, one and then zero at this time.
Maybe just one moment for our first question.
First of all part of the line of AJ Rice with credit Suisse. Please go ahead.
Hello AJ.
We are having difficulty hearing you AJ.
We might need to have you get back into queue.
There are no right does that work is I was hoping that airfreight.
Okay, sorry about that glad to hear everyone save and well sorry about that.
First of all just maybe exploring a little bit the nature of the discussions you're having as these markets start to reopen.
Obviously for the travel nurse and Allied side, it takes a little bit a lead time to get people in there, but I'll turn the way I could see that oswald's wouldn't want to.
Recruit to make up some of the.
Last procedures that now hopefully we'll come back so are they how's that discussion going and what do you expect to see is they reopen some of these markets is there any way to to talk about that.
Sure AJ, so I'll start and then maybe my colleagues can chime in if you have more to add but absolutely. We're we're talking daily if not multiple time to David clients about what their expectations aren't as I mentioned, we're starting to see orders come in which we expected as they were discussing the reopening of whether it be ambulatory surgery.
At centers or physician offices, and then as you would expect are our most strategic MSP clients are talking with us about their plans in some cases, it's a matter of.
Moving patients that had been perhaps cobot patients occupying our suites that are now moving back into IC use and therefore, they are able to open up there oh ours and they want to make sure that we have the staff to help them open.
Their staff is pretty burned out even those that have been perhaps sitting on the sidelines event. They they're turning in some cases not all but in some cases first to travelers to help them open, particularly if we had travelers there previously and then likewise on the physician front, we're already receiving orders from several clients.
Says they are beginning to open and we get a little bit of a preview through even our Stratasys organization.
When you think about it the we mentioned the.
Interpretation minutes were down for the first few weeks and then started to rise and that was really a sign of some of those care settings opening up and.
Procedures, beginning in so that with some of the pre op work that was going on and so we feel pretty confident that every week, we should continue to see.
More orders coming in from those increase needs as we look to our clients use. This as an example, we did a bit of an informal survey with our clients and just sort of looked at different parts of the country and good number of them are expecting that by June they will be moving into.
More full weighing median sort of 50% to 70% opening and then by July opening it is even faster pace and maybe even at full capacity.
The may be optimistic about that I don't know they would know best but at least it gives an indication of how fast they hope that they'll be moving along so maybe with that I'll just ask if Kelly has anything you'd like to add to the discussion yeah. Thank you and Asia I think as you know.
Okay, and maybe just sort of an another question along these lines I know coming into the year one of the challenges was getting more.
Travelers and more people willing to take the temporary assignments.
You mentioned and obviously, it's been reported that people have come out of the.
Woodwork to help serve and help address needs.
You have any sense that that might result in a continuing.
Number of people that would be willing to take these assignments on long term basis or is that a surge that just specific to the crisis.
I have landry pick up on that AJ, because as you well know Landry has been.
Building, the nursing business and has been responsible for the great success that we've had in the last several years and so a lot of investments have been made that I'm sure. He is going to want to talk about so landry you want to take that.
Yes, Hey, Jay Landry.
You might remember that if you went back prior year actually had little bit a headwind, where we had quite a bit to demand out there and.
It into generates more supply to match up with that demand.
A lot of investments over the last 12 to 18 months and those investments really paid off whenever we saw a surge in demand primarily due to some of the co that 19 orders that were getting and there were times whenever whenever we were working through the end to end of March in the beginning of April.
Where we would see our new application numbers be at least two times and even some weeks. It was three times greater than what we are used to so above prior year as well as what our goals were.
Generating that amount of supply it really helped to build our database that we'll be able to used for future placements of course, we're also able to place.
Some of those clinicians on assignment to help with the crisis. So all in all some great investments and some really good numbers of new applicants and nurses in our database.
Okay, and maybe just a last question around stratus they've been discussion.
Inter quarter, and you mentioned and again today of surgery tooling and all to do.
More tele health can you expand a little bit on what you're doing there and is that.
Then become a potential revenue source independent of the translation services or is it all sort of intertwined together.
Yeah, Hey, Dave Kelly. Thanks for that question, it's combination of both of.
We really saw the versatility of the platform and we were able to.
Expand its ability to do secured messaging and communication on behalf of our clients. We are able to shift some of their own interpretation interpreters onto our platform to support that and then we were able to.
Use the platform itself to do some other things for example, we're launching am and care, which is a closed loop capability that allows us to do.
Communications testing support telehealth visit track and document progress.
They have a individuals on progress through the through the disease and communicate that back and we're applying that.
In settings outside of healthcare as well so we do see a lot of versatility am both growing and deploying the interpretation services, but also some other uses for how we leverage those devices and that secure communication to apply to other settings.
Okay. Thanks, a lot.
Thank you AJ.
Thank you index will go to the line of Tony Summer with Suntrust. Please go ahead.
Hi, Tobey thanks.
Yes.
Could you comment about.
So you had been able to discerning short period of time, how the Companys performance has been in and among MSP clients.
Particularly as.
Demand is.
Since it started to soften and see whether the this theory of being able to.
Sustain higher fill rates is is being played out in.
Today.
Great question I'm, So glad you asking because we have a good news story to share there, we certainly we're able to.
Get closer to our MSP clients. During this difficult time in certainly served them well through the crisis itself, but because of that we were able to I think forged stronger relationships with them and add in other capabilities. Other services I mentioned like literally within days and weeks rather than maybe normally taking money.
To add in other services and I think that will enable us to do more for those clients over time, but in addition, as their coven.
Orders decline, which is a good thing we are working with them to plan what that rebound is going to look like and making sure that we at the clinicians ready to staff into those al Let Landry talk first about the success that we've had in nurse and Allied that maybe I'll first mentioned that locums into.
Particular has done an outstanding job of this.
Ingest the last month as an example, they have had their highest direct fill rate that we have ever seen across their MSP client and so proud of them with that in some of them are cobot related but some of them aren't necessarily in so we think that's a good example of how we can not only store has quite well.
That mitigate our downturn, which is what you're referring to during times of demand softness in Atlanta, We want you talked about nurse and allied.
Hey, Tobey Thanks, Susan.
So you have an MSP strategy really does help a lot whenever that demand goes down a little bit, which we certainly have seen for certain specialty.
Whenever that happens we're allows us the opportunity to fill the demand that's there with our own nurses, so more directional but just kind of give you a sense with the nurse and Allied segment, our Q1 revenue mix and our MSP business was 70% and right now we're projecting Q2 to be around 75 per se.
So it really does kind of showing that overall strategy within our MSP accounts and it really kind of helps us whenever the demands a little bit softer.
Thanks could you give us a little bit of color.
Or in your nursing business.
The proportion of business or travelers.
She would covin assignments, just so we can get a sense for what.
Decline looks like as you work your way through to Q.
Sort of on vanilla regular way business.
Yes, I don't know if I have that that number in front of me on that kind of I guess coated 19 placements versus a non.
As you would expect whenever we were exiting Q1, we did see quite a few cancellations.
Areas, such as like or as an elective procedures went away.
Also in our allied business within our skilled nursing facilities.
So we did see quite a few cancellations with businesses were quite honestly the facility might have been closed or there was no census.
For those types of specialties.
Whenever we went towards the end of Q1 and beginning of Q2.
A lot of our demand was around I see you are respiratory therapy and the teams really didn't come to the table and we're able to help out our clients significantly in many areas across the us primarily in some of the hot spots that you, saying.
As you exit Q2.
We are seeing a lot of those come in 19 placements come off and our volumes are coming down so right now our volume.
And our travel nurse business in June is expected to be below prior year.
Yes, just order of magnitude I mean, this is Brian I'd say, we're looking at somewhere probably in the mid teens range from we're seeing right now and we just are this at this interesting inflection point, where you have the demand going down from contemplate assignments again hospitals are starting to plan from four reopening an increasing their their utilization, but it's a bit Earl.
Linked to know the amount timing and magnitude of that have that recovery. So again, we're starting to get some some demand coming and related to it and it's just bank. They will take a few more we extend to see how quickly that will rebound. So right now as we look to Jan based on the data we have were down mid teens and the nursing volume.
So this should help at least you get a sense of of the magnitude as we're exiting the quarter.
Absolutely last question for me could you.
Give us your your best Guesstimate perspective about how.
The demand for.
Temporary clinicians principally nurses, but you can comment on the other.
Categories as well.
A mid high unemployment, which historically has been.
And then sort of this gravitational force.
Hi, I understand your customers talking about building more flexibility into their workforces and meeting to.
Sorry.
Yes, so it's really difficult I know, you're asking us to make our best educated guess and we certainly have those Toby.
More typically during just a pure economic downturn, we if you see a spike in unemployment general unemployment you would see nurse attrition go down and vacancies go down.
This.
Environment. There are some differences that I think are important.
Reason for the downturn being a pandemic and the stress that that put on the clinical workforce already particularly nurses one of the things that we're hearing from the nurses and sell through surveys we've done but also from our clients is that the nurses are very burned out and you see this.
Suppose even in the news in the media, where nurses are frustrated about what they've gone through and certainly very proud of their work, but perhaps needing a break from that environment and this was just reinforced in a survey we did over the last week, which indicated that those clinicians that were.
Most involved in the crisis.
I feel that they need to take a break from nursing.
So we think that will be a factor. The other is at the nursing workforce today is older than it was 10 years ago on average and that could play into their willingness and ability to go back to the patients bedside, particularly on the heels of the pandemic, where they may be fearful of what they.
They they might need to face and the demands.
Fair might be the wrong word because I think everybody wants to step up and take care of those patients, but if they have choices to take other types of nursing related jobs. They might prefer that the other thing to keep in mind as we were already in a very severe nursing shortage before we came into this environment. So you just sort of half.
Factor all of those things into how might play out and also quite honestly, how fast things are going to rebound.
Right now I think that most of our clients are cautiously optimistic about how quickly they will be able to bring patients back in and rebound there procedures in fact.
Okay. Several clients are talking about expanding the.
Realization of there Oh ours and ambulatory surgery centers, so that they can deal with a pent up demand.
Very big in oncology in particular in so they are extending hours on a daily basis talking about opening on the weekend and their existing our previous staff might not be willing to do those things. So we can help augment that expansion.
So hopefully that's helpful. We don't have a crystal ball, we don't have all those answers, but I do think it will be different than the prior economic contraction.
Thank you.
Thank you Toby.
Thank you index will go to the line of Jeff.
So over with BMO capital markets. Please go ahead.
Thanks, So much wanted to focus on billing rates for a second is it safe to assume that the folks you are putting on assignment there were more covert related.
We're building out at a higher rate and if it's possible to give us some sort of order of magnitude there.
Jeff, Yes, so that.
Was primarily a factor in our nursing business and a little bit within Allied where we had respiratory therapy, we didn't experience that in locums as much now granted the need wasn't as great was primarily hospitalized in E. R nurse practitioners a bit of CRM.
And there was sufficient supply of clinicians that we're willing to come into those setting. So we didn't really have a rate uplift in locums, but I'll, let landry speak to the nurse and Allied business.
Yes. Thanks.
I would just reminded that we had some pretty strong year over year Bill rate increases before all this started so across nurse and allied motion as business in Q1, there bill rates were up year over year anywhere kind of in the 2% to 5% range.
Of course whenever the cover not only 19 crisis hit.
Those those placements moved more towards what we consider our crisis rights for our labor disruption rates.
Okay. That's helpful and again order of magnitude your crisis rates versus normalized rates, what's the delta.
Doubling if it's if it's for a really hard to tell position are really quick need and thats. It live again, we see more of a labor disruption type of rate environment.
Okay great.
Just just shifting gears operationally you talked about inter quarter, how demand shifted away from.
Colgate related refinements to other assignments.
Yes, that's a to Craig question, because it goes back to what we even did during the early stages of the crisis, where we needed to shift a few hundred of our team members to help our nurse placement team and it wasn't just in recruitment and account management all those those were certainly.
Credentialed paid and certainly have the support behind them. So big thanks for them and it showed that we could do it to you are asking specifically about recruiters, yes, we've actually been changing our training programs our recruiting programs in profiles over the last year, so that we could.
Okay, Great. That's helpful. Thanks, so much.
Thank you and mix towards the line of Jason Plagman with Jefferies. Please go ahead.
Good afternoon.
Asked about.
A question on gross margin outlook.
Any change in your expectation for Q2 compared to the recent trends.
Expected.
There is no significant changes at the business unit level. So within our we talked about nursing and pricing a lot of that is being you said, obviously at a pass along to thanks to the clinician. So if you look within nursing and Allied Locums a different divisions the margins I could be pretty consistent from Q1 in Q2 and expect that to continue going forward.
Got it.
And then.
Yes, any update on that contract net activity going on but assuming that was paid in discussions slowed during that cobot outbreak, but just any commentary you could provide on.
Let's see new contract and if you're having increased discussions given what we just the healthcare systems went through.
Hey, Jason as Kelly.
Sure you insights around that so.
Both new contracts as well as some expansions. So we're very pleased with that and had a very strong pipeline and you're right. It did slowdown.
During that time, although we were able to bring on new Vms customers, who had very high need clients that had high needs for staffing we were able to.
Offer them are open marketplace solution that allowed for a very rapid sort of contracting and access to staffing and we expect us to sustain.
Following the crisis and that our MSP, our large MSP clients did.
Did slow down but the good news as we're starting to see a level of Reengagement and about 70% of our pipeline has re engaged with us starting to talk about their future needs and moving them back to decisions. We also had several variables on our existing MSP.
I'm clients around renewals and expansions and in fact, some of those were based on the kinds of support and relationship deepening that Susan mentioned early earlier, so I'm very pleased with that as well so it'll be slower in Q2 about expecting that to pick back up.
Justin.
Thanks, Jason.
Absolutely Mark and thank you, we are well and I hope your family is too.
And we felt pretty confident we were going to be above year over year and really most specialties were strong so a bit of weakness in E. R and hospitalists as we began the year, but really a lot of other areas, where we are doing quite well, we had very strong demand across the business overall, we were starting to see the.
Productivity improvements of our team so through the crisis, we saw in a pretty immediate slowdown or almost halting of dentistry, which is small for us, but still it pretty much went away in a matter of a few weeks and then we had surgery primary care oncology and many of the sub specialty.
Yes, it came to a pretty quick.
Because they weren't sure how long they would be going on we also were able to forge some really nice relationships with dates as they were standing up temporary facilities and capabilities expecting more patient flow that in not all covidien somewhat to take care.
But we were ready and in many cases those states are wanting us to keep those relationships and capabilities ready in case, they see another surge.
Thing that they did was really to build some stronger relationships with tele health partners.
We saw some initial.
Leads that workovers related from our Tele health partners and that was a great ways for us to showcase what we are capable of and really leveraging our national network of physician that has tapered off but there's still ongoing needs since they were able to see how we could really assist them to expand their businesses.
We do expect that that we will have ongoing business and relationships with them and can be their staffing partner to to build what they believe is going to be stronger volume going forward. In addition to our own other tele health capabilities and then just finally these non traditional setting they were actually one of the.
And with that I'll have Kelly chat about some of the other leadership areas, yes, piggyback off of that on an interim leadership again coming in with a strong quarter.
We are able to mitigate a lot of the roll offs and cancellations are first on need was really to keep our in terms in place a lot of them are traveling with some of the travel restrictions really working with them in clients to make sure. They were capable of continuing to support the saying they're assignments.
Where we sell leaders come forward and.
We leveraged our interim leaders in some places to serve as mentors are support onboarding from a remote location, we actually use our stratas platform to create a.
They've been secure communication, so some really creative.
Use of that kind of leadership talent to support the market. So.
Again lot of things put on hold we're seeing our new search volume's down pretty significantly the good news as we've been able to maintain our search volumes that were existing so only about 20% 25% of our searches active searches were put on hold we're starting to see some of those come back on line.
And we were deployed deployed.
Thing to point to would be watching hospital synthesis and as those right. Now those are of course are down quite a bit anywhere from the 40% to 50% range right now.
And then.
Susan you've been through multiple cycles the.
In terms of managing the business, both from an expense and productivity perspective.
Production capacity when we.
Good on the other side of this sure sure. So maybe I'll start first with how we are answer facing with our clients and where we see the opportunities in.
Yes, you will know we've we've been through these downturns for different reasons before and we have a history of using them as a catalyst for further differentiation.
Good or bad we know very well how to work through the cost structure and the cost side of this equation.
And make sure that we maintain the financial health of the organization, but what I've also learned is we must continue to invest in the future and we must continue to invest in and support our team because that team and the talent. We have is going to be absolutely essential for us to rebound.
Owned and grow back out of whatever decline that we feel unfortunately for us that team is much bigger today from a differentiation standpoint in an offering you we had by far a more comprehensive set of solutions than we had a decade ago. That's made us more resilient. It helped us I think to me.
Mitigate the downturns that that we may face going ahead, and with our clients. It means we can bring a different value proposition to them than what we could bring to than a decade ago. So we can help them, yes with their staffing needs in recruitment needs, but we can also help them to optimize their cost structure as it relates.
To workforce through our technology offerings, we can help them better understand where when and how they need to have the right person how they can optimize their own internal flex pool and internal pool, which is very important right now so that they can deploy people only when and if they need them, whether it be there people or.
Contingent staff into those different settings. So a lot of discussions going on right now about float pull management and any sort of technology, we can bring to bear by bringing together multiple solutions.
We think we can offer more integrated way for them to think about partnering with us that can save them costs and Thats right now there number two areas of focus beyond patient care, which is always number one but next would be how do they ramp the revenue. So how do we help them do that through our businesses that can get them up and running quickly and expanded.
Their hours in their capabilities and second is reducing cost. So looking at that flexible labor planning is really one of the key conversations that we're having with them now how can they flex up but when needed how can they flex down so I feel like we're in a much better position today.
And we were a decade ago to really be that more holistic partner with them and it's already happening.
And in fact, when we were going through the crisis. It gave us an opportunity to really showcase.
Those more comprehensive integrated capabilities to our existing clients that even as Kelly referred to to prospective clients that maybe we're in the pipeline anywhere considering who they were going to choose as their partner, we could really bring our best foot forward and show them all the things that aim and can do for them.
I think that's what the future will look like in terms of how we work with our clients to help them rebound out of this and how we can make make it a catalyst for us.
To create further differentiation in terms of the cost structure as I mentioned, we've managed through these situations before we've taken Swift action already on those expenses that we feel that we can reduce at least for at a temporary period of time and there's certainly more that we can do if we need to.
Some of it will be happening naturally because of the variable cost structure that there are additional actions, we can take but we'll always want to be focused on also retaining an engaging our team and making sure that we continue the investments that are important to our future.
So hopefully that's helpful.
Thank you.
Thank you and next rewards the line of Tim Mulrooney with William Blair. Please go ahead.
Good afternoon can you hear me Okay. Susan Yes, we can Tim. Thank you, yes, we're running up against the hour here. So I want to make this quick.
On the nursing business can you can you talk about your mix in the travel nursing business what percent of your travel nurses are typically our assignments versus E. R and I see you type assignments and what is it possible for you to re assign a certain percentage of your or nurses to NDR said.
During during this time.
Yeah, Great question. So we don't give that percentages necessarily I think we usually share that our top five specialty areas in nursing are in the critical care areas, all our med surge Kelly.
Typically the top five in this environment, we absolutely we're working with clients and our clinicians to determine who could flex their skill set and work in different settings, and sometimes it was a nurse that was working and floating to another area. It could have even been in allied.
Quite honestly, we had a nurse who used to be a respiratory therapist and so they move back down into the our to help with respiratory therapy and then even physicians in advanced practice professionals were able to flex you can usually of flex to an area that is lower than your license and skill set.
Doesn't always translate that in many cases, they can and so we were certainly trying to work with our clients to make sure that enabled us to pivot people more quickly.
Okay. That's helpful. Thank you one more for me.
On Tele health so.
Do you think this pandemic will hasten the adoption of telehealth visits and.
If so how do you think faster adoption of Tele health ultimately impacts your business have been getting this question more often from investors. These days and would love to hear how you guys are thinking about the absolutely well, we think it yes. It will grow at a faster rate of adoption and I think regulations have and will.
Continue to help that and we're excited about it because we have certainly made investments ourselves into telehealth capabilities. So far it's been in schools area with television and Landry mentioned that I think or maybe I did about how we've been able to pivot our clinicians quickly add to have more of them working more of our speech.
Therapists working over our Tele health platform, we expect that adoption to continue which means that whether schools are open or working online we'll be able to deliver those critical services to the students and then within strategy, we've been able to add additional capabilities and as we look forward, we're going to add more and then as we mentioned, we launched and care. So.
You see it as an opportunity and then building relationships with other tele health providers. We had this this incredible network of clinicians all across the country and we know who they are whether license and in particular, who would like to do Tele health work and so I think it puts us in a great position.
The via a partner for other tele health companies as well.
Understood. Thank you thanks, Tim.
Thank you and just as a reminder, if you wish to ask a question you May press, one and then zero at this time.
It doesn't I have no further questions Lucky.
Thank you very much while we appreciate everybody joining us today, and we will certainly be updating you on our progress as we move forward.
Safe and be well thank you.
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