Healthcare Staffing Report: Sept. 5, 2013

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2Q13 healthcare staffing earnings recap

For publicly traded companies, report cards come four times each year. The latest round of grades have been posted, and were analyzed in a report by our Theodore Vadpey published last week (corporate members can access the full report here).

In the second quarter of 2013, the 10 large firms constituting our general all-segment index grew revenue by a median 3.4 percent, and net income by a median 9.2 percent from the prior year. These figures may appear modest in absolute terms, but this marks the first year-over-year acceleration in revenue growth we have seen in eight quarters, and the first in three quarters for net income. Results for the two pure-play healthcare staffing companies were likewise solid, but reflect some of the industry-specific headwinds that have been in place through the first half of the year.

Click on chart below to enlarge.

AMN Healthcare Services (NYSE: AHS), the largest U.S. healthcare staffing provider according to our estimates, reported $253.9 million (up 7.7 percent year over year) in quarterly revenue and a gross margin of 29.3 percent, up 90 basis points from the second quarter of 2012. Nurse and allied staffing, the company’s largest reporting segment, was up 7 percent year over year. The performance was driven by 10 percent volume growth in travel nursing, partially offset by a 4 percent decline in allied. Management cited the effect of the sequestration as well as continued weakness in therapy due to reimbursement changes as constraining factors. Local staffing revenue edged up just 1 percent year over year. Locum was a bright spot in the report, growing 8 percent year over year, the fastest pace since 2007, on the back of increased hospitalist, primary care and advanced practice specialties.

The adjusted EBITDA margin in AMN's second-quarter 2013 report was 8.4 percent, up year over year from 7.7 percent and edging closer to the company’s stated target for the metric of 10 percent. Net income was $8.4 million, or $0.18 per share, compared to a net loss of $0.8 million in the prior year’s second quarter. Looking forward, the company sees third-quarter revenue at $253 million to $257 million (up 4-5 percent year over ear), gross margin at 29 percent to 29.5 percent and adjusted EBITDA margin at roughly 8 percent. Further declines in therapy are anticipated to be outweighed by strength in imaging, lab specialties, travel nursing and electronic medical records (EMR) implementation.

The fourth-largest U.S. healthcare staffing company, Cross Country Healthcare (NASDAQ: CCRN), posted second-quarter revenue of $110.8 million (up 1.8 percent year over year) and a gross margin of 25.1 percent (up 20 bps year over year). Its nursing & allied segment revenue was flat year over year despite a 3 percent overall increase in bill rates. Generally soft demand was compounded by a lull in staffing related to EMR projects, though the latter is expected to pick up through the remainder of 2013. Travel and per diem were up 1 percent and 3 percent year over year, respectively. Echoing the AMN report, physician staffing was strong for Cross Country in the quarter, up 7 percent year over yera due to robust demand in primary care, anesthesiology and emergency medicine.

Cross Country reported a second-quarter net loss of $1.5 million, or $0.05 per share, though backing out one-time charges for legal and restructuring costs would bring the loss down to $0.02 per share. Adjusted EBITDA was $1.7 million, or 1.5 percent of revenue, a slight improvement from $1.6 million, or 1.4 percent of revenue in the second quarter of 2012. For the third quarter, the company projects revenue of $110 million to $112 million, a gross margin of 25 percent to 25.5 percent and adjusted EBITDA margin of 1 percent to 2 percent.

On Assignment (NYSE: ASGN) provides IT and other types of staffing, but its healthcare business is substantial enough to place the company seventh in our rankings. The company’s healthcare, physician staffing and life sciences division revenue rose 4.7 percent year over year, to $83.0 million, representing 19.9 percent of its revenue for the quarter. Allied staffing was up 7.0 percent from the second quarter of last year, to $14.7 million, while physician staffing revenue rose 5.7 percent to $26.5 million. On Assignment completed the sale of its nurse travel division on Feb. 13 for proceeds of $33.7 million in cash.

Adecco, the staffing giant whose Soliant Health unit placed No. 12 on our 2013 list of largest U.S. healthcare staffing firms, reported $128.3 million in North American medical and science staffing revenue for the second quarter. This represents 9 percent year-over-year growth in constant currency terms, constituting 2 percent of the company’s total revenue.

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