|
Cross Country (CCRN)
|
Q1'08
versus
Q1'07 |
Q2'08
versus
Q2'07 |
Q3'08
versus
Q3'07 |
Q4'08
versus
Q4'07 |
2008
versus
2007 |
| Nurse and Allied
Staffing
|
(2.7%)
|
(7.3%)
|
(11.6%)
|
(13.8%)
|
(8.8%)
|
| Clinical Trials
Services
|
26.2%
|
27.2%
|
(2.9%)
|
(4.9%)
|
9.4%
|
| Other Human
Capital
Management
Services |
15.6%
|
6.5%
|
(1.5%)
|
(4.2%)
|
3.7%
|
| Physician Staffing |
-
|
-
|
-
|
N/A
|
N/A
|
|
Company
Total
|
1.8%
|
(2.5%)
|
(3.8%)
|
13.3%
(11.8%)
|
2.2%
(5.7%)
|
The Company Total in the last two columns is Cross
Country's reported results with and (without)
acquisitions. In September 2008, Cross Country
announced the acquisition of Medical Doctor
Associates, a major Physician Staffing company. As
you can see above, the acquisition significantly
influenced its quarterly and annual results. During
Q4'08, Cross Country had 13.3% growth
versus Q4'07
with this acquisition included in its financial results, but
had 11.8% negative growth in its older divisions for
the
fourth quarter of this year versus the fourth quarter of
last year. This negative growth was most evident in the
nursing and allied staffing segments of Cross Country
which is the largest segments in terms of revenue for
the company at 60% of the quarter's and 72%
of
the
year as a percentage of Cross Country's revenue base.
Cross Country indicated that demand for its services
decreased due to a weak admission trend. In its
earnings announcement of March 5, 2009, Cross
Country indicated that travel bookings were down
27%
year-over-year in the fourth quarter and that it expects
even further weakness in Q1'09. It stated
"Demand as
expressed by the number of open orders from our
hospital clients is down more than 50% since the
start
of the year. This is the most difficult we've seen since
the mid 1990's." Perhaps even more
distressing was
Joe Boshart's comment, "I see no catalyst
that
has the
potential of reversing these negative dynamics for our
nurse staffing business in the near future." On a
positive note, applicant activity is up and the Company
has more nurses than it can place, which could
indicate the potential for a strong turn around at some
time in the future when demand picks up. Cross
Country thinks that it will increase market share in the
nurse and allied staffing segment in the first quarter of
2009, a strong indication of market weakness in
general.
|
AMN Healthcare Services (AHS)
|
Q1'08
versus
Q1'07 |
Q2'08
versus
Q2'07 |
Q3'08
versus
Q3'07 |
Q4'08
versus
Q4'07 |
2008
versus
2007 |
| Nursing and Allied
Staffing
|
2.0%
|
7.0%
|
6.4%
|
5.4%
|
5.2%
|
| Locum Tenens Staffing
|
6.9%
|
4.9%
|
2.8%
|
-
|
3.7%
|
| Physician Permanent
Placement |
5.5%
|
6.6%
|
(4.6%)
|
(6.8%)
|
-
|
|
Company
Total
|
3.4%
|
6.4%
|
4.9%
|
3.5%
|
4.6%
|
On February 15, 2008 AMN acquired Platinum Select
Staffing, a national travel allied staffing firm. Even
though revenue attributable to this transaction was not
published, we believe that the Platinum acquisition is
the major reason that AMN's Nursing and Allied
Staffing segment grew during the quarter versus Q4'07
although in its earnings call, AMN indicated that nurse
staffing experienced consistent year-over-year revenue
growth of 2% to 3% over the past three quarters with
average revenue per traveler per day increasing 3%
during the fourth quarter and for the year. AMN states
that orders are significantly down and says it is
expanding market share in the nursing area due to its
having the largest selection of assignments, which is
also helping it to retain its existing working travelers.
The Locum Tenens staffing growth rate has decreased
every quarter this year but was still up almost 4% on an
annual basis with about 2% coming from price
increases according to the earnings call. The
Physician and Permanent Placement segment of the
Company has switched from growing to decreasing
versus a year ago and was flat for 2008 versus 2007.
Company growth is being constrained mostly by
demand. Supply and an inability to bring in
international nurses as a result of the current visa
retrogression are also having a negative effect. On a
consolidated basis, AMN anticipates revenue to
decline in the low to mid-teens on both a
year-over-year and sequential basis during the first
quarter.
|
On Assignment (ASGN)
|
Q1'08
versus
Q1'07 |
Q2'08
versus
Q2'07 |
Q3'08
versus
Q3'07 |
Q4'08
versus
Q4'07 |
2008
versus
2007 |
| Healthcare Staffing
|
4.4%
|
5.0%
|
7.8%
|
(4.4%)
|
3.2%
|
| Physician Staffing
|
14.5%
|
20.4%
|
23.4%
|
19.9%
|
19.6%
|
| Life Sciences |
2.9%
|
(3.8%)
|
(1.4%)
|
(12.3%)
|
(3.8%)
|
|
IT and Engineering
|
New
|
15.7%
|
11.5%
|
3.8%
|
19.6%
|
|
Company
Total
|
N/A
|
8.5%
|
8.9%
|
(2.9%)
|
8.9%
|
During Q4'08, On Assignment's revenue decreased
2.9% year-over-year versus Q4'07 as a result of lower
volume in its Healthcare and Life Sciences segments.
Nurse Staffing revenue was down 6.9% year-over-year
and Allied Healthcare revenue was up 1.7% for the
same period. The Physician and IT and Engineering
segments both increased year-over-year, although the
IT and Engineering segment only increased
marginally. The net effect is that On Assignment had
negative growth during the quarter versus last year and
revenue was down 8.8% in Q4'08 versus Q3'08. On
Assignment's fourth quarter started with record
performance but November and December revenue
weakened significantly. Despite this, On Assignment
believes that it is increasing market share. The
company does not expect to see a dramatic
improvement in demand for its services over the next
six months and anticipates that revenue for the first
quarter of 2009 will shrink 16% to 19% from the fourth
quarter of 2008. It is experiencing a significant decline
in open orders, fewer renewals and a challenging
environment.
|
Medical Staffing Network (MSNW.PK)
|
Q1'08
versus
Q1'07 |
Q2'08
versus
Q2'07 |
Q3'08
versus
Q3'07 |
Q4'08
versus
Q4'07 |
2008
versus
2007 |
| Branch based per-diem
staffing
|
N/A
|
N/A
|
(8.6%)
|
(27.5%)
|
N/A
|
| Allied Staffing
|
N/A
|
N/A
|
(4.9%)
|
(17.5%)
|
N/A
|
| Travel Nurse Staffing |
N/A
|
N/A
|
(28.2%)
|
(18.3%)
|
N/A
|
|
Company
Total
|
N/A
|
N/A
|
(12.2%)
|
(20.6%)
|
N/A
|
MSN's revenue picture continues to get uglier and
uglier. In addition to the above, on a quarter-to-quarter
basis, revenue decreased 16.3% from Q3'08 to Q4'08.
All segments of the business showed worse results
that they did last year. MSN continues to be under
volume pressure due to stagnant hospital admissions,
but it is also experiencing pressure from a weak
economy and tight credit market. In the first two
quarters of 2008, the acquisition of InteliStaf clouded
reported results by making them seem better than they
were. During Q4'08, 69.5% of MSN's revenue was
derived from per diem staffing, 17.6% was derived
from travel staffing and 11.9% was derived from allied
staffing. The travel segment of the business has
increased from 4% of MSN's revenue due to the
acquisition of InteliStaf. All segments of the business
have been hit hard by the current economic
environment. Q1'09 will probably get worse rather than
better. MSN's financial condition has weakened to the
point where MSN was delisted from NASDAQ. It is now
listed on the pink sheet listings. The Company has
been closing down and is consolidating offices in an
attempt to stay solvent. It does not know when to expect
conditions to stabilize.
Gross Margin
All companies have been taking steps to increase their
gross margin. Some have been more successful than
others. See below:
Gross Margin Percentage
|
Cross Country (CCRN)
|
Q1'08
Percentage |
Q2'08
Percentage |
Q3'08
Percentage |
Q4'08
Percentage |
2008
Percentage |
|
Company
Total
|
25.2%
|
26.7%
|
26.6%
|
26.4%
|
26.2%
|
In Q4'08 Cross Country experienced a 0.7% increase
in gross margin versus Q4'07. However, during 2008
gross margin increased 1.9% versus 2007 and
continued its trend of rising gross margin since 2006.
The acquisition of MDA has had a favorable effect on
gross margin and as previously stated, the impact of
the Assent, AKOS and Metropolitan Research
acquisitions have also favorably impacted gross
margin. Physician staffing, 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 affecting gross margin
favorably.
|
AMN Healthcare Services (AHS)
|
Q1'08
Percentage |
Q2'08
Percentage |
Q3'08
Percentage |
Q4'08
Percentage |
2008
Percentage |
| Nursing and Allied Staffing
|
24.0%
|
24.5%
|
23.6%
|
23.6%
|
23.9%
|
| Locum Tenens Staffing
|
25.9%
|
26.0%
|
26.6% |
26.0% |
26.3% |
| Physician Permanent
Placement |
59.3%
|
61.3%
|
57.5%
|
58.7%
|
59.4%
|
|
Company
Total
|
26.4%
|
26.0%
|
25.7%
|
25.7%
|
26.0%
|
For the nursing and allied segment, AMN experienced
a decrease in gross margin of 0.8% in the fourth
quarter versus the same period in 2007. Gross margin
in the locum tenens staffing business was down 0.1%
versus last year's Q4; in the physician permanent
placement segment, during Q4'08, AMN had a
decrease in gross margin of 3.1% versus the same
period last year. Overall, gross margin decreased
0.9% versus last years' fourth quarter. For the calendar
year 2008, AMN's gross margin percentage was the
same as it was in 2007. In its 8-K issued February 26,
2009, AMN indicated that the lower gross margins it
experienced in Q4'08 mainly reflected the lower
revenue mix from higher margin business lines such
as international nursing and physician permanent
placement.
|
On Assignment (ASGN)
|
Q1'08
Percentage |
Q2'08
Percentage |
Q3'08
Percentage |
Q4'08
Percentage |
2008
Percentage |
| Healthcare Staffing
|
24.2%
|
26.4%
|
25.6%
|
26.3%
|
25.6%
|
| Physician Staffing
|
28.2%
|
30.7%
|
31.6% |
31.9% |
30.7% |
| Healthcare/Physician Staffing
Total |
25.5%
|
27.8%
|
27.5%
|
28.3%
|
27.3%
|
|
Life Sciences
|
32.9%
|
33.0%
|
34.2%
|
34.3%
|
33.6%
|
|
IT and Engineering
|
36.8%
|
37.8%
|
38.1%
|
37.9%
|
37.6%
|
|
Company
Total
|
31.1%
|
32.5%
|
32.6%
|
32.9%
|
32.3%
|
During the fourth quarter, On Assignment's growth
margin increased by 1.1% versus the same quarter in
2007. Also of note is that for Q4'08 and 2008, gross
margin is up in all segments versus On Assignment's
2007 gross margin attainment. The change in mix of
business toward IT and Engineering and Physician
staffing is favorably affecting the overall gross margin.
On Assignment has done an excellent job of
maintaining and growing its' gross margin
percentages. All segments have exceptional gross
margin percentages.
|
Medical Staffing Network (MSNW.PK)
|
Q1'08
Percentage |
Q2'08
Percentage |
Q3'08
Percentage |
Q4'08
Percentage |
2008
Percentage |
|
Company
Total
|
24.1%
|
24.9%
|
25.3%
|
25.6%
|
24.9%
|
MSN has increased its gross margin by 1.0% in this
quarter versus the same quarter last year and by 0.8%
from 2007 to 2008. MSN attributes this to a continued
focus on gross profit margin expansion.
Sales General & Administrative
Expenses
Each company has a different SG&A story. During
2008, only Cross Country and On Assignment had
positive SG&A performance. See below:
Sales General & Administrative Expenses
Percentage
(Excludes Interest, Bad Debt, Depreciation and
Amortization)
|
Cross Country (CCRN)
|
Q1'08
Percentage |
Q2'08
Percentage |
Q3'08
Percentage |
Q4'08
Percentage |
2008
Percentage |
|
Company
Total
|
17.9%
|
18.8%
|
18.8%
|
19.0%
|
18.6%
|
Cross Country's SG&A expenses increased by 1.5% of
revenue in Q4'08 versus Q4'07, more than offsetting
the 0.7% percentage increase as its gross margin
during the quarter. During 2008, however, SG&A
expenses increased less as a percentage of revenue
than gross margin increased as a percentage of
revenue (1.5% SG&A increase during 2008 as
compared to a 1.9% increase in gross margin in 2008).
|
AMN Healthcare Services (AHS)
|
Q1'08
Percentage |
Q2'08
Percentage |
Q3'08
Percentage |
Q4'08
Percentage |
2008
Percentage |
| Nursing and Allied Staffing
|
17.3%
|
17.7%
|
17.2%
|
17.5% Est.
|
17.4% Est.
|
| Locum Tenens Staffing
|
19.4%
|
20.9%
|
18.8% |
18.9% Est. |
19.5% Est. |
| Physician Permanent
Placement |
37.6%
|
32.6%
|
35.5%
|
35.8% Est.
|
35.4% Est.
|
|
Company
Total
|
18.8%
|
19.2%
|
18.4%
|
18.6%
|
18.9%
|
Throughout the year, AMN has been trying to get its
SG&A expenses lowered. During the fourth quarter,
AMN's SG&A expense improved by 1.0% versus the
fourth quarter of 2007. For the year, SG&A expenses
increased 0.2% versus 2007 due to the change in mix
toward business segments having higher SG&A
expenses. In its' 8-K, AMN notes that it began cost
savings initiatives during Q4'08. These will be needed
in the future as revenue will shrink in the first quarter
due to the economic environment.
|
On Assignment (ASGN)
|
Q1'08
Percentage |
Q2'08
Percentage |
Q3'08
Percentage |
Q4'08
Percentage |
2008
Percentage |
|
Company
Total
|
23.6%
|
22.5%
|
22.0%
|
23.4%
|
22.9%
|
Even though On Assignment's SG&A expenses as a
percentage of revenue are higher than the other
companies noted, the fact that On Assignment
experienced operating income at 7.0% during the
quarter is more than respectable given the fall-off in
revenue from Q3'08. During Q4'08, On Assignment
trimmed SG&A expenses by almost $1M. On its
earnings call, On Assignment indicated that its SG&A
in 2009 will be lower than it was in 2008 on a cash
basis and that it has implemented cost containment
measures throughout the organization. We believe that
this will be necessary in order to stay more than
marginally profitable with shrinking volume. On
Assignment's cost structure in its healthcare and
physician staffing areas must be lower than is
reflected above since its gross margin in these areas
are significantly below that of its IT and Engineering
and Life Sciences businesses as shown in the gross
margin section above.
|
Medical Staffing Network (MSNW.PK)
|
Q1'08
Percentage |
Q2'08
Percentage |
Q3'08
Percentage |
Q4'08
Percentage |
2008
Percentage |
|
Company
Total
|
20.2%
|
20.9%
|
19.6%
|
20.4%
|
20.3%
|
MSN has again not been able to use volume to offset
its high SG&A expense levels in the fourth quarter.
During Q4'08, SG&A expenses are up on a
year-over-year basis by 0.9% versus last year. On an
annual basis, SG&A rose by 0.4% versus 2007. MSN
has a long way to go to get its SG&A expenses under
control.
With the restructuring that MSN is going through, we
hope that MSN's SG&A expenses can revert to what we
consider more reasonable levels, which are several
percentage points below current performance.
However, we doubt that MSN's restructuring has been
severe enough given the current economic
environment where MSN is experiencing a smaller
revenue base.
Summary Commentary
Of note in the gross margin section is that all the public
companies had a gross margin of 23.9% or more in
every segment during the fourth 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 as gross margin returns to
historical norms.
The SG&A expenses of the public companies still 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 even as high as
10% if gross margin and SG&A is stringently managed.
The acquisition market is sluggish in all segments.
Valuations for all public companies have decreased
significantly. Credit is hard to come by, even for the
public companies. Very few acquisitions are getting
done and acquisition pricing is soft at this time. It's
really a great time to buy if you have the capital to do
so, although there is some risk that revenue is still
dropping. It is also a great time to do some exit
planning so that you're positioned properly in the
future.
If you would like to confidentially discuss how we could
help you to take advantage of exit planning or
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
extensive 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 actively participate in the Healthcare Staffing
Summit, the American Staffing Association (ASA), the
New York Staffing Association (NYSA) and have
completed over 115 multi-million dollar transactions.
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