CCRN - Cross Country Healthcare Announces Second Quarter 2023 Financial Results

Cross Country Healthcare, Inc. (the "Company") (Nasdaq: CCRN) today announced financial results for its second quarter ended June 30, 2023.

SELECTED FINANCIAL INFORMATION:

Second Quarter Business Highlights

• Revenue and Adjusted EPS exceeded guidance ranges
• Physician Staffing reported strong revenue growth of 105% year-over-year and 12% sequentially
• Travel demand increased throughout the quarter
• Strong quarterly operating cash flows of $119 million
• Repaid the full balance of $73.9 million on the term loan
• Repurchased approximately 200,000 shares of common stock for $4.7 million

“We are pleased that second quarter results met or exceeded our guidance ranges, reflecting strong execution in an environment where health systems remain focused on managing contingent labor spend,” said John A. Martins, President and Chief Executive Officer of Cross Country Healthcare. He continued, “Since the launch of Intellify, our proprietary vendor management system, we have successfully converted nearly half of our Managed Service Programs, saving us millions of dollars annually. Beyond the efficiencies this brings to Cross Country, we are excited about the opportunity that our technology offers clients to optimize their workforce, and to further improve our profitability as we continue to penetrate the vendor neutral space.”

Second quarter consolidated revenue was $540.7 million, a decrease of 28% year-over-year and 13% sequentially. Consolidated gross profit margin was 22.8%, up 20 basis points year-over-year and 40 basis points sequentially. Net income attributable to common stockholders was $21.3 million compared to $52.9 million in the prior year and $29.4 million in the prior quarter. Diluted earnings per share (EPS) was $0.60 compared to $1.40 in the prior year and $0.81 in the prior quarter. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $44.4 million or 8.2% of revenue, as compared with $83.5 million or 11.1% of revenue in the prior year, and $52.1 million or 8.4% of revenue in the prior quarter. Adjusted EPS was $0.69 compared to $1.40 in the prior year and $0.84 in the prior quarter.

For the six months ended June 30, 2023, consolidated revenue was $1.2 billion, a decrease of 25% year-over-year. Consolidated gross profit margin was 22.6%, up 20 basis points year-over-year. Net income attributable to common stockholders was $50.8 million, or $1.41 per diluted share, compared to $114.9 million, or $3.03 per diluted share, in the prior year. Adjusted EBITDA was $96.6 million or 8.3% of revenue, as compared with $180.9 million or 11.7% of revenue in the prior year. Adjusted EPS was $1.53 compared to $3.10 in the prior year.

Quarterly Business Segment Highlights

Nurse and Allied Staffing

Revenue was $495.4 million, a decrease of 32% year-over-year and 15% sequentially. Contribution income was $56.5 million, a decrease from $97.6 million year-over-year and $67.2 million sequentially. Average field contract personnel on a full-time equivalent (FTE) basis were 11,385 as compared with 13,494 in the prior year and 12,518 in the prior quarter. Revenue per FTE per day was $474 compared to $591 in the prior year and $513 in the prior quarter. As expected, travel bill rates continued to normalize throughout the quarter and the number of professionals on assignment declined as clients continue to right-size their needs.

Physician Staffing

Revenue was $45.3 million, an increase of 105% year-over-year and 12% sequentially. Contribution income was $3.5 million, an increase from $1.2 million year-over-year and $1.7 million sequentially. Total days filled were 23,826 as compared with 12,416 in the prior year and 22,097 in the prior quarter. Revenue per day filled was $1,902 as compared with $1,781 in the prior year and $1,829 in the prior quarter. The year-over-year increase in revenue was driven by an increase in volume in several specialties. The year-over-year increase in contribution income was driven by higher revenue.

Cash Flow and Balance Sheet Highlights

Net cash provided by operating activities for the quarter was $119.2 million, due to continued profitability as well as a seven day sequential improvement in days' sales outstanding. For the six months ended June 30, 2023, net cash provided by operating activities was $166.1 million as compared to $10.9 million used in operating activities in the prior year.

During the second quarter, the Company repurchased and retired a total of 0.2 million shares of the Company's common stock for an aggregate price of $4.7 million, at an average market price of $23.78 per share. During the second quarter of 2023, the Company's Board of Directors authorized the replenishment of the amount remaining for share repurchases back to $100 million, effective for trades after May 3, 2023. As of June 30, 2023, the Company had 35.3 million unrestricted shares outstanding and $98.4 million remaining for share repurchases.

On June 30, 2023, the Company repaid outstanding obligations of $73.9 million under the term loan, and terminated the debt agreement. At June 30, 2023, the Company had $0.7 million in cash and cash equivalents, with $31.0 million of borrowings drawn under its revolving senior secured asset-based credit facility (ABL), and $18.2 million of letters of credit outstanding. As of June 30, 2023, borrowing base availability under the ABL was $289.2 million, with $240.0 million of excess availability.

Outlook for Third Quarter 2023

The guidance below applies to management’s expectations for the third quarter of 2023.

The above estimates are based on current management expectations and, as such, are forward-looking and actual results may differ materially. The above ranges do not include the potential impact of any future divestitures, mergers, acquisitions, or other business combinations, changes in debt structure, or future significant share repurchases. The Company has updated its 2023 annual minimum guidance to at least $2.05 billion in revenue and a full year Adjusted EBITDA margin of approximately 8%.

See accompanying non-GAAP financial measures and tables below.

INVITATION TO CONFERENCE CALL

The Company will hold its quarterly conference call on Wednesday, August 2, 2023, at 5:00 P.M. Eastern Time to discuss its second quarter 2023 financial results. This call will be webcast live and can be accessed at the Company’s website at ir.crosscountry.com or by dialing 888-566-1290 from anywhere in the U.S. or by dialing 773-799-3776 from non-U.S. locations - Passcode: Cross Country. A replay of the webcast will be available from August 2nd through August 16th on the Company’s website and a replay of the conference call will be available by telephone by calling 800-819-5743 from anywhere in the U.S. or 203-369-3828 from non-U.S. locations - Passcode: 1402.

ABOUT CROSS COUNTRY HEALTHCARE

Cross Country Healthcare, Inc. is a market-leading, tech-enabled workforce solutions and advisory firm with 37 years of industry experience and insight. We help clients tackle complex labor-related challenges and achieve high-quality outcomes, while reducing complexity and improving visibility through data-driven insights. Diversity, equality, and inclusion is at the heart of the organization’s overall corporate social responsibility program, and closely aligned with our core values to create a better future for its people, communities, and its stockholders.

Copies of this and other press releases, as well as additional information about the Company, can be accessed online at ir.crosscountry.com. Stockholders and prospective investors can also register to automatically receive the Company’s press releases, filings with the Securities and Exchange Commission (SEC), and other notices by e-mail.

NON-GAAP FINANCIAL MEASURES

This press release and the accompanying financial statement tables reference non-GAAP financial measures, such as gross profit margin, adjusted EBITDA, and adjusted EPS. Such non-GAAP financial measures are provided as additional information and should not be considered substitutes for, or superior to, financial measures calculated in accordance with United States generally accepted accounting principles (GAAP). Such non-GAAP financial measures are provided for consistency and comparability to prior year results; furthermore, management believes they are useful to investors when evaluating the Company's performance as they exclude certain items that management believes are not indicative of the Company's future operating performance. Pro forma measures, if applicable, are adjusted to include the results of our acquisitions, and exclude the results of divestments, as if the transactions occurred in the beginning of the periods mentioned. Such non-GAAP financial measures may differ materially from the non-GAAP financial measures used by other companies. The financial statement tables that accompany this press release include a reconciliation of each non-GAAP financial measure to the most directly comparable GAAP financial measure and a more detailed discussion of each financial measure; as such, the financial statement tables should be read in conjunction with the presentation of these non-GAAP financial measures.

In addition, forward-looking adjusted EBITDA and adjusted EPS for fiscal 2023 exclude potential charges or gains that may be recorded during the fiscal year, including among other things, the potential impact of any future divestitures, mergers, acquisitions, or other business combinations, changes in debt structure, or future significant share repurchases. We have not attempted to provide reconciliations of such forward-looking non-GAAP earnings guidance to the comparable GAAP measure, as permitted by Item 10(e)(1)(i)(B) of Regulation S-K, because the impact and timing of these potential charges or gains is inherently uncertain and difficult to predict and is unavailable without unreasonable efforts. In addition, the Company believes such reconciliations would imply a degree of precision and certainty that could be confusing to investors. Such items could have a substantial impact on GAAP measures of our financial performance.

FORWARD-LOOKING STATEMENTS

In addition to historical information, this press release contains statements relating to our future results (including certain projections and business trends) that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, Section 21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the Private Securities Litigation Reform Act of 1995, and are subject to the "safe harbor" created by those sections. Forward-looking statements consist of statements that are predictive in nature and/or depend upon or refer to future events. Words such as "expects", "anticipates", "intends", "plans", "believes", "estimates", "suggests", "appears", "seeks", "will", "could", and variations of such words and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results and performance to be materially different from any future results or performance expressed or implied by these forward-looking statements. These factors include, but are not limited to, the following: the overall macroeconomic environment, including increased inflation and interest rates, demand for the healthcare services we provide, both nationally and in the regions in which we operate, our ability to attract and retain qualified nurses, physicians and other healthcare personnel, costs and availability of short-term housing for our travel healthcare professionals, the functioning of our information systems, the effect of cyber security risks and cyber incidents on our business, the effect of existing or future government regulation and federal and state legislative and enforcement initiatives on our business, our customers ’ ability to pay us for our services, our ability to successfully implement our acquisition and development strategies, including our ability to successfully integrate acquired businesses and realize synergies from such acquisitions, the effect of liabilities and other claims asserted against us, the effect of competition in the markets we serve, our ability to successfully defend the Company, its subsidiaries, and its officers and directors on the merits of any lawsuit or determine its potential liability, if any, and other factors, including, without limitation, the risk factors set forth in Item 1A. "Risk Factors" in the Company ’ s Annual Report on Form 10-K for the year ended December 31, 2022, as filed and updated in our Quarterly Reports on Form 10-Q and other filings with the SEC. You should consult any further disclosures the Company makes on related subjects in its filings with the SEC.

Although we believe that these statements are based upon reasonable assumptions, we cannot guarantee future results and readers are cautioned not to place undue reliance on these forward-looking statements, which reflect management ’ s opinions only as of the date of this press release. There can be no assurance that (i) we have correctly measured or identified all of the factors affecting our business or the extent of these factors ’ likely impact, (ii) the available information with respect to these factors on which such analysis is based is complete or accurate, (iii) such analysis is correct, or (iv) our strategy, which is based in part on this analysis, will be successful. Except as may be required by law, the Company undertakes no obligation to update or revise forward-looking statements. All references to "the Company", "we", "us", "our", or "Cross Country" in this press release mean Cross Country Healthcare, Inc. and its consolidated subsidiaries.