Cross Country Healthcare announces Q2 2014 results & 11% YOY revenue increase
• Revenue increased 11% year-over-year and 4% sequentially to $122.7 million
• Adjusted EBITDA was $3.3 million or 2.7% of revenue
• Cash Flow from Operations was $3.8 million
• Issued third Quarter Guidance: Revenue of $187.0 million - $192.0 million and Adjusted EBITDA margin of 3.0% - 3.5%
Cross Country Healthcare President and CEO William J. Grubbs commented, "I am pleased that the strong execution of our strategy, including positive trends in our managed service programs, produced good revenue and EBITDA growth in the quarter. Demand in our Nurse and Allied segment increased each month throughout the quarter and has continued through July." Grubbs continued, "The integration of our Medical Staffing Network (MSN) acquisition is progressing well and we are on track to reach the $12 to $14 million of synergies targeted."
Second quarter consolidated revenue was $122.7 million, an increase of 11% from the same quarter last year, and 4% sequentially. The Company's consolidated gross profit margin was 26.4%, up 130 basis points from the same quarter last year and 60 basis points sequentially. Adjusted EBITDA (see table titled "Reconciliation of Non-GAAP Financial Measures") was $3.3 million or 2.7% of revenue, as compared with $1.7 million or 1.5% of revenue in the prior year. Loss from continuing operations was $3.2 million or $0.10 per diluted share primarily due to acquisition and integration costs, as compared with a loss of $1.4 million or $0.05 per diluted share in the prior year quarter. Cash flow from operations was $3.8 million during the second quarter of 2014, compared with $5.9 million in the second quarter of 2013.
For the six months ended June 30, 2014, consolidated revenue was $240.7 million, an increase of 9% from the same period last year. Consolidated gross profit margin was 26.1%, up 40 basis points from the same period last year. Adjusted EBITDA was $4.3 million or 1.8% of revenue, as compared with $3.7 million or 1.7% of revenue in the prior year. Loss from continuing operations was $4.0 million or $0.13 per diluted share, as compared with a loss of $2.8 million or $0.09 per diluted share in the same period last year.
On June 30, 2014, the Company acquired substantially all of the operating assets and certain liabilities of Medical Staffing Network ("MSN") for an aggregate purchase price of $48.1 million, subject to post-closing net working capital adjustment. The Company funded $45.6 million at closing, net of cash acquired, of which $1.0 million was funded to an escrow account for the net working capital adjustment. An additional $2.5 million was deferred and is due to the seller in 21 months, less any COBRA expenses incurred by the Company on behalf of former MSN employees over that period. The Company financed the acquisition using $55.0 million in new subordinated debt consisting of a $30.0 million, 5-year term loan and $25.0 million of convertible notes having a 6-year maturity and a conversion price of $7.10.
Quarterly Business Segment Highlights
Nursing & Allied
Revenue from the nurse and allied staffing business segment increased 26% from the same quarter last year, and 3% sequentially. Contribution income in this segment was $6.7 million, up from $3.5 million in the same quarter last year. The year-over-year increase in segment revenue and contribution income came from a combination of robust organic revenue growth of 11% and the December 2013 allied health acquisition. Average field FTEs increased 38.1% to 3,177 from 2,300 in the same quarter last year. Revenue per FTE decreased 8.9% to $286 from $314 in the same quarter last year reflecting the impact of lower average bill rates of the acquired allied health business.
Revenue from the physician staffing business decreased 11% year over year and increased 6% sequentially. The year over year decrease relates to a combination of lower average bill rates and lower volume. On a sequential basis, the increase is due to increased volume. Contribution income was $1.9 million, down from $2.6 million in the same quarter last year, due to negative operating leverage. Total days filled decreased 13.6% to 21,147 from 24,462 in the same quarter last year. Revenue per day filled increased 2.8% to $1,444 from $1,405 in the same quarter last year, primarily related to pricing.
Other Human Capital Management Services
Revenue from the other human capital management services business segment was $9.2 million, down 11% from the same quarter last year and up 5% sequentially. Contribution income was negative $0.2 million, compared to a positive $0.5 million in the same quarter last year.
Cash Flow and Balance Sheet Highlights
Cash flow provided by operating activities was $3.8 million for the quarter. At June 30, 2014, the Company had $9.3 million in cash and cash equivalents and $64.8 million of total debt. The Company had $29.9 million of availability under its credit facility at June 30, 2014.
Outlook for Third Quarter 2014
The Company also provided its guidance for the third quarter of 2014: