AMN Healthcare Services, Inc. (AMN) Q4 2011 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the AMN Healthcare Fourth Quarter and Full Year 2011 Earnings Call. [Operator Instructions] As a reminder, this call is being recorded. I would now like to turn the conference over to your host, Vice President of Investor Relations, Amy Chang. Please go ahead.

Good afternoon, everyone. Welcome to AMN Healthcare’s Fourth Quarter 2011 Earnings Call. A replay of this webcast will be available until March 29th, 2012 at amnhealtchare.com/investors. Details for the audio replay of the conference call can be found in our earnings press release. Regarding our policy on forward-looking statements, various remarks and characterizations we make during this call about future expectations, projections, plans, prospects, events, or circumstances constitute forward-looking statements. Forward-looking statements are identified by words such as believe, anticipate, expect, intend, plan, will, may, and other similar expressions. It is possible that our actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors including those identified in our annual report on Form 10-K for the year ended December 31, 2011 and other periodic reports, which have been filed with and are publicly available from the SEC. The results reported in this call may not be indicative of results for future quarters. These statements reflect the company’s current beliefs and are based upon information currently available to it. Developments subsequent to this call may cause these statements to become outdated. The company does not intend, however, to update the guidance provided today prior to its next earnings release. This call may also contain certain non-GAAP financial information. From time to time, we make available additional information regarding non-GAAP financial measures including pro forma measures in the earnings release and on the company’s website. On the call today are Susan Salka, our President and Chief Executive Officer, as well as Brian Scott, our Chief Financial Officer. Joining us during the Q&A session will be Ralph Henderson, our President of Healthcare Staffing and Bob Livinous, our President of Strategic Workforce Solutions. I will now turn the call over to Susan.

Thank you so much, Amy. Good afternoon, everyone, and welcome to AMN Healthcare’s 2011 Full Year and Fourth Quarter Earnings Conference Call. 2011 was a year of continued market recovery, solid execution, and further innovation in the Workforce Solutions that we provide to our clients. For the full year, we grew consolidated revenues by 11% and adjusted EBITDA by 40% on a pro forma basis. Adjusted EBITDA margin for the year was 7.2%, which was a 150 basis point improvement over 2010. Our growth in operating leverage was driven by several key factors. First, the Travel Nurse division experienced full year pro forma revenue growth of 32% and adjusted EBITDA growth of 71%. This impressive growth reflects the strength of our MSP client relationships, our recruitment strategies, and the ability to leverage our infrastructure. Of course, none of this is possible without maintaining a very keen focus on the quality of our healthcare professionals that we source and select for our clients. A second factor was the revenue synergies we enjoyed from our combination with Medfinders, which enabled our team to significantly improve fill rates. Our more powerful integrated sales team led the industry in MSP growth, winning over 20 new MSP clients in 2011 with an estimated 80 million in annualized growth spend under management. A third factor was the successful integration of the Nurse and Allied brands into 1 platform. This contributed to the improvement in operating margins in this segment of 220 basis points on a pro forma basis. In addition to solid execution, we have further evolved our suite of Workforce Solutions to provide greater value to our healthcare clients. The pace of change has accelerated in healthcare. And hospital executives are increasingly seeking more sophisticated solutions and partners. The hunger for new and innovative solutions is stronger than we have ever seen. The rapid growth of MSP clients is the best example of this trend. We help these clients to gain more control, visibility, and consistency in the utilization of their clinical labor, while also improving quality and compliance. Penetration of MSP is strongest is Nurse Staffing, but has also been growing in the Allied Healthcare business over the past year. During the fourth quarter, approximately 1/3 of our Nurse and Allied revenues were generated by MSP clients. This is a significant increase since 2009 when MSP revenues represented only 6% of our Nurse and Allied revenues. Based on insights from clients, and what most believe to be a natural progression within the industry, we believe that there will be a similar shift towards MSP arrangements in the Locum Tenens market. All signs point to continued growth in MSP penetration. And as the most experienced provider in this phase, AMN is well positioned to capitalize on this trend. Over the past year, we have also made further advancements in our Workforce Solutions through the growth of our RPO business and other Workforce-related consulting services. In addition, we also continued to grow our EMR staffing business. These consultative Workforce Solutions doubled in size in 2011 and they differentiate us with our clients. Over the past 2 years, great progress has been made in shifting the perception of our services from what was once a necessary evil to being seen today as an effective way to manage workforce expenses. These higher margin businesses also help us to make progress towards our goal of returning to a 10% adjusted EBITDA margin in the next 3 to 5 years. Now let’s turn to our current results. We are pleased to report consolidated fourth quarter revenues of $222 million, which was down 3% sequentially and up 8% year-over-year. This was at the upper end of our guidance of $219 to $223. These results exclude our Home Healthcare segment, which were considered discontinued operations. Fourth quarter Nurse and Allied revenues were $148 million, which were flat sequentially and up 16% year-over-year. This growth was driven mainly by the Travel Nurse business where revenues were flat sequentially and up 26% year-over-year. While we hit our peak volumes for travel nursing in November, we typically see a softening over the holidays due to the fewer travelers on assignment and fewer hours being worked. For the first quarter of 2012, travel nurse volume is expected to be up over 5% sequentially and in the mid-teens over prior year. The continued growth has been driven by the addition of more MSP clients, increased supply of candidates, improved fill rates, and strong re-book rates. While volume is up in the fourth quarter, our current open orders are down slightly year-over-year, which we attribute to a weaker flu season and our improved fill rates. Over the past few weeks, we have seen an improvement in new orders and with the number of facilities that have orders open. The leverage and efficiency inherent in our MSP delivery model has also contributed to our improvement in margins for this business. As an example, the Travel Nurse division fourth quarter operating margin improved by 400 basis points year-over-year, at the same time we continued to grow our MSP client base. Fourth quarter Travel Nurse average bill rates were up 2% year-over-year. We expect this trend of modest bill rate improvement to continue throughout 2012. In fact, we are expecting the first quarter bill rate to move up closer to 3% year-over-year. However, we will pass along an appropriate amount of this increase as compensation so that we can ensure that we attract the best healthcare professionals for our clients. We also anticipate continued upward pressure on temporary housing costs. So you should not expect gross margin expansion from these bill rate increases. Fourth quarter revenues for local staffing were $24 million, which was up 1% sequentially and 2% year-over-year. Going into the first quarter, we expect revenues from local staffing to be down sequentially due to the seasonal flu clinic business that we experience in the fourth quarter and the lack of any meaningful flu driven census so far in 2012. Year-over-year revenue growth in local staffing may be stagnant for few quarters as we recently underwent a strategic rationalization of our geographic footprint and we eliminated 8 underperforming offices. These offices were primarily in rural areas and generally had low profitability and less future potential to serve or grow our MSP clients. Closing these offices will enable us to reallocate resources and better serve existing and future MSP clients in the larger metropolitan areas. As an example, we are in the process of opening a local office in New York City to serve a very large MSP client that we implemented in the fourth quarter, and to serve other clients in the area. Fourth quarter Allied revenue was $30 million, which was down 3% sequentially and up 2% year-over-year. This sequential decline was due to normal seasonality as clients operate at reduced service levels during the holidays. Going into the first quarter, we expect a modest sequential improvement driven by volume growth in our therapy business. Although there are certainly some head winds in reimbursement rates for skilled nursing clients, we continue to experience strong demand for therapist overall and we’re focused on growing our therapy supply. We have also experienced recent improvement in our margins, our fill rates, and our re-book rates. Today, approximately 2/3 of our allied business is in the therapy disciplines. And the remainder is in imaging, respiratory, and lab techs. In our Locum Tenens segment, fourth quarter revenues were $65 million, down 10% sequentially and 7% year-over-year. Although most of this sequential decline was due to normal seasonality, there was also the continued market-driven impact of volume decreases in radiology, surgery, and anesthesia. Our government division, which supplies all specialties, also experienced greater softness due to funding delays and budget constraints. Going into the first quarter, overall Lcoums revenues are expected to be relatively flat. This week, Sean Ebner joined AMN as the new president of our Locum Tenens division. We are very excited to have Sean join the AMN family. He has a proven track record of success in the staffing industry. And his extensive sales leadership, operations, and business development experience make him ideally suited to lead our locum tenens business. Most recently, Sean led a very successful division, within Technisource, a subsidiary of Randstad. We look forward to the positive impact that Sean will have in growing our top line revenues and our profitability within Locums. Sean will report directly to Ralph Henderson, whose responsibilities were expanded to cover all of our Temporary Staffing businesses. This reporting structure will help to better capture the cross-selling opportunities that exist across our service lines. Over the years, Ralph has demonstrated a proven track record of industry leading revenue and profitability growth. And we are very pleased to expand his role to President of Healthcare Staffing. In Physician Permit Placements, fourth quarter revenues were $9 million, up 2% sequentially and flat year-over-year. The physician search market continues to be steady and may be revealing some signs of growth ahead. We are expecting first quarter searches to be up sequentially and year-over-year. We also continue to focus on maintaining marketer and recruitment bench strengths to insure we are able to achieve high fill rates on our active searches. We have been able to continue also monetize our thought leadership expertise through projects and surveys that leverage our extensive relationship and database of clinicians. A good example of this is a follow-on survey were we are engaged in a partnership with the Physician’s Foundation to complete one of the largest physician surveys ever conducted in the U.S. On January 30th, we completed the sale of our Home Healthcare business and we used the proceeds to pay down our debt. This divesture enables our leadership team to focus 100% of our attention on our Workforce Solutions, Staffing and Recruitment businesses. As hospital executives seek to transform their business models, they are more open than ever to implementing innovative solutions to manage their clinical workforce. Our leading position in workforce solutions has more clearly differentiated AMN and the added value that we bring to the clients. Beyond our success in the MSP space, another confirmation of our reputation as a leader in workforce innovation is our recent recognition as Supplier of the Year by Novation. They are the largest group purchasing organization in the country. This prestigious award was based on our high level of strategic partnership and compliance with their quality standards. This is an example of our differentiated approach to partnering with healthcare organizations. This type of national recognition and the positive results we are reporting today are made possible by our committed and highly engaged team members and the healthy culture that they create. As a true people business, we are proud to have the most talented, experienced, and passionate team in the industry. I would like to thank everyone for their unique contributions that enable us to serve our clients, our healthcare professionals, and our shareholders. What we are seeing today is the powerful combination of having a highly engaged and capable team coupled with the strategy that puts our client’s needs and goals at the forefront of everything we do. I will come back to you in our Q&A session along with Ralph and Bob to help answer your questions. But for now, I will turn the call over to our CFO, Brian Scott.

Thanks, Susan. Good afternoon, everyone. As previously mentioned, with the recent sale of our Home Healthcare business, the operating results for this segment have been classified separately as discontinued operations for all periods reported. Fourth quarter revenue from continuing operations was $222.1 million, up 8% from last year and down 3% from last quarter. For the full year 2011, we reported revenue of $887.5 million, a 32% increase from 2010. Our gross margin for the quarter was 28.3%, up 80 basis points from last year and up 50 basis points from the last quarter. The increase from both periods was from improved gross margins in the Nurse and Allied segment. Full year 2011 gross margin of 28.1% included favorable workers’ compensation adjustments and the realization of deferred revenue from the adoption of a new accounting standard in our Physician Permanent Placement segment. Excluding these items, gross margin improved from the prior year by 10 basis points. More importantly, end of the year at its highest point. SG&A in the quarter totaled $49 million, which included approximately $300,000 of cost associated with the integration of Medfinders. Excluding acquisition and integration expenses, SG&A as a percentage of revenue of 21.9% decreased from the prior year by 170 basis points, an increase of 40 basis points sequentially. The significantly improved leverage from the prior year resulted from achieving the targeted integration synergies from the acquisition. Also the impact from operations changes implemented over the last several years as well as the prior year having unusually high bad debt expense. Our Nurse and Allied segment revenue increased sequentially by 0.3% to $148.1 million. Volume grew 0.3% sequentially to 5,317 healthcare professionals. And revenue per day was essentially flat on slightly higher bill rates offset by the typical seasonal decline in hours worked. Nurse and Allied gross margin increased year-over-year by 130 basis points and sequentially by 80 basis point to 27.4%, due in part to improved bill pay spreads, more than offsetting an increase in housing costs. Fourth quarter Nurse and Allied operating income was $18.1 million or 12.2% of revenue. That’s compared to $15.2 million or 10.3% of revenue in the prior quarter. This is the highest operating margin for this segment since 2008. The sequential increase in operating margin was due to the higher gross margins along with lower fourth quarter professional liability costs. The third quarter also included about $600,000 of costs associated with closing our You Pay office. The operating margin improved by 380 basis points year-over-year due in large part to cost synergies from integrating the Medfinders Travel, Nurse and Allied businesses and improved operating leverage as well as the higher gross margin. For the full year 2011, Nurse and Allied revenue was $570.7 million, up 54% from the prior year. Segment operating income of $62.8 million or 11% of revenue compares to the prior income of $35.3 million or 9.5% of revenue. Our Locum Tenens segment revenue decreased 10% from the prior quarter reflecting a 7% decrease in day sales and a 3.5% decrease in revenue for day fills. Gross margin of 25.5% was up by 10 basis points from the prior year, but down sequentially by 50 basis points due in part to lower perm placement conversion revenue. Locums’ operating income of $3.9 million of 6.1% of revenues compares to $6.3 million or 8.7% in the prior quarter with a decrease related mainly to the lower revenue. For the full year, Locum Tenens segment revenue was $277.9 million with segment operating income of $21.7 million. This compares to prior year revenue of $264.7 million and operating income of $22 million. Within our Physician Permanent Placement segment, revenue increased sequentially by 2% due in part to an increase in placements made. On a year-over-year basis, revenue was relatively flat. The impact from adoption of a new recognition standard in 2011 is essentially complete with a benefit of less than $100,000 in the fourth quarter. Physician Permanent Placement operating income for the fourth quarter was $2.2 million or 23.1% of revenue. For the full year, Physician Permanent Placement revenue was $38.9 million. That’s compared to $34 million in the prior year with the increase impacted by the revenue recognition change. Segment operating income of $10.6 million compares to the prior year operating income of $8 million. On a GAAP basis, we reported fourth quarter pre-tax income of $4.4 million and full year pre-tax income of $13.9 million. This excludes the Home Healthcare operating results, and associated goodwill, and non-cash and tangible asset impairments of $7.7 million and $31.2 million for the quarter. Excluding the integration and credit agreement amendment costs, our adjusted full-year effective tax rate from continuing operations was 58%. However, due primarily to the continued utilization of certain tax benefits from the Medfinders acquisition, our net cash taxes paid in 2011 was less than $500,000. During the next 5 years, we still anticipate being able to utilize over $20 million of cash tax benefits from the Medfinders acquisition. Diluted earnings per share from continuing operations was $0.04 for the fourth quarter and $0.11 for the full year 2011. Excluding the Medfinders integration expenses and credit facility amendment costs, adjusted earnings per share was $0.04 in the fourth quarter and was $0.16 for the year. Operating cash flow for the quarter was $6.5 million. And for the full year was $19.3 million. Capital expenditures for the fourth quarter were $1.1 million. And for the full year were $4.6 million. Day sales outstanding excluding the retained Home Healthcare accounts receivables were 57 days compared to 55 days in the last quarter and 53 days last year. The year-end increase was partly related to an anticipated temporary impact to consolidated Medfinders collections and to our shared services model. During 2012, we expect this transition to be both operationally more efficient and to ultimately reduce DSO. As Susan noted, on January 30, we completed the sale of our Home Healthcare business and received cash proceeds of $9.65 million and retained the majority of the working capital. As of December 31, our cash and equivalents totaled $4 million. And our total debt outstanding under our credit agreement net of discount was $205 million. Subsequent to year end, we made a $5 million voluntary payment on our long term debt and paid off the $3 million balance on our revolver. Now let’s turn to our guidance for the first quarter. Consolidated revenues are expected to be between $224 and $228 million, which represents a 1% to 3% sequential increase. This sequential increase is driven by continued growth in the Nurse and Allied staffing segments with flat revenues in the Locum Tenens segments. Gross margin is anticipated to be between 27.5% and 28%. SG&A expenses are expected to be approximately 22% of revenue. And adjusted EBITDA margin is expected to be approximately 6.5%. I would also like to provide some other financial estimates for 2012. We anticipate full year 2012 depreciation and amortization expense of approximately $15.5 million. Interest expense for the full year is expected to be around $20.5 million, which includes $3.5 million on non-cash amortization of deferred financing costs and original issue discount. Based on current full year forecasts, our effective income tax rate should be approximately 50% with a cash tax rate closer to 25% taking into account the utilization of the previously-noted tax benefits. Share count should be in the $46 to $46.5 million range. And finally, capital expenditures are expected to be between $6 and $8 million, an increase from last year, but still below historic levels and less than 1% of revenue. This increase will be primarily targeted at several innovative investments in marketing, mobile, and social media technologies in order to drive to improved recruitment, conversion, and retention of healthcare professionals as well as back office enhancements to drive longer-term operational efficiency. And with that, we’d like to open up the call for questions.

[Operator instructions] Our first question comes from the line of A.J. Rice with Susquehanna Financial.

I have just a couple of different questions, if I could get a couple of technical ones first. How much working capital - how much of the net investment is tied up in home health that your hoping to collect on, just curious, how much of that is on the balance sheet at this point?

You know, as we said at the [indiscernible] on the sale, the target capital when we originally negotiated the deal was about 4 million, at the closing it ended up a little bit, a little bit higher than that, and we expect to be able to realize all of that over the next 6 months.

Okay, so that basically receivables there that you’re…

The bulk of that AR and then just normal accrued compensation, other liabilities. So as I said, you normally try to see most of that unwind over the next 6 months.

Okay, and then second, [indiscernible] workmen’s comp and deferred revenue recognition, was that in this quarter, or was that in last year’s quarter? I’m sorry I missed that [indiscernible].

You kind of cut out there a little bit, but I think I heard that you were asking about the revenue recognition and the workers’ comp. The workers’ comp adjustments were in the first and third quarter, there weren’t any in the fourth quarter at all. And then on the deferred revenue, the majority of that was in the first 2 quarters of the year, with much smaller impact on the fourth quarter.

Okay, and then on the Locum Tenens business, it sounds like that the volume adjustments you’re saying it’s -- or the year-to-year volume trend or the sequential volume trend is -- or replacement trend is mostly due to hospital volumes. I just want to confirm that that is what you think, and then therefore, I guess, if hospital lines stabilize, you would see that [indiscernible] asset, the main driver of what you are seeing? And then on the year-to-year price - the price [indiscernible] at 3%, is that really a mix, or is that on an apples-to-apples basis in pressure or price?

Sure, A.J. Well, on the first part of the question, in volume, yes, certainly is, if which we see census continue to stabilize or even grow that would be positive. But our softness has been more in the radiology, anesthesia, surgery related areas. So it does have to be more specific to elective and general surgeries I think for us to see some improvement in a couple of those specialties. If you look at the last year as an example, primary care actually grew quite nicely in 2011. It was up double digits, but we unfortunately saw double digit declines in surgery, radiology, and anesthesia, which offset that. Regarding the 3% of revenue per day filled, it’s a combination of both true bill rate declines in those areas I just mentioned, particularly radiology, where they’ve felt the hardest impact of reimbursement changes that have been made over the last 5 years, and just continue to feel pricing pressure in that business. But also there was a reduction in the on-call hours and the overtime hours. And specifically in those specialties as well as those providers look to find ways to cut their cost overall. They’re hiring fewer Locums in those areas and they are wanting to pay them less, and when they do hire them, they don’t want to pay them overtime, and they don’t want to put them on call.

Okay. All right, that’s helpful. Just my last question, on the nurse staffing where you are seeing some strength, how much -- I mean, obviously you are having some success with the MSP benefit, how much is sort of - maybe can you delineate between that and the underlying market tone? Are you grabbing share through the MSP additions or is it -- and how does that compare versus what we are seeing overall on the marketplace?

Sure. We’re definitely seeing improvement in market share through winning MSP contracts as we look back to the 20 contracts that we won throughout 2011 as an example. Some very key ones and large ones did come from other competitors, and even those that didn’t where they were more traditional competitive accounts where there was no previous MSP, we are picking up share there because typically in a non-MSP client our fill rates are about 0.5 of what we would expect when we actually are the MSP provider. So we pick up share really in either situation when we would in MSP, but we are also seeing improvements in the traditional business. We do measure our orders and our traveler count based on those MSP, and what we consider sort of the traditional competitive accounts. So, Ralph, you want to add anything?

Yes, the growth in the MSP, you know, it’s about 60% of the growth comes from the MSP portion of the business, about 40% comes from the traditional clients, which implies that there’s good demand, you know, in kind of both segments.

The next question comes from the line of Jeff Silber with BMO Capital Markets.

Forgive me, I may have missed some of the comments, but your gross margin in the Nurse and Allied segment were fairly high, I am assuming that is the reason that your overall gross margins were ahead of guidance. Is that something that you should think you could sustain into the first quarter and the rest of the year? Obviously, I know there are some payroll reset, but you know, disregarding that.

The margin in the fourth quarter was probably the main driver of us being above our guidance range. And we did have -- it was a little better than what we really expected as well. So I -- as Susan mentioned earlier, we are getting bill rate increases, we also are planning to pass along the majority of that to both drive more supply as well as to offset the housing cost increases. So I would expect it, for our margins remain where they are, or they could come down slightly as you look into 2012. We had just some good outcomes in the fourth quarter that lifted it a little more than what we would expect.

Some of these other workforce consulting and solution businesses also helped to improve the margins, which is why we are very interested in continuing to expand them along with the value that they bring to our clients. They help us to move our gross margins and EBITDA margins along And so while they weren’t huge things, such as our RPO business growing, our EMR staffing business continuing to do very well, and then some of the smaller workforce consulting projects that we’ve done and we’ve had a nice one in the fourth quarter help us to incrementally move that needle upwards on, again, growth and EBITDA margins.

Okay, great, that is helpful. You know, in terms of your end market, there has been a lot of talk about the potential consolidation, or even further consolidation of your -- of the hospital providers, and I know Moody’s had a report on that that has gotten a lot of airplay the past day or so. If this consolidation continues, what do you think the impact would be on your business?

This is Bob, thank, Jeff. Yes, I think it actually is positive for us. We have been very successful in terms of incorporating the large hospital systems under our MSP program, and we find that during these consolidations they are looking for, you know, consolidations of vendors and often times we get pulled into that in a very positive way. We also are happy with many of our clients who are actually expanding themselves, so they are out acquiring other hospitals and that has been a real benefit to us in a few instances as well. So we think that that’s actually a positive for us in the way which we’ve designed our model.

Okay, great. Brian, you have given some annual guidance for, you know, D&A, interest share count, and CapEx, can we get rough estimates for the first quarter as well?

Sure, I think for D&A, if you take the full year now that I’ve given, and probably spread that pretty evenly.

For year on the interest expense - you know, fourth quarter interest expense was 5.4 million, I think, so, you can - it’s going to probably go down a couple hundred thousand a quarter, and kind of just do it from there.

Share counts?

Share counts will be pretty similar to the fourth quarter.

All right, great, and then one more numbers question. In terms of stock based comp, which would we expect for both the quarter and the year?

Stock count for the entire year?

Stock count for the quarter and the entire year if possible.

Yes, it’s going to be, again, it would be able 6 ½ million for the year more or less, and I would just -- I would probably just spread that evenly as well.

And our next question comes from the line of Frank Atkins with Suntrust.

Going back to the MSP side, can you talk a little bit about the pricing environment there. Any changes, anything you see?

This is Bob again. We actually have started to see a continued improvement in pricing opportunities within the MSP market, and part of that comes from being one of the largest providers, or by far the largest provider, we have a lot of data what we can educate the client on what the trends are that are going on in the marketplace. So as a part of the MSP sale, we can have a very strategic discussion with our clients about what’s going on in the market and what rates will be necessary to meet the demand and the fill rate that you’re looking for. We find clients are less -- not that they’re not concerned about price, but it’s the third thing they worry about. The first thing is quality, fill rates, in one of those 2 orders, and then third tends to be price. And statistically, we’ve looked at the last 10 or so and we’ve actually not seen any price decreases from where we were. We’ve actually increased prices from where we were in several cases.

Okay, great. And if you could talk about tax rate, any guidance you could give for either 1Q or the year?

Well, for 2012, the effective tax rate we’re projecting about 50% based on our current full-year forecast and that should be -- it should be the same for all the quarters.

Great. And in terms of the position perm, it was a pretty nice performance there. Can you talk a little bit about the kind of areas of strength you’re seeing?

Sure. And in the fourth quarter, the strength came from placements. Our ability to fill the placements that we had gotten in the third quarter in particular was kind of a nice kind of little uptick in searches. And then going into the first quarter, we’re seeing our searches go up again sequentially and year over year. Now, as we start to build that, you do get a small deferred revenue impact, but just from a forward-looking standpoint, we see that as a very positive sign of gaining some momentum back in the business. It’s also reflective, Frank, of us being able to build up our marketing staff, the individuals who are you in the field actually talking with our clients, potential clients and building those relationships and we’ve seen more successes at some of the larger teaching facilities, so starting to see more pockets of opportunity open up and we have more of the sales staff to actually be out there educating and selling.

Okay, great. And then, as you look forward, do you see any more strategic rationalization of offices you mentioned in your prepared remarks?

You know, we kind of constantly evaluate the profitability of all of our offices, you know, that overall initiative includes taking a look at markets we should be in that we’re not in today that are kind of MSP centers, you know, so to speak. So we look at both the performance of the office, closing offices as well as opening offices. I think it’s a couple-year journey for us to probably get our footprint exactly like we want it to be.

Okay, and finally, to the extent it’s possible, could you give us any color on some of the, I guess [Technical difficulties]