Cross Country Healthcare, Inc. (Nasdaq: CCRN) today reported revenue of $126.7 million in the first quarter ended March 31, 2012, a 4% increase from revenue of $122.0 million in the prior year quarter and a 2% increase sequentially from the fourth quarter of 2011. The Company incurred a net loss in the first quarter of 2012 of $0.6 million, or ($0.02) per diluted share, which included income and non-income tax expenses related primarily to immaterial adjustments to prior year amounts of $0.5 million after-tax, or $0.02 per diluted share. In the same quarter of the prior year, the Company had revenue of $122.0 million and net income of $0.2 million, or $0.01 per diluted share. Cash flow from operations for the first quarter of 2012 was $1.4 million.
"The start to 2012 has been disappointing, considering the momentum we had generated in our nurse and allied staffing business in the first ten months of 2011. I believe the slowing of momentum in this segment reflected a greater focus by hospitals on temporary nurse staffing usage during year-end budget discussions that, along with seasonality and a weak flu season, caused demand for contract nurses to decrease by more than one-third from mid-November through mid-February. Further exacerbating this was the loss of a large managed service provider (MSP) account in September of 2011, just prior to the year-end contraction in demand. The resulting lower-than-expected revenue in the first quarter in this segment reduced operating leverage as our overhead was calibrated to a greater level of staffing activity," said Joseph A. Boshart, President and Chief Executive Officer of Cross Country Healthcare, Inc.
"More recently we have seen demand increase for our contract nurses by more than 30% from mid-February through the first week of May, although bookings have not yet caught up with this improvement in demand. Moreover, this improvement does not include anticipated positions from one of the nation's leading health care systems which has recently selected us as their MSP provider. To put this into perspective, the projected annual spend for nurse staffing services by this new account represents approximately triple the revenue derived from the MSP account lost last September. We also have several smaller MSP contracts that we anticipate onboarding over the next several months. We expect all of this business to begin ramping up in the third quarter and to be fully in place by the fourth quarter. At the same time, we continue to provide our nurse and allied staffing services during electronic medical record (EMR) implementations - which have contributed to winning some of our recent MSP awards - and are also aggressively pursuing a number of new EMR opportunities," he stated.
"While physician staffing revenue was essentially flat in the first quarter compared to a year ago, our clinical trial services business saw top-line growth of 8% and our other human capital segment delivered 9% revenue growth, driven largely by strong performance from our retained search business. On a sequential basis, all three of these business segments saw increases. I remain convinced that the underlying environment for all of our business segments continues to strengthen and that our results, driven by our strengthened ability to deliver for our clients while working more collaboratively with them, will yield significant value for our shareholders as we move through the coming quarters," added Mr. Boshart.
Nurse and Allied Staffing
For the first quarter of 2012, the nurse and allied staffing business segment (travel and per diem nurse and allied health staffing) generated revenue of $69.5 million, reflecting a 4% increase from the prior year quarter, but a 1% decrease sequentially from the fourth quarter of 2011. The year-over-year increase was due to higher staffing volume and average bill rates, as well as one additional billable day, while the sequential decrease was attributable to fewer hours per FTE and one less billable day, partially offset by an increase in the average bill rate. Contribution income (defined as (loss) income from operations before depreciation, amortization and corporate expenses not specifically identified to a reporting segment) was $4.0 million, a decrease of 20% year-over-year and a 27% decrease sequentially. The contribution income margin (defined as a percentage of segment revenue) was 5.8% in the first quarter of 2012, a decrease of 170 basis points year-over-year due primarily to higher SG&A expenses and payroll taxes. Sequentially, the contribution income margin declined 200 basis points due primarily to the impact of the reset of payroll taxes and higher SG&A expenses.
Segment staffing volume increased 2% from the prior year quarter and was essentially flat sequentially. Travel staffing volume increased 3% on a year-over-year basis, but decreased 1% on a sequential basis while per diem staffing volume decreased 5% year-over-year, but increased 5% sequentially. The average revenue per FTE per day for the first quarter of 2012 was $312, an increase of 1% year-over-year and essentially flat sequentially. For travel nurse staffing, the average hourly bill rate increased 3% year-over-year and 1% on a sequential basis.
Physician Staffing
For the first quarter of 2012, the physician staffing business segment generated revenue of $29.3 million, essentially flat compared to the prior year quarter and a 5% increase sequentially from the fourth quarter of 2011. The sequential improvement was due to a favorable shift in mix and higher staffing volume. Contribution income was $2.4 million, a 13% decrease year-over-year and a 12% decrease sequentially. The contribution income margin was 8.2% in the first quarter of 2012, a decrease of 120 basis points from the prior year quarter due to a combination of higher provider costs and an unfavorable shift in mix to lower bill-rate specialties. Sequentially, the contribution income margin declined 150 basis points due to a combination of factors in the fourth quarter of 2011 that included a favorable professional liability accrual adjustment partially offset by an accrual for state non-income based taxes related to prior years. Physician staffing days filled for the first quarter of 2012 was 20,617 days, essentially flat from the prior year quarter, but a 2% increase sequentially. Revenue per day filled for the first quarter of 2012 was $1,419, down slightly year-over-year and up 3% sequentially.
Clinical Trial Services
For the first quarter of 2012, the clinical trial services segment generated revenue of $16.9 million, an 8% increase from the prior year quarter and a 7% increase sequentially from the fourth quarter of 2011. The year-over-year improvement was due to a significantly higher staffing volume partially offset by lower average bill rates. The sequential improvement was due to three additional billable days and higher staffing volume. Staffing services accounted for 94% of segment revenue. Contribution income was $1.3 million, a 2% increase year-over-year that resulted from a significant increase in staffing volume that was almost entirely offset by the impact of approximately $0.3 million in estimated state non-income based taxes primarily related to prior years. Sequentially, contribution income declined 10% as a result of the seasonal margin contraction due to the reset of payroll taxes and the impact of the aforementioned non-income based taxes partially offset by improved operating leverage.
Other Human Capital Management Services
For the first quarter of 2012, the other human capital management services business segment (education and training and retained search) generated revenue of $11.0 million, a 9% increase from the prior year quarter and a 2% increase from the prior quarter due primarily to substantially higher revenue generated in the retained search business that was partially offset by lower revenue from the education and training business. Contribution income was $1.1 million, a 185% increase year-over-year and a 30% increase sequentially reflecting significant improvement in the retained search business partially offset by weak performance in the education and training business.
Debt Outstanding and Credit Facility
During the first quarter of 2012, the Company reduced its debt by $2.3 million in total from the end of the prior quarter. At March 31, 2012, the Company had $39.7 million of total debt on its balance sheet, and a debt, net of $8.9 million in cash and cash equivalents, to total capitalization ratio of 11%. At the end of the first quarter of 2012, the Company's debt leverage ratio (as defined in its credit agreement) was 1.74 to 1, well below the 2.50 to 1 maximum allowable ratio effective for the duration of the credit agreement.
In March 2012, the Company entered into a third amendment to its Credit Agreement with the lenders party thereto Wells Fargo Bank, National Association, as Administrative Agent. The effect of the Credit Agreement amendment was to increase the number of allowable share repurchases/dividends, using existing cash and cash equivalents, when the Company's Consolidated Leverage Ratio (as defined), after giving effect to the transaction, is less than 2.00 to 1.00 and there are no outstanding revolving credit loans (other than letters of credit obligations). Pursuant to the amendment, the allowable amount has increased from an amount not to exceed $2.5 million to an amount not to exceed $5.0 million in any fiscal year. The financing fees related to this amendment were immaterial. During the second quarter of 2012, the Company intends to amend and extend its current credit facility, which is scheduled to expire in September of 2013.
Stock Repurchase Program Update
During the first quarter of 2012, the Company repurchased 71,653 shares of its common stock at an average cost of $5.22 per share. As of March 31, 2012, the Company can repurchase up to 942,443 shares of its common stock under its current Board authorization, subject to the terms of its credit agreement. Shares may be repurchased from time-to-time in the open market subject to the constraints of the Company's credit agreement and such repurchases may be discontinued at any time at the discretion of the Company. At March 31, 2012, the Company had approximately 30.7 million shares outstanding.
Guidance for Second Quarter 2012
The following statements are based on current management expectations. Such statements are forward-looking and actual results may differ materially. These statements do not include the potential impact of any future mergers, acquisitions or other business combinations, any impairment charges or valuation allowances, debt refinancing costs or significant legal proceedings. For the second quarter of 2012, the Company expects:
- Revenue to be in the $128 million to $130 million range.
- Gross profit margin to be approximately 27.0%.
- Adjusted EBITDA margin to be in the 3.5% to 4.0% range. Adjusted EBITDA, a non-GAAP financial measure, is defined in the accompanying financial statement tables.
- Earnings per diluted share to be in the range of $0.01 to $0.03.
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