Executive Summary / Key Takeaways

• Cross Country Healthcare is strategically transforming into a diversified, tech-enabled workforce solutions provider, moving beyond its traditional reliance on travel nursing.
• Despite a 19.3% year-over-year consolidated revenue decline in Q2 2025, robust growth in Physician Staffing, Homecare, and Education segments, now representing approximately 30% of total revenue, underscores successful diversification efforts.
• The company's proprietary Intellify platform is a key technological differentiator, enhancing operational efficiency and client engagement, with 100% client conversion expected by the end of 2024.
• Management anticipates an inflection point in travel demand in the second half of 2024, supported by rising orders and strategic cost optimization, aiming for sequential revenue growth and improved profitability.
• A pending merger with Aya Holdings II Inc., expected to close in Q4 2025, will take CCRN private, representing a significant and transformative event for the company's future.

A Shifting Healthcare Landscape and CCRN's Strategic Response

Cross Country Healthcare, Inc. (CCRN) operates at the nexus of a dynamic and often challenging healthcare staffing industry. Founded in 1986, the company has evolved significantly, particularly through a strategic digital transformation and re-evaluation between 2019 and 2020. This period laid the groundwork for its current strategy: to become a diversified, tech-enabled workforce solutions provider. The industry itself is characterized by persistent structural staffing shortages, high patient acuity, and an openings-to-hire ratio of 2.1, indicating a systemic supply-demand imbalance that necessitates flexible staffing solutions.

In this competitive landscape, CCRN positions itself as a comprehensive talent management service, offering a broad spectrum of solutions from temporary and permanent placements to managed service programs (MSPs) and vendor management systems (VMS). The company directly competes with major players like AMN Healthcare Services (AMN), Aya Healthcare, and CHG Healthcare Services. While AMN is recognized for its scale and advanced digital recruitment tools, and Aya for its agile, technology-driven platforms, CCRN differentiates itself through a strong brand in travel nursing, proprietary recruitment networks, and a consultative approach to client relationships. This allows CCRN to offer more tailored solutions and potentially greater flexibility in contract terms, particularly in specialized segments.

However, the market is hyper-competitive, with both large and small rivals offering high compensation packages, which pressures bill-pay spreads and limits gross margin normalization. CCRN's strategic response involves leveraging its technological advancements and diversifying its revenue streams to mitigate these pressures and capture market share.

Technological Edge: Intellify and the Digital Transformation

At the core of CCRN's strategic transformation is its commitment to technological differentiation and innovation. The company's flagship platform, Intellify, is a proprietary, SaaS-based Workforce Solutions platform designed to function as both a VMS and MSP. This dual capability is critical in a market where clients increasingly seek the "best of both worlds"—a vendor panel for broad access coupled with accountability from a strategic staffing partner.

Intellify offers tangible benefits by streamlining processes, saving time and resources for clients, and effectively managing labor, coordinating internal float pools, and arranging locum tenens placements. The platform has gained significant traction, serving over 40 clients across 500 facilities with more than 5,500 active users. Management expects 100% of its clients to be fully converted to Intellify by the end of 2024, which is anticipated to propel spend under management in 2025. The company recently secured two new awards with a combined estimated annual spend under management of $70 million, further demonstrating Intellify's market appeal. Additionally, CCRN has achieved its first SaaS-based subscription with a third-party utilizing Intellify, highlighting its versatility.

Beyond Intellify, CCRN's technological ecosystem includes the Xperience app, a candidate-facing tool empowering clinicians to manage their careers. In 2023, Xperience saw over 18,000 app downloads and more than 100,000 unique viewers, with plans for full integration into Intellify. The company also launched Data Aggregation Services (DAS), providing hospitals with unique insights on bill rate trends for real-time benchmarking.

CCRN's R&D initiatives extend to leveraging AI agents and robotic process automation (RPA). These efforts are aimed at lowering costs, enhancing predictive job matching, improving talent sourcing, and assessing candidate suitability. The successful completion of the first phase of its ERP system, with the second phase slated for mid-2025, is expected to yield significant operational efficiencies. For investors, these technological advancements are crucial. They strengthen CCRN's competitive moat by offering superior efficiency and tailored solutions, contributing to better market positioning, and driving long-term growth through cost savings and enhanced service delivery. For instance, leveraging offshore operations in India, partly enabled by these technologies, saves approximately $3 million annually for every 100 positions staffed.

Diversified Growth Engines: Beyond Travel Nursing

While the core Nurse and Allied Staffing segment has faced headwinds, CCRN's strategic diversification into other healthcare staffing verticals is yielding robust growth and improving its overall revenue mix. On an annualized basis, Homecare Staffing, Physician Staffing, and Education businesses collectively represent approximately 30% of total revenue, a significant increase from roughly 10% at the end of 2021.

Physician Staffing (Locums) has been a consistent performer, with Q2 2025 revenue increasing 3.0% year-over-year to $49.8 million. This segment achieved an annual run rate exceeding $200 million in Q3 2024, up from approximately $100 million in 2022, largely driven by late 2022 acquisitions. Macro conditions for locums remain strong, fueled by increased census, surgeries, and high demand for specialties like anesthesiology, CRNAs, and advanced practice nurses. Management anticipates low to mid-single-digit sequential revenue growth in Q4 2024, bucking seasonal trends, and forecasts low double-digit year-over-year growth for 2024. Contribution income for Physician Staffing increased 13.5% year-over-year in Q2 2025 to $4.6 million, reflecting improved operating leverage and a focus on higher-margin specialties.

Homecare Staffing, acquired in 2021, has demonstrated "steady growth," with Q2 2025 revenue up 31.3% year-over-year and 7.0% sequentially. The company has doubled its PACE programs nationwide and more than tripled its locations served. With approximately two dozen contracts in various stages of the sales cycle in H2 2024, management expects mid-teens year-over-year growth in Q4 2024, driven by a robust pipeline as more individuals seek to age in place. This segment boasts gross margins "a little bit above our consolidated average," making it a key contributor to profitability.

The Education business is also performing well, approaching a $100 million annualized run rate. Despite seasonal fluctuations (Q3 2024 revenue down 37% sequentially due to school calendars), management expects continued mid to high single-digit growth. This segment is a top area of focus for both organic expansion and potential M&A, with Q4 2024 revenue expected to be up nearly 70% sequentially as schools return.

Navigating Market Headwinds: Performance and Profitability

CCRN's recent financial performance reflects the dual reality of a challenging core market and successful diversification. For Q2 2025, consolidated revenue decreased 19.3% year-over-year to $274.1 million, primarily due to volume and bill rate declines in Nurse and Allied Staffing. This resulted in a net loss attributable to common stockholders of $6.7 million, an improvement from a $16.1 million loss in Q2 2024.

Direct operating expenses decreased 18.9% to $218.1 million in Q2 2025, largely mirroring the revenue decline and tightening bill-pay spreads. However, as a percentage of revenue, direct operating expenses slightly increased to 79.6% from 79.2% in the prior year, indicating persistent pressure on gross margins. Selling, general and administrative (SG&A) expenses decreased 16.9% to $50.1 million, driven by compensation and benefit reductions, and professional fees. Despite this, SG&A as a percentage of revenue rose to 18.2% from 17.7% year-over-year. Corporate overhead also decreased to $12.5 million from $18.2 million in Q2 2024, reflecting cost management efforts.

Gross margin for Q1 2024 was 20.4%, down 150 basis points sequentially and 200 basis points year-over-year, primarily due to annual payroll taxes, higher health insurance and workers' comp costs, and a professional liability adjustment. Management noted that overall pay rates continue to decline faster than bill rates, but lodging subsidies and other benefits mask this trend, keeping gross margins constrained.

Liquidity remains strong, with $81.2 million in cash and cash equivalents as of June 30, 2025, and no outstanding debt. The company has $125.7 million of available borrowing capacity under its $300 million ABL facility. Operating cash flow for the six months ended June 30, 2025, was $9.9 million, a decrease from $88.4 million in the prior year, partly impacted by ERP implementation costs. Days Sales Outstanding (DSO) was 58 days in Q2 2025, up from 56 days in Q2 2024, but management aims to bring it below 60 days. The company continues its balanced capital allocation strategy, having repurchased 800,000 shares for $12 million in Q3 2024, with $40.5 million remaining under its repurchase program.

Outlook and the Road Ahead: An Inflection Point and Transformative Merger

Management's outlook for CCRN reflects cautious optimism and a clear strategic roadmap, particularly for the latter half of 2024 and into 2025. For Q4 2024, revenue is guided between $300 million and $310 million, with adjusted EBITDA between $11 million and $13 million, representing a margin closer to 4%. This guidance anticipates low to mid-single-digit sequential declines in the travel business, largely offset by a nearly 70% sequential increase in the Education business due to the return to school.

A key assumption underpinning this outlook is an anticipated "inflection point" in the Travel Nurse and Allied business. Management notes that travel demand was "fairly steady and stable" in Q3 2024, with orders up roughly 20% over the quarter, although not all orders translate directly to production due to bill-pay rate mismatches. The demand outlook does not factor in "winter needs" orders, which could provide additional upside if they materialize.

Cost optimization remains a critical focus. CCRN has proactively reduced its U.S. headcount by over 20% in 2024 (and 40% over 18 months), partly by expanding lower-cost operations in India. These actions, combined with efficiencies from Intellify and the ERP system, are expected to drive millions in annualized cost savings. The company's long-term goal is to achieve a high single-digit adjusted EBITDA margin, with mid-single digits expected in the near term as it maintains capacity for future growth.

A transformative event looms on the horizon: the pending merger with Aya Holdings II Inc. On December 3, 2024, CCRN entered into an agreement to become a wholly-owned subsidiary of Aya Holdings II Inc. This transaction, approved by stockholders in February 2025, is expected to close in Q4 2025, subject to customary closing conditions and regulatory approvals (including an FTC Second Request received in February 2025). Upon completion, Cross Country Healthcare will become a private company, and its common stock will no longer trade on Nasdaq. This merger represents a significant strategic shift, reshaping CCRN's ownership and operational structure, and is a critical factor for investors to consider.

Competitive Standing and Strategic Moats

CCRN operates in a highly competitive environment, where its strategic positioning and technological moats are crucial. Against larger, more technologically advanced competitors like AMN Healthcare and Aya Healthcare, CCRN leverages its strong brand in travel nursing and its proprietary Intellify platform. While AMN and Aya may offer superior efficiency in recruitment technology and faster candidate matching, CCRN's consultative services and ability to provide tailored solutions, particularly in non-acute care settings, offer a distinct advantage. Its MSP capture rate strategy, which balances internal fulfillment with robust partner networks, ensures high-quality clinician delivery while maintaining flexibility and supporting sub-vendors.

CCRN's diversified segments, such as Physician Staffing, Homecare, and Education, provide specialized offerings that differentiate it from competitors. For instance, its Physician Staffing segment offers stronger specialization compared to broader staffing firms. The company's investment in AI and RPA aims to close technological gaps, enhancing predictive job matching and talent sourcing.

However, CCRN faces vulnerabilities, including potential over-reliance on certain healthcare sectors and the ongoing pressure on bill-pay spreads from aggressive competitor compensation packages. The blurring lines between MSP and VMS models, where clients demand both vendor choice and accountability, plays directly into Intellify's hybrid capabilities. Barriers to entry in healthcare staffing, such as regulatory compliance and established networks, help CCRN defend its position, though these also favor larger, well-resourced competitors. The pending Aya Merger will fundamentally alter CCRN's competitive standing, integrating it into a larger, private entity, which could unlock new synergies and market opportunities, or present new integration challenges.

Conclusion

Cross Country Healthcare is in a profound period of strategic transformation, moving from a pandemic-driven growth phase to a more diversified, tech-enabled future. Despite recent revenue declines in its core Nurse and Allied Staffing segment, the company's strategic investments in Physician Staffing, Homecare, and Education are yielding robust growth, significantly diversifying its revenue base and improving its margin profile. The proprietary Intellify platform stands as a testament to CCRN's technological leadership, offering quantifiable benefits in efficiency and client engagement that are critical for competitive differentiation.

Management's outlook points to an anticipated inflection in travel demand in the latter half of 2024, supported by ongoing cost optimization and strategic M&A. This, coupled with the continued strong performance of its diversified segments, positions CCRN for sequential revenue growth and improved profitability. The impending merger with Aya Holdings II Inc. in Q4 2025 marks a pivotal moment, signaling a new chapter for the company as it transitions to a private entity. This strategic move, while carrying inherent integration risks, could unlock significant value and further solidify CCRN's position within the evolving healthcare workforce solutions market, driven by its foundational strengths and forward-looking technological roadmap.