Cross Country Healthcare Inc (CCRN) 2014 Q4 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Cross Country Healthcare conference call for the fourth quarter and full year of 2014. This call is being simultaneously webcast live. A replay of this call will also be available until March 19, 2015 and can be accessed either on the Company's website or by dialing 800-395-7443 for domestic calls and 203-369-3271 for international calls. And please enter the passcode of 2015.

I will now turn the call over to Bill Burns, Cross Country Healthcare's Chief Financial Officer. Please go ahead, sir.

Thank you and good morning, everyone. With me today is our Chief Executive Officer, Bill Grubbs.

This call will include a discussion of fourth-quarter and full-year results for 2014 as disclosed in our press release and will also include a discussion of our financial outlook for the first quarter of 2015. After our prepared remarks, you will have an opportunity to ask questions.

I would like to remind everyone that the press release is also available on our website at www.crosscountryhealthcare.com.

Before we begin, we need to remind you that certain statements made on this call may constitute forward-looking statements. As noted in our press release, forward-looking statements can vary materially from actual results and are subject to known and unknown risks, uncertainties and other factors, including those contained in the Company's 2013th annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC.

I would encourage all of you to review the risk factors listed in these documents.

The Company undertakes no obligation to update any of its forward-looking statements.

Also, comments during this teleconference reference non-GAAP financial measures such as adjusted EBITDA or adjusted earnings per share. Such non-GAAP financial measures are provided as additional information and should not be considered substitutes for or superior to financial measures calculated in accordance with US GAAP. More information related to these non-GAAP financial measures is contained in our press release.

In order to facilitate a better understanding of the underlying trends, we may refer to pro forma information on this call, given effect to acquisitions as though they were included in the prior period results.

And lastly, results below adjusted EBITDA continue to include unusual or nonrecurring items that impact our pretax and net income from continuing operations, which I will touch on later in the call.

With that, I will now turn the call over to our CEO, Bill.

Thank you, Bill, and thank you, everyone, for joining us this morning.

I am pleased to report a strong fourth quarter. Overall we had pro forma year-over-year revenue growth at 8.4%, increasing from 6.8% in the third quarter. Our management team and all of our staff have done a good job staying focused on delivering our services during our integration.

Adjusted EBITDA was $6.2 million or 3.3% of revenue, which include the impact of a non-cash adjustment for unamortized insurance premiums. Excluding the impact of this item, adjusted EBITDA would have been 3.8% of revenue at the higher end of our guidance and up from 3.5% in the third quarter. I believe this underlying adjusted EBITDA is more indicative of what our future performance is likely to be.

So let me just clarify that a little bit. There was a little bit over $1 million of additional costs in the quarter that really had nothing to do with Q4. So for me, I need to worry about what we have really done from an operational standpoint and what we look like going forward. So to me, that has nothing to do with Q4. We did 8.4% revenue growth and a 3.8% adjusted EBITDA, which was right in line with our expectations.

Bill Burns will talk a little bit more about that $1 million charge when he talks about the numbers in more detail.

This strong performance was primarily due to strong results from our Nurse and Allied segment, which had pro forma year-over-year revenue growth in the quarter of 11.4%. Our Other Human Capital segment also contributed to this growth with 14.5% year-over-year revenue growth, significantly up from the third quarter. However, this growth was partially offset by continued weak performance in our Physician Staffing segment.

For the fourth quarter, in our Nurse and Allied Staffing segments, which represented 78% of our total revenue, we saw strong demand for our services, as well as growth in the number of healthcare professionals on assignment. Throughout the quarter and now at the end of February, our Nurse and Allied orders remain near historic highs. In order to respond to this demand, we've continued to higher additional recruiters and make incremental investments in candidate attraction.

In addition, our larger national footprint of branch offices is giving us access to additional healthcare professionals. Based on these demand trends, we expect to see continued pro forma year-over-year growth in the first quarter.

Demand has remained strong now for more than six months and as expected we are starting to see an increase in pricing. Year over year our Nurse and Allied bill rates increased 3.8% on a pro forma basis, up from 3% in the third quarter.

Excluding the impact of the MSN acquisition, revenue in our Physician business was down 4% year over year. I am pleased with the changes we made, and we are seeing an increase in pricing, new providers and submittals, but they have not yet translated to revenue growth. I do not expect this business to start turning around until the second half of 2015.

In our Other Human Capital Segment, revenue was up 14.5% year over year, the Education business was more stable with 3.2% year-over-year growth, and we had a significant improvement in performance from our Search business, which had a 38.2% year-over-year revenue growth. The changes we made to our Search business last year are now making a difference, and we expect that to continue in 2015.

Let me move to the full year before turning it over to Bill Burns.

2014 was a year of transformation for Cross Country Healthcare. After implementing fomenting significant changes in 2013, completing the Allied acquisition late in 2013, and the MSN acquisition midyear 2014, we are a much improved company, and I believe we are well positioned to take advantage of strong market conditions. We have increased our market share in travel nursing, per diem and Allied, all in line with our stated strategy. We now have more than 70 branch office locations throughout the country that will allow us to target more profitable local business, address the shift from acute care hospitals to ambulatory care facilities, fill more of our Allied and per diem MSP positions, and have access to a larger pool of healthcare professionals.

We also expanded our workforce solutions, which have more than 50 MSP programs servicing more than 1000 healthcare facilities, as well as additional service offerings, including optimal workforce solutions and predictive modeling scheduling services. We have a stronger management team with a focus on sales, account management, service delivery and candidate attraction. And there is renewed energy and excitement in the Company, as well as pride that we are growing market share. We are a much improved organization with dedicated, experienced staff that is reflected in our improved operating results.

During 2014, we generated $618 million in revenue, up 41% from $438 million in 2013 or 5% on a pro forma basis. Growth was driven predominantly from our Nurse and Allied segment up 68%, mostly due to our two acquisitions, but up 9% on a pro forma basis. This growth was offset by declines of 8% in our Physician Staffing segment and 1% in our Other Human Capital segment.

Full-year adjusted EBITDA was $17.2 million or 2.8% of revenue, up from $8.4 million or 1.9% of revenue in 2013. Overall in 2014, adjusted EBITDA was up 105% on a reported basis with 69% on a pro forma basis.

So to summarize, I am pleased with our continued progress. Our fourth-quarter pro forma year-over-year growth and our underlying adjusted EBITDA both improved from the third quarter, and we are going into 2015 with positive momentum. The economy appears stable, and the market conditions for healthcare staffing remain robust. With the MSN integration settling down, we are well-positioned to continue growing our market share, increasing our profitability and improving shareholder value. We believe we are on track to hit our targeted adjusted EBITDA margin of at least 5% by the fourth quarter of 2015 and 8% on a run rate basis during 2017.

Now let me turn it over to Bill Burns to go into the numbers in more detail.

Thanks, Bill. Let me first review the consolidated results for the quarter.

Turning first to revenue, total revenue for the quarter was $188.1 million, up 72% from the prior year and flat sequentially. On a pro forma basis, revenue for the quarter was up 8% from the prior year. The year-over-year increase in revenue was driven by robust demand in our largest segment, Nurse and Allied Staffing, as well as stronger quarterly results in our Other Human Capital Management Services segment. Gross profit margin for the quarter was 25.3%, down 90 basis points from the prior year and up 30 basis points sequentially. Gross profit margin was negatively impacted by an adjustment from unamortized insurance premiums that related to prior policy periods. Excluding the impact of that adjustment, gross profit margin would have been approximately 50 basis points higher for the quarter and in line with our expectations.

It's important to note that this prior period adjustment was not deemed material and will not have an impact on future results.

Moving down the income statement, SG&A for the quarter was $41.5 million, up 54% on a year-over-year basis and 2% sequentially. The year-over-year increase was primarily due to the impact of the MSN acquisition and to a lesser extent the Allied Healthcare acquisition in late 2013. The sequential increase was primarily attributable to higher recruiting costs as we continue to make investments in the business to meet the high demand for our services.

As a percent of revenue, SG&A was 22.1%, down nearly 260 basis points year over year and up 50 basis points sequentially. During the fourth quarter, we continue to carefully manage our costs to continue improving the operating leverage in our business.

Adjusted EBITDA was $6.2 million, representing a 3.3% margin, which was below our expected range of 3.5% to 4%. The primary driver, again, was the impact of the adjustment for unamortized insurance premiums I mentioned earlier.

Below adjusted EBITDA, we reported acquisition and integration-related charges of $2.5 million for the quarter, primarily related to severance and the consolidation of facilities from the MSN acquisition. The majority of the related actions occurred late in the fourth quarter or are planned for early 2015. As these actions are nearly complete, we expect these costs to taper off significantly in the first quarter of 2015.

Interest expense was $1.8 million, up over the prior year and flat sequentially, reflecting the additional interests associated with our subordinated debt used to fund the MSN acquisition.

There are two other items which impacted pretax earnings I would like to mention. First was a non-cash charge of $9.4 million related to the change in the fair value of the embedded derivative from the convertible notes issued in connection with the MSN acquisition. The primary driver for the increase in the derivative valuation was the increase in our share price over the quarter. Each dollar of movement in our share price is expected to result in approximately a $3.1 million change in the valuation.

The second item is an impairment charge of $10 million recorded during the quarter. In conducting our annual impairment testing for goodwill and other indefinite-lived intangibles, we concluded that the trade name used in our Physician Staffing business was impaired and should be adjusted. The primary driver for the charge was lower revenue, which fell short of expectations, and declined nearly 4% year over year, excluding the impact from acquisitions.

Income tax expense for the quarter was approximately $100,000, reflecting the impact from continued amortization of indefinite-lived intangible assets for tax purposes, and this expense was partially offset by a tax benefit associated with recording the impairment charge.

Net loss attributable to the Company was $20.2 million or $0.65 per share as compared to a net loss in the prior year period of $52.6 million or $1.69 per share.

As a consequence of the nonrecurring non-cash adjustments and the continuing impact from changes in the fair value of the derivative, we included a calculation of adjusted earnings per share in the table to our press release in order to facilitate a better understanding of the underlying performance of the business, excluding the impact of those adjustments.

As highlighted in our press release, adjusted earnings per share for the quarter was $0.03 per diluted share as compared to $0.00 per diluted share in the prior year.

Let me next review the results for our three business segments. Revenue for our Nurse and Allied segment was $146.7 million for the fourth quarter, up 112% year over year and up 11% on a pro forma basis.

On a sequential basis, revenue was down less than 1% as the fourth quarter is typically impacted by additional holidays. We average 6325 field FTEs for the quarter, up 154% from the prior year, and down just about 1% sequentially. Revenue per FTE per day was $252, up 6% year over year on a pro forma basis and up slightly sequentially.

The segment contribution income for the quarter was $11.1 million, representing a 7.6% contribution margin, which was up 70 basis points from the prior year and down 90 basis points sequentially. The sequential decline was entirely due to the adjustment for unamortized insurance premiums I mentioned earlier.

Turning next to our Physician Staffing segment, revenue was $31 million in the fourth quarter, up 1% from the prior year and down 4% sequentially. Excluding the impact from the MSN acquisition, Physician Staffing would have been down approximately 4% on a year-over-year basis. The year-over-year and sequential declines were primarily due to lower volume of days filled.

Segment contribution income for the fourth quarter was $2.6 million, representing an 8.4% contribution margin, up 220 basis points from the prior year and 380 basis points sequentially. The year over year and sequential margin improvement was primarily attributable to improved pricing and lower costs associated with professional liability in the quarter.

Finally, revenue for the Other Human Capital Management Services segment was $10.4 million, representing a 14% increase over both the prior year and sequentially. The significant increase was largely driven by growth in our Search business and to a lesser extent in our Education business.

Contribution income for the segment was approximately $600,000 or 6.1% as compared to a small contribution loss in the prior year and prior quarter.

Turning to cash, we ended the quarter with $5 million of cash and cash equivalents, $57.4 million of debt, excluding the impact of the fair value changes in the derivative liability. Days sales outstanding were 55 days, which was four days higher than the prior year and three days higher than the prior quarter, primarily due to the timing of collections. Net cash used in operations was $1 million, representing both the increase in DSO, as well as the payment of several professional liability claims and a class-action lawsuit. Capital expenditures totaled approximately $800,000. For the full year of 2014, we used $4.1 million of cash from operating activities, which included $6.1 million of acquisition and integration costs and $2.5 million to fund the working capital of our Allied Healthcare acquisition.

This brings me to our guidance. For the first quarter of 2015, we expect consolidated revenue to be in the $185 million to $190 million range. On a pro forma basis, this range assumes a year-over-year growth rate of 4% to 7% and a sequential growth rate of minus 2% to plus 1%. While we don't provide specific guidance for segments, we expect that the year-over-year growth will come primarily from our Nurse and Allied segment, which is expected to grow in the high single-digit range.

Consolidated gross profit margin is expected to be between 25% and 25.5%, and adjusted EBITDA margin is expected to be between 3.2% and 3.7%. These margins reflect seasonally higher costs such as payroll taxes, as well as continued investments to support our growth initiatives. We expect the payroll tax reset will be approximately $1.5 million for the quarter.

While we don't yet provide full-year guidance, we do expect to exit 2015 at a run-rate for our adjusted EBITDA margin of 5%.

This concludes our prepared remarks, and at this point I would like to open up the lines for questions. Operator?

(Operator Instructions). A.J. Rice, UBS.

This is Brandon (inaudible) for A.J.. Just a couple questions. One, some of the cost initiatives -- and you guys have given a bucket list of margin sort of savings or margin enhancements and sort of key cost initiatives that you are working on. What are those this year that will get you to that 5% number? And then also is there any weather impact that you guys are seeing or assuming in your first-quarter guidance as well? Thank you.

I'll talk about the weather, and then Bill can maybe touch on some of the things we're doing from a cost perspective.

Weather is certainly going to be a factor, and I think it's part of the reason why we are trending to a slightly lower year-over-year revenue growth number in the first quarter. I don't have any analysis yet that tells me that it's worse than it was last year because weather was pretty bad last year, if you remember correctly. It feels a lot worse, and my team is telling me it's a lot worse. In fact, today my Education business in Nashville was shut down again. And there's always a little bit bigger impact of weather when you have a bigger branch structure. The branches get shut down, people just can't get to work, and you just never make up the work that you lose on the day shift business from a branch location.

So I do think weather is partly a factor, but I don't have a number associated with that. We will do that when we announce the first quarter. But I do believe (multiple speakers) the quarter. And then in the past initiatives?

On the cost side, so we expect to obviously fully realize the synergies coming out of the MSN acquisition. We previously communicated the $12 million to million will be at a full run-rate for that starting in the first quarter of 2015. So that will certainly be part of the leverage that we will get in the business. The Company continues, though, to execute on other operating efficiencies to centralize and standardize and automate different processes. It's hard to size the exact dollar amount of the impact that gets you to the 5%. It's going to be a combination of things. As Bill mentioned in his prepared remarks, we are continuing to see pricing increases, and we expect that will help uplift margins, and we will continue to make and fund investments in the business. So it might be a little difficult to see the exact dollar amount of cost savings initiatives, but we are actively authentic.

The 5% is going to come from continued new growth. We expect to have continued year-over-year growth, which will obviously contribute. We will get some leverage out of that by the fourth quarter and then some additional cost savings.

But also the first quarter ends up with much higher costs anyway with payroll resets and a couple other things that are happening related to our integration that kind of inflate the cost base in Q1 that we expect to come back in subsequent quarters.

And that's one quick follow-up, your adjusted tax rate you should be thinking about in terms of looking at your invested net income sort of numbers, kind of 40%, 45%, or -- what kind of tax rate you think we should use for that?

That's an interesting question. The tax rate is obviously very difficult for us to predict. We operate with a full valuation allowance. So really the only thing affecting the income tax expense lines are in the indefinite-lived intangible amortization, which pretty much is set throughout the year. It's based on how the assets amortize for tax purposes. There some state and international taxes, a small amount of taxes for that, and as well as anything changes in FIN 48. But it's hard to get a rate because the full valuation allowance kind of meets that, and you don't really see the impact from it.

Okay. Thanks, guys.

Tobey Sommer, SunTrust.

Thank you very much. Good morning. I have a question for you. What proportion of sales is derived today from acute care versus ambulatory or other settings, and how might that mix change do you think over the medium-term?

I don't have that number handy. I apologize for that. It is certainly higher in nonacute care now that we have a larger branch operation than we used to because they do a lot more local business and a lot more ambulatory business. I don't have a breakout of the mix, to be honest with you.

Okay. How much growth have you seen in your recruiter or sales generating headcounts? In -- what are you planning for early this year? Do you need to have kind of a bolus of hiring and expense associated with ramping that up, or is that something you have kind of been on top of for the last six or eight months? Thanks.

I think we've been on top of it. We got a pretty early start. We started to see positive order trends in April, May, June of last year. So we got a little bit ahead of it. I think we announced in early November in our last earnings call that we were up 20% in our recruiter headcount in Nurse and Allied at that point year-to-day. We are up another 13% from that point as of the end of February, and we have enough people in the pipeline that are in process that we will be up another 10% from the current number by the end of May.

So we continue to invest in adding producer headcount, mostly on the recruiter side -- we have made some investments in sales -- but mostly on the recruiter side in order to bring in new applications and make sure that we can increase our fulfillment.

Just to make sure I understand the up 20% comment that was on the third-quarter call, that was year over year, but then the 13% number and the forecasted 10% number by May are sequential from that kind of November time period?

That's right. So, from the end of October, in essence we are up another 13% over the last four months, and we will be up another 10% from the end of February number by the end of May.

Not to ask you to do too much math, but to try to keep apples and oranges separate, would would you guess that would be from a year-over-year standpoint, either now or in May?

Let me try to do the math real quick.

I can ask another question while you are trying to figure that out. Do you think the flu has impacted your orders over the last couple of months, and are you cautious at all about some sort of fall-off in orders as the flu season generally winds down, too?

We tracked the flu trends quite a bit, and we saw that there was a peak this year, certainly higher than last year, not as high as it was a couple years ago. But it was a bit more robust flu season than normal. But we did not see any real change in those. Orders have remained within a few percentage points pretty static now for six months. On a week over week over week over week basis, they just seem to stay the same. I would have expected to see it drop off already due to flu season if we're going to see a drop off, and I haven't seen that yet as of the first week of March.

So I think demand stayed steady, and I expect it to stay steady going forward. So very little impact from what I can tell.

So, historically, if there has been a flu impact, the orders have slowed kind of by this time in the calendar year?

Yes. Usually they start to fall off by the end of February.

The perm grew real nicely. What kind of growth rate range, not a specific guidance thing or something like that, how should we think about that going forward? And I know it's a small slice of the business, but that was a nice growth rate.

I don't plan on 38% every quarter. I do expect that we will be able to grow it. I'm hoping that we will be able to grow in double digits for the whole year, and my goal is to get that business significantly larger than it is. It has the ability to have a decent contribution. It's just very small as you mentioned.

So I would like it to be a big part of our overall business, and right now we are seeing some -- we have a new leadership in there, they've done a good job, the team has done a good job, and we see some good demand there. So we expect double-digit growth this year.

I'll ask one more question, and I'll get back in the queue. Are there any anticipated adjustments in 1Q -- and I apologize if you mentioned this, I probably didn't jot it down -- acquisition and integration or restructuring costs that we can know about for modeling?

There may be some small cost coming through in Q1, but we really do expect it to taper off quite a bit. I would expect the acquisition integration cost line to be about $500,000 in that ballpark at most. So it's hard to say specifically, but most of the actions, as I said, were either had already been occurred late in the fourth quarter or have occurred in early 2015. So we really do expect this to taper off quickly.

Thank you. I'll get back in the queue.

And on the headcount, it's hard for me to say. It's probably up 25%, 30% year over year overall when you add it all up together.

Thank you.

Randy Reece, Avondale partners.

Good morning. When you look at your fourth-quarter revenue result versus the guidance range, what were the primary variances versus your assumptions that you used to assemble guidance for the fourth quarter?

Well, I think we were within the guidance. We are within our range. Towards the lower end, I agree, but we were within the range. I don't think there is -- I'm taking a look now, and I don't believe we've really fallen off drastically from the guidance range. The only business that when you look at relative to what we were hoping for I think would be Physician Staffing has continued to perform a little bit weaker than expected.

The other one I would talk about, it is only because it's newer to us, we bought MSN at the end of June, so we've only had it for two quarters. It's a little bit less predictable on a branch basis to predict than it is the Travel business. So I think we are very good at forecasting the travel, and we are still kind of getting our arms around the branches, which have more of a day and weekly kind of trend to them, not a monthly trend like travel nursing does. So I think we probably didn't quite get as much out of the branches as we expected, and it's a little bit hard to predict.

In MSN's branch business, what -- how does their revenue mix differ from the rest of Cross Country?

Well, it's all integrated now. Our branches are integrated with their branches. So our old branches, plus the Allied HealthGroup acquisition we made, plus the MSN branches, are all integrated together. Now we don't see any revenue from any entity other than a combined branch entity today. But they are predominantly local, per diem, local contract nursing, and local Allied business.

Did the Allied business, just the market demand trends through 2014, did Allied continue to strengthen as much as it looked like it had through the first nine months of the year?

Allied was still pretty good, both travel and Allied and local Allied was still pretty good in Q4. Rehab in particular was up 21%. IRL was up about 33% year over year, so we saw some good trends in certain sectors or segments within Allied.

Very good. Thank you.

Tobey Sommer, SunTrust.

Thanks. That was quick. How is -- any turnover at the branch level? I'm thinking of the MSN properties, but like you said, you've integrated them, so maybe I'll just make the comment more broadly. Because I was curious about you said maybe it's a little more difficult to predict wondering what the root causes may be.

It's not because of turnover, although turnover in branches is always a little bit higher than in the centralized operations. It's just the nature of a distributed branch operation. I don't think that's the case. I think it's just that branches are new to us, and a lot of work in branches is done with two or three days notice. And it's just a little bit harder to predict out a whole quarter as to what's going on. So -- but we were within our range of revenue in the fourth quarter, and I don't think we're that far off on any of the segments, to be honest with you.

As Bill said, physician tends to be more of a drag than anything else in our business today. So we got a little higher turnover, but nothing that's worrisome, and nothing to do in particular with the acquisition or integration. It's just a little bit higher turnover in the branches to begin with. But it's well in line with what my expectations were.

I just want to make sure I caught this. When do you think the changes that you've made in Physician Staffing may be -- may help you achieve growth?

Not soon enough. But I was up there again a few weeks ago, and I'm actually very pleased with what's going on. I'm not pleased with the numbers, but I am pleased with what's going on. We're bringing in more physicians, more providers as we call them, than we ever have before, and we have a lot more submittal activity than we've had in the past as well.

That's all good because future growth is going to come from better activity. And so we are seeing the better activity. The model seems to be working. It just takes a little while to manifest itself into revenue growth.

So I would expect to see -- I'm hoping for some stability in Q2. Year-over-year revenue growth I'd like to see it in Q3. Maybe we'll be year-over-year breakeven in Q3 and maybe some growth in Q4. I would like to see growth in the second half, though.

Okay. Last question for me relates to your capital structure. Any plans to make the structure more efficient, and are there any kind of time constraints as to when that may limit your flexibility? Thanks.

I'll make a comment. Then I'll turn it over to bill. We really can't do anything on the subordinated debt and the convertible loan until after the end of June. We can't do anything about it along the way. We can't do anything on the other $30 million term loan until the end of June. We will talk to our board at the board meeting next week, as well as in May, about our capital structure. We know that some of our debt is a little higher than we would like it to be, and we are a much better performing company than we were when we took that debt on. So we believe there's a very good chance of getting more favorable terms going forward.

So I'll turn it over to Bill, and he can talk about some of the things we talked about.

I think you just said it perfectly. (multiple speakers). I know something we're going to be planning to do in 2015 is taking a look at our capital structure. I think we all agree the interest rates are higher than we would like to see. We think that they were competitive rates from where we were at the time, but nevertheless it's something that we are keeping a close eye on and we will be looking at as we get into 2015.

And we like to build -- if we do that, we would like to bill in some flexibility and scalability so that we have the option to do acquisitions if they become available and we find that they are strategic and they are a good deal financially. So we are looking at that and we're talking to the Board, and we will address it as we get closer to making a decision.

Thanks. I guess I fibbed. One last question. I'm curious about your perspective on the Supreme Court ruling on subsidies and healthcare reform and maybe what you're hearing from customers just so that we can over the next several months interpret what different outcomes could mean for your business and your customers. Thanks.

I have to say a couple months ago, I was a lot less worried about it. But now all the hype since the hearing has actually started, or the arguments have actually started with the Supreme Court, now there's all this talk that maybe this will knock 7 million people out of that healthcare system. If that's really true, knocking 7 million people -- I guess 11.4 million people are now signed up and 12% increase over last year. Knocking out three quarters of them would be a problem. No doubt about it.

My customers do not believe that's what's going to happen. Most of my customers believe that the Supreme Court is going to rule in favor of the government and the subsidies continuing. But I don't know what information they have to do that. That's what they believe is going to happen. They probably have more people in tune with what's happening in DC than I do.

So I wasn't that worried about it a couple months ago because I don't think it will knock that many people out, even after some of the subsidies go away. There's still the tax penalty, and there's still the employer mandate that I think will keep people in the system anyway, but I think I'm leaning towards what my customers are saying, which I am hoping that it is ruled in favor of the government, and we don't cut off the subsidies.

Thank you very much.

At this time, we don't have any more questions in queue.

Great. Well, thank you, everyone. I appreciate you joining us this morning. I look forward to updating you with our first-quarter results in May. Thank you.

Thank you, sir. A replay of today's conference will be available through March 19. You may access the replay by dialing 1-800-395-7443 or 203-369-3271. Please use the passcode of 2015.

Thank you for joining. You may now disconnect.