Q3 2023 Cross Country Healthcare Inc Earnings Call
Good afternoon, everyone welcome to the cross country Health Jurors earnings conference call for the third quarter of 2023. Please be advised that this call is being recorded and a replay of this webcast will be available on the company's website.
Sales for accessing the audio replay can be found in the company's earnings release issued this afternoon.
The prepared remarks, I will open the lines for questions I would not like to turn the call over to Josh Bogle Cross country Healthcare is vice President of Investor Relations. Thank you and please go ahead Sir.
Thank you and good afternoon, everyone I'm joined today by our President and Chief Executive Officer, John Martin's as well as Bill Burns, our Chief Financial Officer, Dan White, Chief commercial off Sir and Mark Food Group President of delivery. Today's call will include a discussion of our financial results for the third quarter of 2023 as well as our outlook for the fourth quarter of.
A copy of our earnings press releases available on our website at cross country Dot com.
Please note that certain statements made on this call may constitute forward looking statements. These statements reflect the company's beliefs based upon information currently available to it as noted in our press release today, what were looking statements can bury materially from actual results in our subject to known and unknown risks uncertainties and other factors, including those contained in the company's 2022.
Annual report on Form 10-K, and quarterly reports on Form 10-Q, as well as in other filings with the SEC. The company does not intend to update guidance or any of its forward looking statements. Prior to the next earnings release. Additionally, we referenced non-GAAP financial measures such as adjusted EBITDA were adjusted earnings per share such non-GAAP financial measures are.
Provided us additional information and should not be considered substitute score or superior to those calculated in accordance with U S gap more information related to these non-GAAP financial measures is contained in our press release also during this call. We may refer to pro forma with normalized numbers for teens, who are most recent acquisitions as though the results were included or excluded.
From the periods presented with that I will now turn the call over to our Chief Executive Officer, John Martin's.
Thanks, Josh and thank you everyone for joining us this afternoon.
Overall I was pleased with our continued ability to execute it will remain a challenge market for the third quarter consolidated revenue was $442 million with adjusted EBITDA $27 million, primarily reflecting a tie a bill pay spreads within our travel business.
I'll touch on some of the market dynamics in a moment.
But I want to stress that we continue to manage the business for long term success and strategically positioned ourselves for future growth opportunities as we see in the market.
Unexpected travel revenue was down 22%.
Driven by boat lower rates and fewer travelers on the side.
Travel Bill rates declined approximately 8% sequentially in line with our estimates for a mid to high single digit decline it both the third and fourth quarters.
Demand for travelers remain fairly stable, who else third quarter after having rebounded from the lows be experienced the second <unk>.
Easily remain below expectations. So we do still anticipate that will pick up as we progress through the fourth quarter.
Regardless cause Elizabeth softness in demand will likely impact the number of travelers we have an assignment over the near term.
As we have pulled that previously they'll reach for older quarters have largely stabilised.
In many cases remain too low to attract candidates who needed to filter.
As a result of the pullback until later this year.
Elevated compensation expectation for nurses, we are seeing some margin depression due to a tightening in the bill pay spreads.
This appears to be a order issue of course, the industry that may persist for the next several quarters.
[noise] strives to remain competitive in order to preserve or market share while protecting our profitability.
Our local we're pretty in business is also self you can text from the surface of demand as clients the cheese.
To reduce reliance.
A little steps.
Turning to our other business lines decision staffing continued its strong performance.
<unk> revenue up more than 90 per cent you over here, putting as quickly on teeth to hit an annual rate of $200 million.
And.
An organic basis.
He was up 21% for the prior year.
Similarly to outpace below double digit growth projected <unk> industry.
Driving this was a combination of higher billable days and they approve mix of higher Bill right specialties.
As one of our fastest growing businesses, we continued to make investments.
That will fuel organic growth and Zoe the country should income for the business remains below our target we believed Ramsey.
Ramsey production.
<unk> was for the higher margin specialties will ultimately lead to improve profitability in 2024.
Within the nurses allies are education business returned from summer break it started off the new school year straw.
Mix trend of double digit year over year growth in the third quarter.
Our home care business also performed well the third word.
Single digit suppose sequentially and over the prior year.
On the back of five <unk> M. S. T way. This is your last call.
As with people, who share <unk> not only sees billions of dollars with R. M. S T account.
But it opens up a multi billion dollar opportunity and the vendor neutral space.
Since launch.
We have not only converted more than half a R. M.
<unk>.
We have one five new vendor neutral programs.
Two of which.
Live today.
This showcases our ability.
[noise] programs in rapid succession.
Our most recent Wayne is also our largest city with annual spend expect it to be in excess of $100 million once fully give some nice.
On the back of this way we are continuing to expand the functionality of the televised by introducing predictive analytics and time and attendance.
On a robust fee slight features that already includes industry, leading dashboard reporting.
Total resource.
In total travel programs Nsp's for nursing allies <unk> <unk>.
Locums Nonclinical endorsed yes.
These new add ons greatly enhanced the value proposition for our clients.
Hey, transparency has been important industry in recent years.
I'm excited to announce that we have created a new company called cross country dust.
Which introduces bill way transparency by utilizing data analytics to provide health care system independent.
<unk> wheeled time insights we.
We believe that data analytics tool offered by dusk is the first such solution in the market.
This new offering to be in bed.
With any televised or a license on a standalone basis.
He recently licensed us to a large national health care system, which is utilizing the tools to price check providers on the local regional and national basis.
This client has credit dust with helping save the billions of dollars from your current staff who provider.
So not yet it's Shirley dollars plus country is significant in terms of the value right health care system.
This further showcases our ability to develop and deploy innovative technologies to advanced health care and help hospitals rationalize their cost.
This brings you to our outlook.
Given my earlier comments on the market backdrop, including a recent demand trends industrywide pressure.
We anticipate that let's put a rescue will be between 400 and $410 million with.
With adjusted EBITDA coming in at $19 million to $24 million for.
For the full year regarding supplies will generate between 143 and $148 million and adjusted.
Presenting a marches about 7%.
As previously noted we will continue to Dallas, Texas.
Cost savings to preserve profitability, while ensuring women's <unk> capacity.
Longterm growth.
So we are not providing guidance for 2024 at this time, we have seen stability the order market.
Believe me can achieve similar margins for the full year.
Hi single digits, given the extended Tailwinds from recent words continued growth higher marching businesses like education, and home care staffing as well as <unk> driven by our technology investments and leveraging a low cost centre of excellence.
I am confident in our ability to drive long term sustainable possible growth.
And we remain focused on a piece of shareholder value to our.
Appointment.
As noted in today's press release, <unk> with solid the third quarter.
Having us to continue be purchasing or shares as well as paying down all of our day.
We will look to leverage our technology assessments and healthy balance sheet to further enhance our platform as well as diversify awfully as we filed a patient.
Oh sure.
In closing we are confident about our prospects exiting the year.
Our ability to build upon the momentum for the <unk>, which we believe will be a meaningful driver longterm revenue growth origin extension.
I want to thank our devoted employees.
Undoing hard work and contributions.
Well recently named to the top most 100 workplaces by Newsweek as well as of 2024 best companies to work for U S News and World report.
Recognitions validates our efforts to foster a culture of Bruce.
Susan and will be.
Lastly, thank you to all the professionals, who May cross country fair employer of choice as well as our shareholders for believing in the car.
With that let me turn the call over to Bill.
Thanks, John and good afternoon, everyone.
John highlighted are consolidated revenue for the third order of $442 million was within our guidance range will be a towards the lower end as our local business experienced softer demand for per diem assignments that we anticipated compared to the prior year in prior quarter revenue was down 30, and a three per cent respectively, driven in large part by the continued normalization both travel demand.
I'll get into more detail on the segments in just a few minutes.
Profit for the quarter was $97 million, which represented the gross margin of 22 per cent gross margin was down 75 basis points sequentially due to the compression of bill pay spreads in both the travel and local businesses as well as an increase in birds and such as health care insurance and workers comp.
Not to mention the industry remains very competitive and they'll pay rates will come down slightly faster <unk>. The cost of housing remains very high driving down the overall margin movie.
Moving down the income statements selling general and administrative expense was $70 million down 12% sequentially and 13 per cent over the prior year.
The majority of the decrease relates to lower variable compensation. Following the historic performance throughout the pandemic as well as the reductions in salary and benefit costs, we mentioned in prior quarters.
We continue to practically balance investments with current market conditions to maintain a profitability, while ensuring we have sufficient capacity for future growth.
Putting actions taken throughout the third quarter it into the start of the fourth we reduced our internal headcount by approximately 20 per cent since the start of the year, while continuing to invest in areas of the business with the highest growth potential as well as in our technology team.
Based on the cost of actions taken the date as well as lower compensation is associated with the sequential decline in revenue. We anticipate total SG&A will decline in the low to mid single digits for the fourth quarter.
As a percentage of revenue SG&A was 16% upfront 50 per cent last quarter and 13% in the prior year.
With the revenue at the lower end of our expectations and a title gross margin, we reported adjusted EBITDA of $27 million, representing an adjusted EBITDA margin of just over 6% for the quarter.
<unk> stated before we are managing this business long too long term sustainable profitability, which necessitated certain investments to be made to ensure sufficient capacity to achieve those goals.
Believe there's new and tell if I programs ramp and we continue to drive productivity improvements across the business that we can achieve our stated goal of high single to low double digit adjusted EBITDA margins in the coming quarters.
Interest expense was $700000, which was down nearly 80% sequentially and from the prior year.
Requirements entirely driven by lower average borrowings throughout the quarter. The majority of the interest expense report it for the third quarter was related to the carrying costs for the ABL fees on your outstanding letters or credit.
Though we ended the quarter with no outstanding debt, who may continue to see amounts drawn and repaid under the ABL during the coming quarter, but we expect interest expense will continue to decline as we're likely to be a net cash position for most of the quarter.
The effects of interest rate on the mouse drawn in her ABL was 6.8 per cent as of September 30th.
Also on the income statement, we reported $4.5 million depreciation and amortization, which continues to grow as our technology projects are completed and put it to us.
And we also recorded an additional $2 million in bed that expense, which was down 25% sequentially.
And finally on the income statement income tax expense was $7 million, representing an effective tax rate of 34 per cent, which was a little higher than we expected based.
Based on the current mix business, we know anticipate on who you are effective tax rate of approximately 31%.
Overall performance resulted in adjusted earnings per share of 39 cents near the midpoint of our guidance.
Turning two segments nurse now I've reported revenue of $397 million down 20 per cent sequentially and 35 per cent from the prior year.
Our largest business travel nurse and allied was down 22% sequentially and 39% in the prior year.
Bill rates for travel were down 8% sequentially billable hours were down 15%.
Looking to the fourth what are we expect that traveled to decline sequentially in the high single solo double digit range with rates and volume is anticipated to be down in the mid single digits respectively.
<unk> billable hours is driven by the continued softness an overall travel demand and late seasonal needs with.
With our current kapow current capacity the possibility remains that we could see sequential growth across the border is new and terrified programs ramp and seasonal orders are received.
Our local are pretty in business continues to feel the impact from this office and demand with revenue down approximately 14 per cent from the prior quarter and 32 per cent from the prior year.
The majority of the decline comes from a reduction billable hours as rates were down about 4% sequentially and over the prior year.
Also within the nursing Alley segment, both our education in homecare stabbing businesses reported year over year growth.
Our education business, which was impacted by the sound break is poised to see a strong fourth quarter returning to hire double digit growth.
And finally physician stabbing once again delivered robust performance reporting it $46 million in revenue, which was up 92 per cent over the prior year.
Excluding the impact and the mental noticed acquisitions completed last year, the business was up 21% average.
Revenue per day filled continue to improve as we focus on higher rate specialties and can do too experienced softer grows.
[noise] stronger growth across the local specialties relative to lower pill raise specialties within the past practices.
Turning to the balance sheet, we ended record with $40 million in cash and no outstanding debt.
With the help of our balance sheet and strong cashbox wearying, well positioned to make further investments in technology and acquisitions as well as to continue repurchasing shares under $100 million share repurchase plan.
From a cash flow perspective, we generated $70 million in cash from operations in the third quarter, which represented 260 per cent conversion on adjusted EBITDA.
On a irritate basis, we've generated $236 million in cash from operations by far our strongest performance and a nine month period.
Driving this performance was strong collections business continues to normalize.
So it was 67 days down five days since the start of the year.
Goal remains to bring DSO below 60 days, which is more in line with our historic performance and we believe that we can continue to make progress towards that in the coming quarters.
I mentioned, we've done a good job of collecting on our receivables and believe opportunity remains for further improvement.
Cashews in investing activity was $3 million, reflecting investments in our technology initiatives from a financing activity perspective, we pay down $30 million on the ABL and repurchased an additional 617000 shares.
Brings me to our outlet for the fourth quarter regarding to revenue between 400 and $410 million, representing a sequential decline of seven to 10 per cent.
Predominantly by the expected decline in both rates and volatile hours for travel.
Regarding to an adjusted EBITDA range between 19, and $24 million, representing an adjusted EBITDA margin approximately five per cent at the midpoint of guidance.
As John mentioned previously we're managing the business for longer term success, <unk>, who is single quarter and continue to believe that we can achieve and maintain high single digit adjusted EBITDA margins.
Adjusted earnings per share is expected to be between 25, and 35 cents based on an average share count of 34.4 million shares.
Also assumed in this guidance is a gross margin between 21, and a half and 22 per cent interest expense of $500000 depreciation and amortization of $5 million stock based compensation of $2 million and an effective tax rate 31 per cent and.
And that concludes our prepared remarks that we would know I took more into questions operator.
Thank you we will now begin the question and answer session. If you would like to ask a question. Please press star one please repeat your phone to record your first and last name clearly when prompted once again that is star one to ask a question and our first question is from Brian <unk> with Jefferts Jeffries. Your line is open.
Good morning, guys are good afternoon, I guess my first question is I think about the seasonality of demand and what you're seeing in queue for and maybe weighing that versus just a fundamental demand for <unk>.
<unk> contract nurse staffing how're, you thinking about those dynamics going alright, maybe you're just looking at it even past few for.
Hey, Brian This is John.
Good evening to you as well so what we're looking at a demand in the fourth quarter I think we'll start back in April we saw the low of demand hit the beginning of April this year than we saw a demand.
Check up to today about 30%, where we sit up from where we were at a low of April.
About 7% from August now, we were all anticipating much larger volumes of winter demands it never really materialized and so the majority of the orders that we have now up 30 per cent from April.
<unk> the overwhelming majority are non which need your core staff and so we really feel at this point demand has stabilized in the market moving forward and while there may be a little bit of winter orders in these numbers, it's it's not more than five per cent and this and the numbers that we have right now and that will we continue to be stable and orders.
Moving forward and again, maybe a little ticked down all these went to orders that are in the mix of the orders. We currently have.
Got it and then maybe it wasn't thinking about your margin commentary for Q4.
As I think about what you had previously.
<unk>, yeah, I like to stay in the double digit margin levels, obviously not there today.
Or should we be thinking about the ability to drive it up.
Let me think about 2020 at four am maybe they'll just any comments, who can make in terms of how we should be modeling.
The thing about it is the model 2024.
Yeah sure Brian Good evening to you. So I think when you look at the third quarter's performance the pay bill spreads were a bit more compressed and we would have anticipated. It started a quarter at the function of a few things you know there's a lot of still heavy competition for the candidates fell right, though they've stabilized on open orders still seemed to be a bit.
Lower than where we'd like to see them in order to generate the margins, we'd like but really when you look under the under the Hood, it's not that the bill rates have come down to pay rates are coming down with the housing costs still kind of remain pretty stubbornly high and it's also a mix of where we are sending our connection so there's a little bit of that going into the pay bill spreads. The other things that really impacted the quarter we had.
Who would you have an uptick in health insurance Uhm, a few more people went to the doctor and what is anticipated to our health costs rose a bit more than we were looking forward to and then we also had some actuarial adjustments to workers comp. So those are the three big drivers to kind of 75 basis point decline, we saw sequentially and so we're not modeling that to bounce back going into Q4.
We moved through 2024, I think there's some opportunity that table spreads could improve I think the mix of the businesses as Locums continues to grow home-care continues to grow well education high double digit growth, which is expected for the fourth quarter going right back to the trajectory they were on.
And then you move beyond that just okay. So what else drives the margins well <unk>, we talk about this numerous times, but obviously the more we can grow spending a management from the vendor neutral programs you got the capture on that spend but then you also have the fees that are attracted to the portion you're not capturing so yeah. We just had our biggest win 100 million dollar account we're really.
Cited about that that account is actively and implementation hopefully probably the logical if it does le Pew for only Q1 at this point in time, but it's it's moving forward in the in the queue. So I think that's sort of opportunity and then we still have a handful of accounts that have not converted I'd say a handful.
Electively few but there are some of the larger ones that are on third party tech that we just had to kind of delay because we've been kind of busy implementing the other new wins that we've had so we have you talked about we've always said, we would prioritize new wins to migrate to an <unk> before we kind of move old programs off but that that's another opportunity. If we go into the new year, but realistically beyond the Max beyond <unk>.
Hi, Thank you start looking at SG&A and I can tell you there's a real concerted effort internally for us to look at how do we become more efficient as an organisation how do we improve productivity across the organization. There's a lot of leverage we can poke uhm again, we've talked about this a little bit as well we have a nice a very good center of excellence in India that we can certainly leverage more than we have we have a few hundred people there today.
Hey, the idea here is there's much more we can do with that group. So we're looking at that I think also then we've got the back office systems in the Middle Office systems that we've got that longterm Oracle project that we've been doing that'll be ramping and going live throughout 2024 and into 2025 that will drive some efficiencies as well because today. Unfortunately, a lot of our middle offices on.
Different platform, so that means billing collections cash apps payroll, we're all done through different platforms.
Migrate to one common platform will have more efficiencies as well, but John anything when it's all in there, but yeah. We just add the any investments, we're making into technology with an <unk> an experienced and as we're trading 830, and we have an integrated system that allows clinicians to self service more and more that will also create some efficiencies are on our <unk>.
<unk> production side as well.
Our next question is from Kevin Fischbeck with Bank of America. Your line is open.
Great. Thanks, maybe just to follow up on that because it looks to me that you guys talked a lot about your bill pay spreads.
And a quarter, which are obviously a pressure, but it does look like you know since.
You know the revenue peaked in Q1, you've had six straight quarters of sequential declines in revenue, but you've also had six straight quarters of sequential increases of SG&A as a percentage of revenue over that time. So it feels like most of the marching compressions actually been on that.
<unk> no, but you've done a great job taking dollars out. So the dollar number is certainly trending down as a percentage of revenue is not coming down fast enough relative to the revenue draw so like.
How do you think about that going forward, if if bill rates or you know total revenue drop like is that where the deleveraging happens what where where is the biggest opportunity. If you think about high single digits. You know margin sustainably where does that G. N a number have to be to make.
That.
That all work out in exactly kind of how do you get there if the revenue run rate is in.
No 1.7 1.8 billion dollar range.
Sure well, Kevin is spelled a couple of things first yeah, you're right. The SG&A as a percent of revenue has picked up it's more a function of the revenues come down, but it's been a rape issue more than anything else and so you know the conditions you still staffing those questions you still have the body count associated with that so everything from recruitment to account management to the folks that are responsible for onboard.
<unk> cetera. So you you wind up having that issue of the declining built the average revenue per FTE simply because of the bill rate compression that we've seen uhm, but yeah. Looking ahead I do think that the SG&A is the number that we're gonna have to squeeze on and continue to find the opportunities to drive it down.
Barring anything else if if the margin remained at 22 per cent you had to put eight per cent you could easily see it that'd be 14 per cent. So we'd be 200 basis points off of that Mark right now for where we ultimately want to get too. So that's that's what were lining up to really go after as we move into 2024 Uhm I will say you further onto the last question for Brian We've taken a lot of Costa actions were.
Taken out 20 per cent of the head count since the start of the year.
All with a very I I would say it was it has not been a broadsword approach, we've been very targeted and focused on where we reduce.
But it's important to understand we're still have investments in there alright. So we're still spending is a fair amount of I T expense tied to projects from a consulting in professional fees perspective that doesn't get capitalized and so that's running through there you know, it's probably north of well over a million dollars a quarter. That's in there just from third party spend maybe a million five that's in the App operating expense from.
From projects and then you've got other areas that we just haven't scaled down because we still believe in them as opportunities for growth and so homecare education. The businesses, we talked about their their physician staffing is are still invested heavier than that we're not a full capacity to say it another way.
Okay, Great. That's helpful. I guess as you talked about the demand I think she said five per cent of the orders were kind of winter orders, where where would that normally be at this point in the year.
It would be somewhere probably 20% wonder whether 20 per cent 20th but you know the difference is Kevin.
You'll be getting the orders of the winter needs and then you fill them because what happens is a start start happening from October all the way through January February but it was what your needs. So the five per cent is more of a stat and a five per cent is is you also mentioned in the prepared remarks or one of the orders were seen about 50 per cent of them aren't.
At the bill rate that <unk> would commiserate with the.
Pay raises or exceed nurses were expecting and so somebody who what we're seeing is we don't see <unk> click return on the orders and what happens is hospitals or weeding until.
They are.
We're beyond demand beyond what they need to then increase the bill rate to attract the supply and so what we're seeing is not as many order. So it's a combination of yes five per cent and probably it's about 20 per cent or 20th and 25 per cent of those orders or would you orders, but this orders turned fast they come in and we start booking ma'am in July August September October.
We haven't seen that we're seeing around five per cent and they're taking a little longer to bulk if that makes sense.
Okay great.
And then I guess you know as you think about next year, you know again you guys aren't.
Giving guidance here, but I guess like you feel like the the queue for number is like a good basic kind of sort of run right or is there still anything got it into your would you say like hey, we still a moving target as far as where demand Bill rates go you know and anything else. We gotta think about as far as what Q4 looks like and why that may or may not be.
A good starting point for next year.
Yeah, Kevin it's still again I'll I'll start on this and I'm sure <unk> you know when you look at the fourth quarter and and I I do think it's a good jumping off point as you look to the next year, they're both headwinds tailwinds and just to put that in context. When we look at the travel Bill right and we talked about there's a lot of stability in the open order rates and there's a lot of stability for the last four or five months.
On the rates that we're locking at the <unk> from the rates for locking up to what's implied in the guidance, there's probably another low single digit sequential decline in bill rates on travel guide you'll go into the first half of 2024. So you got a little bit of a headwind. There then it really becomes how fast the other programs really start to ramp from the M. S. P wins in the B M. S wounds that we've had.
But you know don't anything once over there you know I think you covered until I think I think there's puts and takes to everything I think what we're very encouraged thigh are those five <unk> wins, we had this year, which are ahead of our schedule waiting that 100 million dollar deal that written hunting right now will give us an opportunity to capture 20 to 40 per cent of that.
In our staffing side and then in addition, we did win five more M. S. P's for our home health business and and then we also want to Locums M. S. T and we had crossed sold to our current existing M. S. P's three <unk>. So you know one of the things also.
Just looking at our overhead one of the things where you continue to invest in is it still mentioned technology, because we're never done investing in technology.
Obviously with <unk> <unk>.
But we're getting we're getting a lot of.
A lot of good momentum within <unk>, but also with our data aggregation services or dos that is truly be first what we believe is the first technology in the industry that hasn't true Billy transparency, that's catching on so we're investing in technology and of course with that comes investing in marketing to get the word out of discrete tech.
Now that we have that really we believe is industry changing and then investing in sales cause. It all goes hand in hand. So we can continue to invest in those areas and that will have some you know what we believe will have upside for us in 2024 at the end you Wanna add anything to that sure. Kevin. This is Dan I just think we should also.
Look at.
Our sales final is 25%.
Going bigger going into this quarter than it was even last quarter and last quarter was the biggest one we've ever had so the opportunity. That's ahead of us continues to be really really strong.
One of the things that that I am saying is that customers are being a lot more selective we give them way more options than historically, we have so you're not only M. S. P. R V M S. But some customers who are looking at self managed programs, where they just take the technology.
G and manage it themselves.
So we you know we see lots of opportunity going probably the biggest area of interest in the last quarter has been around our I R. P technology.
That allows us to help them manage their own course staff first.
Using experience our mobile app.
And then add in.
Those odd mentored staff that we can provide on a contingent basis and and so we're really starting to add more value into the whole workforce than we ever have.
From my point of view I think that's what's really going to begin to make a difference in our <unk>.
Alright, great. Thanks.
You bet.
Our next question is from Trevor Romeo with William Blair. Your line is open.
Good evening, Thanks for taking my questions here first just wanted to ask on the supply side I guess, what are you seeing in terms of willingness for nurses to either move into travel rolls or kind of continue traveling you know it seems like hospitals have been pretty successful reducing turnover just curious kind of what's extent you're seeing.
Maybe travel fatigue with nurses, who did travel assignments, but but maybe now have less incentive to travel given the decrease in pay rates.
Hi, Trevor this is John good evening.
You know I think really what we're seeing when you look at the macro numbers and he was really looking at the macro numbers and looking at if you look at the <unk> jolts data of openings to hire openings to hires and that's I think at 2.27 and it was I think 2.27 I think the adjusted from down from 2.30 down to 2.27 for for August.
What we're seeing is that hospitals are still having a hard time hiring nurses and there still is this the stomach shortage of nurses that is not going away and I think they even though well well openings declined a little bit higher self declined even more than the openings. So it's hard to hire nurses now yeah, we did have quite a bit of labor disruptions where.
We're seeing pay increases happened on of course to the core staff sent me a soda a little travel down but.
We've said before what do we need to look at the contingency labor and health care and the travel nurse in particular in trouble Allied we're just a a number or a percentage of what the base pay rates are so when hospitals need to attract clinicians they have to bring out a certain pay rate that will have a compensation package that will <unk>.
<unk> ended up conditions. So what we're seeing is as and we're seeing the clinicians as we mentioned about half of our orders or at rates that are truly not available for the <unk>.
Hospitals start to.
Want to utilize more of these open orders until he's open orders.
Would imagine wanting to see you know what <unk>.
There's the opportunity for them to have those lowered the rate increase the <unk> are available and so to answer your question.
I'm not seeing a lot of nurses leave Rob a nurse right now I think maybe six months ago nine months ago as the market was change. It we saw a bunch of travelers go permanently saw the market can track, but right now with a stabilization and amount of open orders, we have the stabilization of of the Bill right, who also creates a stabilization and.
Pay rates, which are keeping those travel nurses within the industry still.
Okay, Oh, and and actually one other thing I would add to that is one of the things we've seen in a renewal rate. So that's how we track on Ah Ah Ah <unk>, who has a sign with US and then takes another assignment with us or renewal rates are has been very steady for the last several months and and that and that percentage is at pretty much the store.
<unk> <unk> well historically, we've been at our high.
Okay. Thanks, John that's that's helpful. And then uhm on your M. S. P contracts, how long has your capture right then trending lately you know given the step down and and orders are you seeing opportunities to boost that capture right to provide some downside protection and how do you think about kind of balancing that with retaining supplied for <unk>.
Central New orders.
Sure. So we're very careful about our capture right and we're very calculated and strategic about it historically, we averaged somewhere between 65 and 70 per cent, capturing and we're right in that market I think we were 66 or 67 per cent.
The last couple of for the last couple of months and part of that is.
We could close his orders to suppliers, but we don't want one what do you mean the opportunities that we have is to make sure that we have a strong supplier network and that we truly are a partner network with them that we're partnering with them and giving them the opportunity to fill orders because at the end of the day.
More supplier quite we can have it gives us the opportunity to have our suppliers help fill our current M. S. P's and then have us at cross country have excess supply to go out and win new M. S. Ts.
Alright, thanks for the color.
Our next question is from Toby summer with choose insecurities. Your line is open.
Thanks, I wanted to make make sure I understood your comments about.
High single digit EBITDA margins still sort of achievable eat what kind of revenue in gross margin D assume and that comment that would yield that and.
Is that come in applicable to 24 or is that sort of a longer term vision.
Hey, Toby itself. So I guess, it's I I wouldn't say, it's a longer term vision, but I mean, it's certainly not a one two out kind of a number I think that there's a handful of things we do want to see your organic top line growth, obviously, a little bit of gross margin improvement would be helpful. Whether that's from fruit mix or bill pay spreads or <unk> et cetera. So I think there's a little bit of.
That but we're not counting on massive on any one of those in a in a more significant way than the other I think it's about Ah multiple multi.
[laughter] faceted approach of getting to that answer I think we've got to do all of the above we talked about growing margins, we've talked about tightening our SG&A and getting more efficient. So there isn't really one answered that I'm Gonna 0.2, that's gonna say is more important than another I think we've got to do it all.
Okay that makes sense. So if we're gonna have you know potentially bill pay spread compression and you're gonna balance sort of profitability and.
Defending market share than you know.
The outlook for a high single digit margin could be it.
Quarters away not not just a single quarter away right.
I mean, it <unk> it depends on how the business really performs as we move into early 24, right. So if if the larger programs like.
The one we just talked about 100 million dollar program if that ramps. It has the possibility of potential to egg at $10 million annually and the bottom line right I'm, just broad stroke and do you think about the profitability of how that works with a vendor neutral. So that's a couple of million dollars a quarter right. There just from having that kind of a program called wives. So you've got that opportunity I think the the opportunity of getting S.
And a down further.
<unk> I was when I said earlier, we are laser focused on his right now we've got a company wide initiative to look at how do we.
Take our manual processes and bring them to a place where rita automate them or bring him to the lowest cost possible right. That's what we're looking to do so I wouldn't say, it's it's far far into the future I mean, I I I'm not gonna go out and put a quarter out there as to when it exactly happened, but it's certainly possible in 24 to see us get back to eight per cent, maybe maybe not for the full year, but I think.
Certainly within 24 and Toby this is John I would just add that we're going to manage the gross margin to the EBITDA, which really means that we'll be looking at that SG&A number to make sure that we get to that die single digits and and that's how we can be managing the business and what that means is as we're investing in technology.
And sales and marketing as we're <unk> you know what some of the things that we've done it as Bill mentioned, we reduced our workforce bites by 20% over the last year.
What we've done is we've also kept enough that we believed as the market rebounds to 2024, we want to be in a position to capture the upside we don't want to go solo that we couldn't capture the upside of that and of course, we can continue to flex up or down depending upon where the market half what happened to the market and the over the next six months nine months as we'd like to 2020.
Four.
Mmk.
Could you comment on sort of the competitive pressures.
For market share and.
Gross margin and bill pay spread I guess, we're all sort of intertwined.
Who.
What is the.
The dynamic there is others are probably feeling the same thing and feeling like they need to try to.
Sure to cover their own Jean a percentage, who would have enough revenue on top two.
To kind of hit their margin of profit goals.
Hey, Toby this is Johnny get all starting to have fill <unk> and we're calling to add but yeah. There's definitely more pressure on margins as we as we saw a demand drop right from where we were in Covid, but I think also there's only <unk> you know there's.
There's always all amount you can drop right. So you've only drop illegal mountain still retain profitability and of course there'll always be some you know one of the competitors out there that will go very low, but but it happens is they aren't usually able to bring enough supply when they go very well and so you know we think that there'll still be pressure on margin you know.
We entered in 2024, but I think we've done a relatively good job of managing that we'll be able to meet our needs.
<unk> M S P clients and still really hold our margin in nursing allied fairly well compared to what I'm seeing out there in the market and it told me I would just add you know we look at we look at.
Advertise pay packages nationwide market by market and we benchmark ourselves and I think you know we're we're certainly competitive in every market. We're in I would say that there are competitive out there who are looking to offer you know.
What I would say are excessive pay packages that are driving margins down, but it's not like to John's point really sustainable and we're not we're not jumping on that bandwagon at this point in time, it's kind of like you look at it and say well what would it take if we had to go to that point and it's and it doesn't seem like they're they're getting a lot of sure. So I don't know how prevalent.
Prevalent that really is that they're all doing this.
Industrywide cause we we can see it's very very few there are there are increasing the pay packages in general, but there's a handful that I've gotten a little more on the aggressive side that makes it a little bit harder for us as well. So I think it's a highly competitive market when you're looking at the <unk> you know so we're doing what we can to manage our overall gross margin.
Thanks last question for me if I could in your fourth quarter guidance does that include any labour disruption revenue and if so is it you know kind of bigger or smaller than what would average be included in the quarter on average over time.
It's not really meaning it's not that material Toby used to be honest with you I mean, we we we support them when when we can but it's not a it's not going to be a material number to our quarter.
Thank you very much.
Our next question is from Kevin <unk> with Barrington Research. Your line is open.
Good afternoon.
On the five wins for <unk> that you mentioned.
Excuse me think of those as competitive takeaways.
Yes, 100 per cent those or competitor takeaways that that those are not new new new space or new green space.
Okay, great. So I guess this is to take away from that and you. You mentioned you were a little ahead of schedule that the.
The offering continues to resonate well in the marketplace.
Oh, yes, it very well not a matter of fact.
Kevin I was out at the a M C C magnet conference in Chicago, a couple of weeks ago and it was interesting to see you back we had from our current clients who were attending the conference just coming up and giving a testimonial is about.
<unk>, how the technology has truly made a big impact within their organizations. It helped him with the reporting helping them with the insights the data analytics being able to get the reporting on their phone in real time, when they needed and what they're always most impressed about is how are are dashboards or actually built right into into.
R. B M S that when they're actually putting in order in the dashboard you're right. There are they actually put the order in for the dashboard and so <unk> and the other people that we got were from prospective clients. They were just coming up and looking at our technology and saying Wow. This is nowhere near what I have with my current my current vendor and so we're very encouraged by that and you know it's almost like we're doubling down.
<unk> I'm getting the word out there and that's why we talked about investing so much in sales and marketing because we know our technology you know people try to imitate it but nobody can duplicate what we've done with our proprietary algorithms with how we how we code in this this technology, it's it's very different than a lot of what what's out there in the.
Market and as people tried to come and compete with us.
We already are starting to build the next generation of our technology. That's one of the offers we put out with would you tell us a little about it are prepared remarks was our data aggregation services as I mentioned earlier. It is truly be first transparent bill right technology, we believe in the industry.
Seven this is Dan I think I'd like to add a little bit too just as a reminder, I know, we've we've talked about it on previous calls but.
There was a prolonged period of time when health systems were not going out to market for their b M S or their MSP programs and so we've seen tons of activity and I don't see that swelling anytime soon.
<unk> you know evidenced by the remarks I made about our sales pipeline.
Another way for you to think about this is.
Our existing customers are also buying more and so just quarter over quarter, we had a 40% increase in.
In service add ons to those same customers and a lot of that has enabled by this technology. So <unk>.
Adding low comes as John pointed out earlier or adding.
Interim leadership or R. P O or these other things happened so much faster and the lights the customers in a way because they can see the impact so much faster with all the transparency.
And then they start telling their friends. So you know.
I think this is.
We have an opportunity with this abundant amount of activity in my opinion, you know by the time. This is done well we'll win more than we loose.
Okay, well thanks for the insight that was helpful. I will turn it over.
Our last question is from Bill Southerland with the benchmark company. Your line is open.
Oh, thanks, very much for everybody.
I wanted to get a clarification, if I could something that's going to you said bill about the the rates you're looking out blocked in right.
And you said that could be a bit of a <unk>.
I guess I guess I'm just I just wanted to clarify that that's.
Kind of which are available yeah, no worries good evening to you. So if you think about what I said, we have open water rates and we have the rate at which we're locking which I can sort of like the market clearing rate the rate that who which we can get a clinician to the bedside.
And we seem stability in both that's the good news like both of <unk> are no longer continuing that downward trajectory. The open order right in the library are moving kind of sideways up or down one or two per cent nothing nothing that significant but we're still blending down the overall portfolio. So when you look at because we've been locking at this rate for so many months now the fourth quarter is good.
Much much closer to the average bill rate, you'll see for the fourth quarter will be very close to what we're locking up and my point was that it's just a handful of points now two three percentage points from from where we expect the fourth quarter to blend out to be to what that could look like in the first quarter sounds anything else happening on the bill rates. So that's all it really was was just about the portfolio.
Abridging down to the current lock rates, we're seeing in the market.
And then and then and then just to clarify on how you're feeling about just the numbers that you can.
You got tons of orders, but in terms of still right do you have a sense of what that's a trend like in the quarter into next quarter.
I mean, who you know along with bill rate stability, we've seen relative stability in our production as well. So when you look weak over a week in terms of what we call that we spoke cause we go each week. We go through at a recruiter level, we look to see how much we are adding to the <unk> to the to the backlog of revenue and so that's kind of seeing some stability as well I think the key to seeing an uptick in.
We've been asked this before but if if bill rates would increase would would we see a bill rate increase or would we see a volume increase I think it's.
More likely we would see a volume increased and what I mean is it the average open order right where to start to re rise a little bit we would be able to fill more of the orders. So that that's really what it comes down to it. It's it doesn't need to be a wild bill right swing for us to start to feel more it's just that the over the open order average rate if that inches closer to what we're seeing the market close.
Towards we could start to see volume growth.
If you have any color on that no, but I think it's interesting to point out that a recruiter productivity has been consistent and at the same level for the better part of two quarters now so even though there's been bill right pressure and orders that are below market rate. We're seeing the same productivity. That's why it's encouraging in terms of a volume.
Perspective moving forward.
Okay. That's good so I'm I'm thinking it feels like with all the puts and takes that.
Four Q I think someone who says that a good starting point and we've been thinking about three Q as a trough and and maybe.
Maybe it's not.
You know to.
Think about four Q as necessarily that but.
It's sort of a baseline does that does that kind of work.
He was the best way to think about it.
Yeah, I think so I think you'll you'll have assumptions till they are into that you know like we talk about puts and takes as you move through 2024, but it starts to feel like that's a good starting point as you move into the new year and for all the reasons, we talked about the fact that orders of remain fairly stable and actually picked up over the last couple of quarters Bill rates have levelled off it feels like we're.
Getting to that point of some stabilization in the market and you know we we will look to go off of that of course yep.
It's zero.
On cross country Dot just curious about the monetization model for that if there is.
Something significant in that way.
Yeah, you know what really what this is doing is there's two different types of ways to monetize it we can sell it directly to a to a to a non client of ours and I deal with that is we want to make sure that there was transparency in this industry about bill right. Just like we brought just break we brought transparency in the industry, what transparency punched the pay rate over the last <unk>.
Six years, and so part of that is to show clients that how they could rationalize the costs by understanding what the market rates are and then they look at and what <unk> does is it shows them the low medium and high rate ranges from a local regional national level and then the hospital can make sure that.
They can choose a they can obviously select what type of re bayfield to attract which would attract clients in their area and so that's one way we can rationalize but when when you can monetize it by selling it directly but it also allows us to start having conversations with these non client of ours to show them really how a how late we can help them.
Save money and then number two we also in bed and kennan bed dos in two in <unk> and that is also to be monetize as we embedded into an alpha <unk> a separate product <unk>. It can be embedded into <unk>, but we would monetize that when it's embedded in.
Okay.
Oh, the last one for me the five wins, you've had Indian terrify, what's the aggregate dollars on that and told them.
Yeah, you know what we we haven't given out the numbers yet because it's <unk> as we're going through even the one that's greater than 100 million.
We're implementing them will actually get to see the actual dollars and the actual sent through there. So as well we will give the numbers in future future calls, but right now we're letting <unk> first five that especially cause we're implementing three right now come in before we give that total dollar.
Okay. Thanks for everybody.
Thank you.
Ladies and gentlemen, this does conclude the Q&A period.
Now turn it back over to John Martin's for closing remarks.
Thank you operator in closing I'd like to thank everyone for participating in today's call and we look forward to updating you on the progress of the company on the next call in February.
Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation you may now disconnect.