CCRN
#It's hard to answer a little bit, because, yes, I think the actual shock to the team and the fallout of people that aren't on board and those that are on board ---+ I think a lot of that has kind of settled in.
But that doesn't mean that he is now clicking on all cylinders and he's got all the resources he needs and he's got revenue back on track again.
There will be a little bit of a lag as his key performance indicators and his activity levels and the changes he's making in how we measure people and drive performance.
It still takes a quarter or two to come in to play, but yes, I think that everybody has gotten their head around the fact that there is a new world of accountability that didn't exist before.
And that has kind of settled down somewhat.
I think it's all about next year at this point.
I'm trying to give the new president enough time to ---+ without undue pressure on him to perform better financially.
Because I would rather he make the right changes and get the right people and have the right operating metrics in place than to worry about whether I make $2 million or $3 million more in revenues this year.
Yes.
It's probably not all specialties.
We have 17 specialties that we've kind of consolidated down into a lower number.
Our biggest ones are emergency medicine, hospitalists, and primary care.
They are good ones ---+ absolutely.
Unfortunately, we are not participating in the market.
But the good news is we have great capabilities in those three areas that should be growing.
And as the new president gets the people doing the activities they need to do, I feel good that those are three good areas that we should be growing better than they are today.
I guess the point we were trying to make is we've continued to have positive cash flow generations through the month of July.
And in fact, the point I was really bringing up is that we now have over $20 million of cash available to us.
So it's just showing that in the month of July alone, we doubled the cash from where we ended June.
So if you looked at our net debt today, we have the $40 million term loan, $25 million converts at par, and then over $20 million of cash.
So our net debt is very low.
Our real leverage ratio is kind of 1-to-1 from a trailing 12-months perspective.
And no borrowings under the revolver.
If that's the one you are talking about.
The other one we talked about in July was the candidate [transfer].
So we have seen ---+ I'm not going to give the exact numbers, but a significant improvement in candidate flow in June over the first five months of the year and even a bigger increase in July.
We had set a specific target that we believe we needed to get to in order to start driving double-digit growth for our nurse and allied segment.
We are exceeding ---+ we exceeded that for both June and July.
So I feel really good about it.
If we can keep our conversion rates of applications to that convert to placements, which we believe will hold up, this is a really good trend for us.
No, there are two smaller ones.
And the bigger one that was originally anticipated to go live on July 1, part of it will come on on a smaller scale in September.
And I think the bigger piece of it will either be November or it will get pushed into next year.
There's just been a delay that that particular hospital system, as we've seen with some of the results, have various issues that they are dealing with.
And they want to deal with some of those issues before they give us the project.
So the bigger 500 person ---+ I don't know if it was 500.
It was between 300 and 400, I think it was ---+ is pushed out a little bit.
Some of it will come on I think a little bit earlier, but a lot of it is going to be pushed out a little bit later.
It has met multiple benefits for the customers.
It takes away some of the non-core competencies around logistics, with people in hiring and orienting and credentialing these power professionals skills.
But it's also a cost savings initiative for them.
I think that's where we're getting the significant interest.
Since they can't save money on contingent labor right now, they are looking at other ways.
So we did hire, as I mentioned, a couple of senior executives that come from this kind of outsourcing world.
And they are out there now kind of talking to our customer base.
We may win a couple more this year that take a month or six weeks to get implemented.
I'm not sure it will make a huge effect on the second half of the year, but I feel very positive going forward that this is going to be a good growth engine for us.
Well, let's start with the percent of revenue the MSPs are, which actually has gone up from last quarter.
So last quarter, we kind of have three metrics now.
If you look at our total nurse and allied, it's about ---+
Total nurse and allied is about 35% now, including the Mediscan business.
Up from last quarter, it was ---+
Up from 33% last quarter.
And of our total revenue.
For total revenue, it's now roughly 30% of total consolidated revenue versus 28.5% in Q1.
So within workforce solutions, certainly our MSPs are growing significantly faster than our non-MSP customers.
And as a result, you are seeing it show up as a higher percentage.
And that's even with a lower fill rate than we used to have on our existing MSPs.
We feel really good that MSPs will be a good growth engine for us.
Not only the existing ones have been growing quite a bit, but all these new ones that we've won this year haven't even been implemented yet.
And that bodes well hopefully going into Q4 and into next year as well.
Yes.
I think I get it.
So yes, our revenue overall is growing at MSPs, although our fill rate is down to about 60% now.
So that means that the revenue on demand is obviously going up significantly as well.
All of that we feel good about.
But if MSPs are growing at that much, that means some of our non-MSP customers must be declining.
And there's some truth to that.
If we don't have a preferential relationship with a customer, it is hard to service them in this environment.
And we certainly put a lot of our efforts into the MSP side of it.
If I break it out a little bit, so our branches, which is ---+ a lot of it is predominately non-MSP ---+ actually grew at 8% year over year, as I mentioned earlier.
So we do have non-MSP business that's growing as well.
Mediscan doesn't anticipate in our MSPs and that grew at 19% year over year.
So I guess yes, the math says that our non-MSP customers are declining.
And it is harder and harder to service those customers in this kind of environment, if that answers the question.
And <UNK>, if you want to add ---+
So I did say over a year, but you're right: it started about 18 months ago.
As we saw the increases in 2014, we saw the real peak come at the end of Q3.
And then when we saw that it was fairly sustainable, it really was about 18 months ago that we started to bring more recruiters on.
But you're right.
We escalated that or increased the level of recruiter recruitment about a year ago, little over a year ago.
But it takes six to nine months for a recruiter to get up to speed.
And yes, there is this kind of chicken-and-an-egg thing, which is they need to get up to speed and be functional before we turn the spigot on and bring in more candidate flow.
So yes, we've been financing recruiters that are less productive than our average productivity historically.
But we had to get there ---+ again, chicken and an egg.
You can't do one without the other.
The worst thing I could do was to have increased my candidate flow and then not been able to place the people or not be able to get back to them.
That would ruin my reputation in the market.
So I had to do one before the other.
And we now feel that we are at a point where we have enough resources that know what they're doing that are up to speed that we can now invest in the candidate attraction piece of it.
We may not have been as clear about the sequential way we do that, but that's the reality of it.
It was a little catch-up.
Because as we mentioned, we get at it late, but that initiative is paying off.
Again, these are all the turnaround things we've been spending time on for the last few years that kind of come together.
Some of them are coming together all at once and some of them are being phased in over time.
I think generally, nurse and allied pricing will stay above 5% year-over-year price increases for the next few quarters.
I don't see that dropping below that.
Nurse and allied ---+ sorry, travel nursing was almost 11%.
Will it fall below 10%.
There's a possibility, but I think it has some sustainability for the next few quarters as well.
So I think we're going to be pretty close to these.
It may drop 150 basis points from where it is now, but I don't think it is going to drop much more than that.
And if we can drive the volume that we think we can, then this business should grow faster than it has been the last few quarters.
Over 7% for nurse and allied overall, and 11% for travel nursing.
Yes, I think so.
I'm going to say at average.
The interesting point someone made earlier was do we get a lot of pushback from clients.
We still have some of our larger clients where we're still negotiating those price increases.
So they have yet to materialize and earn in our numbers.
But those will come online as we start to lap tougher quarters.
So I think <UNK>'s point about the mid-single digit kind of price increases looking sustainable just based on what we can see for where we are still working with clients to get the price increases put into place.
But on a blended average, I would say we are pretty close to where we need to be.
It depends on whether you include all the MSP revenue into workforce solutions or just the kind of fees we get.
So we get fees for our MSPs that we ---+ but our MSPs are growing and that's fine.
And I think that will end up continuing to grow as a percentage of our overall revenue ---+ of our nurse and allied revenue.
So I'm going to just remove that from the workforce solutions.
So if you look at the other pieces of it, optimal workforce solutions is $20 million to $30 million today.
I'd like to be that to be $100 million in the next few years.
It's a great value proposition for us and we think there's some traction with our customers looking at it.
Predictive analytics is still kind of in pilot mode and isn't generating a lot of revenue right now.
Our recruitment process outsourcing is, I don't know, $300,000 to $500,000 a quarter, maybe.
But that's only because I don't have the infrastructure yet to do more.
I could win five of those a month if I had the infrastructure.
So it's again, a chicken and an egg.
I need to invest in the infrastructure, but I'd like that to be tens of millions of dollars in the next couple of years.
And then the other one is our healthcare education services, which is mostly the charter school business.
And that's ---+
It's probably on a run rate of about $15 million, $16 million.
It's $15 million, so $4 million or $5 million a quarter at the most right now.
I really want to expand that nationally; I'd like to get that to $50 million or $100 million over the next couple of years.
So we think there's some growth opportunities in these, but they are more medium to long term than they are in the next few quarters.
I think we'd like to do both.
I have some acquisition goals that I wouldn't mind achieving on the workforce solution side that could boost RPO or optimal workforce solutions or ---+ and certainly on the educational side.
I would love to do an acquisition in any of those three areas.
But I also would like to do some additional acquisitions on the staffing side.
We're still under the scale from what I would like to be on both allied overall and physician staffing.
And there are several of our businesses built within our organization that have higher gross profit margins.
So search would be an area I would look at.
Our local allied business is over 30% gross profit.
So there are some strategic areas on staffing that I wouldn't mind boosting as well.
So look, we got enough firepower.
Our covenant says we can get to 3.5 times leverage.
We are well below that today, and we are in a good market condition.
So we are out there actively looking to see what's available.
I saw that as well, although I did see some of them also talk about strong outpatient services, which is a growing area for us.
We have not seen any of that in our orders.
In fact, I originally had said that we had passed our previous peak of nurse and allied orders in this quarter.
And one of my finance people went back and looked, and actually, there was one week like last year that was a little bit higher.
But we're really at the all-time high of orders.
We have not seen any drop off based on the numbers that we reported in the public hospital systems.
We used to be almost 90% acute-care hospital as a percentage of our revenue.
We are now down to about 70%.
So we certainly are growing, and that business is growing.
So it means that we are growing on non-acute care business faster than our acute-care business.
And I like that.
I like that diversification and I like that split because that's how healthcare is being delivered today.
And I think with our branch infrastructure, we are well positioned to take advantage of the growth in ambulatory and outpatient.
So that hasn't bothered us a whole lot and we haven't seen a drop-off in demand because of it.
So that's a good question.
It's a combination of them getting up to speed and being ready and a combination of the total number.
And so yes, we are behind where we expected to be.
I expected to pull the trigger on higher candidate attraction a little bit earlier in the year, which is why we had in essence implied a significantly higher revenue number for the second half.
But between the total number of recruiters and whether they were up to speed or not came in a little bit later than we had anticipated.
So again, as I mentioned, there was no value in turning the spigot on for more candidates and increasing the number of applications we had if I didn't have sufficient or capable resources to process them.
So yes, we were a little bit behind the number and a little bit behind those that were coming up to speed.
So we didn't turn that out on until the beginning of June.
And that's a couple of months later than we anticipated.
So that couple of months of extra growth gets pushed into next year and we end up slightly slower growth than we had originally guided to.
There's several things that I'm ---+ I'm not going to talk about all the particulars because it's a bit competitive.
But I think there's several aspects of it.
There are quite a few things that we knew we needed to do that we just delayed until we were ready for them.
We are trying some new things that have come from the external consultants that we hadn't thought of before.
Some of those are working, some of them aren't, but we are very pleased that we are getting exposure to things that we hadn't thought of on our own.
And the third one is it is costing significantly more than we had anticipated.
The market is so robust that there's a lot of competition out there.
And the cost of attracting candidates has certainly gone up year over year.
So this is costing us more than we had originally anticipated.
I'm okay with it, because the results are showing really, really good trends and that revenue will catch up to these costs.
But those are kind of the three things that we looked that.
Yes, we knew certain things we had to do; we were holding them off until we were ready.
There's some new things we are trying that are paying off, and then it's costing a little bit more than we had anticipated.
No, we were up 6.6% year over year in our branch pricing.
That's a combination of per diem and local allied.
Our fill rate at our MSPs is almost 100%.
It's in the high 90%s overall.
Our share is about 60% of the business that's available at the MSPs.
So our overall spend under management is up quite a bit and the overall revenue we are getting is up quite a bit, even though our percentage has gone down from what used to be in the high 80%s to 60%.
Absolutely.
So if you think about it, those are convertible notes.
And so there was a strike price on the shares of $7.10.
So they are well in the money.
We would ---+ they become callable, and so we could choose to pay cash or we could choose to force the convert.
Or we could just offer cash.
Well, we could choose to offer cash, which they would ---+ that's the backup if the shares were trading below the strike.
But the reality is they will convert.
And they're at a fixed rate of 8%.
So the savings was straight 8% on the $25 million that you see.
And it obviously cleans up a bit of the noise in the financials with the embedded derivative going away.
So the debt piece will go away; a couple million dollars of interest will go away.
And those converts are already in our diluted share price account anyway.
And we sized the new facility with that in mind, that the converts would go away, not requiring any cash.
But we feel we have enough liquidity and dry powder ---+ as I mentioned, we have no borrowings under the $100 million revolver.
One thing we didn't mention on this call but is in our other disclosures is that we do have an accordion feature built into this debt structure as well for an additional $50 million.
So that would require going back to the lenders, but at least it's there.
So we have ---+ we feel we are very well financed right now.
Okay.
Thanks, A.
J.
Thanks, everyone, for joining us this morning and I look forward to updating you with our third-quarter results in August.
Thank you.
