Cross Country Healthcare, Inc. (CCRN)

Q1 2010 Earnings Call Transcript

May 6, 2010 10:00 am ET

Executives

Howard Goldman – Director, Investor and Corporate Relations

Joe Boshart – President and CEO

Emile Hensel – CFO

Analysts

Frank Pinkerton – SunTrust

Paul Condra – BMO Capital Markets

Jim Janesky – Stifel Nicolaus

Presentation

Operator

Welcome to the Cross Country Healthcare first quarter 2010 earnings conference call. At this time, all participants are in a listen-only mode. After the presentation, we will conduct a question-and-answer session. (Operator Instructions) Today's conference is being recorded and if you have any objections, you may disconnect at this time.

I would now like to turn the meeting over to Mr. Howard Goldman, Director of Investor and Corporate Relations. Sir, you may begin.

Howard Goldman

Good morning. And thank you for listening to our conference call, which is also being webcast and for your interest in the company.

With me today are Joe Boshart, our President and Chief Executive Officer and Emile Hensel, our Chief Financial Officer. On this call we will review our first-quarter 2010 results, for which we distributed our earnings press release after the close of business yesterday. If you do not have a copy, it is available on our website at www.crosscountry.com. Replay information for this call is also provided in the press release.

Before we begin, I'd first like to remind everyone that this discussion contains forward-looking statements. Statements that are predictive in nature, that depend upon or refer to future events or conditions, or that include words such as expects, anticipates, beliefs, estimates and similar expressions are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results in performance to be materially different from any future results or performance expressed or implied by these forward-looking statements.

These factors were set forth under the forward-looking statement section of our press release for the first quarter of 2010, as well as under the caption "Risk Factors" in our 10-K for the year ended December 31, 2009.

Although we believe that these statements are based upon reasonable assumptions, we cannot guarantee future results. Given these uncertainties, the forward-looking statements discussed on this teleconference might not occur. Cross Country Healthcare does not have a policy of updating or revising forward-looking statements and thus it should not be assumed that our silence over time means that actual events are occurring as expressed or implied in such forward-looking statements. And now, I will turn the call over to Joe.

Joe Boshart

Thank you, Howard. And thank to everyone listening in for joining us this morning. As reported in our press release issued last evening, our revenue for the first quarter of 2010 was $121 million, down 31% from a year ago. Net income was $1.1 million, down 63% from the year-ago quarter. EPS was $0.04 per diluted share and cash flow for the first quarter was $10.3 million. On a sequential basis, revenue was down 2% from the fourth quarter of 2009, which was primarily the result of two less billing days.

So at this point we believe we have weathered the worst of the downturn in our operating environment and have emerged in an attractive competitive position, given the relative strength of our balance sheet and our recent organic market share gains. Two years ago on our quarterly public conference call and reiterated several times subsequently, we outlined our strategy to investors, which was to grow our market position and our margins in our core nurse and allied staffing business, make strategic acquisitions in high-growth, high-margin businesses, opportunistically buy back our shares and maintain a strong balance sheet to provide financial flexibility.

While these strategic objectives may not have sounded particularly exciting at the time, our discipline in staying true to these objectives has resulted in our relative outperformance, vis-a-vis competitors. And at all times, we maintain control of our destiny by staying well within the covenants and commitments we made to our lenders in the past. As a result, we believe we currently have the lowest borrowing cost among major competitors in our industry.

In 2009, despite the worst operating environment in almost two decades, we maintained profitability in every quarter, even after including a significant cost to right size our organization, which were accounted for as ordinary operating expenses. At the same time we re-engineered processes and improved the capacity of our operating platform so that when substantial staffing volume growth does return, we expect to be more efficient and more profitable than in the past in a healthcare market that continues to have very attractive long-term characteristics.

Our present challenge is to maintain the same level of discipline in our management approach while also being open to compelling M&A opportunities now that the market appears to have found a bottom. While we are not happy with the results we reported last evening, we believe they should be looked at on a relative basis. To wit, our gross margin in the first quarter was up 270 basis points from the prior year and when looked at over the past two years relative to public competitors, it is clear no one has done a better job on this critical metric.

Even with this focus on margins, we believe our market share in travel nurse and allied staffing has increased versus all major competitors during 2008 and 2009.

We ended the quarter with a debt leverage ratio comfortably within the maximum leverage allowed under our credit agreement. And more importantly, during the second quarter we made the final earn-out payment for the MDA acquisition of $12.8 million using cash on hand and expect to end the quarter with less debt than we began the quarter.

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