• Revenue: $315 million for Q3 2024, down 7% sequentially and 29% year-over-year.
• Gross Margin: 20.4%, down 40 basis points sequentially and 160 basis points year-over-year.
• Adjusted EBITDA: $10 million for Q3 2024, representing a margin of 3.3%.
• Net Income: Adjusted earnings per share of 12.
• Cash Position: $64 million in cash with no outstanding debt.
• Homecare Staffing Growth: Up 13% year-over-year in Q3 2024.
• Physician Staffing Revenue: $50 million, up 10% year-over-year and 4% sequentially.
• Share Repurchase: 800,000 shares bought back for $12 million in Q3 2024.
• Q4 2024 Revenue Guidance: Expected between $300 million and $310 million.
• Q4 2024 Adjusted EBITDA Guidance: Expected between $11 million and $13 million.

• Warning! GuruFocus has detected 3 Warning Sign with CCRN.

Release Date: November 06, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Cross Country Healthcare Inc (NASDAQ:CCRN) reported third-quarter revenue and adjusted EBITA within guidance ranges, with revenue at the high end.
• Homecare staffing showed strong growth, up 13% year over year, with a robust pipeline of opportunities.
• Physician staffing business grew by 10% year over year, with expectations for continued growth driven by increased billable days and higher revenues per day filled.
• The education business is performing well, with expectations for mid to high single-digit growth.
• The company renewed its largest MSP customer under a multiyear agreement, showcasing strong client relationships and potential for increased spend under management.

Negative Points

• The company faces a highly competitive market, particularly in travel nursing, with high compensation packages from competitors pressuring bill pay spreads and gross margins.
• Gross margin was down 160 basis points year over year, primarily due to bill pay spread compression in the travel business.
• Revenue for the third quarter was down 29% over the prior year, driven by declines in travel nurse and allied segments.
• The company anticipates continued gross margin pressures in the near term, partly offset by cost-saving measures.
• Despite an increase in orders, over 50% are not at the right market bill rate, limiting immediate volume growth.

Q & A Highlights

Q: Can you provide more details on the Q4 revenue guidance and the impact of the labor disruption? A: William Burns, CFO, explained that the sequential revenue decline is primarily due to a labor disruption, estimated to impact revenue by $5 to $6 million. Excluding this, the travel business is expected to decline low to mid-single digits sequentially, offset by a nearly 70% sequential increase in the education business as schools return. Home care and locum tenens are also expected to grow low to mid-single digits sequentially.

Q: What factors are contributing to the gross margin pressure, and what might alleviate this pressure? A: William Burns, CFO, noted that margin pressure is mainly due to the pay bill housing spread in the travel business, with stable bill rates but increased compensation pressure. John Martins, CEO, added that the gap between hospital bill rates and clinician pay expectations needs to close, which could happen as census increases and flu season impacts demand.

Q: With a 20% increase in orders, are these orders at bill rates sufficient to attract supply? A: John Martins, CEO, stated that over 50% of orders are not at the right market bill rate, but the increase in orders is encouraging. It takes time for bill rates to adjust to market levels or for clinician pay expectations to decrease, which is anticipated to happen over the next month or two.

Q: How is the home health care staffing business performing, and what is its economic profile? A: William Burns, CFO, reported that the home health staffing business is run-rating over $100 million, with growth expected to reach $110 to $120 million. The gross margins are above the consolidated average, making it one of the company's better-performing segments.

Q: What is the current status of MSP contracts and capture rates? A: John Martins, CEO, mentioned that spend management is between $650 to $700 million, with recent MSP wins and a strong pipeline. The capture rate has increased to about 73% due to changes in account mix and the inclusion of home care staffing programs.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.