Cross Country Healthcare Announces First Quarter 2020 Financial Results

Variance

Variance

Q1 2020 vs

Q1 2020 vs

Dollars are in thousands, except per share amounts

Q1 2020

Q1 2019

Q4 2019

Revenue

$

210,064

8

%

(2)

%

Gross profit margin*

23.6

%

(110)

bps

(110)

bps

Net loss attributable to common shareholders

$

(2,089)

(18)

%

(83)

%

Diluted EPS

$

(0.06)

$

(0.01)

$

(0.03)

Adjusted EBITDA*

$

4,612

28

%

(44)

%

Adjusted EPS*

$

(0.01)

$

(0.03)

$

(0.08)

Cash flows provided by operations

$

17,162

34

%

421

%

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,

2020

2019

2019

Revenue from services

$

210,064

$

195,171

$

215,096

Operating expenses:

Direct operating expenses

160,461

146,917

161,935

Selling, general and administrative expenses

45,881

46,036

45,572

Bad debt expense

539

270

505

Depreciation and amortization

3,296

2,984

4,627

Acquisition and integration-related costs (a)

77

512

(184

)

Restructuring costs (b)

564

1,140

687

Total operating expenses

210,818

197,859

213,142

(Loss) income from operations

(754

)

(2,688

)

1,954

Other expenses (income):

Interest expense

867

1,422

1,048

Loss on early extinguishment of debt (c)

—

360

1,470

Other (income) expense, net

(31

)

(82

)

144

Loss before income taxes

(1,590

)

(4,388

)

(708

)

Income tax expense (benefit)

178

(3,012

)

(108

)

Consolidated net loss

(1,768

)

(1,376

)

(600

)

Less: Net income attributable to noncontrolling interest in subsidiary

321

391

544

Net loss attributable to common shareholders

$

(2,089

)

$

(1,767

)

$

(1,144

)

Net loss per share attributable to common shareholders - Basic and Diluted

$

(0.06

)

$

(0.05

)

$

(0.03

)

Weighted average common shares outstanding:

Basic and Diluted (d)

35,873

35,700

35,869

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,

2020

2019

2019

Adjusted EBITDA: (e)

Net loss attributable to common shareholders

$

(2,089

)

$

(1,767

)

$

(1,144

)

Interest expense

867

1,422

1,048

Income tax expense (benefit)

178

(3,012

)

(108

)

Depreciation and amortization

3,296

2,984

4,627

Acquisition and integration-related costs (a)

77

512

(184

)

Restructuring costs (b)

564

1,140

687

Loss on early extinguishment of debt (c)

—

360

1,470

Other (income) expense, net

(31

)

(82

)

144

Equity compensation

927

531

879

Applicant tracking system costs (f)

502

1,134

323

Net income attributable to noncontrolling interest in subsidiary

321

391

544

Adjusted EBITDA (e)

$

4,612

$

3,613

$

8,286

Adjusted EPS: (g)

Numerator:

Net loss attributable to common shareholders

$

(2,089

)

$

(1,767

)

$

(1,144

)

Non-GAAP adjustments - pretax:

Acquisition and integration-related costs (a)

77

512

(184

)

Restructuring costs (b)

564

1,140

687

Rebranding impairments and accelerated amortization (h)

731

—

1,978

Loss on early extinguishment of debt (c)

—

360

1,470

Applicant tracking system costs (f)

502

1,134

323

Nonrecurring income tax adjustments

—

—

(428

)

Tax impact of non-GAAP adjustments

(12

)

(834

)

—

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

$

(227

)

$

545

$

2,702

Denominator:

Weighted average common shares - basic, GAAP

35,873

35,700

35,869

Dilutive impact of share-based payments (d)

455

97

472

Adjusted weighted average common shares - diluted, non-GAAP

36,328

35,797

36,341

Reconciliation: (g)

Diluted EPS, GAAP

$

(0.06

)

$

(0.05

)

$

(0.03

)

Non-GAAP adjustments - pretax:

Acquisition and integration-related costs (a)

—

0.02

(0.01

)

Restructuring costs (b)

0.02

0.03

0.02

Rebranding impairments and accelerated amortization (h)

0.02

—

0.05

Loss on early extinguishment of debt (c)

—

0.01

0.04

Applicant tracking system costs (f)

0.01

0.03

0.01

Nonrecurring income tax adjustments

—

—

(0.01

)

Tax impact of non-GAAP adjustments

—

(0.02

)

—

Adjusted EPS, non-GAAP (g)

$

(0.01

)

$

0.02

$

0.07

Cross Country Healthcare, Inc.

Consolidated Balance Sheets

(Unaudited, amounts in thousands)

March 31,

December 31,

2020

2019

Assets

Current assets:

Cash and cash equivalents

$

12,599

$

1,032

Accounts receivable, net

164,801

169,528

Prepaid expenses

6,374

6,097

Insurance recovery receivable

5,130

5,011

Other current assets

1,726

1,689

Total current assets

190,630

183,357

Property and equipment, net

11,965

11,832

Operating lease right-of-use assets

16,263

16,964

Goodwill

101,066

101,066

Trade names, indefinite-lived

5,900

5,900

Other intangible assets, net

42,483

44,957

Other non-current assets

18,672

18,298

Total assets

$

386,979

$

382,374

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued expenses

$

51,095

$

45,726

Accrued employee compensation and benefits

37,199

31,307

Operating lease liabilities - current

4,965

4,878

Other current liabilities

5,743

3,554

Total current liabilities

99,002

85,465

Revolving credit facility

67,648

70,974

Operating lease liabilities - non-current

17,992

19,070

Non-current deferred tax liabilities

7,555

7,523

Long-term accrued claims

27,392

26,938

Contingent consideration

—

4,867

Other long-term liabilities

5,988

4,037

Total liabilities

225,577

218,874

Commitments and contingencies

Stockholders' equity:

Common stock

4

4

Additional paid-in capital

305,935

305,643

Accumulated other comprehensive loss

(1,318

)

(1,240

)

Accumulated deficit

(143,864

)

(141,775

)

Total Cross Country Healthcare, Inc. stockholders' equity

160,757

162,632

Noncontrolling interest in subsidiary

645

868

Total stockholders' equity

161,402

163,500

Total liabilities and stockholders' equity

$

386,979

$

382,374

Cross Country Healthcare, Inc.

Segment Data (i)

(Unaudited, amounts in thousands)

Three Months Ended

Year-over-Year

Sequential

March 31,

% of

March 31,

% of

December 31,

% of

% change

% change

2020

Total

2019

Total

2019

Total

Fav (Unfav)

Fav (Unfav)

Revenue from services:

Nurse and Allied Staffing

$

188,233

89

%

$

175,637

90

%

$

191,417

89

%

7

%

(2

)%

Physician Staffing

18,181

9

%

16,159

8

%

20,011

9

%

13

%

(9

)%

Search

3,650

2

%

3,375

2

%

3,668

2

%

8

%

—

%

$

210,064

100

%

$

195,171

100

%

$

215,096

100

%

8

%

(2

)%

Contribution income (loss): (j)

Nurse and Allied Staffing

$

14,157

$

14,296

$

17,849

(1

)%

(21

)%

Physician Staffing

631

405

1,034

56

%

(39

)%

Search

(335

)

(423

)

(297

)

21

%

(13

)%

14,453

14,278

18,586

1

%

(22

)%

Corporate overhead (k)

11,270

12,330

11,502

9

%

2

%

Depreciation and amortization

3,296

2,984

4,627

(10

)%

29

%

Acquisition and integration-related costs (a)

77

512

(184

)

85

%

(142

)%

Restructuring costs (b)

564

1,140

687

51

%

18

%

(Loss) income from operations

$

(754

)

$

(2,688

)

$

1,954

72

%

(139

)%

Cross Country Healthcare, Inc.

Summary Condensed Consolidated Statements of Cash Flows

(Unaudited, amounts in thousands)

Three Months Ended

March 31,

March 31,

December 31,

2020

2019

2019

Net cash provided by operating activities

$

17,162

$

12,787

$

(5,351

)

Cash used in investing activities

(962

)

(1,245

)

(898

)

Net cash used in financing activities

(4,599

)

(9,295

)

(2,186

)

Effect of exchange rate changes on cash

(34

)

20

9

Change in cash and cash equivalents

11,567

2,267

(8,426

)

Cash and cash equivalents at beginning of period

1,032

16,019

9,458

Cash and cash equivalents at end of period

$

12,599

$

18,286

$

1,032

Cross Country Healthcare, Inc.

Other Financial Data

(Unaudited)

Three Months Ended

March 31,

March 31,

December 31,

2020

2019

2019

Consolidated gross profit margin (l)

23.6

%

24.7

%

24.7

%

Nurse and Allied Staffing statistical data:

FTEs (m)

7,145

7,017

7,339

Average Nurse and Allied Staffing revenue per FTE per day (n)

$

290

$

278

$

284

Physician Staffing statistical data:

Days filled (o)

10,199

10,280

11,672

Revenue per day filled (p)

$

1,783

$

1,572

$

1,714

Acquisition and integration-related costs include costs for prior acquisitions, costs incurred for potential transactions, and accretion and valuation adjustments on our contingent consideration liability related to the Mediscan acquisition.

(b)

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

(c)

Loss on early extinguishment of debt for the three months ended December 31, 2019 represents write-off and extinguishment costs of $1.5 million related to the refinancing of our debt, and for the three months ended March 31, 2019 represents the write-off of debt issuance costs of $0.4 million related to an optional prepayment on our prior term loan and an optional reduction in borrowing capacity under our prior revolving credit facility.

(d)

Due to the net loss for the three months ended March 31, 2020 and 2019, and December 31, 2019, 455, 97, and 472 shares (in thousands) were excluded from diluted weighted average shares.

(e)

Adjusted EBITDA, a non-GAAP (Generally Accepted Accounting Principles) financial measure, is defined as net (loss) income attributable to common shareholders before interest expense, income tax expense (benefit), depreciation and amortization, acquisition-related contingent consideration, acquisition and integration costs, restructuring costs, legal settlement charges, impairment charges, gain or loss on derivative, loss on early extinguishment of debt, 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.

(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)

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-related contingent consideration, acquisition and integration costs, restructuring costs, legal settlement charges, 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.

(h)

Rebranding impairments and accelerated amortization represents the combined impact of impairment of the Nurse and Allied Staffing indefinite-lived trade names as well as accelerated amortization of finite-lived trade names relating to our rebranding initiatives.

(i)

Segment data provided is in accordance with the Segment Reporting Topic of the FASB ASC. In the second quarter of 2019, the Company merged its permanent search recruitment brands. As a result, certain amounts have been reclassified from Nurse and Allied Staffing to Search to conform to the current year presentation.

(j)

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

(k)

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).

(l)

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.

(m)

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

(n)

Average revenue per FTE per day is calculated by dividing the Nurse and Allied Staffing revenue per FTE by the number of days worked in the respective periods. Nurse and Allied Staffing revenue also includes revenue from the permanent placement of nurses. Prior periods have been recalculated to reflect the impact of the segment reporting changes noted above.

(o)

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.

(p)

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