Cross Country Healthcare, Inc. (NASDAQ:CCRN) Q1 2019 Earnings Conference Call May 1, 2019 5:00 PM ET Company Participants Bill Burns - Chief Financial Officer Kevin Clark - Chief Executive Officer Conference Call Participants A.J. Rice - Credit Suisse Jason Plagman - Jefferies Tobey Sommer - SunTrust Jacob Johnson - Stephens Kevin Steinke - Barrington Research Group Henry Chien - BMO Capital Markets Operator Good evening, ladies and gentlemen, and welcome to the Cross Country Healthcare Earnings Conference ...

PART I. FINANCIAL INFORMATION [Item 1. Condensed Consolidated Financial Statements](index=4&type=section&id=Item%201.%20Condensed%20Consolidated%20Financial%20Statements) Unaudited condensed consolidated financial statements, including balance sheets, income statements, cash flows, and equity, are presented with detailed notes on accounting policies, acquisitions, debt, and leases - The financial statements are unaudited and prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q instructions[21](index=21&type=chunk) - These interim statements should be read in conjunction with the audited consolidated financial statements from the Company's Annual Report on Form 10-K for the year ended December 31, 2018[22](index=22&type=chunk) [Condensed Consolidated Balance Sheets (Unaudited)](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets%20(Unaudited)) Condensed Consolidated Balance Sheet Highlights (Amounts in thousands) | Metric | March 31, 2019 | December 31, 2018 | | :-------------------------------- | :------------- | :---------------- | | **Assets:** | | | | Total Assets | $441,435 | $427,003 | | Cash and cash equivalents | $18,286 | $16,019 | | Accounts receivable, net | $154,758 | $166,128 | | Total current assets | $186,484 | $194,905 | | **Liabilities and Stockholders' Equity:** | | | | Total Liabilities | $225,425 | $208,805 | | Total Stockholders' Equity | $216,010 | $218,198 | [Condensed Consolidated Statements of Operations (Unaudited)](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations%20(Unaudited)) Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31, Amounts in thousands, except per share data) | Metric | 2019 | 2018 | | :-------------------------------------------------- | :----- | :----- | | Revenue from services | $195,171 | $210,288 | | Total operating expenses | $197,859 | $206,040 | | (Loss) income from operations | $(2,688) | $4,248 | | Consolidated net (loss) income | $(1,376) | $1,920 | | Net (loss) income attributable to common shareholders | $(1,767) | $1,642 | | Net (loss) income per share - Basic | $(0.05) | $0.05 | | Net (loss) income per share - Diluted | $(0.05) | $0.05 | [Condensed Consolidated Statements of Comprehensive (Loss) Income (Unaudited)](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20(Loss)%20Income%20(Unaudited)) Condensed Consolidated Statements of Comprehensive (Loss) Income Highlights (Three Months Ended March 31, Amounts in thousands) | Metric | 2019 | 2018 | | :---------------------------------------------------- | :----- | :----- | | Consolidated net (loss) income | $(1,376) | $1,920 | | Other comprehensive loss, net of tax | $(199) | $(194) | | Comprehensive (loss) income | $(1,575) | $1,726 | | Comprehensive (loss) income attributable to common shareholders | $(1,966) | $1,448 | [Condensed Consolidated Statements of Stockholders' Equity (Unaudited)](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Stockholders'%20Equity%20(Unaudited)) Condensed Consolidated Statements of Stockholders' Equity Highlights (Amounts in thousands) | Metric | March 31, 2019 | December 31, 2018 | March 31, 2018 | | :------------------------------------------ | :------------- | :---------------- | :------------- | | Total Stockholders' Equity | $216,010 | $218,198 | $236,101 | | Additional Paid-In Capital | $302,802 | $303,048 | $302,325 | | Accumulated Other Comprehensive Loss, net | $(1,661) | $(1,462) | $(1,360) | | Accumulated Deficit | $(85,829) | $(84,062) | $(65,469) | - Net loss attributable to common shareholders was **$1,767 thousand** for the three months ended March 31, 2019, compared to net income of **$1,642 thousand** for the same period in 2018[17](index=17&type=chunk) [Condensed Consolidated Statements of Cash Flows (Unaudited)](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20(Unaudited)) Condensed Consolidated Statements of Cash Flows Highlights (Three Months Ended March 31, Amounts in thousands) | Metric | 2019 | 2018 | | :------------------------------------------ | :----- | :----- | | Net cash provided by operating activities | $12,787 | $13,273 | | Net cash used in investing activities | $(1,245) | $(1,027) | | Net cash used in financing activities | $(9,295) | $(5,149) | | Change in cash and cash equivalents | $2,267 | $7,084 | | Cash and cash equivalents at end of period | $18,286 | $32,621 | [Notes to Condensed Consolidated Financial Statements (Unaudited)](index=10&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements%20(Unaudited)) This section provides detailed notes on the company's accounting policies, acquisitions, debt, leases, fair value measurements, segment data, and recent accounting pronouncements [1. ORGANIZATION AND BASIS OF PRESENTATION](index=10&type=section&id=1.%20ORGANIZATION%20AND%20BASIS%20OF%20PRESENTATION) This section outlines the company's organizational structure and the basis for preparing its condensed consolidated financial statements - The condensed consolidated financial statements include Cross Country Healthcare, Inc. and its direct and indirect wholly-owned subsidiaries, as well as Cross Country Talent Acquisition Group, LLC (controlled but not wholly-owned)[20](index=20&type=chunk) - On March 29, 2019, the Company amended its senior credit facility and made an optional prepayment of **$7.5 million** on its outstanding debt, remaining in compliance with financial covenants[23](index=23&type=chunk) [2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=10&type=section&id=2.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This section details the significant accounting policies used in preparing the condensed consolidated financial statements - Management makes significant estimates for items such as accounts receivable valuation, goodwill, intangible assets, share-based compensation, insurance claims, deferred tax assets, and contingent considerations[24](index=24&type=chunk) - Restructuring costs include ongoing benefit costs, exit costs, and write-offs related to abandoned locations due to fundamental changes in operations[25](index=25&type=chunk) - Effective January 1, 2019, the Company adopted ASU No. 2016-02, Leases (Topic 842), recognizing right-of-use assets of **$22.0 million** and total lease liabilities of **$28.6 million** at the transition date[29](index=29&type=chunk)[30](index=30&type=chunk) [3. REVENUE RECOGNITION](index=11&type=section&id=3.%20REVENUE%20RECOGNITION) This section describes the company's revenue recognition policies and disaggregates revenue by segment Revenue Disaggregation by Segment (Three Months Ended March 31, 2019, Amounts in thousands) | Segment | Temporary Staffing Services | Other Services | Total | | :------------------- | :-------------------------- | :------------- | :---- | | Nurse and Allied Staffing | $172,653 | $3,420 | $176,073 | | Physician Staffing | $15,154 | $1,005 | $16,159 | | Search Services | — | $2,939 | $2,939 | | **Total** | **$187,807** | **$7,364** | **$195,171** | - Accounts receivable includes an estimated **$43.0 million** for worked but unbilled amounts as of March 31, 2019, a decrease from **$44.1 million** at December 31, 2018[32](index=32&type=chunk) [4. ACQUISITIONS](index=12&type=section&id=4.%20ACQUISITIONS) This section provides details on the accounting for the company's acquisitions, including deferred purchase price and contingent consideration - For the Advantage RN acquisition, the remaining **$0.1 million** deferred purchase price was released to the seller in February 2019, and **$2.9 million** from tax liability escrow was released in April 2019[34](index=34&type=chunk)[35](index=35&type=chunk) - Contingent consideration for the Mediscan acquisition, based on performance criteria through 2019, had an estimated fair value of **$7.8 million** as of March 31, 2019[36](index=36&type=chunk) [5. COMPREHENSIVE INCOME](index=12&type=section&id=5.%20COMPREHENSIVE%20INCOME) This section outlines the components of comprehensive income, including foreign currency translation adjustments and derivative instrument changes - The cumulative unrealized foreign currency translation loss was **$1.2 million** at March 31, 2019, a slight decrease from **$1.3 million** at December 31

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 __________________ FORM 10-K þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Fiscal Year Ended December 31, 2018 or o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 0-33169 Cross Country Healthcare, Inc. (Exact name of registrant as specified in its charter) Delaware 13-4 ...

Financial Data and Key Metrics Changes - Revenue for Q4 2018 was $200.9 million, down 9% year-over-year and slightly up sequentially [25] - Adjusted EBITDA for the quarter was $6.2 million, or 3.1% of revenue, compared to $12.3 million, or 5.6% in the prior year [30] - Net loss attributable to common shareholders for the quarter was $19.7 million, or $0.55 per share, compared to net income of $28 million, or $0.77 per diluted share in the prior year [34] Business Line Data and Key Metrics Changes - Revenue for the Nurse and Allied segment was $179.5 million, down 7% year-over-year and up 2% sequentially [35] - Revenue for the Physician Staffing segment was $18.3 million, down 19% year-over-year and down 14% sequentially [38] - Contribution margin for the Nurse and Allied segment was 9%, down 90 basis points year-over-year [37] Market Data and Key Metrics Changes - Overall demand in the market has remained fairly high, with 13 new managed service programs won in 2018, projected to generate approximately $80 million in incremental spend [21] - The company manages approximately $400 million in spend with a capture rate of 61% as of Q4 [22] - Orders at the start of 2019 were 20% ahead of where they were at the start of 2018 [23] Company Strategy and Development Direction - The company aims to return to consolidated organic growth and expand profitability, focusing on technology investments and operational efficiency [17][18] - Leadership changes have been made to align teams for better performance, including the appointment of a new President for Physician Staffing [11][12] - The company is reviewing its cost structure, targeting $6 million to $7 million in annualized savings, with $5 million expected to be realized in 2019 [29] Management's Comments on Operating Environment and Future Outlook - Management acknowledges that the turnaround may not be a straight line and emphasizes the need for tighter alignment between business units [18] - The company expects to see normalization in premium rates in the second half of 2019 [44] - Management is optimistic about the potential for growth in the locum tenens market, which is projected to grow at 4% annually [59] Other Important Information - The company ended the quarter with $16 million in cash and $83.9 million in term loans outstanding [40] - Capital expenditures for the quarter were $1.2 million, in line with expectations [42] - The company repurchased 432,000 shares for an aggregate purchase price of $5 million during the full year [42] Q&A Session Summary Question: What is the company's view on expertise or talent acquisition for future success? - Management is focused on developing a cohesive strategic plan and assessing areas for improvement, including potential acquisitions [47][48] Question: How does the company view the locum tenens business? - Management believes the locum tenens business can be turned around by leveraging existing strengths and improving execution [52][54] Question: What are the current trends in the physician staffing market? - The locum tenens market is growing, and management sees opportunities for improvement in execution and leadership [59][60] Question: What is the expected impact of technology investments? - Management plans to invest between $10 million and $12 million in IT infrastructure to enhance operational efficiency [121] Question: Can the company achieve more than the targeted $5 million in cost savings? - There is potential for additional savings beyond the $5 million target as the company centralizes operations and improves productivity [108]