CROSS COUNTRY HEALTHCARE, INC. The purpose of the following Management's Discussion and Analysis (MD&A) is to help facilitate the understanding of significant factors influencing the quarterly operating results, financial condition, and cash flows of the Company. Additionally, MD&A also conveys our current expectations of the potential impact of known trends, events, or uncertainties that may impact future results. MD&A is provided as a supplement to, and should be read in conjunction with, our 2021 Form 10-K (including Part I, Item 1A, "Risk Factors"), our financial statements and the accompanying notes to our financial statements, as well as the Risk Factors contained herein.
Business Overview
We provide total talent management services, including strategic workforce solutions, contingent staffing, permanent placement, and consultative services for healthcare customers across the continuum of care, by recruiting and placing highly qualified healthcare professionals in virtually every specialty and area of expertise. In addition to clinical roles such as school nurses, speech language, and behavioral therapists, we place non-clinical professionals such as teachers, substitute teachers, and other education specialties at educational facilities across the nation. Our diverse customer base includes both public and private acute care and non-acute care hospitals, outpatient clinics, ambulatory care facilities, single- and multi-specialty physician practices, rehabilitation facilities, Program of All-Inclusive Care for the Elderly (PACE) programs, urgent care centers, local and national healthcare systems, managed care providers, public and charter schools, correctional facilities, government facilities, pharmacies, and many other healthcare providers. Through our national staffing teams, we offer our workforce solutions and place clinicians on travel and per diem assignments, local short-term contracts, and permanent positions. In addition, we continually evaluate opportunities to acquire companies that would complement or enhance our business, like Selected and WSG. Our workforce solutions include managed service programs (MSPs), recruitment process outsourcing (RPO), project management, and other outsourcing and consultative services as described in Item 1. "Business" in our 2021 Form 10-K. By utilizing the solutions we offer, customers are able to better plan their personnel needs, optimize their talent acquisition and management processes, strategically flex and balance their workforce, have access to quality healthcare personnel, and provide continuity of care for improved patient outcomes. We have a history of investing in diversity, equality, and inclusion as a key component of the organization's overall corporate social responsibility program, closely aligned with our core values to create a better future for our people, communities, and our stockholders.
The operating results of our business segments are regularly reviewed by the chief operating decision maker.
? Nurse andAllied Staffing - Nurse andAllied Staffing represented approximately 97% of our total revenue in the second quarter of 2022. The Nurse andAllied 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 andAllied 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.
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nurse practitioners, and physician assistants as independent contractors on
temporary assignments throughout
Summary of Operations
For the quarter endedJune 30, 2022 , revenue from services increased 127% year-over-year to$753.6 million , due to continued growth in both our Nurse andAllied Staffing and ourPhysician Staffing segments. Volumes were stronger as we continued to experience high demand across a wide range of specialties spanning the healthcare continuum, with the highest number of professionals on assignment across our businesses. In the second quarter of 2022, revenue decreased 4% sequentially, primarily as a result of average bill rates declining in the mid-single digits as expected, partly offset by an increase in billable hours. Net income attributable to common stockholders in the second quarter of 2022 was$52.9 million , as compared to$11.5 million in the prior year. For the remainder of 2022, average travel bill rates are anticipated to experience a mid-teen decline sequentially, as previously discussed. Looking beyond the third quarter, we anticipate volumes to remain strong, driving further market share gains despite potential headwinds from changing bill rates or demand from certain specialties. We remain committed to investing in our people and technology, doubling our IT project budget for 2022, versus 2021. In the second quarter of 2022, we launched Intellify, our proprietary Vendor Management System (VMS), which will be deployed to new and existing MSP clients. For the three months endedJune 30, 2022 , cash flow provided by operating activities was$18.1 million , with net borrowings of$33.5 million on our senior-secured asset-based credit facility (ABL), and an increase in working capital stemming from an increase in accounts receivable partly offset by the timing of disbursements. As ofJune 30, 2022 , we had$0.3 million of cash and cash equivalents, with a principal balance of$123.9 million outstanding on our term loan. Borrowing base availability under the ABL was$300.0 million , with$85.0 million of borrowings drawn under our ABL, and$17.5 million of undrawn letters of credit outstanding, leaving$197.5 million of excess availability. In the second quarter of 2022, given positive cash from operations, we made a$50.0 million optional prepayment on our term loan to reduce interest costs. We paid a prepayment premium of$0.5 million pursuant to the Term Loan Agreement and, as a result of the early prepayment, wrote off debt issuance costs of$1.4 million .
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 reportedU.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 Nurse andAllied Staffing FTEs represent the average number of Nurse andAllied Staffing contract personnel on a full-time equivalent basis. Average revenue per FTE per day is calculated by dividing the Nurse andAllied Staffing revenue, excluding permanent placement, per FTE by the number of days worked in the respective periods.Physician Staffing Days filled is calculated by dividing the total hours invoiced during the period, including an estimate for the impact of accrued revenue, by eight hours. Revenue per day filled is calculated by dividing revenue as reported by days filled for the period presented. 25
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Results of Operations
The following table summarizes, for the periods indicated, selected condensed
consolidated statements of operations data expressed as a percentage of revenue.
Our historical results of operations are not necessarily indicative of future
operating results.
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
Revenue from services 100.0 % 100.0 % 100.0 % 100.0 %
Direct operating expenses 77.4 78.1 77.6 78.2
Selling, general and administrative expenses 11.4 15.2 10.5 14.6
Bad debt expense 0.4 0.1 0.4 0.2
Depreciation and amortization 0.5 0.7 0.4 0.7
Acquisition and integration-related costs - 0.3 - 0.1
Restructuring (benefits) costs (0.2) 0.2 - 0.3
Impairment charges - 0.6 0.1 0.3
Income from operations 10.5 4.8 11.0 5.6
Interest expense 0.5 0.4 0.5 0.3
Loss on early extinguishment of debt 0.3 - 0.1 -
Other income, net (0.1) (0.1) (0.1) -
Income before income taxes 9.8 4.5 10.5 5.3
Income tax expense 2.8 1.0 3.0 0.6
Net income attributable to common stockholders 7.0 % 3.5 % 7.5 % 4.7 %
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Comparison of Results for the Three Months Ended
Three Months Ended June 30,
Increase Increase
(Decrease) (Decrease)
2022 2021 $ %
(Amounts in thousands)
Revenue from services $ 753,561 $ 331,827 $ 421,734 127.1 %
Direct operating expenses 583,156 259,237 323,919 125.0 %
Selling, general and administrative expenses 86,009 50,344 35,665 70.8 %
Bad debt expense 3,192 466 2,726 585.0 %
Depreciation and amortization 3,481 2,199 1,282 58.3 %
Acquisition and integration-related costs - 924 (924) (100.0) %
Restructuring (benefits) costs (1,114) 835 (1,949) (233.4) %
Impairment charges - 1,921 (1,921) (100.0) %
Income from operations 78,837 15,901 62,936 395.8 %
Interest expense 3,857 1,196 2,661 222.5 %
Loss on early extinguishment of debt 1,912 - 1,912 100.0 %
Other income, net (1,084) (204) (880) (431.4) %
Income before income taxes 74,152 14,909 59,243 397.4 %
Income tax expense 21,258 3,361 17,897 532.5 %
Net income attributable to common stockholders
358.0 %
Revenue from services
Revenue from services increased 127.1% to $753.6 million for the three months
ended June 30, 2022 , as compared to $331.8 million for the three months ended
June 30, 2021 , due to strong performance in both our Nurse and Allied Staffing
and Physician Staffing segments, primarily driven by an increase in the number
of professionals on assignment, as well as higher bill rates in Nurse and
Allied. 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$323.9 million , or 125.0%, to$583.2 million for the three months endedJune 30, 2022 , as compared to$259.2 million for the three months endedJune 30, 2021 , as a result of revenue increases. As a percentage of total revenue, direct operating expenses decreased to 77.4% compared to 78.1% in the prior year period.
Selling, general and administrative expenses
Selling, general and administrative expenses increased 70.8% to$86.0 million for the three months endedJune 30, 2022 , as compared to$50.3 million for the three months endedJune 30, 2021 , primarily due to increases in compensation and benefit expense, as well as marketing and consulting expense and computer subscription fees. As a percentage of total revenue, selling, general and administrative expenses decreased to 11.4% for the three months endedJune 30, 2022 , as compared to 15.2% for the three months endedJune 30, 2021 .
Depreciation and amortization expense
Depreciation and amortization expense for the three months endedJune 30, 2022 was$3.5 million , as compared to$2.2 million for the three months endedJune 30, 2021 . The increase is primarily due to the additional amortization of other intangible assets from theWorkforce Solutions Group (WSG) and Selected acquisitions. See Note 7 -Goodwill ,Trade Names , and Other Intangible Assets to our condensed consolidated financial statements. As a percentage of revenue, depreciation and amortization expense was 0.5% for the three months endedJune 30, 2022 and 0.7% for the three months endedJune 30, 2021 . 27 --------------------------------------------------------------------------------
Acquisition and integration-related costs
Acquisition and integration-related costs for the three months ended
Restructuring (benefits) costs
There was a restructuring benefit of$1.1 million for the three months endedJune 30, 2022 , associated with the early termination of one of the Company's corporate offices which was previously restructured, partially offset by employee termination costs. Restructuring costs for the three months endedJune 30, 2021 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$0.8 million .
Impairment charges
Non-cash impairment charges totaled$1.9 million for the three months endedJune 30, 2021 , related to real estate restructuring activities. There were no such charges for the three months endedJune 30, 2022 . See Note 9 - Leases to our condensed consolidated financial statements.
Interest expense
Interest expense was$3.9 million for the three months endedJune 30, 2022 , as compared to$1.2 million for the three months endedJune 30, 2021 , due to higher average borrowings and a higher effective interest rate. The effective interest rate on our borrowings was 6.8% and 4.1% for the three months endedJune 30, 2022 and 2021, respectively.
Loss on early extinguishment of debt
Loss on early extinguishment of debt for the three months endedJune 30, 2022 consists of a prepayment premium and the write-off of debt issuance costs related to the optional prepayment on our term loan made in the second quarter of 2022. There were no such expenses for the three months endedJune 30, 2021 .
Other income, net
For the three months ended
Income tax expense Income tax expense totaled$21.3 million for the three months endedJune 30, 2022 , compared to$3.4 million for the three months endedJune 30, 2021 . The increase in income tax expense was primarily driven by federal and state taxes as in the prior year there was a valuation allowance on substantially all of our domestic deferred tax assets. See Note 14 - Income Taxes to our condensed consolidated financial statements. 28 --------------------------------------------------------------------------------
Comparison of Results for the Six Months Ended
Six Months Ended June 30,
Increase Increase
(Decrease) (Decrease)
2022 2021 $ %
(Amounts in thousands)
Revenue from services $ 1,542,293 $ 661,068 $ 881,225 133.3 %
Direct operating expenses 1,197,094 517,013 680,081 131.5 %
Selling, general and administrative expenses 162,822 96,671 66,151 68.4 %
Bad debt expense 5,561 970 4,591 473.3 %
Depreciation and amortization 6,200 4,452 1,748 39.3 %
Acquisition and integration-related costs 40 924 (884) (95.7) %
Restructuring (benefits) costs (634) 2,073 (2,707) (130.6) %
Impairment charges 1,741 2,070 (329) (15.9) %
Income from operations 169,469 36,895 132,574 359.3 %
Interest expense 7,378 1,867 5,511 295.2 %
Loss on early extinguishment of debt 1,912 - 1,912 100.0 %
Other income, net (1,092) (241) (851) (353.1) %
Income before income taxes 161,271 35,269 126,002 357.3 %
Income tax expense 46,394 4,273 42,121 985.7 %
Net income attributable to common shareholders
30,996$ 83,881 270.6 % Revenue from services Revenue from services increased 133.3% to$1.5 billion for the six months endedJune 30, 2022 , as compared to$661.1 million for the six months endedJune 30, 2021 , due to strong performance in both our Nurse andAllied Staffing andPhysician Staffing segments, primarily driven by an increase in the number of professionals on assignment, as well as higher bill rates in Nurse and Allied. See further discussion in Segment Results.
Direct operating expenses
Direct operating expenses increased$680.1 million , or 131.5%, to$1.2 billion for the six months endedJune 30, 2022 , as compared to$517.0 million for the six months endedJune 30, 2021 as a result of revenue increases. As a percentage of total revenue, direct operating expenses decreased to 77.6% compared to 78.2% in the prior year period.
Selling, general and administrative expenses
Selling, general and administrative expenses increased 68.4% to$162.8 million for the six months endedJune 30, 2022 , as compared to$96.7 million for the six months endedJune 30, 2021 , primarily due to increases in compensation and benefits, as well as marketing and consulting expense and computer subscription fees, partially offset by decreases in legal expenses. As a percentage of total revenue, selling, general and administrative expenses decreased to 10.5% for the six months endedJune 30, 2022 as compared to 14.6% for the six months endedJune 30, 2021 .
Depreciation and amortization expense
Depreciation and amortization expense for the six months endedJune 30, 2022 was$6.2 million as compared to$4.5 million for the six months endedJune 30, 2021 . The increase is primarily due to the additional amortization of other intangible assets from the WSG and Selected acquisitions. See Note 7 -Goodwill ,Trade Names , and Other Intangible Assets to our condensed consolidated financial statements. As a percentage of revenue, depreciation and amortization expense was 0.4% for the six months endedJune 30, 2022 and 0.7% for the six months endedJune 30, 2021 . 29
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Acquisition and integration-related costs
Acquisition and integration-related costs for the six months endedJune 30, 2022 include an immaterial amount of legal, professional, and advisory fees for the Selected acquisition that closed late in the fourth quarter of 2021. Acquisition and integration-related costs for the six months endedJune 30, 2021 include costs for legal and advisory fees for the WSG acquisition that closed onJune 8, 2021 .
Restructuring (benefits) costs
There was a restructuring benefit of$0.6 million for the six months endedJune 30, 2022 , associated with the early termination of one of the Company's corporate offices which was previously restructured, partially offset by ongoing lease costs and employee termination costs. Restructuring costs for the six months endedJune 30, 2021 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$2.1 million .
Impairment charges
Non-cash impairment charges totaled$1.7 million for the six months endedJune 30, 2022 and related to real estate activities. Non-cash impairment charges totaled$2.1 million for the six months endedJune 30, 2021 and related to real estate restructuring activities and the write-off of a discontinued software development project. See Note 7 -Goodwill ,Trade Names , and Other Intangible Assets and Note 9 - Leases to our condensed consolidated financial statements.
Interest expense
Interest expense was$7.4 million for the six months endedJune 30, 2022 as compared to$1.9 million for the six months endedJune 30, 2021 , due to higher average borrowings and a higher effective interest rate. The effective interest rate on our borrowings was 6.6% for the six months endedJune 30, 2022 compared to 3.1% for the six months endedJune 30, 2021 .
Loss on early extinguishment of debt
Loss on early extinguishment of debt for the six months ended
Other income, net
For the six months ended
Income tax expense Income tax expense was$46.4 million for the six months endedJune 30, 2022 as compared to$4.3 million for the six months endedJune 30, 2021 . The increase in income tax expense was primarily driven by federal and state taxes as in the prior year there was a valuation allowance on substantially all of our domestic deferred tax assets. See Note 14 - Income Taxes to our condensed consolidated financial statements. 30
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Segment Results
Information on operating segments and a reconciliation to income from operations for the periods indicated are as follows:
Three Months Ended Six Months Ended
June 30, June 30,
2022 2021 2022 2021
(amounts in thousands)
Revenue from services:
Nurse and Allied Staffing $ 731,443 $ 316,188 $ 1,497,023 $ 629,196
Physician Staffing 22,118 15,639 45,270 31,872
$ 753,561 $ 331,827 $ 1,542,293 $ 661,068
Contribution income:
Nurse and Allied Staffing $ 97,567 $ 35,284 $ 207,668 $ 72,701
Physician Staffing 1,220 562 2,985 1,990
98,787 35,846 210,653 74,691
Corporate overhead 17,583 14,066 33,837 28,277
Depreciation and amortization 3,481 2,199 6,200 4,452
Acquisition and integration-related costs - 924 40 924 Restructuring (benefits) costs (1,114) 835 (634) 2,073 Impairment charges - 1,921 1,741 2,070 Income from operations$ 78,837 $ 15,901 $ 169,469 $ 36,895
See Note 12 - Segment Data to our condensed consolidated financial statements.
Certain statistical data for our business segments for the periods indicated are
as follows:
Three Months Ended
June 30, June 30, Percent
2022 2021 Change Change
Nurse and Allied Staffing statistical
data:
FTEs 13,494 7,578 5,916 78.1 %
Average Nurse and Allied Staffing revenue
per FTE per day $ 591 $ 454 137 30.2 %
Physician Staffing statistical data:
Days filled 12,416 9,775 2,641 27.0 %
Revenue per day filled $ 1,781 $ 1,600 181 11.3 %
Six Months Ended
June 30, June 30, Percent
2022 2021 Change Change
Nurse and Allied Staffing statistical
data: (a)
FTEs 13,474 7,096 6,378 89.9 %
Average Nurse and Allied Staffing revenue
per FTE per day $ 609 $ 486 123 25.3 %
Physician Staffing statistical data: (a)
Days filled 25,484 19,244 6,240 32.4 %
Revenue per day filled $ 1,776 $ 1,656 120 7.2 %
See definition of Business Measurements under the Operating Metrics section of our MD&A.
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Segment Comparison - Three Months Ended
Nurse and
Revenue increased$415.2 million , or 131.3%, to$731.4 million for the three months endedJune 30, 2022 , compared to$316.2 million for the three months endedJune 30, 2021 , through strong performance driven by volume increases and higher bill rates. Contribution income increased$62.3 million , or 176.5%, to$97.6 million for the three months endedJune 30, 2022 , compared to$35.3 million for the three months endedJune 30, 2021 , driven by increased revenue and lower costs. As a percentage of segment revenue, contribution income margin was 13.3% for the three months endedJune 30, 2022 , compared to 11.2% for the three months endedJune 30, 2021 . The average number of FTEs on contract during the three months endedJune 30, 2022 increased 78.1% from the three months endedJune 30, 2021 , primarily due to headcount growth in travel nurse and allied, as well as additional headcount resulting from the WSG acquisition. The average revenue per FTE per day increased 30.2%, due to the increase in the average bill rates.
Revenue increased
Contribution income was$1.2 million for the three months endedJune 30, 2022 , compared to$0.6 million for the three months endedJune 30, 2021 . As a percentage of segment revenue, contribution income was 5.5% for the three months endedJune 30, 2022 , compared to 3.6% for the three months endedJune 30, 2021 , driven by higher revenue and lower costs.
Total days filled for the three months ended
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$17.6 million for the three months endedJune 30, 2022 , from$14.1 million for the three months endedJune 30, 2021 , primarily due to increases in compensation and benefit expense, as well as IT and consulting expense. As a percentage of consolidated revenue, corporate overhead was 2.3% for the three months endedJune 30, 2022 and 4.2% for the three months endedJune 30, 2021 .
Segment Comparison - Six Months Ended
Nurse andAllied Staffing Revenue increased$867.8 million , or 137.9%, to$1.5 billion for the six months endedJune 30, 2022 , compared to$629.2 million for the six months endedJune 30, 2021 , through strong performance driven by volume increases and higher bill rates. Contribution income increased$135.0 million , or 185.6%, to$207.7 million for the six months endedJune 30, 2022 , compared to$72.7 million for the six months endedJune 30, 2021 , driven by increased revenue and lower costs. As a percentage of segment revenue, contribution income margin was 13.9% for the six months endedJune 30, 2022 , compared to 11.6% for the six months endedJune 30, 2021 . The average number of FTEs on contract during the six months endedJune 30, 2022 increased 89.9% from the six months endedJune 30, 2021 , primarily due to headcount growth in travel nurse and allied, as well as additional headcount resulting from the WSG acquisition. The average revenue per FTE per day increased 25.3%, due to the increase in the average bill rates.
Revenue increased$13.4 million , or 42.0%, to$45.3 million for the six months endedJune 30, 2022 , compared to$31.9 million for the six months endedJune 30, 2021 , primarily due to an increase in volume in both primary care physicians and certified registered nurse anesthetists. 32 -------------------------------------------------------------------------------- Contribution income was$3.0 million for the six months endedJune 30, 2022 , compared to$2.0 million for the six months endedJune 30, 2021 . As a percentage of segment revenue, contribution income was 6.6% for the six months endedJune 30, 2022 , compared to 6.2% for the six months endedJune 30, 2021 , driven by higher revenue, partially offset by higher direct costs.
Total days filled for the six months ended
Corporate Overhead
Corporate overhead increased to$33.8 million for the six months endedJune 30, 2022 , from$28.3 million for the six months endedJune 30, 2021 , primarily due to increases in compensation and benefit expense, as well as IT and consulting expense, partially offset by decreases in legal and accounting expense. As a percentage of consolidated revenue, corporate overhead was 2.2% for the six months endedJune 30, 2022 and 4.3% for the six months endedJune 30, 2021 .
Liquidity and Capital Resources
AtJune 30, 2022 , we reported$0.3 million in cash and cash equivalents,$123.9 million of term loan outstanding, at par, and$85.0 million of borrowings drawn under our ABL. Working capital increased by$141.2 million to$449.7 million as ofJune 30, 2022 , compared to$308.5 million as ofDecember 31, 2021 , primarily due to an increase in accounts receivable, partially offset by the timing of disbursements. As ofJune 30, 2022 , our days' sales outstanding, net of amounts owed to subcontractors, was 66 days, up 10 days year-over-year and up 4 days sequentially, primarily due to the timing of revenue recognized throughout the year. As ofJune 30, 2022 , 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 and operating lease commitments, and future principal payments on our term loan and our ABL credit facility. 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. We have an effective "shelf" registration statement on Form S-3 on file with theSEC that enables us, in one or more offerings, to sell up to an aggregate of 5,000,000 shares of common stock. Although we do not have any current plans to use the shelf registration statement, the proceeds from any offering could be used for working capital and other general corporate purposes, or to fund acquisitions of businesses, products, and technologies. Net cash used in operating activities was$10.9 million in the six months endedJune 30, 2022 , compared to$9.4 million in the six months endedJune 30, 2021 , primarily due to the continued investment in net working capital associated with the revenue growth in our business, which resulted in a$215.2 million increase in receivables since the start of the year. Net cash used in investing activities was$3.8 million in the six months endedJune 30, 2022 , compared to$27.5 million in the six months endedJune 30, 2021 . Net cash used in the six months endedJune 30, 2022 was for capital expenditures, primarily related to multiple IT projects. Net cash used in the six months endedJune 30, 2021 included$24.5 million related to the acquisition of WSG, as well as capital expenditures and the build-out of our corporate office. Net cash provided by financing activities during the six months endedJune 30, 2022 was$14.0 million , compared to$53.4 million during the six months endedJune 30, 2021 . During the six months endedJune 30, 2022 , we reported net borrowings of$75.8 million on our ABL, and used cash to repay borrowings of$50.4 million on our term loan,$2.4 million on our note payable,$5.3 million for income taxes on share-based compensation,$3.2 million in debt issuance costs, and an immaterial amount for other financing activities. During the six months endedJune 30, 2021 , we reported net borrowings of$100.0 million on our term loan, and used cash to repay borrowing on our ABL of$37.5 million ,$2.4 million on our note payable,$4.5 million of debt issuance costs,$2.2 million for income taxes on share-based compensation, and an immaterial amount for other financing activities. 33
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Debt
2021 Term Loan Credit Agreement
As more fully described in Note 8 - Debt to our condensed consolidated financial statements, onJune 8, 2021 , we entered into a Term Loan Credit Agreement (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 London Inter-Bank Offered Rate (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 condensed 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 onSeptember 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 ofJune 30, 2022 . 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. OnNovember 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 onDecember 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. Aside from our scheduled payments, onJune 23, 2022 , we made an optional prepayment of$50.0 million , and paid a prepayment premium of$0.5 million pursuant to the Term Loan Agreement. As a result of the early prepayment, debt issuance costs of$1.4 million were written off in the three months endedJune 30, 2022 . The prepayment premium and the write-off of debt issuance costs are included as loss on early extinguishment of debt in the condensed consolidated statements of operations. We were entitled to determine the application of the prepayment, which was applied to all future amortization payments, with the balance applied to the remaining balloon payment in 2027.
2019 Loan Agreement
EffectiveOctober 25, 2019 , our prior senior credit facility entered into inAugust 2017 was replaced by a$120.0 million Loan Agreement, which provides for a five-year senior secured revolving credit facility. OnJune 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. OnMarch 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. OnJune 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 inU.S. dollars. OnNovember 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 . OnMarch 21, 2022 , we amended the Loan Agreement (Fifth Amendment), which increased the current aggregate committed size of the ABL from$150.0 million to$300.0 million , extended the credit facility for an additional five years, increased certain borrowing base sub-limits, and provided the option for all or a portion of the borrowings to bear interest at a rate based on the Secured Overnight Financing Rate (SOFR) or Base Rate, at the election of the borrowers, plus an applicable margin. As ofJune 30, 2022 , the interest rate spreads and fees under the Loan Agreement were based on SOFR plus 1.60% for the revolving portion of the borrowing base. The Base Rate (as defined by the Loan Agreement) margin would have been 0.50% for the revolving portion. The SOFR and Base Rate margins are subject to monthly pricing adjustments, pursuant to a pricing matrix based on the Company's excess availability under the revolving credit facility. In addition, the facility is subject to an unused line fee, letter of credit fees, and an administrative fee. The Loan Agreement contains various restrictions and 34 -------------------------------------------------------------------------------- covenants, including a covenant to maintain a minimum fixed charge coverage ratio. We were in compliance with the fixed charge coverage ratio covenant as ofJune 30, 2022 . Borrowing base availability under the ABL was$300.0 million atJune 30, 2022 , with$85.0 million of borrowings drawn as well as$17.5 million of letters of credit outstanding, leaving$197.5 million of excess availability.
See Note 8 - Debt to our condensed consolidated financial statements.
Stockholders' Equity
See Note 11 - Stockholders' Equity to our condensed consolidated financial statements.
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates remain consistent with those reported in our 2021 Form 10-K.
Transactions with Related Parties
See Note 15 - Related Party Transactions to our condensed consolidated financial statements.
Recent Accounting Pronouncements
See Note 16 - Recent Accounting Pronouncements to our condensed consolidated financial statements.
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