Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Item 1. Business, Item 1A. Risk Factors, Forward-Looking Statements, and Item 15. Consolidated Financial Statements and the accompanying notes and other data, all of which appear elsewhere in this Annual Report on Form 10-K.
Management's Discussion and Analysis (MD&A) below generally discusses 2025 and 2024 and provides year-to-year comparisons between 2025 and 2024. Discussions of 2023 and year-to-year comparisons between 2024 and 2023 that are not included in this Form 10-K can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2024 filed with the SEC on March 5, 2025 and such information is incorporated herein by reference.
Business Overview
We provide total talent management services, including strategic workforce solutions, contingent staffing, permanent placement, and consultative services for healthcare customers across the continuum of care, by recruiting and placing highly qualified healthcare professionals in virtually every specialty and area of expertise. In addition to clinical roles such as school nurses, speech language, and behavioral therapists, we place non-clinical professionals such as teachers, substitute teachers, and other education specialties at educational facilities across the nation. Our diverse customer base includes both public and private acute care and non-acute care hospitals, outpatient clinics, ambulatory care facilities, single and multi-specialty physician practices, rehabilitation facilities, PACE programs, urgent care centers, local and national healthcare systems, managed care providers, public and charter schools, correctional facilities, government facilities, pharmacies, and many other healthcare providers. Through our national staffing teams, we offer our workforce solutions and place clinicians on travel and per diem assignments, local short-term contracts, and permanent positions. In addition, we continually evaluate opportunities to acquire companies that would complement or enhance our business, like Workforce Solutions Group, Inc. (WSG) and Mint Medical Physician Staffing, LP and Lotus Medical Staffing LLC (collectively, Mint).
Our workforce solutions include MSPs, VMS, caregiver services to PACE programs (home-based staffing), education health services, RPO, project management, and other outsourcing and consultative services as described in Item 1. Business in this Annual Report on Form 10-K. By utilizing the solutions that we offer, customers are able to better plan their personnel needs,
optimize their talent acquisition and management processes, strategically flex and balance their workforce, have access to quality healthcare personnel, and provide continuity of care for improved patient outcomes.
The Company's two reportable segments, Nurse and Allied Staffing and Physician Staffing, represented approximately 82% and 18%, respectively, of total revenue for the year ended December 31, 2025. See further discussion of these segments in Item 1. Business in this Annual Report on Form 10-K.
Summary of Operations and Recent Updates
For the year ended December 31, 2025 , consolidated revenue decreased 21.6% year-over-year to $1.1 billion , primarily due to volume declines in the Nurse and Allied Staffing and Physician Staffing segments. These declines were partly offset by continued growth in home-based staffing, which was up 28.0% over the prior year. Ne t loss attributable to common stockholders for the year ended December 31, 2025 was $94.9 million, as compared to net loss of $14.6 million for the year ended December 31, 2024.
During the fourth quarter of 2025, the Company recorded a non-cash goodwill impairment charge of $77.9 million related to its Nurse and Allied and Physician Staffing segments. The impairment assessment and related charge was primarily triggered by the fourth quarter decline in the Company's equity market capitalization.
As a result of the cumulative losses, primarily triggered by the significant impairment charge, the Company recorded an additional valuation allowance of $29.6 million in the fourth quarter of 2025 on its deferred tax assets.
During the fourth quarter of 2025, the Company recorded executive transition severance costs of $6.0 million related to the former Chief Executive Officer's separation from the Company in December 2025. The costs include $3.1 million of equity compensation, pursuant to the former Chief Executive Officer’s employment agreement and the corresponding general release executed on December 31, 2025.
For the year ended December 31, 2025 , cash and cash equivalents totaled $108.7 million . D uring the fourth quarter, the Company repurchased 803,175 shares under its authorized Repurchase Program. T he Company also entered into a new Rule 10b5-1 Repurchase Plan to allow for share repurchases during the Company's blackout periods, beginning on December 16, 2025 and effective through November 4, 2026. Cash flow provided by operating activities for the year ended December 31, 2025 was $48.3 million . As of December 31, 2025 , there were no borrowings drawn under the ABL, and borrowing base availability under the ABL was $114.6 million , with $96.3 million of availability net of $18.3 million of letters of credit. See Note 8 - Debt to our consolidated financial statements.
As previously disclosed, on December 3, 2024, the Company entered into a Merger Agreement with Aya Healthcare, Inc. After market close on December 3, 2025, the Company received a notice of termination of the Aya Merger Agreement, effective December 4, 2025. In accordance with the terms of the Aya Merger Agreement, a termination fee of $20.0 million was paid to the Company. This was netted against associated fees paid by the Company and is included in acquisition and integration-related costs in the consolidated statement of operations and comprehensive (loss) income.
During the years ended December 31, 2025 and 2024, the Company incurred $16.6 million and $4.2 million, respectively, in gross fees associated with the Aya Merger, which is included in acquisition and integration-related costs in the consolidated statement of operations and comprehensive (loss) income. The net cash operating inflow associated with the Aya Merger was $5.8 million for the year ended December 31, 2025.
See Results of Operations, Segment Results, and Liquidity and Capital Resources sections that follow for further information.
Operating Metrics
We evaluate the Company's financial condition by tracking operating metrics and financial results specific to each segment. Key operating metrics include hours worked, days filled, number of contract personnel on an FTE basis, revenue per FTE, and revenue per day filled. Other operating metrics include number of open orders, candidate applications, contract bookings, length of assignment, bill and pay rates, renewal and fill rates, number of active searches, and number of placements. These operating metrics are representative of trends that assist management in evaluating business performance. Due to the timing of our business process and other factors, certain of these operating metrics may not necessarily correlate to the reported U.S. GAAP (as defined below) results for the periods presented. Some of the segment financial results analyzed include revenue, operating expenses, and contribution income. In addition, we monitor cash flow, as well as operating and leverage ratios, to help us assess our liquidity needs.
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, 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.
Results of Operations
The following table summarizes, for the periods indicated, selected consolidated statements of operations and comprehensive (loss) income data expressed as a percentage of revenue. Our historical results of operations are not necessarily indicative of future operating results.
Year Ended December 31,
Revenue from services
Direct operating expenses
Selling, general and administrative expenses
Credit loss (credit) expense
Depreciation and amortization
Acquisition and integration-related (income) costs
Restructuring costs
Legal and other losses
Impairment charges
Loss from operations
Interest expense
Interest income
Other expense (income), net
Loss before income taxes
Income tax expense (benefit)
Net loss attributable to common stockholders
Comparison of Results for the Year Ended December 31, 2025 and the Year Ended December 31, 2024
Year Ended December 31,
Increase (Decrease)
Increase (Decrease)
(Amounts in thousands)
Revenue from services
Direct operating expenses
Selling, general and administrative expenses
Credit loss (credit) expense
Depreciation and amortization
Acquisition and integration-related (income) costs
Restructuring costs
Legal and other losses
Impairment charges
Loss from operations
Interest expense
Interest income
Other expense (income), net
Loss before income taxes
Income tax expense (benefit)
Net loss attributable to common stockholders
NM - Not meaningful
Revenue from services
Revenue from services decreased $0.2 billion, or 21.6%, to $1.1 billion for the year ended December 31, 2025, as compared to $1.3 billion for the year ended December 31, 2024, primarily due to volume declines in the Nurse and Allied Staffing and Physician Staffing segments. See further discussion in Segment Results.
Direct operating expenses
Direct operating expenses consist primarily of field employee compensation and independent contractor expenses, housing expenses, travel expenses, and related insurance expenses. Direct operating expenses decreased $0.3 billion, or 21.4%, to $0.8 billion for the year ended December 31, 2025, as compared to $1.1 billion for the year ended December 31, 2024, as a result of revenue decreas es. As a percentage of total revenue, direct operating expenses were relatively flat at 79.7%, as compared to 79.6% in the prior year.
Selling, general and administrative expenses
Selling, general and administrative expenses decreased $32.7 million, or 14.0%, to $200.7 million for the year ended December 31, 2025, as compared to $233.4 million for the year ended December 31, 2024, primarily due to decreases in compensation and benefit expense as a result of lower headcount, as well as marketing and consulting expense, partially offset by an increase in severance costs related to the CEO transition. As a percentage of total revenue, selling, general and administrative expenses increased to 19.0% for the year ended December 31, 2025, as compared to 17.4% for the year ended December 31, 2024 .
Credit loss (credit) expense
Credit loss credit for the year ended December 31, 2025 was $0.4 million, due to collection of aged receivables, as compared to credit loss expense of $21.4 million for the year ended December 31, 2024, driven by a bankruptcy filing by a single MSP customer. There was no significant impact on operations from this MSP client as the majority of the business had been wound down in the prior year. As a percentage of revenue, credit loss credit was 0.0% for the year ended December 31, 2025 and credit loss expense was 1.6% for the year ended December 31, 2024. See Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements.
Depreciation and amortization expense
Depreciation and amortization expense for the year ended December 31, 2025 was $16.8 million as compared to $18.2 million for the year ended December 31, 2024. As a percentage of revenue, depreciation and amortization expense was relatively flat at 1.6% for the year ended December 31, 2025 and 1.4% for the year ended December 31, 2024.
Acquisition and integration-related (income) costs
Acquisition and integration-related income for the year ended December 31, 2025 includes a termination fee of $20.0 million received from Parent during the fourth quarter of 2025, in accordance with the terms of the Aya Merger Agreement, partially offset by associated fees of $16.6 million paid throughout the year. Acquisition and integration-related costs of $4.2 million for the year ended December 31, 2024 related primarily to fees associated with the Aya Merger. See Note 1 - Organization and Basis of Presentation to our consolidated financial statements.
Restructuring costs
Restructuring costs of $3.7 million for the year ended December 31, 2025 were primarily comprised of employee termination costs. Restructuring costs of $4.3 million for the year ended December 31, 2024 were primarily comprised of employee termination costs, ongoing lease exit costs, and software license costs. See Note 2 - Summary of Significant Accounting Policies to our consolidated financial statements.
Legal and other losses
During the year ended December 31, 2025, the Company recorded $2.7 million in legal fees and settlement charges related to various cases and claims. During the year ended December 31, 2024, the Company recorded legal and other losses of $6.7 million, which included the settlement of a class action lawsuit, as well as costs related to an unrecoverable asset.
Impairment charges
Non-cash impairment charges totaled $77.9 million for the year ended December 31, 2025 and included goodwill impairment charges relate d to the Nurse and Allied and Physician Staffing segments, primarily triggered by the fourth quarter decline in the Company's equity market capitalization and the write-off of indefinite-lived trade names related to Medical Staffing Network, as part of our rebranding activities. Non-cash impairment charges totaled $2.9 million for the year ended December 31, 2024, related primarily to real estate restructuring activities. See Note 5 - Goodwill, Trade Names, and Other Intangible Assets and Note 9 - Leases to our consolidated financial statements.
Interest income
Interest income of $3.1 million for the year ended December 31, 2025 related t o higher average cash on hand deposited in interest bearing accounts during the year. Interest income of $2.1 million for the year ended December 31, 2024 related to higher average cash on hand with slightly higher available interest rates during the year.
Other expense (income), net
For the year ended December 31, 2024, other expense (income), net included a decrease of the remaining earnout liability related to the Mint acquisition. There were no such adjustments for the year ended December 31, 2025.
I ncome tax expense (benefit)
Income tax expense totaled $11.3 million for the year ended December 31, 2025, as compared to income tax benefit of $1.8 million for the year ended December 31, 2024. The effective tax rate was (13.6)% and 11.2%, including the impact of discrete items, for the years ended December 31, 2025 and 2024, respectively. The effective tax rate and income tax expense in 2025 were predominantly impacted by the additional valuation allowance on deferred tax assets. The effective tax rate and the income tax benefit in 2024 were impacted by federal, international, and state taxes.
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)
Revenues from services:
Nurse and Allied Staffing
Physician Staffing
Contribution income:
Nurse and Allied Staffing
Physician Staffing
Corporate overhead
Depreciation and amortization
Restructuring costs
Legal and other losses
Impairment charges
Acquisition and integration-related (income) costs
Loss from operations
See Note 17 - Segment Data to our consolidated financial statements.
Certain statistical data for our business segments for the periods indicated are as follows:
Year Ended December 31,
Percent
Change
Change
Nurse and Allied Staffing statistical data:
FTEs
Average Nurse and Allied Staffing revenue per FTE per day
Physician Staffing statistical data:
Days filled
Revenue per day filled
See definition of Business Measurements under the Operating Metrics section of the MD&A.
Segment Comparison - Year Ended December 31, 2025 and Year Ended December 31, 2024
Nurse and Allied Staffing
Revenue decreased $282.6 million, or 24.7%, to $862.8 million for the year ended December 31, 2025, as compared to $1.1 billion for the year ended December 31, 2024, driven primarily by a decline in billable hours in travel and local, partly offset by year-over-year revenue growth of 28.0% in home-based staffing.
Contribution income for the year ended December 31, 2025 decreased $14.7 million, or 20.2%, to $57.9 million, as compared to $72.6 million for the year ended December 31, 2024. As a percentage of segment revenue, contribution income margin increased to 6.7% for the year ended December 31, 2025, as compared to 6.3% for the year ended December 31, 2024.
The average number of FTEs on contract during the year ended December 31, 2025 decreased 17.3% from the year ended December 31, 2024, primarily due to declines in headcount . The average revenue per FTE per day decreased 8.5%.
Physician Staffing
Revenue decreased $7.1 million, or 3.6%, to $191.5 million for the year ended December 31, 2025, as compared to $198.6 million for the year ended December 31, 2024, primarily due to volume declines in certain specialties partially offset by a slight increase in revenue per day filled.
Contribution income for the year ended December 31, 2025 increased $0.9 million, or 5.8%, to $16.2 million, as compared to $15.3 million for the year ended December 31, 2024. As a percentage of segment revenue, contribution income was 8.5% for the year ended December 31, 2025 and 7.7% for the year ended December 31, 2024.
Total days filled decreased 14.0% to 84,213 for the year ended December 31, 2025, as compared to 97,888 for the year ended December 31, 2024. Revenue per day filled was $2,274 for the year ended December 31, 2025 and $2,029 for the year ended December 31, 2024, due to price increase s.
Corporate overhead
Corporate overhead includes unallocated executive leadership and other centralized corporate functional support costs such as finance, IT, legal, and human resources, as well as public company expenses and corporate-wide projects. Corporate overhead decreased to $60.8 million for the year ended December 31, 2025, from $68.5 million for the year ended December 31, 2024, primarily due to decreases in compensation and benefit expense, software and hardware expense, and professional fees, partially offset by an increase of $6.0 million in severance costs related to the CEO transition. As a percentage of consolidated revenue, corporate overhead was 5.8% for the year ended December 31, 2025 and 5.1% for the year ended December 31, 2024.
Liquidity and Capital Resources
At December 31, 2025, we reported $108.7 million in cash and cash equivalents, which is adequate to meet our short-term and long-term operations, with no borrowings drawn under the ABL. Working capital increased by $1.2 million to $215.8 million as of December 31, 2025, as compared to $214.6 million as of December 31, 2024. As of December 31, 2025, our days' sales outstandin g, net of amounts owed to subcontractors, was 58 days, up 3 days year-over-year. As of December 31, 2025, we did not have any off-balance sheet arrangements.
Operating cash flow constitutes our primary source of liquidity and, historically, has been sufficient to fund working capital, capital expenditures, internal business expansion, and debt service. This includes commitments, both short-term and long-term, of interest expense on our debt and operating lease commitments, and future principal payments on the ABL. 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.
In the third quarter of 2022, the Board of Directors authorized the Repurchase Program, whereby we could repurchase up to $100.0 million shares of our common stock. Upon completion of the authorized number of shares available for repurchase under the previous repurchase program, we commenced repurchases under the Repurchase Program during the third quarter of 2022. On May 1, 2023, the Board of Directors authorized approximately $59.0 million in additional share repurchases to be added to the Repurchase Program, such that, effective for trades made after May 3, 2023, the aggregate amount available for stock repurchases was set at $100.0 million. In the third quarter of 2023, we entered into a Rule 10b5-1 Repurchase Plan to allow for share repurchases during the Company's blackout periods, beginning on January 2, 2024 and effective through
November 7, 2024. In the fourth quarter of 2025, we entered into a new Rule 10b5-1 Repurchase Plan to allow for share repurchases during the Company's blackout periods, beginning on December 16, 2025 and effective through November 4, 2026. During the year ended December 31, 2025, we repurchased and retired a total of 803,175 shares of common stock for $6.5 million, at an average price of $8.10 per share. During the year ended December 31, 2024 , we repurchased and retired a total of 2,401,924 shares of common stock for $36.8 million, at an average price of $15.31 per share. As of December 31, 2025 , we had $34.0 million remaining for share repurchase under the Repurchase Program, subject to certain conditions in the Loan Agreement (as defined below).
Cash Flow Comparisons
Year Ended December 31, 2025 Compared to Year Ended December 31, 2024
Net cash provided by operating activities decreased $71.8 million to $48.3 million for the year ended December 31, 2025, as compared to $120.1 million for the year ended December 31, 2024. The Company recorded the Aya termination fee of $20.0 million within operating cash flows for the year December 31, 2025. The fee was partially offset by operating cash outflows for acquisition-related costs. The net cash operating inflows associated with the Aya merger were $5.8 million for the year ended December 31, 2025.
Net cash used in investing activities for the year ended December 31, 2025 was $8.2 million, as compared to $8.7 million for the year ended December 31, 2024, primarily for capital expenditures related to IT projects in both years .
Net cash used in financing activities during the year ended December 31, 2025 was $13.0 million, as compared to $46.8 million during the year ended December 31, 2024. During the year ended December 31, 2025, we used cash to pay $1.8 million for income taxes on share-based compensation, $6.8 million for share repurchases, and $4.4 million for contingent consideration. During the year ended December 31, 2024, we used cash to pay $2.9 million for income taxes on share-based compensation, $37.3 million for share repurchases and related excise tax, and $6.6 million for contingent consideration.
Debt
2021 Term Loan Agreement
On June 8, 2021, we entered into the Term Loan Credit Agreement (Term Loan Agreement), which provided for a six-year second lien subordinated term loan in the amount of $100.0 million (term loan). 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. On April 14, 2023, we amended the Term Loan Agreement (Term Loan Second Amendment), which 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 the Base Rate (as defined in the Term Loan Agreement), at the election of the borrowers, plus an applicable margin. With respect to any SOFR loan, the rate per annum was equal to the Term SOFR (as defined in the Term Loan Second Amendment) for the interest period plus an adjustment of 10 basis points due to the credit spread associated with the transition to SOFR.
As more fully described in Note 8 - Debt to our consolidated financial statements, on June 30, 2023, we repaid all outstanding obligations under the term loan, and terminated the Term Loan Agreement. As a result, debt issuance costs of $1.7 million were written off in the second quarter of 2023 and are included as loss on early extinguishment of debt in the consolidated statements of operations and comprehensive (loss) income. All subsidiary guarantees of the term loan were automatically released upon the termination of the Term Loan Agreement.
2019 Asset-Based Loan Agreement
Effective October 25, 2019, the prior senior credit facility entered into in August 2017 was replaced by a $120.0 million asset-based loan agreement (Loan Agreement), which provided 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 permitted 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. On March 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 (as defined in the Loan Agreement), at the election of the borrowers, plus an applicable margin. On September 29, 2023, we amended the Loan Agreement (Sixth Amendment), which changed the minimum fixed charge coverage ratio from a maintenance covenant to a springing covenant based on excess availability. On July 29, 2024, we amended the Loan Agreement (Seventh Amendment), which allows for all share repurchases paid in cash prior to June 30, 2024 and thereafter to be excluded as restricted payments in the fixed charge coverage ratio calculation if there is no revolving ABL balance.
As of December 31, 2025, the interest rate spreads and fees under the ABL were based on SOFR plus 2.10% for the revolving portion of the borrowing base. The Base Rate margin would have been 1.00% for the revolving portion. The SOFR and Base Rate margins are subject to monthly 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 line fee, letter of credit fees, and an administrative fee. Borrowing base availability under the ABL was $114.6 million as of December 31, 2025, with no borrowings drawn and $96.3 million of availability net of $18.3 million of letters of credit outstanding . For the three months ended December 31, 2025, the excess availability did not fall below the stated threshold and, as a result, there was no covenant compliance period.
See Note 8 - Debt 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 (U.S. GAAP) 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. These estimates and judgments may also be impacted by the 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. 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, 2025. See Note 2 - Summary of Significant Accounting Policies 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, but come with certain risks and uncertainties, including but not limited to: projections of future income and cash flows, market demand, inflationary pressures, long-term growth rates, the identification of appropriate market multiples, royalty rates, and the choice of an appropriate discount rate. 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. Contract assets and contract liabilities acquired in a business combination are recognized in accordance with Revenue from Contracts with Customers Topic 606. Related revenue contracts with customers are accounted for as if we had originated the contracts. The acquired contract assets and contract liabilities are recognized and measured consistent with how they were recognized and measured in the acquiree's financial statements. 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 2025, 2024, and 2023 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 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.
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, 2025 and 2024, we had $3.0 million and $4.8 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, 2025 and 2024, we had $12.0 million and $12.8 million accrued for case reserves and for incurred but not reported workers’ compensation , 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 semi-annually. As of December 31, 2025, and 2024, we had $8.6 million and $7.1 million accrued, respectively, for case reserves and for incurred but not reported professional liability , net of insurance receivables. The accrual for professional liability is based on actuarial models which are prepared by an independent actuary semi-annually.
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 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, 2025 and December 31, 2024, our estimate of amounts that had been worked but had not been billed totaled $48.3 million and $60.4 million , respectively, and are included in accounts receivable in the consolidated balance sheets.
Other Services Revenue
We offer other 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, 2025, 2024, and 2023. 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 credit losses for estimated losses resulting from the inability of our customers to make required payments, which results in a provision for credit loss expense. We determine the adequacy of this allowance based on historical write-off experience, current conditions, an analysis of the aging of outstanding receivables 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 consider current expectations of future economic conditions when estimating our allowance for credit losses. 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, 2025 and 2024, our total allowances were $9.1 million and $9.3 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 customers 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 12 - Contingencies.
Income taxes
Deferred tax assets and liabilities are recognized for 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. As of December 31, 2025, we had deferred tax assets related to federal and certain state net operating loss carryforwards of $9.5 million. The federal and certain
state net operating loss carryforwards have an indefinite carryover. Except for those state net operating loss carryforwards with an indefinite carryover, the carryforwards will expire between 2027 and 2045.
We maintain valuation allowances when it is more likely than not that all or a portion of a deferred tax asset will not be realized. In determining whether a valuation allowance is warranted, we evaluate factors such as prior earnings history, expected future earnings, carryback and carryforward periods, and tax strategies. We consider all positive and negative evidence to estimate if sufficient future taxable income will be generated to realize the deferred tax asset. We consider losses in recent years as well as the impact of one-time events in assessing our pre-tax earnings. Assumptions regarding future taxable income required significant judgment. Our assumptions are consistent with estimates and plans used to manage our business, which include restructuring and other initiatives. In the event actual results differ from these estimates, or we adjust these estimates in future periods for current trends or changes in our estimating assumptions, we may modify the level of valuation allowance which could materially impact our business, financial condition, and results of operations.
As of December 31, 2025 and 2024 , we had $29.7 million and $0.2 million of valuation allowances on our deferred tax assets, respectively. As of December 31, 2025, management assessed the available positive and negative evidence to estimate whether sufficient future taxable income will be generated to permit use of its existing deferred tax assets. On the basis of this evaluation, additional nonrecurring and recurring valuation allowances of $29.5 million were recorded in the fourth quarter of 2025 as income tax expense to reduce the portion of the deferred tax assets that are not more likely than not to be realized. The Company intends to maintain a valuation allowance until sufficient positive evidence exists to support its removal. The December 31, 2025 valuation allowance applied to all domestic deferred tax assets other than certain deferred tax assets expected to be realized. The December 31, 2024 valuation allowance applied to the uncertainty of the realization of certain state net operating losses. See Note 13 - Income Taxes to our consolidated financial statements.
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 years ended December 31, 2025 and 2024, the unrecognized tax benefit is included in uncertain tax positions - non-current in the consolidated balance sheets. As of December 31, 2025, total unrecognized tax benefits recorded was $10.4 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.
Effective January 1, 2024, many jurisdictions implemented the Pillar Two rules issued by the Organization for Economic Co-operation and Development. In general, large multinational entity groups with consolidated revenue in excess of 750 EUR in at least two of the preceding four years could be subject to the new rules in jurisdictions with an effective tax rate below fifteen percent. We currently operate in only one country that adopted the Pillar Two rules, but should meet the safe harbor rules. We do not expect the adoption of the Pillar Two rules by any jurisdiction in which we currently operate to have a material impact on our financial statements.
On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (the Act) into legislation, which among other changes, restored the full expensing of domestic research and experimental expenditures (R&E) in the year incurred. Further, the Act provides taxpayers the option to immediately deduct unamortized domestic R&E expenditures incurred in taxable years 2022 through 2024 over a one- or two-year period. We are not aware of any provision in the Act that would have a material adverse impact on our financial performance, the Balance Sheet, Income Statement and the Statement of Cash Flows.
Tax years 2012 through 2025 remain open to examination by certain taxing jurisdictions.
Seasonality
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.
