Good afternoon, everyone. Welcome to the Cross Country Healthcare's Earnings Conference Call for the Fourth Quarter and Full Year 2021. Please be advised that this call is being recorded, and a replay of this webcast will be available on the company's website.

Details for accessing the audio replay can be found in the company's earnings release issued this afternoon. At the conclusion of the prepared remarks, I will open the lines for questions.

A replay of this call will also be available through March 9, 2022 and can be accessed either on the company's website or by calling (800) 391-9853 in the United States or (203) 369-3269 outside the United States and by entering the passcode 2022. At the conclusion of the prepared remarks, I will open the lines for questions.

I would now like to turn the call over to Mr. Bill Burns, Cross Country Healthcare's Chief Financial Officer. Thank you, and 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 our incoming CEO, John Martins, currently serving as Group President of Delivery; and Buffy White, Group President of Workforce Solutions.

Today's call will include a discussion of our financial results for the fourth quarter and full year of 2021 as well as our outlook for the first quarter of 2022. A copy of our earnings press release is available on our website at crosscountryhealthcare.com.

Please note that certain statements made on this call may constitute forward-looking statements. These statements reflect the company's current beliefs based upon information currently available to it.

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 2020 annual report on Form 10-K and quarterly reports on Form 10-Q as well as in other filings with the SEC.

The company does not intend to update guidance or any of its forward-looking statements prior to the next earnings release. Additionally, we 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, calculated in accordance with U.S. GAAP. More information related to these non-GAAP financial measures is contained in our press release.

Also during this call, we may refer to pro forma when normalized numbers pertain to our most recent acquisitions as though the results were included or excluded from the periods presented. With that, I will now turn the call over to our Co-Founder and Chief Executive Officer, Kevin Clark..

Thanks, Bill, and thank you to everyone for joining us this afternoon. As we reported today, our fourth quarter and full year results represented yet another historic milestone for both revenue and profitability. Fourth quarter revenue was nearly triple the prior year, and the full year was more than double.

This performance was made possible by our amazing team of individuals and their unwavering commitment to our customers, clinicians and professionals. For me, 2021 marks the end of three years since my return to this great company, and I am so incredibly proud of all that we have accomplished.

It is clear to me that we are fundamentally a stronger, more financially sound company with a proven ability to execute and deliver across many fronts. And before I discuss the business, I'd like to just spend a moment on some of the ways we have transformed Cross Country into a growth company with a double-digit adjusted EBITDA margin.

When reimagining our go-to-market strategy, we truly left no stone unturned, from consolidating more than 20 disparate brands to significantly investing in hiring and training more than 1,000 employees to making significant investments in technology.

Our digital transformation has been bold, significantly improving our productivity and magnifying the return on investment from expanding our workforce. Throughout everything, I am especially proud that we have remained committed to our core values for integrity, quality and clinical excellence. Turning to the market.

We continue to see heightened demand for our services, driven by growing needs across virtually every specialty, including operating room, emergency, pediatrics, labor and delivery and med-surg, which are not necessarily related to COVID.

In addition to the nationwide patient demand for healthcare services, our order volume is also the result of turnover and shortages in core staff at many of our clients. As the results of our recent nursing survey completed in partnership with Florida Atlantic Universities, Christine E.

Lynn College of Nursing revealed 37% of nurses identified as being burned out and overworked.

Since the outset of the pandemic, we have taken actions to assist clinicians to cope with these stresses, including providing access to a clinical social worker and establishing a hotline, which has received more than 20,000 calls since the start of the pandemic.

Our compassionate approach to our professionals has strengthened our ability to attract and retain professionals, which has, in turn, helped fuel our historic growth.

In the fourth quarter alone, we expanded the number of professionals on assignment by nearly 100% over the prior year with more than two-third due solely to organic growth, thereby significantly improving our operating leverage.

As we've discussed on previous calls, the historic demand combined with an incredibly tight labor market has resulted in rising wages and bill rates. Throughout the pandemic, though, Cross Country has acted ethically and responsibly by being as transparent as possible and by being sensitive to the pressures placed on our clients.

One of the ways we have sought to help our clients is by staffing the most critical position at lower margins, absorbing as much of the cost increase as possible. And as a result, our consolidated gross margin remains more than 200 basis points below pre-pandemic levels.

Many of our clients have shared their deep appreciation for Cross Country's ability to deliver clinicians and for providing industry insights and market analytics to guide their decisions on the rates necessary to attract clinicians.

In a recent note from an executive at one of our largest MSPs, he highlighted that Cross Country has been a true partner, helping them navigate complex challenges over the last several years. They especially appreciate our real-time market intelligence to facilitate critical decisions.

I've said this before, but Cross Country is committed to doing what is right for our nation, our clients and the patients they treat, which we believe ultimately benefits our shareholders. We believe strongly that our partnership will be remembered long after the pandemic is over.

By leading with a data-driven approach, our team of client-facing professionals are able to credibly provide market insights and develop solutions that address each client's unique needs and challenges. As a result, health systems are increasingly turning to Cross Country as their trusted partner, and our pipeline for new business is growing rapidly.

Throughout 2021, we continued to expand our services with existing clients as well as winning a significant number of new direct staffing customers. In addition, we also signed a record number of recruitment process outsourcing, or RPO, contracts this year, which augments our clients hiring capabilities and helps them build up their core staff.

And I'm thrilled to see our momentum continue to accelerate having already won a couple of managed service programs in just the first few weeks of the new year. Managed service programs, or MSPs, remain a significant part of our business, representing nearly 50% of our consolidated revenue.

As of the fourth quarter, annualized spend under management was more than $1.5 billion, and our capture rate was over 70%, remaining well above pre-COVID levels. Let me next touch on our technology initiatives.

Over the last three years, we have significantly ratcheted up tech investments as we work to build one of the most innovative talent platforms in our industry. Our projects have been extensive and far reaching, impacting not only our employees but our candidates and our clients as well.

The applicant tracking system that we deployed late last year across the travel business continues to deliver incremental productivity gains with a growing headcount on assignment per producer. We are making solid progress on deploying this technology to our other businesses.

From a candidate-facing perspective, our proprietary tool marketplace continues to evolve with new features and functionality being deployed to improve the candidate experience across the entire engagement lifecycle.

I am excited about our tech roadmap for the coming year and look forward to announcing even more robust tools for use by both clients and candidates. And given the success of our technology investments, we are doubling our CapEx budget for 2022.

Another exciting technology development for Cross Country has been the acquisition of Selected, completed in mid-December. Selected is a subscription-based SaaS model for schools to recruit permanent educators and special ed professionals.

As teachers retire or leave the classroom in record numbers amidst the pandemic, schools face a severe shortage and millions of students lack certified teachers in the classroom.

We believe this acquisition complements our ability to solve the workforce challenges faced by school systems across the country and will accelerate the growth potential for our education business. Turning to the businesses.

Our largest segment of nurse and allied again saw strong sequential and year-over-year revenue growth with all lines of business reporting an increase in billable hours. The biggest driver was once again travel nurse and allied with billable hours rising 46% sequentially.

As expected, average bill rates rose approximately 30% from the third quarter, driven by the continued high demand for clinical positions as well as the spike in cases from the Omicron variant.

With tens of thousands of openings continuing into the new year, we anticipate average bill rates will rise modestly in the first quarter, though we believe rates will likely moderate throughout 2022. As we've called out before, compensation costs are the primary determinant in bill rates.

And with persistent industry-wide shortages, those costs are not expected to decline rapidly in the near term. We were also very pleased with the stronger-than-expected results from our recent acquisition of Cross Country Workforce Solutions Group, reporting 15% sequential growth and on a pro forma basis, growing by 59% over the prior year.

This business allows us to deliver critical support to some of the neediest populations by delivering professionals to the home, working with some of the nation's largest PACE proprietors and contributing to nationwide health equity. That brings me to our outlook.

Our first quarter guidance points to another record quarter in the company's history with both sequential and year-over-year growth driven by our ability to attract, recruit and place professionals on assignment. We expect consolidated revenue between $740 million and $750 million, representing sequential growth of 16% to 17%.

With minimal changes expected in bill rates, the growth is principally driven by continued strong execution and growing the number of professionals on assignment. The biggest driver of the volume growth continues to be travel nurse and allied, where we expect to reach yet another historic milestone for the number of travelers on assignment.

From a profitability perspective, we anticipate adjusted EBITDA to be between $80 million and $85 million, which represents an adjusted EBITDA margin of 11%.

As we look beyond the first quarter, we expect to continue growing our market share by increasing the number of professionals on assignment, despite potential headwinds from changing bill rates or demand from certain specialties such as respiratory therapists.

Though we don't give full year guidance, we are operating at a much higher level, and we believe that our investments in people and technology are providing the foundation for full year revenue growth.

Looking ahead, we believe we will exit the year on a run rate that exceeds $2 billion in annualized revenue and can expect adjusted EBITDA margins to remain in the high single to low double-digit range, well above the 3% margin experienced in the fourth quarter of 2018 when I rejoined the company.

Just before handing the call over to Bill to take us through the numbers in more detail, I'd like to say a few words.

As this will be my last earnings call as CEO, I wanted to thank our shareholders for believing in Cross Country, and I especially wanted to thank the talented team of leaders and professionals at Cross Country who have supported and embraced the changes we have made.

It has been the honor of my lifetime to return as the CEO of the company, I cofounded. And as I transition to the Chairman of the Board, I am thrilled to be leaving the company in John's very capable hands as the next CEO.

As many of you know, I've worked with John for many years in my career, and I am confident that under his leadership, we will continue our path of sustained profitable growth. Though I won't be as heavily involved in the day-to-day activities of running Cross Country, I plan to be a very active Chairman.

Along with the rest of the Board, we will continue to be focused on ensuring the strategic direction for this company and giving John the support that he needs to execute on our strategic vision. With that, let me turn the call over to Bill..

Thanks, Kevin. Once again, Cross Country has achieved a historic level of performance, significantly exceeding our initial guidance for the quarter, driven by our strong execution across all lines of business.

While the market dynamics of a tight labor supply and its high demand has increased average bill rates, it's been our continued ability to organically grow the number of professionals on assignment across all of our businesses that has contributed the most to our performance.

As a result, fourth quarter consolidated revenue was $640.7 million, representing a 71% sequential increase and a nearly 200% increase over the prior year. Turning to the segments. Nurse and allied reported $62.4 million of revenue, driven by double-digit sequential growth in all major businesses, including travel, local and WSG.

As Kevin has already mentioned, the strongest growth was seen by travel nurse and allied, where rates continue to rise as expected, with most of the growth coming from more than doubling the number of professionals on travel assignments.

As we've discussed on previous calls, we have seen continued double-digit productivity gains for our producers, coupled with continued investments in new producers necessary to meet the rising demand.

Looking ahead, we anticipate a further sequential increase in average travel rates in the low to mid-single digits, primarily as a result of mix and regional spikes in demand related to the Omicron variant.

In general, we anticipate rates will soften throughout 2022, starting in the second quarter, though with continued strong demand and persistent labor shortages, rates may remain well above pre- COVID rates for the foreseeable future. Also driving the sequential growth of the segment was the performance from our local business.

Local was on a positive trajectory coming into the quarter and far surpassed our expectations by reporting strong double-digit growth both sequentially and over the prior year of nearly 30%. This performance was driven by a combination of higher rates and an increase in billable hours and improved mix.

Our education business also reported stronger-than-expected results with high double-digit growth. Education was significantly impacted by COVID and has been recovering steadily since the pandemic first appeared.

I'm pleased to share that this business has returned to pre-COVID level, and we are expecting continued strong growth as we integrate our most recent acquisition of Selected. Looking ahead, we see robust demand for our education business as professionals leave their permanent positions in record numbers due in part to burnout and fatigue over COVID.

Physician Staffing, our only other segment, also reported stronger-than-expected results, growing 23% over the prior year and 8% sequentially, bucking the usual seasonal trend for that business.

We're pleased to see this business perform so well with the growth coming from an increase in days billed, which has surpassed the volume we saw prior to the pandemic. Relative to the prior year, the growth has been in non-COVID specialties such as primary care and hospitalists, obstetrics and anesthesia.

Gross profit for the quarter was $147.1 million, representing a gross margin of 23%, which was up 65 basis points sequentially and down 225 basis points from the prior year. Despite the increase in bill rates, gross margin continues to be impacted by higher compensation costs driven by crisis needs and an overall tight labor market.

It's worth noting that despite the margin decline, gross profit was up more than $92 million over the prior year, driven by the volume growth we've seen across our business.

Looking ahead, gross margin will likely decline in the first quarter, driven by the annual payable tax reset as well as higher compensation costs pertaining to the spiking cases coming into the new year, not covered by increases in bill rates. Total SG&A was $65.8 million for the quarter, up 24% sequentially and 47% over the prior year.

Excluding the impact from WSG, SG&A was up approximately 28% over the prior year. The primary driver of the year-over-year increase is related to the investments in revenue producers and variable compensation associated with the record performance of the company.

Since the start of the year, we've steadily invested in our organization, expanding our total headcount by approximately 45% with more than 90% of the increase supporting the rise in the number of professionals on assignment.

With demand remaining strong, we expect to continue making investments in revenue producers to fuel continued organic revenue growth in the coming quarters. There are several items worth calling out on the income statement.

Below operating income, interest expense was $2.8 million, primarily attributable to the carrying cost of our $175 million subordinated term loan.

As a reminder, we initially entered the debt agreement in connection with the acquisition of WSG, and subsequently increased the facility by $75 million to fund the increase in net working capital as we grow the business.

And finally, our tax provision was a net credit due to discrete items recorded during the quarter, including $24 million from the release of the valuation allowance on deferred tax assets and net operating losses. Excluding the impact from discrete items, our effective tax rate for the quarter was approximately 28%.

From a balance sheet perspective, we ended the quarter with $1 million in cash and $184 million in debt outstanding, including $175 million subordinated term loan and $9 million in borrowings under our ABL facility.

As of December 31, the company was able to access the full line under our ABL, which we believe is sufficient to fund continued organic growth. From a cash flow perspective, we had a use of cash from operations of $73 million due to the investment in net working capital associated with a $264 million in sequential revenue growth.

Our days sales outstanding was 58 days, down three days over the prior quarter and flat over the prior year. Capital expenditures were $2.3 million for the quarter, bringing the full year spend to $7 million. It's worth noting that only about half of our total IT project spend qualifies for capitalization under GAAP.

In 2021, for example, we spent more than $9 million on IT projects to develop, enhance and deploy the tools that are shaping our digital future. This brings me to our outlook. We expect consolidated revenue to be between $740 million and $750 million, representing a 125% to 128% increase over the prior year and between 16% and 17% sequentially.

The majority of the sequential growth is expected to come from an increase in the number of professionals on assignment with billable hours anticipated to rise more than 14%. We are guiding to a gross margin of between 21.5% and 22%, which represents a 100 to 150 basis point decline on a sequential basis.

Overall, gross margin remained below pre-COVID levels primarily as a result of margins realized on rapid response orders related to COVID and an incredibly tight labor market. As a result of the historical organic growth, our adjusted EBITDA for the quarter is expected to be between $80 million and $85 million, reflecting a margin of 11%.

And our adjusted earnings per share range is $1.38 to $1.48. Also assumed in this guidance are depreciation and amortization of $2.7 million; interest expense of $3.5 million; stock-based compensation expense of $1.6 million and an effective tax rate of 30% and 37.7 million shares outstanding. This concludes our prepared remarks.

And at this point, we'd like to open the lineup for questions.

Operator?.

[Operator Instructions] Our first question comes from A.J. Rice with Credit Suisse. Go ahead, please. Your line is open..

Sure. Best wishes to Kevin and John in the new roles and all. So let me - just a couple of different things here. I understand what you're doing with the gross margin and working with the customers that have these super high bill rates in this tight environment.

Do you think as your bill rate expectations come down over the course of this year, you'll see that gross margin recover or is any of this, in your mind, a permanent tightening of the bill pay spread?.

Yes, A.J., and thanks for the kind wishes. We do think that we will see gross margin recover as the crisis staffing eases across our client base. And we are kind of forecasting, call it, a bill rate assumption that is north of where we were pre-COVID but is somewhere between 30% and 35% lower than where we are today.

But over that period of time, we think that will be one factor that will improve our gross margin as we kind of get back to kind of historical norms. The other thing I want to point out is that we have all lines of business are growing and growing dynamically.

So we have other lines of business that have higher margin, and we think that will help blend our margin to a better place.

Bill?.

Yes, A.J., thanks for the question. So the gross margin, I think, over time will certainly start to come back as bill rates come down. I don't think it will move in harmony where bill rates and pay rates are going to align exactly that way. I think there's a possibility bill rates could come down a little bit faster than some of the compensation rates.

But to Kevin's point, I think the mix improvement we expect to continue seeing from growth like in our education business, which is doing fantastic at this moment back to its double-digit growth rate. So they've historically had a margin over 30%. So we expect that will continue.

Growth in other lines like our RPO business is also seeing fantastic growth with high double-digit margins. So the long term is, yes, the margins we do anticipate, even within the travel business will start to inch forward, though it's a little hard to see exactly how that plays out in the second and third quarters this year..

Okay. And I just might ask, you mentioned market share and I guess I would wonder, on the one hand, obviously, I'm sure everyone is scrambling to meet the demand that's out there. On the other hand, you've improved your sourcing of candidates.

So do you believe, across the board, you've picked up market share? Are you having to skew more of your placements to your MSP accounts and some of the non-MSP? Is there an opening for other competitors to come in and do you think that's permanent? Just give us some flavor for what's happening in the competitive landscape and how you think you've fared in the midst of all this?.

Well, look, we don't have visibility across our entire industry, there are so many private companies out there. We do have visibility with the one other publicly traded competitor that we have. And if you look at our growth rate in the fourth quarter of 197%, you can compare that to theirs of 116%.

So I'd say vis-a-vis that particular peer, we're growing at a faster clip. So we believe market share is improving. We've had a significant year of 2021 in terms of customer wins with national accounts, direct contracts and MSPs. As we called out in our comments earlier, we now have over $1.5 billion in MSP under management.

We think, look, the digital transformation, all of the steps that we've put in place across people, processes and technology are accelerating our ability to win market share versus our competition.

Maybe John, you want to add some thoughts there as well?.

Yes, sure. Thank you, Kevin, and thank you, A.J., for nice comments previously. But what I'd say on - in terms of how we are really expanding our capacity is really important part of our story.

So as Kevin mentioned, with all our technology investments that we've done over the last several years, we've really seen a larger productivity gain in our producers, which has given us more capacity. And that's only one part of the story.

The other part of the story is we really revamped our partner network or our sub-vendor or supplier partner network that also helps us fill our MSPs.

So we've added capacity internally with our own producers and we've added capacity to - with our partner network and really engaging with strategic partnerships with these organizations to help fill our MSP's needs.

And so, what this allows us to do is to have excess capacity beyond filling our MSPs, but to go out there and to use that capacity to win new accounts in the market..

Our next question comes from Tobey Sommer with Truist Securities. Go ahead, please. Your line is open..

What revenue level do you think is required to sustain high single-digit or low double-digit EBITDA margin?.

Tobey, it's Bill. Well, as Kevin mentioned in his prepared remarks, we think we exit this year somewhere in that $2 billion run rate, so call it $500 million a quarter. And at that level of revenue, we think the high single, low double-digit margins are sustainable for what we've been seeing.

And so, that anticipates declines in bill rates, volume continued growth on other parts of the business across education, across our local business. So that's how we envision that playing out. That level of revenue at that run rate would support us being a 9% to, call it, 11% EBITDA company..

And from that level in the fourth quarter, do you - no one has perfect visibility, this has been a dynamic seems like an understatement to describe the market trends and changes.

But at this point, would you consider that to be a base level from which you could grow or are you just kind of looking out into that fourth quarter and saying, hey, we can imagine this happening based on anticipated trends?.

Yes. We certainly do model out past the fourth quarter of next - of this year, but it is hard to glimpse exactly how that's going to play out. I think there'll be certain lines of business that will continue growth.

I think regardless of what bill rates do from that point forward, we would continue to expect volume growth across all the lines, including travel. At those bill rates, they could potentially, on the travel side, see a small another mid-single low double-digit kind of decline from that point forward.

But I think overall, it's - the marketplace is supporting the bill rate. The labor supply issues are just not going away.

And so we anticipate that the compensation costs will remain, which is why we're doing all that we can to kind of support our clients with a comprehensive suite of solutions and helping them build up their core staff as well so they can reduce reliance on contingent..

Okay.

And if you look at your strategic positioning in the MSP market, are there opportunities for you to broaden the offering through partnerships to include sort of more than clinical professionals that would, I don't know, differentiate yourself versus other MSP providers?.

Well, that's a great question, Tobey. And I'll start, and I'll have Buffy White also respond. But look, we - our MSPs are growing across these large health care system enterprises, which now are much more complex than a single hospital, as you know. It covers everything from outpatient and ambulatory to even home health care.

So we think there's a lot of opportunities across the spectrum of what our customer footprint is. And it's - in terms of total strategic positioning around nonclinical, we're seeing these large health care systems asked for our health and support around a variety of nonclinical jobs.

For example, environmental, cafeteria, financial, project management, general. And in the past, we have structurally looked at partnerships to help provide that nonclinical opportunity. But we believe that this is an area of opportunity for cross-country. But Buffy, maybe you want to expand on that, what you're seeing in the market..

Yes, certainly, Kevin and Tobey, thanks for the question. We're seeing an acceleration of conversations in this area and our solutions are accelerating with them.

So first of all, clients are really focused on better planning, better forecasting for what their talent requirements are going to be, tighter protocols in place for when they use talent in what ways, right? So we're in a unique position where we can get in there and help them look at their utilization models, help them with predictive analytics on what are they going to need in the future and partner with them based upon market entitling and diagnostics to kind of take a look at how they can help manage their total talent better, not just their clinical talent, not just their staffing talent, but their total talent across the full whole house within the system.

So we're seeing a lot of accelerated conversations. And we do believe we're uniquely positioned not just by way of the different lines of business and staffing offerings that we have, in addition to RPO search and advisory solutions, but also by this broader supplier network that John spoke of that we can bring as part of our solutions to them.

And cross-selling within our MSPs is really critical across all those different aspects or all the different specialties even beyond clinical. As a matter of fact, in one of our large MSPs, just in the last month, I signed six amendments that brings in additional offerings to them well beyond the clinical staffing that we've done historically.

So I would say you're going to see a lot more of this moving forward..

Perfect. I'll just ask one other question and I'll get back in the queue. You've done a little bit of M&A, but it doesn't seem like you're spending large sums of money. What is the - and you're accumulating a lot of kind of latent cash in terms of receivables.

So what does the optimal capital structure look like for the firm over time? And could you sort of define the M&A strategy that you're deploying to get there? Because it seems like they're - I'd love to find sort of the unifying thread among the activity that you've already had..

Yes. Tobey, it's a great question. Look, there's such opportunity, we have such a strong balance sheet to the points that you just made. We targeted tuck-in acquisitions last year.

We completed two tuck-in acquisitions, Workforce Solutions Group positioned us in a whole new segment, catering to senior and elder care to pay centers and federally qualified health clinics. And then our subscription-based SaaS business for education, our ability to electrify our education division by helping school systems find candidates.

So we're very excited about what we did last year. But the question remains, what are we going to do going forward? And as we've called out before, the segments that we'd like to scale up, so to speak, are certainly our locums business, certainly, areas like our education business and now our home health care business.

These are segments that are attractive to us. We look at technology as we just pointed out. So we're in a very, very good position. I always like to say that I came back to Cross Country three years ago, it was to transform the company. And if there's a transformational opportunity out there, we continue to seek that.

We just haven't found the right one, but maybe to the financing side, Bill over to you..

So Tobey, as you can probably see, we're just about a little north of 1x levered right now. So we've got a fair amount of firepower, especially on the trailing 12-month EBITDA number we've got out there. I think as we look out at 2022, we'll certainly be revisiting what is the right capital debt structure for us right now.

As you know, we have a subordinated debt piece that's there. It's a wonderful partner. We're happy to be paired up with them. And then, of course, we have our ABL sitting on top of that. But I think looking ahead, we want to make sure that we're getting the most liquidity that we have to be able to fund those acquisitions.

But barring - finding that next opportunity for acquisition, obviously, servicing the debt would be an opportunity for us and then, of course, continuing the tech investments that we talked about..

Our next question comes from Kevin Fischbeck with Bank of America. Go ahead, please. Your line is open..

This is actually Courtney Fondufe on for Kevin. I guess one of the first things just to really double down on this MSP strategy. Thanks for the color. I think you last told us in like Q2 that you had 80 to 85 customer relationships.

Can you just give an update on where that number is trending today?.

Sure. We have approximately 100 facilities that represent that $1.5 billion MSP spend. As we called out in our prepared remarks earlier, we've had two successful new customer acquisition opportunities so far this year, but we have a very, very robust pipeline.

We have become, in the last three years, once again, the trusted market leader in the marketplace. We've had near perfect client retention during this pandemic because we've done all the right things.

We stood by our clients with a sensible advice around pricing, compensation with market analytics and data analysis, all those things, including the fact that our brand is resonating again in the marketplace for nearly 36 years as the market leader in clinical excellence, which is what we've always been known for.

But Buffy, I don't know if you want to add to that at all..

No, I think - I mean, you hit on everything I was going to say. I think a couple of things the retention is significant over the last two years. So they found that we were the ones that moved in, and we have very strong retention of our MSPs.

I think the other thing around - I understand the count is very important, but I also think the expansion within the existing MSPs that we have is very, very important because it means that we have become a trusted adviser for them. They're allowing us to get wider and broader within their healthcare system.

And we also count MSPs as a broader system versus individual facilities. So just to kind of call that out a little bit and put it into perspective..

Okay. That's super helpful. And then, I guess, one other one on one of your key operating metrics. It looks like revenue per physician day has been coming down since I think it surpassed 1,700 in Q1 of 2021. But it actually looks like it's below where we saw it in the second half of 2019.

So is it the mix of specialties that's driving that? And then along that lens, like which specialties are lower unit economics?.

Courtney, this is Bill. Maybe I'll just give you some color and then I'll certainly see if John has anything to add. But it is a function of mix.

The revenue per day build is - if you think about it, there's two big large buckets, there's physicians and then there's what we call advanced practice specialties, which includes advanced - sorry, physician assistance, CRNAs and several other type of advanced specialties that are not truly physicians, but kind of operate like that.

They have a different bill rate structure or different - it's a small - a lower bill rate, but that is also where we've seen the highest demand. So we've seen some of that mix happening, which has brought down the overall average.

What's interesting, though, is that in the most recent quarter, the physician side is where we saw the strongest and most robust growth.

But John, any color you want to give on servicing the volume and demand?.

Sure, thank you, Bill. Yes, demand is definitely up significantly over last year in pre-pandemic levels. And as Bill has mentioned, physician orders right now are up 92% compared to prior year. But our advanced practice orders and this is where that bill rate mix comes in, is up 125% compared to prior year.

And if we look a little deeper, where if we look pre-COVID, physician orders are only up 14% over pre-COVID but advanced practice are up 87% over pre-COVID.

And so really, what we're seeing is more of this advanced practice orders coming in and obviously, more of our fills are coming in advanced practice, which is creating that lower average days dollars..

Okay. That makes a lot of sense. And I guess, just one last quick follow-up on that. I mean I feel like generally in the industry, we're hearing about providers trying to decrease the burden on physicians and trying to rely more on CRNAs and advanced physicians. So do you think this would be like a long-term headwind to pricing or --.

It actually - it kind of is twofold, right? Well, yes, the - with the physicians burnout and retirements, we are seeing more advanced practice - practitioners coming on board. But we also have seen over the last year a slowdown in elective surgeries that are now coming back onboard and a lot of other specialties.

So I think - and so I think as the surgery historically back on board, then we'll have more demand for radiology, anesthesiology and pathologists, we'll see those bill rates increase as well. So I think overall, we should see a balance..

And our last question comes from Brian Tanquilut with Jefferies. Go ahead, please. Your line is open..

I guess just a quick question.

Everyone has been focused on the demand side, but as we think about supply, I mean, are there any KPIs that you can share with us that gives you confidence in your ability to sustain supply levels and the attractiveness of Cross Country versus some of the competitors that are in the market?.

Yes. I mean, look, Brian, I think we've done a great job over the past three years in advancing the organization's brand and how it resonates in the marketplace, as I mentioned earlier.

But also important is we now use very sophisticated candidate acquisition strategies that include things like leveraging data mining with artificial intelligence to do job matching to candidates includes things like programmatic advertising, where we use very specific geo-targeted algorithms to attract the exact experience in specialty for each of our customers.

We've also - as we've also talked about, expanded significantly the number of revenue producers. We have tripled probably the number of revenue producers that we had just a couple of years ago.

And then all of the employee productivity tools that we've called out, for example, our cloud-based application software system where we've seen significant increase in the book of businesses of each of our recruiters. The other thing I want to just point out too is really interesting to us.

We have 41% of the nurses and other healthcare clinicians that we're doing business with today are traveling or working for Cross Country for the very first time and that's really significant. Part of that is this fundamental shift towards the gig economy.

Part of it is some of the comments I mentioned already in terms of the way we're resonating in the marketplace. But we think that's a fundamentally a huge endorsement that we're doing things right at Cross Country. We like to think about, for example, we've improved things, including the speed at which a candidate can find a job.

So we can have a job seeker come into our digital ecosystem. We have thousands of healthcare clinicians using, for example, marketplace. And in a matter of minutes, they can look at a shift. They can submit their credentials and they can be interviewed the same day.

That's a significant improvement and the ability for us to accelerate the conversion of the candidate flow that we have into working. And if you look at Cross Country today, I mean, we have to get that story across in a bigger way. The company currently has a fairly low PE multiple relative to peers and others.

And we think that's partly that we need to prove quarter-in and quarter-out that we're a sustained growth company and that we can continue to have the type of results that we've been reporting on the last 12 to 18 months on a consistent basis going forward.

And finally, I'll just kind of wrap and just say, look, one of the things that's driving a lot of the supply dynamics with our customers is certainly this pandemic hangover. The pandemic hangover is going to lead to significant utilization in the healthcare system this year as people catch up with things like elective care and preventative medicine.

People haven't gone to their doctors for fear of COVID. And these large healthcare systems equally have to prepare for the next pandemic. So they're making investments in people, in technology. They're investing in digital tools, such as telehealth.

And consumers are changing the way they embrace care, leaning into more low-cost sites of care, for example, virtual - with virtual means or retail clinics, et cetera. So there's a lot going on that's going to drive supply. Final comment is just - I read something interesting the other day, 31% of healthcare clinicians can work remotely.

So if you think about nurses, you can have triage nurses work locally. You can have medical writers work locally, where utilization review. So the health care delivery system is changing. It's accommodating. There's big demand out there, as we know, and Cross Country is at the forefront of attracting that supply..

Got it. And then last question for me. We talked about - about home health and your expansion there.

Is there anything that you need to do to strategize the growth there, any kind of infrastructure that you need to build to gain traction in the home health space?.

Yes. I mean that's a great question. And the answer is yes. With a 59% year-over-year growth rate, that is just such a magnificent opportunity for Cross Country. We are the market leader in providing senior and elder care to pay centers and federally qualified health clinics around the country.

And we leverage the same model, this MSP model in that business.

We refer to it as managed service outsource agreements, but where we provide all those services, providing a variety of healthcare clinicians to brick-and-mortar locations, but then we follow those patients back to their home, and we have 1,700 caregivers that provide care into the home.

So to absorb that type of opportunity, we are going to bring a lot of the technology that we've brought to the travel business into other parts of our business to Workforce Solutions Group. And to the extent, we haven't said it enough, we are doubling down around our investment in technology this year.

We spent order of magnitude about $9 million in 2021 around capital expenditure projects around IT and the product organization, we hope to double that spend this year because it will help accelerate our business..

Ladies and gentlemen, this does conclude the Q&A period. I'll now turn it back over to Kevin Clark for closing remarks..

Yes. Well, thank you very much. And I'd like to thank our shareholders, our healthcare clinicians, our providers, our professionals, our clients, our employees, our Board for their passion, compassion as we continue to deliver great results to do not just our shareholders, but to the bedside into the classrooms. So thank you all.

We look forward to reporting next quarter on our continued success..

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect..