10-Q: Cross Country Healthcare Reports Q1 2026 Results, Merger Announced

Cross Country Healthcare, Inc. reported a net loss of $4.3 million for Q1 2026, with revenues down 17.8% year-over-year, alongside the announcement of a definitive merger agreement.

Summary

• Cross Country Healthcare, Inc. reported a net loss of $4.3 million for the first quarter of 2026, compared to a net loss of $0.5 million in the same period of 2025.
• Consolidated revenue for Q1 2026 decreased by 17.8% to $241.1 million, primarily due to volume declines in the Nurse and Allied Staffing and Physician Staffing segments.
• The Nurse and Allied Staffing segment saw revenue decrease by 16.9% to $201.4 million, while Physician Staffing revenue decreased by 22.5% to $39.6 million.
• Contribution income for the company was $15.5 million, down from $21.3 million in Q1 2025.
• The company had $105.6 million in cash and cash equivalents as of March 31, 2026, with no borrowings drawn under its asset-based credit facility.
• A significant subsequent event is the announcement on May 6, 2026, of a definitive merger agreement with KL Criss Cross Intermediate, LLC, under which the company will be acquired for $13.25 per share in cash.

Sentiment

Score: 3

Explanation: StockSavvy.ai views this filing as negative due to the significant year-over-year decline in revenue and widening net loss, despite the announcement of a merger which offers a potential exit for shareholders.

Positives

• Cross Country Community Care segment showed year-over-year revenue growth of 15.8%.
• The company maintained a strong liquidity position with $105.6 million in cash and cash equivalents and $109.3 million in borrowing base availability under its ABL facility, with no outstanding borrowings.
• The company repurchased $5.8 million of its common stock during the quarter under its share repurchase program.

Negatives

• Consolidated revenue decreased by 17.8% to $241.1 million in Q1 2026 compared to $293.4 million in Q1 2025.
• Net loss attributable to common stockholders widened to $4.3 million in Q1 2026 from $0.5 million in Q1 2025.
• Direct operating expenses as a percentage of revenue increased slightly to 80.3% from 80.0%.
• Selling, general and administrative expenses increased as a percentage of revenue to 19.0% from 17.9%.
• Contribution income margin decreased in both the Nurse and Allied Staffing segment (6.3% vs. 7.1%) and Physician Staffing segment (7.0% vs. 7.9%).
• The number of Full-Time Equivalents (FTEs) in Nurse and Allied Staffing decreased by 14.1%, and days filled in Physician Staffing decreased by 22.1%.

Risks

• The proposed merger with KL Criss Cross Intermediate, LLC carries risks related to closing conditions, regulatory approvals, diversion of management time, potential adverse effects on stock price, and disruption of business operations and relationships.
• The company faces risks related to macroeconomic factors, including delays in customer payments and inflationary pressures, uncertain or reduced demand, and the impact of initiatives to address customer financial and operational challenges.
• Risks related to cybersecurity and cyber incidents are mentioned.
• The company is subject to government regulation and legislative/enforcement initiatives.
• Outcomes of regulatory and legal proceedings, claims, and investigations pose a risk.
• The company's ability to attract and retain qualified healthcare personnel is a risk.
• Costs and availability of short-term housing for travel healthcare professionals are a risk.
• The company is subject to risks associated with global economic and political changes, pandemics, marketplace conditions, and disruptions in credit and financial markets.

Future Outlook

The filing does not provide specific forward-looking financial guidance for future periods. However, it details a significant forward-looking event: the proposed merger with KL Criss Cross Intermediate, LLC, which is expected to result in the company's securities being delisted from the Nasdaq.

Management Comments

• "Consolidated revenue decreased 17.8% year-over-year to $241.1 million, primarily due to volume declines in the Nurse and Allied Staffing and Physician Staffing segments. These declines were partly offset by continued growth in Cross Country Community Care, which was up 15.8% over the prior-year period."
• "Net loss attributable to common stockholders in the first quarter of 2026 was $4.3 million, as compared to net loss of $0.5 million for the same period in the prior year."
• "As of March 31, 2026, there were no borrowings drawn under the revolving senior-secured asset-based credit facility (ABL), and borrowing base availability under the ABL was $109.3 million, with $91.0 million of availability net of $18.3 million of letters of credit."

Industry Context

StockSavvy.ai notes that Cross Country Healthcare's performance in Q1 2026 reflects broader trends in the healthcare staffing sector, characterized by declining volumes in core segments, potentially due to shifts in healthcare utilization and labor market dynamics. The company's strategic move towards acquisition via merger indicates a consolidation trend within the industry.

Comparison to Industry Standards

• The filing does not provide direct comparisons to specific industry benchmarks or competitors' results for the reported quarter.
• The decline in revenue and increase in net loss for Cross Country Healthcare in Q1 2026, compared to the prior year, suggests a challenging operating environment within the healthcare staffing sector.
• The company's focus on Nurse and Allied Staffing (84% of revenue) and Physician Staffing (16% of revenue) aligns with typical segmentations in the healthcare staffing industry.

Legal Proceedings

• The company is involved in various litigation, claims, investigations, and other proceedings primarily related to employee matters, professional liability, tax, and payroll practices.
• During Q1 2026, $1.2 million was recorded for legal fees and settlement charges.
• The company believes the outcome of outstanding contingencies will not have a material adverse effect on its business, financial condition, results of operations, or cash flows.

Related Party Transactions

• The company engages a digital marketing firm related to its President, CEO, and Chairman of the Board, on terms believed to be arm's-length and approved by the Audit Committee.
• The company provides services to entities affiliated with certain Board members, on terms believed to be arm's-length.
• In April 2026, a twelve-month contract was entered into with a firm related to the son-in-law of the CEO, with terms approved by the Audit Committee.

Stakeholder Impact

• Shareholders: The announced merger offers shareholders the opportunity to receive $13.25 in cash per share, providing a liquidity event. However, the current financial performance indicates a challenging operating environment.
• Employees: The decline in revenue and operational adjustments may impact staffing levels and employment opportunities within the company.
• Customers: The merger and potential delisting could introduce uncertainty regarding future service continuity and relationships, although the company aims to maintain operations until closing.
• Creditors: The company's strong liquidity position and available credit facility provide comfort, but the merger's consummation will alter the capital structure and ownership.

Next Steps

• The company has entered into a definitive merger agreement with KL Criss Cross Intermediate, LLC, which is subject to customary closing conditions, including stockholder approval.
• If the merger is consummated, the company's securities will be delisted from the Nasdaq Global Select Market and deregistered.
• The company will continue to operate under its current management until the closing of the merger.

Key Dates

Recommendation

The company's deteriorating financial performance (declining revenue, widening net loss) is a significant concern. However, the announced merger at a premium price ($13.25/share) provides a clear path to liquidity for shareholders. Given the pending transaction, a 'hold' recommendation is appropriate to allow investors to await the closing of the merger and receive the cash consideration, while acknowledging the underlying business challenges.

Keywords

Cross Country Healthcare, Healthcare Staffing, Form 10-Q, Quarterly Report, Merger Agreement, KL Criss Cross Intermediate, Financial Results, Nurse Staffing, Physician Staffing, Revenue Decline, Net Loss