Cross Country Healthcare, Inc. Q1 FY2024 earnings call

• First quarter 2024 revenue and adjusted EBITDA were in line with expectations. Team performing well in a tough environment with travel demand softened. Focus on growth opportunities across portfolio including locums, education, home care staffing, etc. - Travel business: Demand down in high double digits since end of 2023, weekly production down mid- to high single digits, open order rates stable, average bill rates declining. - Local or per diem business faced headwinds with double-digit sequential volume decline and mid- to high single-digit REITs decline. Focus on expanding into non-acute care settings. - Strong performance in other lines: Physician Staffing revenue up double digits YOY, Homecare up mid-single digits YOY and sequentially, Education up low double digits sequentially. - Actions taken to align cost structure: U.S. head count down over 20% since start of year, leveraging India operations for cost savings, investments in technology like Intellify, migration of legacy clients to Intellify. - Outlook for second quarter: Revenue between $330M - $340M, adjusted EBITDA $10M - $15M, goal for high single-digit adjusted EBITDA margin, focus on strategic technology investments, share repurchases, potential M&A.

Nurse and Allied reported revenue of $332 million, down 10% sequentially and 43% from the prior year. Travel nurse in Allied was down 11% sequentially and 48% from the prior year, with billable hours down 9% sequentially and bill rates down 2%. Local business first quarter revenue was down 36% from the prior year and 19% sequentially. Homecare Staffing was up 4% sequentially, Education was up 11%. Physician Staffing delivered $47 million in revenue, up 16% over the prior year and flat sequentially.

• Second quarter revenue anticipated between $330 million and $340 million, adjusted EBITDA $10 million to $15 million. - Goal to achieve high single-digit adjusted EBITDA margin, expect mid-single-digit adjusted EBITDA margins near term while maintaining capacity. - Focus on putting healthy balance sheet to work through strategic technology investments, share repurchases, and potential M&A. - Goal to close on several accretive acquisitions to diversify platform, enhance value proposition, and improve margin profile.

• Market headwinds affecting travel and local business demand. - Competitive pressures impacting bill-pay spreads. - Burden charges such as health insurance, workers' comp, and professional liability that can put incremental pressure on gross margin. - Uncertainties in the travel market recovery timeline.

Q: Trevor Romeo asked about Q2 guide, demand trends for first 4 months of the year and competitive headwinds.

A: Bill Burns said Q2 not following historic patterns, driven by travel, bill rates projected to decline, John Martins added demand fell sharply but leveled off last 6 weeks.

Q: Brian Tanquilut asked about locums supply and sustainability.

A: John Martins said locums has long runway for physicians, need to attract right candidates and offer quality jobs.

Q: Albert Rice asked about gross margin pressure and competitive pressure on bill-pay spread.

A: William Burns said burden charges were a surprise, payroll tax reset higher, competitive pressure still prevalent but open order rate ticked up.

Q: A.J. Rice asked about gross margin and incremental pressure.

A: William Burns said burden charges like health insurance, workers' comp, professional liability were surprises, but majority not expected to recur.

Q: Albert Rice asked about availability of supply and expectations.

A: John Martins said expectations reset, some travelers went back to core, Marc Krug added reset on expectations, pay transparency.

Q: William Sutherland asked about Allied business growth.

A: William Burns said Allied business more resistant to decline, Marc Krug mentioned strong demand in imaging, physical therapy.

Q: Constantine Davides asked about per diem challenges.

A: John Martins said per diem parallel to nursing side, affected by acute care and skilled nursing facility changes, William Burns said local business sequentially flat.

Q: Tobey Sommer asked about competitive pressures and Intellify.

A: John Martins said competitive effects baked out, William Burns said order volume improvement from won programs, John Martins talked about Intellify's importance.

Q: Kevin Steinke asked about Intellify pipeline and local staffing commitment.

A: John Martins said Intellify pipeline robust but cycles longer, local staffing committed to finding right opportunities for strategic partnerships.