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Cross Country Healthcare Announces First Quarter 2021 Financial Results

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Cross Country Healthcare, Inc. (the "Company") (Nasdaq: CCRN) today announced financial results for its first quarter ended March 31, 2021.

SELECTED FINANCIAL INFORMATION:

Variance

Variance

Q1 2021 vs

Q1 2021 vs

Dollars are in thousands, except per share amounts

Q1 2021

Q1 2020

Q4 2020

Revenue

$

329,241

57

%

53

%

Gross profit margin*

21.7

%

(190

)

bps

(350

)

bps

Net income attributable to common shareholders

$

19,448

1,031

%

322

%

Diluted EPS

$

0.53

$

0.59

$

0.40

Adjusted EBITDA*

$

26,733

480

%

132

%

Adjusted EBITDA margin*

8.1

%

590

bps

280

bps

Adjusted EPS*

$

0.58

$

0.59

$

0.39

Cash flows used in operations

$

(24,927

)

(245

)

%

(1,392

)

%

* Refer to accompanying tables and discussion of non-GAAP (Generally Accepted Accounting Principles) financial measures below.

"We entered the year on a very positive trajectory, with solid execution, higher productivity, and exceptional performance," said Kevin Clark, Co-founder and Chief Executive Officer for Cross Country Healthcare. He continued, "This was the single largest revenue quarter in our Company's history and was fueled by our passionate, tireless efforts to deliver the critical professionals needed across the country."

First quarter consolidated revenue was $329.2 million, an increase of 57% year-over-year and 53% sequentially. Consolidated gross profit margin was 21.7%, down 190 basis points year-over-year and 350 basis points sequentially. Net income attributable to common shareholders was $19.4 million compared to a net loss of $2.1 million in the prior year and net income of $4.6 million in the prior quarter. Diluted earnings per share (EPS) was $0.53 per share compared to a loss of $0.06 per share in the prior year and income of $0.13 per share in the prior quarter. Adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) was $26.7 million or 8.1% of revenue, as compared with $4.6 million or 2.2% of revenue in the prior year, and $11.5 million or 5.3% of revenue in the prior quarter. Adjusted EPS was $0.58 compared to a loss of $0.01 in the prior year and income of $0.19 in the prior quarter.

Quarterly Business Segment Highlights

In the first quarter of 2021, the Company modified its reportable segments to the following two reportable segments – Nurse and Allied Staffing and Physician Staffing. Previously reported Search segment results have been reclassified to Nurse and Allied Staffing. See accompanying tables below.

Nurse and Allied Staffing

Revenue was $313.0 million, an increase of 63% year-over-year and 57% sequentially. Contribution income was $37.4 million, an increase compared to $13.8 million in the prior year and $22.8 million in the prior quarter. Average field contract personnel on a full-time equivalent (FTE) basis were 6,614 as compared with 7,145 in the prior year and 5,798 in the prior quarter. Revenue per FTE per day was $522 compared to $290 in the prior year and $368 in the prior quarter. As a result of the rise in demand and a tight labor market, our average travel bill rates increased due to the increases in pay rates required to attract healthcare professionals. Throughout the coronavirus pandemic (COVID-19), we have worked with our clients to adjust bill rates, both increasing and decreasing rates as necessary, to provide critical healthcare professionals.

Physician Staffing

Revenue was $16.2 million, a decrease of 11% year-over-year and 1% sequentially. Contribution income was $1.4 million, an increase compared to $0.6 million in the prior year and $0.9 million in the prior quarter. Total days filled were 9,469 as compared with 10,199 in the prior year and 9,911 in the prior quarter. Revenue per day filled was $1,714 as compared with $1,783 in the prior year and $1,658 in the prior quarter.

Cash Flow and Balance Sheet Highlights

Cash flow used in operations for the quarter was $24.9 million compared to cash flow provided by operations of $17.2 million in the prior year and $1.9 million in the prior quarter, primarily due to strong sequential revenue growth which resulted in a $76.6 million increase in receivables since the start of the year. Days' sales outstanding was 56 days as of March 31, 2021, flat year-over-year and down 2 days sequentially.

At March 31, 2021, the Company had $13.5 million in cash and cash equivalents, $96.0 million of borrowings drawn under its asset-based loan facility (ABL), and $18.5 million of letters of credit outstanding. Availability under the ABL is subject to a borrowing base, which was $150.0 million as of March 31, 2021, with $35.5 million available for borrowing as of March 31, 2021.

Outlook for Second Quarter 2021

The guidance below applies to management’s expectations for the second quarter of 2021.

Q2 2021 Range

Year-over-Year

Sequential

Change

Change

Revenue

$300 million - $310 million

38% - 43%

(9)% - (6)%

Gross Profit Margin*

22.0% - 22.5%

(140) bps - (90) bps

30 bps - 80 bps

Adjusted EBITDA*

$19.0 million - $21.0 million

64% - 81%

(29)% - (21)%

Adjusted EPS*

$0.37 - $0.42

$0.21 - $0.26

$(0.21) - $(0.16)

* Refer to discussion of non-GAAP financial measures below.

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 share repurchases. We expect COVID-19 will continue to impact our business throughout the second quarter, with average bill rates remaining higher than the prior year though declining sequentially for certain assignments, as well as lower demand for certain services such as locum tenens, education, and search. See accompanying non-GAAP financial measures and tables below.

INVITATION TO CONFERENCE CALL

The Company will hold its quarterly conference call on Wednesday, May 5, 2021, at 5:00 P.M. Eastern Time to discuss its first quarter 2021 financial results. This call will be webcast live and can be accessed at the Company’s website at ir.crosscountryhealthcare.com or by dialing 888-566-1099 from anywhere in the U.S. or by dialing 773-799-3716 from non-U.S. locations - Passcode: Cross Country. A replay of the webcast will be available from May 5th through May 19th at the Company’s website and a replay of the conference call will be available by telephone by calling 800-510-0118 from anywhere in the U.S. or 203-369-3808 from non-U.S. locations - Passcode: 2021.

ABOUT CROSS COUNTRY HEALTHCARE

Cross Country Healthcare, Inc. (CCH) is a leader in providing total talent management including strategic workforce solutions, contingent staffing, permanent placement, and consultative services for healthcare customers. Leveraging our 35 years of industry expertise and insight, CCH solves complex labor-related challenges for customers while providing high-quality outcomes and exceptional patient care. As a multi-year Best of Staffing® Award winner, CCH is committed to an exceptionally high level of service to both our clients and our healthcare professionals. CCH was the first publicly traded staffing firm to obtain The Joint Commission Certification, which it still holds with a Letter of Distinction. In February 2021, CCH earned Energage’s inaugural 2021 Top Workplaces USA award. CCH has a longstanding history of investing in its diversity, equality, and inclusion strategic initiatives as a key component of the organization’s overall corporate social responsibility program which is closely aligned with its core values to create a better future for its people, communities, the planet, and its shareholders.

Copies of this and other news releases as well as additional information about the Company can be obtained online at ir.crosscountryhealthcare.com. Shareholders 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 U.S. 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 U.S. 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.

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, and are subject to the "safe harbor" created by those sections. Forward-looking statements consist of statements that are predictive in nature, 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. Forward-looking 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 potential impacts of the COVID-19 pandemic on our business, financial condition, and results of operations, 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, demand for the healthcare services we provide, both nationally and in the regions in which we operate, 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 clients 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 set forth in Item 1A. "Risk Factors" in the Companys Annual Report on Form 10-K for the year ended December 31, 2020, and in our 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 managements 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, and/or (iv) our strategy, which is based in part on this analysis, will be successful. The Company undertakes no obligation to update or revise forward-looking statements. All references to "we", "us", "our", or "Cross Country" in this press release mean Cross Country Healthcare, Inc. and its subsidiaries.

Cross Country Healthcare, Inc.

Consolidated Statements of Operations

(Unaudited, amounts in thousands, except per share data)

Three Months Ended

March 31,

March 31,

December 31,

2021

2020

2020

Revenue from services

$

329,241

$

210,064

$

215,606

Operating expenses:

Direct operating expenses

257,776

160,461

161,214

Selling, general and administrative expenses

46,327

45,881

44,870

Bad debt expense

504

539

652

Depreciation and amortization

2,253

3,296

2,199

Acquisition and integration-related costs

77

Restructuring costs

1,238

564

842

Impairment charges

149

166

Total operating expenses

308,247

210,818

209,943

Income (loss) from operations

20,994

(754

)

5,663

Other expenses (income):

Interest expense

671

867

671

Other (income) expense, net

(37

)

(31

)

326

Income (loss) before income taxes

20,360

(1,590

)

4,666

Income tax expense (benefit)

912

178

(156

)

Consolidated net income (loss)

19,448

(1,768

)

4,822

Less: Net income attributable to noncontrolling interest in subsidiary

321

210

Net income (loss) attributable to common shareholders

$

19,448

$

(2,089

)

$

4,612

Net income (loss) per share attributable to common shareholders - Basic

$

0.54

$

(0.06

)

$

0.13

Net income (loss) per share attributable to common shareholders - Diluted

$

0.53

$

(0.06

)

$

0.13

Weighted average common shares outstanding:

Basic

36,181

35,873

36,177

Diluted

37,034

35,873

36,778

Cross Country Healthcare, Inc.

Reconciliation of Non-GAAP Financial Measures

(Unaudited, amounts in thousands, except per share data)

Three Months Ended

March 31,

March 31,

December 31,

2021

2020

2020

Adjusted EBITDA:a

Net income (loss) attributable to common shareholders

$

19,448

$

(2,089

)

$

4,612

Interest expense

671

867

671

Income tax expense (benefit)

912

178

(156

)

Depreciation and amortization

2,253

3,296

2,199

Acquisition and integration-related costsb

77

Restructuring costsc

1,238

564

842

Legal settlements and feesd

375

600

Impairment chargese

149

166

Loss on disposal of fixed assets

364

Other income, net

(37

)

(31

)

(38

)

Equity compensation

1,349

927

1,340

Applicant tracking system costsf

375

502

690

Net income attributable to noncontrolling interest in subsidiaryg

321

210

Adjusted EBITDAa

$

26,733

$

4,612

$

11,500

Adjusted EBITDA margina

8.1

%

2.2

%

5.3

%

Adjusted EPS:h

Numerator:

Net income (loss) attributable to common shareholders

$

19,448

$

(2,089

)

$

4,612

Non-GAAP adjustments - pretax:

Acquisition and integration-related costsb

77

Restructuring costsc

1,238

564

842

Legal settlements and feesd

375

600

Impairment charges (excluding rebranding impacts)e

149

166

Rebranding impairments and accelerated amortizatione

731

Applicant tracking system costsf

375

502

690

Nonrecurring income tax adjustments

(18

)

Tax impact of non-GAAP adjustments

(2

)

(12

)

(2

)

Adjusted net income (loss) attributable to common shareholders - non-GAAP

$

21,583

$

(227

)

$

6,890

Denominator:

Weighted average common shares - basic, GAAP

36,181

35,873

36,177

Dilutive impact of share-based paymentsi

853

455

601

Adjusted weighted average common shares - diluted, non-GAAP

37,034

36,328

36,778

Reconciliation:

Diluted EPS, GAAP

$

0.53

$

(0.06

)

$

0.13

Non-GAAP adjustments - pretax:

Restructuring costsc

0.03

0.02

0.02

Legal settlements and feesd

0.01

0.02

Rebranding impairments and accelerated amortizatione

0.02

Applicant tracking system costsf

0.01

0.01

0.02

Adjusted EPS, non-GAAPh

$

0.58

$

(0.01

)

$

0.19

Cross Country Healthcare, Inc.

Consolidated Balance Sheets

(Unaudited, amounts in thousands)

March 31,

December 31,

2021

2020

Assets

Current assets:

Cash and cash equivalents

$

13,488

$

1,600

Accounts receivable, net

245,489

170,003

Prepaid expenses

5,430

5,455

Insurance recovery receivable

4,752

4,698

Other current assets

575

1,355

Total current assets

269,734

183,111

Property and equipment, net

13,026

12,351

Operating lease right-of-use assets

9,835

10,447

Goodwill

90,924

90,924

Trade names, indefinite-lived

5,900

5,900

Other intangible assets, net

33,341

34,831

Other non-current assets

19,593

19,409

Total assets

$

442,353

$

356,973

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued expenses

$

59,797

$

49,877

Accrued employee compensation and benefits

53,383

35,540

Operating lease liabilities - current

4,803

4,509

Other current liabilities

3,677

3,497

Total current liabilities

121,660

93,423

Revolving credit facility

96,025

53,408

Operating lease liabilities - non-current

13,978

15,234

Non-current deferred tax liabilities

6,858

6,592

Long-term accrued claims

24,624

25,412

Other long-term liabilities

5,534

7,995

Total liabilities

268,679

202,064

Commitments and contingencies

Stockholders' equity:

Common stock

4

4

Additional paid-in capital

309,711

310,388

Accumulated other comprehensive loss

(1,286

)

(1,280

)

Accumulated deficit

(135,289

)

(154,737

)

Total Cross Country Healthcare, Inc. stockholders' equity

173,140

154,375

Noncontrolling interest in subsidiary

534

534

Total stockholders' equity

173,674

154,909

Total liabilities and stockholders' equity

$

442,353

$

356,973

Cross Country Healthcare, Inc.

Segment Dataj

(Unaudited, amounts in thousands)

Three Months Ended

Year-over-
Year

Sequential

March 31,

% of

March 31,

% of

December 31,

% of

% change

% change

2021

Total

2020

Total

2020

Total

Fav (Unfav)

Fav (Unfav)

Revenue from services:

Nurse and Allied Staffing

$

313,008

95

%

$

191,883

91

%

$

199,177

92

%

63

%

57

%

Physician Staffing

16,233

5

%

18,181

9

%

16,429

8

%

(11

)%

(1

)%

$

329,241

100

%

$

210,064

100

%

$

215,606

100

%

57

%

53

%

Contribution income:k

Nurse and Allied Staffing

$

37,417

$

13,822

$

22,835

171

%

64

%

Physician Staffing

1,428

631

942

126

%

52

%

38,845

14,453

23,777

169

%

63

%

Corporate overheadl

14,211

11,270

14,907

(26

)%

5

%

Depreciation and amortization

2,253

3,296

2,199

32

%

(2

)%

Acquisition and integration-related costsb

77

100

%

%

Restructuring costsc

1,238

564

842

(120

)%

(47

)%

Impairment chargese

149

166

(100

)%

10

%

Income (loss) from operations

$

20,994

$

(754

)

$

5,663

NM

271

%

NM-Not meaningful

Cross Country Healthcare, Inc.

Summary Condensed Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)

Three Months Ended

March 31,

March 31,

December 31,

2021

2020

2020

Net cash (used in) provided by operating activities

$

(24,927

)

$

17,162

$

1,929

Net cash used in investing activities

(1,186

)

(962

)

(956

)

Net cash provided by (used in) financing activities

38,004

(4,599

)

(2,827

)

Effect of exchange rate changes on cash

(3

)

(34

)

8

Change in cash and cash equivalents

11,888

11,567

(1,846

)

Cash and cash equivalents at beginning of period

1,600

1,032

3,446

Cash and cash equivalents at end of period

$

13,488

$

12,599

$

1,600

Cross Country Healthcare, Inc.

Other Financial Data

(Unaudited)

Three Months Ended

March 31,

March 31,

December 31,

2021

2020

2020

Consolidated gross profit marginm

21.7

%

23.6

%

25.2

%

Nurse and Allied Staffing statistical data:

FTEsn

6,614

7,145

5,798

Average Nurse and Allied Staffing revenue per FTE per dayo

$

522

$

290

$

368

Physician Staffing statistical data:

Days filledp

9,469

10,199

9,911

Revenue per day filledq

$

1,714

$

1,783

$

1,658

(a)

Adjusted EBITDA, a non-GAAP financial measure, is defined as net (loss) income attributable to common shareholders before interest expense, income tax expense (benefit), depreciation and amortization, acquisition and integration-related costs, restructuring costs, legal settlements and fees, impairment charges, gain or loss on derivative, loss on early extinguishment of debt, gain or loss on disposal of fixed assets, gain or loss on sale of business, other expense (income), net, equity compensation, applicant tracking system costs, and includes net income attributable to noncontrolling interest in subsidiary. Adjusted EBITDA should not be considered a measure of financial performance under GAAP. Management presents Adjusted EBITDA because it believes that Adjusted EBITDA is a useful supplement to net income attributable to common shareholders as an indicator of operating performance. Management uses Adjusted EBITDA for planning purposes and as one performance measure in its incentive programs for certain members of its management team. Adjusted EBITDA, as defined, closely matches the operating measure typically used in the Company's credit facilities in calculating various ratios. Adjusted EBITDA Margin is calculated by dividing Adjusted EBITDA by the Company's consolidated revenue.

(b)

Acquisition and integration-related costs include costs for valuation adjustments related to the contingent consideration liability for the Mediscan acquisition.

(c)

Restructuring costs are primarily comprised of employee termination costs, lease-related exit costs, and reorganization costs as part of planned cost savings initiatives.

(d)

Legal settlements and fees include legal settlement charges as presented on the consolidated statements of operations as well as legal fees pertaining to non-operational legal matters which are included in selling, general and administrative expenses. For the three months ended March 31, 2021 and December 30, 2020, we incurred legal fees related to various legal matters outside the normal course of operations.

(e)

Impairment charges of $0.1 million for the three months ended March 31, 2021 related to the write-off of a discontinued software development project. Impairment charges of $0.2 million for the three months ended December 31, 2020 related to right-of-use assets and related property and equipment in connection with leases that were vacated during the second and third quarters of 2020. Rebranding impairments and accelerated amortization related to finite-lived trade names in connection with the rebranding initiatives.

(f)

Applicant tracking system costs are related to the Company's project to replace its legacy system supporting its travel nurse staffing business. These costs are reported in selling, general and administrative expenses on the consolidated statement of operations and included in corporate overhead in segment data.

(g)

Cross Country Talent Acquisition Group, LLC was controlled by the Company but not wholly owned. The Company recorded the ownership interest of the noncontrolling shareholder as noncontrolling interest in subsidiary. Effective December 31, 2020, the sole professional staffing services agreement held by this joint venture was terminated. The Company subsequently entered into a direct staffing agreement with the hospital system.

(h)

Adjusted EPS, a non-GAAP financial measure, is defined as net (loss) income attributable to common shareholders per diluted share before the diluted EPS impact of acquisition and integration-related costs, restructuring costs, legal settlements and fees, impairment charges, rebranding impairments and accelerated amortization, gain or loss on derivative, loss on early extinguishment of debt, gain or loss on sale of business, applicant tracking system costs, and nonrecurring income tax adjustments. Adjusted EPS should not be considered a measure of financial performance under GAAP. Management presents Adjusted EPS because it believes that Adjusted EPS is a useful supplement to its reported EPS as an indicator of operating performance. Management believes it provides a more useful comparison of the Company's underlying business performance from period to period and is more representative of the future earnings capacity of the Company.

(i)

Due to the net loss for the three months ended March 31, 2020, 455 shares (in thousands) were excluded from diluted weighted average shares.

(j)

Segment data provided is in accordance with the Segment Reporting Topic of the FASB ASC. In the first quarter of 2021, the Company modified its reportable segments and disclosed two reportable segments - Nurse and Allied Staffing and Physician Staffing beginning in the first quarter of 2021. Revenue in the amount of $2.8 million and $3.6 million, and contribution income of $0.6 million and contribution loss of $0.3 million, included in the previously-reported Search segment have been reclassified to Nurse and Allied Staffing for the three months ended December 31, 2020 and March 31, 2020, respectively.

(k)

Contribution income is defined as income (loss) from operations before depreciation and amortization, acquisition and integration-related costs, restructuring costs, legal settlement charges, impairment charges, and corporate overhead. Contribution income is a financial measure used by management when assessing segment performance.

(l)

Corporate overhead includes unallocated executive leadership and other centralized corporate functional support costs such as finance, IT, legal, human resources, and marketing, as well as public company expenses and corporate-wide projects (initiatives).

(m)

Gross profit is defined as revenue from services less direct operating expenses. The Company's gross profit excludes allocated depreciation and amortization expense. Gross profit margin is calculated by dividing gross profit by revenue from services.

(n)

FTEs represent the average number of Nurse and Allied Staffing contract personnel on a full-time equivalent basis.

(o)

Average revenue per FTE per day is calculated by dividing Nurse and Allied Staffing revenue, excluding permanent placement, per FTE by the number of days worked in the respective periods.

(p)

Days filled is calculated by dividing the total hours invoiced during the period, including an estimate for the impact of accrued revenue, by 8 hours.

(q)

Revenue per day filled is calculated by dividing revenue as reported by days filled for the period presented.

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Contacts

Cross Country Healthcare, Inc.
William J. Burns, Executive Vice President & Chief Financial Officer
561-237-2555
wburns@crosscountry.com