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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 below generally discusses 2021 and 2020 items and year-to-year comparisons between 2021 and 2020. Discussions of 2019 items and year-to-year comparisons between 2020 and 2019 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

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Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020 filed with the SEC on February 25, 2021 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 the first quarter of 2021, we modified our reportable segments to reflect the following two business segments: Nurse and Allied Staffing and Physician Staffing. Based on our revised management structure that better aligns with our operations, we aggregated the previously-reported Search segment in Nurse and Allied Staffing to reflect how the business is evaluated, and the operating results are regularly reviewed by the chief operating decision maker. Prior period data in this MD&A has been reclassified to conform to the new segment reporting structure.

● Nurse and Allied Staffing – For the year ended December 31, 2021, Nurse and Allied Staffing represented approximately 96% of total revenue. 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 clients 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 retained search services for healthcare professionals, as well as contingent search and recruitment process outsourcing services. We provide flexible workforce solutions to our healthcare customers through diversified offerings designed to meet their unique needs, including: MSP, RPO, and consulting services.

● Physician Staffing – For the year ended December 31, 2021, Physician Staffing represented approximately 4% of total revenue. Physician Staffing provides physicians in many specialties, as well as CRNAs, NPs, and PAs as independent contractors on temporary assignments throughout the U.S.

Summary of Operations

For the year ended December 31, 2021, revenue from services increased 100% year-over-year to $1,676.7 million, due to continued solid execution and strong performance in our Nurse and Allied Staffing segment, and growth in our Physician Staffing segment. Given the incredibly tight labor market and extreme risk faced by healthcare professionals throughout the pandemic, direct operating expenses rose by 105% over the prior year. Average bill rates rose during the year as we continued to experience significant demand for our services across virtually every specialty, related to both COVID and non-COVID assignments, such as operating room, emergency, pediatrics, labor and delivery, and medical surgical. As a result, we significantly expanded the number of professionals on assignment over the prior year. Throughout the pandemic, we have acted with integrity, and worked collaboratively with clients on adjusting bill rates in response to rapidly changing market conditions. Ensuring our clients have a continuing supply of clinicians and professionals to meet their needs has remained our top priority, and as a result, we grew our investments in attracting candidates and added significant capacity by growing our workforce. As a result of the rising compensation costs for professionals on assignment, and our commitment to absorb as much of the increases as possible, our consolidated gross profit margin decreased 180 basis points year-over-year. Despite the decline in gross margin and significant investments in our workforce, the rising number of professionals on assignment improved our operating leverage, and as a result net income attributable to common stockholders for the year ended December 31, 2021 was $132.0 million, as compared to a net loss of $13.0 million in the prior year. Net income for 2021 was favorably impacted by the reversal of valuation allowances in connection with net operating losses, which is not expected to recur in the future. Going forward, the Company expects to see a significant increase in cash taxes and have an effective tax rate of approximately 30 percent.

For the year ended December 31, 2021, cash flow used in operating activities was $85.6 million, due to the investment in net working capital associated with the historic growth in our business. As of December 31, 2021, we had $1.0 million in cash and

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cash equivalents and $174.3 million principal balance on our term loan. Availability under the asset-based credit facility (ABL) was $150.0 million, with $9.2 million of borrowings drawn under our ABL, and $18.2 million of undrawn letters of credit outstanding, leaving $122.6 million available for borrowing as of December 31, 2021. See Note 8 - Debt to our consolidated financial statements.

In 2021, we refinanced the Company with a new subordinated $175.0 million term loan and completed two acquisitions. On June 8, 2021, we entered into an asset purchase agreement with Workforce Solutions Group, Inc. (WSG), which allows us to deliver critical support to some of the neediest populations by delivering professionals to the home. On December 16, 2021, we entered into an asset purchase agreement with Selected, a subscription-based SaaS model for schools to recruit permanent educators and special education professionals.

As we progress throughout 2022, we anticipate that bill rates will likely decline as COVID hospitalizations decline. However, demand remains robust amidst a backdrop of tight supply for clinicians and professionals, which will likely continue throughout much of 2022. We anticipate continued volume growth throughout 2022, as we continue to invest in both added capacity and our technologies. Our proprietary tool, Marketplace, continues to evolve, with new features and functionality being deployed to improve the candidate experience across the entire engagement life cycle. In 2021, we spent more than $9.0 million on advancing our digital platforms and given the success of our projects, we anticipate expanding our spend on IT related projects, by more than doubling the level of investments in the coming year.

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, and 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 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.

Business Segment Business Measurement

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Results of Operations

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

Year Ended December 31,

Direct operating expenses 77.6 75.8

Selling, general and administrative expenses 12.8 20.8

Bad debt expense 0.3 0.4

Depreciation and amortization 0.6 1.5

Acquisition and integration-related costs 0.1 —

Restructuring costs 0.2 0.7

Impairment charges 0.1 1.9

Income (loss) from operations 8.3 (1.1)

Interest expense 0.4 0.3

Other (income) expense, net (0.1) —

Income (loss) before income taxes 8.0 (1.4)

Income tax expense (benefit) 0.1 —

Consolidated net income (loss) 7.9 (1.4)

Less: Net income attributable to noncontrolling interest in subsidiary — 0.1

Net income (loss) attributable to common stockholders 7.9 % (1.5) %

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Comparison of Results for the Year Ended December 31, 2021 compared to the Year Ended December 31, 2020

Year Ended December 31,

Increase (Decrease) Increase (Decrease)

(Amounts in thousands)

Acquisition and integration-related costs 1,068 77 991 NM

NM - Not meaningful

Revenue from services

Revenue from services increased $840.2 million, or 100.5%, to $1,676.7 million for the year ended December 31, 2021, as compared to $836.4 million for the year ended December 31, 2020, due to strong performance in our Nurse and Allied Staffing segment, resulting from both an increase in volume and higher bill rates. In general, the increase in bill rates related to the spike in COVID needs late in the fourth quarter of 2020, which continued throughout 2021, as well as a continued high level of demand for our services throughout the current year due to the overall tight labor supply for clinicians and professionals. See further discussion in Segment Results.

Direct operating expenses

Direct operating expenses are comprised primarily of field employee compensation and independent contractor expenses, housing expenses, travel expenses, and related insurance expenses. Direct operating expenses increased $668.0 million, or 105.4%, to $1,301.7 million for the year ended December 31, 2021, as compared to $633.7 million for the year ended December 31, 2020, as a result of revenue increases. As a percentage of total revenue, direct operating expenses increased to 77.6% compared to 75.8% in the prior year period, as compensation costs rose by a higher percentage than our bill rates.

Selling, general and administrative expenses

Selling, general and administrative expenses increased $41.5 million, or 23.9%, to $215.3 million for the year ended December 31, 2021, as compared to $173.8 million for the year ended December 31, 2020, primarily due to increases in compensation and benefits, as well as equity compensation expense, marketing, and consulting, partially offset by lower rent expense due to the closure of a significant number of offices in 2020 and a decrease in legal expenses. As a percentage of total revenue, selling, general and administrative expenses decreased to 12.8% for the year ended December 31, 2021 as compared to 20.8% for the year ended December 31, 2020.

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Depreciation and amortization expense

Depreciation and amortization expense for the year ended December 31, 2021 decreased to $9.9 million as compared to $12.7 million for the year ended December 31, 2020. The decline was driven by a combination of lower depreciation on certain assets given the closure of offices, as well as accelerated amortization of trade names associated with our rebranding initiatives in the prior year. See Note 5 - Goodwill, Trade Names, and Other Intangible Assets to our consolidated financial statements. As a percentage of revenue, depreciation and amortization expense was 0.6% for the year ended December 31, 2021 and 1.5% for the year ended December 31, 2020.

Acquisition and integration-related costs

Acquisition and integration-related costs for the year ended December 31, 2021 include costs for legal and advisory fees, as well as integration costs, for the WSG acquisition that closed late in the second quarter of 2021, and legal and professional fees for the Selected acquisition that closed late in the fourth quarter of 2021.

Restructuring costs

Restructuring costs for the years ended December 31, 2021 and 2020 were primarily comprised of employee termination costs and ongoing lease costs related to the Company's strategic reduction of its real estate footprint and totaled $2.6 million and $6.1 million, respectively. Restructuring costs for the year ended December 31, 2020 also included reorganization costs as part of our planned costs savings initiatives.

Impairment charges

Non-cash impairment charges totaled $2.1 million for the year ended December 31, 2021 and related to real estate

restructuring activities and the write-off of a discontinued software development project. Non-cash impairment charges totaled $16.2 million for the year ended December 31, 2020. These were comprised of $10.7 million of impairment related to our Search and Nurse and Allied businesses and $5.5 million related to real estate restructuring activities. See Note 5 - Goodwill, Trade Names, and Other Intangible Assets and Note 10 - Leases to our consolidated financial statements.

Interest expense

Interest expense was $6.9 million for the year ended December 31, 2021 and $2.9 million for the year ended December 31, 2020, due to higher average borrowings and a higher effective interest rate. The effective interest rate on our borrowings was 5.7% and 3.5% for the years ended December 31, 2021 and 2020, respectively.

Income tax expense (benefit)

Income tax expense totaled $1.2 million for the year ended December 31, 2021, compared to income tax benefit of $0.2 million for the year ended December 31, 2020. The effective tax rate was 1.0% and 1.5%, including the impact of discrete items, for the years ended December 31, 2021 and 2020, respectively. The effective tax rate in 2021 was impacted by the $37.5 million release of valuation allowance on deferred tax assets and federal, international, and state taxes. The effective tax rate in 2020 was impacted by the additional valuation allowance on deferred tax assets, impairment of indefinite-lived intangibles, and international and state taxes.

For the year ended December 31, 2021, we recorded a net valuation allowance release of $37.5 million (comprised of $18.4 million related to federal NOLs, $7.5 million related to state NOLs, and $11.6 million related to other net deferred tax assets) on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. The valuation allowance on an immaterial amount of state NOLs was not released due to the respective expiration periods and specific state taxable income projections. See Note 14 - Income Taxes to our consolidated financial statements.

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Segment Results

Information on operating segments and a reconciliation to loss from operations for the periods indicated are as follows:

Year Ended December 31,

(amounts in thousands)

Revenue from services:

Contribution income:

Acquisition and integration-related costs 1,068 77

In the first quarter of 2021, the Company modified its reportable segments and, as a result, now discloses the following two reportable segments - Nurse and Allied Staffing and Physician Staffing. Revenue in the amount of $10.5 million and contribution loss in the amount of $1.1 million included in the previously-reported Search segment have been reclassified to Nurse and Allied Staffing for the year ended December 31, 2020. See Note 18 - Segment Data.

Certain statistical data for our business segments for the periods indicated are as follows:

Year Ended December 31, Percent

Nurse and Allied Staffing statistical data:

Physician Staffing statistical data:

See definition of Business Measurements under the Operating Metrics section of our Management's Discussion and Analysis.

Segment Comparison - Year Ended December 31, 2021 compared to the Year Ended December 31, 2020

Nurse and Allied Staffing

Revenue increased $837.3 million, or 109.0% to $1,605.8 million for the year ended December 31, 2021, from $768.5 million for the year ended December 31, 2020, driven by volume increases and higher bill rates, due to the continuing impacts from COVID as well as the overall tight labor supply for clinicians and professionals.

Contribution income for the year ended December 31, 2021, increased $131.5 million or 177.4%, to $205.7 million from $74.2 million in year ended December 31, 2020, driven by increased revenue. As a percentage of segment revenue, contribution income margin increased to 12.8% for the year ended December 31, 2021 from 9.7% for the year ended December 31, 2020.

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The average number of FTEs on contract during the year ended December 31, 2021 increased 43.8% from the year ended December 31, 2020, primarily due to headcount growth in travel nurse and allied which grew by more than double over the prior year, as well as additional headcount resulting from the WSG acquisition. Average revenue per FTE per day increased approximately 46.6% in the year ended December 31, 2021 compared to the year ended December 31, 2020, due to the increase in the average travel bill rates as a result of the increases in pay rates required to attract healthcare professionals.

Physician Staffing

Revenue increased $3.0 million, or 4.3% to $70.9 million for the year ended December 31, 2021, compared to $67.9 million for the year ended December 31, 2020, primarily due to an increase in volume in several specialties.

Contribution income for the year ended December 31, 2021, increased $0.7 million or 19.6% to $4.3 million compared to $3.6 million in the year ended December 31, 2020. As a percentage of segment revenue, contribution income was 6.1% for the year ended December 31, 2021 and 5.3% for the year ended December 31, 2020, driven by higher revenue, partially offset by higher direct costs.

Total days filled increased 13.3% to 44,169 in the year ended December 31, 2021, compared to 38,987 in the year ended December 31, 2020. Revenue per day filled was $1,605 for the year ended December 31, 2021 and $1,742 for the year ended December 31, 2020 due to a shift in the mix of business.

Corporate overhead

Corporate overhead includes unallocated executive leadership and other centralized corporate functional support costs such as finance, IT, legal, human resources, and marketing, as well as public company expenses and corporate-wide projects. Corporate overhead increased to $55.1 million for the year ended December 31, 2021, from $51.9 million for the year ended December 31, 2020, primarily due to increases in compensation and benefits, as well as equity compensation expense, and consulting expense, partially offset by decreases in legal expenses. As a percentage of consolidated revenue, unallocated corporate overhead was 3.3% for the year ended December 31, 2021, and 6.2% for the year ended December 31, 2020.

Transactions with Related Parties

See Note 17 - Related Party Transactions to our consolidated financial statements.

Liquidity and Capital Resources

At December 31, 2021, we reported $1.0 million in cash and cash equivalents, $174.3 million of term loan outstanding, at par, and $9.2 million of borrowings drawn under our ABL. Working capital increased by $218.8 million to $308.5 million as of December 31, 2021, compared to $89.7 million as of December 31, 2020, primarily due to strong sequential growth, partially offset by the timing of disbursements. As of December 31, 2021, our days' sales outstanding, net of amounts owed to subcontractors, was 58 days, flat year-over-year. As of December 31, 2021, we do not have any off-balance sheet arrangements.

Our operating cash flow constitutes our primary source of liquidity and, historically, has been sufficient to fund our working capital, capital expenditures, internal business expansion, and debt service. This includes our commitments, both short-term and long-term, of interest expense on our debt, payments on our promissory note payable, and operating lease commitments, as well as any settlements on uncertain tax positions, and future principal payments on our term loan and our Loan Agreement. We expect to meet our future needs from a combination of cash on hand, operating cash flows, and funds available through the ABL. See debt discussion which follows.

Cash Flow Comparisons

Year Ended December 31, 2021 Compared to Year Ended December 31, 2020

Net cash used in operating activities during the year ended December 31, 2021 was $85.6 million compared to net cash provided by operating activities of $27.2 million during the year ended December 31, 2020. The use of cash is due primarily to the investment in net working capital associated with the historic growth in our business, with accounts receivable increasing $318.4 million since the start of the year.

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Net cash used in investing activities during the year ended December 31, 2021 was $34.0 million compared to $4.6 million in the year ended December 31, 2020. Net cash used in both periods was for capital expenditures, primarily related to the project to replace our applicant tracking system and various other IT initiatives. The year ended December 31, 2021 also included expenditures related to the development of our on-demand staffing platform and the build-out of our corporate office, and $26.9 million related to the acquisitions of WSG and Selected.

Net cash provided by financing activities during the year ended December 31, 2021 was $119.1 million, compared to net cash used in financing activities of $22.0 million during the year ended December 31, 2020. During the year ended December 31, 2021, we reported net borrowings of $175.0 million on our term loan, and used cash to repay borrowing on our ABL of $44.2 million, $0.7 million principal payment on our term loan, $2.4 million on our note payable, $6.1 million of debt issuance costs, $2.2 million for income taxes on share-based compensation, and an immaterial amount for other financing activities. During the year ended December 31, 2020, we used cash to repay borrowing on our ABL of $17.6 million, $2.4 million to pay our note payable, $0.7 million for income taxes on share-based compensation, and $1.3 million for other financing activities.

Debt

2021 Term Loan Agreement

As more fully described in Note 8 - Debt to our consolidated financial statements, on June 8, 2021, we entered into a Term Loan Agreement, which provides for a six-year second lien subordinated term loan in the amount of $100.0 million (term loan). The term loan has an interest rate of one-month LIBOR plus 5.75% per annum, subject to a 0.75% LIBOR floor. The term loan was used to pay the cash consideration, as well as any costs, fees, and expenses in connection with the WSG acquisition (see Note 4 - Acquisitions to our consolidated financial statements), with the remainder used to pay down a portion of the asset-based credit facility.

The borrowings under the Term Loan Agreement generally bear interest at a variable rate based on either LIBOR or Base Rate (as defined in the Term Loan Agreement) and are subject to mandatory prepayments of principal payable in quarterly installments, commencing on September 30, 2021, with each installment being in the aggregate principal amount of $0.3 million (subject to adjustment as a result of prepayments) provided that, to the extent not previously paid, the aggregate unpaid principal balance would be due and payable on the maturity date. The Term Loan Agreement contains various restrictions and covenants applicable to the Company and its subsidiaries, including a covenant to maintain a minimum net leverage ratio. The Company was in compliance with this covenant as of December 31, 2021. Obligations under the Term Loan Agreement are secured by substantially all the assets of the borrowers and guarantors under the Term Loan Agreement, subject to customary exceptions.

On November 18, 2021, we amended the Term Loan Agreement (Term Loan First Amendment), which provided the Company an incremental term loan in an aggregate amount equal to $75.0 million. Additionally, the Term Loan First Amendment increased the aggregate amount of all increases (as defined in the Term Loan Agreement) to be no greater than $115.0 million. The borrowings will be used primarily to fund organic growth. Commencing on December 31, 2021, installments of the mandatory prepayments will be in the aggregate principal amount of $0.4 million. All other terms, conditions, covenants, and pricing of the Term Loan Agreement remain the same.

2019 Loan Agreement

Effective October 25, 2019, our prior senior credit facility entered into in August 2017 was replaced by a $120.0 million Loan Agreement, which provides for a five-year senior secured revolving credit facility. On June 30, 2020, we amended the Loan Agreement (First Amendment), which increased the current aggregate committed size of the ABL from $120.0 million to $130.0 million. All other terms, conditions, covenants, and pricing of the Loan Agreement remained the same. On March 8, 2021, we amended the Loan Agreement (Second Amendment), which increased the current aggregate committed size of the ABL from $130.0 million to $150.0 million, increased certain borrowing base sub-limits, and decreased both the cash dominion event and financial reporting triggers. On June 8, 2021, we amended the Loan Agreement (Third Amendment), which permits the incurrence of indebtedness and grant of security as set forth in the Loan Agreement and in accordance with the Intercreditor Agreement, and provides mechanics relating to a transition away from LIBOR as a benchmark interest rate to a replacement alternative benchmark rate or mechanism for loans made in U.S. dollars. On November 18, 2021, we amended the Loan Agreement (Fourth Amendment), whereby the permitted indebtedness (as defined in the Loan Agreement) was increased to $175.0 million.

As of December 31, 2021, the interest rate spreads and fees under the Loan Agreement were based on LIBOR plus 1.50% for the revolving portion of the borrowing base and LIBOR plus 4.00% on the Supplemental Availability (as defined in the Loan

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Agreement). The Base Rate (as defined by the Loan Agreement) margins would have been 0.50% and 3.00% for the revolving portion and Supplemental Availability, respectively. The LIBOR and Base Rate margins are subject to monthly pricing adjustments, pursuant to a pricing matrix based on our excess availability under the revolving credit facility. In addition, the facility is subject to an unused fee, letter of credit fees, and an administrative fee. The Loan Agreement contains various restrictions and covenants, including a covenant to maintain a minimum fixed charge coverage ratio. We were in compliance with the fixed charge coverage ratio covenant as of December 31, 2021. Availability under the ABL is subject to a borrowing base, which was sufficient to access the full facility size of $150.0 million at December 31, 2021, with $9.2 million of borrowings drawn as well as $18.2 million of letters of credit outstanding, leaving $122.6 million available for borrowing.

Note Payable

As of December 31, 2021, the third and final installment of the subordinated promissory note payable, made in connection with the Mediscan acquisition, in the amount of $2.5 million is included in current portion of debt on the consolidated balance sheets. This installment is to be paid, together with interest at a rate of 2% per annum, accruing from April 1, 2020, on January 31, 2022. See Note 4 - Acquisitions to our consolidated financial statements.

See Note 8 - Debt to our consolidated financial statements.

Stockholders' Equity

See Note 15 - Stockholders' Equity to our consolidated financial statements.

Critical Accounting Policies and Estimates

We have identified the following critical accounting policies that affect the more significant judgments and estimates used in the preparation of our consolidated financial statements. The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent assets and liabilities. We evaluate our estimates on an on-going basis, including those related to asset impairment, accruals for self-insurance, allowance for doubtful accounts and sales allowances, taxes and other contingencies, and litigation. We state our accounting policies in the notes to the audited consolidated financial statements for the year ended December 31, 2021, contained herein. These estimates are based on information that is currently available to us and on various assumptions that we believe to be reasonable under the circumstances. Actual results could vary from those estimates under different assumptions or conditions.

We believe that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements:

Goodwill, trade names, and other intangible assets

Our business acquisitions typically result in the recording of goodwill, trade names, and other intangible assets, and the recorded values of those assets may become impaired in the future. The determination of the value of such intangible assets requires management to make estimates and assumptions that affect our consolidated financial statements. For intangible assets purchased in a business combination, the estimated fair values of the assets received are used to establish their recorded values. As more fully described in Note 2 - Summary of Significant Accounting Policies, we assess the impairment of goodwill of our reporting units and indefinite-lived intangible assets annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable.

Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. Significant judgments are required to estimate the fair value of reporting units including estimating future cash flows, and determining appropriate discount rates, growth rates, company control premium, and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit. See Note 5 - Goodwill, Trade Names, and Other Intangible Assets, where impairment testing in 2021, 2020, and 2019 is more fully described.

Indefinite-lived intangible assets related to our trade names were not amortized but instead tested for impairment at least annually, or more frequently should an event or circumstances indicate that a reduction in fair value may have occurred. We

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perform testing of indefinite-lived intangible assets, other than goodwill, at the asset group level using the relief from royalty method. If the carrying value exceeds the fair value, an impairment loss is recorded for that excess.

There can be no assurance that the estimates and assumptions made for purposes of the annual impairment test will prove to be accurate predictions of the future. Although management believes the assumptions and estimates made are reasonable and appropriate, different assumptions and estimates could materially impact the reported financial results.

In addition, we are required to test the recoverability of long-lived assets, including identifiable intangible assets with definite lives, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. In testing for potential impairment, if the carrying value of the asset group exceeds the expected undiscounted cash flows, we must then determine the amount by which the fair value of those assets exceeds the carrying value and determine the amount of impairment, if any.

Risk and Uncertainties

The calculation of fair value used in these impairment assessments included a number of estimates and assumptions that required significant judgments, including projections of future income and cash flows, long-term growth rates, the identification of appropriate market multiples, royalty rates, and the choice of an appropriate discount rate. See Note 5 - Goodwill, Trade Names, and Other Intangible Assets. In addition, deterioration of demand for our services, deterioration of labor market conditions, reduction of our stock price for an extended period, or other factors as described in Item 1A. Risk Factors, may affect our determination of fair value of goodwill, trade names, or other intangible assets. This evaluation can also be triggered by various indicators of impairment which could cause the estimated discounted cash flows to be less than the carrying amount of net assets. If we are required to record an impairment charge in the future, it could have an adverse impact on our results of operations. Under the current credit agreements, an impairment charge will not have an impact on our liquidity. As of December 31, 2021, we had total goodwill, intangible assets not subject to amortization, and other intangible assets of $167.7 million or 22.9% of our total assets.

Health, workers' compensation, and professional liability expense

We maintain accruals for our health, workers’ compensation, and professional liability claims that are partially self-insured and are classified as accrued compensation and benefits on our consolidated balance sheets. We determine the adequacy of these accruals by periodically evaluating our historical experience and trends related to health, workers’ compensation, and professional liability claims and payments, based on actuarial models, as well as industry experience and trends. If such models indicate that our accruals are overstated or understated, we will adjust accruals as appropriate. Healthcare insurance accruals have fluctuated with increases or decreases in the average number of corporate employees and healthcare professionals on assignment as well as actual company experience and increases in national healthcare costs. As of December 31, 2021 and 2020, we had $4.1 million and $3.9 million accrued, respectively, for incurred but not reported health insurance claims. Corporate and field employees are covered through a partially self-insured health plan. Workers’ compensation insurance accruals can fluctuate over time due to the number of employees and inflation, as well as additional exposures arising from the current policy year. As of December 31, 2021, and 2020, we had $12.5 million and $12.4 million accrued for case reserves and for incurred but not reported workers’ compensation claims, net of insurance receivables, respectively. The accrual for workers’ compensation is based on an actuarial model which is prepared or reviewed by an independent actuary quarterly. As of December 31, 2021, and 2020, we had $4.9 million and $5.8 million accrued, respectively, for case reserves and for incurred but not reported professional liability claims, net of insurance receivables. The accrual for professional liability is based on actuarial models which are prepared by an independent actuary quarterly.

Revenue recognition

We recognize revenue from our services when control of the promised services is transferred to our customers, in an amount that reflects the consideration we expect to receive in exchange for the service. We have concluded that transfer of control of our staffing services, which represents the majority of our revenues, occurs over time as the services are provided.

The following is a description of the nature, amount, timing and uncertainty of revenue and cash flows from which we generate revenue.

Temporary Staffing Revenue

Revenue from temporary staffing is recognized as control of the services is transferred over time, and is based on hours worked by our field staff. We recognize the majority of our revenue at the contractual amount we have the right to invoice for services

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completed to date. Generally, billing to customers occurs weekly, bi-weekly, or monthly and is aligned with the payment of services to the temporary staff. Accounts receivable includes estimated revenue for employees’ and independent contractors’ time worked but not yet invoiced. At December 31, 2021 and December 31, 2020, our estimate of amounts that had been worked but had not been billed totaled $140.0 million and $48.3 million, respectively, and are included in accounts receivable in the consolidated balance sheets.

Other Services Revenue

We offer other optional services to our customers that are transferred over time including: MSPs providing agency services (as further described below in Gross Versus Net Policies), RPO, other outsourcing services, and retained search services, as well as separately billable travel and housing costs, which in total amount to less than 5% of our consolidated revenue for the years ended December 31, 2021, 2020, and 2019. Generally, billing and payment terms for MSP agency services are consistent with temporary staffing as the customers are similar or the same. Revenue from these services is recognized based on the contractual amount for services completed to date which best depicts the transfer of control of services.

For our RPO, other outsourcing, and retained search services, revenue is generally recognized in the amount to which the entity has a right to invoice which corresponds directly with the value to the customer. We do not, in the ordinary course of business, offer warranties or refunds.

Gross Versus Net Policies

We record revenue on a gross basis as a principal or on a net basis as an agent depending on the contracted arrangement, as follows:

•We have certain contracts with acute care facilities to provide comprehensive MSP solutions. Under these contract arrangements, we primarily use our nurses, along with third-party subcontractors, to fulfill customer orders. If a subcontractor is used, we invoice our customer for these services, but revenue is recorded at the time of billing, net of any related subcontractor liability. The resulting net revenue represents the administrative fee charged by us for our MSP services.

•Revenue from our Physician Staffing business is recognized on a gross basis as we are the principal in the arrangements.

Allowances

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of our customers to make required payments, which results in a provision for bad debt expense. We determine the adequacy of this allowance based on historical write-off experience, current conditions, an analysis of the aging of outstanding receivable and customer payment patterns, and specific reserves for customers in adverse conditions adjusted for current expectations for the customers or industry. Based on the information currently available, we also considered current expectations of future economic conditions, including the impact of COVID, when estimating our allowance for doubtful accounts. If the financial condition of our customers were to deteriorate, resulting in an impairment of their ability to make payments, additional allowances may be required. We write off specific accounts based on an ongoing review of collectability as well as our past experience with the customer. In addition, we maintain a sales allowance for rate and hour differences which may arise in the ordinary course of business and adjustments to the reserve are recorded as contra-revenue. As of December 31, 2021 and 2020, our total allowances were $6.9 million and $4.0 million, respectively.

Contingent liabilities

We are subject to various litigation, claims, investigations, and other proceedings that arise in the ordinary course of our business. These matters primarily relate to employee-related matters that include individual and collective claims, professional liability, tax, and payroll practices. Our healthcare facility clients may also become subject to claims, governmental inquiries and investigations, and legal actions to which we may become a party relating to services provided by our professionals. We record a liability when available information indicates that a loss is probable and an amount or range of loss can be reasonably estimated. Significant judgment is required to determine both the probability of loss and the estimated amount. At least quarterly, we review our accrual and/or disclosures to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, or new information. However, losses ultimately incurred could materially differ from amounts accrued. See Note 13 - Contingencies.

34

Income taxes

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and other loss carryforwards. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. During 2021, the Company utilized 100 percent of its federal NOL carryforward and a significant amount of state NOLs. As of December 31, 2021, we have deferred tax assets related to certain state and foreign NOL carryforwards of $72.4 million. But for those NOL carryforwards with an indefinite carryover, the carryforwards will expire as follows: state between 2022 and 2040, and foreign between 2022 and 2026.

As of December 31, 2021 and 2020, we had valuation allowances on our deferred tax assets of an immaterial amount and $37.5 million, respectively. For the year ended December 31, 2021, we recorded a valuation allowance release of $37.5 million (comprised of $18.4 million related to federal NOLs, $7.5 million related to state NOLs, and $11.6 million related to other net deferred tax assets) on the basis of management’s reassessment of the amount of its deferred tax assets that are more likely than not to be realized. The valuation allowance on an immaterial amount of state NOLs was not released due to the respective expiration periods and specific state taxable income projections. See Note 14 - Income Taxes to our consolidated financial statements.

As of each reporting date, management considers new evidence, both positive and negative, that could affect its view of the future realization of deferred tax assets. As of December 31, 2021, in part because in the current year we achieved 12 quarters of cumulative pretax income including permanent items in the U.S. federal tax jurisdiction, management determined that there is sufficient positive evidence to conclude that it is more likely than not that our net deferred tax assets are realizable. We therefore reduced the valuation allowance accordingly.

In arriving at our conclusion to reduce the valuation allowance we considered several positive and negative factors. For the 12 quarters ended December 31, 2021, the Company has $110.3 million in cumulative pretax income including permanent items. The Company also has a history of utilizing NOLs prior to expiration, most notably the full utilization of the federal net operating loss carryforward in 2021. The Company is also forecasting positive pretax book income which is expected to exceed the reversal of its future tax deductions, further proving future estimates of taxable income. The growth estimates are tied to the growing demand for healthcare solutions for our customers, including a growing aging U.S. population, and our customers’ pressure to keep costs down by using our staffing solutions. With regard to negative evidence, the Company does not have any material taxable temporary differences to offset deductible temporary differences and does not have any taxable income available for carryback to offset NOLs. As such, the primary focus of our analysis emphasized the current and prior two-year cumulative pretax income analysis, the full utilization of the federal net operating loss carryforward, and projections of future taxable income.

We are subject to income taxes in the U.S. and certain foreign jurisdictions. Significant judgment is required in determining our consolidated provision for income taxes and recording the related deferred tax assets and liabilities. In the ordinary course of our business there are many transactions and calculations where the ultimate tax determination is uncertain. An unrecognized tax benefit represents the difference between the recognition of benefits related to exposure items for income tax reporting purposes and financial reporting purposes. For the year ended December 31, 2021, the majority of the unrecognized tax benefit is classified as a component of other long-term liabilities in the consolidated balance sheets, while $0.4 million is classified as an offset to certain state NOLs within the deferred tax asset. As of December 31, 2021, total unrecognized tax benefits recorded was $9.2 million. We reserve for interest and penalties on exposure items, if applicable, which is recorded as a component of the overall income tax provision.

We are regularly under audit by tax authorities. Although the outcome of tax audits is always uncertain, we believe that we have appropriate support for the positions taken on our tax returns and that our annual tax provision includes amounts sufficient to pay any assessments. Nonetheless, the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued for each year.

Recent Accounting Pronouncements

See Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements.

Seasonality

35

See Item 1. Business.

Inflation

We do not believe that inflation had a significant impact on our results of operations for the periods presented. On an ongoing basis, we seek to ensure that billing rates reflect increases in costs due to inflation. In addition, we attempt to minimize any residual impact on our operating results by controlling operating costs.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Interest Rate Risk

We are exposed to interest rate risk associated with our debt instruments which have interest based on variable rates. As of December 31, 2021, we are exposed to the risk of fluctuation in interest rates relating to our Term Loan Agreement entered into on June 8, 2021 and our Loan Agreement entered into on October 25, 2019. These agreements charge interest at a rate based on either LIBOR or Base Rate (as defined in the agreements) plus an applicable margin.

A 1% change in interest rates on our variable rate debt would have resulted in interest expense fluctuating approximately $1.1 million and $0.6 million, respectively, for the years ended December 31, 2021 and 2020. See Note 8 - Debt to our consolidated financial statements.

See Item 1A, Risk Factors under “The interest rates under our Term Loan Credit Agreement (Term Loan Agreement) and our ABL Credit Agreement (Loan Agreement) may be impacted by the phase-out of the London Interbank Offered Rate (LIBOR)” for a discussion of the interest rate risk related to the potential phase-out of LIBOR in 2021.

Foreign Currency Risk

We have minor exposure to the impact of foreign currency fluctuations. Approximately 1% of selling, general and administrative expenses are related to certain software development and information technology support provided by our employees in Pune, India. Changes in foreign currency exchange rates impact translations of foreign denominated assets and liabilities into U.S. dollars and future earnings and cash flows from transactions denominated in different currencies. We have not entered into any foreign currency hedges.

Our international operations transact business in their functional currency. As a result, fluctuations in the value of foreign currencies against the U.S. dollar have an impact on reported results. Expenses denominated in foreign currencies are translated into U.S. dollars at monthly average exchange rates prevailing during the period. Consequently, as the value of the U.S. dollar changes relative to the currencies of our non-U.S. markets, our reported results vary.

Fluctuations in exchange rates also impact the U.S. dollar amount of stockholders’ equity. The assets and liabilities of our non-U.S. subsidiaries are translated into U.S. dollars at the exchange rate in effect at the end of a reporting period. The resulting translation adjustments are recorded in stockholders’ equity, as a component of accumulated other comprehensive loss, included in other stockholders’ equity in our consolidated balance sheets.

Item 8. Financial Statements and Supplementary Data.

See Item 15 – Exhibits, Financial Statement Schedules of Part IV of this Report.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

We carried out an evaluation, under the supervision and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our "disclosure controls and procedures" (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended, or the Exchange Act), as of the end of the

36

period covered by this report. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures are effective. Disclosure controls and procedures are designed to ensure that information required to be disclosed in our reports filed or submitted under the Exchange Act is recorded, processed, summarized, communicated to management, including the Chief Executive Officer and the Chief Financial Officer, and reported within the time periods specified in the SEC's rules and forms. The disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports required under the Exchange Act of 1934, as amended, is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, in order to allow timely decisions regarding any required disclosure.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal controls over financial reporting during 2021 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We have not experienced any material impact to our internal controls over financial reporting despite the fact that most of our employees are working remotely due to the COVID pandemic.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) and Rule 15d-15(f) under the Exchange Act). Our internal control system is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risks that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted an evaluation of the effectiveness of our internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO, in the Internal Control-Integrated Framework (2013 framework).

We purchased and acquired substantially all of the assets and assumed certain liabilities of Workforce Solutions Group, Inc. and Selected, Inc. in 2021. Due to the timing of the acquisitions and as allowed under SEC guidance, management's assessment of and conclusion regarding the design and effectiveness of internal control over financial reporting excluded the internal control over financial reporting of the acquired businesses, which is relevant to our 2021 consolidated financial statements as of and for the year ended December 31, 2021. The financial statements of the acquisitions constitute approximately 8% of total assets and 3% of revenues from services of the consolidated financial statement amounts as of and for the year ended December 31, 2021.

Based on its evaluation, management concluded that, as of December 31, 2021, our internal control over financial reporting is effective based on the specific criteria.

Attestation Report of Independent Registered Public Accounting Firm

The effectiveness of our internal control over financial reporting as of December 31, 2021 has been audited by Deloitte & Touche LLP, an independent registered public accounting firm, as stated in their report which appears in Part IV, Item 15 of this report.

Item 9B. Other Information.

None.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections.

Not applicable.

37

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

Information with respect to directors, executive officers and corporate governance is included in our Proxy Statement for the 2022 Annual Meeting of Stockholders (Proxy Statement) to be filed pursuant to Regulation 14A with the SEC not later than 120 days after the close of the fiscal year covered by this Annual Report and such information is incorporated herein by reference.

Item 11. Executive Compensation.

Information with respect to executive compensation is included in our Proxy Statement to be filed with the SEC not later than 120 days after the close of the fiscal year covered by this Annual Report and such information is incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholders Matters.

Information with respect to beneficial ownership of our common stock is included in our Proxy Statement to be filed with the SEC not later than 120 days after the close of the fiscal year covered by this Annual Report and such information is incorporated herein by reference.

With respect to equity compensation plans as of December 31, 2021, see table below:

Equity compensation plans approved by security holders — $ — 2,219,300

Equity compensation plans not approved by security holders None N/A N/A

(1) For Performance Stock Awards issued under the 2020 Omnibus Incentive Plans, we consider the expected number of shares that may be issued under the award to be outstanding. When the number of Performance Stock Awards have been determined, we true up the actual number of shares that were awarded and return any unawarded shares into shares available for issuance. Performance Stock Awards were issued under the 2020 Omnibus Incentive Plan beginning March 31, 2021. See Note 15 - Stockholders' Equity to our consolidated financial statements.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

Information with respect to certain relationships and related transactions, and director independence is included in our Proxy Statement to be filed with the SEC not later than 120 days after the close of the fiscal year covered by this Annual Report and such information is incorporated herein by reference.

Item 14. Principal Accountant Fees and Services.

Information with respect to the fees and services of our principal accountant is included in our Proxy Statement to be filed with the SEC not later than 120 days after the close of the fiscal year covered by this Annual Report and such information is incorporated herein by reference.

38

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) Documents filed as part of the report.

(1) Consolidated Financial Statements

Report of Independent Registered Public Accounting Firm

Consolidated Balance Sheets as of December 31, 2021 and 2020

Notes to Consolidated Financial Statements

(2) Financial Statements Schedule

(3) Exhibits

39

EXHIBIT INDEX

No. Description

40

EXHIBIT INDEX (CONTINUED)

No. Description

41

*14.1 Code of Ethics, revised November 15, 2021

*21.1 List of subsidiaries of the Registrant

42

EXHIBIT INDEX (CONTINUED)

No. Description

*101.INS XBRL Instance Document

*101.SCH XBRL Taxonomy Extension Schema Document

*101.DEF XBRL Taxonomy Extension Definition Linkbase Document

*101.LAB XBRL Taxonomy Extension Label Linkbase Document

*101.CAL XBRL Taxonomy Extension Calculation Linkbase Document

*101.PRE PRE XBRL Taxonomy Extension Presentation Linkbase Document

________________

# Represents a management contract or compensatory plan or arrangement

* Filed herewith

** Furnished herewith

43

Item 16. Form 10-K Summary.

Not applicable.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized.

CROSS COUNTRY HEALTHCARE, INC.

By: /s/ Kevin C. Clark

Name: Kevin C. Clark

Title: Co-Founder & Chief Executive Officer

Principal Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed by the following persons in the capacities indicated and on the dates indicated:

Signature Title Date

/s/ Kevin C. Clark Co-Founder & Chief Executive Officer February 28, 2022

Kevin C. Clark (Principal Executive Officer)

William J. Burns (Principal Accounting and Financial Officer)

/s/ W. Larry Cash Director February 28, 2022

W. Larry Cash

/s/ Thomas C. Dircks Director February 28, 2022

Thomas C. Dircks

/s/ Gale Fitzgerald Director February 28, 2022

Gale Fitzgerald

/s/ Darrell S. Freeman, Sr. Director February 28, 2022

Darrell S. Freeman, Sr.

/s/ Janice E. Nevin, M.D., MPH Director February 28, 2022

Janice E. Nevin, M.D., MPH

/s/ Mark Perlberg Director February 28, 2022

Mark Perlberg

/s/ Joseph A. Trunfio, Ph.D. Director February 28, 2022

Joseph A. Trunfio, Ph.D.

44

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Page

Cross Country Healthcare, Inc.

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34) F- 2

Consolidated Balance Sheets as of December 31, 2021 and 2020 F- 4

Notes to Consolidated Financial Statements F- 9

Financial Statement Schedule

Schedules not filed herewith are either not applicable, the information is not material or the information is set forth in the consolidated financial statements or notes thereto.

F- 1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the shareholders and the Board of Directors of Cross Country Healthcare, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Cross Country Healthcare, Inc. and subsidiaries (the "Company") as of December 31, 2021 and 2020, the related consolidated statements of operations, comprehensive income (loss), stockholders' equity, and cash flows, for each of the three years in the period ended December 31, 2021, and the related notes and the schedule listed in the Index at Item 15 (collectively referred to as the "financial statements"). We also have audited the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control — Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America.

As described in Management’s Report on Internal Control Over Financial Reporting, management excluded from its assessment the internal control over financial reporting at Workforce Solutions Group, Inc. and Selected Inc. (collectively, the "Excluded Acquisitions"), which were acquired during the year ended December 31, 2021, and whose financial statements constitute approximately 8% of total assets, and 3% of revenues from services of the consolidated financial statement amounts as of and for the year ended December 31, 2021. Accordingly, our audit did not include the internal control over financial reporting at the Excluded Acquisitions.

Basis for Opinions

The Company’s management is responsible for these financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on these financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures to respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

F- 2

company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Insurance Claim Liabilities — Refer to Notes 2 and 7 to the financial statements

Critical Audit Matter Description

The Company provides workers’ compensation insurance coverage and professional liability coverage for eligible employees. The Company records its estimate of the ultimate cost of, and reserves for, workers' compensation and professional liability benefits based on actuarial models prepared by an independent actuary using the Company’s loss history as well as industry statistics. The Company’s consolidated balance sheet as of December 31, 2021 includes short-term and long-term accruals for workers’ compensation and professional liability claims of $10.8 million and $25.3 million, respectively.

We identified the insurance claim liabilities for workers’ compensation coverage and professional liability coverage as a critical audit matter because of the significant assumptions made by management in estimating the liability. This required a high degree of auditor judgment as well as increased effort, including the involvement of actuarial specialists in performing procedures to evaluate the reasonableness of management’s judgement in estimating the liability.

How the Critical Audit Matter Was Addressed in the Audit

Our audit procedures related to insurance claims liabilities for workers’ compensation coverage and professional liability coverage included the following, among others:

•We tested the effectiveness of controls related to insurance claim liabilities, including those over the assumptions used to estimate the insurance claim liabilities.

•We tested the underlying data that served as the basis for the actuarial analysis, including historical paid claims, to test that the inputs to the actuarial estimate were complete and accurate.

•We involved actuarial specialists with specialized skill, industry knowledge, and relevant experience who assisted in:

–Comparing prior year expected development and ultimate loss to actuals incurred during the current year to identify potential bias in the determination of the insurance claim liabilities.

–Developing an independent range of estimates of the insurance claim liabilities, utilizing paid and reported loss development factors from the Company’s historical data and industry loss development factors.

–Evaluating qualifications of the Company’s actuaries by assessing the certifications and determining whether they meet the Qualification Standards of the American Academy of Actuaries to render the statements of actuarial opinion in their analyses.

/s/ Deloitte & Touche LLP

Boca Raton, Florida

We have served as the Company's auditor since 2015.

F- 3

CROSS COUNTRY HEALTHCARE, INC.

CONSOLIDATED BALANCE SHEETS

(amounts in thousands, except for share data)

December 31,

Assets

Current assets:

Cash and cash equivalents $ 1,036 $ 1,600

Insurance recovery receivable 5,041 4,698

Operating lease right-of-use assets 7,488 10,447

Trade names, indefinite-lived 5,900 5,900

Non-current deferred tax assets 11,525 —

Liabilities and Stockholders' Equity

Current liabilities:

Accounts payable and accrued expenses $ 109,753 $ 49,877

Operating lease liabilities - current 4,090 4,509

Income tax payable 7,307 8

Current portion of earnout liability 7,500 —

Operating lease liabilities - non-current 10,853 15,234

Non-current deferred tax liabilities 190 6,592

Non-current earnout liability 9,000 —

Commitments and contingencies

Stockholders' equity:

Accumulated other comprehensive loss (1,293) (1,280)

Total Cross Country Healthcare, Inc. stockholders' equity 297,528 154,375

Noncontrolling interest in subsidiary — 534

Total liabilities and stockholders' equity $ 732,809 $ 356,973

See accompanying notes.

F- 4

CROSS COUNTRY HEALTHCARE, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(amounts in thousands, except per share data)

Year Ended December 31,

Operating expenses:

Acquisition and integration-related costs 1,068 77 201

Legal settlement charges — — 1,600

Other expenses (income):

Loss on derivative — — 1,284

Loss on early extinguishment of debt — — 1,978

Other (income) expense, net (770) 280 (68)

Weighted average common shares outstanding:

See accompanying notes.

F- 5

CROSS COUNTRY HEALTHCARE, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(amounts in thousands)

Year Ended December 31,

Other comprehensive (loss) income, before income tax:

Unrealized foreign currency translation (loss) gain (33) (40) 47

Unrealized loss on interest rate contracts — — (1,078)

Reclassification adjustment to statement of operations — — 1,312

Taxes on other comprehensive (loss) income:

Valuation allowance adjustment — — 511

Other comprehensive (loss) income, net of tax (13) (40) 222

See accompanying notes.

F- 6

CROSS COUNTRY HEALTHCARE, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(amounts in thousands)

Shares Dollars

Exercise of share options 14 — — — — — —

Vesting of restricted stock 231 — (801) — — — (801)

Equity compensation — — 3,396 — — — 3,396

Foreign currency translation adjustment, net of taxes — — — 47 — — 47

Net change in hedging transaction, net of taxes — — — 175 — — 175

Distribution to noncontrolling shareholder — — — — — (1,572) (1,572)

Vesting of restricted stock 306 — (658) — — — (658)

Equity compensation — — 5,403 — — — 5,403

Foreign currency translation adjustment, net of taxes — — — (40) — — (40)

Distribution to noncontrolling shareholder — — — — — (1,154) (1,154)

Equity compensation — — 6,894 — — — 6,894

Foreign currency translation adjustment, net of taxes — — — (13) — — (13)

Dissolution of noncontrolling interest — — — — — (324) (324)

Distribution to noncontrolling shareholder — — — — — (210) (210)

See accompanying notes.

F- 7

CROSS COUNTRY HEALTHCARE, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(amounts in thousands)

Year Ended December 31,

Cash flows from operating activities

Loss on early extinguishment of debt — — 1,978

Changes in operating assets and liabilities:

Net cash (used in) provided by operating activities (85,618) 27,204 5,542

Cash flows from investing activities

Acquisitions, net of cash acquired (26,876) — —

Cash flows from financing activities

Proceeds from term loan 175,000 — —

Principal payments on term loan (688) — (83,876)

Principal payments on note payable (2,426) (2,426) —

Borrowings under revolving credit facility — — 5,000

Repayments on revolving credit facility — — (5,000)

Proceeds under Senior Secured Asset-Based revolving credit facility — — 76,640

Cash paid for shares withheld for taxes (2,230) (658) (801)

Cash payments to noncontrolling shareholder (210) (1,153) (1,573)

Effect of exchange rate changes on cash 6 (11) 10

Cash and cash equivalents at end of year $ 1,036 $ 1,600 $ 1,032

Supplemental disclosure of cash flow information:

See accompanying notes.

F- 8

CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

1. Organization and Basis of Presentation

Nature of Business

Cross Country Healthcare, Inc. (the Company) was incorporated in Delaware on July 29, 1999 as a business providing travel nurse and allied health staffing services. As of December 31, 2021, the Company provides total talent management services, including strategic workforce solutions, contingent staffing, permanent placement, and consultative services for healthcare customers. The Company places highly qualified healthcare professionals in virtually every specialty and area of expertise. Its diverse client base includes both clinical and nonclinical settings, servicing both public and private acute care and non-acute care hospitals, outpatient clinics, ambulatory-care centers, single and multi-specialty physician practices, rehabilitation facilities, urgent care centers, local and national healthcare systems, managed care providers, both public schools and charter schools, correctional facilities, government facilities, pharmacies, and many other healthcare providers.

The consolidated financial statements include the accounts of the Company and its direct and indirect wholly-owned subsidiaries, as well as Cross Country Talent Acquisition Group, LLC, which was a joint venture controlled by the Company but not wholly owned. The Company recorded the ownership interest of the noncontrolling shareholder as noncontrolling interest in subsidiary. Effective December 31, 2020, the sole professional staffing services agreement held by this joint venture was terminated and, as a result, the Company dissolved Cross Country Talent Acquisition Group, LLC in the third quarter of 2021. All intercompany transactions and balances have been eliminated in consolidation.

Certain prior year amounts have been reclassified to conform to the current year presentation. See the consolidated balance sheets and statements of cash flows, Note 3 - Revenue Recognition, and Note 18 - Segment Data.

2. Summary of Significant Accounting Policies

Use of Estimates

The preparation of consolidated financial statements in conformity with United States generally accepted accounting principles (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Management has assessed various accounting estimates and other matters, including those that require consideration of forecasted financial information, in context of the unknown future impacts of the current global outbreak of COVID-19 (COVID) using information that is reasonably available to the Company at the time. Significant estimates and assumptions are used for, but not limited to: (i) the valuation of accounts receivable; (ii) goodwill, trade names, and other intangible assets; (iii) other long-lived assets; (iv) revenue recognition; (v) accruals for health, workers’ compensation, and professional liability claims; (vi) valuation of deferred tax assets; (vii) legal contingencies, and (viii) income taxes. Accrued insurance claims and reserves include estimated settlements from known claims and actuarial estimates for claims incurred but not reported. As additional information becomes available to the Company, its future assessment of these estimates, including management's expectations at the time regarding the duration, scope, and severity of the pandemic, as well as other factors, could materially and adversely impact the Company's consolidated financial statements in future reporting periods. Actual results could differ from those estimates.

COVID

The Company continues to closely monitor the COVID pandemic, and prioritize the mental health and well-being of its employees. While operating primarily through a remote workforce, the Company's offices remain open with stringent safety guidelines and procedures in place, including allowing only vaccinated employees on-site, social distancing, and enhanced cleaning at all of its locations. Business travel, including visits to healthcare clients, continues to be somewhat limited at the request of the Company's clients who are continuing to cope with the pandemic twenty-four hours a day/seven days a week.

Throughout the pandemic, the Company has partnered with its clients to deliver flexible solutions aimed at solving their immediate and long-term challenges. It has continued to provide data, industry insights, marketing analytics, and consulting services to assist clients in determining the appropriate rates necessary to attract the supply they need. One of the Company's core values is to act ethically and responsibly, and it has been especially important during this pandemic to be transparent and build trust with its clients to re-enforce long-lasting relationships as both demand and bill rates have increased to unprecedented levels.

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CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

2. Summary of Significant Accounting Policies (continued)

Cash and Cash Equivalents

The Company considers all investments with original maturities of three months or less to be cash and cash equivalents. Interest income on cash and cash equivalents was immaterial for the years ended December 31, 2021, 2020, and 2019, and is included in other income (expense), net, in the consolidated statements of operations.

Accounts Receivable, Allowance for Doubtful Accounts, and Concentration of Credit Risk

Accounts receivable potentially subject the Company to concentrations of credit risk. The Company generally does not require collateral and mitigates its credit risk by performing credit evaluations and monitoring at-risk accounts. The allowance for doubtful accounts is established for losses expected to be incurred on accounts receivable balances. Accounts receivable are written off against the allowance for doubtful accounts when the Company determines amounts are no longer collectible. Judgment is required in the estimation of the allowance and the Company evaluates the collectability of its accounts receivable and contract assets based on a combination of factors. The Company bases its allowance for doubtful account estimates on its historical write-off experience, current conditions, an analysis of the aging of outstanding receivable and customer payment patterns, and specific reserves for customers in adverse condition adjusted for current expectations for the customers or industry. Based on the information currently available, the Company also considered current expectations of future economic conditions, including the impact of COVID, when estimating its allowance for doubtful accounts.

The opening balance of the allowance for doubtful accounts is reconciled to the closing balance for expected credit losses as follows:

Allowance for Doubtful Accounts (amounts in thousands)

Write-Offs, net of Recoveries (699) (349)

Write-Offs, net of Recoveries (358) (532)

Write-Offs, net of Recoveries (138) (800)

Write-Offs, net of Recoveries (917) (344)

In addition to the allowance for doubtful accounts, the Company maintains a sales allowance for billing-related adjustments which may arise in the ordinary course of business and adjustments to the reserve are recorded as contra-revenue. The balance of this allowance as of December 31, 2021 and December 31, 2020 was $0.8 million and $0.6 million, respectively.

The Company’s contract terms typically require payment between 30 to 60 days from the date of invoice and are considered past due based on the particular negotiated contract terms. The majority of the Company's customers are U.S. based healthcare systems with a significant percentage in acute-care facilities. No single customer accounted for more than 10% of the Company's accounts receivable balance as of December 31, 2021 and 2020, or revenue for the years ended December 31, 2021, 2020, and 2019.

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CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

2. Summary of Significant Accounting Policies (continued)

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation. Depreciation is determined on a straight-line basis over the estimated useful lives of the assets, which generally range from three to ten years. Leasehold improvements are depreciated over the shorter of their estimated useful life or the term of the individual lease. On an annual basis, the Company reviews its property and equipment listings and disposes of assets that are no longer in use.

Certain software development costs have been capitalized. Such costs include charges for consulting services and costs for Company personnel associated with programming, coding, and testing such software. Amortization of capitalized software costs is included in depreciation expense in the consolidated statements of operations and begins when the software is ready for use. See Note 6 - Property and Equipment.

Cloud Computing Arrangements

Implementation costs associated with cloud computing arrangements are capitalized when incurred during the application development phase. In connection with the licensing of software products, the Company has entered into arrangements in which it does not take possession of the software; rather, the software application resides on the vendor's or a third-party's hardware, and the Company accesses and uses the software on an as-needed basis over the Internet or via a dedicated line. Therefore, the cloud computing arrangement does not give rise to an intangible asset. Costs are capitalized in accordance with the Company’s policies for other capitalizable service costs. Amortization is calculated over the contractual term of the cloud computing arrangement and is included in selling, general and administrative expenses in the consolidated statements of operations. As of December 31, 2021 and 2020, the Company has a current asset of $0.5 million and $0.4 million, respectively, included in prepaid expenses and a non-current asset of $4.8 million and $3.2 million, respectively, included in other non-current assets in the consolidated balance sheets that have been capitalized in conjunction with implementations. Amortization of the cloud computing assets was $0.4 million for the year ended December 31, 2021 and immaterial for the years ended December 31, 2020 and 2019.

Leases

The Company determines whether an arrangement constitutes a lease at commencement. Operating leases are included in operating lease right-of-use assets, and operating lease liabilities - current and non-current in the consolidated balance sheets. Finance leases are included in other non-current assets, other current liabilities, and other long-term liabilities in the consolidated balance sheets. See Note 10 - Leases.

Right-of-use assets are measured based on the corresponding lease liability adjusted for: (i) payments made to the lessor at or before the commencement date; (ii) initial direct costs; and (iii) tenant incentives under the lease. Rent expense commences when the lessor makes the underlying asset available to the Company. Lease liabilities are measured based on the present value of the total lease payments not yet paid discounted based on its incremental borrowing rate, as the rate implicit in the lease is not determinable. The Company estimates its incremental borrowing rate based on an analysis of publicly-traded debt securities of companies with credit and financial profiles similar to its own. The variable portion of the lease payments is not included in the right-of-use assets or lease liabilities. Rather, variable payments, other than those dependent upon an index or rate, are expensed when the obligation for those payments is incurred and are included in lease expense in selling, general and administrative expense in the consolidated statements of operations. Rent expense for operating lease payments is recognized on a straight-line basis over the lease term. The Company does not assume renewals or early terminations unless it is reasonably certain to exercise these options at commencement.

Deferred rent credits related to tenant improvement allowances and other leasehold incentives reduced the beginning operating right-of-use asset recognized, and will be recognized as a reduction to future rent expense over the expected remaining term of the respective leases.

The Company leases apartments for eligible field employees under short-term agreements (typically three to six months), which generally coincide with each employee’s staffing contract. Costs relating to these leases are included in direct operating expenses in the consolidated statements of operations.

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CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

2. Summary of Significant Accounting Policies (continued)

Business Combinations

Business combinations are accounted for at fair value. The associated acquisition costs are expensed as incurred and recorded as acquisition and integration-related costs; noncontrolling interests, if any, are reflected at fair value at the acquisition date; restructuring costs associated with a business combination are expensed; contingent consideration is measured at fair value at the acquisition date, with changes in the fair value after the acquisition date affecting earnings; and goodwill is determined as the excess of the fair value of the consideration conveyed in the acquisition over the fair value of the net assets acquired. The accounting for business combinations requires estimates and judgments as to expectations for future cash flows of the acquired business, and the allocation of those cash flows to identifiable intangible assets, in determining the estimated fair value for assets and liabilities acquired. The fair values assigned to tangible and intangible assets acquired and liabilities assumed are based on management's estimates and assumptions, including valuations that utilize customary valuation procedures and techniques. If the actual results differ from the estimates and judgments used in these estimates, the amounts recorded in the financial statements could result in a possible impairment of the intangible assets and goodwill or require acceleration of the amortization expense of finite-lived intangible assets. The results of the acquired businesses' operations are included in the consolidated statements of operations of the combined entity beginning on the date of acquisition. See Note 4 - Acquisitions.

Goodwill, Trade Names, and Other Intangible Assets

Goodwill represents the excess of purchase price and related costs over the fair value assigned to the net tangible and identifiable intangible assets of businesses acquired. Other identifiable intangible assets with definite lives are being amortized using the straight-line method over their estimated useful lives which have ranged from 5 to 16 years. Goodwill and certain intangible assets with indefinite lives are not amortized. Instead, these assets are reviewed for impairment annually at the beginning of the fourth quarter, and whenever circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying amount.

When reviewed, the Company has the option to first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount, as a basis for determining whether it is necessary to perform the quantitative testing. If it is determined that a quantitative test is necessary or more efficient than a qualitative approach, the Company measures the fair value of its reporting units using a combination of income and market approaches.

The Company performs its annual review on October 1. If the reporting unit’s carrying value exceeds its fair value, an impairment charge is recognized for the amount by which the carrying amount exceeds the reporting unit’s fair value not to exceed the total amount of goodwill allocated to that reporting unit. Additionally, income tax effects from any tax deductible goodwill on the carrying amount of the reporting unit when measuring the goodwill impairment loss is considered, if applicable.

The Company determines its reporting units by identifying its operating segments and any component businesses and aggregates the component businesses if they have similar economic characteristics. The Company had the following reporting units that it reviewed for impairment: (1) Nurse and Allied Staffing; (2) Physician Staffing; and (3) Search.

Management considers historical experience and all available information at the time the fair values of its reporting units are estimated. However, fair values that could be realized in an actual transaction may have differed from those used to evaluate the potential impairment of goodwill.

Long-lived assets and identifiable intangible assets with definite lives are evaluated for impairment. Long-lived assets and definite-lived intangible assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount may not be recoverable.

Recoverability of long-lived assets is measured by a comparison of the carrying amount of the asset group to the future undiscounted net cash flow that is expected to be generated by those assets. If such assets are considered to be impaired, the impairment charge recognized is the amount by which the carrying amount of the assets exceeds the fair value of the assets.

Any related impairment losses are recognized in earnings and included in the caption impairment charges in the consolidated statements of operations. See Note 5 - Goodwill, Trade Names, and Other Intangible Assets.

Debt Discount and Debt Issuance Costs

Stated discounts on proceeds and other fees reimbursed to lenders were treated as a discount associated with the respective debt instrument and presented in the balance sheet as an offset to the carrying amount of the debt. Debt issuance costs associated with

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CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

2. Summary of Significant Accounting Policies (continued)

the revolving line-of-credit are presented as an asset, included in other non-current assets in the balance sheet. Discounts are amortized to interest expense using the effective interest rate method, or a method that approximates the effective interest rate method, over the expected life of the debt.

Derivative Financial Instruments

The Company was exposed to interest rate risk due to its outstanding senior secured term loan entered into on August 1, 2017 with a variable interest rate. As a result, the Company had entered into an interest rate swap agreement to effectively convert a portion of its variable interest payments to a fixed rate. The principal objective of the interest rate swap was to eliminate or reduce the variability of the cash flows in those interest payments associated with the Company’s long-term debt, thus reducing the impact of interest rate changes on future interest payment cash flows. The Company had determined that the interest rate swap qualified as a cash flow hedge. As the critical terms of the hedging instrument and the hedged forecasted transaction were the same, the Company had concluded that changes in the cash flows attributable to the risk being hedged were expected to completely offset at inception and on an ongoing basis. Changes in the fair value of the interest rate swap agreement designated as a cash flow hedge were recorded as a component of accumulated other comprehensive loss, net of deferred taxes, within stockholders’ equity and were amortized to interest expense over the term of the related debt as the interest payments were made. Interest rate swap payments were included in net cash provided by operating activities in the consolidated statements of cash flows. The Company terminated its interest rate swap agreement on September 26, 2019. See Note 9 - Derivative.

Sales and Other State Non-income Tax Liabilities

The Company's sales and other state non-income tax filings are subject to routine audits by authorities in the jurisdictions where it conducts business in the United States which may result in assessments of additional taxes. The Company accrues sales and other state non-income tax liabilities based on the Company’s best estimate of its probable liability utilizing currently available information and interpretation of relevant tax regulations. Given the nature of the Company’s business, some subjectivity exists as to both whether sales and other state non-income taxes can be assessed on its activity and how the sales tax will ultimately be measured by the relevant jurisdictions. The Company makes a determination for each reporting period whether the estimates for sales and other non-income taxes in certain states should be revised. The expense is included in selling, general and administrative expenses on its consolidated statements of operations and the liability is reflected in sales tax payable within other current liabilities in the consolidated balance sheets.

Insurance Claims

The Company provides workers’ compensation insurance coverage, professional liability coverage, and healthcare benefits for eligible employees. The Company records its estimate of the ultimate cost of, and reserves for, workers' compensation and professional liability benefits based on actuarial models prepared or reviewed by an independent actuary using the Company’s loss history as well as industry statistics. The healthcare insurance accrual is for estimated claims that have occurred but have not been reported and is based on the Company’s historical claim submission patterns. Furthermore, in determining its reserves, the Company includes reserves for estimated claims incurred but not reported as well as unfavorable claims development.

Under circumstances such as in the Company’s insured professional liability and workers' compensation policies, since a right of legal offset does not exist due to the fact that there are three parties to an incurred claim, the insured, the insurer, and the claimant, the related liability to the claimant should be classified separately on a gross basis with a separate related receivable from the insurer recognized as being due from insurance carriers. Accordingly, the Company’s consolidated balance sheets as of December 31, 2021 and 2020 reflect the related short-term liabilities in accrued compensation and benefits and the relatedlong-term liabilities as long-term accrued claims, and the short-term receivable portion as insurance recovery receivable and the long-term portion as non-current insurance recovery receivable. See Note 7 - Balance Sheet Details. The ultimate cost of workers’ compensation, professional liability, and health insurance claims will depend on actual amounts incurred to settle those claims and may differ from the amounts reserved by the Company for those claims.

Workers’ compensation benefits are provided under a partially self-insured plan. The Company has letters of credit to guarantee payments of claims. At December 31, 2021 and 2020, the Company had outstanding approximately $16.7 million and $17.0 million, respectively, of standby letters of credit as collateral to secure the self-insured portion of this plan.

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CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

2. Summary of Significant Accounting Policies (continued)

The Company has occurrence-based primary professional liability policies that provide the Company and each working professional in its nurse and allied healthcare business with coverage. The Company has a claims-made professional liability policy for its physicians and advanced practitioners, with a $0.5 million self-insured retention per claim. At both December 31, 2021 and 2020, the Company had outstanding $1.5 million of standby letters of credit as collateral to secure reimbursement of expenses under the existing plan.

Subject to certain limitations, the Company also has umbrella liability coverage for its working nurses and allied healthcare professionals. While this umbrella coverage does not extend to professional liability claims against its independent contractor physicians and advanced practitioners, it does cover claims brought against all of the Company’s subsidiaries for non-patient general liability.

Revenue Recognition

Revenue from the Company’s services is recognized when control of the promised services are transferred to the Company’s customers, in an amount that reflects the consideration it expects to receive in exchange for the service. The Company has concluded that transfer of control of its staffing services, which represents the majority of its revenues, occurs over time as the services are provided.

The following is a description of the nature, amount, timing, and uncertainty of revenue and cash flows from which the Company generates revenue.

Temporary Staffing Revenue

Revenue from temporary staffing is recognized as control of the services is transferred over time and is based on hours worked by the Company’s field staff. The Company recognizes the majority of its revenue at the contractual amount the Company has the right to invoice for services completed to date. Generally, billing to customers occurs weekly, bi-weekly, or monthly and is aligned with the payment of services to the temporary staff. Accounts receivable includes estimated revenue for employees’ and independent contractors’ time worked but not yet invoiced. At December 31, 2021 and December 31, 2020, the Company's estimate of amounts that had been worked but had not been billed totaled $140.0 million and $48.3 million, respectively, and are included in accounts receivable in the consolidated balance sheets.

Other Services Revenue

The Company offers other optional services to its customers that are transferred over time including: managed service programs (MSP) providing agency services (as further described below in Gross Versus Net Policies), recruitment process outsourcing (RPO), other outsourcing services, and retained search services, as well as separately billable travel and housing costs, which in total amount to less than 5% of its consolidated revenue for the years ended December 31, 2021, 2020, and 2019. Generally, billing and payment terms for MSP agency services is consistent with temporary staffing as the customers are similar or the same. Revenue from these services are recognized based on the contractual amount for services completed to date which best depicts the transfer of control of services. The Company does not, in the ordinary course of business, offer warranties or refunds.

Gross Versus Net Policies

The Company records revenue on a gross basis as a principal or on a net basis as an agent depending on the contracted arrangement, as follows:

Managed Service Programs

The Company has certain contracts with healthcare facilities to provide comprehensive services through its MSPs. Under these contractual arrangements, the customer’s orders are filled with either one of the Company's healthcare professionals or a third party's healthcare professionals (subcontractors).

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CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

2. Summary of Significant Accounting Policies (continued)

When its healthcare professional is staffed, the Company determined that it acts as a principal in the arrangement, as it is considered the employer of record. Accordingly, revenue is reported on a gross basis in the consolidated statements of operations.

Alternatively, the Company determined that it acts as an agent in the arrangement when a subcontracted healthcare professional is staffed, as the Company does not control the services before they are transferred to the customer. Accordingly, revenue is reported on a net basis in the consolidated statements of operations. The customer is invoiced for the hours worked by the subcontracted healthcare professional multiplied by the hourly bill rate. A subcontractor liability, which is recognized as a reduction of revenue, is established in accrued expenses for the invoiced amount, net of an administrative fee, and is generally payable after the Company has received payment from its customer. The Company’s administrative fee is calculated as a percentage of the customer’s invoice and is recognized over time as the services are rendered by the subcontracted healthcare professional. The Company does not collect or recognize an upfront placement fee.

Physician Staffing

The Physician Staffing business has contracts with its healthcare customers to provide temporary staffing services. The Company uses independent contractors for these services. The Company determined that it acts as a principal in these arrangements and, therefore, revenue is reported on a gross basis in the consolidated statements of operations.

See Note 3 - Revenue Recognition for the Company's revenues disaggregated by revenue source. Sales and usage-based taxes are excluded from revenue.

Contract Costs

All contract fulfillment costs are expensed as incurred to direct operating expenses. There were no contract assets or material contract liabilities as of December 31, 2021 and 2020.

Practical Expedients and Exemptions

For the Company’s contracts that have an original duration of one year or less, the Company uses the practical expedients and has elected to recognize any incremental costs of obtaining these contracts as expensed when incurred. Further, the Company does not disclose the value of unsatisfied performance obligations for: (i) contracts with an original expected length of one year or less; and (ii) contracts for which it recognizes revenue at the amount to which it has the right to invoice for services performed.

Share-Based Compensation

For the years ended December 31, 2021, 2020, and 2019, the Company granted performance-based stock awards and restricted stock for a fixed number of common shares to employees. The Company values its restricted stock awards and the fair value of its performance-based stock awards by reference to its stock price on the date of grant. The Company has elected to recognize compensation expense on a straight-line basis over the requisite service period of the entire award.

The Company granted performance-based stock awards to certain key personnel pursuant to its 2014 Omnibus Incentive Plan, amended and restated on May 23, 2017 (2017 Plan), and replaced by the 2020 Omnibus Incentive Plan, effective for awards granted after May 19, 2020, as described in Note 15 - Stockholders' Equity. Pursuant to the plans, the number of target shares that vest are determined based on the level of attainment of the targets. If a minimum level of performance is attained for the awards, restricted stock is issued based on the level of attainment. The Company recognizes performance-based restricted stock as compensation expense based on the most likely probability of attaining the prescribed performance and over the requisite service period beginning at its grant date and through the date the restricted stock vests.

Compensation expense related to share-based payments is included in selling, general and administrative expenses in the consolidated statements of operations, and totaled $6.9 million, $5.4 million, and $3.4 million during the years ended December 31, 2021, 2020, and 2019, respectively. See Note 15 - Stockholders’ Equity.

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CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

2. Summary of Significant Accounting Policies (continued)

Advertising

The Company’s advertising expense consists primarily of online advertising, internet direct marketing, print media, and promotional material. Advertising costs are expensed as incurred and totaled $9.5 million, $6.2 million, and $7.9 million for the years ended December 31, 2021, 2020, and 2019, respectively, and are included in selling, general and administrative expenses in the consolidated statements of operations.

Restructuring Costs

The Company considers restructuring activities to be programs whereby it fundamentally changes its operations, such as closing and consolidating facilities, reducing headcount, and realigning operations in response to changing market conditions. As a result, restructuring costs on the consolidated statements of operations primarily include employee termination costs and lease-related exit costs.

Reconciliations of the employee termination costs and lease-related exit costs beginning and ending liability balance is presented below:

Year Ended December 31,

(amounts in thousands)

________________

(a) Aside from what is presented in the table above, restructuring costs in the consolidated statements of operations for the years ended December 31, 2021 and 2020 include $1.3 million and $1.1 million, respectively, of ongoing lease costs related to the Company's strategic reduction in its real estate footprint, and an immaterial amount in 2019, which are included as operating lease liabilities - current and non-current in our consolidated balance sheets. Other costs were immaterial for the years ended December 31, 2021, 2020, and 2019.

Income Taxes

Deferred income tax assets and liabilities are determined based upon differences between the financial reporting and tax basis of assets and liabilities, and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse.

The Company recognizes in its financial statements the impact of a tax position if that position is more likely than not of being sustained on audit, based on the technical merits of the position. The Company recognizes interest and penalties related to unrecognized tax benefits in the provision for income taxes.

The Company determines the need for a valuation allowance by assessing the probability of realizing deferred tax assets, taking into consideration all available positive and negative evidence, including historical operating results, expectations of future taxable income, carryforward periods available to the Company for tax reporting purposes, the evaluation of various income tax planning strategies, and other relevant factors. The Company maintains a valuation allowance when it is more likely than not that all or a portion of a deferred tax asset will not be realized based on consideration of all available evidence. Adjustments to the deferred tax valuation allowances are made to earnings in the period when such assessments are made. Significant judgment is required in making this assessment. See Note 14 - Income Taxes.

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CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

2. Summary of Significant Accounting Policies (continued)

Comprehensive Income (Loss)

Total comprehensive income (loss) includes net income or loss, foreign currency translation adjustments, and net change in derivative transactions, net of any related deferred taxes and valuation allowance. Certain of the Company’s foreign subsidiaries use their respective local currency as their functional currency. Assets and liabilities of these operations are translated at the exchange rates in effect on the balance sheet date. Income statement items are translated at the average exchange rates for the period. The cumulative impact of currency fluctuations related to the balance sheet translation is included in accumulated other comprehensive loss in the accompanying consolidated balance sheets and was an unrealized loss of $1.3 million at December 31, 2021 and 2020.

The income tax impact related to components of other comprehensive income (loss) for the years ended December 31, 2021 and 2019 is reflected in the consolidated statements of comprehensive income (loss). There was no income tax impact related to components of other comprehensive income (loss) for the year ended December 31, 2020.

Fair Value Measurements

FASB guidance defines fair value, establishes a framework for measuring fair value under U.S. GAAP, and expands disclosures about fair value measurements. The Company’s financial assets and liabilities required to be measured on a recurring basis were its: (i) deferred compensation asset and (ii) deferred compensation liability as of December 31, 2021; and additionally (iii) contingent consideration liabilities as of December 31, 2020. See Note 11 - Fair Value Measurements.

Earnings Per Share

Basic earnings per share is computed by dividing net income available to common stockholders (numerator) by the weighted average number of vested unrestricted common shares outstanding during the period (denominator). Diluted earnings per share gives effect to all dilutive potential common shares outstanding during the period including stock appreciation rights and options and unvested restricted stock, as calculated utilizing the treasury stock method. See Note 16 - Earnings Per Share.

Recently Adopted Accounting Pronouncements

Effective January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740), Simplifying the Accounting for Income Taxes, which simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740, and improves consistent application of and simplifies U.S. GAAP for other areas of Topic 740 by clarifying and amending existing guidance. The guidance requires either a prospective, retrospective, or modified retrospective approach

depending on the amendment. The Company prospectively adopted this guidance with no material impact on its consolidated financial statements.

Recent Accounting Pronouncements

On October 28, 2021, the FASB issued ASU No. 2021-08, Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers, which requires contract assets and contract liabilities such as deferred revenue acquired in a business combination to be recognized and measured by the acquirer on the acquisition date in accordance with ASC 606, Revenue from Contracts with Customers. Generally, this amendment will result in the acquirer recognizing contract assets and contract liabilities at the same amounts recorded by the acquiree. Historically such amounts were recognized by the acquirer at fair value in acquisition accounting. This guidance is effective for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The amendments should be applied prospectively to business combinations occurring on or after the effective date of the amendments. Early adoption is permitted, including adoption in an interim period. The Company is currently in the process of evaluating this standard and expects to adopt this standard in its first quarter of 2023.

On March 12, 2020, the FASB issued ASU No. 2020-04, Reference Rate Reform (Topic 848), Facilitation of the Effects of Reference Rate Reform on Financial Reporting, which provides optional expedients and exceptions for applying U.S. GAAP to contracts, hedging relationships, and other transactions, subject to meeting certain criteria, that reference LIBOR or another reference rate expected to be discontinued. When elected, the optional expedients for contract modifications must be applied

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CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

2. Summary of Significant Accounting Policies (continued)

consistently for all eligible contracts or transactions. On January 7, 2021, the FASB issued ASU No. 2021-01, Reference Rate Reform (Topic 848), Scope, to refine the scope of guidance on reference rate reform to apply to derivatives that are affected by the discounting transition. The amendments in these updates are effective as of March 12, 2020 through December 31, 2022. As of December 31, 2021, the Company does not anticipate that this guidance will have a material impact on its consolidated financial statements; however, it will continue to assess the potential impact on its debt contracts and future hedging relationships, if applicable, through the effective period.

3. Revenue Recognition

The Company's revenues from customer contracts are generated from temporary staffing services and other services. Revenue is disaggregated by segment in the following table. See Note 2 - Summary of Significant Accounting Policies.

NurseAnd AlliedStaffing PhysicianStaffing Total Segments

(amounts in thousands)

NurseAnd AlliedStaffing PhysicianStaffing Total Segments

(amounts in thousands)

NurseAnd AlliedStaffing PhysicianStaffing Total Segments

(amounts in thousands)

________________

In the first quarter of 2021, the Company modified its reportable segments and, as a result, now discloses the following two reportable segments - Nurse and Allied Staffing and Physician Staffing. Other Services in the amount of $10.5 million and $14.8 million, respectively, included in the previously-reported Search segment have been reclassified to Nurse and Allied Staffing for the years ended December 31, 2020 and 2019. See Note 18 - Segment Data.

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CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021

4. Acquisitions

Selected

On December 16, 2021, the Company purchased and acquired substantially all of the assets and assumed certain liabilities of Selected, Inc. for a purchase price of $3.5 million in cash, subject to adjustment, and $1.5 million in shares (or 59,429 shares) of the Company's common stock. The transaction was treated as a purchase of assets for income tax purposes. The acquisition has not been fully integrated as of December 31, 2021.

The sellers are also eligible to receive up to an additional $1.5 million in earnout cash consideration, based on Selected's revenues for each of the twelve-month periods ending on the first and second anniversaries of the first day after the closing date. The liability of $1.5 million is included in non-current earnout liability on the consolidated balance sheets. See Note 11 - Fair Value Measurements.

The acquisition of Selected, Inc. primarily consists of a Software as a Service, subscription-based recruiting and talent matching platform. The acquisition was not significant and has been accounted for using the acquisition method of accounting. Selected's results of operations, since the date of acquisition, are included in the Cross Country Education business unit within the Nurse and Allied Staffing business segment, and are not material.

The Company has not completed its valuation of assets acquired and liabilities assumed. Any necessary adjustments will be finalized within one year from the date of acquisition. As a result, $6.5 million has been recorded as goodwill on the Company's consolidated balance sheet. Associated acquisition-related costs incurred were immaterial and have been included in acquisition and integration-related costs on the Company's consolidated statements of operations for the year ended December 31, 2021. See Note 5 - Goodwill, Trade Names, and Other Intangible Assets.

Cross Country Workforce Solutions Group

On June 8, 2021, the Company purchased and acquired substantially all of the assets and assumed certain liabilities of Workforce Solutions Group, Inc. for a purchase price of $25.0 million in cash and $5.0 million in shares (or 307,730 shares) of the Company's common stock. The parties agreed to a final net working capital reduction of $1.1 million which was received in the fourth quarter of 2021. The transaction was treated as a purchase of assets for income tax purposes.

F- 19

CROSS COUNTRY HEALTHCARE, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 2021