|
Cross Country (CCRN)
|
Q1'07
versus
Q1'06 |
2007
versus
2006 |
Q1'08
versus
Q1'07 |
| Nurse and Allied
Staffing
|
5.5%
|
3.9%
|
(2.7%)
|
| Clinical Trials
Services
|
86.8%
|
69.9%
|
26.2%
|
| Other Human
Capital
Management
Services |
(3.1%)
|
8.5%
|
15.6%
|
|
Company
Total
|
10.2%
|
9.6%
|
1.8%
|
As you can see above, Cross Country's growth came
from business segments outside of nursing and allied
staffing and that this segment actually contributed less
revenue in the first quarter of 2008 than the first quarter
of 2007. Nursing and allied now represent 78% of
Cross Country's revenue base and it is shrinking as a
percentage of the total as Clinical Trials Services and
Other Human Capital Management Services are
emphasized. On a positive note, Cross Country
continues to indicate that strong pricing is offsetting
volume weakness in the Nursing and Allied Staffing
segment.
|
AMN Healthcare Services (AHS)
|
Q1'07
versus
Q1'06 |
2007
versus
2006 |
Q1'08
versus
Q1'07 |
| Nursing and Allied
Staffing
|
12.6%
|
5.1%
|
2.0%
|
| Locum Tenens Staffing
|
10.5%
|
15.8%
|
6.9%
|
| Physician Permanent
Placement |
5.0%
|
2.1%
|
5.5%
|
|
Company
Total
|
11.7%
|
7.6%
|
3.4%
|
In its 10-Q for the period ending March 31, 2008, 2007,
AMN indicated that as of February 15, 2008 it acquired
Platinum Select Staffing, a national travel allied staffing
firm. This was a relatively substantial transaction for
the Company and even though revenue attributable to
this transaction was not published, we believe that this
acquisition is the only reason that AMN's Nursing and
Allied Staffing segment grew at all during the quarter
versus Q1'07. Locum tenens staffing remains strong
although its growth rate is decreasing. The Physician
and Permanent Placement segment of the Company
is growing at about the same rate it was a year ago.
Company growth is being constrained by supply and
an inability to bring in international nurses as a result
of the current visa retrogression. In early May, 2008,
AMN indicated that demand for travel nurses and allied
healthcare professionals rose since the beginning of
the year. This is all well and good, but when the issue
is supply, additional demand isn't going to help future
results.
|
On Assignment (ASGN)
|
Q1'07
versus
Q1'06 |
2007
versus
2006 |
Q1'08
versus
Q1'07 |
| Healthcare Staffing
|
5.9%
|
2.9%
|
4.4%
|
| Physician Staffing
|
New
|
New
|
14.5%
|
| Life Sciences |
19.7%
|
14.6%
|
2.9%
|
|
IT and Engineering
|
New
|
New
|
New
|
|
Company
Total
|
NA
|
NA
|
NA
|
On Assignment experienced some growth in
Healthcare Staffing in the first quarter of 2008 versus
the first quarter of 2007. The life science segment
growth slowed dramatically in the first quarter versus
any period in the last year. On Assignment's Physician
Staffing and It and Engineering segments are growing
nicely. In its 8-K, On Assignment indicated that its IT
and Engineering segment grew 19.3% on a pro-forma
basis versus Q1'07. Company growth is being
powered by the acquisitions it made in the first quarter
of 2007. Had it not been for these acquisitions, growth
would have been less than 4%. Because of its
balanced business model, On Assignment is well
positioned to grow in 2008 without great dependency
on GDP or labor market growth.
|
Medical Staffing Network (MRN)
|
Q1'07
versus
Q1'06 |
2007
versus
2006 |
Q1'08
versus
Q1'07 |
| Branch based per-diem
Staffing
|
(2.4%)
|
Not Reported
|
N/A
|
| Allied Staffing
|
(0.6%)
|
Not Reported
|
N/A
|
| Travel Nurse Staffing |
(45.8%)
|
Not Reported
|
N/A
|
|
Company
Total
|
(4.5%)
|
N/A
|
N/A
|
MSN's revenue grew 60% year over year for the first
quarter, although most if not all of its growth came from
the acquisitions of InteliStaf Holdings and AMR
ProNurse in 2007. MSN has been under volume
pressure due to stagnant hospital admissions for
some time now. The recent acquisition of InteliStaf
clouds this within the reported results. In its 10-K for
2007, MSN indicated that the weaker demand
experienced in Q4'7 has reversed itself as Q1'08
progressed, although in its 10-Q for Q1'08, MSN
indicated that its revenue is still under pressure as
stagnant admissions have suppressed incremental
demand for temporary nurses and that it cannot predict
when conditions will improve. During Q1'08, 68% of
MSN's revenue was derived from per diem staffing,
18% was derived from travel staffing and 14% was
derived from allied staffing. The travel segment of the
business has increased from 4% to 18% of its
business due to the acquisition of InteliStaf.
Gross Margin
Each company has a different gross margin story
although all companies increased their gross margin
in Q4'07 verses Q4'06. See below:
Gross Margin Percentage
|
Cross Country (CCRN)
|
Q1'07
Percentage |
207
Percentage |
Q1'08
Percentage |
|
Company
Total
|
23.0%
|
24.3%
|
25.2%
|
In Q1'08 Cross Country experienced a 2.2% increase
in gross margin versus the same period in 2007 and
continued its trend of rising gross margin since 2006.
As previously stated, most of the increase is due to the
impact of the Assent, AKOS and Metropolitan Research
acquisitions. Also impacting gross margin is the fact
that the clinical trials services and other human capital
management services (which have higher gross
margins than the nursing and allied staffing
businesses) are increasing as a percentage of Cross
Country's business whereas the nursing and allied
staffing business segment is decreasing as a
percentage of Cross Country's business.
|
AMN Healthcare Services (AHS)
|
Q1'07
Percentage |
2007
Percentage |
Q1'08
Percentage |
| Nursing and Allied Staffing
|
23.3%
|
23.8%
|
24.0
|
| Locum Tenens Staffing
|
25.2%
|
26.0%
|
26.7% |
| Physician Permanent
Placement |
63.2%
|
61.3%
|
61.6%
|
|
Company
Total
|
25.5%
|
26.0%
|
26.4%
|
For the nursing and allied segment, AMN experienced
an increase in gross margin of 0.7% in the first quarter
versus the same period in 2007 and was also up
slightly than the average gross margin for 2007. Gross
margin in the locum tenens staffing business
experienced a similar phenomenon; in the physician
permanent placement segment during Q1'08, AMN
had an decrease in gross margin of 1.6% versus the
same period last year. Overall, AMN's gross margin
was up 0.9% inQ1'08 vs. Q1'07 and up 0.4% the year
ending
December 31, 2007.
|
On Assignment (ASGN)
|
Q1'07
Percentage |
2007
Percentage |
Q1'08
Percentage |
| Healthcare Staffing
|
24.6%
|
25.3%
|
24.2%
|
| Physician Staffing
|
29.4%
|
29.2%
|
28.2% |
| Healthcare/Physician Staffing
Total |
26.0%
|
26.5%
|
25.5%
|
|
Life Sciences
|
32.9%
|
33.4%
|
32.9%
|
|
IT and Engineering
|
37.1%
|
37.4%
|
36.8%
|
|
Company
Total
|
30.6%
|
31.7%
|
31.1%
|
During the first quarter, On Assignment's growth
margin decreased versus last year in most segments
and versus 2007. However, overall Company gross
margin was up 0.5% for the quarter versus last year
due to a change in mix of business toward IT and
Engineering and Physician staffing.
|
Medical Staffing Network (MRN)
|
Q1'07
Percentage |
2007
Percentage |
Q1'08
Percentage |
|
Company
Total
|
23.2%
|
24.1%
|
24.1%
|
MSN has increased its gross margin by 0.9% in this
quarter versus the same quarter last year.MSN
attributes this to a more favorable pricing environment
than in recent years, although MSN notes that there is
gross profit margin pressure.
Sales General & Administrative
Expenses
Each company has a different SG&A story, none of
which are positive. See below:
Sales General & Administrative Expenses
Percentage
(Excludes Interest, Bad Debt, Depreciation and
Amortization)
|
Cross Country (CCRN)
|
Q1'07
Percentage |
2007
Percentage |
Q1'08
Percentage |
|
Company
Total
|
16.8%
|
17.1%
|
17.9%
|
Cross Country's SG&A expenses worsened by 1.1% of
revenue in Q1'08 versus Q1'07 on top of a 0.3%
worsening for 2007 verses 2006. Some of this is due
to Cross Country's mix of business changing, but
SG&A continues to go the wrong way for the Company.
|
AMN Healthcare Services (AHS)
|
Q1'07
Percentage |
2007
Percentage |
Q1'08
Percentage |
| Nursing and Allied Staffing
|
17.3%
|
17.6%
|
17.3%
|
| Locum Tenens Staffing
|
20.0%
|
18.7%
|
19.4% |
| Physician Permanent
Placement |
35.7%
|
37.5%
|
37.6%
|
|
Company
Total
|
18.5%
|
18.7%
|
18.8%
|
During the first quarter, AMN's SG&A expenses
worsened by 0.3% versus the first quarter of 2007. Only
Locum Tenens Staffing showed improvement in SG&A
expenses as a percentage of revenue. As a result,
AMN's SG&A expenses continue to be a little too high
and will continue to have a slightly negative effect on
profitability until they are
brought in line.
|
On Assignment (ASGN)
|
Q1'07
Percentage |
2007
Percentage |
Q1'08
Percentage |
|
Company
Total
|
23.5%
|
23.0%
|
23.6%
|
On Assignment's SG&A expenses were almost flat as
a percentage of revenue from Q1'07 to Q1'08. This
may actually be an improvement as On Assigment's
mix of business has change over the last year. As
noted previously, On Assignment is much more of a
hybrid company than any of the other companies
noted. A significant portion of its revenue comes from
outside of its traditional businesses due to
acquisitions last year. On Assignment does not report
SG&A by segment. We continue to believe that On
Assignment probably has a much better cost structure
in its healthcare and physician staffing areas than is
reflected above especially since its gross margin in
these areas are significantly below that of its other
businesses as shown in the gross margin section
above.
|
Medical Staffing Network (MRN)
|
Q1'07
Percentage |
2007
Percentage |
Q1'08
Percentage |
|
Company
Total
|
21.9%
|
19.9%
|
20.2%
|
MSN seems to have been able to use volume to offset
its high SG&A expense levels. During Q1'08, SG&A
expenses are down on a year over year basis by 1.7%
versus last year. With the acquisitions of InteliStaf and
AMR ProNurse now integrated into the rest of the
company, we hope to see MSN's SG&A expenses
revert to what we consider more reasonable levels,
which are a few percentage points below current
performance.
Summary Commentary
Industry revenue will continue to be limited by supply
acquisition and turnover rather than by demand.
Retrogression will not be lifted any time in the near
future. That is bad news for all companies involved
with bringing healthcare personnel in to the country
from international locations.
Of note in the gross margin section is that all the public
companies had gross margin of 24.0% or more in the
first quarter, no matter what segment of the business
was reported. This is not by accident as all the public
companies are attempting to increase their gross
margin. Still, from an overall viewpoint, the gross
margin percentage for the public companies noted
above remains about 1%- 2% lower than it was prior to
2002-2003 in the nurse staffing and travel nurse
segments of the market. Longer term, we expect that
the gross margin percentage for public companies will
rise by 1%-2% in those segments.
The SG&A expenses of the public companies will need
to shrink over time to get back to where they were prior
to 2004 as they are still out of line with historical
percentages by 1-2% of revenue. As a point of
reference, healthcare staffing companies probably
should have SG&A expenses in the range of 15% to
17% of revenue for travel or per-diem companies and
in the range of 18% to 20% for physician and allied
staffing companies. These guidelines should allow for
EBITDA in the range of 6% to 8% or more if gross
margin is properly managed.
The acquisition market is still strong in most
segments, although there has been some fall off in
acquisition pricing. We are getting concerned about
how long acquisition demand will stay strong due to
the continuing weakness in the economy and in
hospital admissions. Demand in the per-diem staffing
area has already weakened.
If you would like to confidentially discuss how we could
help you to take advantage of acquisition opportunities
available at this time, we should talk! Please contact
either of us at the numbers below and for more
information about us please visit our websiteIf you
would like to confidentially discuss how we could help
you to either plan your exit or to take advantage of
acquisition opportunities available at this time, we
should talk! Please contact either of us at the numbers
below and for more information about us please visit
our website
www.lyonsolutions.com.
Sincerely,
Visit Our Website
About Lyons Solutions,
LLC
We were founded in
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and today Lyons Solutions, LLC is a
premier Investment Banking advisor and Exit Planner
to the
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staffing industry nationwide. Since 1989
we've
completed over 30 healthcare
staffing
industry transactions. We have built an
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database and
provide sound, practical advice to owners
of private
companies seeking to execute an exit strategy,
business
sale,
merger, acquisition, recapitalization or
management
buyout transaction. Seller clients tend to
have
revenue ranging from $5 million to $100
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work with our clients to plan their exits and to jointly
determine the
best
time for them to approach the market and
then
aggressively develop alternatives for our
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consider. Our senior deal makers / exit planners
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