Good evening, ladies and gentlemen, and welcome to the Cross Country Healthcare Earnings Conference Call for the First Quarter of 2020. This call is being simultaneously webcast live.

A replay of this call will be available until May 21, 2020, and can be accessed either on the company's website or by dialing 800-391-9852 for domestic calls and 402-220-9826 for international calls and by entering the passcode 2020. I will now turn the call over to Bill Burns, Cross Country Healthcare's Chief Financial Officer. Please go ahead, sir..

Thank you, and good afternoon, everyone. I'm joined today by our President and Chief Executive Officer, Kevin Clark; as well as Buffy White, President of Workforce Solutions and Services; and Steve Saville, Executive Vice President of Operations.

Today's call will include a discussion of our financial results for the fourth quarter and full year results for 2019, as well as our outlook for the first quarter of 2020. A copy of the press release is available at www.crosscountryhealthcare.com.

Before we begin, we need to remind everyone that certain statements made on this call may constitute forward-looking statements.

As noted in our press release, forward-looking statements can vary materially from actual results and are subject to known and unknown risks, uncertainties and other factors, including those contained in the company's 2018 annual report on Form 10-K and other quarterly reports on Form 10-Q, as well as other filings with the SEC.

The company undertakes no obligation to update any of its forward-looking statements. Also, comments made during this teleconference reference, non-GAAP financial measures, such as adjusted EBITDA or adjusted earnings per share.

Such non-GAAP financial measures are provided as additional information and should not be considered substitutes for or superior to measures calculated in accordance with US GAAP. More information related to these non-GAAP financial measures is contained in our press release.

With that, I will now turn the call over to our President and Chief Executive Officer, Kevin Clark..

Thank you, Bill, and thank you to everyone for joining us this afternoon. When we released our Q4 results in early March, we said at the time that we had yet to see any impact from COVID-19 on our business, and that has certainly changed.

Since the pandemic became a stark reality for our country, Cross Country Healthcare has been leading the way in delivering critical staff to many of the impacted health care systems around the nation.

Over the last 6 weeks, we have staffed more than 1,000 health care professionals on COVID-19 assignments with the majority going to our Managed Service Programs. Given the nature of our business, we were prepared for the potential that our employees might be infected.

Since March, hundreds of our health care professionals were tested for COVID-19 with many having to be quarantine and more than 70 testing positive. Several of our employees that tested positive had been hospitalized, and we wish them a speedy recovery.

Tragically though, one of our beloved long-tenured employees succumbed to the disease last month and our hearts go out to her family.

Our priority continues to be the health, safety and support of the people and communities we serve, including our dedicated team of more than 1,600 employees and of course, the thousands of health care workers we employ each year.

The first critical step in our response was to ensure business continuity and seamless operations across our footprint of 57 offices throughout the country and our offshore location in India. Being headquartered in South Florida we're no strangers to hurricanes, so we were well prepared to work remotely.

And within just 48 hours, all of our employees were able to work from home, well in advance of orders to shelter in place in many of our markets.

As part of our response, we established a cross-functional crisis team with representation from all parts of the business, including operations, credentialing, recruitment as well as corporate functions such as legal, finance, marketing and human resources.

This team has met daily and has been a constant consultation with customers and health care professionals making decisions and executing on our mission.

I am incredibly proud and deeply appreciative to all of our outstanding employees for their dedication, passion and tireless efforts to staff the hundreds of critical health care professionals and heroes needed around the country.

We recognize that this is a national emergency, and we are doing everything we can to partner with our clients to ensure they have the staff necessary to respond to the crisis.

Our approach has been to consult with clients to establish plans and protocols as well as identify ways to facilitate the rapid response, including evaluating demand, streamlining credentialing requirements and establishing pricing guidelines.

Ultimately, our clients make the decision on the rates they are willing to pay, and we make every effort to staff all of them regardless of the pricing.

Proposed bill rates for these assignments are based on market data and are a reflection of the higher compensation for the health care professionals who have demonstrated an unwavering commitment to be on the front lines and a great personal risk in order to treat patients in need.

As you know, we don't normally mention specific clients by name, but two of our larger Managed Service Programs were at the epicenter of the crisis and warrant me calling them out, Northwell Health in New York and Providence St. Joseph Health in the Northwest.

Both of these clients were proactive in responding to the unique challenges in their markets, and were incredibly welcoming towards Cross Country travelers into their systems. The feedback we received from nurses on assignment is a testament to how both of these systems are handling the crisis.

Their leadership and passion for delivering the highest standard of patient care will be remembered long after this pandemic is behind us. We are honored to stand by their side as well as with hundreds of systems across the nation to help them through the crisis. Cross Country has been a market leader for nearly 35 years.

And we have established hard-earned trust with our clients and health care workers. With the nation in crisis and lives on the line, we believe that doing what is right for our customers, health care professionals and the patients they treat protect the long-term value of the thousands of client relationships we have established.

Prior to the outbreak here in the United States, we were on a very positive trajectory with revenue growing and profitability expanding. While there was a modest impact from COVID-19 on the first quarter, we were pleased that results were within our guidance ranges with consolidated revenue of 210 million and adjusted EBITDA of 4.6 million.

The biggest impact on the quarter from COVID-19 was related to school closures, which negatively impacted adjusted EBITDA by approximately 1 million. Aside from our COVID-19 response, we continue to make progress on our key technology initiatives.

Last month, we successfully launched Cross Country Marketplace, our proprietary on-demand staffing platform. Cross Country Marketplace is a one-stop self-service portal for health care professionals that will greatly improve the candidate experience.

Early indications are that health care professionals are embracing this tool and are using it successfully. And as a result, we will be continuing development efforts to build out functionality and integration. The second key IT initiative is with respect to our applicant tracking system.

And we remain on target for full implementation across our travel business in the third quarter. This new applicant tracking system is just one component of our larger technology ecosystem that we expect will drive growth in both revenue and profitability as well as greater productivity across our business.

While COVID-19 will certainly impact our second quarter, it has also provided us with a unique opportunity.

We were already on a path to reduce our physical office footprint, but given our ability to work remotely without disruption throughout this crisis, combined with the successful launch of Marketplace, we are confident that we can accelerate our efforts.

Over the balance of the year, we will be steadily and deliberately moving to further reduce the number of physical per diem branch offices by moving to a regional hub strategy with locations in key markets.

I want to stress that per diem nursing and local allied remain a vital and integral part of our business, and we are not pulling out of any of the markets we serve. Branch-based employees in the markets impacted will largely remain with Cross Country and will deliver the same amazing consultative service that we are known for in the industry.

Before the end of the year, we expect to reduce roughly two thirds of the physical offices, representing about 25% of our total square footage, driving an estimated annual cost savings of more than $2.0 million once completed.

In addition to the closure of physical offices, we are continuing to drive other operational savings through efficiencies and organizational alignment.

Looking ahead, the pandemic has certainly changed the landscape for the health care sector as systems were forced to take drastic steps such as canceling elective procedures and furloughing thousands of workers.

As we disclosed in our press release, due to the uncertainty from the impact of COVID-19 on our business, we are not issuing guidance for the second quarter.

That said, there are some positive indications that the curve may, in fact, be flattening in some of the hardest hit states, and we have already begun shifting our focus to assisting clients with returning back to a more normal state.

We are actively helping clients to prepare for the potential surge in demand from patients that may have deferred their health care. With many states resuming elective procedures in recent days, we are expecting to see higher order volumes for surgical specialties for both nurses and physicians in the coming weeks.

Lastly, we expect that many schools will reopen in the fall, though we remain ready to continue servicing clients on a virtual basis. Just before I turn the call over to Bill, we want to wish all of the nurses are very Happy Nurses Week.

Your contributions to the country are so greatly appreciated, and we are honored that so many of you choose to represent Cross Country. With that, let me turn the call over to Bill to go through the first quarter results in more detail..

Thanks, Kevin. We began 2020 on a solid trajectory with all 3 segments growing over the prior year. Consolidated revenue was $210.1 million, up 8% over the prior year as we continue to grow the number of professionals on assignment.

Adjusted EBITDA was $4.6 million, representing a 28% increase over the prior year, which was at the lower end of our guidance range, in part due to the impacts from the school closures as well as continued investments in revenue producers in the early part of the quarter.

On a sequential basis, revenue was down $5 million or 2% due primarily to the seasonal impact from the start of the New Year, while the sequential decline in adjusted EBITDA was driven by both the seasonal decline in revenue as well as the impact from the annual payroll tax reset.

As schools began closing in the middle of March, and our branches saw a decline in local allied due to COVID-19, our revenue was approximately $3 million lower than expected, which resulted in adjusted EBITDA being $1 million lower for the quarter. Revenue for Nurse and Allied was $188.2 million, up 7% from the prior year and down 2% sequentially.

As we reported in the fourth quarter, we began to see pricing moving up, and the trend continued for the first quarter with average rates of approximately 4%. Total hours worked in the quarter grew in the low single digits and would have been higher were it not for the decline in education as well as the decline in our branch business.

Our Physician Staffing segment also continued their recovery with another strong quarter. Revenue for the segment was $18.2 million, representing a 13% increase over the prior year and a 9% sequential decline, due mostly to seasonality.

The year-over-year growth was predominantly driven by favorable bill rates and mix with double-digit growth across both Physicians and Advanced Practice specialties. Gross profit margin for the quarter was 23.6%, representing 110 basis point decline over the prior year and prior quarter.

The year-over-year decline was primarily driven by lower bill-pay spreads within Nurse and Allied as average pay rates rose faster than bill rates. It is also worth noting that despite the impact of COVID-19 on our education and branch businesses, which operated at higher gross margins, we were slightly above our guidance range.

Total SG&A was $45.9 million for the quarter, up 1% sequentially and flat over the prior year. As Kevin mentioned, COVID-19 has presented a unique opportunity.

The combination of our experience with working from home and the early success from the launch of our Marketplace allows us to greatly reduce the office footprint throughout the US by migrating to a regional hub strategy for our local and per diem businesses.

Additionally, we expect cost savings from further centralization and automation as well as potential benefits from the full deployment of our new applicant tracking system across the rest of the travel business.

As a result of these efforts, we are targeting annual cost reductions of between $10 million and $12 million across our business, and we look to realize between $6 million and $8 million in 2020. Below adjusted EBITDA, there are a few items to call out. We recognized restructuring costs of $600,000, primarily associated with severance.

Given the plans to further reduce costs, we expect to incur additional charges throughout 2020 pertaining to both severance as well as other exit costs related to the office reduction. And finally, interest expense was approximately $900,000, representing a 20% sequential decline and a 39% decline over the prior year.

Year-over-year decline was driven by a lower effective interest rate on the new ABL facility as well as lower average borrowings during the quarter. From a balance sheet perspective, we ended the quarter with $12.6 million in cash and $67.6 million in outstanding debt under our ABL, excluding letters of credit.

Due to the uncertainty from the COVID-19 pandemic and out of an abundance of caution, we opted to hold more cash than we might have otherwise. From a cash flow perspective, collections were relatively strong for the quarter, and our days sales outstanding was 56 days, a decline of two days from the fourth quarter.

Cash flow from operations for the first quarter was $17.2 million, up from $12.8 million in the prior year due in part to the stronger collections as well as the timing for disbursements. Thanks to the strong free cash flow generated during the quarter, we further reduced our overall indebtedness.

Our debt net of cash was approximately $55 million or $15 million lower than the start of the year. This brings me to our outlook. As Kevin mentioned, due to the uncertainty of the impact COVID-19 have on our business, we will not be providing guidance for the second quarter.

However, we would like to provide some additional insights on the business and the second quarter. Our ability to staff hundreds of urgent COVID-19 orders should generate substantial revenue for the company, and we continue to staff new COVID-19 related orders.

However, given the uncertainty each health system faces, we do not know how long assignments will run or what percentage may renew. Additionally, we've seen unprecedented volatility in non COVID-19 orders.

For instance, our travel nurse orders, excluding COVID-19, were up more than 60% as of March 31, and in the last several weeks have declined sharply as hospital census has fallen and elective procedures have been canceled.

Recent orders are down across most specialties, though we've seen the biggest declines in emergency room, operating room and surgical specialties. We remain optimistic that the market will stabilize and orders will return to their pre COVID-19 levels in the coming months.

The White House and the CDC recently stated that they expect deferred elective procedures to resume as part of the first phase in reopening the country. And we have already started receiving new non COVID-19 related orders as systems in many states returned to normal and look to give their permanent staff much needed time to catch their breath.

This concludes our prepared remarks. And at this point, I'd like to open the lines for questions.

Operator?.

Thank you. Before we begin – entertain questions, I would like to turn the call back to Bill Burns..

Thank you, Sue. Just before we open the lines for questions, I'd like to provide everyone with a quick update. Unfortunately, Kevin Clark, our CEO, will not be able to join us today for the Q&A session due to the flare-up of a pre-existing orthopedic condition that he's getting taken care of right now.

As recently as this morning, when we spoke, Kevin thought that he'd be able to join the call, but unfortunately, that's not going to happen. So we'll press on and we'll answer your questions. On behalf of our entire leadership team and the Board, we wish Kevin a speedy recovery, and we will look to provide an update as appropriate. Thank you.

And operator, we can open for questions..

[Operator Instructions] Our first question is from A.J. Rice with Credit Suisse. You may go ahead..

Thanks. Hi, everybody and while here everyone's staying. First of all, maybe when we look at the 4% rate increase, I could envision a scenario where you had premium rates for a portion of those placements to hot areas or something and the other was more normalized.

Was the 4% sort of across the board? Or was it concentrated in a limited number of assignments that had premium rates? Can you give us some flavor for what you're seeing on the rate side?.

Yeah. Sure. Hi, A.J., this is Bill. The rates were already beginning to trend up as we reported at the end of the fourth quarter. So we had seen some good momentum across most of the Nurse and Allied businesses.

There's a minimal impact from the COVID-19 surge orders in the first quarter, but predominantly, that will be in the second quarter, so most of this is just the trending in the overall bill rates for that business..

Okay. And you gave us some good numbers on the school impact, 3 million of revenues, 1 million of EBITDA, and that sounds like that was primarily concentrated in the last couple of weeks of the first quarter.

Should we assume that we just multiply that out and for the full period of the second quarter, you'll have a similar impact given most schools seem to be staying closed? And then how do you think about the summer? I know we're hoping by the fourth quarter, you're back to schools being open, but any thoughts about how to trend that or what to think about that?.

Yeah, A.J., I'll start off, and then maybe I can ask Steve to just help us a little bit with the education discussion, like for the summer session. But the early weeks of the – last few weeks of the quarter were certainly impacted by the school closures.

As we've begun to get some more stability in the education space, we are continuing to offset some of that with teleservice to education based clients. So it's not a complete – that we would just normally spread that out over the residual for the second quarter.

So there'll be a bigger impact in the second quarter without a doubt, but it's not as though the entire business is going to 0 because we are doing things to take an offset. So I can't give you the exact numbers right at this point in time, but it will be larger for the second quarter..

Okay.

And then on the summer, you typically generate business in the education – revenue in the education segment in the summer? Or does that automatically shut down during those months?.

Well, I'll start with the historic trends that I've seen up to this point. Typically, the summer months for us have not generated significant revenue across the school space, as you might expect.

There is some thinking in this world, I'm going to pivot to Steve that perhaps there is an opportunity that we'll see some school revenue continue into the summer months. But Steve, I don't know if you have any other color you can share on that..

Sure. Hi, A.J., this is Steve. Just on the summer months in particular, some of the jurisdictions that we operate in will have summer services. They're already talking about providing school throughout July, which is usually the month where you'll see a significant dip in school related revenues.

We have been delivering teleservices as Bill stated a few moments ago across our client network. The first two weeks that COVID hit, which was towards the end of the quarter, most schools were completely off cycle. What we've seen is that there have been restarts. We're continuing to deliver care under the IEPs that the children are governed by.

And again, with some of the schools planning for services throughout the summer, we expect to have some revenue, say, coverage throughout the entire quarter..

Okay. Great and just maybe to wrap up, you talked about some of the procedures starting to come back and some states starting to open up.

As you have discussions with your clients, are they suggesting that they may need you? Are you getting any early orders? And any sense of how long that pent-up demand from the hospital's perspective might take to play out? I guess, I'd also ask an aspect of it. Is it skewed to or – I know you have a significant per diem business.

Has the per diem business been impacted in a different way than the travel and as this has played out..

Sure. I'll start, and maybe I can ask Buffy to provide some additional insights. Yes, A.J., look, I mean, it's been an incredibly volatile situation in the last, say, six weeks with tracking the demand across all systems and where things are moving. Initially, right after COVID hit, we saw a huge surge in needs for ICU and ER and things like that.

That has kind of calmed down. There was a – then subsequent to that, we saw orders pull back, as I mentioned, in the – mostly in the medical – the Med-Surge and the OR areas. More recently, that trend is starting to bounce back.

So it looks as though we've had – it's a short time period, so we really can't predict the trend, but we are starting to see some positive signs that, that may be bouncing off the bottom there and coming back. I'll just leave it with one more comment about per diem. Per diem certainly has been impacted by this.

As I mentioned, the local offices, they do some allied and, of course, service some schools as well. So they had about $1 million impact in the first quarter on lower revenues. So they're seeing that sort of trend continues into the second quarter right now.

But again, as systems reopen, there's the opportunity that per diem will be one of the first areas that they'll seek to fill some of the gaps. But I'm going to ask Buffy to add a little more color to that..

Yes, certainly. Thank you. So obviously, very uncertain at this time, but I would say we still have some COVID activity out there. But as we're starting to see some of the state's open up, health care systems are starting to look to offer those the normal services prior to COVID and certainly the elected surgeries.

We're starting to see some order activity. I'm happy to say in the areas of OR, some CNA, certainly in the allied space, some of the lab work. So we are optimistic that we are going to start to see those in some of the states, again, that are opening up. Hospitals are obviously being very cautious in following the guidelines.

On the per diem side, we are seeing – obviously, there was some impact. I am with Bill that I am encouraged that we will see some per diem activity as the hospitals are trying to ramp up. And as their census grows, we're also seeing some areas of growth in the local markets for screening services to support the businesses as they potentially open up..

Okay, sounds great. Thanks a lot..

Thank you, A.J..

Thank you. Our next question is from Jason Plagman with Jefferies. You may go ahead..

Hey, good afternoon. I was just wondering if you're willing to give any understanding of the volatility, but any commentary you can provide as far as the number of Nurse and Allied staff on assignment at the end of March as in comparison to the end of April versus the end of March, even if it's just directional.

Just trying to get a feel for how that's trending thus far in the quarter for Q2..

Yeah. I think it'd be really hard to give you that insight right now, Jason. This is Bill. I think looking at just how things are moving so rapidly. As we talked about early March, had seen no impact from COVID-19 in the business and within a couple of weeks, we had a very sharp surge. We've had a lot of – obviously, staff.

We mentioned we've staffed over 1,000 health care professionals on COVID-19-related assignments. Those are continuing, and we're continuing to staff new ones. So that number could continue to grow.

We just don't know how long those assignments will run and whether the renewals will happen or if they'll be returning back to pre COVID kind of normal needs. And then as far as the rest of the business, it's really hard because we have a working nurse count, of course, that's always out with our clients.

And the order flow is starting to turn back around. So we'd have to look and see how the quarter shakes out for us to be able to give that insight. But I think right now, it's about consulting with our clients, helping them get their staff ready for the time that they're going to reopen and what they're going to need.

Buffy, anything else you'd add to that?.

No, I would agree. I mean, it's difficult to say. I think for the COVID assignments that we have right now, the assignment length varies based upon what they're seeing in the local geographies and how COVID is impacting their census. So I would agree with everything else. It's just really difficult to say..

Okay. And you mentioned that the length of those COVID assignments is varying.

So I'm assuming those are not a typical 13 week assignment, it's more like a three or four week or kind of any – how should we be thinking about the typical duration of those? Is it a couple – two weeks or is it closer to four or six?.

Yeah. And I probably should preface this by saying that the orders in the counts we're talking about are predominantly on the travel side. So there are contract lengths as long as 13 weeks. It varies by client and what they were thinking their needs would be. So there's probably all across that spectrum in there of contract assignment lengths.

So yes, some will be up for renewal in the middle of the quarter, somewhere in the whole length of the quarter. But again, we just – we don't know what our clients' needs will be. But Buffy, I don't know if you have any other color on the assignment length..

No, I agree. I mean, we're also seeing some renewals. So I think, again, that is widely varied based upon the geographies. Certainly, where we saw some of the highest surge in the epicenter of the crisis, we're certainly seeing much, much longer or many longer assignments, whereas others might be more abbreviated, say, eight to 13 weeks..

Okay. That's helpful. And then just wanted to ask one question on the Physician Staffing, anything you would call out as far as COVID impact there? I'm assuming that didn't have a big impact in Q1, but just what you're seeing in Q2 and kind of demand on the Physician Staffing side would be helpful..

Yeah. Jason, I'd say, look, they certainly have seen similar trends in the demands, particularly around the surgical and the anesthesia elective procedures. But again, and they've had some positive indications from the COVID as well in terms of staffing.

But Steve, I don't know if you have any additional color on – you'd like to provide on the trend there?.

No. I mean, outside of being in regular communication with all of our clients to assess what – evaluating their demand, ensuring that, based on that assessment, we're streamlining the process for moving physicians and advanced practitioners into their centers.

What we've experienced is that with the elective surgeries on a hold, we have seen the surgical services area really step back. Surgical specialties, as Bill called out, anesthesia and CRNA services in particular.

We're also starting to see a reset on that as some states come back on from the – with restarting elective surgeries; we're seeing some reengagement and almost immediate reengagement. So right now, I would say we've had a spike down, and we're seeing a spike back up.

And really, as we walk through understanding how we're restarting this process, we're still early in this. And the trending is really difficult for us to call out any further..

Okay, fair enough. Thanks for the questions..

Thanks Jason..

Thank you. The next question is from Tobey Sommer with SunTrust. You may go ahead..

Thanks. I was wondering if you could comment on April revenue trends and that were several days past the close of that month, a? And could you comment on year-over-year orders? You did reference, I think it was travelers, up 60% at the end of the quarter.

But what do things look like in aggregate now?.

Yeah. Again, we're not going to get into – too much into the quarter simply because it has moved around so much. Just starting with the orders, I think that we saw a very sharp decline coming out of the quarter and into the month – early month of April, and it seems to be rebuilding that order – the order book.

So I think it's hard to predict where that's going to come out for the quarter. But I'm not going to give an intra-quarter kind of a metric. I think it's too premature at this point.

And sorry, what was the second part of your question?.

What were April revenue trends?.

Yeah. That's probably a harder one. We're not at the point where we can speak to the month of April yet. Books are still being closed and the like. I think, again, we have lots of puts and takes going on. We have more revenue coming in from the COVID surge.

We've had, obviously, cancellations on certain other assignments, and the school business remains a headwind for us in the month of April. So hard to give you that number right now, Tobey, which is part of the reason we're not guiding to Q2..

Am I right that in your prepared remarks, you did reference up 60%, which part of the business was that? And then I think you said down year-over-year.

Is that accurate?.

Yeah. The order counts were up – this was travel nurse. That's the business we have some of the best line of sight to, right? I mean, it's where we get the most visibility; we get longer lead times on the orders. So yes, that's correct.

At the end of the first quarter, we were up over 60% year-over-year, down sequentially just slightly from the end of the year. And that's – a lot of that has to do with the seasonality of where the business comes into the year.

But – and there may have been some early impact from COVID in the first quarter for the order count as well at March 31, but I think most of the impact we've seen has really been coming in April..

Okay.

What kind of premium rate are we talking about on average for your 1,000 placements related to COVID-19?.

Yeah. It's a great question. And again, I want to preface this by saying that the premium rate that we're talking about or the higher bill rate is largely a function of the compensation and the geography where the clients are and the cost that it takes to get a headcount professional, working professional there.

The bill rates range, I mean, some clients – it's very, very unique to each client. In some cases, clients looked at like wanting to just do a small increase off of the existing bill rate. In other cases, we presented recommendations.

So I would say it's more akin to what we've seen in other instances of labor disruptions and what I've called out the project revenue. So we're looking at a higher bill rate. But of course, that comes with a much higher pay package as well..

Sure.

I understand you're holding gross margins, but could you remind us what prior labor disruptions and other similar situations have been like?.

Yes. I mean, I think again, it runs everything across the entire spectrum. But I'd say the high point you're probably looking at bill rates could be, in some cases, as high as two times what a normal traveler might have been. Pay rates can be anywhere from two plus.

The pay packages, in many cases, were a higher percentage of the bill rate than they might have been otherwise just because of the nature of this pandemic and the need to get the labor there so quickly.

But Buffy, anything you would add to the demand and what you're seeing in terms of the compensation rates again?.

No. I think for Cross Country, I think we're very proud of how we handled and partnered with our clients to set the rates. Of course, it was based upon the client decisioning on what the rates would be.

We did evaluate the marketplace, but it was highly driven by what it would take to attract supply that would work in the environment, right? And these circumstances are working at the crisis.

So we definitely – they varied widely by geography and by based upon where some of the surge was hitting, and the number of incidences of COVID that they had within their facilities. But I would agree with you, Bill, it was upwards of two times. And then obviously, the pay packages were significantly up as well..

Yeah. But again, I would just caution, Tobey, not to think that all of those assignments are at that kind of a multiple. I was just kind of giving you the parameters of the maximum..

I would agree..

Sure. I appreciate that.

Can you give us a little bit more color on the changes to the per diem? Because I think I heard you say you're going to shutter kind of two third of the physical footprint but maintain staff? Are they going to be working remotely? And then physical staff and real estate will be more on a hub basis? Any more color would be helpful..

Sure. Yes. I think you've hit it right on the head, Tobey. That's the plan right now is that in many of these markets, we've maintained fairly small offices that are now having the success of marketplace behind us and having seen the success of work from home and the ability to maintain productivity in those markets.

It's kind of giving us the confidence. But again, it shouldn't be a surprise. We've been on a path to reducing our office footprint and reducing the brick-and-mortar cost for the company for some time. This is really just an acceleration of those efforts.

But again, I'll hand it to Buffy to speak to what you're seeing from a productivity perspective for the folks that are in those markets..

I would agree, Bill. I think this did just allow us to accelerate our vision in this place. I think the local markets and local presence will always be an advantage for Cross Country. So we will maintain our presence. It continues to be important so that we can stay connected with our clients and our candidates and the communities with which we support.

This is really a shift from a bricks-and-mortar perspective. I think with the immediate pivot to work from home for the safety of our staff and business continuity, we saw very strong production, we saw very strong adoption to the work from home model. And so it did just accelerate.

It's just based off of the confidence that we were seeing in the business..

In the physician business, the orders that you're starting to see, are they for start times – start assignments in the near term? Because my understanding is the industry, in general, has a – generally kind of in normal times, a longer lead time where you're getting the orders farther in advance..

This is Bill again. I'll just start. I mean, I think to some extent, some of the orders can be calling back physicians so they don't have the same lead time if it's somebody that they were not in need of during the early days of the COVID crisis. But again, I'll ask Steve for some insights on what the order trends are seeing with lead times..

Thanks Bill. And Tobey, yeah. Bill, you hit the nail on the head that we've had callbacks for physicians that were serving accounts prior to the COVID crisis. And that Tobey would allow for a faster adoption and faster revenue recapture.

But to your point, for new orders that are coming in, we will have the same privileging requirements that – and timing in terms of delivery that we've traditionally had..

Okay. Just a cash flow question, I'll get back in the queue.

Do you expect sort of cash flow and account receivable harvesting to drive better cash from ops near term?.

Well, I would say we've maintained a strong focus on the cash flow and obviously, our collections are key to us. We want to keep our DSO down as low as we can. So it remains a focus area for us as we move into the second quarter. But if your question is, do we expect the cash flow to improve from receivables on business trends.

I'd say there's a lot of factors that go into that. But obviously, we're going to keep pushing hard on driving collections to get the cash flow that we've seen through the first quarter.

We had a slight slip back in the fourth quarter with it being a use of cash in part because of DSO and in part because of some timing of payments, but I was pleased to see that cash flow into the first quarter.

And I'll say this about our results to date is that the cash generation thus far into the second quarter has remained on track or close to our expectations, so not seeing any kind of deterioration there..

Thank you. Our final question comes from Henry Chien with BMO. You may go ahead..

Hey, good afternoon guys. Good afternoon everybody. I wanted to ask just to make sure I'm hearing it correctly. So it seems like there was a surge in travel nurse orders with the COVID crisis onset.

And of course, that was balanced with a decline in elective procedure-related staffing, though it sounds like that's extremely volatile and probably in some cases, declined sequentially.

And just what's your sense of what's driving that? Was that the – like the impact of the shut-ins and then infections being a lot lower than expected? Or is it – or is hospitals just over hiring and capacity was also more than expected? If that makes sense, just kind of understand what you're seeing from the order level or just from your just conversations with the clients?.

Yeah. Totally understood. Thanks for the question, Henry. I'll start, and I'll ask Buffy if she has any additional comments. But when we saw coming into March, the orders definitely surged on those COVID-19 response or crisis orders that was an immediate response to the market was that.

And then as I think census and electric procedures began to taper off – taper down in terms of census, we saw the operating on the surgical specialties and then in the ER room as well, sort of where we saw the biggest pullback. Hospitals have had to take drastic steps across the nation, including furloughing workers.

So there's been a lower need for the contingent staff. But again, it really is about when and how those systems reopen and our ability to staff and help them staff back up. So that's what our focus is right now.

We're working with all of our clients and consulting with them about what their expectations are and when they think they'll be back to full capacity and what their needs are and how fast.

We're staying in constant consultation with the health care professionals that we have on staff or that had been on staff, ensuring that we can bring them back as quickly as the client needs. But I'll – again, I'll ask Buffy if there's any other insights you might have, Buffy, to that..

No, I would agree. I think it would come as no surprise as we saw the markets that were hit with higher COVID surge. It was heavier reliance on specialties like ICU. At the same time, they were discontinuing some of their normal services, their elective surgeries, so a reduction in OR and some of the other services there.

I believe that in the markets where we saw lower COVID incidences hit, the census was certainly low. I do believe that, that was in part taken on the state's actions for shelter in place.

But as I mentioned, we are starting to see some turnaround in the states that are opening up, the health care facilities offering some of the elective surgery, so OR is opening up a bit.

We're hoping to see some lab and some CNAs, so it's – right now, we're just seeing a little bit of volatility for certain, but we are starting to see a shift in the mix..

Okay. Got it. Yeah. Okay. Got it. Yeah. And so just – so that surge in travel nurse related to COVID. I mean it sounds like it's – that was just very femoral.

Is that the kind of right way to think about it? And is that – that was just like a quick surge?.

Yes. I don't think the order counts in that regard. I mean, most of those assignments that we staffed, the nurses continue on assignment. There are new orders still coming in, but not at the rate and pace that we saw in the early days of the pandemic..

Yes. Got it. Okay.

And then is that like a function of – yes, I guess, it might be too much detail, but is that a function of like infections coming down for those hospitals?.

Yeah. Well, I think in part, some systems are staffed and have gotten the headcount that they needed. And in some cases, it is because the – what they were preparing for is not necessarily as severe as might have been forecasted.

So there probably is a few different scenarios there as to why clients are not continuing, looking for the number of COVID-19 kind of response assignments that they had been initially..

Got it. Okay. Alright, thanks so much..

Thank you. And that was our last question..

Okay. Well, thank you, everyone, again for joining us today. We look forward to updating you on our next earnings call when we can provide you further updates on our business as well as the status of the turnaround. Thank you again..

And thank you for joining. You may now disconnect..