Cross ntry Healthcare(CCRN) - 2021 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The unaudited statements show significant growth in assets, revenue, and a shift to net income driven by high market demand Condensed Consolidated Balance Sheets The balance sheet reflects substantial growth in assets and equity, driven by increased accounts receivable and acquisition-related goodwill Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2021 | Dec 31, 2020 | | :--- | :--- | :--- | | Total Current Assets | $313,273 | $183,111 | | Total Assets | $520,420 | $356,973 | | Total Current Liabilities | $144,662 | $93,423 | | Total Liabilities | $303,621 | $202,064 | | Total Stockholders' Equity | $216,799 | $154,909 | - Accounts receivable, net, increased significantly to $301.0 million as of September 30, 2021, from $170.0 million at year-end 2020, reflecting strong business growth[9] - Goodwill increased to $113.0 million from $90.9 million, primarily due to the acquisition of Workforce Solutions Group (WSG)[9][49] Condensed Consolidated Statements of Operations The company achieved a significant profitability turnaround with a 93% Q3 revenue surge and substantial net income Statement of Operations Summary (in thousands, except per share data) | Metric | Q3 2021 | Q3 2020 | Nine Months 2021 | Nine Months 2020 | | :--- | :--- | :--- | :--- | :--- | | Revenue from services | $374,905 | $193,968 | $1,035,973 | $620,811 | | Income (loss) from operations | $26,447 | ($381) | $63,342 | ($14,823) | | Net income (loss) attributable to common shareholders | $23,433 | ($1,334) | $54,429 | ($17,574) | | Diluted net income (loss) per share | $0.62 | ($0.04) | $1.46 | ($0.49) | Condensed Consolidated Statements of Cash Flows Operating cash flow turned negative due to a large increase in accounts receivable, while financing activities provided cash from new debt Cash Flow Summary for Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2021 | 2020 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($12,253) | $25,275 | | Net cash used in investing activities | ($29,360) | ($3,659) | | Net cash provided by (used in) financing activities | $40,869 | ($19,183) | - The significant use of cash in operations was driven by a $122.9 million increase in accounts receivable, reflecting strong business growth[20][200] - Financing activities were primarily driven by $100.0 million in proceeds from a new term loan, partially offset by net repayments of $49.4 million on the revolving credit facility[20][201] Notes to Condensed Consolidated Financial Statements Key disclosures cover the WSG acquisition, a change in segment reporting, new debt agreements, and the pandemic's impact on demand - The company acquired Workforce Solutions Group, Inc. (WSG) on June 8, 2021, for $25.0 million in cash and $5.0 million in stock, with a potential additional earnout of up to $15.0 million[44][45] - In Q1 2021, the company modified its reportable segments into two: Nurse and Allied Staffing and Physician Staffing[43][110] - On June 8, 2021, the company entered into a new six-year, $100.0 million Term Loan Credit Agreement to fund the WSG acquisition and pay down its ABL facility[71] - The COVID-19 pandemic, particularly the Delta variant, continued to drive high demand and elevated bill rates for the company's healthcare staffing services[28][142] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations (MD&A) Management attributes strong revenue growth to the Nurse and Allied segment, discusses rising costs, and maintains a positive outlook - Q3 2021 revenue increased 93% year-over-year to $374.9 million, driven by strong performance in the Nurse and Allied Staffing segment[137] - For the first time in company history, revenue for the nine-month period exceeded $1.0 billion[137] - Average bill rates are expected to rise again in the fourth quarter due to both COVID-19 and non-COVID-19 related needs, coupled with a tight labor market[138] Results of Operations Q3 revenue grew 93.3%, outpacing SG&A growth and indicating improved operating leverage despite higher direct operating costs Comparison of Q3 2021 vs Q3 2020 (in thousands) | Item | Q3 2021 | Q3 2020 | Change ($) | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Revenue from services | $374,905 | $193,968 | $180,937 | 93.3% | | Direct operating expenses | $291,111 | $145,965 | $145,146 | 99.4% | | SG&A expenses | $52,847 | $40,804 | $12,043 | 29.5% | | Income (loss) from operations | $26,447 | ($381) | $26,828 | NM | - Direct operating expenses as a percentage of revenue increased to 77.6% in Q3 2021 from 75.2% in Q3 2020, as compensation costs rose at a higher percentage than bill rates[153] Segment Results The Nurse and Allied segment drove growth with a 100.6% revenue increase, while the Physician Staffing segment also grew Segment Performance - Q3 2021 vs Q3 2020 | Segment / Metric | Q3 2021 | Q3 2020 | % Change | | :--- | :--- | :--- | :--- | | Nurse and Allied Revenue | $356.1M | $177.5M | +100.6% | | - FTEs | 9,003 | 5,403 | +66.6% | | - Avg. Revenue per FTE per day | $425 | $353 | +20.4% | | Physician Staffing Revenue | $18.8M | $16.5M | +14.1% | | - Days filled | 12,187 | 9,682 | +25.9% | | - Revenue per day filled | $1,540 | $1,699 | -9.4% | - The Nurse and Allied Staffing segment's contribution income margin improved to 11.4% in Q3 2021 from 10.1% in Q3 2020[179] Liquidity and Capital Resources The company managed liquidity with a new term loan and ABL facility, despite negative operating cash flow from receivable growth - Net cash used in operating activities was $12.3 million for the nine months of 2021, compared to $25.3 million provided in the same 2020 period, primarily due to a $122.9 million increase in receivables from strong growth[200] - The company entered into a new $100.0 million term loan on June 8, 2021, and amended its ABL credit facility, increasing its size to $150.0 million[202][204] - As of September 30, 2021, the company had $126.7 million available for borrowing under its ABL facility[139][207] Item 3. Quantitative and Qualitative Disclosures About Market Risk The company's primary market risk is variable interest rate exposure on its debt and the upcoming LIBOR phase-out - The company is exposed to variable interest rate risk from its Term Loan Agreement and ABL Credit Agreement[213] - A 1% change in interest rates would have fluctuated interest expense by approximately $0.7 million for the nine months ended September 30, 2021[214] - The company notes the risk related to the potential phase-out of LIBOR and its impact on its credit agreements[215] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures are effective as of September 30, 2021[217] - No changes occurred during the quarter that materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[218] PART II. OTHER INFORMATION Item 1. Legal Proceedings The company faces routine litigation deemed immaterial and secured a $1.6 million reimbursement for prior legal fees - The company is involved in various litigation, claims, and proceedings that arise in the ordinary course of business, primarily related to employee matters, professional liability, and tax practices[116][221] - In Q3 2021, the company arranged for a $1.6 million reimbursement for legal fees incurred in 2020 and 2021 related to a grand jury subpoena[116] Item 1A. Risk Factors Updated risks include potential pandemic impacts, uncertainty from the LIBOR phase-out, and liabilities from the WSG acquisition - The ongoing COVID-19 pandemic and related issues, such as vaccine mandates for healthcare workers, could negatively impact the supply of healthcare professionals and demand for services[222][224] - The planned phase-out of LIBOR by the end of 2021 creates uncertainty and could lead to higher interest payments on the company's variable-rate debt[229][230] - The company may face unforeseen liabilities from the WSG acquisition, and the sellers' indemnification obligations are limited, which could adversely impact financial results[231][233] Item 6. Exhibits This section lists filed exhibits, including Sarbanes-Oxley certifications from the CEO and CFO, and XBRL data files - The filing includes certifications by the CEO and CFO pursuant to Sarbanes-Oxley Act requirements[235] - Interactive Data Files (XBRL) are included as exhibits to the filing[235]