Cross Country Healthcare (CCRN) Q3 2019 Earnings Call Transcript

Cross Country Healthcare (CCRN 4.41%)
Q3 2019 Earnings Call
Nov 05, 2019, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good evening, ladies and gentlemen, and welcome to the Cross Country Healthcare earnings conference call for the third quarter of 2019. This call is being simultaneously webcast live. A replay of this call will also be available until November 19, 2019, and can be accessed either on the company's website or by dialing (800) 839-5574 for domestic calls and (203) 369-3669 for international calls and by entering the passcode 2019. I will now turn the call over to Bill Burns, Cross Country Healthcare's chief financial officer.

Please go ahead, sir.

Bill Burns -- Chief Financial Officer

Thank you, and good afternoon, everyone. I'm joined today by our president and chief executive officer, Kevin Clark; as well as Buffy White, president of workforce solutions and services; and Steve Saville, executive vice president of operations. Today's call will include a discussion of our financial results for the third quarter and our outlook for the fourth quarter of 2019 as contained in our press release, a copy of which is available at www.crosscountryhealthcare.com. At the conclusion of our prepared remarks, we will open the lines for questions.

Before we begin, we need to remind everyone 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 2018 annual report on Form 10-K and quarterly reports on Form 10-Q, as well as in other filings with the SEC. The company undertakes no obligation to update any of its forward-looking statements. Also, comments made 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 U.S. GAAP. More information related to these non-GAAP financial measures is contained in our press release. Lastly, in order to facilitate a better understanding of our underlying trends, we may refer to pro forma information on this call, giving effect to acquisitions and divestitures as though the transactions had occurred at the start of the periods impacted.

With that, I will now turn the call over to our president and chief executive officer, Kevin Clark.

Kevin Clark -- President and Chief Executive Officer

Thank you, Bill, and thank you to everyone for joining us this afternoon. Before I begin, I would like to welcome Buffy and Steve to the call and look forward to having them share their thoughts and insights on the business during Q&A. And I would also like to give a huge thank you to our teams across the business for another successful review by the Joint Commission with distinction, continuing Cross Country's long-standing track record and commitment to quality. For those that may not be familiar, the Joint Commission is an independent organization that accredits and certifies more than 22,000 healthcare organizations and programs in the U.S.

each year, and we are proud to be certified by this organization. Turning to the quarter, our performance clearly exceeded our expectations for both top-line growth and profitability. Even more exciting is that we saw year-over-year consolidated revenue growth for the first time since Q1 of 2018. We believe this growth is the result of both the changes and investments we are making across the business, as well as the effect of favorable market conditions.

Let me first address what we are seeing in the market. Demand has steadily increased across all segments of our business, most notably in travel nurse with orders growing 16% sequentially and up more than 50% over the prior year. Part of this increase in demand is attributable to the MSP wins in 2018 and 2019 that continue to ramp, but the majority is coming from the broader marketplace as healthcare systems continue to struggle with persistent and pervasive clinical labor shortages. Another indicator of the relative strength in the market is the growth in spend under management at our MSPs, which increased 8% sequentially and 11% over the prior year with growth coming from both existing and recently implemented programs.

While the market trends are clearly favorable, it is important to note that we must continue to execute across many fronts to meet that demand and ultimately realize the revenue. When I rejoined the company, it was my priority to create a vision for us to become a leading total talent solutions provider and to ensure we have a cohesive strategic plan, a plan that not only provides a framework to guide decision-making but also establishes a blueprint for the changes we need to make. I know I've shared this previously, but the core tenets of that strategy include evolving the go-to-market approach, reinvigorating our culture and digitally transforming our company. As part of evolving our go-to-market approach, we have refreshed our brands going from over 20 disparate brands down to one core brand, Cross Country Healthcare with seven divisions.

We have hired and aligned the right leadership across the organization, we've invested heavily in revenue producers, funded through significant cost savings in overhead, and we are continuing to improve our candidate experience. Changes in candidate attraction, engagement and marketing strengthen our ability to attract the highest quality professionals. Even modest improvements in our approach to performance marketing such as lead-to-applicant conversions have a meaningful impact on our revenue and return on investment. From a corporate culture perspective, we have made tremendous progress.

We are investing in our people, providing them with new training and resources, as well as giving folks better tools and technology to work more productively. We have improved the decision-making at the desk level and we are seeing the results. It is truly a great time to be at Cross Country. And lastly, on the technology front, we have made terrific progress with both internal and external-facing tools.

Specific to our new applicant tracking system, we will be rolling out the first implementation this month to a smaller business unit within Cross Country nurses and the feedback thus far from our user testing has been extremely positive. And from a client and candidate perspective, the market continues to shift toward more mobile-enabled models and data-centric tools. To that end, we are working to create the easiest and most seamless way to interact with our clients. These initiatives, some of which we are developing internally, commenced in the third quarter and should yield benefits as we progress through 2020.

Looking at the fourth quarter, I am encouraged by the level of demand and activity, especially in our travel business. We are expecting to see sequential growth in most lines of business despite the impact from holidays in the fourth quarter. Our education business is expected to grow sequentially coming off the summer months and going into the new school year. From a longer-term perspective, with the turnaround taking hold in both revenue and profitability growing again, we believe that a high single-digit EBITDA margin is possible over the next few years with a goal to get to 8%, effectively doubling our current level of profitability.

The primary levers we need to pull are improving operating leverage through top-line growth, expanding our gross margin through better bill-pay spreads and improved mix, as well as continuing to improve the overall efficiency of our organization with greater automation through the enterprise. We will also continue to explore strategic M&A tuck-ins with higher margins, and across all fronts, we fully expect technology to play a key role in enabling improved performance. And just before I turn it over to Bill, I want to comment on the successful refinancing that we just announced. Bill and the team did an amazing job vetting all the alternatives, sourcing, negotiating and ultimately closing on this new facility last month.

We believe that it not only secures the liquidity needed for operations but also paves the way for us to be more acquisitive. With that, let me turn the call over to Bill Burns, who will review our results in more detail.

Bill Burns -- Chief Financial Officer

Thanks, Kevin. As Kevin mentioned, performance in the third quarter was better than expected with revenue and adjusted EBITDA exceeding the upper end of our guidance ranges. Consolidated revenue for the quarter was $209.2 million, up 3% sequentially and up 4% over the prior year, driven predominantly by growth in our largest segment, nurse and allied. Revenue for the nurse and allied segment was $185 million, up 2% sequentially and up 5% over the prior year, with the prior-year performance being driven by an increase in the number of FTEs on assignment, as well as the impact from modest price increases and a favorable mix.

Within the segment, the growth was broad-based with all service lines reporting year-over-year improvement. Physician staffing reported stronger-than-expected revenue of $20.4 million, down 4% over the prior year but up 13% sequentially. Notably, the sequential growth was driven by increased volume across both physician and advanced practice specialties. Gross profit margin for the quarter was 24.4%, which was down 130 basis points over the prior year and 100 basis points sequentially.

The lower margins are largely the result of tightening bill-pay spreads as compensation costs rose faster than bill rates. We've begun to see some upward movement in bill rates and should demand remain at these levels, we would expect that trend to continue. Total SG&A was $44.4 million, up 1% over the prior year and down 3% sequentially. The sequential decline was primarily driven by lower salaries due to reductions in headcount, as well as favorable health insurance and other professional fees.

With respect to the previously announced cost-savings program, we've continued to make solid progress, identifying additional opportunities to reduce overhead and consolidate our footprint. As of September 30, 2019, the majority of the identified actions were complete, and we now expect to realize gross savings of between $12 million and $13 million on an annualized basis with $7 million to $8 million being realized this year. An estimated $10 million of the gross savings has been reinvested primarily in revenue-producing headcount, which has helped to drive some of the overperformances we have achieved in the third quarter. For the entire year, we expect net savings to be realized at between $1 million and $2 million.

Adjusted EBITDA for the quarter was $7.3 million, above the high end of our guidance range, driven largely by the overachievement on revenue mentioned earlier. Below adjusted EBITDA, there are a few items to call out. We continue to recognize restructuring costs, primarily associated with severance costs and other exit costs related to the consolidation of excess office space. In connection with the office consolidations, we recognized an impairment charge of $1.8 million on the right-to-use assets and leasehold improvements on more than 40,000 square feet of space exited as part of that effort.

In addition, we recognized $1.3 million for a loss on derivative pertaining to the termination of an interest rate swap. Turning to the balance sheet. We ended the quarter with $9.5 million in cash, which was down versus the prior year and prior quarter. The primary driver of the sequential decline was due to lower collections and an increase in days sales outstanding, while the year-over-year decline resulted from $12.5 million in payments made on our prior credit facility.

The lower collections in the quarter were due primarily to the impact from the summer vacation on our education business, while the increase in DSO was primarily the result of strong sequential growth experienced in other parts of the business. Overall, DSO was 58 days, up seven days from the prior quarter, which is still down four days versus the end of the prior year. From a debt perspective, we closed the quarter with $71.4 million in principal outstanding under the senior term loan and $20.6 million in undrawn standby letters of credit. As we announced last week, we successfully refinanced our senior credit facility to a new, more flexible and cost-effective $120 million asset-based credit facility.

Under the terms of the new facility, the company has full access to the line, subject to its borrowing base collateral and it contains limited financial covenants. In addition, the new facility contains an uncommitted accordion feature that allows us to increase the facility by an additional $30 million. We believe this to be an important step in ensuring the company has the proper debt structure and flexibility to continue to invest both organically and in future acquisitions. This brings me to our 2019 fourth-quarter guidance.

Our outlook is for revenue to be between $205 million and $210 million, reflecting year-over-year consolidated growth of between 2% and 5%. Sequentially, the range assumes some impact from the holidays on those lines of business, as well as the seasonal pullback in physician staffing. From a profitability perspective, gross margin is expected to be between 24.3% and 24.8%, adjusted EBITDA is projected to be between $6.7 million and $7.7 million and adjusted earnings per share is projected to be between $0.05 and $0.07. Also implied in this guidance is $2.6 million of depreciation and amortization expense, $1.1 million of interest expense, $1 million in stock comp expense, a tax expense of $300,000 and a diluted share count of 35.9 million shares.

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

Questions & Answers:

Operator

[Operator instructions] Our first question is coming from Jason Plagman. Your line is now open.

Jason Plagman -- Analyst

Good afternoon. Just wanted to get some more details. Kevin, thanks for providing the kind of the long-term margin thoughts. But just wondering if you could provide any more color on kind of the timing there.

Is that a two to three-year journey to get to the 8% EBITDA margin? Any additional thoughts on the trajectory would be helpful.

Kevin Clark -- President and Chief Executive Officer

Yes. Sure, Jason. Look, we believe the business is in a growth phase. We believe we can grow EBITDA over the next several quarters from a longer-term perspective.

With the turnaround taking hold in both revenue and profitability growing again, we believe that this high single-digit EBITDA is achievable largely from operating leverage gains, automation, the impact of the investments we're making across technology and also an improvement of the business mix. We have certain businesses, segments that have higher margin and growing into some of these adjacent spaces that we've talked about on the prior calls as part of that strategy. The wildcard for us is items like M&A. We have an M&A process at looking at tuck-in acquisitions.

And that will have significant impact as we go forward as well. So look, a very positive, strong background. Economically, demand is up 50% year over year this quarter in terms of the volume of demand, and so it's good conditions. As I said on the call, good to be at Cross Country.

We're very bullish in the next few years.

Jason Plagman -- Analyst

So is it appropriate to frame that target as kind of a multi-year target but you're not setting a firm target date to achieve 8%?

Kevin Clark -- President and Chief Executive Officer

Yes. I mean, look, we think high single digits is the goal. It's our benchmark and we think we'll get there over the next few years. It could be a little sooner, it could be about that time frame.

We don't have a crystal ball but we like the backdrop. We like the management team we have in place. The reorganization that we did this year, the investments that we've made to digitally transform the company are giving us great optimism. So we're going to get there.

We called that guidance of growing our adjusted EBITDA in Q4. So it's not always linear but we expect to be growing over time.

Jason Plagman -- Analyst

OK. That makes sense. And then I just wanted to switch gears a little bit to what you're seeing as far as the winter orders and kind of the outlook for demand as we head into 2020, what you're seeing there from your clients?

Kevin Clark -- President and Chief Executive Officer

Yes. So I'll start that. Maybe I'll ask Buffy White to add some commentary. So far, it's been a light flu season but orders are up heading into the winter months across the board.

We're seeing orders up there. We are in a very supply constrained marketplace. We're seeing specialty nursing positions with very high demand. Our physician business has higher demand.

We're seeing requests from our MSP clients to help them through various other services that we provide in our total talent solution including IRP, our Internal Resource Pools, and RPO and some of the perm actions.

Buffy White -- President of Workforce Solutions and Services

Yes. Thanks, Kevin. This is Buffy. I would say in a few of our key accounts, we're starting to see some volume of winter orders.

Typically, we see them come in, in mid-October. I would say this year, we're seeing a little bit slower activity right off the bat. We'll see a little bit more in Q4. But at this point, it's potential, we're going to see more of the volume for Q1.

We are going back through all of our key clients to consult with them and look at last year trends versus this year trends. So I do anticipate a higher order flow will come, it just seems a little later this year.

Jason Plagman -- Analyst

OK. Great. Thanks for the question.

Operator

Our next question is coming from A.J. Rice from Credit Suisse. Your line is now open.

A.J. Rice -- Credit Suisse -- Analyst

Thanks. First of all, maybe just following up on your comments around strength of the market. Are you seeing, as you're -- I know sometimes when you get a squeeze related to the flu or something, the premium pay ratchets up. But as the underlying market just seems like it's strengthening and it doesn't seem like it's driven particularly by seasonal factors, what are the clients saying about the willingness to step up the rate a bit and to fill the positions?

Kevin Clark -- President and Chief Executive Officer

Yes. Good question, A.J. I mean, look, we've seen -- we're starting to see some upward movement in bill rates. I think our bill rates are up about 1%, low single digits.

We would expect that trend to continue, given the large demand that we've seen in the marketplace. So from a bill rate -- pay to bills are compressed. I mean I think what we are challenged by, as we called out, is our gross margin. There's a lot of competition in this marketplace.

And with our customers, they are expanding and consolidating, and they are following the continuum of the patient from walk-in clinics and urgent care to large acute hospitals, which is our traditional client into ambulatory care, outpatient, post-acute care, as well as home healthcare and hospice. So they are getting larger and they are pushing -- they have more leverage in the marketplace, and they're pushing back on bill rates as much as possible. And Buffy, you want to add to that?

Buffy White -- President of Workforce Solutions and Services

No. I would agree. I mean, at this point, we're seeing such high demand in the market. Obviously, the supply continues to become constrained.

Our healthcare professionals have options. So we are going back in, consulting with our clients on what we're seeing in the marketplace, the balance between demand and supply. My thoughts are this is not sustainable for the longer term. It's a question of when we can start to see some of those rates, particularly in the high volume.

We see the volume coming more in the top six to eight specialties. So we are consulting with them, seeing when there's going to be that appetite for increase.

A.J. Rice -- Credit Suisse -- Analyst

OK. Another question is, obviously, in the comment, I'm going to one brand and I understand that there probably are significant savings associated with doing that. I think one of the reasons the industry got into each of the main players have -- and it was that they could tailor one brand in one direction, playing vanilla travel nursing, another for a nurse that didn't need housing, another for a nurse that wanted a very tailored experience. When you go back to one brand, are you -- and what is the -- are you -- what is the time frame to go back to that one-brand approach?

Kevin Clark -- President and Chief Executive Officer

Well, we already are principally one brand. Look, 60% of our healthcare professionals are millennials. They look for a job differently today than they did even two or three years ago or 10 years ago. The -- most people find their jobs by pulling out their mobile devices and using their thumb to do a search.

And so we're seeing the benefits of having one brand because we could invest more dollars into our programmatic advertising and some of our talent networks that we're building. And it allowed us to kind of focus more on reaching those millennial clients or millennial candidates when they're looking for jobs.

A.J. Rice -- Credit Suisse -- Analyst

OK. And then my last question would be, you mentioned a couple of times in your prepared remarks about M&A and tuck-in deals. Any -- would you enlighten us a little bit on where you think that might be attractive? What types of acquisitions would you look for? Where do you feel like you need to strengthen or broaden on product offering, service offering?

Kevin Clark -- President and Chief Executive Officer

Great question. I'll let Steve take -- address that. He runs our M&A effort here at Cross Country.

Steve Saville -- Executive Vice President of Operations

Thank you, Kevin. A.J., with regard to our M&A strategy, we are looking, again, as Kevin and Bill both mentioned that improving -- we're identifying acquisition opportunities that can improve our margins. Most particularly, the sectors that have been previously called out by this organization include Locums' Allied, Education and Technology. What we've done internally is we've built a process around programmatically identifying sourced opportunities, and we're keeping that process moving and looking to execute against that when the opportunity is right, so that we have accretive deals that are complementary to our existing services or new opportunities within adjacent markets.

A.J. Rice -- Credit Suisse -- Analyst

OK. Thanks a lot.

Operator

Our next question comes from Tobey Sommer from SunTrust. Your line is now open.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Thank you. Could you talk about your recruiter headcount? Where it sits in your eyes for the -- where you are in your turnaround? How much it's up year over year and where productivity is versus kind of where it can ultimately go? Just kind of give us color along those dimensions.

Kevin Clark -- President and Chief Executive Officer

Yes. Thanks, Tobey. Great question. I mean, look, a lot of the investments that we're making as a company really is all focused about employee productivity and improving productivity from automation is a big goal of the enterprise.

As we've talked about in prior calls, we've invested heavily in improving or increasing our revenue-producer headcount this year. And we largely caught up to where we felt that the company needs to be in Q1 and Q2. Q3, we didn't add as many recruiters and other account managers as we had in the previous two quarters, but we still have added and we'll continue to add on an incremental basis. I'd like to think that we're kind of at a steady state now that we'll be adding recruiters as the company advances with orders and our opportunity to kind of train people, onboard them and make them productive.

And Buffy, you might want to add to it.

Buffy White -- President of Workforce Solutions and Services

Yes. I would agree. At this point, we are at steady state. We're very proud of the team that we've assembled here.

We consistently pipeline for when we see growth within our organization, and we need to complement our teams. We've been focused on training, continuing to add capacity through allowing higher productivity per recruiter, providing them some tools and we continue to nurture them. So as we move forward, we'll evaluate the need. And as demand grows, we may need to add in the future.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

As the company kind of improves its internal operations and execution this year and year to date, how do you think about the need for market pricing to increase to kind of build momentum to sustain the unit growth in volume growth, kind of revenue growth that you've experienced so far? It seems to me like there might be a need for pricing to attract more supply to the market, as well as Cross Country.

Kevin Clark -- President and Chief Executive Officer

I'll let -- Bill, you want to take that?

Bill Burns -- Chief Financial Officer

Yes, sure. Tobey, yes, look, where the demand has obviously been, we've seen wages rising faster than the bill rates, and we've talked about this before, where we would expect pricing to start to move upward. It began inching upward this quarter and we would expect that trend to continue. To the point about how do we get higher margins on the bottom line, absolutely expanding the bill-pay spread is important to us to getting there.

The biggest driver of getting to that 8% goal or high single digits remains operating leverage in the business, so both from a volume expansion, as well as getting better margins. The margin will come from pricing to bill-pay spreads, as well as improving the mix of this we have by leveraging the other high-margin businesses. So we definitely want to continue to explore that. And as our clients, unfortunately, are heavily cost pressure themselves, so there's that natural balance that to strike with them.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

With respect to bill rates, what kind of bill rate growth do you think would be required for a meaningful increase in available supply?

Bill Burns -- Chief Financial Officer

Well, right now, what we see at the pay rates have risen faster than the bill rates, so we're still managing to bring supply to our customers and continue to meet the fill rate obligations. The question is on the percentage side, how fast can bill rates rise? And I don't know that we can call it out just right now. We did see an uptick sequentially in premium rates as a mix of our business. I know that was an earlier question.

We have seen some movement in that regard. I know throughout the last couple of years, we had called out that premium rates have been declining as a percentage of the overall total. We've seen that trend start to reverse itself. So we're hopeful that that will continue and move in that direction.

But as far as the future for price increases, obviously, we'll be working with all of our clients and looking at where we think that that makes sense. As Buffy pointed out earlier, negotiating on the hardest to fill jobs, the hottest and most in-demand specialties.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

And two last questions for me. Could you comment on the IT migration? You sounded bullish about it, but could you update us on the time lines of the more significant brands? And I may have missed it in the discussion of the new credit facility, but how much total liquidity is available to the firm today?

Steve Saville -- Executive Vice President of Operations

I'll take the first part of that. So we're rolling out our first pilot to a smaller business unit in just a couple of weeks. But the larger part of the organization will be onboarded onto our new applicant tracking software system late spring. And we think the majority of our employees and kind of the main division will be onboarded by the end of the second quarter.

Bill Burns -- Chief Financial Officer

And then just specific to the new facility, Tobey, yes, we were thrilled to get that finished. It's a $120 million asset baseline. Our level availability will fluctuate on two things: one is our overall collections but then the other piece is how receivables are moving and what our borrowing base collateral is. When we signed up to the facility, we expected -- or we're targeting to have at least $20 million to $30 million in availability for general operating purposes and liquidity, and that seems to be where we're trending at the moment.

But it's so -- it's a good facility for us and that it fits our needs to continue to operate and continue to invest in growth for the business.

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Thank you very much.

Operator

Our last question in queue is coming from Kevin Steinke from Barrington Research. Your line is now open.

Kevin Steinke -- Barrington Research -- Analyst

Good afternoon. So you mentioned the nice growth in MSP spend under management. Just curious about the trends you're seeing in terms of growth within existing accounts that are already ramped up. That is, are they as demand increasingly -- increasing significantly at those existing accounts versus what are you seeing from a ramp-up of newer accounts or signing of new accounts?

Kevin Clark -- President and Chief Executive Officer

Yes, I'll start then Buffy can also add commentary. Kevin, look, our legacy MSPs tend to have a higher capture rate than the new ones that we bring in onboard. And I think we've called out that our capture rate is really high 50 percentages, somewhere between 57% and upward to 60%. Just to kind of review it, we manage about $420 million of spend.

We have about $80 million of MSP spend that is currently being onboarded. We've signed so far year to date, eight contracts with -- it's -- I would kind of label our pipeline as fairly strong. I mean we see some terrific opportunities in a lot of different parts of the market. So overall, I mean, we're encouraged by our existing basic customers and trending toward developing a higher capture rate and onboarding our new ones.

And Buffy, you might want to add some color?

Buffy White -- President of Workforce Solutions and Services

Yes. I would say, in our existing MSPs, we're continuing to penetrate. We're expanding the services across the continuum of what we can offer our clients. We're also seeing the MSPs that have been newer in implementation continuing to ramp up.

So we're excited about the growth there. I think the conversations with some of our clients are starting to mature and progress. Clients are looking for more mature solutions, some alternative solutions from your traditional staffing. They're looking at total talent solutions.

The alternatives like resource pools and resource -- or recruitment process outsourcing to complement their total talent acquisition strategy. So the conversations are changing, and I'm very excited about what potential there is within our particular larger MSP accounts in Q1.

Kevin Steinke -- Barrington Research -- Analyst

OK. Great. That's helpful color. And on the Physician Staffing business, really nice sequential growth there.

Where do you feel like that business is in terms of the state of the turnaround, the level of investment or operational upgrade you need to do there? Just maybe an update overall on your Physician Staffing operations.

Kevin Clark -- President and Chief Executive Officer

Yes. Good question. Look, we're very excited. As we talked about earlier in the year, we made a management change.

We felt really good about the executive leadership that we have. The business has really turned around on a quarter-over-quarter basis. The business grew 13.2%. Still down year over year in very low single -- low to mid-single digits but it's great improvement.

So we're seeing strong demand across really our -- throughout our different major specialties. We continue to see probably the most growth in anesthesiology, as well as primary care and hospital medicine. But maybe, Steve, since you manage -- Steve Saville manages our other human capital services, including Cross Country Locums, our physician, and advanced practice division. So maybe you can add some color.

Steve Saville -- Executive Vice President of Operations

Sure, Kevin. Thank you. Kevin. With regard to our Locums division.

Kevin covered pretty much how the quarter played out. Sequentially, it was very productive. We continue to invest behind revenue producers, and we've worked with this outstanding management team to build an outstanding execution strategy for the business. We expect that all of this effort and investment will lead to year-over-year growth sometime in 2020.

Kevin Steinke -- Barrington Research -- Analyst

OK. Great. That's helpful. I guess, Steve, as long as you're on the call, maybe -- it sounds like you're working in quite a few different areas there.

But maybe just as your role as EVP of operations, maybe just give us a little more overview of the types of things you're working on as the company looks to improve operational efficiencies and drive margins higher.

Steve Saville -- Executive Vice President of Operations

Sure, Kevin. I'm happy to comment about that. We've initiated a number of cost reductions that are non-headcount-related, examining every aspect of our operations from the way in which we engage vendors to the way in which we manage key segments of spend in the G&A category. And we've worked and continue to work and will -- and have established a regular and routine review of those categories so that we can identify cost savings and execute on them very quickly.

One example that we're working through right now is our background check process. We're both examining and improving the process internally but working to identify key vendors for those services nationally.

Kevin Steinke -- Barrington Research -- Analyst

That's great. Appreciate you taking all the questions.

Operator

We show no further questions right now, speakers.

Kevin Clark -- President and Chief Executive Officer

So -- well, thank you, everybody. We appreciate your time, and we look forward to the next earnings call. Have a good evening.

Operator

[Operator signoff]

Duration: 37 minutes

Call participants:

Bill Burns -- Chief Financial Officer

Kevin Clark -- President and Chief Executive Officer

Jason Plagman -- Analyst

Buffy White -- President of Workforce Solutions and Services

A.J. Rice -- Credit Suisse -- Analyst

Steve Saville -- Executive Vice President of Operations

Tobey Sommer -- SunTrust Robinson Humphrey -- Analyst

Kevin Steinke -- Barrington Research -- Analyst

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