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

A replay of this call will also be available until August 20, 2020, and can be accessed either on the company's website or by dialing 866-486-4654 for domestic calls and 203-369-1642 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 Co-Founder 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 financial results for the second quarter of 2020, and our outlook for the third quarter. A copy of our press release is available on our website at 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 2019 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in 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 financial measures calculated in accordance with U.S. 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 Co-Founder and CEO, Kevin Clark..

Thanks, Bill, and thank you to everyone for joining us this afternoon. As we discussed on our last earnings call, we believe that Cross Country has been leading the way in responding to the pandemic by supporting our clients and ensuring the health and safety of our employees.

Following the initial surge in demand in the early part of the second quarter, we were successful in staffing nearly 1,000 health care professionals on COVID-19 related assignments throughout the United States.

Thanks to the tremendous efforts of our staff who worked tirelessly, we were able to deliver mission-critical health care professionals to the bedside of many of our fellow citizens be fallen by this terrible virus.

I want to personally thank all of the health care heroes who risk their personal safety and that of their families to serve on the front line of the pandemic. Their dedication and bravery demonstrate what is great about America and serve as an inspiration to all of us.

Since the start of the pandemic, we have seen an unprecedented level of volatility in demand with orders first rising more than 20% as the pandemic unfolded and then falling sharply by more than 80% as hospitals nationwide experienced lower census and mandatory deferrals of elective procedures.

Starting in June and continuing into the third quarter, we have seen orders rise significantly with California, Texas, Florida, Georgia, Tennessee and the Carolina's seeing the biggest increases. From a specialty perspective, the most significant growth has been an ICU, which appears to be largely COVID related.

But we also are seeing increases in some of the hardest hit specialties such as surgical and operating room nurses. Driven by strong execution throughout the second quarter, our Nurse and Allied segment reported year-over-year revenue growth of 10%.

As a result of the company's response to COVID-19, we recognized more than $30 million in incremental revenue primarily due to the nearly 1,000 health care professionals we placed on COVID-19 related assignments at our Managed Service Programs or MSPs.

Due to the sudden surge in demand from COVID-19, MSP spend increased sequentially by approximately 14%. And our capture rate increased more than 500 basis points to approximately 65%. Our physician staffing business was also impacted by COVID-19 with declines in most specialties including anesthesia and primary care.

As a result, following two quarters of double-digit year-over-year growth, our revenue was down approximately 6% for the second quarter. Normally we experienced a sequential increase for this business in the third quarter, but given the lower demand we are expecting it to be flat-to-down low-single digits.

Though it's likely that this pandemic will cause disruption in the industry for several quarters, it has provided us with an opportunity to accelerate our plans to integrate and optimize our operations.

By streamlining our business and moving to a unified platform of connected technologies we will drive improved performance, productivity and efficiency. We announced last quarter a plan to save more than $10 million driven by the closure of a significant number of offices and reductions in headcount.

Over the course of the second quarter, we continue to expand this plan and have identified additional opportunities to drive even greater savings.

We now expect to realize annualized cost reductions of more than $20 million, driven by further operational efficiencies in non-revenue producing areas as well as the right-sizing of teams in response to current market conditions.

As we're committed to Cross Country and our shareholders, our senior leadership team and Board of Directors all participated in a reduction to their compensation for the balance of the year. With such uncertainty in so many displaced employees, we felt it important to demonstrate that we are in this together for the long term.

In part, these cost reductions have been enabled by our demonstrated ability to work remotely as well as the continued deployment of technology such as Cross Country Marketplace, our proprietary on demand staffing platform and the planned deployment of our new applicant tracking system later in the third quarter.

While these reductions are significant, I believe, we have sufficient capacity to continue delivering the highest quality of service and we will continue to make targeted investments in revenue producers as we see the market improve.

I also want to add that our local staffing business which fills thousands of ships with per diem nurses, CNAs, and allied health professionals remain a vital part of our enterprise solution for health systems. We fill in the gaps with key shortages locally and regionally. Let me spend just a minute on our technology initiatives.

Despite the disruptions caused by COVID-19, we continue to make progress across all of our key technology initiatives. Cross Country Marketplace, which is a one-stop self-service portal for health care professionals that will greatly improve the candid experience was further rolled out across additional markets.

We have continued to refine the road map for enhanced functionality to be released over the next 18 months. With respect to our new applicant tracking system, we remain on target for full implementation across our travel nurse 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.

Once implemented, we will continue to a new phase for upgrading and integrating the middle and back office platforms to bring the company's IT infrastructure and business processes into a single cohesive platform. Looking ahead, there remains a significant level of volatility in the market with unprecedented rapid swings in demand both up and down.

Following a strong revenue quarter, we are expecting a sequential decline for the third quarter driven by the timing for changes in demand as well as shorter assignment lengths pertaining to COVID-19.

As a result of the uncertainty, we have widened our normal guidance ranges and expect third quarter revenue to be down sequentially between 17% and 22%.

This reflects the wind down of premium rate COVID assignments from the start of the pandemic continued lower demand for our physician business and the impact from summer break and anticipated challenges with school restarts for our education business.

As a result of the expected decline in revenue, we are also guiding to a sequential decline in adjusted EBITDA.

While we do not give full year guidance, given the current market conditions, we are optimistic that we will see sequential improvement in both revenue and profitability for the fourth quarter as we work to increase the number of professionals on assignment.

And finally, before turning the call back over to Bill, I'd like to make a comment about our longer term outlook. Cross Country has been a market leader for nearly 35 years and we are well-positioned to return the company to growth as the pandemic eases in the hospital market recovers.

We were making great strides prior to the pandemic with several quarters of consolidated growth and improved profitability. And while the pandemic has interrupted our path, we nevertheless believe this company can still achieve greater levels of profitability.

I am therefore reaffirming our stated goal of achieving 8% adjusted EBITDA margins by the fourth quarter of 2022. Now, let me turn the call over to Bill to walk us through the results in more detail.

Bill?.

Thanks Kevin. Our results for the second quarter reflected strong execution across many fronts. Consolidated revenue was $216.8 million, representing a 7% increase over the prior year and a 3% increase sequentially, generated primarily from the nearly 1,000 nurses on COVID-related assignments.

The combination of the higher gross profit with an estimated $2 million in realized cost savings generated adjusted EBITDA of $11.6 million for the quarter. Turning to Nurse and Allied, revenue was $198.1 million, up 5% sequentially and 10% over the prior year.

The most significant driver of the increase was COVID-related assignments for travelers which generated more than $30 million in incremental revenue principally due to the higher bill rates. This was partly offset by declines in other specialties as clients look to reduce travelers on assignment to respond to their declines in census.

Our local branch-based business experienced approximately a 12% to 13% decline both sequentially and over the prior year on lower demand throughout the quarter.

Partly offsetting the declines was incremental revenue from both COVID-19 crisis orders as well as demand for positions such as screeners, testers, and contact tracers, which can further serve to diversify our client base. As expected, education was down roughly 50% compared with the prior year due to the mandatory school closures.

However, we were able to offset a significant portion of the revenue through our new tele service model. While we do not yet know for certain which schools will reopen for in-class instruction, we expect the tele service model will continue to grow.

Bill rates for the Nurse and Allied segment were considerably higher during the quarter, due primarily to the mix of business.

As we called out on our first quarter earnings call, we established corporate pricing guidelines for COVID assignments, whereby the higher rates were determined in consultation with clients to ensure our ability to quickly provide the critical staff needed.

Excluding the impacts from COVID bill rates were up sequentially in the low to mid-single-digit range. Our Physician Staffing segment, which have been growing for the last two quarters prior to COVID, reported revenue of $16.9 million, representing a 7% sequential decline.

The specialties most impacted by COVID were anesthesiologists and certified registered nurse anesthetists due to the nationwide reduction in electric procedures. Compared to the prior year, the business was down roughly 6% though advanced practice specialties experienced modest growth of 1%.

Gross profit for the quarter was $50.7 million, driven primarily by higher revenue and travel nurse from the COVID-related assignments. Gross margin was 23.4%, which was down 20 basis points sequentially, due primarily to the mix of business from COVID assignments and declines in other higher-margin businesses such as education and local allied.

Ordinarily, we experienced a 50 to 60 basis point sequential increase in gross margin for the second quarter as a result of the annual payroll tax we set that happens in our first quarter.

However, despite the higher bill rates margins on our COVID assignments were generally lower than our normal business due to the increased compensation for the healthcare professionals working on the front lines.

Again, we believe strongly that competitive rates for both the client and healthcare professional protect not only the health of the patients they treat, but the long-term value of the thousands of relationships we've established with clients and health care professionals.

Total SG&A was $42.3 million for the quarter, down 8% both sequentially and over the prior year. As part of the cost savings program we realized approximately $2 million of benefit during the quarter. Additional SG&A savings were related to lower health care-related expenses and travel expenses.

Our cost action plan is now estimated to drive gross savings of between $20 million and $22 million annually, and we expect to realize $10 million to $12 million this year. As the market recovers, we expect to make incremental investments in revenue producers or other revenue-generating activities, which will offset some of these savings.

Below adjusted EBITDA, there are a few items to call out. We recognized restructuring costs of $2.3 million associated with severance and other exit costs. We incurred $1.6 million in legal fees pertaining to ongoing non-operating legal matter.

We also recognized $15 million in non-cash impairment charges, $10.5 million of which related to the impairment of indefinite-lived assets for our search business and $4.5 million related to the write-off of the right to use assets associated with leases exited during the quarter.

And finally, interest expense was approximately $700,000 representing a 14% sequential decline and a 48% decline over the prior year. The 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 $6.2 million in cash and $49.1 million in outstanding debt under our ABL, excluding letters of credit. From a cash flow perspective, we again experienced strong collections, which drove a net sales day's sales outstanding of 49 days, representing a seven-day improvement.

The strong collections were fueled by higher sales in the early part of the quarter primarily related to COVID. Cash flow from operations was $16.6 million, bringing the year-to-date total to $33.7 million, representing an $8.6 million increase over the prior year.

CapEx for the quarter was $1.5 million, which was up $500,000 over the first quarter due in part to the purchase of laptops to enable our entire workforce to work remotely. As a result of the significant free cash flow, we further reduced our net debt by $12 million, bringing the year-to-date reduction to $27 million. This brings me to our guidance.

As Kevin mentioned due to the uncertainty of the impact COVID-19 may have on our business, we've decided to widen our normal guidance ranges. We expect consolidated revenue to be between $170 million and $180 million, representing a 17% to 22% sequential decline.

The primary drivers for the decline are the timing for changes in demand throughout the quarter as well as the shorter assignment lengths pertaining to COVID-19. As the initial COVID-19 assignment staffed in the second quarter, have begun to wind down, we entered the third quarter with fewer health care professionals on assignment.

Demand bounced back late in the second quarter and has continued to grow into the start of the third quarter. And as a result, we expect a number of active assignments for the third quarter to continue to grow.

In our travel nurse business, for example, we've already seen a 5% increase in the number of professionals on assignment since the start of the third quarter. We also expect to staff urgent needs in the hardest hit states, though at this point, we are not projecting the same level of needs as we saw in the second quarter.

We are guiding to a gross margin of between 23.75% and 24.25%, which represents a sequential increase of between 35 and 85 basis points, primarily due to the shift in mix. As we stated previously, the COVID-related crisis orders generally have lower gross margins than our normal business.

Adjusted EBITDA is expected to be between $4 million and $6 million, reflecting the sequential decline in volume partially offset by additional savings of between $1 million and $2 million. Our adjusted earnings per share range is a loss of $0.02 to $0.06.

Also assumed our depreciation and amortization of $3.1 million, interest expense of $700,000 stock-based compensation expense of $1.3 million and tax expense of $200,000 as well as a fully diluted share count of 36.5 million shares. This concludes our prepared remarks. And at this point, I'd like to open the line for questions.

Operator?.

Thank you. [Operator Instructions] And our first question is from A.J. Rice with Credit Suisse. You may go ahead..

Thanks. Hi, everybody. A couple of questions, if I could. In your prepared remarks you've rattled off some markets that have strength. It sounds like most of those are markets where you're probably getting COVID assignments and hotspots.

I guess, I'm interested, can you speak to the markets that have sort of been through the cycle? I'm not sure, how much exposure you have to those but say some of the northeast markets maybe upper Midwest where maybe the worst is behind at this point? And do you sort of see the market returning to normal, or is it still most systems are so shell-shocked from what they've been through that's been slow to recover.

Any thoughts about that?.

Yes. Hey, A.J., it’s Kevin. I appreciate the question. I mean, look we're operating in a highly volatile market, and it's experiencing unprecedented fluctuation. Right now, the strong markets in terms of demand are in the South in the West and even in the Midwest. We are seeing more orders in the Northeast to your question.

We're seeing more orders in the Northwest, where the pandemic really began for us. Those were the two kind of epicenters that we focused on with our initial COVID response. So it's shifting around. It's a bit of a roller coaster. But as we indicated in our comments demand is up sharply from this historic low back in May..

Okay. And I guess, as you have discussions with your customer base, there was speculation that coming out the other end of this we might see an uptick in local nurse turnover as nurses would say, I rolled up my sleeves and they missed the crisis but now I'm sort of burned out and I need to take time off.

So I wonder, if you're seeing that alternatively with a soft economy you might expect, there might be some nurses want to work extra shifts and that would be an offset I guess from your perspective.

Is it – what are your customers telling you as to what's happening turnover rates and things like that relative to their own nurse employees?.

Yeah. I'll start that question A.J., and then I'll ask Buffy White to also join in. Look, there is – as I mentioned we've seen a substantial uptick in demand. A lot of that demand is coming in reinforcing this very, very tight supply that we have. I mean, if you look at just the state of California, there's a shortage of 45,000 nurses.

Our local business is very important to our total talent management solution, and we're seeing a lot of local needs, especially to some of your – to your point vacation and just renewal for permanent staff that are overworked and tired. We're seeing fill in the gaps. And that's pretty broad-based. It's not just RN, but it's also LPN and CNA.

So it's an important part of our overall solution and we're seeing a lot of demand. But it's also spotty. It depends on the region of the country.

Buffy?.

Yeah. I would completely agree with that. I think we are hearing from the health care facilities. They may have made some core – adjustments to their core staff during the course of COVID-19 given whether their census was low.

Also, as you can imagine with COVID-19 their core staff, they are trying to release them due to fatigue or offer them some PTO, since they were supporting during the COVID-19 surge in some regions.

So I do believe that, they are trying to make some accommodations there that is driving, contingent ease up for some of the facilities in some of the regions. We are seeing increased requests due to that, especially on the per diem side and local nursing side to supplement, so that they can offer that.

And I think also as health care facilities ramp back up their core staff after making some headcount changes, we can support that as well through contingent staffing..

And A.J. just on the RN side 76% of the orders that we've received are either critical care, ICU, telemetry and med-surg. So that's very much of a focus on tele and ICU..

Interesting. Okay. And maybe one last question. Just the dynamics, I mean, there's cross-currency as it relates to your applicant pool obviously a lot of people stepped up. It seemed like early days. They wanted to help out with the crisis.

So that maybe resulted in more applicants than you would normally see or people that wouldn't traditionally be an applicant coming in.

Is that sort of settled out, what are you seeing – I hear your orders are up, but what are you seeing in terms of applicants and people willing to take on for example a travel assignment and so forth?.

Yeah. As I mentioned, it is a very tight labor pool. I mean, we are using – as our peers would be using a multifaceted way to broaden our candidate supply. For example, where we spend a lot on paid search with programmatic media.

We have a very ambitious outreach from things like word of mouth referral, referral programs, social media it's really a very highly integrated comprehensive marketing approach to kind of reach the sources. And fortunately for Cross Country as a market leader we have a large footprint of clients.

We have a large number of open orders and that's an attractive part of our overall offering. So our candidate pool is large to begin with but it's tight. And I think the nurses who want to work have lots of choices, lots of good choices out there, right now..

Okay. Thanks a lot..

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

Thank you. I was wondering if you could give us a little bit of color on your guidance and what the contribution is from sort of crisis-related orders that I understand from your remarks are down relative to 2Q, but probably still substantial.

And then what is the -- at this point for regular way business particularly in travel nurse how -- what do orders look like on a year-over-year basis? I don't know if you have sort of the month of July or something like that?.

Yes. Tobey. How are you? And congratulations on the name change for your firm. Maybe I'll start with the latter question and then I'll let Bill also respond. But the simple answer year-over-year our orders are up from where they were this time last year fairly substantially. Now obviously, COVID is driving a lot of that.

And as I just mentioned before the line share of those orders are around critical care and telemetry in that search. But orders are definitely up and they've been rising each and every week since really the low point in May.

And Bill do you want to comment on the guidance question?.

Yes Tobey. Sure. How are you by the way? It's predominantly the change from Q2 to Q3 as you see in our guidance is a significant decline in revenue and that's really coming predominantly from our travel business. There's some contribution coming out of education and just from the summer break and locums is kind of running flat quarter-over-quarter.

But travel nurse seems to be indicating that the -- where the biggest decline would be and that's where the biggest benefit came from with COVID when Kevin in his prepared remarks called out about $30 million of incremental revenue due to the premium differential in the bill rates on COVID assignments.

And we still have a good chance to offset a good share of that as we go into the second quarter, but that is the biggest driver of the sequential decline. It's just the wind down on those COVID assignments.

They're not completely wind down of course there's still plenty of health care professionals in the Northeast and the harder hit states that are still on assignment but it's significantly lower.

And also, there's a function as we move now into the pandemic into sort of later stages, we're seeing a little bit of differing in rates and how the different markets are being affected and where the bill rates are. So it's not as much that the mix will be down so much. It's also a function of the bill rates..

That makes sense. Thanks for the color. You did comment that the fourth quarter sequentially you would expect to be up.

Is that driven by a particular segment? And if you could comment on your visibility into that? Are you getting orders farther out in the future, or orders getting extended so you're sort of travel on assignment volumes building? What informs your comment to be able to make something farther out than you typically do?.

Well Tobey, as you know there's a lag -- there can be a lag in this industry because of the assignment length. And our orders are up tenfold from the low point in the second quarter, but we did experience that decline in orders.

And those declines were broad-based around elective surgery, paediatrics all the different specialties as people refrain from going into acute care for their patient care. So as Bill just pointed out as the initial COVID orders have come to an end or tapered off. And this new surge of orders has rebuilt.

It just takes with the average length of a travel assignment as an example for 13 weeks there's just a time lag. So we're optimistic about finishing the year on a very positive note as we indicated in the remarks. Because as we called out, we're already seeing our head count up five-plus percent just in the first month of the new quarter.

Orders have rebounded. And we have a lot of confidence in our ability as a large successful recruitment organization to fill those job orders but we have to kind of manage through this transition period..

And Tobey just in addition to the demand that we've seen come back in travel. And as Kevin pointed out, we're growing back the headcount there. We also have the sequential improvement just from our education business as well as schools return.

Even though, we don't know that yet the mix of schools that will be in person, we would expect to continue to generate revenue from the tele service model and that offset quite a bit of the these other revenue generation activity that we had going on in that business..

Okay. And could you comment on the company's kind of focus on MSP customers and maybe not filling as many orders with smaller customers sort of, one might call the spot market.

And what you're seeing in pricing in particular because hospitals have been hurt and we're curious if they're going to their vendors and looking for concessions?.

Yes. So good question, Tobey. I mean, as we indicated our MSP book of business is at an all-time high. We posted $139 million of spend under management in the quarter. Our capture rate improved 500 basis points to 65%, which was a positive. However, that's really highly dependent upon the order flow the orders have been all over the map.

Our overall orders were down as we mentioned on a historic basis 80% in May. But so were MSP orders. So they've bounced back. We have been very consultative with our large clients really all of our clients, we've sat down with them as their partner.

We're sensitive to the financial strain that hospitals are under and we've been very careful to put thoughtful programs around in terms of attracting the candidates they need to operate their facilities in a seamless way. In terms of our suppliers, we have a very robust supply chain. We work with the best companies in the industry.

It's a bedded supply chain. And those suppliers receive orders based on where the overall flow is. So for example today as we mentioned with many more orders our affiliate vendors have significantly more jobs to fill than they did as we were impacted as well in May..

Thank you very much..

Thank you. Next question comes from Kevin Steinke from Barrington Research Group..

Hey. Good afternoon. You mentioned expanding the branch closure program as you roll out Cross Country Marketplace.

Is there more to go beyond this next tranche of closures do you think in that progression, or what does ultimately your branch footprint look like down the road do you think?.

Yes. Good question. Hi, Kevin. Look when I joined the company, we joined the company 18 months ago. I think we had approximately 65 offices nationwide. Today, we have 19 offices. We've closed a substantial number of small to midsized branches, especially, over the last three to four months.

We have taken advantage of this crisis that we're in to accelerate becoming more efficient, moving our employees to a virtual work-from-home with very high productivity.

And as you mentioned the other component that's driving the closures of those offices is our new proprietary technology CCH Cross Country Marketplace, which is our app that we've rolled out to numerous markets in our local per diem business.

And we'll continue to roll that marketplace technology to all those markets over the next 6 months to 12 months. So that -- the technology initiative is helping shift the way a candidate experiences their interaction with Cross Country, their ability to use a mobile device to look for a ship, submit their credentials in real time.

And we think over time that will make us even more efficient around that business. In terms of your last question where do we go from here in terms of a footprint? I think we're probably going to settle around 15 offices for the company in kind of a steady state basis, and within those offices -- 15 or so offices.

And we have reorganized our medical staffing network local business into eight regions. So we're driven out of regional hubs in terms of how we're growing that business..

Okay. That's very good color. Thanks. And you mentioned that once -- I believe you mentioned once the applicant tracking contracting system is fully implemented you expect to undertake an upgrade of the technology for the middle and back office.

Could you kind of talk about how significant and undertaking that is? And maybe a time line for that and the cost savings that could come out of that?.

Yes. Well I'll start with some answer and then I'll throw it over to Bill as we kind of think about how we're estimating and sizing that project. But first let me just take you back. I mean my journey started again here 18 months ago. And over that first call it 15 months we established a ton of momentum. Cross Country has been winning again.

We had four great quarters of growth of revenue and adjusted EBITDA. And we set ourselves on really a three-year path to digitally transform the entire enterprise, and we're halfway through. This is a marathon. It's not a sprint.

And for me and my management team we're about halfway through kind of that transition from into a kind of a modern innovative unified single one Cross Country enterprise platform for our technology.

And you're right to ask the question, because this quarter on schedule on track, we will be rolling out our new applicant tracking software system to the balance of our travel nurse division. And later this year we will be adding our travel allied division. And over the next 12 to 15 months, we'll be moving our local business as well to that platform.

And so if you think about having kind of the unified applicant tracking software system, which will also integrate with our sales CRM.

The next step in that road map for our technology is the middle office, and we anticipate that 2021 will be the year in which so called over the next 18 months that we are able to migrate a substantial part of our middle office onto this unified platform, and the benefits are numerous.

We get operating leverage, improved productivity and efficiency and we can operate with greater automation and employee productivity in that environment. So Bill, I don't know if you want to comment in terms of kind of how we're thinking about the capital expenditure around that, but I'll let you wrap that up..

Sure. Thanks Kevin. So the original phase of the applicant tracking system was slated to cost between $12 million and $14 million. It's on track and on budget.

So we're -- as we move through the different phases of this, it's obviously going to cost much less than that reach incremental phase, because we'll be able to build upon the core engine that's already there in place. So as we look at just the middle office, for example, a high level estimate and we're still refining this.

I mean, we've got our scoping exercises. But our expectation is that we'll undertake this initiative, almost immediately after we complete the deployment of our new applicant tracking system, and we'll move right into this next phase.

So the early indications are it's probably looking at between $3 million to $5 million just for that middle office kind of integration. And then of course, our IT road map is much broader than that. It covers spans multiple years. So, we haven't been able to give that guidance yet, as we're still refining some of the details there..

Okay. That's really helpful. And then one last question for me. You mentioned the 8% adjusted EBITDA margin target by the fourth quarter of 2022.

Do you have any assumptions in terms of the cadence of how you get there, maybe the market environment you're assuming for that, or any other color about how we get to that target at that point?.

Kevin, good question. I mean it's really the -- it's -- I'll give you a multi-faceted answer. Look, we expect our business to grow and see significant increases in terms of the volume in the market share that we have in this industry.

We think with the enhancements, we're making the transformation with our technology that we should have a lift in margin from employee productivity, as Bill and I have talked about in the past improving the average number of health care professionals on assignment, for example, per recruiter per account manager has a significant algorithmic effect in terms of being a multiplier for the business.

So we expect greater volume. We expect greater productivity. We're taking a lot of cost out and we're accelerating that cost reduction. That's another significant part of that. And keep in mind, although, we've been a little bit thrown off course here with the pandemic.

As we've talked about before, we believe in a accretive M&A approach to adding especially to the segments that we believe strongly in our physician business, our education and our allied business with accretive tuck-in acquisitions. We have a pipeline.

That pipeline has been a little bit suspended as companies have been kind of reeling with this roller coaster of demand. But we feel that that will also contribute to our success in getting to that a 8% or so by the fourth quarter in a couple of years from now..

Thank you..

Thank you. And that was actually our last question..

Well, thank you. Well, look, thank you for joining us this evening. We look forward to updating you on our progress throughout the rest of the year. Please stay safe, and we'll talk to you in three months. Thank you very much everybody..

Thank you for joining. You may now disconnect..