10-Q: Cross Country Healthcare Reports Q1 2025 Results Amidst Pending Merger with Aya Healthcare

Cross Country Healthcare's Q1 2025 results show a revenue decline due to decreased demand in nurse and allied staffing, partially offset by growth in homecare and physician staffing, as the company progresses towards its merger with Aya Healthcare.

Summary

• Cross Country Healthcare's Q1 2025 revenue decreased by 22.6% year-over-year to $293.4 million.
• The decline is attributed to lower volume and average bill rates in the Nurse and Allied Staffing segment.
• This was partially offset by a 29.5% increase in Homecare Staffing revenue and an 8.8% increase in Physician Staffing revenue.
• The company reported a net loss attributable to common stockholders of $0.5 million, compared to a net income of $2.7 million in the same period last year.
• Operating cash flow for the quarter was $5.7 million.
• As of March 31, 2025, the company had $80.7 million in cash and cash equivalents and no borrowings under its revolving credit facility.
• The merger with Aya Healthcare is expected to close in the second half of 2025, pending regulatory approvals.
• The company incurred $2.0 million in fees associated with the pending Aya Merger during the first quarter of 2025.
• The Aya Merger was approved by the Company's stockholders at a special meeting held on February 28, 2025.

Sentiment

Score: 5

Explanation: The sentiment is neutral. While revenue and net income have declined, there are positive aspects such as growth in specific segments and the pending merger. The overall outlook is uncertain due to the ongoing regulatory review of the merger.

Positives

• Homecare Staffing revenue experienced a 29.5% year-over-year increase.
• Physician Staffing revenue increased by 8.8% year-over-year.
• Nurse and Allied Staffing margins showed continued improvement exiting the first quarter and into the second quarter of 2025.
• The company has $80.7 million in cash and cash equivalents.
• The company has $133.5 million of availability net of $14.9 million of letters of credit under its ABL.
• The Aya Merger was approved by the Company's stockholders at a special meeting held on February 28, 2025.

Negatives

• Consolidated revenue decreased by 22.6% year-over-year.
• Net loss attributable to common stockholders was $0.5 million, compared to a net income of $2.7 million in the same period last year.
• The Nurse and Allied Staffing segment experienced declines in both volume and average bill rates.
• Contribution income decreased $10.0 million, or 36.6%, to $17.2 million for the three months ended March 31, 2025, as compared to $27.2 million for the three months ended March 31, 2024.

Risks

• The timing to consummate the proposed Aya Merger is uncertain.
• The risk that a condition of closing of the proposed Aya Merger may not be satisfied or that the closing of the proposed Aya Merger might otherwise not occur exists.
• The risk that a regulatory approval that may be required for the proposed Aya Merger is not obtained or is obtained subject to conditions that are not anticipated exists.
• Diversion of management time on transaction-related issues could impact operations.
• Announcements relating to the proposed Aya Merger could have adverse effects on the market price of the common stock of the Company.
• The proposed Aya Merger and its announcement could have an adverse effect on the ability of the Company to retain customers and retain and hire key personnel and maintain relationships with its suppliers and customers.
• Unexpected costs, charges or expenses resulting from the Aya Merger could arise.
• Potential litigation relating to the Aya Merger could be instituted against the parties to the Merger Agreement or their respective directors, managers or officers, including the effects of any outcomes related thereto.
• Macroeconomic factors, including increased inflation and interest rates, could adversely affect the company.
• Demand for healthcare services and the company's ability to attract and retain qualified personnel are ongoing risks.
• Cyber security risks and incidents could negatively impact the business.
• Government regulation and legislative initiatives could affect the business.
• The company's ability to successfully implement its acquisition and development strategies is a risk.

Future Outlook

The company expects the Aya Merger to close in the second half of 2025, subject to customary closing conditions, including regulatory approvals. Upon completion of the Aya Merger, it is expected that Cross Country will become a private company and its common stock will no longer trade on Nasdaq.

Management Comments

• Exiting the first quarter and into the second quarter of 2025, Nurse and Allied Staffing margins showed continued improvement.

Industry Context

The healthcare staffing industry is currently experiencing a normalization in demand after a period of high demand during the COVID-19 pandemic. This is reflected in the decline in revenue for the Nurse and Allied Staffing segment. However, certain segments like Homecare Staffing are showing continued growth, indicating a shift in demand towards different types of healthcare services.

Comparison to Industry Standards

• Comparing Cross Country Healthcare's performance to competitors like AMN Healthcare and Team Health, the revenue decline in travel nursing aligns with industry trends of normalization after the pandemic surge.
• However, the growth in Homecare Staffing is a positive sign, reflecting the increasing demand for in-home care services, similar to trends seen in companies like LHC Group and Amedisys.
• The pending merger with Aya Healthcare is a strategic move to consolidate market share, similar to other recent acquisitions in the healthcare staffing industry, such as the acquisition of Envision Healthcare by KKR.

Related Party Transactions

• The Company has entered into an arrangement for digital marketing services provided by a firm that is related to a certain member of the Company's Board of Directors.
• The Company provides services to entities that are affiliated with certain members of the Company's Board of Directors.

Stakeholder Impact

• Shareholders are impacted by the decline in revenue and net income, as well as the uncertainty surrounding the merger.
• Employees may be affected by cost management measures and potential changes resulting from the merger.
• Customers may experience changes in service offerings and pricing as the company adapts to market conditions and integrates with Aya Healthcare.
• Suppliers and creditors may be impacted by the company's financial performance and the terms of the merger.

Next Steps

• The company will continue to work towards closing the merger with Aya Healthcare in the second half of 2025.
• The company will focus on managing costs and improving margins in the Nurse and Allied Staffing segment.
• The company will continue to invest in and grow its Homecare Staffing and Physician Staffing segments.

Key Dates

Keywords

healthcare staffing, travel nurse, physician staffing, Aya Healthcare, merger, revenue, financial results, quarterly report, Cross Country Healthcare