Cross ntry Healthcare(CCRN) - 2024 Q1 - Quarterly Results

First Quarter 2024 Financial Highlights Cross Country Healthcare's Q1 2024 results show significant declines in key financial metrics, though within guidance, with strategic adjustments for long-term growth Consolidated Financial Performance Cross Country Healthcare reported a significant decline in consolidated revenue, net income, and Adjusted EBITDA for Q1 2024 compared to the prior year and prior quarter, although these metrics were within guidance ranges. Gross profit margin also decreased Q1 2024 Consolidated Financial Performance | Metric | Q1 2024 | Variance Q1 2024 vs Q1 2023 | Variance Q1 2024 vs Q4 2023 | | :--------------------------------------- | :------ | :-------------------------- | :-------------------------- | | Revenue (in thousands) | $379,174 | (39)% | (8)% | | Gross profit margin* | 20.4% | (200) bps | (150) bps | | Net income attributable to common stockholders (in thousands) | $2,692 | (91)% | (70)% | | Diluted EPS | $0.08 | $(0.73) | $(0.18) | | Adjusted EBITDA* (in thousands) | $15,282 | (71)% | (26)% | | Adjusted EBITDA margin* | 4.0% | (440) bps | (100) bps | | Adjusted EPS* | $0.19 | $(0.65) | $(0.10) | | Cash flows provided by operations (in thousands) | $6,011 | (87)% | (50)% | - Revenue, Adjusted EBITDA, and Adjusted EPS were all within the company's guidance ranges for Q1 2024[1] CEO Commentary and Business Overview The CEO highlighted the company's ability to perform in a challenging market, noting positive momentum in physician staffing, homecare, and education. The company is adjusting its infrastructure due to near-term headwinds in contingent nursing labor, focusing on long-term growth and profitability as a tech-enabled workforce solutions provider - The company is pleased with momentum in physician staffing, homecare, and education[18] - Near-term headwinds for contingent nursing labor are leading the company to right-size its infrastructure while managing for the long-term[18] - The company's strategy is to execute as a tech-enabled workforce solutions provider, aiming for growth and improved profitability[18] Segment Performance Segment performance shows a significant decline in Nurse and Allied Staffing, while Physician Staffing demonstrates strong year-over-year growth Nurse and Allied Staffing The Nurse and Allied Staffing segment experienced significant year-over-year and sequential declines in revenue and contribution income, alongside a decrease in average field contract personnel and revenue per FTE per day Nurse and Allied Staffing Performance (Q1 2024) | Metric | Q1 2024 | Q1 2023 | Q4 2023 | YoY Change | QoQ Change | | :-------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Revenue (in thousands) | $332,200 | $582,302 | $367,155 | (43)% | (10)% | | Contribution income (in thousands) | $27,200 | $67,200 | $33,900 | (60)% | (20)% | | Average field contract personnel (FTE) | 9,124 | 12,518 | 9,570 | - | - | | Revenue per FTE per day | $397 | $513 | $414 | - | - | Physician Staffing The Physician Staffing segment demonstrated strong year-over-year growth in revenue and contribution income, with revenue remaining flat sequentially. Total days filled and revenue per day filled also increased year-over-year Physician Staffing Performance (Q1 2024) | Metric | Q1 2024 | Q1 2023 | Q4 2023 | YoY Change | QoQ Change | | :-------------------------------- | :------ | :------ | :------ | :--------- | :--------- | | Revenue (in thousands) | $47,000 | $40,405 | $46,880 | 16% | —% | | Contribution income (in thousands) | $3,100 | $1,700 | $1,900 | 82% | 61% | | Total days filled | 23,785 | 22,097 | 23,578 | - | - | | Revenue per day filled | $1,976 | $1,829 | $1,988 | - | - | Cash Flow and Balance Sheet Highlights The company reported a significant decrease in cash flow from operations year-over-year and sequentially. As of March 31, 2024, the company had no debt outstanding and maintained substantial borrowing base availability under its ABL facility. Share repurchases were also conducted during the quarter Cash Flow from Operations (in thousands) | Period | Net Cash Provided by Operating Activities | | :--------------------------------- | :-------------------------------------- | | Three months ended March 31, 2024 | $6,011 | | Three months ended March 31, 2023 | $46,865 | | Three months ended December 31, 2023 | $12,074 | - As of March 31, 2024, the Company had $5.2 million in cash and cash equivalents with no debt outstanding[6] - Borrowing base availability under the ABL was $200.1 million, with $186.3 million net of letters of credit[6] - The company repurchased approximately 300,000 shares of common stock for $6.4 million during the quarter[1][21] Second Quarter 2024 Outlook The company provides Q2 2024 guidance, anticipating continued year-over-year and sequential declines in key financial metrics Q2 2024 Guidance Cross Country Healthcare provided guidance for the second quarter of 2024, projecting further year-over-year and sequential declines in revenue, Adjusted EBITDA, and Adjusted EPS Q2 2024 Financial Guidance | Metric | Q2 2024 Range | YoY Change | QoQ Change | | :---------------- | :-------------------------- | :--------- | :--------- | | Revenue | $330 million - $340 million | (39)% - (37)% | (13)% - (10)% | | Adjusted EBITDA* | $10.0 million - $15.0 million | (77)% - (66)% | (35)% - (2)% | | Adjusted EPS* | $0.10 - $0.20 | $(0.59) - $(0.49) | $(0.09) - $0.01 | - The Q2 2024 estimates are forward-looking and do not include the potential impact of future divestitures, mergers, acquisitions, changes in debt structure, or significant share repurchases[36] Company Information Overview of Cross Country Healthcare's business, mission, and investor communication details About Cross Country Healthcare Cross Country Healthcare is a market-leading, tech-enabled workforce solutions and advisory firm with 38 years of experience, focused on solving labor challenges and achieving high-quality outcomes through data-driven insights. The company emphasizes diversity, equality, and inclusion as core to its corporate social responsibility - Cross Country Healthcare is a market-leading, tech-enabled workforce solutions and advisory firm with 38 years of industry experience[38] - The company helps clients address complex labor-related challenges and achieve high-quality outcomes by reducing complexity and improving visibility through data-driven insights[38] - Diversity, equality, and inclusion are central to the organization's corporate social responsibility program and core values[38] Conference Call and Investor Relations The company announced details for its Q1 2024 earnings conference call, including webcast and dial-in information, and provided resources for accessing press releases and SEC filings - A conference call to discuss Q1 2024 financial results was scheduled for Wednesday, May 1, 2024, at 5:00 P.M. Eastern Time[24] - The call was webcast live and accessible via the company's investor relations website (ir.crosscountry.com) or by phone[24] - Replays of the webcast and conference call were made available for a limited period[24] - Additional company information, press releases, and SEC filings can be accessed online at ir.crosscountry.com[25] Non-GAAP Financial Measures and Reconciliations This section explains the use of non-GAAP financial measures and provides detailed reconciliations to their GAAP equivalents Explanation of Non-GAAP Measures The company utilizes non-GAAP financial measures such as gross profit margin, Adjusted EBITDA, and Adjusted EPS to supplement GAAP results, believing they offer useful insights into operating performance and comparability. These measures exclude certain items not indicative of future operating performance, and reconciliations to comparable GAAP measures are provided - Non-GAAP financial measures (e.g., gross profit margin, Adjusted EBITDA, Adjusted EPS) are provided as additional information and are not substitutes for GAAP measures[39] - Management believes non-GAAP measures are useful for evaluating performance and provide a more useful comparison of underlying business performance by excluding items not indicative of future operating performance[39] - Reconciliations of non-GAAP financial measures to the most directly comparable GAAP financial measures are included in the financial statement tables[39] - The company has not provided reconciliations for forward-looking non-GAAP guidance (Adjusted EBITDA and Adjusted EPS) due to the inherent uncertainty and difficulty in predicting the impact and timing of potential charges or gains[26][27] Adjusted EBITDA Reconciliation The company provides a reconciliation of Net income attributable to common stockholders to Adjusted EBITDA, detailing adjustments for interest expense, income tax expense, depreciation and amortization, and various non-recurring or non-operating items Adjusted EBITDA Reconciliation (in thousands) | Item | March 31, 2024 | March 31, 2023 | December 31, 2023 | | :----------------------------------------- | :------------- | :------------- | :---------------- | | Net income attributable to common stockholders | $2,692 | $29,436 | $9,038 | | Interest expense | 462 | 3,690 | 586 | | Income tax expense | 997 | 10,683 | 3,931 | | Depreciation and amortization | 4,642 | 4,904 | 4,471 | | Restructuring costs | 938 | 429 | 863 | | Legal and other losses | 3,650 | 1,125 | — | | Impairment charges | 604 | — | — | | Other income, net | (1,230) | (20) | (175) | | Equity compensation | 1,198 | 1,775 | 1,166 | | System conversion costs | 1,329 | 129 | 668 | | Adjusted EBITDA | $15,282 | $52,141 | $20,592 | | Adjusted EBITDA margin | 4.0% | 8.4% | 5.0% | - Adjusted EBITDA is defined as net income (loss) attributable to common stockholders before interest expense, income tax expense (benefit), depreciation and amortization, acquisition and integration-related (benefits) costs, restructuring (benefits) costs, legal and other losses, impairment charges, and other specified non-operating items[34] Adjusted EPS Reconciliation The company presents a reconciliation of GAAP Diluted EPS to Adjusted EPS, adjusting for the per-share impact of restructuring costs, legal and other losses, impairment charges, other income, system conversion costs, and their tax effects Adjusted EPS Reconciliation | Item | March 31, 2024 | March 31, 2023 | December 31, 2023 | | :----------------------------------------- | :------------- | :------------- | :---------------- | | Diluted EPS, GAAP | $0.08 | $0.81 | $0.26 | | Non-GAAP adjustments - pretax: | | | | | Restructuring costs | 0.02 | 0.01 | 0.02 | | Legal and other losses | 0.10 | 0.03 | — | | Impairment charges | 0.02 | — | — | | Other income, net | (0.03) | — | — | | System conversion costs | 0.04 | — | 0.03 | | Tax impact of non-GAAP adjustments | (0.04) | (0.01) | (0.02) | | Adjusted EPS, non-GAAP | $0.19 | $0.84 | $0.29 | - Adjusted EPS is defined as net income (loss) attributable to common stockholders per diluted share before the diluted EPS impact of acquisition and integration-related (benefits) costs, restructuring (benefits) costs, legal and other losses, impairment charges, system conversion costs, and nonrecurring income tax adjustments[34] Forward-Looking Statements This section outlines the inherent risks and uncertainties associated with forward-looking statements, cautioning against undue reliance Disclaimer and Risk Factors The report includes forward-looking statements subject to known and unknown risks and uncertainties that could cause actual results to differ materially. These factors include macroeconomic conditions, demand for healthcare services, ability to attract personnel, cybersecurity risks, government regulation, and the impact of artificial intelligence, among others - Forward-looking statements are predictive in nature and involve known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially[41] - Key risk factors include the overall macroeconomic environment (inflation, interest rates), demand for healthcare services, ability to attract and retain qualified personnel, costs of short-term housing, information system functioning, cybersecurity risks, government regulation, and social/ethical/security issues related to AI[41] - Readers are cautioned not to place undue reliance on forward-looking statements, which reflect management's opinions only as of the press release date[28] - The company undertakes no obligation to update or revise forward-looking statements, except as required by law[28] Consolidated Financial Statements Comprehensive presentation of the company's consolidated statements of operations, balance sheets, and cash flows Consolidated Statements of Operations The Consolidated Statements of Operations provide a detailed breakdown of the company's revenues, operating expenses, and net income for the three months ended March 31, 2024, March 31, 2023, and December 31, 2023 Consolidated Statements of Operations (in thousands, except per share data) | Item | March 31, 2024 | March 31, 2023 | December 31, 2023 | | :----------------------------------------- | :------------- | :------------- | :---------------- | | Revenue from services | $379,174 | $622,707 | $414,035 | | Direct operating expenses | 301,877 | 483,284 | 323,546 | | Selling, general and administrative expenses | 63,252 | 84,260 | 67,566 | | Bad debt expense | 1,290 | 4,908 | 4,165 | | Depreciation and amortization | 4,642 | 4,904 | 4,471 | | Restructuring costs | 938 | 429 | 863 | | Legal and other losses | 3,650 | 1,125 | — | | Impairment charges | 604 | — | — | | Total operating expenses | 376,253 | 578,910 | 400,611 | | Income from operations | 2,921 | 43,797 | 13,424 | | Interest expense | 462 | 3,690 | 586 | | Other income, net | (1,230) | (12) | (131) | | Income before income taxes | 3,689 | 40,119 | 12,969 | | Income tax expense | 997 | 10,683 | 3,931 | | Net income attributable to common stockholders | $2,692 | $29,436 | $9,038 | | Net income per share - Diluted | $0.08 | $0.81 | $0.26 | | Weighted average common shares outstanding - Diluted | 34,597 | 36,560 | 34,685 | Consolidated Balance Sheets The Consolidated Balance Sheets present the company's financial position, including assets, liabilities, and stockholders' equity, as of March 31, 2024, and December 31, 2023 Consolidated Balance Sheets (in thousands) | Item | March 31, 2024 | December 31, 2023 | | :----------------------------------------- | :------------- | :---------------- | | Assets: | | | | Cash and cash equivalents | $5,242 | $17,094 | | Accounts receivable, net | 357,458 | 372,352 | | Total current assets | 387,318 | 415,153 | | Property and equipment, net | 28,200 | 27,339 | | Goodwill | 135,430 | 135,430 | | Total assets | $648,439 | $679,317 | | Liabilities and Stockholders' Equity: | | | | Accounts payable and accrued expenses | $68,921 | $85,333 | | Accrued compensation and benefits | 51,606 | 52,297 | | Total current liabilities | 128,442 | 148,587 | | Total liabilities | 180,249 | 205,924 | | Total stockholders' equity | 468,190 | 473,393 | | Total liabilities and stockholders' equity | $648,439 | $679,317 | Consolidated Statements of Cash Flows The Summary Condensed Consolidated Statements of Cash Flows detail the net cash provided by operating, investing, and financing activities for the three months ended March 31, 2024, March 31, 2023, and December 31, 2023 Summary Condensed Consolidated Statements of Cash Flows (in thousands) | Item | March 31, 2024 | March 31, 2023 | December 31, 2023 | | :-------------------------------- | :------------- | :------------- | :---------------- | | Net cash provided by operating activities | $6,011 | $46,865 | $12,074 | | Net cash used in investing activities | (2,210) | (3,496) | (2,875) | | Net cash used in financing activities | (15,653) | (46,681) | (6,416) | | Change in cash and cash equivalents | (11,852) | (3,313) | 2,793 | | Cash and cash equivalents at end of period | $5,242 | $291 | $17,094 | Segment Data and Other Financial Data This section provides detailed revenue and contribution income by segment, along with key operational statistics for Nurse and Allied Staffing and Physician Staffing, and definitions for various financial and statistical measures Segment Revenue and Contribution Income (in thousands) | Segment | Q1 2024 Revenue | Q1 2023 Revenue | Q4 2023 Revenue | Q1 2024 Contribution Income | Q1 2023 Contribution Income | Q4 2023 Contribution Income | | :-------------------- | :-------------- | :-------------- | :-------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Nurse and Allied Staffing | $332,186 | $582,302 | $367,155 | $27,183 | $67,169 | $33,901 | | Physician Staffing | $46,988 | $40,405 | $46,880 | $3,138 | $1,724 | $1,947 | | Total | $379,174 | $622,707 | $414,035 | $30,321 | $68,893 | $35,848 | Other Financial and Statistical Data | Metric | March 31, 2024 | March 31, 2023 | December 31, 2023 | | :---------------------------------------- | :------------- | :------------- | :---------------- | | Gross profit (in thousands) | $77,297 | $139,423 | $90,489 | | Consolidated gross profit margin | 20.4% | 22.4% | 21.9% | | Nurse and Allied Staffing FTEs | 9,124 | 12,518 | 9,570 | | Average Nurse and Allied Staffing revenue per FTE per day | $397 | $513 | $414 | | Physician Staffing Days filled | 23,785 | 22,097 | 23,578 | | Physician Staffing Revenue per day filled | $1,976 | $1,829 | $1,988 | - Definitions are provided for key financial measures such as Adjusted EBITDA, Adjusted EPS, Contribution income, and operational statistics like FTEs and Revenue per day filled[34]