Cross Country Healthcare (CCRN), a provider of talent management and other services to the healthcare industry, is blaming a ten year old acquisition and the pandemic for overstating sales five consecutive years between 2020-24.

In its latest quarterly filing, Cross Country revealed it just discovered its 2014 acquisition of Medical Staffing Network Healthcare resulted in errors pertaining to:

“...an elimination entry that was improperly recorded, which resulted in the overstatement of revenue and the understatement of subcontractor liabilities.”

Cross Country says the misstatements were primarily related to fiscal years 2020-22, a period in which the company’s business accelerated due to the pandemic.

Though immaterial in any given year management’s eyes, correcting the error cumulatively in the third quarter of 2024 is material so Cross Country restated what it calls “relevant periods”.

The company included a revised balance sheet and stockholder equity statement for 2022 and 2023 and an income statement for 2022, revealing it had:

—Overstated revenue $3.2 million, or 0.1% in 2022
—Overstated net income $2.4 million, or 1.2% in 2022

Had the revenue correction been made to the Q3 2024 results, it would have accounted for 1% of Cross Country’s sales.

Though errors for other reporting periods will be corrected in future filings, note the language Cross Country uses to describe the latest misstatements:

“...the impact of the error was inconsequential in 2023 and 2024.”

Notably, cash bonuses for Cross Country’s executives are based on Annual Revenue and Adjusted EBITDA targets, both of which were inflated due to the errors.

Equity awards are granted based on Cross Country’s share price, which certainly wasn’t harmed by overstating sales.

The company’s two CEOs during the misstated periods were awarded more than $12.6 million in cash bonuses and equity.

Lastly, Cross Country's CFO says the company’s disclosure controls and procedures are effective.