Cross Country Healthcare, Inc. Q3 FY2024 earnings call

• Operating in a competitive market with competitors offering high compensation packages pressuring bill pay spread and limiting near-term gross margin normalization.
• Travel demand was steady in Q3, orders up ~20% over Q3, and approaching an inflection point. Home care staffing up 13% YOY in Q3, with steady growth and robust pipeline. Physician staffing up 4% sequentially and 10% YOY, with an annual run rate of over $200 million from 2022's $100 million. Education business performing well, approaching $100 million annual run base. Renewed largest MSP customer under multi-year agreement and expect 100% of clients on Intellify platform by end of year.

Nurse and Allied reported revenue of $265 million, down 9% sequentially and 33% from the prior year. Travel, the largest business within Nurse and Allied, was down 11% sequentially and 41% from the prior year. Local business had better-than-expected results due to labor disruption. Home care staffing saw 13% year-over-year growth in the third quarter. Physician staffing had 4% sequential growth and 10% year-over-year growth, with an annual run rate of over $200 million. Education business is approaching $100 million on an annualized run base and expected to see mid to high single digit growth. Revenue contribution: Nurse and Allied is a significant part, with Travel being the largest within it, while home care, physician staffing, and education are growing and now represent approximately 30% of total revenue.

• Fourth quarter revenue expected between $300 and $310 million. Adjusted EBITDA expected $11 to $13 million. Adjusted earnings per share expected between $0.10 and $0.14. Education business to benefit from return to school. Travel and local businesses expected low to mid-single-digit declines in billable hours with modest bill rate improvement. Goal to achieve high single digit adjusted EBITDA margin in long term, but near term mid-single digits.
• Repurchased ~800,000 shares in Q3 for ~$12 million, focused on strategic capital deployment including M&A exploration and technology investment.

• Competitive market with competitors offering high compensation packages pressuring bill pay spread and limiting near-term gross margin normalization. Market波动 affecting business performance. Uncertainty around M&A exploration and integration.

Q: Unpack Q4 revenue guidance, specifically on core travel business sequential trend and Q1 outlook A: Bill Burns said Q4 sequential step down due to labor disruption (~$5-10M revenue impact), travel business down low mid-single-digits sequentially on volume, education business up nearly 70% sequentially on return to school. John Martins said not commenting on Q1 as too far out but encouraged by demand inching forward Q: Drill down on orders up 20% sequentially in 4Q, quality of orders and FTEs A: John Martins said over 50% of orders not at market bill rate, orders stepping up but FTEs down sequentially. Marc Krug said increase in almost every specialty for travel nursing, broad based demand Q: MSPs, dollar value under management, net growth in contracts, capture rates A: John Martins said spending management between $650M-$700M, signed another VMS, slower cycle due to more stakeholders in hospitals. Bill Burns said capture rate moved up, higher in PACE and home care staffing programs Q: Locums growth, margin target, capacity for growth A: John Martins said high demand due to census up, surgeries, anesthesiology and CRNA needs. Bill Burns said Q3 locums up ~10% YOY, 60% volume growth, 40% mix of bill rates and business. Margin profile higher than consolidated average. John Martins said capacity in business for growth, measured by daily producer capacity Q: Stock buybacks, strategic capital deployment, M&A A: Bill Burns said ~$40M authorization for share buyback, holding cash in 4Q to deploy strategically, M&A market expected to be frothier, combination of M&A, share purchases, and technology investment