Good afternoon, everyone. Welcome to Cross Country Healthcare's Earnings Conference Call for the Second Quarter 2024. Please be advised that this call is being recorded and a replay of this webcast will be available on the company's website. Details for accessing the audio replay can be found in the company's earnings release issued this afternoon. At the conclusion of the prepared remarks, I will open the lines for questions. I would now like to turn the call over to Josh Vogel, Cross Country Healthcare's Vice President of Investor Relations. Thank you, and please go ahead, sir.

Thank you and good afternoon, everyone. I'm joined today by our President and Chief Executive Officer, John Martins; as well as Bill Burns, our Chief Financial Officer; and Marc Krug, Group President of Delivery. Today's call will include a discussion of our financial results for the second quarter of 2024 as well as our outlook for the third quarter. A copy of our earnings press release is available on our website at crosscountry.com. Please note that certain statements made on this call may constitute forward-looking statements. These statements reflect the company's beliefs based upon information currently available to it. 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 2023 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC. The company does not intend to update guidance or any of its forward-looking statements prior to the next earnings release. Additionally, we 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 those calculated in accordance with U.S. GAAP. More information related to these non-GAAP financial measures is contained in our press release. Also during this call, we may refer to pro forma when normalized numbers pertain to our most recent acquisitions as though the results were included or excluded from the periods presented. With that, I would now like to turn the call over to our Chief Executive Officer, John Martins.

Thanks, Josh, and thank you, everyone, for joining us this afternoon. As you can see in today's press release, our second quarter 2024 revenue and adjusted EBITDA were near the high end of our guidance ranges, reflecting our continued ability to execute in what remains a challenging environment for core Nurse and Allied. Specific to travel, we have started to see some positive signs in the market. After troughing at the end of the first quarter, travel demand has been steadily rising in the last couple of months and today, it is up more than 20% relative to the start of the second quarter. This increase in orders has been fueled in part by a bounce-back in the market as well as the impact from recent MSP wins that are starting to ramp. As a result, we are also starting to see weekly production improve and though that will have a minimal impact on our third quarter, we believe that we are nearing an inflection point to begin re-growing our professionals on assignment as we enter the fourth quarter. With our sales pipeline remaining robust, we anticipate sequential revenue growth in the fourth quarter. We also continue to see strong momentum across the rest of our portfolio, notably in Locums, Education and Homecare, coupled with our strong balance sheet. I believe that Cross Country is very well positioned for long-term sustained, profitable growth. Bill will get into the numbers in a few minutes. But I'd like to take a moment to comment on our second quarter results. Travel revenue was on track with expectations for both rates and values. And as expected, our actual average bill rates declined modestly as we continue to blend down towards current market rates on open orders. Similar to the recent increase in demand, we've…

Thanks, John, and good afternoon, everyone. As highlighted in our press release, performance for the second quarter was in line with expectations, with revenue and adjusted EBITDA near the high end of our guidance ranges. Consolidated revenue for the second quarter of $340 million was down 10% sequentially and 37% over the prior year, driven primarily by declines in travel and local assignments in large acute care settings. I'll get into more details on the segments in just a few minutes. Gross profit for the quarter was $71 million, which represented a gross margin of 20.8%. Gross margin was up 40 basis points sequentially due primarily to the impact from the annual payroll tax reset at the start of the year. Gross margin was down 200 basis points over the prior year, due principally to higher lodging subsidies on travel assignments as well as certain versions such as health insurance, workers' comp and professional liability. Specific to the bill pay spread, it's worth noting that overall pay rates continue to decline faster than bill rates, but the cost of housing and benefits continue to mask that trend. Moving down the income statement. Selling, general and administrative expense was $60 million, down 5% sequentially and 24% over the prior year. The majority of the decrease relates to lower salary and benefit costs associated with reductions in headcount. Over the last 18 months, we've been proactively managing our costs in order to align with the broader market while preserving capacity and funding investments in parts of the business where we are seeing opportunities for organic growth. By leveraging our enterprise capacity metrics and by off-shoring certain operational and middle-office processes, we have scaled down our U.S. headcount by more than 20% since the start of the year. As a percent of revenue,…

Thank you. [Operator Instructions] Our first question will come from Kevin Fischbeck with Bank of America. Your line is open.

I guess I just want to get a little more color on the volume outlook. I guess we've obviously had a difficult time getting visibility into where those numbers were going to trend a couple quarters out. I guess last quarter, you were thinking that these two volumes were in the back half, but now it's kind of pushed to Q4. I mean, when you think about that visibility, is there anything anecdotally you can put on top of, I guess, I understand the math, but kind of think Q3 should be stable, and stable should be the beginning towards going up. But like is there anything you can say anecdotally around demand, or initial view and early order for Q4 that kind of gives you a little more comfort about potential growth?

Hi, Kevin. This is John. I'll start, and then Bill will give a follow-up from my response. But when we start with demand, as we said in our prepared remarks, we've seen demand steadily increase over the last couple months, where we saw from the start of the second quarter up 20%. But what's important to note is that it's over a broad spectrum of specialties and disciplines. It's not just one or two disciplines. And the other thing I think that's very encouraging is that the demand increase is not being driven by winter needs. The winter needs, and that would be defined as orders now that we're getting for October starts, we're not seeing that. There's zero winter needs in this increase. And we would still anticipate to see those winter needs coming in later. And we've been speaking over the last several weeks, to our clients and other hospital leaders. In fact, I spoke with a CEO of a large hospital system last week, and they're all seeing increase in census. They're all seeing increase in higher acuity, which is very much in line with what the publicly traded hospitals have reported, over the past couple weeks. And then, if we also look at the macro level, and we look at BLS JOLTS data report that came out yesterday, that showed a openings to hire ratio of 2.1, which of course we've talked about before, which is historically pre-COVID was 1.5. So you're talking two job openings per hire, one hire. It's just continuing to show that the systemic supply and demand imbalance is out there. And then lastly, I'll leave you this for a hand that we're built. If you start looking just across country what we're doing and why we're optimistic as an organization, the first half wins that we had, and we started to implement, they're now all being starting to ramp up. They're implemented. And we're starting to increase our capture rate. We still have more ramp in the back half of the year to increase that capture rate, from wins in the first and second quarter that we implemented. And then announcing the two wins we announced today, those will start implementing and then have a potential fourth quarter impact as we start ramping those up. And so with that is, why we're really optimistic about why we believe demand - will be sustainable and starting increasing, because of the macro level, because of what we're seeing in the market, and of course because of the wins that we've had. And as we ramp up those wins, we'll start seeing demand increase for those new accounts. Bill?

Yes. Hi, Kevin. So I guess I'll just give a couple of points. I mean, besides the fact that demand has been improving for the last couple of months now, and bill rates also are improving modestly, nothing - not off to the races, but travel is a business we have the best lens on. And when we look at our traveler on assignment count across the quarter, it's very, very stable month-to-month-to-month across the third quarter. So what we had been seeing up until this point was, Q1 and Q2 were sequential declines throughout the quarter exiting at a low point. Now, as we come into July, we see that the travelers on assignment are forecasted through the balance of this quarter, and we're already a month into the quarter. So we kind of have a good lens on, where August should be. And then September, really, we're starting to lock those orders now. So, I think that's one thing, is that the travelers on assignment is steady. The bill rates in the backdrop are improving a little bit, which is helping. And then, I'd say one other point is when I look at the weekly production, and this is really down in the weeds, but when you look at our weekly production, if I strip out the 4th of July, which is a short week for us. Our actual weekly average production is up about 3%, relative to the second quarter production. So, we're coming in at a good clip. I don't - it's early. It's just a few weeks, but at least it's starting to indicate that the market backdrop is improving and production is following. If that continues, that's why we say I think, the sequential improvement we would really expect is more going into the fourth quarter. But there's still an opportunity to affect the third quarter. We're not certainly giving up on it, but I just want to be clear. I think that the opportunity really is more towards the back end in the fourth quarter.

Okay. No, that's all very helpful. I guess one thing that makes it difficult from the outside, to tell exactly what's going on is that, you and your peer don't really disclose kind of the same contract growth versus kind of new contract wins, or the impact of losses. So it's hard to tell how much of the decline was maybe lost share, and how much of this improvement might be new contract wins. If you stripped out things that kind of looked at a same client basis, how would those trends look? Is that still coming down, or is that actually going up, or how should we think about same-store, if you will?

Yes, Kevin, it's Bill again. So I mean, I don't think we've made any secrets about it. We had attrition earlier in 2023, and as we exited last year, we were on a much better trajectory. We do have an internal metric we look at for net contract value, which is the net effect of wins, losses, and expansions. And for the last couple of quarters, we've had positive net contract value. So we're adding more to the stable, to our pipeline, and to our portfolio, excuse me, of opportunities that we can staff. That's probably the biggest thing I can tell you. The retention and renewal rates are pretty strong at this point. I would say it's really about continuing to win new business.

Yes, I'd just add, this is John. Kevin, the reason we haven't really disclosed those numbers is, we became volumes from hospitals going down and bill rates going down. It's hard to say what the baseline was. So they're kind of meaningless where the number was. And so as Bill said, we've now tracked over the last several quarters and having that positive rate. So in the future, we can see ourselves tracking that more and publishing that for you.

Yes, and then just a little more color on the MSP business, or the vendor neutral business. So we have between $600 million and $700 million spent on a management on an annualized basis. Our capture rate for the quarter was just under 70%, which was down a tick from the first quarter. And that was largely due to the ramp of our large vendor neutral program that we called out. If I take them out, the capture rate actually moved up a couple of hundred basis points. So, we were increasingly doing better with our own programs, but we also have this opportunity across that vendor neutral program. So that's another thing that just gives us a little bit of comfort, as we look to the back half.

All right, great. Thank you.

Thank you. Next, we will hear from Trevor Romeo with William Blair. You may proceed.

Afternoon. Thanks so much for taking the questions. First one, just definitely encouraging to finally hear about an uptick in demand in some of the numbers. I'm just kind of wondering when you speak to the client base, what is the general consensus on why you're starting to see an increase in demand? I know, I think, John, you just mentioned the growing census volumes as one thing. But generally, does it feel like the hospitals are now comfortable with the mix of permanent travel staff, where they are? Are you seeing less CFO and finance organization involvement in the staffing decisions? And does it kind of feel like, is it the start of a new post pandemic equilibrium, in your view?

Hi, Trevor, it's John. Yes, you actually answered the question for me. Thank you. But yes, it does feel that. Talking to our clients and talking to other healthcare leaders out there, what we're hearing is that they're comfortable with the labor they have. And some of them who are using a lot of labor, they're comfortable, because they're having a hard time finding. They're looking their own core staff and they need to keep beds open. And we've become a very valuable resource for them. Other ones have already settled down, and they've figured out the right number. And I would say almost every client we speak to feels very comfortable with the amount of contingency labor they're using. And I would also point out that while bill rates, we're starting to see that stabilization, there's still overall maybe coming a little bit down. But we're really starting to see a stabilization. But within those orders and in those specialties, we're actually seeing some specialties starting to increase bill rates, because there is still, again, as I mentioned earlier, this supply and demand imbalance that's out there. So overall, I think hospitals seem to be, from what we're hearing, very comfortable with where they're at. It's definitely census driven. There's higher acuity. And it's not just, because of one issue. A lot of this, and we've talked about this for the last 18 months after COVID, but a lot of this was all the deferred healthcare that happened. And now, we're actually seeing increases in heart disease. We're seeing an increase in diabetes, hypertension. And all these lead to other issues with people's health. And that's really what seems to be driving this. And so, there's not a date where this goes away, but this probably is a prolonged issue that will go on for some time.

Great. Okay. And then I think, John, you'd said the recent demand increase, I think, has not been driven by winter needs orders. But I was just curious, because I think this is kind of the time where you start getting some of those indications. Have you received any indications of clients at this point on their winter needs, how much they will need, I guess, and expectations on how you think that might play out this year?

First part of the question is yes, that is correct. This uptick has no winter needs included in it. And clients are waiting a little bit longer than normal is what we're hearing to give us those needs. They're waiting, holding the cards a little closer to the vest until we get there. So I would anticipate, we're going to get the winter needs probably closer to September than normal in the past where we'd see it in July and August.

Okay. Great. Thank you. I'll leave it there.

Our next question will come from Brian Tanquilut with Jefferies. Your line is open.

Hi, good afternoon, guys. Maybe just curious, any comments you can share first on this segment, operating margin for nurse and allied, and how we should be thinking about that. It sounds like there's optimism into Q4. So just your view on the cadence for potential improvement in that margin level as we look into Q3 and Q4?

Yes, Brian, it's Bill again. I guess what I'd say is, starting with the bill pay spreads, we've had some improvement in the bill pay spreads for specific to travel. But it's been kind of muted, as John mentioned, by the, I'll call it the housing or the lodging subsidy portion of it, because those costs haven't gone down with inflation, et cetera. So those elements of the compensation package remain elevated relative to the bill rate. So, we're not getting the overall gross margin improvement we'd like to see out of the bill pay spreads. Now as bill rates start to tick up a little bit, perhaps there's an opportunity there. But I think the bigger levers for us, really around margin will be continuing to drive the mix of our business with new Intellify clients coming aboard. That certainly helps, not just because of the efficiencies of staffing direct clients that are, where you've got either exclusivity or certainly at least, you know, a crack to be able to pipeline for their orders. You also have the fees from the subcontractor portion. So it helps the overall margin mix. And then you have to think about the rest of the mix of business. Multiple lines of business operate with higher margins than travel today. So our home care does, our education business does, our search RPO business does. They're on a good trajectory, those lines. So I think as we enter the fourth quarter, schools come back off their summer break. That's their next chance for them to see another organic jump in their revenue run rate, as they start a new school year. So, I think we'll come into the fourth quarter with a pretty good clip there. They were already exiting at, some of the highest…

Now that makes a lot of sense. And then maybe, John, as we're starting to see seemingly the stabilization of bill rates, right? How are you thinking about where the premium for temp versus permanent placements will end up? Or is it the right spot where we are right now? Because obviously that has narrowed versus pre-COVID levels. So just curious what your thoughts are on that?

Yes, I think, Brian, we are in a challenging market with margins. And so I think we're probably in this spot where it is right now. And adding a little color to the bill's margin statements is really what I think what's going to happen in this industry. And you're seeing what we're doing across country is this becomes an SG&A game where margins are going to be hard to crack. I think we have, you're looking at every, nickel, dime and quarter on the margin side to improve. And you're going to get that. But really, I think you're going to see the margins and where the margin, even a margin is going to improve is, as we get that SG&A down, because that's the new model of what the industry is heading towards. And so, when we move, as we've increased and really expanded our operations in India, to lower some of our costs there. As we start utilizing more of our technology with AI and creative analytics, not only for our clients within Intellify, our clinicians with experience, but also internally within our organizations for our team members, that's where this game is going to be won and lost.

Got it. Okay. Sounds good. Thank you, guys.

Our next question will come from A.J. Rice with UBS. Please go ahead.

Hi, thanks for the question. I wanted to just go back, make sure I'm getting the right takeaway. So the rate was down about 5% sequentially. I know you had guided for it to be low, single-digit coming out of the first quarter. And admittedly, it seems to be improving versus before, but it seems like there was a little bit of variance. Is that a mix, either the types of nurses you're providing to hospitals, or is home health and education picking up on a relative percentage? Is that impacting it? What was the main variance there and how much of those other aspects impacting your rate?

Hi, A.J., this is Bill. I think there's a lot to that question. So I think when you look at the revenue per FTE per day, certainly there's a mixed element where education, home care in particular, growing nicely, it has a lower overall average bill rate, but that would be with regards to the KPI we publish. When we talk in the prepared remarks about the bill rates, I think the bill rates are tracking very closely to what we've expected. I'd say if there really wasn't a big surprise, it's not as though anything significant changed in the marketplace for us. So if there's anything more significant there, I'd say it's probably an element of mixed across between allied and nursing, because they do have slightly different bill rates.

Okay. And then in the FTEs, just again to be precise about it, you were down about 7.8%. I think coming out of the first quarter, you said low double-digit decline. Where was that in placements, travelers to hospitals? Was it that the home health and the education was so strong that that's why there was a variance? How much sort of broke out between the different segments?

I mean, I guess we'd have to go down one-by-one-by-one, but there wasn't a real, I wouldn't say there wasn't a big surprise for the quarter across any of the lines of business. I do think home care performed a little bit stronger, so that's a piece of it as well. But on the travel side, I think we exited right in line with where we thought we were going to be. So there really wasn't a big surprise to the numbers. Anything else would really have been caused by mix.

And then just a final question. Some of the discussion we've had over the last six months or so has been about the competitive landscape, and that there could be some shakeout of especially some of the smaller competitors that have grabbed share in the marketplace. How much is your feeling a little bit better about the outlook, any change in the competitive landscape? Are you seeing any meaningful change in terms of pressure either on bill pays rate, your availability of nurses, whatever that would be impacted by changing competitive landscape in any way?

Hi, A.J., this is John. Yes, look, this is a tremendously competitive market right now. A lot of new entrants came in over the last, through COVID and probably a little before COVID, but many companies started putting out their shingle during COVID. And I think those smaller companies are going to have a struggle. If you're not, if you don't have MSPs or VMSs and you are not being able to control some of your orders and be able to increase capture share, because you're utilizing third-parties. I think we're going to see a lot of the midsize and small size companies be challenged in this market and continue to be challenged in this market as margins, as we said earlier, as margins are constrained.

Okay. It sounds like that's still in process as opposed to something you've seen a meaningful change in the last six months or so?

Still in process. I think companies are still trying to hang on, but I think you can only hang on for so long.

Okay. All right. Thanks a lot.

Our next question will come from Bill Sutherland with The Benchmark Company. Your line is open.

Hi, guys. I'm just thinking about the fact that the health systems are mostly saying that they're happy, with where they've gotten their ratio of contract labor to full time. And so if that ratio, I mean, is mostly where it should be, then is market growth going to be primarily in terms of those travelers primarily? Is that mostly going to be market share, taking share primarily, I suppose, through your MSP expansion?

Yes, I think a good portion of that is going to be gaining market share, winning MSPs, winning more VMS deals, increasing our capture as we're winning those deals and ramping them up. And I don't know when, if I had that crystal ball, when the market expands again. You're definitely reading it the right way as we're talking to clients saying they're happy and content with where the number of - temporary commissions they have on assignment are. That may be good for now, but the dynamic may change in six months right or three months. And part of that goes to the whole BLS JOLTS data where we're seeing two openings for everyone hire. While the hospitals I was talking about earlier have done a tremendous job of hiring new core staff, attrition still seems to be not favoring them as nurses are still leaving and there's this discrepancy. So there is a chance for the market to grow, but I don't think any of us want to plant a flag, and say this is the date that the market is going to start growing. So to your earlier assertion, yes, as we grow and we see ourselves increase our share of the market, it's going to be by outperforming our competitors, winning more MSPs, having higher capture rates, winning VMSs, increasing the capture rates there, and probably a little bit of market share going up.

Okay.

And I'm sorry, and a little bit of the market growing, but I don't want to plant a flag of saying the date - in the next two months or a month when we see the marketing starting to expand, but I think for certain over the next year we'll start seeing the market expand just when you start seeing that happen. The faster, and obviously, just to go on, the faster it happens, obviously the faster we'll increase our, then we can start increasing the expectations of our growth as that happens.

You've read stories in the industry press about how hospitals will kind of figure out how to manage flexible, you know, add flexibility to their own workforce. Is that really in line with the reality, or is that just a few isolated cases?

I think there are some hospitals that have done a terrific, tremendous job of being able to utilize their own resources to add flex pools. And we recognize that across country that this is an opportunity for hospitals to do it, but many hospitals don't have the knowledge or capabilities, and certainly not the technology. If you go into most hospitals around the country, many, many of them have some type of internal resource pool or float pool. And most of them manage it on Excel spreadsheets, and that's the reality of what's happening. And so when we built Intellify, we actually built Intellify with an internal resource pool or float pool technology that allows hospitals, for us to go into hospitals, and we have experts that have run large resource pools at hospitals across country, could help bring this technology and these learnings from their past experiences to hospitals to teach them. So there is an opportunity for hospitals to increase their utilization of their core staff and hire their own local float pool staff, to increase their productivity, but I would say it's really right now, it's not widespread in a good programs with utilization. I think certain hospitals do it very, very well, but I think a lot of hospitals could benefit from using our expertise, and our technology to create some optimization within their staffing.

Okay. And then, I just wanted to get one clarification on how you're thinking about how the fourth quarter could be shaping up, and you eliminate - you're not factoring in winter orders. Is that the main driver for the seasonal pickup in the travel and allied in the fourth quarter? And so, that would be - I don't know how to think about it. Would that be incremental if the winter orders are sort of picking up?

Yes, that's how we think about it. We're not building in any anticipation of winter orders. While we are anticipating that we will get orders in September as we're modeling it, we're anticipating - especially as we saw last year. We anticipated we'd receive winter orders last year, and we waited from July all the way to September, October, November, December, January, and never realized those orders. So, as we modeled it out this year, we are not modeling in those winter needs, but we're anticipating them, and that would be on top of what we're modeling.

Okay. Thanks, guys.

You're welcome.

Next, we will hear from Tobey Sommer with Truist. You may proceed.

Thank you. I wanted to ask another bill rate question. If you look at your recent week's sales production and the bill rates associated with those in travel nursing, how does that compare to the average bill rate of your travelers on assignment? Thanks.

Hi, Tobey. It's Bill. Well, I guess what I'd say is it's starting to move in the right direction, right? It's low single-digits. The average bill rate on open orders, the average bill rate on locked orders, and what we're seeing from overall production is starting to move up just a little bit. It's low single-digit percentage improvements, but it's still moving in the right direction. So, it's not declining as we're looking at this point from a production standpoint relative to what our average bill rate is.

And when you say improving low single-digits, I presume that's sort of on some sequential comparison or something compared to a few months ago, or something like that?

Yes, I apologize. I should have been more clear. The third like - if I look at third quarter production relative to second quarter production, we're up about 2% on what we're seeing so far coming into this quarter. And open order rates are really following a very similar track. In fact, open order rates today, believe it or not, on the same. If I look at a basket of orders, just MedSurg and ICU as an example, open order rates are actually up closer to 4% over the prior year. But again, a lot goes into that, but the point is the backdrop is improving. That's the important point.

Right. And at this point in a given month, how much of the travel nurses are renewals versus sort of recent - the product of recent sales production? And I know that varies month-to-month, but in approximate terms, can you tell us what a split looks like there?

Sorry, Tobey, could you repeat that question? I apologize.

Yes. What proportion of your travelers on assignment have been renewed from a previous assignment? Oh, I see - that's probably a good question for Marc. So how often do our travelers renew? What percentage of renewal rates do we typically see from an assignment rolling quarter?

In terms of how many assignments are they completing?

Yes. I know there hasn't been a material change in our renewal rates quarter-over-quarter, but it's historically been about the two-thirds?

Yes, you're right. We don't give the exact number out, but it's in that range?

And it doesn't really, it hasn't really changed that much. If there's probably like two-thirds is a good way to describe it, Tobey, and then it probably bounces on three to four points down or three to four points up from that midpoint. And it's been a very tight range. And it's interesting. It's been a tight range from COVID to even post-COVID and pre-COVID. It's been in that probably eight-point swing.

Okay. I'm trying to square how long it'll take for renewal rates, which tend to blend down from whenever those nurses started their sort of travel stints, and where weekly sales production rates are today. When you think of it in those terms, are nurses renewing? Can that continue to cause some overall bill rate declines? Or do you think that effect is approaching the end for you?

I think we're nearing the end. I think bill rates on assignments that renew, we're not seeing continued step down in those rates. So I think it's largely baked in. I know where you're going with the question. You're right that the portfolio continues to blend down to an open order rate, but we're nearing that. We're nearing the bottom. I mean, plus or minus a point or two. It's not wildly going to be a rate-driven story, as we look at third and fourth quarter right now.

Thanks. That's helpful. We're going with the difference is coins, not a lot of bills. I got it. And the winter orders, how do you think about that? It's been so long since we've had anything seasonal that could be called normal. If your memory goes back far enough to refresh us on what that could look like or used to look like, that would be helpful?

Sure. And again, I think you're right. We have to definitely go back to the recesses of our minds to remember what that looked like. Typically, we would have seen, again, depending, I'll just give it for the industry-wide perspective. You would have seen a 20% to 30% increase in orders coming in June, July, and more of call it July, August, September for starts between October and January. And those would have been the winter needs. And that historically was pretty much for over a decade where you saw that happen. And you're right. Last year, as I mentioned earlier, we never saw those orders come through. And that's why we're really not modeling those winter needs into where we're seeing we're going to be in the fourth quarter. But there could be upside on that if it comes through.

Thanks. Last one from me. You talked about some client wins and Intellify, et cetera. Several quarters ago, you had lost some business. Is the effect of that market share loss out of the P&L or are there lingering renewals of travelers that you're still sort of generating revenue and EBITDA from?

I guess, Tobey, it's Bill. I'd say it's mostly out. I mean, from accounts that have traded over, if we're still continuing to support them, the level of support is kind of stabilized at this point. So, I don't think there's a lot of headwinds faced from client retention.

Yes, this is John. Tobey, what I'd say is on the programs where we chose not to participate if we lost it, those are all clean and they're gone. There are programs that we may have lost that - we wanted to participate in. Those ones are participating at the level that we're happy with. So there's no other things to be able to come out of the numbers at this point.

Terrific. Thank you for your help.

Our next question will come from Constantine Davides with JMP. Your line is open.

All right. Thanks. So really nice cash flow improvement this quarter. Just wondering if you can give us a sense for where cash flow did shake out this year. Last year, you had some outsized working capital improvements. And then this year, you have the drag associated with that one client. Just if you can kind of help us understand where you're thinking on the cash flow front, if there's any other sort of puts and takes to think about?

Hi, Constantine. No, appreciate that. And look, at the end of the day, we did a great job this quarter bringing our DSO back in line. The impact from the bankruptcy of that client, as we called out last quarter, was between four and five days. So we reported 56 days. So even if you said excluding that, you would have been calling it 60. At the end of the day, we're getting very close to where I think the normalized DSO for this business will be. I don't think there's a significant opportunity for much further improvement, maybe a little bit. But I'd say it's more about converting EBITDA to cash flow at this point. So as we look to this quarter coming and the quarter after, it'll be closer to our normal conversion rates, right? So you have your reported EBITDA, you have your other costs that come out of it. Interesting to note that interest won't be a drag this quarter coming up. We'll actually be a little bit of a good guy for the first time, because we will be holding onto a sizable portion of the cash.

Got it. Thanks. And then I guess related question, John, just if you're a little bit more confident that we're nearing an inflection point, does that make you more comfortable in terms of deploying capital towards M&A? And I guess, you know, a follow-up to that is, do you see the need, to scale up the coordinators in allied business? Or is there more of a preference towards some of your specialty sub-verticals, be it something like education or home care or maybe additional locums opportunities? Thanks.

Sure. So what I'd say is, look, we have a balanced approach when it comes to our capital allocation strategy. We're continuing to repurchase shares. We talked about in Q2, almost 1 million shares repurchased. And we'll continue to look to repurchase shares as well moving forward. We're also deploying capital investments into our technology. I mentioned earlier, look, we want to create efficiencies throughout our whole organization. And that starts with Intellify as we're delivering our candidates, to our hospitals and other clients. It also goes into our experience app and continuing to invest in that as well, to create the efficiencies to get clinicians faster to the hospital at a lower cost, as well as all our internal technologies. And finally, we continue with a really disciplined approach on our M&A. While the last 12 months has been really slow in deals in the industry that are coming in, we're out there aggressively looking. And we have, as you noted, a great balance sheet, a good amount of cash on hand. And we're really well positioned to look out there and pick up those deals when they come through. And the deals we're looking at, we look more towards our diversifying the portfolio of the organization. Looking towards the allied locums, which we've done tremendous, our last acquisition of locums, [indiscernible] has done really well for us, looking at the education space. And also technologies that can improve how we deliver clinicians, or how we improve how we can have more impact and help hospitals achieve their goals of retaining clinicians and optimizing the workforce.

Thank you. And our last question will come from Kevin Steinke with Barrington Research. Please go ahead.

Thank you. So with the demand picture and travel improving, and you also mentioned bill rates improving modestly, do you think there's an opportunity over the next several quarters for some incremental gross margin improvement? Or do you think this constrained environment is more structural? And as you referenced, the adjusted EBITDA margin improvement is really just going to, all have to come from the SG&A side?

Hi, Kevin. Thanks for the question. It's Bill again. As I mentioned a little while ago, I think bill pay spread, is going to be hard to come by, right? I think that we're competitive market on both sides. And sure, we're happy that the bill rates improved a little bit. I think that will give you some leverage as, if you think of it, the MNIL subsidies don't necessarily flex with the bill rate. So as the bill rate improves, you'll get a little bit of an uplift if those dollars just even remain flat. So there's a little opportunity there, but the majority of the gross margin improvement for the business will come from mix, will come from other operational efficiencies and from the mix of clients that are utilizing and Intellify.

Okay. Understood. And you've referenced in the last couple quarters here about insurance costs, pressuring the gross margin. Is that something that's completely out of your control? Or is there something you could do to manage that with your providers or, in terms of rates, or policy or anything like that?

Well, some of it's experience driven, and some of it is your premiums that you're going to space each year. So we do come into a renewal cycle as we go through the third quarter. I'm not going to hazard a guess as to how the rates will look on the renewals for premiums, but specific to health, I mentioned a little while ago that that is one that is somewhat, it seems to be experience driven. And as you're kind of declining on a number of personnel basis, and that's also applies to our corporate employee basis. John mentioned we're down 20% since the start of the year. It's probably nearly double that since our peak, probably 18 months ago. And so, you have a phenomenon where folks carry their benefits for a period of time post-employment. And you're still having those claims come through, until they either secure their next assignment, or their new benefits kick in. So, I think we're seeing a little bit of an excessive amount of health insurance costs relative to that, but it's also continuing rising healthcare costs in the country as a driver. So we take what we, you know, we do what we can to take appropriate actions. But as I said, we've got the renewals coming up in the third quarter. We'll know more as we go into the fourth quarter of what that looks like.

Okay. Thanks for taking the questions.

My pleasure.

Ladies and gentlemen, this does conclude the Q&A period. I'll now turn it back over to John Martins for closing remarks.

Thank you, operator. In closing, I'd like to thank everyone for participating in today's call. And we look forward to updating you on the progress of the company on the next call.

Ladies and gentlemen, this does conclude today's conference call. Thank you for your participation. You may now disconnect.