Q2 2019 Earnings Call
Ladies and gentlemen, thank you for standing by and welcome to Am in healthcare second quarter 2019 earnings call. At this time all lines are in a listen only mode and later, we will conduct a question and answer session. If you would like to ask a question on today's conference you can press Star then one on your Touchtone phone and as a reminder, today's call is being recorded I would now like to turn the call over to our host Randle Reece director of Investor Relations. Please go ahead.
Good afternoon, everyone.
Welcome to AMN healthcare second quarter 2019 earnings call.
A replay of this webcast will be available until August twentyth at Amarin healthcare Dot investor room Dot com following the conclusion of this call.
Details for the audio replay of the conference call.
In our earnings release issued this afternoon.
Various remarks, we make during this call about future expectations projections plans events or circumstances.
Constitute forward looking statements.
These statements reflect the Companys current beliefs based on information currently available to it.
Our actual results may differ materially from those indicated by these forward looking statements.
As a result of various factors, including those identified in our most recent Form 10-K and subsequent filings with the SEC.
The company does not intend to update the guidance or any forward looking statements provided today.
Prior to this next earnings release.
This call contains certain non-GAAP financial information.
Information regarding and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and on our financial reports page and then healthcare Dot investor room Dot com.
On the call today are Susan Salka, Chief Executive Officer, Brian Scott Chief Financial Officer.
Kelly Rakowski President of leadership in search Ralph Henderson.
President of professional services and staffing and then why president of workforce solutions.
I will now turn the call over to Susan. Thank you so much Randy.
As we head into the second half of the year. We are very pleased to share. Good news with you regarding ammons performance and the positive impact being made by our team members all across the country.
Our financial results exceeded our guidance for the quarter driven by strength in nurse and Allied although several of our businesses also beat expectations and we are excited about the early contributions from our latest acquisition advanced medical who joined the Amgen family in mid June .
We are seeing the union of advanced in Amman pay off even at this early stage. The advance team is doing a wonderful job delivering to their clients and expanding business across all of the markets. They serve.
Their school based therapy solutions continue to perform very well and are poised to achieve or exceed the growth we expected for the upcoming school year.
In addition, the infusion of travel nurse and Allied orders from Amgen Msps, coupled with their highly capable recruiters has enabled the team to help Amen serve these clients. During this time of high demand.
This was an ideal time for Amazon to bring on the expertise of the advanced team. In addition to their performance I've been very impressed and inspired by their enthusiasm for community service and harnessing our greater resources to make a positive impact.
As we think about our market environment. Today, we are very optimistic demand across most of our businesses is strong and in several cases, showing signs of increasing need for amgen's expertise.
Competition for skilled clinical talent is intense and staffing demand is even higher than it was last quarter across nearly all of our divisions.
Turnover and vacancy throughout health care remain at record levels and labor attention continues as many clinicians are frustrated by being asked to cover higher than usual workloads.
Consolidation and increasing complexity and managing healthcare labor drives demand for more comprehensive workforce solutions and pushes amgen to continuously enhance our capabilities.
This is most visible in our MSP related business, where we had another.
Another quarter of double digit revenue growth.
The need for outsourced staffing and workforce optimization is stronger than we have ever seen and with Amgen successful track record and significant delivery capabilities, we continue to win new clients as well as expand existing relationships.
We have signed several new and expanded MSP contracts this year, which we expect to add nearly 200 million of annualized gross spend under management at maturity.
Now, let's review our latest results and outlook second quarter consolidated revenue of $535 million was our second highest on record.
Gross margin was 33.5% and adjusted EBITDA was $67 million or 12.5% of revenue.
Our nurse and Allied segment posted revenue of $332 million flat year over year, which was better than guidance due to higher labor disruption revenue and 5 million from the advanced acquisition.
Revenue for our largest business travel nurse staffing grew 2% year over year on an organic basis.
Growth was driven by volume with average fill rates relatively flat on a year over year basis.
Demand for travel nurses continued to grow since we last shared our performance in early may today demand for travel nurses is more than 20% higher than prior year and the growth is in all types of clients, including our MSP clients direct and third party.
Adding to our confidence is the fact that we have begun to receive the seasonal winter needs for assignments, starting in the fourth and first quarters.
In most cases clients are indicating their contingent staffing needs in the future will be greater than or close to the same as last year.
As we look forward to the third quarter were beginning to see pricing improve with our revenue per day is expected to be above prior year. This is a very good sign that the higher levels of demand are also making way for some positive movement in pricing, which allows us to increase pay rates to attract and convert candidates.
Allied staffing remain exceptionally strong even as comps got tougher in the second quarter. This team is really firing on all cylinders and we were excited to see 9% organic revenue growth in the second quarter.
The greatest increase is in the imaging respiratory and laboratory specialties, which is very helpful. Since the availability of this talent is slightly more accessible than in therapy.
Client needs are very robust and we foresee solid growth continuing in this division.
As we look to the third quarter for the nurse and Allied segment, we expect revenue to be up 16% to 18% year over year, including a full quarter from the addition of advanced with organic growth in the mid single digits.
In the Locum Tenens segment second quarter revenue was in line with our expectations at 82 million.
Although still below prior year, we continued to make steady progress after our process and technology changes.
Our new hiring and training programs have gone well in fact in recent weeks, our newer recruiters contributed 16% to placement activity and our tenured staff is nearly reaching the productivity levels that we had a year ago.
For the third quarter locum Tenens revenue looks to be flat to slightly up sequentially, which would result in an improving year over year comparison, we believe that locums revenue will hit year over year growth by mid to late fourth quarter.
Second quarter revenue in our other workforce solutions segment was $121 million showing year over year growth of 3% our leadership and search division, which is compromised comprised of interim leadership and permanent placement solutions makes up about half of this segment's revenue.
This group grew revenue, 4% year over year, and 7% sequentially. We're excited about the momentum that they have in this business and how the collective team is elevating the conversation and a strategic approach with our clients.
Within our mid revenue cycle business the integration of our Med partners in peak brands is progressing very nicely and I'm impressed with their new go to market strategy and collaboration with our other businesses.
Although revenue is still lower year over year, there are more favorable trends as we head into the third quarter.
Other workforce solutions also includes our Vms and Avantas businesses, which had solid second quarter growth with expectations of continued growth through the remainder of the year.
In the third quarter total revenue for the other workforce solutions segment is expected to be up approximately 3% year over year with growth in most businesses.
Before I turn the call over to Brian I'd like to take a moment to thank our thousands of corporate team members and health care professionals, who put their hearts and their talents and helping our clients and their patients every single day. The biggest reason for amgen's success is the quality of our people and the passion they have for making a positive impact.
A great example of this kind of impact that we can make with our clients and our clinicians is our upcoming medical and community mission trip to Guatemala.
For the seventh consecutive year, all soon be joining and then sponsored doctors nurses and other team members to provide medical care and install smoke free stoves and water filters and support local schools in the most impoverished areas of the country.
During our week together, we will be fortunate to serve over 1000, Guatemalan patients and families. This is just one of the many ways that Amgen strives to use our resources to help others and to make a difference.
Now I'll turn the call over to Brian for a financial update after which Kelly, Ralph and Dan will join us for the Q and a session.
Thanks, Susan and good afternoon, everyone. The company's second quarter revenue of $535 million was above the high end of our guidance range.
The biggest driver of this upside came from the higher than expected performance in our nurse and Allied segment.
Revenue was up 1% sequentially and down 4% year over year.
Gross margin for the quarter was consistent with our guidance of 33.5%.
Up 110 basis points from last year, and 30 basis points better than the prior quarter.
The year over year increase was a result of increased margins in the nurse and Allied and other workforce solutions segments, along with a favorable segment mix shift.
Second quarter nurse and Allied segment revenue was $332 million.
Flat with the prior year and down 2% sequentially due to typical seasonality.
The quarter included an $8 million labor disruption event.
Which was the biggest driver of our outperformance.
The prior year included a $25 million labor disruption event, creating a difficult year over year comparison.
Nurse and Allied gross margin of 27.5% was 120 basis points better than the prior year, So down 40 basis points from prior quarter.
The year over year increase was from the combination of a higher labor disruption margin this year.
Partly offset by higher health insurance costs.
The margin was also down sequentially from the higher insurance costs.
Segment, EBITDA margin was 14.7% with about a 100 basis points benefit from a favorable malpractice reserve adjustment included in our DNA.
Second quarter Locum Tenens segment revenue of 82 million was 24% less than the prior year and up 2% on a sequential basis.
Gross margin of 27.8% was consistent with prior quarter and we expect a similar margin in the third quarter.
Segment EBITDA margin of 8.7% was above our expectations due in part to a favorable actuarial adjustments.
And we expect to run in the 7% to 8% margin range until we gain more operating leverage on future revenue growth.
Second quarter other workforce solution segment revenue of $120 million was up 3% year over year and 6% higher sequentially.
Segment gross margin of 54% was higher by 190 basis points year over year, and 150 basis points sequentially due to a favorable shift in business mix within the segments and an improved margin from our interim leadership business.
On a consolidated basis second quarter, adjusted EBITDA of $67 million was down 5% year over year.
Adjusted EBITDA margin of 12.5% was lower by 10 basis points year year over year, though up 10 basis points sequentially.
The margin in the quarter was favorably impacted by their previously noted malpractice reserve reductions at a higher margin on the labor disruption revenue.
These benefits were partly offset by lower reserve increases higher clinician health insurance cost and certain commission and bonus accrual true ups.
Adjusting for these items the consolidated margin for the quarter was in line with our guidance at approximately 12%.
We reported net income of $20 million and delivered earnings per share of 61 cents in the second quarter.
Adjusted earnings per share was 77 cents compared with 83 cents in the year ago quarter.
Our GAAP income tax rate in the quarter was 26% and was 30% on an adjusted basis.
Our tax rate is expected to be 30% in the third and fourth quarters.
Cash provided by operations was $29 million for the quarter.
Day sales outstanding at quarter end was 63 days, but excluding the advance acquisition would have been 60 days.
At June Thirtyth cash and equivalents totaled $21 million.
Capital expenditures in the second quarter were $8 million.
At quarter end, our total debt outstanding was $671 million and our leverage ratio was 2.4 times to one.
Now, let's turn to third quarter 2015 guidance.
The company expects consolidated revenue of $560 million to $566 million.
Up approximately 7% year over year.
Excluding the impact of the advance acquisition consolidated revenue would be flat to up 1%.
This guidance does not assume any material labor disruption events in the quarter.
Gross margin is projected to be approximately 33% with the sequential decline due mainly to having a full quarter impact of the advanced acquisition.
As you know expenses as a percentage of revenue are expected to be approximately 22.5%.
Adjusted EBITDA margin is expected to be approximately 12%.
Although third quarter 2019 as wins include the following.
Interest expense of $7.4 million.
Depreciation expense of $5.6 million.
Amortization expense of $9.6 million.
Stock based compensation expense of $4.2 million.
And acquisition integration and other extraordinary expenses of about $4 million.
Diluted share count is expected to be 47.5 million shares.
And now we'd like to open up the call for questions.
Thank you, ladies and gentlemen, if you would like to ask a question. Please press Star then one on your Touchtone phone. If you are using a speakerphone. Please pick up the handset before pressing the numbers again star one if youd like to ask a question.
And our first question comes from Jason Plagman. Please go ahead.
Hey, good afternoon, thanks for the questions.
So first one.
Was just wanted to get some more.
Color on that.
Your trends with with your large largest client if you if you've seen.
That level of.
Headwind only growth.
Normalize a little bit or just any color you can provide on how thats impacting your Q3 outlook and then also for the winter season.
Hey, Jason This is Ralph I'll handle that one if Dan has anything to add bill or Susan will move to covenants.
We did see some improvement in the second quarter with that client we've talked about the Q1 decreased spend in the neighborhood I think 12% to 13% year over year. So it's a slightly favorable to that in the second quarter that quite also.
It has a lot of winter needs that decrease that caused the sequential decrease.
When the volume comes down by just over $20 million from one quarter to the next windows winter needs and.
And then as we look forward is probably where the better news is we're looking to Q3, where it would have.
No it probably a less material impact than it did in Q1 and Q2.
The other positive news there is that Thats really kind of impacting just our travel nurse business and the client continues to grow in other areas of the business. So we're seeing considerable growth from them in our allied or locums business as well as our Rep response business.
Great that's helpful and then.
On the MSP.
Wins in the quarter.
And also another solid quarter, but just what youre seeing as far as.
Activity in the marketplace.
Health systems looking for strategic partners any any commentary on if you've seen any change in that activity.
Since last quarter.
Hi, Jason This is Dan.
We actually see lots of really terrific activity in the marketplace, our our wins since our last call are worth over $40 million and gross spend and as Susan mentioned.
Puts us just nearly 200 million year to date.
Geographic mix and the specialty mix. So those programs are very nice and align well with the rest of our programs.
We saw also an additional 40 million in AR and contracts for our Vms business, which also shows a lot of nice activity for those kinds of programs as well. So if you also factor in the fact that we have a little over $110 million and programs that are currently in contracting in our pipeline I feel really good about where we are going to and.
This year versus last year on the activity and productivity really of our sales team.
Thank you and now to line of Tobey Sommer. Please go ahead.
Is your phone on mute Sir.
Maybe we can circle back to Toby Oh, right and now to line of AJ Rice. Please go ahead.
Hi, everybody just first ask about under the last few quarters, we've talked about some of the dynamics with the hospital customer base or you know maybe pay bonuses to to get full time employees and not be it is willing to raise rates as needed to for you to get that incremental person to fill a slot for them. It sounds like you're saying that maybe changing a little bit are you seeing some of the premium rate.
Situations return I know, we pretty much anniversary through all that but where are we at in terms of getting the increases you think you need to meet the demand that you're seeing.
Hiatus, Ralph I'll I'll start out on that one.
You're right we are.
Seeing clients are increasing the percentage of time, they're paying a higher on bonus for their internal staff and we felt once that said about 10% of requisitions have a signing bonus attached to it a range would normally be in kind of that 3% to 7% range. Historically said that probably gives you some sense of.
How difficult it is higher in todays market.
But to your point, yes, we are starting to in our travel nurse business to see some pricing increases as we get into July it's not anything significant yet but.
After I think about six quarters of.
Pricing decreases.
Respectfully in line with the market at the time.
We are doing we started to see an increase as we entered Q3, so that'll help bring more supply to the marketplace. I think we've talked about this before 75% of that goes back to the traveler and that will help us recruit.
And what are our numbers up on them on the fulfillment side too.
Thank you Okay and then my other question would be around your locum Tenens business I guess in the last few quarters, there's been discussion about.
You know how the.
Demand for certain specialties are days, where others have picked up but youve had to build that pipeline and then second there has been discussion about the technological upgrades or technology upgrades, you've been doing that thats, a depressed performance a little bit it sounds like again both of those are moving in a good direction and if I heard you right to draw even saying you think you might show year to year growth in the fourth quarter in that business I want to confirm that and maybe flush out a little more those two drivers of potential long term growth and where you're at in anniversary. Some of the issues, but also maybe start to be able to say growth is in sight in the next few quarters.
This Ralph I'll start again on that one on.
Right demand is beginning to improve and the business is probably a result of our people not being as distracted by technology and process changes and getting back to their their cord.
RG and.
We're beginning to.
Yes, the new technology and tools to beef up our capabilities in those areas. So we're seeing stronger stronger February fill rates and growth rates there.
Our new recruiters, which we talked about last quarter, which was more of an S.J. item. In Q1 is are beginning to produce they actually make up about 16% of our production.
And in time, they could make up a third.
40% of our our production. So they are ramping nicely the new tool is actually easier to learn and so there are able to get into their career faster and start producing revenue for us.
It was a third part of the question of turning the corner now turning to the fourth quarter part of it yes. We do we continue to anticipate sequential growth in Q3, and then as well.
Looking forward to getting back up over prior year.
In Q4 and maybe.
Towards the end of the quarter before we get there but.
All signs point that that that's going to begin happening of course, we're looking forward to more robust growth after that.
All right. Thank you and now to line of Sam England. Please go ahead.
As your phone on mute.
Well, we'll move along to line of Mark Mark Roan. Please go ahead.
Hi, good afternoon, everybody sounds like things are turning up wondering if you can talk a little bit about the color in terms of the winter orders a little bit more and also can you remind us exactly how much strike revenue you ended up getting this quarter and how much you might anticipate a in the coming quarters or what the computer was there.
Sure Mark I'll take that second part of the question first as I mentioned that we had one event that was the most material in the quarter was about $8 million, we had a little over 10 million in total, but some of that we had anticipated and it occurred when we gave our last guidance. So really that was the biggest part last year, we were a little over $25 million a majority from one major event. So that I think that kind of covers that although it did help this quarter. It was still down year over year as we expected.
Right.
On a winter orders as Ralph.
Well right now it's very early to call. It and so we are just beginning to see.
Some of the needs from some of our larger customers, particularly on the west coast and they're in line with what we were at this point last year. They don't have any insight yet as to flu, so things could improve or or change quite a bit from here and we probably have about a dozen of our large winter order clients that havent actually placed their orders yet so little early to call, but there is no bad news there.
Okay. It sounds like it's it's good and then with regards to the orders being up.
Roughly around 20% can you talk about how widespread that is and also.
Two what are the difficulties with regards to filling the orders and.
Potentially capturing even more robust revenue growth.
Hey, Mark this is Susan I'll jump in and give rough a little break here.
I also want Kelly to weigh in on some of the demand that they're seeing and leadership in search that just in regards to our nurse and Allied business, where we can make that statement about orders being up over 20% really across the board in those businesses. It really is very geographically dispersed which is nice because we want assignments for all kinds of potential candidates and it also helps support our rebook rates, which continue to be very strong and they're not all just coming from one client or one area. In fact, our facilities with orders are also up over 20% in both nurse and Allied which is another very good healthy sign for the marketplace now certainly our MSP clients can be some of the highest fill rates for us which is they should be we're very focused on making sure that we meet their expectations in overall fill rates and where we do they have the opposite.
TD to really make sure that we're doing our part in Philly knows but even with our direct clients and third party, we see orders up significantly, which really tells us that it's not just in Amman, MSP story, but rather it's really a broad market increase so would that Kelly, maybe I'll ask you to share a little bit more insight on the leadership businesses, while yeah I'd be happy to I think on the on the interim management side, we're seeing very similar demands for interim leadership positions us very much in accordance with what we're seeing in our in our clinical demand as well and that's really across the board and highly concentrated in our.
Clinical leadership needs and we see that at the start of the quarter that demand continues to increase.
And on the same side, we're seeing some really nice trends in our permanent placement business across the board all three physician Perm executive search as well as our PEO experienced double digit sequential growth in volume this past quarter, and we're continuing to see that and I think that's reflective of the market and needs as well as as we brought our different search capabilities together and really getting more leverage out of our sales and client account focus across the country I'm, a higher level of cross selling and meeting our client needs more comprehensively, so very encouraged by those trends as well.
And Mark this Ralph I'll weigh in on the clinician supply constraints are improving slightly over what we talked about last quarter, certainly the higher demand higher demand in MSP slight movement in bill rates are helping it's kind of interesting phenomenon. Our actual leads are up on a year over year basis for applications are down so would probably gets to people fence setting a little bit right now theyre looking at jobs. They are more active in that.
Looking and looking for opportunities, but they're not yet pulled the trigger on that on those opportunities.
All right. Thank you and again, if youd like to ask a question. Please press Star then one.
And now to line of Henry Chen. Please go ahead.
Hi, everybody.
Thanks for thanks for the question I wanted to ask about.
So we've been hearing some stuff about.
Reimbursements rates coming down a bit with.
From the insurance carriers, just wondering what kind of impact do you see on that or is it if that if any and.
And maybe if you could just comment on sort of the.
The general kind of pricing environment.
Thank you good. Thanks, yes, this Ralph all to US just a little bit on the tone in the market I think it's probably important to note. When we're in front of our clients were just actually going getting through our quarterly reviews right now what we're hearing is they are very very confident in their patient volumes.
Let me there maybe some lingering concerns about reimbursement changes, but it's actually quieter than it's been for the last three or four quarters. So I don't think that is troubling them right now I think.
Everyone's of course going to watch the politics of things, but we're not we're not hearing that from our clients I think the the constraint on the on the bill rate increases.
Just can we fill it internally first though they'll actually opened the order with us, but they don't move quite as quickly and so they see what sort of flow that they have on applicants and then.
Their sites several steps have to go through before they actually start increasing build rates and we're we're partway through those steps now, but we're not completely through that yet.
Does that help.
Got it okay, yes, no that helps.
Great all right. Thanks, so much.
Thank you again star one and now to line of Tobey Sommer. Please go ahead.
Thank you thanks for coming back to me.
Could you comment on on pricing.
In the interplay maybe dynamic between.
What you described the sort of better bill rates on average.
Looking forward as well as.
The what you are seeing for winter needs and how that plays into it. Thanks.
Sure Tobey. So we mentioned that we were starting to see some improvement in pricing looking into the third quarter and that would be our average bill rate, which is really a a composition of the regular bill rate, which has increased a bit but more so the mix and utilization of premium rate assignments and we are seeing that mix increase a little bit as we go into the third quarter now it will naturally increase as we go into the fourth and the first quarter since that's when winter assignments begin and as we're getting into early glance at the rates for those winter assignments I'd say they are on par with what we had seen on last year. So we're feeling good about that and if we continue to see a positive mix shift that should generally be positive overall for us in terms of being able to again have the pay rates to support strong fill rates for those assignments.
Generally we've seen this over the decades in you know very well having covered this industry for so long that we have seen this dynamic play out many times, where we begin to see demand increase at a fairly rapid pace, which we saw in the second quarter and continuing into today and it takes a few months if not quarters before we really start to see that translate into some improved pricing and without improved pricing than we can increase pay rate and that helps to pull more supply into the industry's I'd say, we're we're not quite there yet, but I would expect based on historical trends that we would be getting there in the next few months now of course, our team isn't waiting for that we're doing all kinds of things to increase the number of applications to do a better job of converting or increase that conversion rate. We're doing a lot of really exciting and interesting thing.
Earnings on our mobile and digital and so I think we can make improvement even without more significant pricing increases, but generally that's when you start to see the greater volumes start to really impact the business.
In from your perspective, two more questions from me how much does would price have to move to.
Kind of increase the travel nurse supply in the market in available to the company and what to what does improving demand in your various perm businesses.
Mean to you as far as.
The.
A pricing cycle, what how do you how do you connect those two pieces of information.
So I'll start with the general pricing question, then have Kelly talk about physician I don't think there is a perfect correlation and number on the pricing and it's because it depends on also just the sheer volume of orders and demand that we have which I have to say as at near historical highs and so usually if you have significant demand it doesn't take quite as much pricing movement to really start to pull supply into the market, but certainly something sort of north of 3% would probably be enough to start to make some movement. Some of that again is already occurring with the premium rate mix shift in of itself because usually premium rates are closer to 10% above the regular rate. So just with a mix of more premium rate assignments, we'll see some of that movement as well. So I'm sorry, there is not a perfect correlation and a perfect answer because there just some.
Many different inputs and dynamics that can occur so and I'll add this is kelly from the perspective of the permanent hires, particularly nursing as a comparison I mean, we're seeing our clients face the same challenges in the market, they're seeing a lot of attrition as you know nurses and other clinicians get recruited away, we're seeing a higher level of sign on bonuses and then anything to say.
Competitive in their and their permanent roles too. So it's an like Susan said, how hard to tie the two together, but we're so we're seeing the same dynamics play out for both permanent roles as well as.
Contingent role so our team does a good job of keeping each other current with what are some of the latest trends in the market and supporting our clients in both regards.
Thank you and now to line of Mitra Ramgopal. Please go ahead.
Yes, hi, good afternoon, just two questions. Susan I know you mentioned in Locums you expect by mid late fourth quarter, we should start seeing some growth there and I was just wondering if that's more a reflection of the investments you've made in the technology and a new people. We have brought on or is there also some strength in the underlying market that's going to help that.
So we are seeing growth today, just to be clear and we had some growth going into the second quarter and the third quarters. It's so what you're referring to is a year over year growth and.
We expect that will kind of cross that threshold and a late fourth quarter. It is that our team is becoming more productive they're doing a much better job of really maximizing what the system is capable of and I think just getting through that learning curve. The newer producers that we've hired the recruiters and account managers that have come on board over the last six months are becoming more productive as we mentioned there making up a little over 15% of our placement activity today and that's just going to continue to increase every day and in the fourth quarter. In particular, we should start to see them as Ralph said approach, maybe even a third or more of our placement activity and so some of it is just getting the momentum and the benefit of the changes that we've been making over the last year and the fact that we really haven't had continued disruption I think were beyond the technology and.
Process disruption elements and now, it's just really fine tuning and and maximizing the potential of the system. The underlying demand is strong overall, if we look at the total aggregate demand within Locums is actually at very high levels, we have different fill rates within different specialties. So as Ralph mentioned, we still have fairly low demand in emergency medicine and in Hospitalists, where we traditionally had very high fill rates. So we've got to make sure that we are finding demand in other areas, where we where we can have equally high fill rates is that but it's it's improving every day and I feel like the team is on a very good path right now.
Okay, No that's great.
And then quickly on advanced medical I know its goal very early there, but I was just curious in terms of if you're already starting to see any incremental opportunities as it relates to areas you've talked about that could be interesting mental health and.
Totally therapy et cetera.
Or is it.
Still too early to see anything yet.
Well, they're off to a great start.
It's actually beat our our forecast for their first couple of weeks of Q2, so a shout out to the advance team.
Their school business is what their focus has been so we havent spent much time on integration yet or cross selling.
So they can focus on their schools business and that is up considerably over prior year.
You know in the 50 plus percentage range.
Which is good we also be.
The demand is higher.
Our ability to attract clinicians has been.
Better than it is in our in the nursing or in the Locums business, So lots and lots of positive there. The besides this school businesses, where they've also taken advantage of our MSP programs and begun filling orders in those programs and so they are up about five fold what their track record was they were supplier in the program before so they kind of knew us into the clients but.
Under our program, they've actually performed considerably better which is which is positive as well.
So so far so good teller therapy, which is when things were most excited about in their business right now.
We'll start it exists as a way to supervise.
People working in school environments, which is which helps extend the reach of the clinician.
And our hope is to expand that beyond therapy, which is in speech skills to into more behavioral specialties overtime.
And so we're just kind of beginning those conversations, but obviously, it's a powerful combination.
Of.
Once we get into the schools to be able to expand.
To help them, even with the nurses, which we have a business, we havent been in or into the doctors on the on the behavioral health side as well so lots of upside there and they're off to a great start.
Overall.
Thank you and now to line of Bill Sutherland. Please go ahead.
Okay. Thank you.
Curious on the.
200 million in MSP.
Wins to date.
What's the mix that you've got there of nursing Allied and locum and then.
Curious with the fill rate is ticking up partially.
Due to.
Advanced thanks.
Sure So I'll start with that.
Bill This is Dan.
Yeah, if you look at the whole group overall about 60% of the total listeners.
30% of the total is locums.
And the rest is outlined an interim exact combined.
And then with regard to the fill rates clearly you know those ones aren't the ones that are are yet even implemented at this point.
And so I think just generally if you look at our Msps our fill rates overall are kind of in that sort of 55 to 65, depending on what.
Business line or you are talking about that at our internal capture right I think our affiliate vendors, which we have an amazing network.
Gets us into the nineties.
Which we think is kind of industry leading numbers there.
But also right we have a bunch of new business. So I know all our capture is good.
And I'm thinking in particular of one large client we talked about a couple of quarters ago. I think we're already internal captures up enough, 40% to 45% range, we'd normally wouldn't be that high that early in that relationship.
So when you bring on a new client actually your fill rate goes down temporarily on the aneel entire portfolio, particularly if you have a lot of new wins like we've had recently, but.
We're trending.
At or above where we thought we'd be in and it will we get better and better at at those new clients. So we'd expect we'll have more of a contribution.
Further out Q4, and Q1 and beyond and as I mentioned now they advanced scene is helping and they're doing a very nice job of filling into organic piece that it is still early they've only been with now less than two months and so.
We.
We're looking forward to even more.
You know opportunity for them to help us fill those jobs, but they're doing a great job out of the gates.
Got it and then if I could ask just one on mid revenue.
If you could just.
For brought a little more perspective on that.
That partner and peak comp coming together and when you think it'll start to lead to some revenue growth. Thanks.
Yes, so that that team has really done a fantastic job of bringing those two brands in teams together to try to really get the synergies out of being more one organization and we brought them all on the same system that actually occurred over the last few months and they've been operating on the new system, which was actually already existed. We just wanted to get everybody operating out of the same front office and back office systems. So that we could more easily see and placed candidates.
There was really no disruption evident and they are often running into the third quarter and were already seeing some nice trends. There demand is up a in a couple of their major businesses Han and up in case management as well they've been doing a really great job of starting to sell into our MSP clients within Amazon as well as winning other new clients and then their placement activity in general is up in really most of their business lines coming into the third quarter.
So I don't know if I can give you a date on exactly when that will translate into year over year growth, but I would say really on a kind of all key trends, we're seeing a much better trajectory going forward. So I'll give a little more color on the said we'd had several quarters, where we had some sequential declines in part as we mentioned I think two quarters ago peak had a large customer that has reduced our utilization and so that was part of the reason for that as we are getting through that as our third quarter guidance, we expect to be up a little bit sequentially. So that's we're talking about a better trend were still down year over year in the kind of mid single digits that will that will likely be the trend through the back half of the year just because of that larger decline has declined but I think if you get into this year with the momentum we are seeing would expect to get back to growth early next year.
Thank you and now to line of Tim Mchugh. Please go ahead.
Thanks, just one follow up.
Welcome.
I guess, the improving or the pace of improvement in productivity out of the new salespeople.
Is that.
I guess, it's improving but it was from a low base so relative to your expectations.
How is that progressing and then also.
How are you finding turnover amongst both the legacy sales people in the sales people.
They are on the new model. Thanks.
This is Ralph I'll start with the second one where our turnover in the.
Second quarter decreased significantly over what we've been experiencing the prior two to three quarters, which when that people were probably most frustrated when we've actually had a large number of employees come back to us.
Rejoined the team which is great.
Of the new recruiters are actually above where we anticipated they'd be at this point so.
We had.
With our we speculated I guess at the time that the new tool would be easier to learn than the than the old database in systems and that's that's proven true yeah, I think we would.
We'd be happy if it were higher and I think if the demand trends change just a little bit that would that would be useful but in the meantime, they're they're they're beating our expectations, but there's still a lot of upside in those in those new hires.
Okay. Thanks, and then on the mid revenue cycle.
Or mid cycle.
Revenue collection.
I know you're going through some process improvement it's.
Are we still quarters away from seeing that sort of business returned to positive growth or is that something in the near term you might you might expect to see turnaround.
Yeah. So were we are seeing it turn and improve going into the third and the fourth quarter as Brian mentioned earlier, we had a fairly large client.
That brought their program in house last year. It started last year, and so that created a bit of a headwind for something and some other things, but that actually was one of the bigger headwinds will start to lap that at the end of this year. So in terms of year over year growth I think we're talking more first quarter of 2020.
All right. Thank you and now to line of Jason Plagman. Please go ahead.
Hey, we haven't heard much from Brian So I thought I'd throw him. A question just one question on capital deployment any thoughts on priorities with the leverage ticking up.
And the Abbott and is there any appetite for incremental M&A in the near future are you focused on digesting advanced medical for the time being.
That's that's it for me.
Thanks, Jason I'd kind of all those are true in some respect we Uh huh.
We're still looking at opportunities and I think that that hasn't really changed at the leverage level that we're at at 2.4 times, we think that still gives us capacity to to do acquisitions in the meantime, we'll as we as we throw off cash will will likely focus on debt reduction.
We still have the opportunity to buy back shares too, but what will probably focus more on reducing our debt just to provide more more capacity, but I don't think that the last acquisition advanced is not diminished our interest in.
Exploring opportunities to make acquisitions, we're still very disciplined and finding the right targets.
In the right spaces, but it's actually been a little more active in the last few months Theres a few different opportunities that we've been able to look at and some other ones. We are having dialogue with as well so that really nothing's really changed in that regard, we think advance the integration with its in a space that we're very familiar with so we think we'll have a very successful integration as we focus more on that in the back half of the year and that gives us room to continue to look at opportunities.
Thank you and again, if youd like to ask a question. Please press Star then one and now its line of Mark Mark Cohen. Please go ahead.
Just a quick follow up on advanced medical what are you assuming for the.
For the third quarter and.
Based on that assumption, what we got organic revenue growth before them.
So.
Now that it's about 35 million or so of revenue in the in the third quarter care, yet I'm afraid I don't have the exact numbers with me here, but I think it would represent double digit growth on a year over year basis.
Unfortunately that is really to talk about the schools business. There, we're seeing very strong growth in the number of new starts in the in the New school year. So thats a part of it. Although nursing is also up quite a bit they were they were kind of flat to down a little bit as we exited 2018 or back to a nice growth rate and then the core therapy business as well so really all parts of the business are growing.
Great and then on Locums, because with regards to the systems.
How how far along are you in terms of like if.
100% were applicable how far along are you in terms of the system optimization.
Yeah. This is ralph but it's not a big concern for US anymore, I know, we talked about that for several quarters. So.
Are we have a system that is.
You know significantly better than our say our prior systems. We are releasing new releases is that software. It's just a different animal now it used to be you put it in place what you used to Virginia, just kept until a new version came out but.
With the tools that we have now where we release.
New software upgrades about every two weeks.
When we cross trained employees on those about every four weeks. So we continue to make changes as we see that that will improve the business but.
Technology is not in not keeping us from growing any any longer.
Great. Thanks.
Thanks Mark.
Thank you and now to line of Tobey Sommer. Please go ahead.
Tobey good you have a follow up question.
Maybe not yes, I was hoping you could ask about or just comment about school business.
Sort of the addressable market and whether the advance has all the scale that that it needs for you to kind of attack that market or there may be some sort of capability or geographic presence that.
Could be rounded out either through M&A or organic means.
Yes, Tobey this is Ralph and Brian what brands I want to introduce me to the school business. They may want to weigh in on that.
With a little reluctant when we first heard about the growth rates in the business and about the size of the addressable market, but our our research shows it's north of a billion.
And certainly Underpenetrated, there's probably four or five.
Companies that have over 50 million in revenue in that space is very fragmented. So there's a great upside opportunity.
And then the addressable market could be considerably larger.
As schools I think start to understand that they have options available to them to staff and these are mandated staffing.
Levels for them, so they get reimbursed by the government on them and.
So were.
Think schools may not even know our option exists in some cases Big school systems of course, do but there's certainly a.
A very large market to go after there probably.
Not quite as Big I guess is travel nursing, but maybe at least half is big.
This is Bryan and thank you very much of their ability to go after or.
The entire country. If you look at the you look at the growth. It had this year in some of their newer wins are in school districts that are in different geography is all over the country. So theres no limitation that it actually have some distinct advantages, which won't go into all the details in terms of how they are able to recruit talent.
Into these opportunities and really partner more with some of the school districts to address their total leads versus buying kind of in a fragmented way, which is historically how that that industry is operating so we see it as a lot of operating for them to continue to penetrate that market.
Thanks I appreciate.
Thank you we have no one else in queue. Please continue.
Okay, well. Thank you everyone for joining us today for a robust conversation. We appreciate your time and we look forward to updating you on our progress on our next earnings call.
Alright, Thank you and ladies and gentlemen that does conclude our conference for today today's call will be available for replay after 730 P.M. Eastern time today through Midnight August Twentyth 2019, you may access the ATM replay system at anytime by dialing one 804, 756, 701 and entering the access code of 469775.
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