Cross Country Healthcare, Inc. (CCRN) Q3 2024 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call reveals several challenges: revenue and gross profit declines, competitive pressures, and margin compression. Despite share repurchases, the financial performance is weak with declining revenue and pressured margins. The Q&A highlights concerns about margin pressures and unclear future guidance, indicating potential uncertainties. The market strategy and financial health ratings are negatively impacted by these factors, leading to an overall negative sentiment.
Key Financial Performance
Consolidated Revenue $315 million, down 29% year-over-year, driven primarily by expected declines in Travel, Nurse and Allied.
Gross Profit $64 million, with a gross margin of 20.4%, down 160 basis points year-over-year due to bill pay spread compression in the travel business.
Selling, General and Administrative Expense $54 million, down 22% year-over-year, primarily due to lower salary and benefit costs from headcount reductions.
Adjusted EBITDA $10 million, representing a margin of 3.3%, reflecting lower revenue and gross margin pressure.
Adjusted Earnings Per Share $0.12, at the high end of the guidance range, primarily due to lower stock compensation and discrete tax benefits.
Nurse and Allied Revenue $265 million, down 33% year-over-year, with Travel down 41% year-over-year.
Home Care Staffing Revenue Up 13% year-over-year, driven by recent PACE program wins.
Physician Staffing Revenue $50 million, up 10% year-over-year, with billable days up 6% year-over-year.
Cash from Operations $7.5 million for the quarter, with $96 million for the 9 months.
Cash Position $64 million in cash, with no outstanding debt.
Share Repurchase Repurchased over 800,000 shares for about $12 million.
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Operating Highlights
Home Care Staffing Growth: Home care staffing has continued its steady growth, up 13% year-over-year in the third quarter.
Physician Staffing Growth: Physician staffing has continued to grow up 4% sequentially and 10% year-over-year.
Education Business Growth: Education business is performing well, approaching $100 million on an annualized run base.
Travel Nurse and Allied Market: Orders are up roughly 20% over the third quarter, indicating a potential inflection point.
MSP Wins: Recent MSP wins are expected to contribute positively to the business.
Cost Management: Proactive cost management has improved contribution income by 15% sequentially and 80% year-over-year.
Headcount Reduction: Investment in headcount reduced by another 4%, driving approximately $2 million per quarter in savings.
Technology Investment: Continued investment in technology, notably on client and candidate facing tools as well as ERP system.
Share Repurchase: Repurchased 800,000 shares for about $12 million in the third quarter.
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Risk or Challenges
Competitive Pressures: The company is operating in a highly competitive market, particularly in Travel, Nurse, and Allied sectors, where competitors are offering high compensation packages, pressuring bill pay spreads and limiting gross margin normalization.
Regulatory Issues: The company referenced known and unknown risks, uncertainties, and other factors that could materially affect results, as noted in their filings with the SEC.
Supply Chain Challenges: There are challenges related to bill pay spread compression in the travel business, where pay rates are declining faster than bill rates, impacting gross margins.
Economic Factors: The overall economic conditions are affecting the travel staffing market, with a noted decline in professionals on assignment and normalization in bill rates.
Labor Disruption: A small labor disruption impacted the third quarter performance, which is not expected to recur in the fourth quarter.
Cost Management: The company has been proactive in managing costs due to lower revenue and gross margin pressures, including a reduction in headcount.
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Guidance & Outlook
Home Care Staffing Growth: Home care staffing has continued its steady growth, up 13% year-over-year in Q3 2024. The company expects this business to be up again in the mid-teens year-over-year in Q4 2024.
Physician Staffing Growth: The physician staffing business has grown 4% sequentially and 10% year-over-year. For 2024, it is forecasted to be up in the low double digits year-over-year.
Education Business Growth: The education business is expected to see continued mid to high single-digit growth for the foreseeable future.
Intellify Technology Platform: The company expects 100% of clients to be fully converted to the Intellify platform by the end of the year, which is anticipated to increase spend under management in 2025.
M&A Opportunities: The company is exploring M&A opportunities to expand its portfolio in markets with strong growth potential.
Q4 2024 Revenue Guidance: The company anticipates Q4 2024 revenue to be between $300 million and $310 million.
Q4 2024 Adjusted EBITDA Guidance: Adjusted EBITDA is expected to be between $11 million and $13 million, reflecting gross margin pressures.
2024 Adjusted Earnings Per Share Guidance: Adjusted earnings per share is expected to be between $0.10 and $0.14.
Long-term Margin Goals: The company aims for a high single-digit adjusted EBITDA margin, with expectations for mid-single digits in the near term.
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Shareholder Return Plan
Share Repurchase: In the third quarter, the company repurchased more than 800,000 shares at an aggregate cost of $12 million.
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Key Q&A
Q:Can you unpack the Q4 revenue guidance a little bit?
A:The main reason for the sequential step down is the labor disruption, impacting revenue by about $5 million to $6 million. Stripping that out, the travel business is expected to go down low mid-single-digits sequentially, offset by a nearly 70% increase in the education business.
Q:What do you think the industry needs to see for margin pressure to abate?
A:The margin pressure is primarily from the pay bill housing spread in the travel business. The gap between clinician pay expectations and hospital bill rates needs to close for margins to improve.
Q:Can you comment on the orders up 20% sequentially in the fourth quarter?
A:Over 50% of orders are not at market bill rates, so while orders are up, they aren't translating into immediate volume increases.
Q:Are there seasonal orders impacting the fourth and first quarter?
A:There are some seasonal needs, but the demand is becoming more just-in-time. The flu season is contributing to the demand.
Q:Can you provide more perspective on home health care staffing?
A:The home health staffing business is running over $100 million, with gross margins above the consolidated average.
Q:What is the current status of MSPs?
A:Spend under management is between $650 million to $700 million, with a good pipeline for MSPs and minimal churn.
Q:What is the margin target for locums?
A:The margin profile for locums is higher than the consolidated average, but not by a lot.
Q:How are you thinking about stock buybacks versus M&A?
A:There is authorization for over $40 million in buybacks, but the focus is on maintaining cash for potential M&A opportunities.
Q:Review of Unclear Management Responses
A:Management avoided giving a direct answer regarding the first quarter outlook, stating it's too far out to comment.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Constantine Davidez
Cross Country
Davidez Citizens
Hi
PACE program
Sure Trevor
Travel
Trevor Romeo
asset
average
base
body
business
buyback
capital
capture rate
care staffing
chasm
churn
clinician bill
clinician expectation
color Sure
flu
inflection point
interest income
labor disruption
leverage
physician staffing
queue
rate clinician
return school
sign
spend
step
strength
summer month
CCRN Transcript
Cross Country Healthcare, Inc. (CCRN) Q3 2024 Earnings Call Transcript
Unknown11-7
The earnings call reveals several challenges: revenue and gross profit declines, competitive pressures, and margin compression. Despite share repurchases, the financial performance is weak with declining revenue and pressured margins. The Q&A highlights concerns about margin pressures and unclear future guidance, indicating potential uncertainties. The market strategy and financial health ratings are negatively impacted by these factors, leading to an overall negative sentiment.
Cross Country Healthcare, Inc. (CCRN) Q2 2024 Earnings Call Transcript
Unknown8-1
The earnings call presents a mixed picture: strong cash flow, share repurchases, and positive guidance on demand increase are offset by significant revenue decline, competitive pressures, and a substantial bad debt expense. The Q&A reveals optimism about demand but acknowledges competitive challenges and cost pressures. The neutral rating reflects these balanced positives and negatives, with no strong catalyst for significant stock price movement.
Cross Country Healthcare, Inc. (CCRN) Q1 2024 Earnings Call Transcript
Neutral5-2
Cross Country Healthcare, Inc. (CCRN) Q1 2024 Earnings Call Transcript
Unknown5-2
The earnings call highlights several negative trends, including declining revenue in the Nurse and Allied business, increasing DSO, and gross margin underperformance. Despite some optimism about the Locum business and technology investments, the lack of clear guidance and significant challenges in key segments overshadow positive aspects. Q&A further emphasizes demand softness and management's vague responses, leading to a negative sentiment. With no market cap data, the reaction could vary, but the overall sentiment leans negative due to the revenue decline and uncertainties.
CCRN Report
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