Cross ntry Healthcare(US:CCRN)2023-11-01 16:00PART I. – FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The unaudited condensed consolidated financial statements for Q3 and nine months ended September 30, 2023, reflect significant year-over-year declines in revenue and net income, driven by lower demand in Nurse and Allied Staffing, offset by increased operating cash flow Condensed Consolidated Statements of Operations Highlights (Q3 2023 vs Q3 2022) | Metric | Q3 2023 (in thousands) | Q3 2022 (in thousands) | Change (%) | | :--- | :--- | :--- | :--- | | Revenue from services | $442,291 | $636,098 | -30.5% | | Income from operations | $20,303 | $52,175 | -61.1% | | Net income | $12,812 | $34,793 | -63.2% | | Diluted EPS | $0.36 | $0.93 | -61.3% | Condensed Consolidated Balance Sheets Highlights (as of Sep 30, 2023 vs Dec 31, 2022) | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total current assets | $445,229 | $675,673 | | Total assets | $707,739 | $947,839 | | Total current liabilities | $183,578 | $271,640 | | Debt | $0 | $148,735 | | Total liabilities | $238,078 | $490,620 | | Total stockholders' equity | $469,661 | $457,219 | Condensed Consolidated Statements of Cash Flows Highlights (Nine Months Ended Sep 30) | Metric | 2023 (in thousands) | 2022 (in thousands) | | :--- | :--- | :--- | | Net cash provided by operating activities | $236,424 | $129,730 | | Net cash used in investing activities | ($10,900) | ($6,763) | | Net cash used in financing activities | ($214,825) | ($93,674) | | Change in cash and cash equivalents | $10,697 | $29,284 | Notes to Condensed Consolidated Financial Statements Detailed notes explain accounting policies, revenue by segment, recent acquisitions, term loan repayment, and stock repurchases, highlighting divergent segment performance and goodwill adjustments Revenue by Segment (Nine Months Ended Sep 30, 2023) | Segment | Revenue (in thousands) | | :--- | :--- | | Nurse And Allied Staffing | $1,474,273 | | Physician Staffing | $131,420 | | Total | $1,605,693 | - On June 30, 2023, the Company fully repaid its outstanding term loan obligations of $73.9 million and terminated the Term Loan Agreement, resulting in a write-off of $1.7 million in debt issuance costs84 - During the nine months ended September 30, 2023, the Company repurchased and retired 2,038,691 shares of common stock for $51.2 million, with $83.7 million remaining available for repurchase under the current program as of September 30, 202361178 - The company completed acquisitions of HireUp and Mint in late 2022, leading to a decrease in goodwill from $163.3 million at year-end 2022 to $135.4 million at September 30, 2023, primarily due to measurement period adjustments384279 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes the Q3 2023 revenue decline to normalization in Nurse and Allied Staffing, partially offset by strong Physician Staffing growth, while utilizing robust operating cash flow for debt repayment and share repurchases Results of Operations Q3 2023 saw significant declines in revenue and net income, primarily driven by lower Nurse and Allied segment performance, with similar trends observed for the nine-month period, impacting operating leverage Comparison of Results (Q3 2023 vs Q3 2022) | Metric (in thousands) | Q3 2023 | Q3 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue from services | $442,291 | $636,098 | ($193,807) | (30.5)% | | Income from operations | $20,303 | $52,175 | ($31,872) | (61.1)% | | Net income | $12,812 | $34,793 | ($21,981) | (63.2)% | Comparison of Results (Nine Months Ended Sep 30) | Metric (in thousands) | 2023 | 2022 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue from services | $1,605,693 | $2,178,391 | ($572,698) | (26.3)% | | Income from operations | $99,289 | $221,644 | ($122,355) | (55.2)% | | Net income | $63,593 | $149,670 | ($86,077) | (57.5)% | Segment Results The company's segments showed divergent performance, with Nurse and Allied Staffing revenue declining due to lower FTEs and bill rates, while Physician Staffing experienced robust growth driven by increased days filled Nurse and Allied Staffing Key Metrics (Q3 2023 vs Q3 2022) | Metric | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $396.6M | $612.3M | -35.2% | | Contribution Income | $39.2M | $77.8M | -49.6% | | FTEs | 9,849 | 12,524 | -21.4% | | Avg. Revenue per FTE per day | $434 | $526 | -17.5% | Physician Staffing Key Metrics (Q3 2023 vs Q3 2022) | Metric | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Revenue | $45.7M | $23.8M | +91.8% | | Contribution Income | $2.6M | $0.8M | +225% | | Days filled | 23,004 | 13,219 | +74.0% | | Revenue per day filled | $1,986 | $1,803 | +10.1% | Liquidity and Capital Resources Strong liquidity was demonstrated by increased operating cash flow, enabling full term loan repayment and significant stock repurchases, with substantial cash and ABL availability remaining - Net cash provided by operating activities increased by $106.7 million to $236.4 million for the nine months ended September 30, 2023276 - On June 30, 2023, the company repaid all $73.9 million in outstanding obligations under its term loan and terminated the agreement251254 - As of September 30, 2023, the company had $14.3 million in cash, no borrowings under its ABL facility, and $209.5 million of excess availability197251 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is variable interest rates on its ABL Agreement, with term loan risk eliminated, and a hypothetical rate change would impact interest expense - The company is exposed to variable interest rate risk from its Loan Agreement, which charges interest based on SOFR or a Base Rate257 - A 1% change in interest rates would have caused interest expense to fluctuate by approximately $0.6 million for the nine months ended September 30, 2023281 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective259 - There were no changes in internal control over financial reporting during the most recently completed fiscal quarter that have materially affected, or are reasonably likely to materially affect, internal controls283 PART II. – OTHER INFORMATION Item 1. Legal Proceedings The company is involved in various ordinary course legal proceedings, with management believing the outcome of outstanding matters will not materially adversely affect its financial condition - The company is involved in various litigation, claims, and investigations that arise in the ordinary course of business156 - Management believes the outcome of any outstanding loss contingencies as of September 30, 2023, will not have a material adverse effect on its business, financial condition, results of operations, or cash flows156 Item 1A. Risk Factors No material changes have occurred to the company's risk factors since their disclosure in the 2022 Annual Report on Form 10-K - There are no material changes to our Risk Factors as previously disclosed in our 2022 Form 10-K262 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's common stock repurchases during Q3 2023, with a significant amount remaining available under the board-authorized program Issuer Purchases of Equity Securities (Q3 2023) | Period | Total Shares Purchased | Average Price Paid per Share | Approx. Dollar Value Remaining Under Program | | :--- | :--- | :--- | :--- | | July 2023 | 113,802 | $27.07 | $95,329,000 | | August 2023 | 443,822 | $23.02 | $85,114,000 | | September 2023 | 59,200 | $24.66 | $83,654,000 | | Total | 616,824 | $23.92 | $83,654,000 | - The share repurchases were made under a $100 million stock repurchase program, which was replenished by the Board of Directors effective May 3, 2023264 Item 5. Other Information This section discloses the termination of a Rule 10b5-1 trading plan by an executive officer on August 18, 2023 - On August 18, 2023, Susan E. Ball, Executive Vice President, Chief Administrative Officer, General Counsel and Secretary, terminated a Rule 10b5-1 trading arrangement289266 Item 6. Exhibits This section lists exhibits filed with the Form 10-Q, including the ABL Credit Agreement amendment, CEO and CFO certifications, and XBRL data files - The report includes several exhibits, such as Amendment No. 6 to the ABL Credit Agreement, CEO and CFO certifications (31.1, 31.2, 32.1, 32.2), and XBRL data files267