Healthcare Staffing Report: Nov. 26, 2013


Third quarter healthcare staffing earnings recap

The continuing gradual improvement of economic and employment conditions in the U.S. have laid the foundation for solid growth in the overall market for temporary staffing. In the third quarter of 2013, the 10 large publicly traded firms constituting our general all-segment index grew revenue by a median 5.4 percent, and net income by a median 14.2 percent from the prior year, according to a report by Staffing Industry Analysts’ Research Associate Tyler Womack published last week (Corporate Members can access the full report here However, results among the few publicly held companies that focus on healthcare staffing were a mixed bag, owing to the continuing headwinds of sequestration, lower hospital census and reductions in therapy reimbursement that have constrained growth throughout 2013.

Click on chart below to enlarge.

AMN Healthcare Services (NYSE: AHS), which controls 10 percent of the U.S. healthcare staffing market according to our estimates, reported $257.1 million (up 5.4 percent year-over-year) in quarterly revenue and a gross margin of 29.4 percent, up 90 basis points (bps) from the third quarter of 2012. Both of these figures were at the top end of the company’s guidance range. AMN’s largest reporting segment, Nurse and Allied Staffing, was up 3 percent year-over-year, as a 12 percent decline in allied revenue was more than offset by increases of 2 percent in volume and 5 percent in revenue per day for the travel nurse business. The Locum Tenens division reported its third consecutive quarter of both year-over-year and sequential revenue growth, up 11 percent and 4 percent over the respective periods, driven by the hospitalist, primary care, advanced practice and behavioral health specialties.

 The adjusted EBITDA margin in AMN’s 2013 third quarter was 8.4 percent, up year-over-year from 7.7 percent and edging closer to the company’s long-term target of 10 percent. Net income was $8.6 million, or $0.18 per share, up from $5.9 million, or $0.12 per share in the prior year’s third quarter. Looking towards the fourth quarter, the company anticipates revenue of $246 million to $250 million (vs. $247.8 million in the fourth quarter of 2012), gross margin at 29 percent to 29.5 percent and adjusted EBITDA margin at roughly 8 percent.

Painting a less rosy picture was Cross Country Healthcare (NASDAQ: CCRN), which reported a 4 percent year-over-year decline in revenue, to $108.0 million, and a 26.1 percent gross margin (up 160 bps year-over-year). While business in each of its divisions fell, the revenue shortfall was attributed primarily to physician staffing, which was down 4 percent year-over-year as an increase in the willingness of physicians to accept permanent positions was blamed for lower locum tenens demand. Primary care and OBGYN were the most impacted specialties, countered by growth in anesthesiology and oncology. Lower hospital admissions and delayed EMR projects were cited for the 3 percent year-over-year decrease in Nursing and Allied revenue, though conditions were said to have begun improving late in the quarter. 

Cross Country reported third quarter 2013 net income of $0.9 million, or $0.03 per share. Adjusted EBITDA was $2.9 million, or 2.7 percent of revenue, a substantial improvement from $1.0 million, or 0.9 percent of revenue in third quarter of 2012. Tight control of operating expenses combined with stronger pricing and bill-pay spreads allowed Cross Country to improve profitability despite the decline in revenue. For the fourth quarter, the company projects revenue of $107 million to $110 million (vs. $111.7 million in the fourth quarter of 2012), a gross margin of 25 percent to 25.5 percent and adjusted EBITDA margin of 1 percent to 2 percent. 

Though information technology constitutes approximately 80 percent of the company’s total revenue, the scale of On Assignment’s (NYSE: ASGN) healthcare staffing business is substantial enough to place the company seventh in our rankings. Allied staffing revenue was down 5 percent from the third quarter of 2012, to $15.5 million, while physician staffing revenue fell 1 percent, to $26.2 million. A less favorable revenue mix due to a higher proportion of lower-margin specialties caused year-over-year gross margin compression in both business, to 28.2 percent ( down 230 bps) in physician and 31.2 percent (down 130 bps) in allied. On Assignment sold off its nurse travel division in February of this year for $33.7 million in cash.


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