Cross Country Healthcare Inc (CCRN) 2015 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the Cross Country Healthcare conference call for the first quarter of 2015. We would like to inform all guests that today's conference is being recorded. If you have any objections, you may disconnect at this time. Additionally, there will be a question-and-answer session on today's conference call. (Operator Instructions).

This call is being simultaneously webcast live. A replay of this call will also be available until May 21, 2015 and can be accessed either on the Company's website or by dialing 1-800-395-7443 for domestic calls and 203-369-3271 for international calls and by entering the passcode 2015.

I will now turn the call over to Mr. 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 first-quarter results for 2015 as disclosed in our press release and will also include a discussion of our financial outlook for the second 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 2014 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 obligations 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 of our business, we will refer to pro forma information on this call, giving effect to acquisitions as though they were included in the prior period results.

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

Thank you, Bill, and thank you to everyone for joining us this morning. We have had a good start to 2015, in line with our expectations. The integration of the MSN acquisition is essentially complete and has transformed the Company, driving a year-over-year increase in revenue of 57%.

I am also very pleased with our year-over-year improvement in profitability as we were able to increase our adjusted EBITDA from 0.9% last year to 3.3% this year, an increase of more than $5 million. We are well-positioned for continued improvement in our performance this year and we remain on track to achieve our targeted 5% adjusted EBITDA by the fourth quarter.

Overall, we had pro forma year-over-year growth at 5% with growth from two out of our three reporting segments. nurse and allied staffing had revenue growth of 85%, or 8% on a pro forma basis. And other human capital management services also had revenue growth of 8%. Growth in these two segments was offset by a decline in revenue for physician staffing of 4%.

Let me stop here and add a little bit of color to our growth rates because I am pleased with what we have been able to accomplish. We had some strong headwinds in the first quarter of about $12 million. We had a small business that we acquired with MSN that we have closed down since the acquisition. It was about $1 million of revenue in the first quarter. But really the task we had underhand was to overcome an $11 million decline quarter over quarter in EMR business. So let me give you the numbers.

In the first quarter of 2014, we had a little over $13 million of EMR business. In the first quarter of 2015, we only had a little over $2 million, so that is an $11 million swing. So I feel pretty good that our pro forma 8% year-over-year growth in nurse and allied, not only did we make up for the $12 million shortfall from those two items I just talked about but we added another $11 million on top of that. So that is a lot of new business for us to generate and I feel pretty good about our results there.

We are going to have these quarters where we lap certain projects or certain items that we need to make up for, and that is our job, to make up for them. And I just feel pretty good that we did a good job of overcoming that $12 million headwind in the first quarter.

So let me move on. The demand for our nurse and allied services remains very high. The number of orders has remained steady now for over six months, still near all-time historic highs. Pro forma bill rates year-over-year showed a modest increase of 2% and this is the ninth consecutive quarter with an expansion of our bill pay spreads in nurse and allied staffing, though the trend was not as strong as we had seen in the second half of 2014. I believe this is due to the timing for implementing the price increases we have negotiated as well as an extremely high renewal rate for existing assignments.

Now, although high renewal rates is a good sign generally, it does hinder our ability to adjust rates in the quarter. We do expect higher bill rate growth and bill pay spread expansion in the second quarter.

Physician staffing continued to underperform with a 4% year-over-year revenue decline this quarter. There were some encouraging signs though, with an increase of revenue per day build of 10% year-over-year from $1,444 to $1,587. We also saw an improvement in gross profit margins and contribution income over last year. We continue to implement the operational changes to grow this business and, as I mentioned last quarter, expect to see progress in the second half of 2015.

Our other human capital management services had an 8% year-over-year revenue growth and a much improved contribution income. The education business had a decline in revenue of 6% but the search business continued its turnaround with a very strong revenue growth of 40% and a contribution income of 18%. That is very similar to what we saw in the fourth quarter and although I don't believe these levels are sustainable throughout the year, although I did say that last quarter as well, we will continue to invest in the search business as this is an important part of our revenue growth and margin expansion strategy. So we are on a very good trend in our perm search business.

There are some exciting things happening also with our workforce solutions offering. Three new MSPs are being implemented in the second quarter that should generate revenue in the second half of 2015. One of those is the large program we announced last November but has been delayed due to the size and complexity of the program. That is starting now though in May. Although we have been winning on average about two MSP deals per quarter, I believe we can increase that to three or four and we have made investments in our workforce solutions management team and salesforce to make that happen.

Also within our workforce solutions services, we are implementing three new electronic medical record programs, one that will generate revenue in Q2 and Q3, one that will generate revenue in Q3 and Q4, and one that will generate -- actually, one that will start in Q3 and run through all of 2016. Remember, as I just said, in the first quarter of 2015, our EMR programs were down significantly year-over-year, so I am pleased to see these programs being implemented. An $11 million drop in one quarter, I am glad to be able to see we are going to make some of that up in subsequent quarters.

The relationship with our largest customer involves both an MSP as well as our optimal workforce solutions offering, what we call OWS. As is customary, we have expanded our MSP operation to a new facility that they recently acquired and we have also grown our OWS operation to include a new unit within the hospital system. We have a strong relationship and a long-term contract with this customer that now accounts for approximately 5% of our total revenue.

We are also making progress with our new predictive modeling service where we support our customers' efforts to improve their scheduling and reduce labor costs. We have interest from more than 20 customers, are currently implementing two pilot programs, and during contract negotiations for a third program. We are encouraged by the interest in this new service line.

The combined operations of Cross Country Healthcare and MSN are now starting to pay dividends. We are currently in negotiations for a second optimal workforce solutions program with a new client and we believe we can continue to grow the service line as our newly expanded workforce solution sales team gets up to speed. We are also negotiating a large MSP operation that was presented to us because they see our large branch footprint as a way to help them as they shift away from the large acute-care hospitals to ambulatory facilities that they own, specifically physicians' offices, independent surgery centers, walk-in clinics, rehab centers, and other similar facilities.

We see both of these developments as positive reinforcement of our strategy to expand into more value-added services, to be competitive in all sectors within healthcare staffing, and to be in the local markets to better serve our customers and adjust to the changes in how healthcare is delivered.

The integration of MSN into our existing businesses is essentially complete and has been very successful. We have achieved the targeted cost synergies of $12 million to $14 million and as I just mentioned, we are working on some promising revenue synergies with the additional capabilities of the combined organizations.

Through all of the significant changes in the last 12 months, I am encouraged with our continued progress in improved performance. We have emerged as a much stronger organization and are much more competitive in the marketplace. And although we grew faster than the market in 2014, I believe we will continue to grow at or above the market in our nurse and allied staffing and other human capital management services segments in 2015.

As I mentioned earlier, we are on track for our 5% adjusted EBITDA goal in the fourth quarter and to achieve a run rate of 8% adjusted EBITDA sometime in 2017.

Let me turn it over to Bill Burns to go into the numbers in a little bit more detail.

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

Turning first to revenue, total revenue for the quarter was $186 million, up 57% from the prior year and down 1% sequentially. On a pro forma basis, revenue for the quarter was up 5% from the prior year. The year-over-year increase in revenue was driven by continued strong demand in our largest segment, nurse and allied staffing, as well as stronger results in our other human capital management services segment. Sequentially, weather had a negative impact of approximately 1% on consolidated revenue with the majority of the impact felt in our nurse and allied staffing.

Gross profit margin for the quarter was 25.3%, down 50 basis points from the prior year and flat sequentially. The year-over-year decline is largely due to the impact from the MSN acquisition. As we expected, first-quarter gross profit margin was negatively impacted by approximately $1 million, or 50 basis points, due to the annual payroll tax reset.

Moving down the income statement, SG&A for the quarter was $41.2 million, up 40% on a year-over-year basis and down 1% sequentially. The year-over-year increase was attributable to the impact of the MSN acquisition. As a percent of revenue, SG&A was 22.1%, down nearly 280 basis points year-over-year and flat sequentially.

During the first quarter, we continue to realize synergies from the MSN acquisition and manage our overall cost to improve the operating leverage in our business. As we are now essentially complete with the MSN integration, we will be undertaking further steps to improve the operating effectiveness of our Company. I will touch on these actions in just a moment.

Adjusted EBITDA was $6.2 million, representing a 3.3% margin, which was within our expected range. As we mentioned last quarter, we expected the acquisition and integration charges to taper off significantly. For the quarter, we recorded approximately $100,000 as compared with $2.5 million in the fourth quarter of 2015. As a result, we have realized the value of the cost synergies we expected to achieve from the MSN acquisition.

Interest expense was $1.7 million, up over the prior year and essentially flat from the prior quarter, reflecting the additional interest associated with our subordinated debt used to fund the MSN acquisition. In addition, we recorded a $2.1 million non-cash gain on the change in the fair value of the embedded derivative from our convertible notes. The primary driver for the decrease in the valuation was the movement in our share price over the quarter. Income tax expense for the quarter was approximately $1 million, primarily due to the impact from continued amortization of indefinite lived intangible assets for tax purposes.

Net income attributable to common shareholders was $2.9 million, or $0.05 per diluted share, as compared to a net loss in the prior-year period of $0.8 million or $0.03 per share. Adjusted earnings per diluted share was approximately $0.03.

Let me next review the results for our three business segments. Revenue for nurse and allied staffing was $149.1 million for the first quarter, up 85% year-over-year and up 8% on a pro forma basis. Even with the decline in EMR as Bill mentioned earlier, the negative impact from weather, and the winding down of a noncore account acquired with the MSN business. Segment revenue was up 1% sequentially.

We averaged 6,454 field FTEs for the quarter, up 107% from the prior year and up 2% sequentially. Revenue per FTE per day was $257, up 1% year-over-year on a pro forma basis and up 2% sequentially. Segment contribution income for the quarter was $10.6 million, representing a 7.1% contribution margin, down 30 basis points year-over-year 50 basis points sequentially. The sequential decline was primarily due to the impact of the payroll tax reset.

Turning next to our physician staffing segment, revenue was $27.3 million, down 4% from the prior year and 10% sequentially. On a pro forma basis, physician staffing would have been down approximately 10% from the prior year. The year-over-year and sequential declines were entirely due to lower volume of days filled. Segment contribution income for the first quarter was $2.1 million, representing a 7.7% contribution margin, up 510 basis points from the prior year and down 60 basis points sequentially. The year-over-year improvement was primarily attributable to improved pricing and lower charges related to professional liability. The sequential decline was attributable to lower sales volumes resulting in lower operating leverage for the business.

Finally, revenue for the other human capital management services segment was $9.5 million, representing an 8% increase over the prior year. The year-over-year increase was entirely driven by continued strength in our executive and physician search business, which grew by 40% over the prior year. On a sequential basis, segment revenue declined by approximately 9% due to seasonality in our education business, which was also impacted by weather. Segment contribution income was approximately $600,000, or 6.3% of revenue. On a year-over-year basis, contribution income increased 263% and was flat sequentially.

Turning to cash, we ended the quarter with $7.5 million of cash and cash equivalents and $61.7 million of outstanding debt. Day sales outstanding was 59 days, which was four days higher than the prior year and the prior quarter. Net cash provided by operations was $300,000 as compared to cash used in operations of $9.1 million in the prior year and $1 million used in the prior quarter. The first quarter tends to be the lightest cash quarter of the year as there are many year-end liabilities which are paid at the start of the year as well as the impact from higher payroll taxes.

Capital expenditures for the quarter totaled $600,000, in line with our expectations. During the quarter, we borrowed an additional $3 million under our revolver and had approximately $39 million of availability as of March 31. This brings me to our guidance.

For the second quarter of 2015, we expect consolidated revenue to be in the $188 million to $192 million range, which assumes a pro forma year-over-year and sequential growth rate of 1% to 3%. While we don't provide specific guidance for segments, we expect the year-over-year growth will come from our nurse and allied staffing and other human capital management services and will be partly offset by declines in physician staffing.

Turning to margins, consolidated gross profit margin is expected to be between 25.5% and 26% while our adjusted EBITDA margin is expected to be between 3.7% and 4.2% for the quarter, which is up 100 to 150 basis points year-over-year and 40 to 90 basis points sequentially. As Bill mentioned, we continue to expect to exit 2015 with a 5% adjusted EBITDA margin.

From an EPS perspective, we expect adjusted earnings per diluted share to be between $0.05 and $0.07, representing a $0.04 to $0.06 improvement year-over-year and a $0.02 to $0.04 improvement sequentially. This range also assumes a diluted share count of 31.9 million shares.

And finally, with the MSN integration now complete, we are beginning the next phase of our optimization efforts to position the Company for continued margin expansion. Plans will include the further centralization of back office and support functions, the closure or reduction in excess facility space and the outsourcing of certain non-core functions. Additionally, we will be making continued investments in our IT infrastructure as we undertake these actions.

The total expected annualized savings is between $4 million and $5 million and we expect to incur restructuring costs associated with these efforts in the range of $1 million to $2 million. We will continue to provide updates on these efforts throughout the year. We believe these actions are necessary to achieve a truly world-class operation focused on delivering the highest level of service to our clients and driving shareholder value.

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

q-and-a

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

This is Brandon Fazio for A.J. A couple of questions, please. The $12 million headwind that you cited this year, if you add that back to organic growth, it is obviously on the nurse side. What do you think you would've done from an organic growth standpoint on nurse ex that? And then with your guidance in the second quarter of sort of 1% to 3%, it sounds like a lot of new contract stuff that you were highlighting on the call will come in in the second half of the year. Maybe just walk us through that. In that context also, just what the EMR sort of comps stack up to be for the rest of this year as well will be helpful. Thank you.

Yes, nurse and allied's without that headwind would have grown at 16% instead of the 8%, basically double what the organic rate was. Q3 -- I'm sorry, Q2 is interesting because we still have a little bit of headwind from EMR, and I will give you the number there. We did a little over $13 million in the first quarter of 2014 in the EMR business, a little over $9 million in the second quarter. It went down to $5 million in the third quarter and a little over $2 million in the fourth quarter.

So we have a little bit of headwind of EMR in the second quarter as well. But the bigger item we have to deal with is the fact that our core nurse and allied business grew at 11% year-over-year in the second quarter last year and the MSN business, right before we closed the deal, also grew 12% year-over-year in the second quarter last year. So we are bumping up against a pretty big comp number.

So, having us drop back down to what I consider market rate, which is high single digit growth in nurse and allied, is to be expected now that we are lapping some pretty big growth numbers in Q2. So, we have Q2 guidance implies high single digit growth for nurse and allied, high single digit growth for other human capital management services. And what brings us down to the lower pro forma growth is really still the underperformance in our physician staffing. Did I get all the questions?

Yes, thank you. Also, the timing on the -- obviously announced the cost restructuring here with the $4 million to $5 million of savings. Does that start to be implemented all through this year or is that a longer time period that we should be thinking about those savings being realized?

I think are going to try to get all the actions done in the second and the third quarter for the most part so that this is part of us helping to get to our 5% adjusted EBITDA in the fourth quarter. So, our goal is to get them all done in the next two quarters.

Great. Thank you very much.

And where the costs will come in, it will vary. We are not sure how much will come in Q2 and how much will come in Q3, so we are still looking at the timing of some of these, but it should all happen in Q2 and Q3.

Great. Thanks.

Tobey Sommer, SunTrust Robinson Humphrey.

Thanks. I think this chart with the growth in 2Q, and I understand the context that you just provided, so that kind of informs my question. You are growing in line with the market even with some tough comps. What might you be able to do to exceed the market rate of growth? And is there something you could share with us maybe about additions to sales-generating headcount that we can use to kind of get some visibility as to drivers for growth in our quarters as opposed to just 2Q?

Yes, there's a few things that I would like to see happen that could drive things a little bit better. I think part of the reason why we didn't get as much growth in Q1 as I would've liked although, as I said, I am pretty pleased with the fact that we got over that $12 million headwind and still added another $11 million on top of the nurse and allied business, but I had expected that big MSP that we won in the fourth quarter to be implemented in Q1 and it got delayed.

So, there are several things that could happen. One is we continue to invest in recruiters to bring in candidates and our applications are actually up quite a bit actually. They were up from Q3 to Q4 last year, our nurse and allied applications were up about 6%, but from Q4 to Q1, our nurse and allied applications are up another 26%. So, as these new recruiters continue to get up to speed, the faster they get up to speed, the more revenue we will get out of it.

Also, with the three MSPs and the three EMR projects, if they come on board a little bit faster than our normal ramp rates, that could provide a little bit of benefit on the revenue growth as well.

So, there are some things that could happen faster than they normally do, but we are bumping up against double digit growth as well as a little bit of headwind from the EMR projects that carried over from Q1 last year.

Right. How quickly -- what is the change in sales generating headcount, recruiters, etc.?

It is hard now that we are fully integrated with MSN for me to do a kind of year-over-year comparison. It gets very confusing. We had talked about being up 20% as of the end of October last year. That was on a year-to-date basis. We are up another 13% we announced by the end of February this year from that number in October, and we expect to be up another 10% from the end of February number by the end of May. And we are still on track for that. We still have several recruiters that are kicking in.

But most of those recruiters, all the ones I have just talked about, I shouldn't say all of them, most of those are still within their first six months, which is really kind of the ramp-up time before they start to kick in. So, they are just now starting to kick into productivity, which you can see with the growth in our applications.

Right, so in a 10-month period or so, that is an increase of, I don't know, 40% or 50% kind of?

That's about right.

Okay. How long do you think this productive market for growth may last? Because I'm sure that is integral to you making these hiring choices. Given the ramp time that it takes, you have got to think that a new hire today has the runway to get you the return you would like.

That's right. And part of this is trying to take advantage of the current trends but also predicting whether or not this is going to be sustainable going forward. I think it is very positive that we've seen near historic high demands for the last six months. We haven't seen any slowdown. We have thousands of orders that come in every week. And so, I feel pretty good.

I think the only two things that could derail it is a negative ruling from the Supreme Court on the subsidies for the Affordable Care Act in the states that don't run their own exchanges, or some slow down in the economy. And although I know we had a kind of anemic economic growth in Q1, I think that is probably mostly related to weather. The other economic indicators don't worry me a whole lot.

So I believe it is going to be sustainable for a while and that is why we are making the investments.

Okay, thanks. Two more questions for me. What sort of percent exposure may you have to states using the federal exchange? I understand that is the majority of the country, I think.

I don't know if it's the majority. I don't know. I know that, out of the 11.5 million people that have signed up, I think there are 7 million or 7.5 million that get some kind of subsidy, but they won't all be affected by the ruling. And even those that are affected by the ruling, it doesn't mean that they are going to drop out of the system. But I don't know the specific answer to how much total exposure we have in the specific states.

Okay. Then my last question and I will get back in the queue is what sort of plans or flexibility may you have to optimize the balance sheet over the next year or so? Thanks.

I will turn that over to Bill Burns. We have been looking at options with our capital structure, and I will let Bill talk about that a little bit.

Thanks, and hi, Tobey. So obviously we are a much different company than we were a year ago. It certainly opens up a lot more opportunities for us to look at our financing alternatives. We are -- our subject, at least the term portion of our subject, becomes callable on July 1, so we are obviously evaluating how that plays into our long-term cap structure.

But really the decision is going to weigh also into other acquisition opportunities that might come along. So, we are looking at all uses, multiple ways of leveraging up the balance sheet to either pay down our term debt or to look at additional investments in the business, like acquisitions.

Thank you very much.

Randy Reece, Avondale.

Good morning. I wanted to talk about physician staffing and try to get a little more understanding about what happened between Q4 and Q1. I was wondering if you could discuss the variances in your operating metrics versus what you were looking for and how much was controllable and how much maybe wasn't.

Well, I've spent a lot of time up there and I am obviously disappointed that we are not making faster progress even though I have been saying for quite a while I didn't expect to see much improvement until the second half of 2015. And even though I've been saying that, obviously I've been hoping for it to come around sooner.

I was encouraged when I was up there a couple of weeks ago. I do believe we are taking a lot of the right actions. We have better visibility to our metrics and to our sales and recruitment activity.

We have seen a pretty decent increase. If you go from our number of submissions of physicians into positions from January to the end of April, they are up about 60% or 70%. So, we are seeing a lot more activity but it still takes a while for that to turn into revenue for us.

So, I am encouraged by the actions we have taken. I am encouraged by the acceptance of the new model. I am encouraged by the activity that we are seeing. But it is still disappointing that we are not seeing the progress that we had hoped to see sooner than this.

And Randy, this is Bill. I would just also add the other thing that I think is encouraging is the price increases we are seeing, we have seen them across all but one of our specialties. So that was a nice sequential change for us going from Q4 into Q1. So there are obviously the volume declines that we need to outstrip. But I think, to Bill's point, the productivity is eventually going to have to trickle through.

The team is struggling there a little bit because we have put in some additional controls on pricing and gross profit margins and that does limit them a little bit and it probably contributes somewhat to some of the revenue shortfall. But the fact is I need the gross profit to increase and I need the bottom line to increase, and both of those increased year-over-year in the quarter.

So that is encouraging, but we need to get the revenue back on track as well.

That sounds like that your volume issues might have been spread across the business and not really localized in any particular area.

No, there are a couple of specialties. I don't know if you have them.

I have it here.

There's a couple of specialties that got hit harder than others but it is not geographic-based. It was customer-specific. There are a couple of specialties. I don't know (inaudible)

Yes, the top decliners were in emergency medicine, OB/GYN, and primary care for the quarter in terms of volume declines. There is other smaller declines and actually a few in specialties actually had volume increases like anesthesia and hospitals and advanced practices.

Yes, advanced practices is really, really doing well for us. What was the growth in --?

Year-over-year it was up over 20% in volume.

Very good. Thank you very much.

Tobey Sommer, SunTrust Robinson Humphrey.

I heard you talk about bill rates but I missed it if you quantified them. What was bill rate growth in the travel nurse business and where might it go in a couple of quarters once this renewal stuff kind of has been digested?

We didn't talk about it, the specifics but that's good question actually. So, we had grown our nurse and allied bill rates by 3% in the third quarter last year. We grew them by 3.8% in the fourth quarter last year. So, we were somewhat hopeful that we would start to improve even on that 3.8% as we came into the year.

We saw a slowdown in it. Actually, our nurse and allied rates grew by 2.2% in the first quarter on a year-over-year basis, which is a little over $1. And we still got bill pay expansion, although we gave about 80% of it up to the nurse in this quarter. And I do think that is mostly timing, as I mentioned earlier in the call, even though I didn't say the specific numbers.

We should be seeing a higher bill rate increase. I know the percentages we are negotiating and they just haven't come through yet. We are seeing that they improved from January to February to March and into April, so I believe we will have higher bill rate percentage growth and higher bill pay spreads in the second quarter.

And is that, when you say coming through, do you mean coming through like evident in the P&L or being realized at the customer level?

We saw them being realized at the customer level from each month through so far year to date. We obviously did not see them a whole lot in the P&L in the first quarter, but I believe we will start to see that in the second quarter.

Okay. And is it broad-based at this point or is it still certain specialties with outsized bill rate growth that is influencing the overall mix?

Yes, we tend to get bill rate increases because of two reasons. One is geographies that are hard-to-fill positions or specialties that are hard to fill. It is not necessarily across the board, but in some cases we are getting general rate increases across the board because the customers are seeing that their fill rates are down, submittals are down, and the issue is that their competing hospital down the street has upped their rates, and so they need to keep up with the Joneses.

So, it is somewhat broad-based but very specific high rates. We have some things. We have a couple of specialties in California, and I don't remember what it is off the top of my head, that they just could not find that they have multiple openings, could not find the people. They upped the rates to well over $100 an hour just to be able to start getting submittals.

Now, that is not going to happen across the board, but it just shows you that in certain skill sets, when the hospital is losing revenue, or they don't have quality at the bedside, that they are going to do something about it.

Okay. That makes sense. And then I just wanted to get a little bit of color on the per diem business and how that's going. I know your footprint is bigger now and that is a business that kind of requires skilled office managers in each branch to perform optimally.

It's actually been working very well. We have seen good growth in our -- it's actually our branch-based business which is a combination of our old per diem, the MSN per diem, and the Allied Health Group that we acquired from On Assignment. We call that our branch op business now. In our branch business, actually the old allied health group business is growing as well as our per diem as well as the acquired per diem, so we are seeing some pretty broad-based growth a little bit higher than mid-single digit growth on a year-over-year basis.

So that is still going well. We have a good team there, good regional people, good branch managers, and we expect that to continue. As I mentioned earlier, our customers -- we see in the jobs reports that there's a lot of growth in the nonacute care ambulatory facilities. Our customers are now coming to us and saying, we need to deal with these differently, and the fact that we have a larger branch footprint is actually helping us support those customers. So that is helping us to maintain the growth in our branch-based operation.

Okay. The last question for me is you have come close to wrapping up your integration with MSN and I guess maybe even it's pretty well done. Are you still at this point having an internal focus to kind of generate better growth in physician and kind of lap this EMR or are you still actively looking at M&A? Thanks.

Now that we have done the integration, we have looked at a few M&A opportunities, nothing that was in the right price range, and so we have walked away from a couple. There are things in the marketplace. We will continue to look at them. The Board is supportive of that.

The fact is that we have done two acquisitions that we have integrated very well and they continue to perform well. So, I think I feel comfortable that I have the right team in place. I think the Board feels comfortable that we can execute and integrate an acquisition.

We do have some firepower with $39 million or $40 million of availability. Plus, as Bill mentioned, we have a lot more options now of financing than we did a year ago when we weren't performing that well. 12 months makes a big difference when you start generating $6 million or $7 million a quarter in EBITDA. So yes, we are looking and will continue to look but it needs to be strategic and it needs to be at the right price, but we are not ruling it out.

Thanks. I guess I do have one more.

In the first quarter, you said you had $2 million in business comped against the $13 million a year ago, so an $11 million headwind. Does that $2 million go to zero at some point in a future quarter or is that kind of a rate that that business may continue?

I think it is probably going to up slightly in Q2 because we have one program that is being implemented now. It will probably go up in Q3 because we have a couple, three programs being implemented by Q3.

So, we will probably see a little bit of an increase in the next few quarters on the EMR business. Eventually, in a couple of years, yes, that could be gone, but we believe that there is some level of follow-on to these EMR projects. In fact, the one program that we have starting in Q3 that will go all the way through the end of 2016 is someone that already went through the whole program and implemented one technology, found out that they didn't like it, and now they have got some of the government subsidies to do that.

Now they're with their own dime, on their own -- with their own money, they are now changing to a new technology and that is going to go for a while. We see other companies that have been through three phases of upgrades or tweaking what they have, and so we think there is a little bit of follow-on work but I don't think -- if you look at last year, we did $13 million, $9 million, that's $22 million plus $5 million is $27 million. We did almost $30 million of EMR business.

I don't think it is going to get back to that level, but I think there's probably a couple of years of some level of EMR for a little while.

Thank you very much for the color.

Randy Reece, Avondale.

I just wanted to follow up on some of these organic or pro forma growth numbers. Is there a significant difference between the organic growth rate in nurse and allied and pro forma growth rate this quarter? I know that the MSN business was a little unpredictable for you last quarter. Did that improve this quarter?

What was that particular --?

I think the question is how is the MSN acquisition performing relative to our core business?

Oh. We can't see that anymore. It is all integrated in together. So the interesting part is, in the second quarter of last year, before we acquired it, our nurse and allied grew at just about what they did before we acquired it. And then in the third quarter of last year when we could still see the two of them, ours grew at 12% year-over-year and the MSN business grew at 12% year-over-year.

But now by the fourth quarter, we can't see them independently anymore and certainly we can't in the first quarter of 2015. So, it is just an integrated business now, so you have to look at it on the whole.

All right. Thank you very much.

And there was a second part of that.

I was just -- is the extension, I know that looking at fourth-quarter results, you had felt like the acquired MSN business had proved less predictable than you expected. I don't know how much you can tell about it now if you are rolling it all up in a different way. But I'm just wondering how it felt.

Yes, no, I know what you are referring to, Randy. I was talking about our branch-based business, which is a per diem business we acquired from MSN. And I was making the comment that it was only our second quarter with a very large branch-based business and it is just a little bit less predictable than the travel business that, you know, you book things 30 days in advance and they tend to be on assignment for three months at a time.

Branch-based business is two shifts, three shifts there, five shifts there. It is just a little bit harder to predict. So I didn't mean to send the message that we don't have visibility to it. It is just a different method of forecasting in the branch-based business versus our travel business. And that is what I was referring to.

All right. Thank you.

And this concludes all questions in the queue at this time.

Okay, great. So, Operator, do you have a closing comment you want to make first? Let me just close out.

So, I want to thank everyone for joining us and for the questions. And we will be back to update our second-quarter results in August. Over to you, Operator.

Thank you very much. This does conclude today's conference. A replay of today's conference will be available through May 21, 2015. You may access the replay by dialing 1-800-395-7443, or 1-203-369-3271. Please use the passcode 2015. Thank you for joining. You may now disconnect.