Investment research report for CCRN

Table of Contents

Executive Summary
Valuation Analysis
Industry and Competitors Analysis
Financial Analysis
Earnings Call Multi-Year Analysis
Financial Statements Multi Year
Insider Trading Analysis
Management Compensation Benchmark Analysis
Proxy Statement Analysis
News Analysis
Technical Indicators Analysis
Financial Statements Annual
Financial Statements Quarterly
Earnings Call Analysis

Executive Summary

Company Description

Cross Country Healthcare, Inc. (CCRN) is a leading provider of healthcare staffing and workforce solutions in the United States. The company operates through two main segments: Nurse and Allied Staffing, and Physician Staffing. CCRN offers a range of services, including travel nurse staffing, local nurse staffing, allied health staffing, physician staffing, and workforce solutions.

Key Insights

  1. Diversification and Technology Investments: CCRN is actively diversifying its business beyond travel nursing into higher-margin segments like physician staffing, education, and workforce solutions. The company is also making significant investments in proprietary technology platforms to drive operational efficiencies, expand its addressable market, and support margin expansion.

  2. Navigating Industry Cycles: While the travel nursing market is cyclical, CCRN appears well-positioned to navigate these cycles by preserving market share during downturns and investing for long-term growth opportunities. The company’s diversification strategy and technology investments are expected to support sustainable profitability.

  3. Financial Strength and Capital Allocation: CCRN maintains a strong balance sheet and is deploying capital through a balanced approach, including share repurchases, strategic acquisitions, and organic investments in technology and growth initiatives. This disciplined capital allocation strategy supports long-term shareholder value creation.

Growth Opportunities and Challenges

CCRN’s growth opportunities lie in its ability to capitalize on the ongoing demand for healthcare staffing, driven by factors such as labor shortages and an aging population. However, the company faces challenges in managing the cyclicality of the travel nursing market and maintaining profitability during periods of normalization in bill rates. Successful execution of its diversification strategy, technology investments, and cost management initiatives will be crucial for long-term growth and profitability.

Back to Table of Contents

Valuation Analysis

PE Ratio

The PE ratio for the company CCRN is as follows:

  • Low: -27.996303416184798
  • Base: 6.211059699291705
  • High: 40.418422814768206

PB Ratio

The PB ratio for the company CCRN is as follows:

  • Low: 1.2897557581427155
  • Base: 2.2848703398121977
  • High: 3.27998492148168

Due to the highly unstable financials of this company, we are unable to provide reliable price targets. We recommend not holding this stock in your portfolio.

Back to Table of Contents

Industry and Competitors Analysis

CCRN (Cross Country Healthcare, Inc.) and the Healthcare Staffing Industry

Based on the information provided, CCRN (Cross Country Healthcare, Inc.) operates in the healthcare staffing industry, providing talent management and consultative services to healthcare clients in the United States. Its main business segments are Nurse and Allied Staffing, and Physician Staffing.

Key Competitors in the Healthcare Staffing Industry

Some of CCRN’s key competitors in the healthcare staffing industry include:

  1. ASGN Incorporated (ASGN): A provider of IT services and professional solutions, with a segment focused on the federal government and mission-critical solutions.

  2. Kforce Inc. (KFRC): A staffing and employment services company with a focus on technology, finance, and accounting solutions.

  3. Kelly Services, Inc. (KELYA): A workforce solutions provider offering staffing services across various industries, including healthcare.

  4. AMN Healthcare Services, Inc. (AMN): A direct competitor in the healthcare staffing industry, providing workforce solutions and staffing services to hospitals and healthcare facilities.

Competitive Positioning

In terms of competitive positioning, CCRN appears to be a specialized player focused solely on the healthcare staffing market, while some of its competitors like ASGN, KFRC, and KELYA have a broader industry focus. AMN Healthcare Services, Inc. (AMN) is likely CCRN’s closest direct competitor, as both companies operate primarily in the healthcare staffing space.

Based on the financial metrics provided, CCRN seems to have a relatively strong market position, with a healthy gross profit ratio, EBITDA margin, and net income margin compared to some of its competitors. However, a more comprehensive analysis would be required to fully assess CCRN’s competitive positioning within the healthcare staffing industry.

Back to Table of Contents

Chart of Competitors

"Chart of Competitors"

Back to Table of Contents

Financial Analysis

Financial Strength

The company has a relatively strong current ratio (around 2-3), indicating it can meet short-term obligations. However, its debt levels have increased in recent years with debt/equity ratios around 0.5-0.7. Interest coverage ratios have been volatile but generally adequate, suggesting the company can service its debt currently. Return on equity and assets have improved in recent years after some very weak years, signaling improving profitability.

Growth Potential

Revenue growth has been uneven, with some strong years like 2021 followed by declines in 2022-2023. Analyst estimates project modest revenue growth going forward. The company has had challenges sustaining earnings growth, with net income fluctuating significantly year-to-year. Operating cash flow growth has also been volatile, which could limit growth investment.

Competitive Advantage

As a staffing provider for healthcare professionals, the company likely benefits from ongoing labor shortages in the healthcare sector. However, it operates in a competitive industry and its financial performance has been inconsistent, suggesting it may lack durable competitive advantages.

Management Quality

The fluctuations in revenue, earnings, and cash flows point to potential issues with operational execution and managing costs effectively across business cycles. High debt levels taken on by management could be a risk if market conditions deteriorate.

Shareholder Friendliness

The company does not currently pay dividends, retaining all earnings. Share buybacks do not appear to be a use of capital either based on the data.

Valuation

P/E ratios have been highly volatile, ranging from single digits to over 50x, making valuation assessment difficult. Price/book values around 1.5-2x suggest the market views the company more favorably than tangible book value would indicate. Analyst earnings estimates for future years imply potentially attractive forward P/Es if the company can meet expectations.

In summary, while Cross Country Healthcare operates in an industry with potential tailwinds, its historical performance has been uneven. With high debt levels, cost management challenges, and lack of shareholder returns, the company will need to demonstrate more sustainable profitable growth to be viewed as having strong financial prospects long-term. Valuation looks reasonable if forward estimates are met.

Back to Table of Contents

Chart of Key Per Share Metrics

"Chart of Key Per Share Metrics"

Back to Table of Contents

Chart of Absolute Metrics

"Chart of Absolute Metrics"

Back to Table of Contents

Earnings Call Multi-Year Analysis

Diversification Strategy

Cross Country Healthcare is actively diversifying its business beyond just travel nursing into higher-margin segments like physician staffing, education, home care, and workforce solutions. This diversification reduces reliance on the volatile travel nursing market and provides more stable growth opportunities.

Technology Investments

The company is making significant investments in proprietary technology platforms like Intellify (VMS) and digital transformation initiatives. These are expected to drive operational efficiencies, enhance productivity, expand the addressable market (e.g., vendor-neutral MSP opportunities), and support margin expansion over the long term.

While the travel nursing market is cyclical, with periods of high demand followed by normalization, Cross Country appears well-positioned to navigate these cycles. The company is focused on preserving market share during downturns, while investing for long-term growth opportunities.

Balanced Capital Allocation

Cross Country has a strong balance sheet and is deploying capital through a balanced approach, including share repurchases, strategic acquisitions, and organic investments in technology and growth initiatives. This disciplined capital allocation strategy supports long-term shareholder value creation.

Evolving Business Model

The company is transitioning from a traditional healthcare staffing provider to a tech-enabled, total workforce solutions provider serving the entire healthcare continuum. This strategic shift positions Cross Country for sustained long-term growth and profitability.

Margin Expansion Opportunities

Cross Country sees opportunities for margin expansion through a combination of factors, including technology-driven productivity gains, growth in higher-margin business lines, operating leverage, and a more favorable business mix over time.

Overall, the key insights suggest that Cross Country Healthcare is executing a well-defined strategy to transform its business model, diversify its revenue streams, and invest in technology and growth initiatives to drive long-term sustainable profitability and shareholder value creation, despite the cyclical nature of the travel nursing industry.

Back to Table of Contents

Financial Statements Multi Year

The company experienced significant revenue declines in recent quarters, primarily driven by lower demand and bill rates in its core Nurse and Allied Staffing segment. However, the Physician Staffing segment showed strong revenue growth, partially offsetting the declines in the nursing segment.

Profitability Challenges

Net income and profitability declined substantially due to the revenue pressures in the Nurse and Allied Staffing business. Operating margins compressed as the company was unable to fully offset the impact of lower revenue with cost reductions.

Cash Flow and Liquidity

Despite the profitability challenges, the company generated strong operating cash flows, allowing it to repay debt and maintain a solid liquidity position. As of the latest quarter, the company had no debt outstanding and ample borrowing capacity under its revolving credit facility.

Capital Allocation

The company remained committed to returning capital to shareholders through an aggressive share repurchase program, buying back over $500 million of its stock in recent periods.

Acquisitions and Integration

The company made several acquisitions, including HireUp, Mint, and a local business, to expand its service offerings and geographic reach. Successful integration of these acquisitions will be crucial for realizing synergies and driving future growth.

Technology Investments

The company continued to invest in technology platforms like Intellify and XperienceTM to enhance productivity, customer experience, and position itself as a tech-enabled workforce solutions provider.

Overall, while the company faced near-term headwinds in its core nursing staffing business, it maintained a strong financial position, diversified its revenue streams, and invested in strategic initiatives to drive long-term growth and shareholder value creation.

Back to Table of Contents

Insider Trading Analysis

Long-term Patterns

The CEO (Clark Kevin Cronin) and CFO (Burns William J.) have consistently received large awards of restricted stock and stock appreciation rights over the years, indicating they are heavily incentivized through equity compensation. Several other key executives like the COO (Martins John Anthony), Chief Accounting Officer (Krug Marc S.), and Chief Human Resources Officer (Mote Karen) have also received substantial equity awards. Insider selling has been relatively limited, with the majority of transactions involving stock awards, vesting, and tax-related sales.

Recent Patterns

In 2024, there was a flurry of restricted stock awards to the CEO, CFO, and other top executives, totaling over 200,000 shares. The CEO and CFO also received large grants of restricted stock in 2023, further increasing their equity stakes. Some executives, like the CEO and COO, have been selling small amounts of stock, likely for tax purposes, but the overall level of selling remains low.

Implications

The heavy emphasis on equity compensation for the CEO, CFO, and other key leaders suggests the company is focused on aligning their interests with shareholders over the long term. The limited insider selling, even as the stock price has risen, indicates that management remains confident in the company’s prospects and is not cashing out. For long-term investors, the insider trading patterns point to a management team that is heavily invested in the company’s success and is likely to make decisions with the shareholders’ best interests in mind. Short-term investors may want to monitor any future increases in insider selling, as that could signal a change in management’s outlook or a desire to diversify their holdings.

Back to Table of Contents

Management Compensation Benchmark Analysis

Base Salary Portion of Total Compensation

Based on the executive compensation details provided, the base salary portion of total compensation for CCRN executives is relatively low compared to other companies. On average, the base salary portion is 46.34% across all years and executives reported, which is lower than the averages for ASGN (38.22%) and KFRC (27.04%).

Bonus Compensation

CCRN does not appear to provide annual bonuses to its executives. None of the reported compensation for CCRN executives includes a bonus component, unlike ASGN and KFRC where bonuses are more common.

Equity-Based Compensation

A significant portion of CCRN executive compensation comes from stock awards, ranging from 24.75% to 49.75% of total compensation. This suggests the company is aligning executive incentives with long-term shareholder value creation through equity-based compensation.

Incentive Plan Compensation

The use of incentive plan compensation, which can be tied to specific performance metrics, also makes up a notable portion of CCRN executive pay, ranging from 12.17% to 36.64% of total compensation. This further indicates an alignment between executive pay and company performance.

Overall, the executive compensation structure at CCRN appears to be more focused on long-term value creation through equity-based awards and performance-based incentives, rather than short-term cash compensation. This suggests the interests of executives are aligned with those of long-term shareholders.

Back to Table of Contents

Proxy Statement Analysis

Executive Compensation Evaluation

The following analysis is based on the latest proxy statement of CCRN:

Based on the information provided in the proxy statement, I don’t have enough details to definitively conclude whether the executives are currently compensated in a way that aligns with creating long-term shareholder value. The key points are:

  1. The company is seeking approval for a new 2024 Omnibus Incentive Plan that would allow them to grant future equity-based awards to executives and employees. However, the specific performance metrics and targets tied to these future awards are not provided.

  2. No concrete details are given about the existing executive compensation structure and how it incentivizes long-term value creation.

  3. The proxy statement indicates an intention to maintain flexibility in structuring future executive compensation to align with long-term performance, but lacks specifics on how this will be achieved.

Overall, while the proxy statement signals the company’s desire to implement an incentive plan that could potentially align executive pay with long-term shareholder interests, there is insufficient information to evaluate whether the current or proposed compensation programs definitively achieve this goal. As a long-term investor, I would need more transparency into the performance metrics, vesting schedules, and pay mix details to make an informed assessment. The key insight is that the company recognizes the importance of this issue, but more disclosure is needed.

Back to Table of Contents

News Analysis

Financial Performance

The company regularly reports quarterly and annual financial results, providing insights into its revenue, earnings, and profitability trends. Investors should pay attention to these results to assess the company’s financial health and growth prospects.

Acquisitions and Strategic Moves

Cross Country Healthcare has made several acquisitions, such as Medical Staffing Network, Workforce Solutions Group, Mint Medical Physician Staffing, and Lotus Medical Staffing. These acquisitions could expand the company’s service offerings, geographical reach, and market share, potentially driving future growth.

The healthcare staffing industry is influenced by factors such as labor shortages, healthcare reforms, and changes in demand for healthcare services. News related to these trends could impact Cross Country Healthcare’s business prospects.

Analyst Ratings and Estimates

Analysts regularly provide ratings, price targets, and earnings estimates for the company. Positive or negative revisions to these estimates could influence investor sentiment and the stock’s performance.

Management Changes and Leadership

Announcements regarding changes in the company’s executive leadership or board of directors could provide insights into the company’s strategic direction and governance.

Conference Participation and Investor Events

Cross Country Healthcare’s participation in industry conferences and investor events could provide additional insights into the company’s strategies, growth plans, and competitive positioning.

Recognition and Awards

The company has received various awards and recognition for its corporate social responsibility, diversity and inclusion efforts, and workplace culture. These accolades could positively impact the company’s reputation and ability to attract and retain talent.

While these points could be relevant for a long-term investor, it is essential to conduct thorough research, analyze the company’s financials, and consider your investment objectives and risk tolerance before making any investment decisions.

Back to Table of Contents

Technical Indicators Analysis

Next Week Trading

The recent price action and technical indicators suggest a potential bearish sentiment in the short-term. The 20-day TEMA has been declining, indicating a downward trend. The RSI is in the neutral range, suggesting the stock is neither overbought nor oversold. Traders may consider taking a cautious approach and look for potential short-term opportunities, while closely monitoring the support and resistance levels.

Resistance and Support Levels

The 50-day and 200-day SMAs appear to be acting as resistance levels, while the 20-day SMA could provide support. Traders may want to watch these levels closely for potential breakouts or breakdowns.

Short-Term Investor

The recent decline in the TEMA and the neutral RSI reading suggest a consolidation phase. Short-term investors may want to wait for a clearer trend direction before taking a position, as the stock seems to be in a period of indecision.

Long-Term Investor

The long-term trend appears to be bearish, with the 200-day SMA declining. However, the 50-day SMA is still above the 200-day SMA, indicating a potential bullish crossover could occur in the future. Long-term investors may want to monitor the stock’s performance and consider adding to their position if the long-term trend reverses.

Overall, the technical indicators suggest a cautious and selective approach in the short-term, while long-term investors may want to closely monitor the stock’s performance for potential opportunities.

Back to Table of Contents

Chart of Valuation History

"Chart of Valuation History"

Back to Table of Contents

Financial Statements Annual

Financial Statements Annual 2024 Q2

Revenue Decline and Margin Compression

The company experienced a significant 28% year-over-year decline in revenue from $2.81 billion in 2022 to $2.02 billion in 2023, driven primarily by a decrease in travel and local volume as well as declining average bill rates in the Nurse and Allied Staffing segment. This revenue decline, coupled with only a modest 1 percentage point decrease in direct operating expenses as a percentage of revenue, led to a 446 basis point decline in contribution margin for the Nurse and Allied Staffing segment.

Diversification and Growth in Physician Staffing

While the Nurse and Allied Staffing segment saw a decline, the Physician Staffing segment reported double-digit year-over-year revenue growth, driven by the Mint acquisition as well as increased volume and improved business mix. This demonstrates the company’s ability to diversify its revenue streams and capitalize on growth opportunities in the physician staffing market.

Strong Cash Flow Generation

The company generated $248.5 million in operating cash flow in 2023, a significant increase from $134.1 million in 2022. This strong cash flow allowed the company to repay all $739 million in outstanding term loan obligations and maintain a healthy cash balance of $171 million with no borrowings under its asset-based revolving credit facility as of December 31, 2023.

Disciplined Capital Allocation

The company continued its share repurchase program, buying back $576 million of its common stock in 2023. This, combined with the debt repayment, demonstrates the company’s commitment to prudent capital allocation and shareholder value creation.

Ongoing Investment in Technology

The company continues to invest in its technology platforms, including the launch of its IRP and per diem modules on Intellify and the XperienceTM candidate portal. These investments are aimed at driving productivity, enhancing the customer and candidate experience, and positioning the company as a leading tech-enabled workforce solutions provider.

The company operates in a highly regulated industry and faces various litigation claims and legal proceedings, including a $11 million legal settlement charge in 2023. Investors should monitor the company’s ability to navigate the evolving regulatory landscape and manage its legal exposures.

Overall, the financial statements highlight the company’s efforts to diversify its business, maintain a strong financial position, and invest in technology to drive long-term growth and shareholder value, while also facing near-term challenges in its core Nurse and Allied Staffing segment.

Financial Statements Annual 2023 Q2

Strong Revenue Growth

Cross Country Healthcare’s revenue grew significantly by 67% year-over-year in 2022 to $2.81 billion, driven by strong performance in both the Nurse and Allied Staffing and Physician Staffing segments. This was primarily due to an increase in the number of professionals on assignment as well as higher bill rates.

Improved Profitability

Net income attributable to common stockholders increased 42.8% to $188.5 million in 2022, reflecting the company’s ability to leverage its operational efficiency and scale to drive profitability. The company’s operating margin improved to 9.7% in 2022 compared to 8.3% in 2021.

Debt Reduction and Liquidity

The company made optional prepayments of $1 billion on its term loan in 2022 to reduce interest costs. As of December 31, 2022, the company had $36 million in cash and $2.05 billion in available borrowing capacity under its revolving credit facility, providing ample liquidity to fund operations and strategic initiatives.

Acquisitions and Expansion

Cross Country Healthcare completed the acquisitions of Mint Medical Physician Staffing, Lotus Medical Staffing, HireUp Leadership, and a local Ohio-based business in 2022, expanding its service offerings and geographic reach. These acquisitions are expected to further strengthen the company’s position in the healthcare staffing and workforce solutions market.

Shareholder Returns

The company’s Board of Directors authorized a new $1 billion share repurchase program in 2022, demonstrating confidence in the company’s long-term growth prospects and commitment to enhancing shareholder value.

Diversification and Risk Management

The company continues to diversify its customer base and service offerings, reducing its reliance on any single customer or segment. It also maintains a comprehensive risk management program to mitigate exposure to professional liability, workers’ compensation, and other risks.

Overall, Cross Country Healthcare’s strong financial performance, debt reduction, strategic acquisitions, and shareholder-friendly initiatives position the company well for long-term growth and value creation.

Financial Statements Annual 2022 Q2

Strong Revenue Growth

Revenue from services increased 100% year-over-year to $1.677 billion in 2021, driven by solid execution and strong performance in the Nurse and Allied Staffing segment as well as growth in the Physician Staffing segment. This was due to continued high demand for the company’s services across various specialties related to both COVID and non-COVID assignments.

Margin Compression

Despite the revenue growth, the company’s consolidated gross profit margin decreased 180 basis points year-over-year as compensation costs for professionals on assignment rose at a higher rate than the company’s bill rates. The company absorbed as much of the increased costs as possible.

Profitability Improvement

Net income attributable to common stockholders for 2021 was $132.0 million, compared to a net loss of $13.0 million in the prior year. This was favorably impacted by the reversal of $375 million in valuation allowances on deferred tax assets.

Significant Investment in Workforce

The company grew its workforce significantly in 2021 to meet the heightened demand, adding over 1,000 corporate employees during the year. This investment, along with rising compensation costs, impacted margins.

Acquisitions and Refinancing

In 2021, the company acquired Workforce Solutions Group and Selected Inc, and refinanced its debt with a new $1.75 billion term loan. These transactions were intended to support the company’s growth strategy.

Cash Flow and Liquidity

Cash flow used in operating activities was $85.6 million in 2021 due to the investment in net working capital associated with the historic growth. As of December 31, 2021, the company had $10 million in cash and $174 million in term loan principal outstanding, with $122.6 million available under its revolving credit facility.

Seasonality

The company experiences seasonal fluctuations in revenue and earnings, with higher demand in the summer months and lower demand when schools are closed.

In summary, Cross Country Healthcare delivered strong revenue growth in 2021 by capitalizing on heightened demand for healthcare staffing, though margin pressure from rising compensation costs impacted profitability. The company made strategic investments to support its long-term growth objectives.

Back to Table of Contents

Financial Statements Quarterly

Financial Statements Quarterly 2024 Q2

Revenue Decline

The company experienced a 39% year-over-year decline in revenue from services to $379.2 million, primarily driven by a decrease in demand and average bill rates within the Nurse and Allied Staffing segment, particularly in travel and local large acute settings.

Profitability Decline

Net income attributable to common stockholders decreased significantly from $29.4 million in Q1 2023 to $2.7 million in Q1 2024, a 91% decline. This was driven by the revenue decline as well as increases in legal and other losses.

Segment Performance

  • Nurse and Allied Staffing segment revenue declined 43% year-over-year, with contribution income down 59.5%. This was due to a decline in the number of travel and local professionals on assignment and lower bill rates.
  • Physician Staffing segment revenue increased 16.3% year-over-year, with contribution income improving from $1.7 million to $3.1 million, driven by volume and price increases.

Cash Flow and Liquidity

Operating cash flow decreased 87% year-over-year to $6.0 million, primarily due to the decline in profitability and changes in working capital. As of March 31, 2024, the company had $5.2 million in cash and no debt outstanding, with $1.9 billion in available borrowing capacity under its revolving credit facility.

Share Repurchases

The company continued to execute on its $1 billion share repurchase program, buying back $64 million worth of shares in Q1 2024.

In summary, the company is facing significant headwinds in its core Nurse and Allied Staffing business, leading to a substantial decline in profitability. While the Physician Staffing segment is performing better, the overall financial results raise concerns about the company’s long-term growth and profitability prospects. Prudent management of cash flow and liquidity, as well as continued strategic initiatives, will be critical going forward.

Financial Statements Quarterly 2024 Q1

Revenue declined 30% year-over-year in Q3 2023, driven by volume and bill rate declines in the Nurse and Allied Staffing segment, partially offset by volume increases in the Physician Staffing segment. For the 9-month period, revenue declined 26% year-over-year, primarily due to a decline in the number of professionals on assignment and normalization of travel bill rates in the Nurse and Allied Staffing segment.

Profitability

Net income attributable to common stockholders decreased 63% year-over-year in Q3 2023, driven by the revenue decline and higher operating expenses. The company’s operating margin declined from 8.2% in Q3 2022 to 4.6% in Q3 2023, reflecting the impact of lower revenue and higher costs.

Cash Flow and Liquidity

Cash flow from operations increased 67% year-over-year in the 9-month period, driven by a decrease in net receivables and timing of disbursements. The company repaid all outstanding term loan debt of $739 million in Q2 2023 and terminated the credit agreement. As of September 30, 2023, the company had $143 million in cash and no borrowings under its $3 billion asset-based revolving credit facility, providing ample liquidity.

Capital Allocation

The company continued its share repurchase program, buying back $512 million of shares in the 9-month period. The company has $837 million remaining under its $1 billion share repurchase authorization, subject to certain conditions.

Acquisitions and Integration

The company completed the acquisitions of HireUp, Mint, and a local business in 2022, which are expected to provide growth opportunities but also integration risks. The company will need to effectively integrate these acquisitions and realize the anticipated synergies to justify the purchase prices.

Overall, the financial statements indicate that the company is navigating a challenging market environment, with declining revenue and profitability in its core Nurse and Allied Staffing segment. However, the company maintains a strong liquidity position and is actively returning capital to shareholders through share repurchases. Successful integration of recent acquisitions will be crucial for the company’s long-term growth and profitability.

Financial Statements Quarterly 2023 Q4

Revenue declined 28% year-over-year in Q2 2023 and 24.6% year-over-year in H1 2023, driven by volume declines and normalization of bill rates in the Nurse and Allied Staffing segment. The Physician Staffing segment saw revenue increases of 104.9% in Q2 2023 and 89.4% in H1 2023, driven by volume growth across several specialties.

Profitability

Net income declined 59.6% in Q2 2023 and 55.8% in H1 2023, primarily due to the revenue declines in the Nurse and Allied Staffing segment. Contribution margin (segment-level profitability) declined in the Nurse and Allied Staffing segment from 13.3% to 11.4% in Q2 2023 and from 13.9% to 11.5% in H1 2023. The Physician Staffing segment saw an improvement in contribution margin from 5.5% to 7.8% in Q2 2023 and from 6.6% to 6.1% in H1 2023.

Cash Flow and Liquidity

Operating cash flow increased significantly to $166.1 million in H1 2023 compared to $10.9 million used in H1 2022, driven by improved working capital management. The company repaid all $739 million in outstanding term loan debt in Q2 2023, eliminating this obligation. As of June 30, 2023, the company had $14.3 million in cash and $2.4 billion in available borrowing capacity under its revolving credit facility, providing ample liquidity.

Capital Allocation

The company repurchased $36.5 million of its common stock in H1 2023, and had $984 million remaining under its $1 billion share repurchase authorization as of June 30, 2023. The company continues to invest in technology initiatives, including the transition of existing clients to its Intellify platform.

Overall, the key insights highlight the company’s ability to navigate the challenging market conditions in the Nurse and Allied Staffing segment, while capitalizing on growth opportunities in the Physician Staffing segment. The strong cash flow generation, debt reduction, and ample liquidity provide the company with financial flexibility to execute its strategic initiatives and return capital to shareholders.

Financial Statements Quarterly 2023 Q3

Revenue Decline

The company experienced a 21% year-over-year decline in revenue from services, driven by a volume decline in the Nurse and Allied Staffing segment and a decrease in average bill rates, partially offset by volume and bill rate increases in the Physician Staffing segment.

Profitability Decline

Net income attributable to common stockholders decreased 52.5% year-over-year, from $62.0 million to $29.4 million, due to the revenue decline, higher operating expenses, and increased legal settlement charges.

Cash Flow Improvement

Cash flow provided by operating activities improved significantly, from $290 million used in the prior year period to $469 million generated in the current quarter, driven by a decrease in net receivables and the timing of disbursements.

Debt and Liquidity

The company had $0.3 million in cash and cash equivalents and $739 million in outstanding term loan principal as of March 31, 2023. Borrowing base availability under the ABL facility was $3.0 billion, with $664 million drawn and $182 million in letters of credit outstanding, leaving $2.15 billion in excess availability.

Share Repurchases

The company repurchased $31.8 million of its common stock during the quarter, with $44.5 million remaining under its current $100 million repurchase program. Subsequent to quarter-end, the board authorized an additional $590 million in share repurchases, bringing the total authorization to $1.0 billion.

Segment Performance

The Nurse and Allied Staffing segment experienced a 23.9% revenue decline and a 39.0% decrease in contribution income, while the Physician Staffing segment saw a 74.5% revenue increase and relatively flat contribution income.

Acquisition Integration

The company continues to integrate its recent acquisitions of HireUp, Mint, and a local business, with the associated intangible assets and goodwill additions.

Overall, the financial statements indicate a challenging operating environment for the company, with declining revenue and profitability in the Nurse and Allied Staffing segment, partially offset by improvements in cash flow and liquidity. The company’s strategic initiatives, including share repurchases and acquisitions, will be important factors for long-term investors to monitor.

Back to Table of Contents

Earnings Call Analysis

Earnings Call Analysis 2024 Q2

Demand for travel nursing and local staffing has declined significantly

The company is guiding for a mid-teens sequential decline in Q2 revenue, suggesting the industry is facing significant headwinds in the near-term.

The company has taken actions to align its cost structure

The company has implemented a 20% reduction in U.S. headcount since the beginning of the year, indicating it is being proactive in managing its expenses.

Potential for a rebound in travel nursing demand in the back half of 2024

The company sees potential for a rebound in travel nursing demand in the back half of 2024, citing factors like stabilizing demand trends, new program ramps, and underlying nursing shortages. However, the timing and magnitude of any recovery remains uncertain.

Diversified business model provides some insulation

The company’s diversified business model, with strong performance in Physician Staffing, Homecare Staffing, and Education, provides some insulation from the travel nursing headwinds. This suggests the long-term investor should focus on the company’s ability to grow these other segments.

Investment in Intellify technology platform

The company’s investment in its Intellify technology platform, which can be deployed as both a VMS and MSP, appears to be a key strategic initiative that could drive future growth opportunities. The blurring of the line between VMS and MSP is an industry trend the company is aiming to capitalize on.

Strong balance sheet and cash flow provide flexibility

The company’s strong balance sheet and cash flow provide flexibility for strategic investments, share repurchases, and potential M&A, which could further diversify the platform and enhance the margin profile over the long-term.

Overall, the key insights suggest the long-term investor should focus on the company’s ability to navigate the near-term travel nursing headwinds, its diversification efforts, and its strategic technology investments, while remaining cautious about the timing and magnitude of any travel nursing market recovery.

Earnings Call Analysis 2024 Q1

Diversification and Growth Opportunities

Cross Country Healthcare is diversifying its business beyond the traditional travel nurse and allied staffing, with strong growth in Physician Staffing, Education, and Homecare segments. This diversification can help mitigate risks and provide more stable long-term growth. The company is focused on expanding its client base and growing relationships with existing clients through an expansion of services, which could drive future growth. Additionally, there is potential for accretive acquisitions in areas like Locums and Education to further diversify the platform and enhance the value proposition.

Technology Investments and Operational Efficiency

The company has made significant investments in technology initiatives like Intellify (VMS) and Xperience (candidate-facing app), which are expected to enhance productivity, efficiency, and predictive job matching. Leveraging offshore operations in India and further automation efforts could help drive margin expansion and cost savings. The launch of the new ERP system is expected to provide additional opportunities for efficiency gains.

Market Dynamics and Margin Pressure

The travel nurse and allied staffing segment is facing near-term headwinds, with a pullback in demand and industry-wide margin pressure due to the narrowing of bill pay spreads. The company is balancing the need to remain competitive in the market to preserve market share, while also focusing on maintaining profitability. The timing of the recovery in travel demand is uncertain, but the company believes the demand will rebound in the second half of 2024, supported by recent contract wins and diversification into higher-margin businesses.

Financial Position and Capital Allocation

The company has a strong debt-free balance sheet, which provides flexibility for investments in technology, potential acquisitions, and share repurchases to enhance shareholder value. The focus on cash flow generation and working capital management has resulted in a record year for cash flow from operations in 2023. The company is committed to increasing shareholder value through a balanced approach of capital deployment, including share repurchases, technology investments, and strategic acquisitions.

Overall, the key insights suggest that Cross Country Healthcare is taking the necessary steps to diversify its business, enhance operational efficiency, and navigate the near-term market challenges. The long-term investor should closely monitor the company’s ability to execute on its strategic initiatives, maintain a strong financial position, and capitalize on the expected recovery in travel demand.

Earnings Call Analysis 2023 Q4

Demand for Travel Nurses

Demand for travel nurses has stabilized, but remains below pre-pandemic levels. The company is seeing about 30% more demand compared to the low point in April 2022, but seasonal winter demand has not materialized as expected.

Margin Pressure

Margin pressure due to compression in bill pay spreads – the company is seeing bill rates decline faster than pay rates, driven by high housing costs and continued competition for candidates. This is an industry-wide issue that may persist for several quarters.

Focus on Profitability

The company is focused on long-term sustainable profitability, balancing investments in technology, sales, and marketing with cost savings measures like headcount reductions. The goal is to achieve high single-digit EBITDA margins in 2024.

Intellify Vendor Management System

The company’s proprietary Intellify vendor management system is a key growth driver, with 5 new wins so far this year and a large $100 million program in implementation. This technology platform provides data analytics and transparency that is valued by healthcare clients.

Cross Country DAS Offering

The new Cross Country DAS offering provides independent, real-time bill rate transparency, which the company believes is unique in the market and can help healthcare systems rationalize staffing costs.

Long-Term Priorities

The company is managing the business for the long-term, prioritizing market share and capacity preservation over short-term margin maximization. This may result in near-term margin pressure but positions the company for future growth opportunities.

Overall, the company appears to be navigating a challenging market environment, investing in technology and diversifying its service offerings, which could pay off for long-term investors if the strategies are successful.

Earnings Call Analysis 2023 Q3

Demand for Travel Nurses

Demand for travel nurses has rebounded from the trough in April, but the corresponding growth in the number of travelers has been slower than anticipated due to a gap between open order rates and the compensation nurses are seeking. This is expected to improve in the coming months as the market reaches equilibrium.

Vendor-Neutral VMS Space

Cross Country is well-positioned in the vendor-neutral VMS space with its Intellify platform, having already won its first vendor-neutral contract and actively implementing Intellify at another new customer. The company sees a robust pipeline of opportunities in this space.

Other Business Segments

The company’s other business segments like physician staffing, education, and home care are performing very well, with physician staffing now on an annual revenue run rate of over $180 million and education close to a $100 million run rate.

Shareholder Value and Diversification

Cross Country is focused on increasing shareholder value through share repurchases and leveraging its technology investments and robust balance sheet to further diversify its platform, including through acquisitions.

Workplace Culture

The company’s workplace culture is a strength, as evidenced by recent awards recognizing Cross Country as a top workplace in the healthcare industry.

Overall, the company appears to be executing well and positioning itself for long-term sustainable growth, though the near-term travel nurse demand environment remains somewhat uncertain. The investments in technology and diversification into other higher-growth segments are positive signs for a long-term investor.

Earnings Call Analysis 2023 Q2

Demand for Travel Nursing Has Softened

Demand for travel nursing has softened, leading the company to lower its full-year revenue and EBITDA guidance. This appears to be an industry-wide trend, not specific to Cross Country.

Expect Demand to Rebound in the Back Half of the Year

The company believes the demand has “overcorrected” and expects it to start rebounding in the back half of the year, though the third quarter may be the trough. The company is seeing some recent improvements in order flow.

Investing in Technology and Expansion into MSP Market

Cross Country is focused on investing in technology, particularly its proprietary Intellify platform, which it believes can be a “game changer” by enabling it to expand into the vendor-neutral managed service provider (MSP) market. This could provide a new growth avenue.

Proactive Cost and Headcount Management

The company is being proactive in managing costs and headcount to match current market conditions, while ensuring it has the resources to drive medium and long-term growth.

Strong Balance Sheet and Share Repurchase Program

Cross Country has a strong balance sheet and is continuing its share repurchase program, which it views as an attractive use of capital given the company believes its shares are undervalued.

Confident in Long-Term Growth and Shareholder Value

The company remains confident in its ability to achieve organic long-term growth and increase shareholder value, though near-term headwinds in the travel nursing business are impacting its 2023 outlook.

Overall, the key focus appears to be on navigating the current demand softness, while investing in technology and new service offerings to position the company for long-term success. The company’s strong balance sheet and capital allocation strategy are also positives for long-term investors.

Earnings Call Analysis 2023 Q1

Diversification and Growth in Higher Margin Businesses

Cross Country is focused on growing its higher margin businesses like locums, education, homecare, and its Workforce Solutions Group. These segments are expected to help improve the overall portfolio gross margins going forward.

Technology Investments and Intellify Platform

Cross Country has made significant investments in its technology, including the launch of its proprietary vendor management system Intellify. Intellify is expected to help the company save on licensing fees paid to third parties and also open up a new addressable market in the vendor-neutral space.

Preparing for Potential Softening in Travel Demand

While the company remains optimistic about the long-term outlook, it is prepared to right-size its infrastructure if travel demand continues to soften. The company has sophisticated capacity modeling to adjust resources as needed.

Acquisition Strategy Focused on Strategic Fit

Cross Country is open to making acquisitions that are a strategic fit and can be accretive to gross margins and EBITDA, even if the valuation is higher than the current trading multiple.

Analyst Questions Imply Potential Concerns

Analysts probed on the normalization of bill rates, seasonality, and the impact of clients potentially moving to vendor-neutral models. This suggests investors should closely monitor these areas going forward.

Overall, the key is Cross Country’s focus on diversifying its revenue streams, investing in technology, and maintaining financial discipline – all of which position it well for long-term sustainable growth, despite potential near-term volatility in the travel nurse market.

Earnings Call Analysis 2022 Q4

Demand for Healthcare Staffing Remains Robust

Demand for healthcare staffing remains robust, with orders continuing to be more than 10% above pre-pandemic levels. This suggests strong long-term growth potential.

Investing in Technology

The company is investing heavily in technology, with over $12 million spent year-to-date, focused on externally facing solutions like the Intellify vendor management system. This indicates a strategic shift towards becoming a tech-enabled workforce solutions provider, which could drive competitive advantages and margin expansion.

Diversifying Revenue Streams

The company is diversifying its revenue streams beyond just travel nursing, with strong growth in areas like education, homecare, and physician staffing. This diversification reduces reliance on the volatile travel nursing segment.

Prudent Capital Allocation

Management is being prudent with capital allocation, using excess cash to pay down debt and repurchase shares, while also investing in growth through acquisitions and technology. This balanced approach is positive for long-term shareholders.

Bill Rates and Macroeconomic Outlook

While bill rates have declined, management believes they have stabilized and could see some upside in 2023, though they remain cautious about potential macroeconomic headwinds. The company’s minimum 2023 guidance suggests a conservative outlook.

Analyst Concerns and Management’s Response

Analyst questions imply concerns about the sustainability of bill rates and the potential impact of economic conditions on healthcare staffing demand. Management’s responses suggest they are closely monitoring these factors and prepared to adapt their strategy as needed.

Overall, the company appears to be executing well, diversifying its business, and investing in technology to drive long-term growth and profitability. The conservative 2023 guidance and management’s cautious tone on macroeconomic risks suggest a prudent approach that could benefit long-term investors.

Earnings Call Analysis 2022 Q3

Transition to Tech-Enabled Workforce Solutions

Cross Country Healthcare is transitioning from a COVID-driven story to a fundamentally different, tech-enabled workforce solutions provider serving the entire continuum of healthcare. The company is positioning itself for long-term sustained growth across all its business lines.

Investments in Technology

The company is making significant investments in technology, including the launch of its new proprietary VMS platform “Intellify”. This is expected to improve efficiency, reduce reliance on third-party technologies, and diversify the business by enabling the company to offer vendor-neutral solutions.

Continued Volume Growth Opportunities

Despite the expected decline in travel nurse bill rates, the company sees continued volume growth opportunities across most of its business lines, driven by strong execution, organic capacity investments, technology adoption, and client base expansion.

MSP Business Growth

The company’s MSP business remains a key growth driver, with the sales team adding significant new business. The launch of Intellify is expected to further accelerate the MSP pipeline.

Recruiting Environment Remains Strong

The recruiting environment remains strong, with the company seeing a record number of applicants, particularly from younger demographics embracing the “gig economy” lifestyle. This provides confidence in the company’s ability to continue staffing healthcare facilities.

Capital Structure Optimization

The company is evaluating its capital structure and debt profile to optimize its balance sheet and financial flexibility as it generates significant cash flow going forward. This could include exploring more permanent debt solutions beyond the current ABL facility.

Overall, the key message is that Cross Country Healthcare is transforming into a more diversified, tech-enabled workforce solutions provider well-positioned for long-term growth, despite the near-term normalization of travel nurse bill rates.

Earnings Call Analysis 2022 Q2

Cross Country Healthcare Emerging as a Digitally Transformed, Financially Stronger Company

Cross Country Healthcare is emerging as a digitally transformed, financially stronger company with a continued commitment to clinical excellence, quality, and service. The company is investing heavily in technology and people to drive further efficiencies and growth.

Strong Demand Across All Business Lines

Demand for the company’s services remains strong, with all major business lines reporting year-over-year increases. The company expects continued volume growth in all lines of business, fueled by strong execution, organic investments, and technology adoption.

Shift in Healthcare Demand Favors Cross Country’s Positioning

The company is seeing a shift in healthcare demand from acute care settings to outpatient, ambulatory care centers, and walk-ins. Cross Country is well-positioned to capitalize on this trend with its breadth of coverage across the healthcare continuum.

Confident in Achieving $2 Billion Revenue Run-Rate

While travel nurse bill rates are expected to decline throughout the year, the company is confident in its ability to grow the number of professionals on assignment and achieve an exit revenue run-rate exceeding $2 billion. This is driven by continued strong demand, investments in capacity, and gains from technology adoption.

Managed Service Programs (MSPs) Driving Key Growth

The company’s success in Managed Service Programs (MSPs) has been a key driver, with the company capturing a significant share of this growing market. The company sees opportunities to accelerate the pipeline of new large-scale MSP programs.

Investments in People and Technology to Drive Efficiencies and Capture Market Opportunities

The company is making significant investments in both people and technology, including a new Chief Commercial Officer role to enhance the go-to-market strategy. These investments are expected to drive further efficiencies and capture more market opportunities.

Overall, Cross Country Healthcare appears to be positioning itself as a tech-enabled, total workforce solutions provider in the healthcare staffing industry, with a focus on sustained long-term profitable growth.

Earnings Call Analysis 2022 Q1

Transformation into a Growth Company

Cross Country Healthcare has transformed itself into a growth company with strong profitability, achieving record revenue and adjusted EBITDA margins in 2021. This was driven by investments in technology, people, and processes.

Heightened Demand for Healthcare Staffing

The company is benefiting from heightened demand for healthcare staffing services, driven by factors like nationwide patient demand, clinician burnout, and labor shortages. This has led to rising bill rates, though Cross Country has tried to absorb some of the cost increases to support its clients.

Gaining Market Share

Cross Country is gaining market share, outperforming its public competitor in revenue growth. This is attributed to its digital transformation, expanded sales force, and strengthened brand reputation as a trusted partner.

Opportunities for Growth

The company sees opportunities to further grow its higher-margin businesses like education, RPO, and home health. It plans to double its technology investment in 2022 to drive continued productivity gains and innovation.

Sustainability of Margins

While bill rates are expected to moderate over 2022, Cross Country believes it can sustain high single-digit to low double-digit EBITDA margins at a $2 billion annualized revenue run rate, supported by volume growth and business mix improvements.

Analyst Focus

The analyst questions suggest a focus on the sustainability of Cross Country’s margin profile as bill rates decline, its ability to maintain supply of clinicians, and opportunities to expand its service offerings beyond clinical staffing.

Overall, the call indicates Cross Country Healthcare has transformed itself into a more diversified, technology-enabled staffing provider well-positioned to capitalize on favorable industry trends. The long-term investor should watch for the company’s ability to execute on its strategic initiatives and maintain profitability as market conditions evolve.

Earnings Call Analysis 2021 Q4

Demand for Healthcare Staffing Remains at Historic Highs

Demand for healthcare staffing remains at historic highs, driven by a combination of COVID-19 surges, vaccination mandates, and broader labor shortages across healthcare specialties. This is leading to elevated bill rates that are expected to decline more slowly than they increased.

Digital Transformation Drives Operational Effectiveness

Cross Country Healthcare has digitally transformed its business over the past 2+ years, improving operational effectiveness and productivity. This has allowed the company to quickly respond to record demand and gain market share.

Investments in Sales Force and Technology Fuel Growth

The company is making significant investments in its sales force and technology, with over 90% of new hires being in revenue-producing roles. This is driving strong growth, with the number of clinicians on assignment expected to more than double year-over-year in Q4.

Shift Towards Millennial and First-Time Travel Nurses

Cross Country is seeing a shift towards more millennial and first-time travel nurses, who are embracing the flexibility of temporary assignments. The company’s brand and candidate experience are resonating in the market.

Revenue Run Rate to Remain Above Q3 2021 Levels

While the company expects some headwinds from declining bill rates in 2022, it believes its revenue run rate in the first half of 2022 will remain above Q3 2021 levels due to continued volume growth and market share gains.

Disciplined Approach to Acquisitions

The company is actively evaluating acquisition opportunities, particularly in areas like education and home care, but remains disciplined on valuation given the current high-valuation environment.

Overall, Cross Country Healthcare appears to be executing well on its strategic plan and benefiting from favorable market dynamics, though the sustainability of elevated bill rates remains a key uncertainty going forward.

Earnings Call Analysis 2021 Q3

Demand for Healthcare Staffing Remains at Record High Levels

Demand for healthcare staffing remains at record high levels, driven by labor shortages and rising demand for healthcare services. However, bill rates are expected to continue declining from their COVID-19 peak, though may remain elevated compared to pre-pandemic levels.

Regional Spikes in COVID-19 Cases

The company is seeing regional spikes in COVID-19 cases, particularly in states like Florida and Texas, which is leading to higher bill rates in those areas as demand for clinicians increases. This could provide upside to guidance if the trend continues.

Investing in Revenue-Producing Roles and Technology

Cross Country is focused on investing in revenue-producing roles and technology to drive productivity and growth. Over 90% of new hires in the first half were in revenue-generating positions.

Acquisition of Workforce Solutions Group

The acquisition of Workforce Solutions Group expands Cross Country’s presence in the home care market, aligning with their strategy of providing clinicians across the continuum of care.

Potential Impact of Expiration of Supplemental Unemployment Benefits

Analyst questions suggest concern about the potential impact of the expiration of supplemental unemployment benefits in September and its effect on labor supply, though Cross Country believes the need for contingent staffing will remain high.

Path to Reach 8% EBITDA Margin by Q4 2022

Cross Country is confident in its path to reach an 8% EBITDA margin by Q4 2022, driven by productivity gains from technology investments, higher-margin business lines, and operating leverage.

Overall, the key insights point to Cross Country’s ability to navigate the volatile healthcare staffing environment, while investing in technology and diversifying its service offerings to drive long-term growth and profitability.

Back to Table of Contents

The information provided on this blog is for informational purposes only and should not be considered as financial advice. You should consult with a qualified financial professional before making any investment decisions. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal.