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, the MD&A also conveys our current expectations of the potential impact of known trends, events, or uncertainties that may impact future results. MD&A is provided as a supplement to, and should be read in conjunction with, our Annual Report on Form 10-K for the year endedDecember 31, 2019 , our financial statements and the accompanying notes to our financial statements, as well as the Item 1A. Risk Factors contained herein.
Business Overview
We provide total talent management services, including strategic workforce solutions, contingent staffing, permanent placement and other consultative services for healthcare clients. We recruit and place highly qualified healthcare professionals in virtually every specialty and area of expertise. Our diverse client base includes both clinical and nonclinical settings, servicing acute care hospitals, physician practice groups, outpatient and ambulatory-care centers, nursing facilities, both public schools and charter schools, rehabilitation and sports medicine clinics, government facilities, and homecare. Through our national staffing teams and network of office locations, we offer our workforce solutions and we can place clinicians on travel and per diem assignments, local short-term contracts and permanent positions. Our workforce solutions include managed service programs (MSPs), electronic medical record (EMR) transition staffing, recruitment process outsourcing (RPO), internal resource pool (IRP), and other outsourcing and consultative services as described in Item 1. Business in our Annual Report on Form 10-K for the year endedDecember 31, 2019 . By utilizing our various solutions, clients can better plan their personnel needs, talent acquisition and management processes, strategically flex and balance their workforce, access quality healthcare personnel, and provide continuity of care for improved patient outcomes. We manage and segment our business based on the nature of the services we offer to our customers. As a result, in accordance with the Segment Reporting Topic of the FASB ASC, we report three business segments - Nurse andAllied Staffing ,Physician Staffing , and Search. ? Nurse andAllied Staffing - Nurse andAllied Staffing represented approximately 90% of our total revenue in the third quarter of 2020. 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 staff healthcare personnel and substitute teachers in public and charter schools. We provide flexible workforce solutions to our healthcare clients through diversified offerings designed to meet their unique needs, including MSP, optimal workforce solutions (OWS), EMR, IRP and consulting services.
?
? Search - Search represented approximately 1% of our total revenue in the
third quarter of 2020. Search includes retained and contingent search services
for physicians, healthcare executives, and other healthcare professionals, as
well as RPO.
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Summary of Operations
For the quarter endedSeptember 30, 2020 , revenue from services decreased 7% year-over-year to$194.0 million , due to volume declines across all businesses due to COVID-19, resulting in an 8% decrease in direct operating expenses. Selling, general and administrative expenses also decreased$3.6 million or 8% year-over-year driven by reductions in headcount and the closure of offices as part of our cost savings program. Net loss attributable to common shareholders in the third quarter of 2020 was$1.3 million as compared to a net loss of$3.1 million in the prior year. Profitability in the current quarter was impacted by$2.3 million of restructuring costs, and$1.1 million of non-cash impairment charges. Profitability in the third quarter of 2019 was impacted by$1.6 million of restructuring costs,$1.8 million of non-cash impairment charges, and$1.3 million loss on derivative. For the nine months endedSeptember 30, 2020 , we generated cash flow from operating activities of$25.3 million and repaid a net of$14.9 million on our senior-secured asset-based credit facility (ABL). As ofSeptember 30, 2020 , we had$3.4 million of cash and cash equivalents, and availability under the ABL of$110.2 million , with$56.0 million of borrowings drawn under our ABL, and$19.5 million of undrawn letters of credit outstanding, leaving$34.7 million available for borrowing.
COVID-19 Response
Following the initial surge from COVID-19 in early March and the early part of the second quarter of 2020, orders declined and bottomed out by the end of May. Towards the end of the second quarter, demand continued to climb throughout the month of June, reaching a peak again in late July. In comparison to the initial surge where orders were concentrated in select metropolitan cities on the east coast,California , thePacific Northwest , and Midwest, the second and third waves experienced during most of the third quarter and continuing into the fourth quarter were located in states not previously impacted as severely by the pandemic. While not as material as incremental revenue generated during the second quarter, the incremental revenue generated during the third quarter more than offset other COVID-19 related declines across much of our business. From a demand perspective, we have seen an unprecedented level of volatility in the second and third quarters of 2020, with orders first rising as the pandemic unfolded, and then falling sharply as hospitals nationwide experienced lower census and mandatory deferrals of elective procedures, then rising again as the second and third waves of the pandemic hit. As hospitals look to contingent labor to help support their staffing needs in this highly volatile environment, they are doing so with an increased focus on cost containment. As a result, we have seen a shorter length of assignments for certain COVID-19 related orders than our typical pre-COVID-19 length of approximately thirteen weeks. In addition, while bill rates reached a peak during the second quarter as the market demanded premium pay, they began to decline during the latter part of the second quarter and into the third quarter. Overall bill rates, on average, were lower in the third quarter compared to the second quarter as the emergent acuity of the pandemic began to soften, while remaining above our normal pre-COVID-19 average levels. We ended the quarter with cash of$3.4 million and$34.7 million available for borrowing. We do not expect the future impacts of COVID-19 to have a significant impact on our ability to generate operating cash flows, to borrow available funds under our ABL, or to maintain compliance with our financial covenants under our revolving credit facility. The pandemic has provided us an opportunity to accelerate plans of integrating and optimizing our operations, driven by the closure of a significant number of offices and reductions in headcount. These cost reductions have been enabled by our demonstrated ability to work remotely. Additionally, during the quarter, we implemented our new applicant tracking system for our travel nurse business, which we believe will create further operational efficiencies, enhanced productivity, and a world-class candidate experience.
Refer to Item 1A. Risk Factors for further discussion about potential additional risks and uncertainties.
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
basis (FTE)s, 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. Some of the segment financial results analyzed include revenue,
operating expenses, and contribution income. In addition, we monitor cash flow
as well as operating and leverage ratios to help us assess our liquidity needs.
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Business Segment Business Measurement
Nurse and Allied Staffing FTEs represent the average number of Nurse and
Allied Staffing contract personnel on a full-time
equivalent basis.
Average revenue per FTE per day is calculated by
dividing the Nurse and Allied Staffing revenue per
FTE by the number of days worked in the respective
periods. Nurse and Allied Staffing revenue also
includes revenue from the permanent placement of
nurses.
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 8
hours.
Revenue per day filled is calculated by dividing
revenue as reported by days filled for the period
presented.
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 Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
Revenue from services 100.0 % 100.0 % 100.0 % 100.0 %
Direct operating expenses 75.2 75.6 76.1 75.1
Selling, general and administrative expenses 21.0 21.2 20.8 22.5
Bad debt expense 0.5 0.3 0.4 0.2
Depreciation and amortization 1.7 1.4 1.7 1.6
Acquisition and integration-related costs - (0.2) - -
Restructuring costs 1.2 0.8 0.8 0.5
Legal settlement charges - - - 0.3
Impairment charges 0.6 0.8 2.6 2.7
(Loss) income from operations (0.2) 0.1 (2.4) (2.9)
Interest expense 0.3 0.7 0.3 0.7
Loss on derivative - 0.6 - 0.2
Loss on early extinguishment of debt - 0.1 - 0.1
Loss before income taxes (0.5) (1.3) (2.7) (3.9)
Income tax expense (benefit) 0.1 - - 5.2
Consolidated net loss (0.6) (1.3) (2.7) (9.1)Less: Net income attributable to noncontrolling interest in subsidiary
0.1 0.2 0.1 0.2
Net loss attributable to common shareholders (0.7) % (1.5) % (2.8) % (9.3) %
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Comparison of Results for the Three Months Ended
Three Months Ended
Increase
(Decrease) Increase (Decrease)
2020 2019 $ %
(Amounts in thousands)
Revenue from services $ 193,968 $ 209,200 $ (15,232) (7.3) %
Direct operating expenses 145,965 158,194 (12,229) (7.7) %
Selling, general and administrative expenses 40,804 44,407 (3,603) (8.1) %
Bad debt expense 946 588 358 60.9 %
Depreciation and amortization 3,247 2,907 340 11.7 %
Acquisition and integration-related costs - (426) 426 100.0 %
Restructuring costs 2,316 1,607 709 44.1 %
Impairment charges 1,071 1,804 (733) (40.6) %
(Loss) income from operations (381) 119 (500) (420.2) %
Interest expense 608 1,398 (790) (56.5) %
Loss on derivative - 1,284 (1,284) (100.0) %
Loss on early extinguishment of debt - 94 (94) (100.0) %
Other income, net (10) (54) 44 81.5 %
Loss before income taxes (979) (2,603) 1,624 62.4 %
Income tax expense 169 94 75 79.8 %
Consolidated net loss (1,148) (2,697) 1,549 57.4
Less: Net income attributable to noncontrolling
interest in subsidiary 186 431 (245) (56.8) %
Net loss attributable to common shareholders $ (1,334) $ (3,128) $ 1,794 57.4 %
Revenue from services
Revenue from services decreased 7.3% to $194.0 million for the three months
ended September 30, 2020 , as compared to $209.2 million for the three months
ended September 30, 2019 , primarily due to volume declines across all of our
lines of business. Bill rates for COVID-19 assignments trended downward in the
third quarter, but remained higher than pre-COVID-19 rates, and were up as
compared to the prior year. 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 decreased$12.2 million , or 7.7%, to$146.0 million for the three months endedSeptember 30, 2020 , as compared to$158.2 million for the three months endedSeptember 30, 2019 as a result of revenue declines. As a percentage of total revenue, direct operating expenses decreased to 75.2% compared to 75.6% in the prior year period.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased 8.1% to$40.8 million for the three months endedSeptember 30, 2020 , as compared to$44.4 million for the three months endedSeptember 30, 2019 , primarily due to reductions in headcount, lower healthcare costs, and lower rent expense due to the closure of a significant number of offices, enabled by our ability to work remotely. These reductions were partially offset by increases in IT expenses and legal fees, as well as additional compensation expense related to the short-term incentive plan. As a percentage of total revenue, selling, general and administrative expenses decreased to 21.0% for the three months endedSeptember 30, 2020 as compared to 21.2% for the three months endedSeptember 30, 2019 . 27 --------------------------------------------------------------------------------
Depreciation and amortization expense
Depreciation and amortization expense for the three months endedSeptember 30, 2020 increased to$3.2 million as compared to$2.9 million for the three months endedSeptember 30, 2019 . Amortization expense increased due to accelerated amortization of trade names in our Nurse and Allied andPhysician Staffing segments, associated with our rebranding initiatives. See Note 6 -Goodwill ,Trade Names , and Other Intangible Assets. As a percentage of revenue, depreciation and amortization expense was 1.7% for the three months endedSeptember 30, 2020 and 1.4% for the three months endedSeptember 30, 2019 .
Acquisition and integration-related costs
Acquisition and integration-related costs include accretion and valuation
adjustments on our contingent consideration liability related to the Mediscan
acquisition and was a benefit of
Restructuring costs
Restructuring costs were primarily comprised of employee termination costs, ongoing lease costs related to the Company's strategic reduction of its real estate footprint, and reorganization costs as part of our planned cost savings initiatives and totaled$2.3 million during the three months endedSeptember 30, 2020 . During the three months endedSeptember 30, 2019 , restructuring costs totaled$1.6 million and were primarily comprised of employee termination costs and lease-related exit costs.
Impairment charges
Non-cash impairment charges totaled$1.1 million for the three months endedSeptember 30, 2020 . These were comprised of$0.2 million of customer list impairment of our Nurse and Allied business and$0.9 million related to real estate restructuring activities. During the three months endedSeptember 30, 2019 , in connection with our restructuring activities we ceased using leased space which resulted in impairment charges related to our right-of-use assets of$1.2 million and$0.6 million of impairment related to property and equipment. See Note 6 -Goodwill ,Trade Names , and Other Intangible Assets to our condensed consolidated financial statements.
Interest expense
Interest expense was$0.6 million for the three months endedSeptember 30, 2020 as compared to$1.4 million for the three months endedSeptember 30, 2019 , due to lower average borrowings and a lower effective rate. The effective interest rate on our borrowings was 3.3% for the three months endedSeptember 30, 2020 compared to 6.4% for the three months endedSeptember 30, 2019 .
Loss on derivative
Loss on derivative was$1.3 million for the three months endedSeptember 30, 2019 , which was paid to terminate an interest rate hedge related to our term loan that was subsequently refinanced inOctober 2019 . There were no similar charges for the three months endedSeptember 30, 2020 .
Loss on early extinguishment of debt
Loss on early extinguishment of debt of$0.1 million for the three months endedSeptember 30, 2019 related to write-offs of debt issuance costs resulting from a reduction in borrowing capacity on our revolving credit facility. There were no similar charges for the three months endedSeptember 30, 2020 .
Income tax expense
Income tax expense totaled$0.2 million for the three months endedSeptember 30, 2020 , compared to$0.1 million for the three months endedSeptember 30, 2019 . As a result of the Company's valuation allowance on substantially all of its domestic deferred tax assets, income tax expense for the three months endedSeptember 30, 2020 and 2019 was primarily impacted by international and state taxes. See Note 13 - Income Taxes to our condensed consolidated financial statements. 28 --------------------------------------------------------------------------------
Comparison of Results for the Nine Months Ended
Nine Months Ended
Increase
(Decrease) Increase (Decrease)
2020 2019 $ %
(Amounts in thousands)
Revenue from services $ 620,811 $ 607,128 $ 13,683 2.3 %
Direct operating expenses 472,471 456,280 16,191 3.5 %
Selling, general and administrative expenses 128,939 136,387 (7,448) (5.5) %
Bad debt expense 2,383 1,503 880 58.5 %
Depreciation and amortization 10,472 9,448 1,024 10.8 %
Acquisition and integration-related costs 77 385 (308) (80.0) %
Restructuring costs 5,210 2,884 2,326 80.7 %
Legal settlement charges - 1,600 (1,600) (100.0) %
Impairment charges 16,082 16,306 (224) (1.4) %
Loss from operations (14,823) (17,665) 2,842 16.1 %
Interest expense 2,219 4,258 (2,039) (47.9) %
Loss on derivative - 1,284 (1,284) (100.0) %
Loss on early extinguishment of debt - 508 (508) (100.0) %
Other income, net (46) (212) 166 78.3 %
Loss before income taxes (16,996) (23,503) 6,507 27.7 %
Income tax (benefit) expense (32) 31,840 (31,872) (100.1) %
Consolidated net loss (16,964) (55,343) 38,379 69.3
Less: Net income attributable to noncontrolling
interest in subsidiary 610 1,226 (616) (50.2) %
Net loss attributable to common shareholders $ (17,574) $ (56,569) $ 38,995 68.9 %
Revenue from services
Revenue from services increased 2.3% to $620.8 million for the nine months ended
September 30, 2020 , as compared to $607.1 million for the nine months ended
September 30, 2019 , reflecting an increase in revenue in Nurse and Allied
Staffing , partially offset by declines in Physician Staffing and Search. Revenue
for the nine months ended September 30, 2020 reflects growth in all three
segments in the first quarter and a high volume of COVID-19 assignments in Nurse
and Allied Staffing in the second and third quarters, with volume declines in
the third quarter in Physician Staffing and Search. See further discussion in
Segment Results.
Direct operating expenses
Direct operating expenses increased $16.2 million , or 3.5%, to $472.5 million
for the nine months ended September 30, 2020 , as compared to $456.3 million for
the nine months ended September 30, 2019 . As a percentage of total revenue,
direct operating expenses increased to 76.1% compared to 75.1% in the prior year
period reflecting a change in the mix of business, primarily as the higher
compensation of COVID-19 assignments were generally priced at a lower average
margin.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased 5.5% to$128.9 million for the nine months endedSeptember 30, 2020 , as compared to$136.4 million for the nine months endedSeptember 30, 2019 , primarily driven by reductions in headcount, lower healthcare costs, and lower rent expense due to the closure of a significant number of offices, enabled by our ability to work remotely, coupled with lower consulting expenses. These reductions were partially offset by increases in equity compensation expense, IT expenses, and legal fees, as well as additional compensation expense related to the short-term 29 --------------------------------------------------------------------------------
incentive plan. As a percentage of total revenue, selling, general and
administrative expenses decreased to 20.8% for the nine months ended
Depreciation and amortization expense
Depreciation and amortization expense for the nine months endedSeptember 30, 2020 increased to$10.5 million as compared to$9.4 million for the nine months endedSeptember 30, 2019 . Amortization expense increased due to accelerated amortization of trade names in our Nurse and Allied andPhysician Staffing segments, associated with our rebranding initiatives. As a percentage of revenue, depreciation and amortization expense was 1.7% for the nine months endedSeptember 30, 2020 and 1.6% for the nine months endedSeptember 30, 2019 .
Acquisition and integration-related costs
Acquisition and integration-related costs include costs for prior acquisitions, costs incurred for potential transactions, and accretion and valuation adjustments on our contingent consideration liability related to the Mediscan acquisition. In the first quarter of 2020, the final earnout amount of the contingent consideration related to the Mediscan acquisition was determined, resulting in an additional accrual of$0.1 million . For the nine months endedSeptember 30, 2019 , costs totaled$0.4 million , and included$0.1 million of accretion and valuation adjustments on the contingent consideration liability and$0.3 million of expenses related to prior acquisitions. See Note 7 - Debt.
Restructuring costs
Restructuring costs were primarily comprised of employee termination costs, ongoing lease costs related to the Company's strategic reduction of its real estate footprint, and reorganization costs as part of our planned cost savings initiatives and totaled$5.2 million during the nine months endedSeptember 30, 2020 . During the nine months endedSeptember 30, 2019 , restructuring costs totaled$2.9 million and were primarily comprised of employee termination costs and lease-related exit costs.
Legal settlement charges
Legal settlement charges totaled$1.6 million during the nine months endedSeptember 30, 2019 and related to the resolution of a medical malpractice lawsuit in excess of carrier limits, as well as a 2019 California wage and hour class action settlement agreement. There were no similar charges for the nine months endedSeptember 30, 2020 .
Impairment charges
Non-cash impairment charges totaled$16.1 million for the nine months endedSeptember 30, 2020 . These were comprised of$10.7 million of impairment of our Search and Nurse and Allied businesses and$5.4 million related to real estate restructuring activities. During the nine months endedSeptember 30, 2019 , in connection with our restructuring activities we ceased using leased space which resulted in impairment charges related to our right-of-use assets of$1.2 million and$0.6 million of impairment related to property and equipment. In addition, as part of evolving our go-to-market strategy, in the second quarter of 2019, we eliminated certain brands across all of our segments as part of our rebranding initiatives and, as a result,$14.5 million of indefinite-lived trade names related to Nurse andAllied Staffing were written off as impairment charges. See Note 6 -Goodwill ,Trade Names , and Other Intangible Assets and Note 8 - Leases to our condensed consolidated financial statements.
Interest expense
Interest expense was$2.2 million for the nine months endedSeptember 30, 2020 as compared to$4.3 million for the nine months endedSeptember 30, 2019 , due to lower average borrowings and a lower effective interest rate. The effective interest rate on our borrowings was 3.7% for the nine months endedSeptember 30, 2020 compared to 6.2% for the nine months endedSeptember 30, 2019 .
Loss on derivative
Loss on derivative was$1.3 million for the nine months endedSeptember 30, 2019 , which was paid to terminate an interest rate hedge related to our term loan that was subsequently refinanced inOctober 2019 . There were no similar charges for the nine months endedSeptember 30, 2020 . 30 --------------------------------------------------------------------------------
Loss on early extinguishment of debt
Loss on early extinguishment of debt of$0.5 million for the nine months endedSeptember 30, 2019 related to write-offs of debt issuance costs resulting from a reduction in borrowing capacity on our revolving credit facility, as well as optional debt prepayments of$12.5 million made on our Term Loan. There were no similar charges for the nine months endedSeptember 30, 2020 .
Income tax (benefit) expense
Income tax benefit was less than$0.1 million for the nine months endedSeptember 30, 2020 , compared to expense of$31.8 million for the nine months endedSeptember 30, 2019 . As a result of the Company's valuation allowance on substantially all of its domestic deferred tax assets, income tax (benefit) expense for the nine months endedSeptember 30, 2020 and 2019 was impacted by international and state taxes as well as the impairment of indefinite-lived intangibles. Income tax expense for the nine months endedSeptember 30, 2019 included$35.8 million of additional valuation allowance recorded as a discrete item in the second quarter of 2019. See Note 13 - Income Taxes to our condensed consolidated financial statements.
Segment Results
Information on operating segments and a reconciliation to loss from operations for the periods indicated are as follows:
Three Months Ended Nine Months Ended
September 30, September 30,
2020 2019 2020 2019
(amounts in thousands)
Revenue from services:
Nurse and Allied Staffing $ 175,244 $ 184,974 $ 561,575 $ 541,398
Physician Staffing 16,452 20,407 51,505 54,594
Search 2,272 3,819 7,731 11,136
$ 193,968 $ 209,200 $ 620,811 $ 607,128
Contribution income (loss):
Nurse and Allied Staffing $ 18,233 $ 16,097 $ 53,028 $ 46,504
Physician Staffing 827 811 2,677 1,724
Search (308) 78 (1,694) (526)
18,752 16,986 54,011 47,702
Corporate overhead 12,499 10,975 36,993 34,744
Depreciation and amortization 3,247 2,907 10,472 9,448
Acquisition and integration-related costs - (426) 77 385 Restructuring costs 2,316 1,607 5,210 2,884 Legal settlement charges - - - 1,600 Impairment charges 1,071 1,804 16,082 16,306 (Loss) income from operations$ (381) $ 119 $ (14,823) $ (17,665) 31
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Certain statistical data for our business segments for the periods indicated are
as follows:
Three Months Ended
September 30, September 30, Percent
2020 2019 Change Change
Nurse and Allied Staffing statistical
data:
FTEs 5,403 7,083 (1,680) (23.7) %
Average Nurse and Allied Staffing revenue
per FTE per day $ 353 $ 284 69 24.3 %
Physician Staffing statistical data:
Days filled 9,682 11,675 (1,993) (17.1) %
Revenue per day filled $ 1,699 $ 1,748 (49) (2.8) %
Nine Months Ended
September 30, September 30, Percent
2020 2019 Change Change
Nurse and Allied Staffing statistical
data: (a)
FTEs 6,116 7,039 (923) (13.1) %
Average Nurse and Allied Staffing revenue
per FTE per day $ 335 $ 282 53 18.8 %
Physician Staffing statistical data: (a)
Days filled 29,077 32,709 (3,632) (11.1) %
Revenue per day filled $ 1,771 $ 1,669 102 6.1 %
See definition of Business Measurement under the Operating Metrics section of our Management's Discussion and Analysis.
Segment Comparison - Three Months Ended
Nurse and
Revenue decreased$9.7 million , or 5.3%, to$175.2 million for the three months endedSeptember 30, 2020 , compared to$185.0 million for the three months endedSeptember 30, 2019 , driven by volume declines in certain specialties, partly offset by higher bill rates. Volume for the three months endedSeptember 30, 2020 was negatively impacted due to suspended services resulting from school closures as well as a decrease in census at our clients which resulted in lower demand for non-COVID-19 related assignments. Contribution income increased$2.1 million ,or 13.3%, to$18.2 million for the three months endedSeptember 30, 2020 , compared to$16.1 million for the three months endedSeptember 30, 2019 driven by lower selling, general and administrative expenses. As a percentage of segment revenue, contribution income margin was 10.4% for the three months endedSeptember 30, 2020 , compared to 8.7% for the three months endedSeptember 30, 2019 . The average number of FTEs on contract during the three months endedSeptember 30, 2020 decreased 23.7% from the three months endedSeptember 30, 2019 , reflecting the decreased demand for non-COVID-19 related assignments, as well as the loss of an OWS customer that decided to bring their staffing in-house. The average revenue per FTE per day increased 24.3%, reflecting higher average bill rates related to increased pricing and mix.
Revenue decreased$4.0 million , or 19.4%, to$16.5 million for the three months endedSeptember 30, 2020 , compared to$20.4 million for the three months endedSeptember 30, 2019 , primarily due to reduced demand from our customers in the physician specialties as a result of the nationwide reduction in elective procedures, partly offset by growth in the advanced practice specialties. Contribution income was$0.8 million for the three months endedSeptember 30, 2020 , consistent with the three months endedSeptember 30, 2019 . As a percentage of segment revenue, contribution income was 5.0% for the three months ended 32 --------------------------------------------------------------------------------
Total days filled for the three months endedSeptember 30, 2020 were 9,682 as compared with 11,675 in the prior year. Revenue per day filled was$1,699 as compared with$1,748 in the prior year.
Search
Revenue decreased$1.5 million , or 40.5%, to$2.3 million for the three months endedSeptember 30, 2020 , compared to$3.8 million for the three months endedSeptember 30, 2019 , due to declines in executive search and physician search revenue as a result of the COVID-19 pandemic.
Contribution loss was
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$12.5 million for the three months endedSeptember 30, 2020 , from$11.0 million for the three months endedSeptember 30, 2019 , due to an increase in legal fees and IT expenses, as well as additional compensation expense related to the short-term incentive plan. As a percentage of consolidated revenue, corporate overhead was 6.4% for the three months endedSeptember 30, 2020 and 5.2% for the three months endedSeptember 30, 2019 .
Segment Comparison - Nine Months Ended
Nurse and
Revenue increased$20.2 million , or 3.7%, to$561.6 million for the nine months endedSeptember 30, 2020 , compared to$541.4 million for the nine months endedSeptember 30, 2019 , primarily driven by higher bill-rate COVID-19 related assignments worked by travelers, partly offset by volume declines in other specialties. Volume for the nine months endedSeptember 30, 2020 was negatively impacted due to suspended services resulting from school closures as well as a decrease in census at our clients which resulted in lower demand for non-COVID-19 related assignments. Contribution income increased$6.5 million or 14.0%, to$53.0 million for the nine months endedSeptember 30, 2020 , compared to$46.5 million for the nine months endedSeptember 30, 2019 . As a percentage of segment revenue, contribution income margin was 9.4% for the nine months endedSeptember 30, 2020 , compared to 8.6% for the nine months endedSeptember 30, 2019 .
The average number of FTEs on contract during the nine months ended
Revenue decreased$3.1 million , or 5.7%, to$51.5 million for the nine months endedSeptember 30, 2020 , compared to$54.6 million for the nine months endedSeptember 30, 2019 , primarily due to a reduction of volume related to reduced demand as a result of the nationwide reduction in elective procedures, partially offset by higher bill rates due to mix of business. Contribution income increased$1.0 million , or 55.3% to$2.7 million for the nine months endedSeptember 30, 2020 , compared to$1.7 million for the nine months endedSeptember 30, 2019 . As a percentage of segment revenue, contribution income was 5.2% for the nine months endedSeptember 30, 2020 , compared to 3.2% for the nine months endedSeptember 30, 2019 , driven by lower selling, general and administrative expenses. Total days filled for the nine months endedSeptember 30, 2020 were 29,077 as compared with 32,709 in the prior year. Revenue per day filled was$1,771 as compared with$1,669 in the prior year. 33 --------------------------------------------------------------------------------
Search
Revenue decreased$3.4 million , or 30.6%, to$7.7 million for the nine months endedSeptember 30, 2020 , compared to$11.1 million for the nine months endedSeptember 30, 2019 , due to declines in executive search and physician search revenue as a result of the COVID-19 pandemic, partially offset by an increase in RPO revenue.
Contribution loss was
Corporate Overhead
Corporate overhead increased to$37.0 million for the nine months endedSeptember 30, 2020 , from$34.7 million for the nine months endedSeptember 30, 2019 , primarily due to higher IT expenses, legal expenses, additional compensation expense related to the short-term incentive plan, and higher equity compensation expense as a result of the acceleration of vesting of restricted stock awards related to directors who either retired or became retirement eligible, partially offset by lower consulting expense. As a percentage of consolidated revenue, corporate overhead was 6.0% for the nine months endedSeptember 30, 2020 and 5.7% for the nine months endedSeptember 30, 2019 .
Transactions with Related Parties
See Note 14 - Related Party Transactions to our condensed consolidated financial statements.
Liquidity and Capital Resources
AtSeptember 30, 2020 , we had$3.4 million in cash and cash equivalents and$56.0 million of borrowings drawn under our ABL. Working capital decreased by$12.1 million to$85.8 million as ofSeptember 30, 2020 , compared to$97.9 as ofDecember 31, 2019 . As ofSeptember 30, 2020 , our days' sales outstanding, net of amounts owed to subcontractors, increased 6 days to 64 days as ofSeptember 30, 2020 , compared to 58 days as ofDecember 31, 2019 , primarily due to a decrease in revenue. 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, including our commitments as described in the Commitments table in our Form 10-K for the year endedDecember 31, 2019 . Although there is uncertainty related to the anticipated impact of COVID-19 on our future results, 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. Net cash provided by operating activities was$25.3 million in the nine months endedSeptember 30, 2020 , compared to$10.9 million in the nine months endedSeptember 30, 2019 , primarily due to stronger collections and the timing of disbursements. Net cash used in investing activities was$3.7 million in the nine months endedSeptember 30, 2020 , compared to$2.0 million in the nine months endedSeptember 30, 2019 . Net cash used in both periods was for capital expenditures, primarily related to the project to replace our applicant tracking system. Net cash used in financing activities during the nine months endedSeptember 30, 2020 was$19.2 million , compared to$15.4 million during the nine months endedSeptember 30, 2019 . During the nine months endedSeptember 30, 2020 , we used cash to repay borrowing on our ABL of$14.9 million ,$2.4 million to pay our note payable, and$1.9 million for other financing activities. During the nine months endedSeptember 30, 2019 , we used cash to make optional principal prepayments on our term loan of$12.5 million and paid$2.9 million for other financing activities. Debt 2019 ABL Credit Agreement OnJune 30, 2020 , we amended the Loan Agreement, 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 remain the same. AtSeptember 30, 2020 , availability under the ABL was$110.2 million and we had$56.0 million of borrowings drawn, as well as$19.5 million of letters of credit outstanding, leaving$34.7 million available for borrowing. 34 -------------------------------------------------------------------------------- As ofSeptember 30, 2020 , the interest rate spreads and fees under the Loan Agreement were based on LIBOR plus 2.00% for the revolving portion of the borrowing base and LIBOR plus 4.00% on the Supplemental Availability. The Base Rate (as defined by the Loan Agreement) margins would have been 1.00% and 3.00%, respectively, 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 applicable to the Company and its subsidiaries, including a covenant to maintain a minimum fixed charge coverage ratio. We were in compliance with the fixed charge coverage ratio covenant as ofSeptember 30, 2020 . Stockholders' Equity
See Note 10 - Stockholders' Equity to our condensed consolidated financial statements.
Commitments and Off-Balance Sheet Arrangements
As ofSeptember 30, 2020 , we do not have any off-balance sheet arrangements. Our commitments over the next five years did not change materially fromDecember 31, 2019 . See Note 12 - Contingencies to our condensed consolidated financial statements. Critical Accounting Policies and Estimates Our critical accounting policies and estimates remain consistent with those reported in our Annual Report on Form 10-K for the year endedDecember 31, 2019 , filed with theSEC , other than the adoption of ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326), Measurement of Credit Losses on Financial Instruments as discussed in Note 2 - Summary of Significant Accounting Policies and Note 3 - Customer Contracts to our condensed consolidated financial statements.
Recent Accounting Pronouncements
See Note 15 - Recent Accounting Pronouncements to our condensed consolidated financial statements.
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