Q2 2024 Cross Country Healthcare Inc Earnings Call
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Good afternoon, everyone welcome to cross country Healthcare's earnings conference call for the second quarter 'twenty 'twenty four please be advised that this call is being recorded and a replay of this webcast will be available on the company's website details for accessing the audio replay can be found in.
The company's earnings release issued this afternoon.
Joshua David Vogel: At the conclusion of the prepared remarks, I will open the lines for questions I would now like to turn the call over to Josh Vogel Cross country healthcare as a vice president of Investor Relations. Thank you and please go ahead Sir.
Speaker Change: Thank you and good afternoon, everyone I'm joined today by our President and Chief Executive Officer, John Martin as well as Bill Burns, Our Chief Financial Officer, and Mark who is president of delivery. Today's call will include a discussion of our financial results for the second quarter of 2024 as well as our outlook for the third quarter, a copy of our earnings press release.
Speaker Change: 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.
In our press release forward looking statements can vary materially from actual results and are subject to known and unknown risks uncertainties and other factors, including those contained in the company's 2023 annual report on Form 10-K quarterly reports on Form 10-Q, as well as in other filings with the SEC. The company does not intend to update guidance or any of its.
Forward looking statements prior to the next earnings release. Additionally, we reference non-GAAP financial measures such as adjusted EBITDA or adjusted earnings per share such non-GAAP financial measures are provided as additional information and should not be considered substitutes for or superior to those calculated in accordance with U S. GAAP more information related to these non-GAAP.
John A. Martins: Financial measures is contained in our press release also during this call. We may refer to pro forma normalized numbers for teens, who are most recent acquisitions, though the results were included or excluded from the periods presented with that I would now like to turn the call over to our Chief Executive Officer, John Martin's.
John A. Martins: Thanks, Josh and thank you everyone for joining us. This afternoon as you can see in today's press release, our second quarter 2020 for revenue and adjusted EBITDA were near the high end of our guidance ranges.
Speaker Change: Selecting our continued ability to execute in what remains a challenging environment, our core nurse and allied.
Speaker Change: Specific to travel we have started to see some positive signs in the market.
Speaker Change: After 12 weeks at the end of the first quarter travel demand has been steadily rising for the last couple of months and today is up more than 20% relative to the start of the second quarter.
Speaker Change: This increase in orders has been fueled in part by a bounce back in the market as well as the impact from recent MSP wins, but it's starting to ramp.
Speaker Change: As a result, we are also starting to see weekly production improve and so that will have a minimal impact on our third quarter. We believe that we are nearing an inflection point to begin are we growing our professionals on assignment as we enter the fourth quarter.
Speaker Change: With our sales pipeline remains robust, we anticipate sequential revenue growth in the fourth quarter.
Speaker Change: We also continued to see strong momentum across the rest of our portfolio, notably in Locums education, and homecare, coupled with our strong balance sheet I believe that cross country is very well positioned for long term sustained profitable growth.
Speaker Change: Don will get into the numbers in a few minutes, but I'd like to take a moment to comment on our second quarter results.
Don: Revenue was on track with expectations for both weight and body.
Don: And as expected our actual average bill rates declined modestly as we continue to blend down towards quite markedly on open orders.
Speaker Change: Similar to the recent increase in demand. We've also seen a modest improvement in our open order wheats.
Speaker Change: From a bill pay spread perspective, we remain in a very competitive environment for talent.
Speaker Change: And they'll open the order rates are up slightly lodging subsidies and insurance costs are continuing to pressure our margins were.
Speaker Change: Regardless, who will remain competitive.
Speaker Change: N P leached preserve our market share and ensure our clients how clinicians that's at that site.
Speaker Change: Turning to the physician staffing we once again delivered a strong top line reporting a record $48 million in revenue for a single quarter.
Speaker Change: Which was up 7% over the prior year and 3% sequentially.
Speaker Change: Commission income also increased both year over year and sequentially, reflecting.
Speaker Change: The improved mix and proactive cost management.
Speaker Change: Our home care business was up double digits year over year and mid single digits sequentially.
Speaker Change: Driven in part by recent wins and program implementations that we hire.
Speaker Change: On prior calls.
Speaker Change: Since acquiring the business in 2021, we have doubled the number of these programs nationwide while more than tripling the number of locations, we serve and as a result, we will continue to make investments in this business.
Speaker Change: Lastly, our education business continued to perform well in line with expectations.
Speaker Change: Revenue was up modestly year over year in the second quarter, though down sequentially due to the start of the summer vacation and chip.
Speaker Change: We continue to believe this business can sustain organic growth as we expand our client base and geographical footprint.
Speaker Change: Shifting gears I wanted to give an update on our cost actions.
Speaker Change: As noted on our last call. We are focused on remaining competitive while being mindful of preserving shareholder value and profitability.
Speaker Change: Accordingly over the last 18 months, we have been proactively adjusting our cost structure to align with the demand environment.
Speaker Change: In 2024, we've reduced our U S head count by more than 20%.
Speaker Change: With a portion of these reductions made possible by expanding our operations in India.
Speaker Change: Today, we believe we have the right level of capacity in place to fuel organic growth.
Speaker Change: As market conditions improve.
Speaker Change: So we've been very focused on driving cost out of the business. We continued to invest heavily in technology.
Speaker Change: The most impactful of these investments remains our client facing workforce solutions platform in telephony.
Speaker Change: Whether clients are managing their labor force Vms MSP or multiple programs across their enterprises, we're navigating pretty damn shifts coordinating internal locals arranging locum tenens placements in kilobyte streamlining their processes saving them time and resources.
Speaker Change: As I like to say, we've never done investing in technology and this is certainly the case within teleflex.
Speaker Change: We are focused on continually enhancing the platform with the latest features and functionality, including AI and predictive analytics.
Speaker Change: And we are collaborating with our clients to tailor solutions to meet their specific needs.
Speaker Change: Showcasing the flexibility and agility that is.
Speaker Change: Since its launch nearly two years ago.
Speaker Change: <unk> has been critical mass and wide adoption.
Speaker Change: We now have more than what are your clients across 500 facilities with more than 5500 active users.
Speaker Change: <unk> also continues to fuel our pipeline with opportunities in various stages of the sales cycle.
Speaker Change: I'm pleased to announce that we have.
Speaker Change: Two new awards in contracting with a combined estimated annual spend under management of $70 million.
Speaker Change: Well both programs will utilize the telephonic, it's worth noting that one is a vms program and the other is an MSP.
Speaker Change: Which is reflective of a more balanced demand environment, we see in the market today.
Speaker Change: I'm also excited to announce when we have our first SaaS based subscription with a third party, who is utilizing our <unk> technology for the delivery of their services.
Speaker Change: Additionally, I'm happy with the speed of execution and implementation from the team on all of our current programs in flight. So we have highlighted last quarter.
Speaker Change: Now turning to our outlook.
Speaker Change: Given that the travel demand backdrop that persisted through much of the second quarter as well as the normal seasonal impact.
Speaker Change: Asian business for the summer break we end.
Speaker Change: Chesapeake that third quarter revenue will be between 305 and $315 million with adjusted EBITDA coming in at $10 million to $13 million.
Speaker Change: While our goal remains to achieve a high single digit adjusted EBIT margin, we still expect mid single digits in the near term, while ensuring we have sufficient capacity in place to grow once travel market duplex.
Speaker Change: We believe we can expand our market share by leveraging client and candidate facing technologies as well as our expertise in delivering high quality clinical and non clinical recessions.
Speaker Change: We also envision a strong runway of growth or other lines of business, notably welcomes home care and education.
Speaker Change: And of course, we are focused on putting our strong balance sheet to work, we have a comprehensive capital allocation strategy that emphasizes the balanced approach, including investing in key areas for growth, particularly in technology as well as executing share repurchases.
Speaker Change: We bought back almost 1 million shares in the second quarter, bringing the total to 5 million shares repurchased since August of 2022.
Speaker Change: Additionally, we are actively exploring M&A opportunities that will help to further diversify our business complement existing lines of business and augment our technological capabilities.
Speaker Change: All of which can enhance our value proposition and improve our margin profile.
Speaker Change: In closing I'm encouraged by the recent trends in travel.
Speaker Change: I believe that the market is nearing an inflection.
Speaker Change: Coupled with impactful recent wins and the momentum in many of her otherwise business. We have a solid foundation in place for long term growth and improved profitability.
Speaker Change: None of this is possible without our dedicated employees.
Speaker Change: Thank all of you for your hard work.
Speaker Change: Last quarter, we won several most loved workplace awards and it Humbles me, but we have such a deep pool of talent does make cross country their employer destination of choice.
Speaker Change: I also want to thank all of our health care professionals, who continued hard work and contributions as well as our shareholders for believing in the company.
Speaker Change: With that let me turn the call over to Bill.
Bill: Thanks, John and good afternoon, everyone as highlighted in our press release performance for the second quarter was in line with expectations with revenue and adjusted EBITDA near the high end of our guidance ranges.
Bill: Consolidated revenue for the second quarter of $340 million was down 10% sequentially and 30%, 37% over the prior year, driven primarily by declines in travel and local assignments in large acute care settings I'll get into more details on the segments in just a few minutes.
Bill: Gross profit for the quarter was $71 million, which represented a gross margin of 28% gross margin was up 40 basis points sequentially due primarily to the impact from the annual payroll tax reset at the start of the year.
Bill: Gross margin was down 200 basis points over the prior year due principally to higher lodging subsidies on travel assignments as well as certain burdens such as health insurance workers' comp and professional liability spin.
Bill: Specific to the bill pay spread it's worth noting that overall pay rates continued to decline faster than bill rates, but the cost of housing and benefits continue to mask that trend move.
Bill: Moving down the income statement, selling general and administrative expense was $60 million down 5% sequentially and 24% over the prior year.
Bill: The majority of the decrease relates to lower salary and benefit costs associated with reductions in head count over.
Bill: Over the last 18 months, we've been proactively managing our cost in order to align with the broader market, while preserving capacity and funding investments in parts of the business, where we are seeing opportunities for organic growth.
Bill: By leveraging our enterprise capacity metrics and by offshoring, certain operational and Middle office processes, we have scaled down our U S headcount by more than 20% since the start of the year.
Bill: As a percent of revenue SG&A was 18% for the quarter and on an adjusted basis, excluding the ERP implementation costs and stock based compensation SG&A was roughly 17%.
Bill: With the first phase of our ERP now alive. We have started the second phase of this multi year initiative to replace multiple middle office systems for payroll and billing.
Bill: We expect this next phase will take us into the middle of 2025 to complete.
Bill: Also within operating expenses, we reported a bad debt expense of $19 million, reflecting the impact of a bankruptcy reported by a single MSP clients given.
Bill: Given the unusual and distortive impact from such a bankruptcy we have excluded the charge pertaining to this client from our adjusted EBITDA as discussed on previous calls there is no significant impact on operations from this client as the majority of the business have been wound down in the prior year ex.
Bill: Excluding the bad debt charge in our other normal add backs adjusted EBITDA was $14 million for the quarter near the high end of our guidance range and representing an adjusted EBITDA margin of four 2%.
Bill: Interest expense was $600000 related primarily to the carrying cost of our ABL and fees related to our outstanding letters of credit.
Bill: As a result of our strong collections, we ended the quarter once again with no debt outstanding given.
Bill: Given our significant cash position at the end of the quarter, we will likely report net interest income for the third quarter, depending on our capital allocation decisions I'll go into more detail in a few minutes.
Bill: And finally on the income statement, we reported an income tax benefit of $3 $5 million.
Bill: This net tax benefit was driven primarily by the bad debt charge I mentioned, a moment ago and was partly offset by a higher effective tax rate.
Bill: Our overall effective tax rate is impacted by permanent differences such as the nondeductible portion of meals and incidentals as well as reserves for certain uncertain tax positions relative to our pre tax income overall.
Speaker Change: Our overall performance resulted in adjusted earnings per share of <unk> 10 sets towards the lower end of the range, primarily as a result of the higher tax rate.
Speaker Change: Turning to the segments nurse and Allied reported revenue of $292 million down, 12% sequentially and 41% from the prior year, our largest business travel nurse and Allied was down 16% sequentially and 48% from the prior year, driven primarily by a decline in billable hours and to a lesser extent the normalization in bill rates.
Speaker Change: As John noted our travel orders have risen over the last several months and is up another 8% just since the start of the third quarter.
Speaker Change: With an improving demand outlook. We're also starting to see a modest increase in open water rates specialties, such as med surge ICU and respiratory.
Speaker Change: These trends continue we would anticipate them, having a more meaningful impact on our fourth quarter results.
Speaker Change: Similar to travel our local up per DM business has also been impacted by softer demand for contingent clinical labor with revenue down approximately 2% sequentially.
Speaker Change: Also within nurse and allied or home care staffing business was up 6% sequentially and 12% over the prior year.
Speaker Change: By a number of recent pays program wins, we believe this business is poised for continued organic growth.
Speaker Change: Education was up 4% from the prior year, but down 10% sequentially due to the timing of school breaks.
Speaker Change: Finally physician staffing reported a record $48 million in revenue, which was up 7% over the prior year and 3% sequentially billable days were up 2% both sequentially and over the prior year with price and favorable mix accounting for the rest of the increases.
Speaker Change: Turning to the balance sheet.
Speaker Change: We ended the quarter with $70 million in cash and no outstanding debt with the health of our balance sheet and strong cash flow, we remain well positioned to make further investments in technology and accretive acquisitions as well as to continue repurchasing shares under our $100 million share repurchase plan.
Speaker Change: From a cash flow perspective, we generated $82 million in cash from operations in the second quarter fuelled by strong collections from clients.
Speaker Change: Days sales outstanding was 56 days, representing an 18 day sequential improvement and 12 days since the start of the year.
Speaker Change: Cash used in investing activities was $3 million, primarily reflecting the continued technology investments to expand functionality and features from telephone as well as the build out and deployment of our new ERP system.
Speaker Change: As a result of the strong cash quarter, we often buy more shares of our stock repurchasing nearly 1 million shares or roughly 3% of the outstanding shares for approximately $15 million under both our <unk> and <unk> one trading plans.
Speaker Change: With no debt and $70 million in cash I expect we will continue to repurchase some amount of shares throughout the remainder of the year, but we'll be preserving a decent amount of cash to fund strategic investments.
Speaker Change: Moving to our outlook for the third quarter.
Speaker Change: We're guiding to revenue of between 305 and $315 million, representing a sequential decline of 7% to 10% driven predominantly by the expected decline in the number of travelers on assignment.
Speaker Change: Let me just pause on that for a second.
Speaker Change: Though the number of travelers will be down sequentially I think it's important to note that the number of travelers is expected to remain fairly steady throughout the quarter, indicating that we are seeing some stability with the recent rise in orders and commensurate improvement in production. We may see the number of travelers start to grow linked in the third quarter or early in the fourth with a sequential decline in revenue loading the gross profit we're guiding to an adjusted.
Speaker Change: Even a range of between 10 and $13 million, representing an adjusted EBITDA margin of between three and 4%.
Speaker Change: Adjusted earnings per share is expected to be between eight and 12 based on an average share count of approximately $33 5 million shares.
Speaker Change: Also assumed in this guidance is a gross margin of 21% interest income of $250000 depreciation and amortization expense of $5 million stock based compensation expense of $2 million and a tax provision of between one and $2 million.
Speaker Change: And that concludes our prepared remarks, and we'd now like to open the lines for questions operator.
Speaker Change: Thank you we will now begin the question and answer session.
Speaker Change: I'd like to ask a question. Please press star one on mute your phone and record your name clearly if you need to withdraw your question Press Star two again to ask a question. Please press star one.
Speaker Change: Our first question will come from Kevin Fischbeck with Bank of America. Your line is open.
Speaker Change: Okay.
Kevin Mark Fischbeck: Yeah, I guess I just wanted to get a little more color on the.
Kevin Mark Fischbeck: Our volume outlook I guess.
Speaker Change: I see.
Speaker Change: I had a difficult time getting visibility into where those number who are going to trend. Yeah. A couple of quarters out I guess last quarter, you were thinking that we could see behind growth in the back half and now it's kind of pushed to Q4 I mean, when you think about that that visibility is there anything anecdotally you can put on top of I guess I understand the math kind of Q3 should be stay.
Speaker Change: Oh and stable should be the beginning towards going up but like is there anything you can say anecdotally around demand or initial view in early orders for Q4 to kind of give you a little more comfort about potential growth.
Speaker Change: Yeah, Hey, Kevin This is John I'll start and then Bill will follow up from my response, but.
Kevin Mark Fischbeck: Yes.
Bill: When you start start with demand as we said our prepared remarks, we've seen demand.
Speaker Change: Italy increase over the last couple of months, where we saw sort of the second quarter up 20%.
Bill: Well, what's important to note is that.
Bill: It's over a broad spectrum of specialties and disciplines. Its not just one or two disciplines and the other thing I think it's very encouraging is that.
Speaker Change: The demand increase is not being driven by winter needs. This is we have the winter needs and that will be defined as orders now that we're getting for October starts we're not seeing that zero zero winter needs in this increase and we would still anticipate to see those who who needs coming in later.
Speaker Change: And moving to speaking over the last several weeks to our clients and some and other hospital users as I spoke with a CEO of a large.
Speaker Change: Hospital system last week, and they're all seeing increase in census, they're all seeing increase in higher acuity.
Bill: Which is very much in line with what the publicly traded hospitals.
Bill: As reported over the past couple of weeks.
Bill: And and then if we.
Bill: So look at the macro level when we look at BLS Jolts data report that came out yesterday.
Bill: And that showed a eight.
Bill: Hey openings to higher ratio of 221, which of course, we've talked about before which is historically been pre COVID-19 was one five so youre talking huge job openings per higher who want higher it's just continuing to show that the systemic supply demand imbalances out there.
Bill: And then lastly, I'll leave you this for him there were built.
Speaker Change: If you start looking.
Speaker Change: Just a quick country, what we're giving you why were optimistic this organization.
Bill: The first half wins that we had and we started to implement theyre now all being starting to ramp up their implemented.
Bill: And we're starting to increase our capture rate and we still have more ramp in the back half of the year to increase that capture rate from the wins in the first and second quarter. It will be implemented and then announcing any two wins, we had we announced today those will start implementing and then have a fourth potential fourth quarter impact as we start ramping those up and so with that is why we are.
Bill: We're really optimistic about why we believe demand is will be sustainable and sort of increasing because of the macro level because of what we're seeing in the market and of course because of the wins that we've had.
Bill: As we ramp up those wins will start seeing demand increase for those new accounts Bill Yeah, Hey, Kevin So I guess I'll just give a couple of points I mean, besides the fact that demand has been improving for the last couple of months now.
Bill: And bill rates also are improving modestly not nothing not off to the races, but.
Speaker Change: Travel is a business we have the best lens on and when we look at our traveler on assignment count across the quarter, it's very very stable month to month to month across the third quarter. So what we had been seeing up until this point was Q1 and Q2 were sequential declines throughout the quarter exiting at a low point now as we come into July we see that the travelers on assignment are forecasted.
Bill: Through the balance of this quarter and we're already a month into the quarter. So we kind of have a good lens on where August should be.
Bill: And then September really you know, we're starting to lock those orders now so I think that's one thing is the travelers on assignment is steady the bill rates in the backdrop are improving a little bit which is helping and then I'd say one other point is when I look at the weekly production and this is really down in the weeds, but when you look at our weekly production if I strip out the fourth of July which is a short week for us.
Bill: Our actual weekly average production is about up about 3% relative to this to the second to the second quarter production. So we're coming in at a good clip I know it's early it's just a few weeks, but at least it's starting to indicate that the market backdrop is improving and production is following it if that continues that's why we say I think the sequential improvement we would really expect to see.
Bill: Going into the fourth quarter, but there is still an opportunity to affect the third quarter, we're not certainly giving up on it but I just wanted to be clear I think that the opportunity really is more towards the back end in the fourth quarter.
Speaker Change: Okay. That's all very helpful I guess.
Speaker Change: One thing that makes it difficult from the outside to tell exactly what's going on is that are you and your peer don't really.
Speaker Change: I was kind of the same contract growth versus kind of new contract wins or or or the impact of losses. So it's hard to tell how much of the decline was maybe lost share and how much of this improvement might be new contract wins, if you stripped out.
Bill: Things have kind of looked at our same client basis.
Speaker Change: How would those trends because that's still coming down or is that actually going up or how should we think about.
Speaker Change: Same store if you will.
Speaker Change: Yeah, Kevin I'll, just spill again, so I mean, I don't think we've made any secrets about it we we had attrition earlier in 2023 and as we exited last year, we were on a much better trajectory. We do have an internal metric we look at it for net contract value, which is the net effect of wins losses in expansions and for the last couple of quarters. We've had positive net contract value. So we're adding.
Speaker Change: More to the stable to our pipeline to our portfolio excuse me of opportunities that we can staff.
John: That's probably the biggest thing I can tell you we the retention and renewal rates are pretty strong at this point I would say, it's really about continuing to win new business. Yes, I'd just add this is John Kevin. The reason, we haven't really disclosed those numbers as well.
John Trevor Romeo: What we became volume is from hospitals going down in bill rates going down, but it's hard to say what the baseline was there kind of meaningless, where the number was and so as Bill said, we've now tracking over the last several quarters are having a positive rate. So in the future. We can see ourselves tracking at that the more and publishing that.
Speaker Change: Just a little more color on the MSP business, where the vendor neutral business. So we have between 600 and $700 million of spend under management on an annualized basis, our capture rate for the quarter was just under 70%, which was down a tick from the from this from the first quarter and that was largely due to the ramp up of our large vendor neutral program that we called out if I take them.
John: The capture rate actually moved up a couple of hundred basis points. So we're increasingly doing better with our own programs, but we also have this opportunity across that vendor neutral program. So that's another thing that just give us a little bit of comfort as we look to the back half.
Speaker Change: Alright, great. Thank you.
Bill: Okay.
Bill: Thank you next we will hear from Trevor Romeo with William Blair You May proceed.
Trevor Romeo: Afternoon. Thanks, so much for taking the questions.
Trevor Romeo: First one just.
Trevor Romeo: Definitely encouraging to finally hear about an uptick in in demand in some of the numbers.
Trevor Romeo: Just kind of wondering when you speak to the client base.
Speaker Change: What is the general consensus on why Youre, starting to see an increase in demand I know I think John you just mentioned the growing census volumes is one thing, but generally you know does it feel like the hospitals are now kind of comfortable with the mix of permanent travel staff, where they are you know are you seeing less CFO and finance organization involvement in the staffing decisions and does it kind of feel like this is the start.
Speaker Change: The new post pandemic equilibrium in your view.
Speaker Change: Hey, Joe It's John Yes, you actually answered the question for me. Thank you.
Speaker Change: But yet it does go ahead and welcome to our clients and talking to other health care leaders out there.
Speaker Change: What we're hearing is that they are comfortable with the labor they have.
Speaker Change: Some of them, who are using a lots of labor, they're comfortable because they're having a hard time finding.
Speaker Change: Oh of course, they have they need to keep that open and we've become a very valuable resource with them on other ones have already settled down and they've figured out the right number and I would say.
Speaker Change: Almost every time, we see two feels very comfortable with the amount of contingency labor they are using.
Speaker Change: And I would also point out that while bill rates were starting to see that stabilization, yes, theres still.
Speaker Change: Who all maybe coming a little bit down, but we're really starting to see a stabilization, but within those orders and in those specialties were actually seeing some specialty is starting to increase bill rates. Because there is still again as I mentioned earlier is supply and demand imbalance on thats out there. So overall I think hospitals seem to be from what we're hearing very calm.
Speaker Change: <unk> with where they're at it's definitely census, driven or there is a higher acuity and it's not just because of one issue a lot of this and we talked about this for the last 18 months after COVID-19, but a lot of this was all the deferred health care that happened and now we're actually seeing increases in it.
Speaker Change: In <unk>.
Speaker Change: Heart disease, we're seeing increase in diabetes hypertension, and all of these lead to other.
Speaker Change: Issues with People's Health, and Thats really what seems to be driving this and so there's not a deep where this goes away, but this probably has a prolonged issue that will go on for some time.
Speaker Change: Yep, great, Okay, and then I think.
Speaker Change: John You had said the recent demand increase I think has not been driven by winter needs orders, but was just curious because I think this is kind of a time, where you start getting some of those indications have you received any indications on clients at this point on.
Speaker Change: Their winter needs are how much they will need I guess and expectations on how you think that might play out this year.
Speaker Change: First part the question is yes that is correct.
Speaker Change: Uptake has no winter needs included in it.
Speaker Change: Clients are waiting a little bit longer than normal is what we're hearing to give us those needs are waiting a little caught hold your cards, a little closer to divest.
Speaker Change: Until we get there so I would anticipate when they get the winter needs probably closer to September than normal in the past, where we'd see it in July and August.
Speaker Change: Okay, great. Thank you I'll leave it there.
Brian Gil Tanquilut: Our next question will come from Brian <unk> with Jefferies. Your line is open.
Brian: Hey, good afternoon guys.
Brian: Maybe just curious.
Brian Gil Tanquilut: Any comments you can share first on this segment operating margin for nurse and Allied and how we should be thinking about that and it sounds like there's optimism into Q4. So just your view on the cadence.
Speaker Change: For potential improvement in that margin level as you look into Q3 into Q4.
Bill: Yeah, Brian It's bill again.
Speaker Change: I guess, what I'd say is.
Speaker Change: Starting with the Bill pay spreads we've had some improvement in the bill pay spreads for specific to travel but.
John: It's been kind of muted as John mentioned note by the I'll call. It the housing or the lodging subsidy portion of it because those costs haven't gone down with inflation et cetera. So those those elements of the compensation package remained elevated relative to the bill rates. So we're not getting the overall gross margin improvement, we'd like to see out of the bill pay spreads now as bill Bill rates start to tick up a little.
Speaker Change: Perhaps there's an opportunity there, but I think the bigger levers for us really around margin, we'll be continuing to drive the mix of our business with new <unk> clients coming aboard that certainly helps not just because of the efficiencies of staffing direct clients that are where you've got either exclusivity or at least certainly at least.
Speaker Change: <unk> to be able to pipeline for their orders.
Speaker Change: You also have the fees from the subcontractor portion. So it helps the overall margin mix and then you have to think about the rest of the mix of business multiple lines of business operate with higher margins. Then traveled today. So our home care does our education business does our search RPM business does.
Speaker Change: They're on a good trajectory those lines. So I think as we enter the fourth quarter schools come back off their summer break fix their next chance for them to see another organic jumping their revenue run rate as they start a new school year. So I think we will come into the fourth quarter with a pretty good clip there they were already exiting some of the highest level that we've seen for that business. So I think coming into the new school year will be up.
Speaker Change: Another opportunity beyond that it's really about continuing to drive all of our efficiencies as we can and I'll just make one quick comment on the margins with regards to the burdens. So I mentioned health care workers comp, let me just pause on that for a second so workers comp.
Speaker Change: For us it isn't like we've had a major uptick in claims or workers' comp cases, theres, some timing elements to it when cases settle but it's also an actuarial driven model. So there's sometimes there's some some charges that come through you just youre dealing with so I think that was what we saw in the second quarter. The health comment, though I think is an interesting dynamic and as the head count has been declining.
Speaker Change: What our benefits carry on for the month after the person as long as they are at the start of the month their benefits carryforward. So we've seen a little bit of is that the health care cost as we've had fewer people a declining number of people on assignment to health care costs relative to the actual people working has been a little bit elevated so I <unk>.
Speaker Change: That we will see that start to normalize as we move into the back half as well so that that may not be as big of a drag as we go into the next year that doesn't mean health care costs aren't rising. They certainly are specialty prescriptions and the like are a big driver of it but for US right now it seems to be the number of claims that we're seeing relative to.
Speaker Change: Yes to the total expense we expect.
Speaker Change: No that makes a lot of sense and then maybe John.
Speaker Change: We're starting to see who stimuli the stabilization of bill rates rate. How are you thinking about where the premium for temp versus permanent placements will end up or is it the right spot where we are right now because obviously that has narrowed versus pre COVID-19 levels. So just curious what your thoughts are in that.
Speaker Change: Yes, I think Brian we are in a challenging market with with margins and so I think we're probably in a spot where it is right now and adding a little color to fill those margin.
Speaker Change: Statements is really really I think what's going to happen in this industry and you're seeing what we're doing across country is this becomes an SG&A game, where margins are going to be hard to crack I think we have you are looking at every every nickel diamond quarter on the margin side to improve that youre going to get that but really like you to see the margins where the margin EBIT margin is going to improve.
Speaker Change: As we get that SG&A down because that's a new model of what the industry is heading towards and so when we move as we've increased and really expanded our operations in India.
Speaker Change: Lower some of our costs there as we start utilizing.
Speaker Change: More of our technology with AI and predictive analytics not only for our clients with <unk>, our clinicians who are experienced but also internally within organizations who are team members. That's where this game is going to be one of the most.
Speaker Change: Got it okay.
Speaker Change: Thank you guys.
Speaker Change: Our next question will come from AJ Rice with UBS. Please go ahead.
Speaker Change: Okay.
Albert J. William Rice: Thanks for the question.
Albert J. William Rice: I Wonder who just go back make sure I'm getting the right takeaway. So the rate was down about 5% sequentially. I know you had guided for it to be low single digits coming out of the first quarter and admittedly you know it seems to be improving versus before but it seems like there was a little bit of variance.
Speaker Change: Our mix either the types of nurses, who are providing the hospitals or as a home health and.
Speaker Change: And education picking up on a relative percentages is that impacting it or what was the.
Speaker Change: The main variance there and how much of those other aspects impacting your rate.
Speaker Change: Hey, a J this is bill.
AJ: There's a lot to that question. So I think when you look at the revenue per FTE per day, certainly, there's a mix element where education home care in particular.
Speaker Change: Growing nicely as it has a lower overall average bill rate, but that would be with regards to the kpis. We published when we talk in the prepared remarks about the bill rates I think the bill rates are tracking very closely to what we've expected I would say if there really wasn't a big surprise, it's not as though.
Speaker Change: Anything significant change for <unk>.
Speaker Change: Marketplace for us its so if there's anything.
Speaker Change: More significant that I'd say, it's probably an element of mix for cross between Allied and nursing because they do have slightly different bill rates.
Speaker Change: Okay and then.
Speaker Change: And the Ftes just again to be.
Speaker Change: Besides about it you were down about seven 8% I think coming out of the first quarter, you said low double digit.
Speaker Change: Decline.
Speaker Change: Where would the barrier.
Speaker Change: Was that in placements travel travelers to hospitals was there was it that the home health and the.
Speaker Change: The education was so strong that that's why are you with the various how much how much sort of broke out between the different segments.
Speaker Change #113: I mean, I guess, we'd have to go down one by one by one but the.
Speaker Change: There wasn't a real I would say there wasn't a big surprise for the quarter across any of the lines of business I would I think do think home care performed a little bit stronger. So that's a piece of it as well but.
Speaker Change: But on the travel side I think we exited right in line with where we thought we were going to be so there really wasn't a big surprise to the numbers anything else, who really have been caused by mix.
Speaker Change: And then just a final question some of the discussion we've had.
Speaker Change: Over the last six months or so it's been about the competitive landscape in that there could be some shake out of especially some of the smaller competitors that had grabbed share in though.
Speaker Change #105: And the marketplace, how much is your feeling a little bit better about the outlook any change in the competitive landscape are you seeing any meaningful change in terms of pressure either one.
Speaker Change: Bill pay spread your availability of nurses whatever that would be impacted by a change in competitive landscape in anyway.
Speaker Change: A J. This is John Yes look this is a tremendously competitive market right now a lot of new entrants came in over the last through Covid and probably a little before COVID-19, but many companies started putting out their shingle.
Speaker Change: During Covid and I think those smaller companies are going to.
Speaker Change: The struggle.
Speaker Change: If you don't have the MSP.
Speaker Change: Or VNS is and you are not being able to control some of your orders and be able to increase capture because you're utilizing third parties.
Speaker Change: We're going to see a lot of the midsize and small sized companies be challenged in this market and continue to be challenged in this market.
Speaker Change: As margins as we said earlier as margins are constrained.
Speaker Change: Okay. It sounds like that's still in process as opposed to something that you've seen a meaningful change in the last six months or so.
Speaker Change #106: It's still in process I think I think.
Speaker Change: Companies are still trying to hang on but I think.
Speaker Change: You've only hang on for so long.
Speaker Change #101: Okay, alright, thanks, a lot.
Speaker Change #101: Our next question will come from Bill Sutherland with Benchmark Company. Your line is open.
William Sutherland: Hey, guys.
William Sutherland: I'm just thinking about the fact that.
Speaker Change: Health systems are mostly saying that they are happy with where they've gotten there.
Speaker Change: Ratio of Contra.
Speaker Change: Contract labor.
Speaker Change: Full time.
Speaker Change: So if that ratio I mean is mostly where it should be.
Speaker Change: Then.
Speaker Change: Is is market growth can be primarily.
Speaker Change: In terms of as travelers, primarily is that mostly going to be a market share.
Speaker Change: Taking share.
Speaker Change: Primarily that actually comes through your.
Speaker Change: Your MSP expansion.
Speaker Change #142: Yes, I think a good portion of that is going to be.
Speaker Change: Gaining market share winning msp's, winning more vms deals increasing increasing our capture rate as we're winning those deals and ramping them up.
Speaker Change: And I don't know when.
Speaker Change #104: I had that crystal ball when that when the market expands again, yes.
Speaker Change: And Youre definitely reading it the right way as we're talking to clients, saying, Theyre happy and content with where the number of conditions.
Speaker Change: Regulations, they have an assignment are.
Speaker Change: That may be good for now, but the dynamic may change in six months or three months and part of that goes to the whole BLS jolts data, where we're seeing two openings for everyone higher while the hospitals, who had earlier who has done a tremendous job of hiring new core staff attrition is still seems to be not favoring them.
Speaker Change: As nurses are still leading and there is discrepancy so.
Speaker Change: There is a chance for the market to grow but I don't think any of us want to plant a flag and say this is the date that the market construct right. So.
Speaker Change #100: To your earlier assertion, yes, as we continue as we grow we see ourselves increase.
Speaker Change: Our our share of the market it is going to be by outperforming competitors winning more MSP.
Speaker Change #103: Tap, having higher capture rates, winning Vms is increasing attach rates there.
Speaker Change #160: And probably a little bit of market share going up mhm, okay, and I'm, sorry, and a little bit of the market growing but I don't I don't want to plant a flag a save the date in the next two months or a month, obviously, the marketing starting to expand but I assume for certain over the next year, we will start seeing the market expanded.
Speaker Change: When you start seeing that happen.
Speaker Change: The faster obviously just to go on the faster it happens obviously the faster we will.
Speaker Change: It will increase and we can start increasing the expectations of our growth as it happens.
Speaker Change #112: You've reached stories in the industry press about how hospitals, who kind of figure out how to manage flexible.
Speaker Change: You know add flexibilities in there.
Speaker Change #110: Workforces that is that is that really.
Speaker Change: In line with the reality or is that just a few isolated cases.
Speaker Change #109: I think there are some hospitals that have done a terrific tremendous job.
Speaker Change #109: Being able to utilize their own resources to add flex flex pools, and we recognize that across country that there that this is an opportunity for hospitals to do it but many hospitals don't have.
Speaker Change #109: The knowledge or capabilities and certainly not the technology. If you go into those hospitals around the country.
Speaker Change #109: Many many of them have some type of internal resource pool or float pool and most of them manage it on excel spreadsheets.
Speaker Change #117: The reality of what's happening and so when we built the televised we actually build <unk> within our internal research for local technology that allows hospitals for us to go into hospitals, and we have experts who have run large.
Speaker Change #117: Resource pools at hospitals.
Speaker Change #109: Across country can help bring this technology and these.
Speaker Change #109: Learnings from their past experiences to hospitals to teach them. So there is an opportunity for hospitals to increase.
Speaker Change #109: The utilization of their core staff.
Speaker Change: And hire their own local local staff to increase their productivity, but I would say, it's really right now not a its not widespread in a good programs with utilization I think certain hospitals do it very very well, but I think a lot of hospitals.
Speaker Change #125: Benefit from using our expertise and our technology to create.
Speaker Change: Some optimization within their staffing.
Speaker Change #111: Okay, and then I just wanted to.
Speaker Change #121: One clarification on how youre thinking about the how the fourth quarter could be shaping up and you eliminate youre not youre not factoring in the winter orders is that the main driver for the seasonal pickup in.
Speaker Change: The.
Speaker Change: Travel and allied in the fourth quarter and so.
Speaker Change #128: That would be.
Speaker Change #120: I don't know how to think about it would that be incremental to.
Speaker Change #119: The winter orders are.
Speaker Change: Picking up.
Speaker Change #174: Yes, that's that is how do we think about it where we're not.
Speaker Change: Building in any anticipation of when your orders, while we are anticipating that we will get orders.
Speaker Change: September as we're modeling that we're anticipating especially as we saw last year. We anticipated we received orders last year and we waited from July August September October November December January that will realize those orders. So as we model. It out this year, we are not modeling in those who fits your needs.
Speaker Change: But.
Speaker Change: We're anticipating them and that would be on top of what we're modeling.
Speaker Change: Okay.
Speaker Change: Thanks, guys.
Speaker Change #108: You're welcome.
Speaker Change #108: Next you'll hear from Tobey Sommer with Truest, who you May proceed.
Tobey O'Brien Sommer: Thank you I wanted to ask another bill rate question.
Speaker Change #135: If you.
Speaker Change #102: Look at your recent weeks.
Tobey O'Brien Sommer: Sales production and the bill rates associated with those in travel nursing.
Speaker Change #123: How does that compare to the average bill rate of your travelers on assignment.
Speaker Change #102: Thanks.
Tobey: Hey, Tobey its bill.
Tobey: Well I guess, what I'd say is it's starting to move in the right direction right. It's low single digits that the average bill rate on open orders the average bill rate on locked orders and what we're seeing from an overall production is starting to move up just a little bit.
Speaker Change #102: It's low single digit percentage improvement, but it's still moving in the right direction. So it's not declining as we're looking at this point from a production standpoint relative to what our average bill rate is.
Speaker Change #144: And when you say improving low single digits I presume, that's sort of on some sequential comparison or something compared to a few months ago or something like that yeah, I apologize I should've been more clear that the third if I look at third quarter production relative to second quarter production were up about 2% on what we're seeing so far coming into this quarter and.
Speaker Change #102: Open order rates are really following a very similar track in fact open order rates today believe it or not on the same if I look at a basket of orders just med surge in ICU. As an example, open order rates are actually up closer to 4% over the prior year, but again a lot goes into that but the point is the backdrop is improving that's the important point.
Speaker Change #116: And at.
Speaker Change #116: At this point in a in a given month.
Speaker Change #122: How much of the travel nurses are renewals.
Speaker Change #145: Versus sort of recent product of recent sales production and I know that varies month to month, but in approximate terms can you tell us what the split looks like there.
Speaker Change #153: So sorry, Tony could you repeat that question I apologize.
Speaker Change #116: Yes.
Speaker Change #116: What proportion of your travelers on assignment had been renewed from our previous assignment.
Speaker Change #116: Oh, I see what youre, saying, but that's probably a good question for Mark. It's so how often do our travelers renew what percentage of renewal rates, we typically see from assignment rolling quarter.
Mark: In terms of how many assignments completing yes, I mean, there's been I know there hasn't been a material change in our renewal rates.
Speaker Change #102: After over quarter, but it's it's it's historically been.
Mark: About two thirds rail correct like that it's if we don't give the exact number out but it's in that range and it doesn't really it hasnt really changed that much.
Speaker Change #102: There's probably it's like two thirds is a good way to describe it.
Speaker Change #102: Toby and then it probably balances.
Toby: Three to four points down to three to four points up from that from that midpoint and it's been a very tight range.
Speaker Change #102: And it's interesting it's very tight range from Covid.
Speaker Change #102: Covid, even post COVID-19 than pre Covid, it's been in that probably eight point swing.
Speaker Change #102: Okay.
Speaker Change #102: Trying to square, how long it'll take for <unk>.
Speaker Change #102: Renewal rates, which tend to blend down from wherever those whenever those nurses started there you know sort of travel stents.
Speaker Change #102: And where weekly sales production rates are today.
Speaker Change #102: When you think of it in those terms are our nurses renewing.
Speaker Change #102: Can that continue to cause some.
Speaker Change #102: Overall bill rate.
Speaker Change #156: The declines or do you think that that effect is.
Speaker Change #126: Approaching the end for you here.
Speaker Change #143: I think I think we're nearing the end I think bill rate bill rates on assignments that renew we're not seeing continued step down in those rates. So I think it's largely baked in I know, what youre, where youre going with the question you're right that the portfolio continues to blend down to an open order rate.
Speaker Change #143: But we're nearing that we're nearing the bottom I mean, plus or minus a point or two it's not it's not wildly going to be a rate driven story and as we look at third and fourth quarter right now.
Speaker Change #163: Thanks, that's helpful. So we're going with the differences coins not not a lot of bills I got it.
Speaker Change #102: The.
Speaker Change #137: The winter orders how do we.
Speaker Change #171: How do you think about that it's been so long since we've had anything seasonal that could be called normal. If your if your memory goes back far enough to refresh us on what that could look like or used to look like that would be helpful.
Speaker Change #102: Sure.
Speaker Change #107: And again I think youre right, we have to definitely go back to the recesses of our bias is to remember.
Speaker Change #141: What that looks like.
Speaker Change #115: Typically we would have seen.
Speaker Change #146: Again, depending.
Speaker Change #132: I'll just give it for the industry wide perspective.
Speaker Change #115: You would've seen a 20% to 30% increase in orders coming in June July are more call. It July August September for starts between October and January and those would have been the winter needs.
Speaker Change #115: And that historically was pretty much for over a decade, where you saw that happen.
Speaker Change #115: And you're right last year as I mentioned earlier, we never saw those orders come through and Thats. Why we are really not modeling those winter needs into where we're seeing we're going to be in the fourth quarter.
Speaker Change #115: But there could be upside on that if it comes through.
Speaker Change #148: Thanks last one from me you talked.
Speaker Change #134: <unk> talked about some client wins and telephone et cetera.
Speaker Change #134: Several quarters ago, you had lost.
Speaker Change #115: Some business.
Speaker Change #150: Is the effect of that market share loss out of the P&L or are there lingering renewals of travelers that you're still sort of generating revenue and EBITDA for them.
Speaker Change #151: I guess there'll be it's bill I'd say, it's mostly out I mean from accounts that have traded over where if we're still continuing to support them and the level of support Hasnt is kind of stabilized at this point. So I don't think theres a lot of headwinds faced from.
Speaker Change #115: Client retention is John who have you what I'd say is on the programs, where we chose not to participate if we lost it those are all clean and Theyre gone. There are programs that we may have lost that we participate.
Speaker Change #115: Wanted to participate in those ones are for participating at the level that we're happy with so there is no. There is no other things to be able to come out of the numbers at this point are.
Speaker Change #124: Terrific. Thank you for your help.
Speaker Change #124: Okay.
Speaker Change #124: Our next question will come from Constantine Davita with JMP. Your line is open.
Constantine Kyriakos Davides: Thanks, Bill really nice cash flow improvement this quarter.
Constantine Kyriakos Davides: Just wondering who can give a sense for where cash flow should shake out this year last year you had some.
Speaker Change #133: Outside of working capital improvements and then this year you have the drag associated with that one client.
Speaker Change #147: Client just if you can.
Speaker Change #167: Kind of help us understand.
Speaker Change #175: Where's your thinking on the cash flow front, if there's any other sort of puts and takes to think about.
Constantine: Hey, Constantine.
Constantine Kyriakos Davides: No I appreciate that and look at the end of the day, we did a great job this quarter, bringing our DSO back in line, but the the impact from the bankruptcy that client as we called out last quarter was between four and five days. So we reported 56 days. So even if you said excluding that you would have been call. It 60 at the end of the day, we're getting very close to where I think the normalized.
Constantine: DSO for this business will be.
Constantine: I don't think there is a.
Constantine: Significant opportunity for much further improvement, maybe maybe a little bit, but I'd say, it's more about converting EBITDA to cash flow at this point. So as we look to this quarter coming in the quarter after it'll be closer to a normal conversion rates right. So you have your reported EBITDA you have your other cost to come out of it is interesting to note that interest won't be a drag this quarter coming up.
Constantine: I will actually be a little bit of a good guy for the first time, because we will be holding onto a sizable portion of the cash.
Speaker Change #138: Got it thanks, and then I guess related question John just.
Speaker Change #168: If you're a little bit more confidence that we're nearing an inflection point does that make you more comfortable in terms of deploying capital towards M&A.
John: And I guess.
Speaker Change #166: A follow up to that is you can't see it.
Speaker Change #139: The need to scale up the core nurse and allied business or is there.
Speaker Change #136: More of a preference towards some of your.
Speaker Change #136: Holly sub verticals be it something like education.
Speaker Change #173: Home care or maybe additional locums opportunities. Thanks.
Speaker Change #161: So what I'd say is look we have a balanced approach when it comes through our capital allocation strategy.
Speaker Change #149: We're continuing to repurchase shares when we talked about in Q2, almost $1 million million shares repurchased and we will continue to look to repurchase shares as well moving forward.
Speaker Change #149: Also deploying capital.
Speaker Change #162: <unk> into our technology I've mentioned earlier look we want to create efficiencies throughout our whole organization and that starts with a televised as we're delivering are are candidates to our hospitals and other clients. It also goes into our experience app and continuing to invest in that as well to create efficiencies.
Speaker Change #178: To get clinicians faster to the hospital at a lower cost as well as all our internal technologies.
Speaker Change #115: And finally.
Speaker Change #115: We continue with a really disciplined approach on our M&A why.
Speaker Change #115: The last 12 months has been really slow in deals in the industry that are coming in.
Speaker Change #115: We're out there aggressively looking and.
Speaker Change #115: We have as you noted a great balance sheet.
Speaker Change #115: Good amount of cash on hand.
Speaker Change #115: And we're really well positioned.
Speaker Change #115: To look out there and pick up those deals when they come through and the deals we're looking at we're probably.
Speaker Change #115: We look more towards.
Speaker Change #115: Our diversifying the portfolio of the organization looking towards.
Speaker Change #155: Allied Locums, which we've done tremendous our last acquisition of Locums mentioned Lotus has done really well for us.
Speaker Change #115: Looking at <unk>.
Speaker Change #115: The education space and also technologies that can improve how we deliver clinicians or how we improve how we can.
Speaker Change #115: Have more impact and help hospitals achieve their goals of retaining clinicians and optimizing their workforce.
Speaker Change #115: Yeah.
Speaker Change #157: Thank you.
Speaker Change #157: Last question will come from Kevin Spanky with Barrington Research. Please go ahead.
Speaker Change #182: Thank you so with the demand picture.
Kevin Mark Fischbeck: Travel improving and.
Speaker Change #164: You also mentioned bill rates improving modestly.
Speaker Change #170: We think there is an opportunity.
Kevin Mark Fischbeck:
Speaker Change #169: Over the next several quarters or some incremental gross margin improvement or do you think this.
Speaker Change #169: Constrained environment is more structural and as you referenced the.
Speaker Change #172: The adjusted EBITDA margin improvement is really just going to.
Speaker Change #181: I'll have to come from the SG&A side.
Kevin Mark Fischbeck: Hey, Kevin Thanks for the question, it's Bill again as.
Kevin Mark Fischbeck: As I mentioned, a little while ago I think bill pay spreads, it's going to be hard to come by it right I think the competitive market on both sides.
Speaker Change #158: And sure we are.
Speaker Change #158: We're happy that the bill rates improved a little bit I think that will give you some leverage as.
Kevin Mark Fischbeck: If you think of it the <unk> subsidies don't necessarily flexibility so as the bill rate improves you'll get a little bit of an uplift if those dollars just even remained flat. So there's a little opportunity there, but the majority of the gross margin improvement for the business will come from mix will come from other operational efficiencies and from the mix of clients that are using utilizing in telephony.
Speaker Change #152: Okay understood and.
Speaker Change #177: You've referenced in the last couple of quarters here about <unk>.
Speaker Change #140: Insurance costs are.
Speaker Change #159: Pressuring the gross margin is that something that's completely out of it.
Speaker Change #180: Control or is there something you can do to manage that with your providers are.
Speaker Change #165: You know in terms of rates or policy or anything like that.
Speaker Change #179: Well some of it's experienced driven and some of it is your premiums that youre going to space. Each year. So we do come into a renewal cycle as we go through the third quarter.
Speaker Change #159: I am not going to hazard, a guess as to how the rates will look on the renewals were premiums but.
Speaker Change #159: Specific to health I mentioned, a little while ago that that is one that is somewhat seems to be experienced driven in azure.
Speaker Change #159: Kind of declining on a number of personnel basis and this also applies to our corporate employee base as John mentioned, we're down 20% since the start of the year.
John: It's probably nearly double that since our peak for probably 18 months ago, and so you have a <unk>.
Speaker Change #154: I'm gonna, where folks carry their benefits for a period of time post employment and Youre still having those claims come through until either secure their next assignment or the new benefits kick in so I think we're seeing a little bit of an excessive amount of health insurance costs relative to that but it's also continuing rising health care costs in the country as a driver so we.
Speaker Change #154: We take what we do what we can to take appropriate actions, but as I said, we've got the renewals coming up in the third quarter. We will know more as we go into the fourth quarter of what that looks like.
Speaker Change #154: Okay. Thanks for taking the questions.
Speaker Change #183: Our pleasure.
Speaker Change #154: Ladies and gentlemen, this does conclude the Q&A period, I'll now turn it back over to John Martin for closing remarks.
John A. Martins: 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.
Speaker Change #140: Okay.
Speaker Change #176: Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation you may now disconnect.