CROSS COUNTRY HEALTHCARE INC (CCRN)

ITEM 2.    MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The purpose of the following Management’s Discussion and Analysis (MD&A) is to help facilitate the understanding of significant factors influencing the quarterly operating results, financial condition, and cash flows of the Company. Additionally, MD&A also conveys our current expectations of the potential impact of known trends, events, or uncertainties that may impact future results. MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year ended December 31, 2025 (2025 Form 10-K) (including Part I, Item 1A. “Risk Factors”), our financial statements and the accompanying notes to our financial statements.

Business Overview

We provide total talent management services, including strategic workforce solutions, contingent staffing, permanent placement, and consultative services for healthcare customers across the continuum of care, by recruiting and placing highly qualified healthcare professionals in virtually every specialty and area of expertise. In addition to clinical roles such as school nurses, speech language, and behavioral therapists, we place non-clinical professionals such as teachers, substitute teachers, and other education specialties at educational facilities across the nation. Our diverse customer base includes both public and private acute care and non-acute care hospitals, outpatient clinics, ambulatory care facilities, single and multi-specialty physician practices, rehabilitation facilities, Program of All-Inclusive Care for the Elderly (PACE) programs, urgent care centers, local and national healthcare systems, managed care providers, public and charter schools, correctional facilities, government facilities, pharmacies, and many other healthcare providers. Through our national staffing teams, we offer our workforce solutions and place clinicians on travel and per diem assignments, local short-term contracts, and permanent positions. In addition, we continually evaluate opportunities to acquire companies that would complement or enhance our business, like Workforce Solutions Group, Inc. (WSG) and Mint Medical Physician Staffing, LP and Lotus Medical Staffing LLC (collectively, Mint).

Our workforce solutions include managed service programs (MSPs), vendor management systems (VMS), caregiver services to PACE programs (home based PACE services), education health services, recruitment process outsourcing (RPO), project management, and other outsourcing and consultative services as described in Item 1. “Business” in our 2025 Form 10-K. By utilizing the solutions that we offer, customers are able to better plan their personnel needs, optimize their talent acquisition and management processes, strategically flex and balance their workforce, have access to quality healthcare personnel, and provide continuity of care for improved patient outcomes.

The Company’s two reportable segments offer services to its customers as described below:

●    Nurse and Allied Staffing – Nurse and Allied Staffing represented approximately 84% of total revenue in the first quarter of 2026. The Nurse and Allied Staffing segment provides workforce solutions and traditional staffing, including temporary and permanent placement of travel nurses and allied professionals, as well as per diem and contract nurses and allied personnel. We also provide clinical and non-clinical professionals on short-term and long-term assignments to customers such as local and national healthcare plans, managed care providers, public and charter schools, correctional facilities, skilled nursing facilities, and other non-acute settings. In addition, Nurse and Allied Staffing provides executive search services for healthcare professionals, as well as contingent search. We provide flexible workforce solutions to our healthcare customers through diversified offerings designed to meet their unique needs, including MSP, RPO, and consulting services. We also offer our Software as a Service (SaaS)-based, proprietary, vendor management technology, Intellify® to facilities to manage all or a portion of their agency services.

●    Physician Staffing – Physician Staffing represented approximately 16% of total revenue in the first quarter of 2026. Physician Staffing provides physicians in many specialties, as well as certified registered nurse anesthetists, nurse practitioners, and physician assistants as independent contractors on temporary assignments throughout the United States (U.S.).

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Recent Events

On May 6, 2026, the Company entered into an Agreement and Plan of Merger with KL Criss Cross Intermediate, LLC, a Delaware corporation (Parent), and KL Criss Cross Merger Sub, Inc., a Delaware corporation and a wholly owned subsidiary of Parent (Merger Sub), pursuant to which Merger Sub will merge with and into the Company (Merger), with the Company surviving as a wholly owned subsidiary of Parent. If the Merger is consummated, the Company’s securities will be delisted from the Nasdaq Global Select Market and deregistered under the Securities Exchange Act of 1934, as amended, as promptly as practicable after the effective time of the Merger. For additional information regarding the proposed Merger, see Note 16 – Subsequent Event.

Summary of Operations

For the quarter ended March 31, 2026, 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.

For the three months ended March 31, 2026, cash and cash equivalents totaled $105.6 million. During the first quarter, the Company repurchased 657,653 shares under the Repurchase Program (as defined below). Cash flow provided by operating activities for the three months ended March 31, 2026 was $4.8 million. 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. See Note 8 - Debt to our condensed consolidated financial statements.

See Results of Operations, Segment Results, and Liquidity and Capital Resources sections that follow for further information.

Operating Metrics

We evaluate our financial condition by tracking operating metrics and financial results specific to each of our segments. Key operating metrics include hours worked, days filled, number of contract personnel on a full-time equivalent (FTE) basis, revenue per FTE, and revenue per day filled. Other operating metrics include number of open orders, candidate applications, contract bookings, length of assignment, bill and pay rates, renewal and fill rates, number of active searches, and number of placements. These operating metrics are representative of trends that assist management in evaluating business performance. Due to the timing of our business process and other factors, certain of these operating metrics may not necessarily correlate to the reported U.S. generally accepted accounting principles (U.S. GAAP) results for the periods presented. Some of the segment financial results analyzed include revenue, operating expenses, and contribution income. In addition, we monitor cash flow, as well as operating and leverage ratios, to help us assess our liquidity needs.

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Results of Operations

The following table summarizes, for the periods indicated, selected condensed consolidated statements of operations and comprehensive loss data expressed as a percentage of revenue. Our historical results of operations are not necessarily indicative of future operating results.

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Comparison of Results for the Three Months Ended March 31, 2026 and the Three Months Ended March 31, 2025

Revenue from services

Revenue from services decreased 17.8% to $241.1 million for the three months ended March 31, 2026, as compared to $293.4 million for the three months ended March 31, 2025, primarily due to volume declines in the Nurse and Allied Staffing and Physician Staffing segments. See further discussion in Segment Results.

Direct operating expenses

Direct operating expenses consist primarily of field employee compensation and independent contractor expenses, housing expenses, travel expenses, and related insurance expenses. Direct operating expenses decreased $41.3 million, or 17.6%, to $193.5 million for the three

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Item 7.  Management's Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Item 1. Business, Item 1A. Risk Factors, Forward-Looking Statements, and Item 15. Consolidated Financial Statements and the accompanying notes and other data, all of which appear elsewhere in this Annual Report on Form 10-K.

Management's Discussion and Analysis (MD&A) below generally discusses 2025 and 2024 and provides year-to-year comparisons between 2025 and 2024. Discussions of 2023 and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 5, 2025 and such information is incorporated herein by reference.

Business Overview

We provide total talent management services, including strategic workforce solutions, contingent staffing, permanent placement, and consultative services for healthcare customers across the continuum of care, by recruiting and placing highly qualified healthcare professionals in virtually every specialty and area of expertise. In addition to clinical roles such as school nurses, speech language, and behavioral therapists, we place non-clinical professionals such as teachers, substitute teachers, and other education specialties at educational facilities across the nation. Our diverse customer base includes both public and private acute care and non-acute care hospitals, outpatient clinics, ambulatory care facilities, single and multi-specialty physician practices, rehabilitation facilities, PACE programs, urgent care centers, local and national healthcare systems, managed care providers, public and charter schools, correctional facilities, government facilities, pharmacies, and many other healthcare providers. Through our national staffing teams, we offer our workforce solutions and place clinicians on travel and per diem assignments, local short-term contracts, and permanent positions. In addition, we continually evaluate opportunities to acquire companies that would complement or enhance our business, like Workforce Solutions Group, Inc. (WSG) and Mint Medical Physician Staffing, LP and Lotus Medical Staffing LLC (collectively, Mint).

Our workforce solutions include MSPs, VMS, caregiver services to PACE programs (home-based staffing), education health services, RPO, project management, and other outsourcing and consultative services as described in Item 1. Business in this Annual Report on Form 10-K. By utilizing the solutions that we offer, customers are able to better plan their personnel needs,

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optimize their talent acquisition and management processes, strategically flex and balance their workforce, have access to quality healthcare personnel, and provide continuity of care for improved patient outcomes.

The Company's two reportable segments, Nurse and Allied Staffing and Physician Staffing, represented approximately 82% and 18%, respectively, of total revenue for the year ended December 31, 2025. See further discussion of these segments in Item 1. Business in this Annual Report on Form 10-K.

Summary of Operations and Recent Updates

For the year ended December 31, 2025, consolidated revenue decreased 21.6% year-over-year to $1.1 billion, primarily due to volume declines in the Nurse and Allied Staffing and Physician Staffing segments. These declines were partly offset by continued growth in home-based staffing, which was up 28.0% over the prior year. Net loss attributable to common stockholders for the year ended December 31, 2025 was $94.9 million, as compared to net loss of $14.6 million for the year ended December 31, 2024.

During the fourth quarter of 2025, the Company recorded a non-cash goodwill impairment charge of $77.9 million related to its Nurse and Allied and Physician Staffing segments. The impairment assessment and related charge was primarily triggered by the fourth quarter decline in the Company's equity market capitalization.

As a result of the cumulative losses, primarily triggered by the significant impairment charge, the Company recorded an additional valuation allowance of $29.6 million in the fourth quarter of 2025 on its deferred tax assets.

During the fourth quarter of 2025, the Company recorded executive transition severance costs of $6.0 million related to the former Chief Executive Officer's separation from the Company in December 2025. The costs include $3.1 million of equity compensation, pursuant to the former Chief Executive Officer’s employment agreement and the corresponding general release executed on December 31, 2025.

For the year ended December 31, 2025, cash and cash equivalents totaled $108.7 million. During the fourth quarter, the Company repurchased 803,175 shares under its authorized Repurchase Program. The Company also entered into a new Rule 10b5-1 Repurchase Plan to allow for share repurchases during the Company's blackout periods, beginning on December 16, 2025 and effective through November 4, 2026. Cash flow provided by operating activities for the year ended December 31, 2025 was $48.3 million. As of December 31, 2025, there were no borrowings drawn under the ABL, and borrowing base availability under the ABL was $114.6 million, with $96.3 million of availability net of $18.3 million of letters of credit. See Note 8 - Debt to our consolidated financial statements.

As previously disclosed, on December 3, 2024, the Company entered into a Merger Agreement with Aya Healthcare, Inc. After market close on December 3, 2025, the Company received a notice of termination of the Aya Merger Agreement, effective December 4, 2025. In accordance with the terms of the Aya Merger Agreement, a termination fee of $20.0 million was paid to the Company. This was netted against associated fees paid by the Company and is included in acquisition and integration-related costs in the consolidated statement of operations and comprehensive (loss) income.

During the years ended December 31, 2025 and 2024, the Company incurred $16.6 million and $4.2 million, respectively, in gross fees associated with the Aya Merger, which is included in acquisition and integration-related costs in the consolidated statement of operations and comprehensive (loss) income. The net cash operating inflow associated with the Aya Merger was $5.8 million for the year ended December 31, 2025.

See Results of Operations, Segment Results, and Liquidity and Capital Resources sections that follow for further information.

Operating Metrics

We evaluate the Company's financial condition by tracking operating metrics and financial results specific to each segment. Key operating metrics include hours worked, days filled, number of contract personnel on an FTE basis, revenue per FTE, and revenue per day filled. Other operating metrics include number of open orders, candidate applications, contract bookings, length of assignment, bill and pay rates, renewal and fill rates, number of active searches, and number of placements. These operating metrics are representative of trends that assist management in evaluating business performance. Due to the timing of our business process and other factors, certain of these operating metrics may not necessarily correlate to the reported U.S. GAAP (as defined below) results for the periods presented. Some of the segment financial results analyzed include revenue, operating expenses, and contribution income. In addition, we monitor cash flow, as well as operating and leverage ratios, to help us assess our liquidity needs.

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Results of Operations

The following table summarizes, for the periods indicated, selected consolidated statements of operations and comprehensive (loss) income data expressed as a percentage of revenue. Our historical results of operations are not necessarily indicative of future operating results.

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Comparison of Results for the Year Ended December 31, 2025 and the Year Ended December 31, 2024

NM - Not meaningful

Revenue from services

Revenue from services decreased $0.2 billion, or 21.6%, to $1.1 billion for the year ended December 31, 2025, as compared to $1.3 billion for the year ended December 31, 2024, primarily due to volume declines in the Nurse and Allied Staffing and Physician Staffing segments. See further discussion in Segment Results.

Direct operating expenses

Direct operating expenses consist primarily of fiel

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