10-Q: Cross Country Healthcare Reports Q2 Loss Amid Merger Costs

Cross Country Healthcare, Inc. reported a net loss of $6.7 million in Q2 2025, a significant improvement from the prior year, despite a 19.3% revenue decline, as it progresses towards its acquisition by Aya Healthcare.

Summary

• Consolidated revenue for the three months ended June 30, 2025, decreased by 19.3% year-over-year to $274.1 million, primarily due to declines in volume and average bill rates in travel nurse and allied, and per diem staffing.
• Net loss attributable to common stockholders for Q2 2025 was $6.7 million, an improvement from a net loss of $16.1 million in Q2 2024.
• Loss from operations improved to $5.9 million in Q2 2025 from $19.2 million in Q2 2024.
• For the six months ended June 30, 2025, revenue decreased by 21.1% to $567.5 million, and net loss was $7.1 million, an improvement from $13.4 million in the prior year period.
• Acquisition and integration-related costs totaled $6.0 million for Q2 2025 and $8.0 million for the six months ended June 30, 2025, primarily due to fees associated with the pending Aya Merger.
• Credit loss expense significantly decreased to $30 thousand in Q2 2025 from $18.9 million in Q2 2024, which was related to a customer bankruptcy.
• Net cash provided by operating activities for the six months ended June 30, 2025, was $9.9 million, a substantial decrease from $88.4 million in the same period of 2024.
• The Nurse and Allied Staffing segment's revenue decreased by 23.0% in Q2 2025, with a 16.4% decline in professionals on assignment and a 7.7% normalization in bill rates, though Homecare Staffing within this segment grew 31.3%.
• The Physician Staffing segment's revenue increased by 3.0% in Q2 2025, driven by higher rates and favorable specialty mix, despite an 8.3% decrease in days filled.
• The Aya Merger is expected to close in the fourth quarter of 2025, subject to customary closing conditions, including regulatory approvals, and will result in the company becoming private and delisting from Nasdaq.
• As of June 30, 2025, cash and cash equivalents were $81.2 million, with no borrowings drawn under the $300.0 million asset-based revolving credit facility (ABL), which had $125.7 million of availability net of letters of credit.

Sentiment

Score: 4

Explanation: The sentiment is moderately negative due to significant revenue decline and a substantial drop in operating cash flow, indicating operational weakness. While net loss improved, this was largely due to reduced one-off expenses rather than core business strength. The pending merger provides a potential exit for shareholders, but the FTC Second Request introduces a delay and regulatory uncertainty.

Positives

• Net loss significantly improved to $6.7 million in Q2 2025 from $16.1 million in Q2 2024, and to $7.1 million for the six months ended June 30, 2025, from $13.4 million in the prior year period.
• Loss from operations improved by 69.5% in Q2 2025 and 58.0% for the six months ended June 30, 2025, compared to the prior year periods.
• Credit loss expense was immaterial in Q2 2025 ($30 thousand) compared to $18.9 million in Q2 2024, indicating improved collections or reduced bad debt.
• Legal and other losses decreased significantly to $1.1 million in Q2 2025 from $3.9 million in Q2 2024, and to $1.1 million for the six months ended June 30, 2025, from $7.6 million in the prior year period.
• Homecare Staffing within the Nurse and Allied Staffing segment experienced strong year-over-year revenue growth of 31.3% in Q2 2025 and 30.4% for the six months ended June 30, 2025.
• Physician Staffing segment revenue increased by 3.0% in Q2 2025 and 5.9% for the six months ended June 30, 2025, driven by higher rates and favorable specialty mix.
• Contribution income for Nurse and Allied Staffing increased by 138.6% in Q2 2025, and its margin improved to 6.2% from 2.0% in the prior year.
• Contribution income for Physician Staffing increased by 13.5% in Q2 2025, and its margin improved to 9.2% from 8.3% in the prior year.
• Corporate overhead decreased to $12.5 million in Q2 2025 from $18.2 million in Q2 2024, reflecting cost management.
• The company has strong liquidity with $81.2 million in cash and cash equivalents and $125.7 million of available borrowing capacity under its ABL facility as of June 30, 2025, with no outstanding debt.

Negatives

• Consolidated revenue declined significantly by 19.3% in Q2 2025 and 21.1% for the six months ended June 30, 2025, primarily due to volume and bill rate declines in the Nurse and Allied Staffing segment.
• Net cash provided by operating activities decreased substantially to $9.9 million for the six months ended June 30, 2025, from $88.4 million in the prior year period.
• Direct operating expenses as a percentage of revenue increased to 79.6% in Q2 2025 from 79.2% in Q2 2024, indicating tightening bill/pay spreads.
• Selling, general and administrative expenses as a percentage of revenue increased to 18.2% in Q2 2025 from 17.7% in Q2 2024.
• Acquisition and integration-related costs increased significantly to $6.0 million in Q2 2025 due to the pending Aya Merger, compared to an immaterial amount in Q2 2024.
• The average number of FTEs on contract in Nurse and Allied Staffing decreased by 16.4% in Q2 2025, and average revenue per FTE per day decreased by 7.7%.
• Total days filled for Physician Staffing decreased by 8.3% in Q2 2025, despite revenue growth driven by higher rates.
• Days sales outstanding increased by 4 days year-over-year and 1 day sequentially to 58 days as of June 30, 2025.

Risks

• The timing to consummate the proposed Aya Merger is uncertain, and there is a risk that closing conditions may not be satisfied or that the closing might not occur.
• Regulatory approval, specifically from the U.S. Federal Trade Commission (FTC), may not be obtained for the Aya Merger or could be obtained subject to unanticipated conditions.
• The proposed Aya Merger could divert significant management time from ongoing business operations.
• Announcements relating to the proposed Aya Merger could adversely affect the market price of the company's common stock.
• The proposed Aya Merger and its announcement could have an adverse effect on the company's ability to retain customers and key personnel, and maintain relationships with suppliers and customers.
• The Merger Agreement could be terminated, potentially requiring the company to pay a termination fee.
• Competing offers for the company could emerge.
• Unexpected costs, charges, or expenses may result from the Aya Merger.
• Potential litigation relating to the Aya Merger could be instituted against the parties or their directors/officers.
• The overall macroeconomic environment, including increased inflation and interest rates, could materially adversely affect future results.
• Demand for healthcare services provided by the company, both nationally and regionally, could be uncertain or reduced.
• The company's ability to attract and retain qualified nurses, physicians, and other healthcare personnel is critical.
• Costs and availability of short-term housing for travel healthcare professionals could impact profitability.
• The functioning of information systems and the effect of cybersecurity risks and incidents pose threats to the business.
• Existing or future government regulation and federal/state legislative and enforcement initiatives, including data privacy and protection laws, could impact operations.
• Social, ethical, and security issues relating to the use of artificial intelligence could affect the business.
• Customers' ability to pay for services could be impaired.
• The company's ability to successfully implement acquisition and development strategies, integrate acquired businesses, and realize synergies from such acquisitions is uncertain.
• Liabilities and other claims asserted against the company could adversely affect financial results.
• Competition in the markets served by the company could intensify.
• The company's ability to successfully defend lawsuits or determine its potential liability is a risk.
• Estimates and assumptions used in financial reporting, such as accounts receivable valuation, goodwill, and legal contingencies, may not prove accurate, leading to material adverse impacts.

Future Outlook

The company expects the proposed Aya Merger to close in the fourth quarter of 2025, subject to the satisfaction of customary closing conditions, including regulatory approvals. Upon completion, Cross Country Healthcare will become a private company, and its common stock will no longer trade on Nasdaq. The company anticipates meeting future cash needs through a combination of cash on hand, operating cash flows, and funds available through its asset-based loan facility.

Management Comments

• Consolidated revenue declined 19.3% year-over-year to $274.1 million for the quarter ended June 30, 2025, as there continued to be a decline in both volume and average bill rates in travel nurse and allied, and per diem.
• These declines were partly offset by continued growth in Homecare Staffing, which was up 31.3% over the prior year, as well as growth in our Physician Staffing segment, which was up 3.0% over the prior year.
• Net loss attributable to common stockholders in the second quarter of 2025 was $6.7 million, as compared to net loss of $16.1 million for the same period in the prior year.
• The Aya Merger is expected to close in the fourth quarter of 2025, subject to the satisfaction of other customary closing conditions, including regulatory approvals.
• Upon completion of the Aya Merger, Cross Country will become a private company and its common stock will no longer trade on Nasdaq.
• The outcome of any outstanding loss contingencies, individually or in the aggregate, as of June 30, 2025, is not expected to have a material adverse effect on the business, financial condition, results of operations, or cash flows.
• Terms of related party digital marketing services are believed to be equivalent to arm’s-length transactions and were approved by the Audit Committee.
• Services provided to entities affiliated with Board members were conducted on terms equivalent to those prevailing in an arm’s-length transaction.

Industry Context

The healthcare staffing industry is experiencing a normalization in demand and bill rates, particularly in the travel nurse and allied sectors, following the elevated levels seen during the pandemic. This is evidenced by the company's significant revenue decline in its Nurse and Allied Staffing segment. However, growth in specialized areas like Homecare Staffing and Physician Staffing suggests a shift in demand within healthcare delivery models. The pending acquisition by Aya Healthcare indicates a trend towards consolidation in the sector, with larger players seeking to expand market share and operational efficiencies, potentially leading to a more concentrated market structure.

Comparison to Industry Standards

• The decline in travel nurse and allied bill rates and volumes suggests a return to more competitive, pre-pandemic market conditions, where supply and demand dynamics are normalizing.
• The growth in Homecare Staffing (31.3% year-over-year) aligns with broader healthcare trends favoring in-home care and community-based services, potentially outperforming segments tied to acute care facility staffing.
• The Physician Staffing segment's revenue growth (3.0% year-over-year) driven by higher rates, despite a decrease in days filled, indicates strong pricing power in certain physician specialties, which may be more resilient to overall market softening compared to general nursing staff.
• The improvement in net loss, despite revenue decline, is largely attributable to a significant reduction in credit loss expense and legal/other losses, which were unusually high in the prior year due to specific events (customer bankruptcy, class action lawsuit settlement). This suggests an improvement in managing one-off financial impacts rather than a fundamental improvement in core operational profitability relative to revenue.

Corporate Governance

Legal Proceedings

• The company is involved in various litigation, claims, investigations, and other proceedings in the ordinary course of business, primarily related to employee-related matters, professional liability, tax, and payroll practices.
• During Q2 2025, the company recorded $1.1 million in legal fees and settlement charges related to various cases and claims.
• Management believes the outcome of any outstanding loss contingencies will not have a material adverse effect on its business, financial condition, results of operations, or cash flows as of June 30, 2025.
• Sales and other state non-income tax filings are subject to routine audits by authorities, and the company accrues liabilities based on its best estimate of probable liability.

Related Party Transactions

• The company has an arrangement for digital marketing services with a firm related to a Board member, with immaterial expenses incurred in Q2 2025 and YTD Q2 2025, believed to be on arm's-length terms.
• The company provides services to entities affiliated with certain Board members, generating $2.5 million in revenue for Q2 2025 and $4.5 million for YTD Q2 2025, believed to be on arm's-length terms.

Stakeholder Impact

• Shareholders face uncertainty regarding the timing and ultimate completion of the Aya Merger, which, if successful, will result in the company becoming private and its stock delisting from Nasdaq, providing a defined exit.
• Employees in the Nurse and Allied Staffing segment are impacted by headcount declines and restructuring costs, including employee terminations.
• Customers are experiencing a decline in volume and bill rates for travel nurse and allied staffing, suggesting a shift in market dynamics and potentially increased competition for staffing services.
• The company's liquidity remains strong with substantial cash and ABL availability, which benefits creditors and ensures operational stability despite revenue declines.
• The pending merger and associated costs, along with operational declines, could impact employee morale and retention, particularly for key personnel.

Next Steps

• Substantially comply with the FTC's Second Request for additional information regarding the Aya Merger.
• Work towards the expected closing of the Aya Merger in the fourth quarter of 2025.
• Upon merger completion, the company will become a private entity, and its common stock will no longer trade on Nasdaq.
• Adopt ASU No. 2023-09 (Income Taxes) for the annual report for the fiscal year ended December 31, 2025.
• Adopt ASU No. 2024-03 (Income Statement Expense Disaggregation Disclosures) for the annual report for the fiscal year ending December 31, 2027.

Key Dates

Recommendation

The company is currently under a definitive merger agreement with Aya Healthcare, which has been approved by shareholders and is expected to close in Q4 2025. While the operational results show significant revenue decline and reduced operating cash flow, the primary driver for the stock's value is the agreed-upon acquisition price. Holding the stock allows investors to realize the merger consideration, assuming the deal closes as expected. The FTC's Second Request introduces a delay and some regulatory risk, but the company still anticipates closing in Q4 2025. A 'hold' recommendation is appropriate for investors awaiting the completion of this strategic transaction.

Keywords

Healthcare Staffing, Nurse Staffing, Physician Staffing, Travel Nurse, Allied Health, Temporary Staffing, Healthcare Workforce Solutions, SEC Filing, 10-Q, Aya Merger, Mergers and Acquisitions, Human Resources, Medical Staffing