|
Cross Country (CCRN)
|
Q2'08
versus
Q2'07 |
2007
versus
2006 |
Q1'08
versus
Q1'07 |
| Nurse and Allied
Staffing
|
(7.3%)
|
3.9%
|
(2.7%)
|
| Clinical Trials
Services
|
27.2%
|
69.9%
|
26.2%
|
| Other Human
Capital
Management
Services |
6.5%
|
8.5%
|
15.6%
|
|
Company
Total
|
(2.5%)
|
9.6%
|
1.8%
|
As you can see above, Cross Country's had negative
growth for the second quarter of this year versus the
second quarter last year. This lack of performance
came from the nursing and allied staffing segments of
Cross Country which are the largest in terms of
revenue for the company at 78% of Cross Country's
revenue base. In its' 10-Q, Cross Country indicated
that demand in these segments has stabilized,
however this demand has not translated to staffing
volume and Cross Country thinks that the nation's
employment statistics are having an adverse effect on
the willingness of nurses to relinquish their security of
a full-time hospital staff position. Other companies
seem to disagree with this viewpoint. On a positive
note, Cross Country continues to indicate that strong
pricing is offsetting some of the volume weakness in
the Nursing and Allied Staffing segment.
|
AMN Healthcare Services (AHS)
|
Q2'08
versus
Q2'07 |
2007
versus
2006 |
Q1'08
versus
Q1'07 |
| Nursing and Allied
Staffing
|
7.0%
|
5.1%
|
2.0%
|
| Locum Tenens Staffing
|
4.9%
|
15.8%
|
6.9%
|
| Physician Permanent
Placement |
6.6%
|
2.1%
|
5.5%
|
|
Company
Total
|
6.4%
|
7.6%
|
3.4%
|
As of February 15, 2008 AMN 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 major if not only reason that AMN's Nursing and
Allied Staffing segment grew at all during the quarter
versus Q2'07. 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 demand,
supply and an inability to bring in international nurses
as a result of the current visa retrogression.
|
On Assignment (ASGN)
|
Q2'08
versus
Q2'07 |
2007
versus
2006 |
Q1'08
versus
Q1'07 |
| Healthcare Staffing
|
5.0%
|
2.9%
|
4.4%
|
| Physician Staffing
|
20.4%
|
New
|
14.5%
|
| Life Sciences |
(3.8%)
|
14.6%
|
2.9%
|
|
IT and Engineering
|
15.7%
|
New
|
New
|
|
Company
Total
|
8.5%
|
NA
|
NA
|
On Assignment's revenue increased 8.5% year-over-
year as a result of growth in its Healthcare, Physician
and IT and Engineering segments. In its 10-Q On
Assignment indicated that the growth was due to both
demand in its end markets as well as an expanded
and more experienced sales and fulfillment team. The
life science segment revenue decrease of 3.8% was
primarily due to a 9.2% decrease in the average
number of contract professionals on assignment and
a decrease in direct hire and conversion fee revenues,
which was partially offset by a 5.2% increase in the
average bill rate. Both the Nurse Travel and Allied
Healthcare lines increased during the quarter. Nurse
Travel revenue increased 6.5% which included a 4.2%
increase in the average bill rate and a 2.9% increase in
the average number of nurses on assignment. Allied
Healthcare revenue increased 1.9% overall. However,
it experienced a 5.1% increase in the average bill rate
and a 6.6% decrease in the average number of
contract professionals. Physician Staffing revenue was
affected by a 13.9% increase in contract professionals
and a 5.9% increase in the average bill rate. The IT and
Engineering segments grew due to a 10.9% increase
in the number of contract professionals and a 6.3%
increase in the average bill rate. Company growth is
still being powered by the acquisitions it made in the
first quarter of 2007. 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)
|
Q2'08
versus
Q2'07 |
2007
versus
2006 |
Q1'08
versus
Q1'07 |
| Branch based per-diem
Staffing
|
N/A
|
Not Reported
|
N/A
|
| Allied Staffing
|
N/A
|
Not Reported
|
N/A
|
| Travel Nurse Staffing |
N/A
|
Not Reported
|
N/A
|
|
Company
Total
|
(4.5%)
|
N/A
|
N/A
|
MSN's revenue grew 52.2% year over year for the
second 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, but it is also experiencing pressure
from a weak economy and tight credit market. The
acquisition of InteliStaf clouds this within the reported
results. During Q2'08, 67% of MSN's revenue was
derived from per diem staffing, 18% was derived from
travel staffing and 15% 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)
|
Q2'08
Percentage |
2007
Percentage |
Q1'08
Percentage |
|
Company
Total
|
26.7%
|
24.3%
|
25.2%
|
In Q2'08 Cross Country experienced a 3% 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)
|
Q2'08
Percentage |
2007
Percentage |
Q1'08
Percentage |
| Nursing and Allied Staffing
|
24.5%
|
23.8%
|
24.0
|
| Locum Tenens Staffing
|
25.9%
|
26.0%
|
26.7% |
| Physician Permanent
Placement |
59.3%
|
61.3%
|
61.6%
|
|
Company
Total
|
26.4%
|
26.0%
|
26.4%
|
For the nursing and allied segment, AMN experienced
an increase in gross margin of 1.2% in the second
quarter versus the same period in 2007 and was also
up from the average gross margin for 2007. Gross
margin in the locum tenens staffing business
experienced a similar phenomenon being up 0.4%
versus last year's Q2; in the physician permanent
placement segment, during Q2'08, AMN had an
decrease in gross margin of 0.5% versus the same
period last year. Overall, AMN's gross margin was up
0.9% inQ2'08 vs. Q2'07.
|
On Assignment (ASGN)
|
Q2'08
Percentage |
2007
Percentage |
Q1'08
Percentage |
| Healthcare Staffing
|
26.4%
|
25.3%
|
24.2%
|
| Physician Staffing
|
30.7%
|
29.2%
|
28.2% |
| Healthcare/Physician Staffing
Total |
27.8%
|
26.5%
|
25.5%
|
|
Life Sciences
|
33.0%
|
33.4%
|
32.9%
|
|
IT and Engineering
|
37.8%
|
37.4%
|
36.8%
|
|
Company
Total
|
32.5%
|
31.7%
|
31.1%
|
During the first quarter, On Assignment's growth
margin increased versus 2007 and last quarter in
most segments. Overall Company gross margin was
up 0.8% for the quarter versus last year and 0.4%
versus last quarter. The change in mix of business
toward IT and Engineering and Physician staffing is
favorably affecting the overall gross margin, however,
all segments have exceptional gross margin
percentages.
|
Medical Staffing Network (MRN)
|
Q2'08
Percentage |
2007
Percentage |
Q1'08
Percentage |
|
Company
Total
|
24.9%
|
24.1%
|
24.1%
|
MSN has increased its gross margin by 0.4% in this
quarter versus the same quarter last year. MSN
attributes this to a continued focus on gross profit
margin expansion.
Sales General & Administrative
Expenses
Each company has a different SG&A story. Only that of
On Assignment is positive. See below:
Sales General & Administrative Expenses
Percentage
(Excludes Interest, Bad Debt, Depreciation and
Amortization)
|
Cross Country (CCRN)
|
Q2'08
Percentage |
2007
Percentage |
Q1'08
Percentage |
|
Company
Total
|
18.8%
|
17.1%
|
17.9%
|
Cross Country's SG&A expenses worsened by 1.7% of
revenue in Q2'08 versus Q2'07 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,
especially as revenue has decreased by $4.4M versus
last year and costs have increased by $2.2M for Q2'08
versus Q2'07.
|
AMN Healthcare Services (AHS)
|
Q2'08
Percentage |
2007
Percentage |
Q1'08
Percentage |
| Nursing and Allied Staffing
|
17.7%
|
17.6%
|
17.3%
|
| Locum Tenens Staffing
|
20.9%
|
18.7%
|
19.4% |
| Physician Permanent
Placement |
32.6%
|
37.5%
|
37.6%
|
|
Company
Total
|
19.2%
|
18.7%
|
18.8%
|
During the second quarter, AMN's SG&A expenses
worsened by 1.0% versus the second 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 too high
and will continue to have a negative effect on
profitability until they are brought in line.
|
On Assignment (ASGN)
|
Q2'08
Percentage |
2007
Percentage |
Q1'08
Percentage |
|
Company
Total
|
22.5%
|
23.0%
|
23.6%
|
On Assignment is making significant improvements in
SG&A expenses as a percent of revenue versus last
year and even though its SG&A expenses as a
percentage of revenue are higher than the other
companies noted, the fact is that On Assignment is
now experiencing an operating income that at 7.6%
during the quarter is more than respectable. We
believe that On Assignment is setting the stage for
significant profit growth and performance this year and
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)
|
Q2'08
Percentage |
2007
Percentage |
Q1'08
Percentage |
|
Company
Total
|
20.9%
|
19.9%
|
20.2%
|
MSN has not been able to use volume to offset its high
SG&A expense levels in the second quarter. During
Q2'08, SG&A expenses are up on a year over year
basis by 0.4% versus last year. With the acquisitions of
InteliStaf and AMR ProNurse now integrated into the
rest of the company, we hope to eventually see MSN's
SG&A expenses revert to what we consider more
reasonable levels, which are several percentage
points below current performance.
Summary Commentary
Industry revenue will continue to be limited for the most
part by supply acquisition and turnover rather than by
demand. Retrogression does not appear as though it
will 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, particularly nurses.
Of note in the gross margin section is that all the public
companies had gross margin of 24.5% or more in
every segment during the second quarter. 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%- 1.5%
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%-1.5%
in those segments.
The SG&A expenses of most 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. Acquisition pricing has firmed up again
although we are getting concerned about how long
acquisition demand will stay strong due to the
continuing weakness in the stocks of the public
companies, 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 website. If 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
1984 as
Lyons &
Associates, Inc.
and today Lyons Solutions, LLC is a
premier Investment Banking advisor and Exit Planner
to the
healthcare
staffing industry nationwide. Since 1989
we've
completed over 30 healthcare
staffing
industry transactions. We have built an
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corporate and private equity buyer
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
million. We
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
clients to
consider. Our senior deal makers / exit planners
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participate
in the Healthcare Staffing Summit, the
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Staffing Association (ASA), the New York Staffing
Association (NYSA) and have
completed over 110
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