AMN Healthcare Services, Inc. (AMN) Q4 2022 Earnings Call Transcript

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AMN Healthcare Services, Inc. (NYSE:AMN) Q4 2022 Earnings Conference Call February 16, 2023 5:00 PM ET

Company Participants

Randle Reece - Senior Director, Investor Relations

Cary Grace - Chief Executive Officer

Jeff Knudson - Chief Financial Officer

Kelly Rakowski - Group President and COO of Strategic Talent Solutions

Landry Seedig - Group President and COO of Nursing and Allied Solutions

James Taylor - President and Chief Operating Officer of Physician and Leadership Solutions

Conference Call Participants

Kevin Fischbeck - Bank of America

A.J. Rice - Credit Suisse

Tobey Sommer - Truist

Tim Mulrooney - William Blair

Mark Marcon - Robert W. Baird

Brian Taji Phillips - Jefferies


Good day, and invited to AMN Healthcare Fourth Quarter 2022 Earnings Call. At this each participants are successful a listen-only mode. After nan speaker position location will beryllium a mobility and reply session. [Operator Instructions]. Please beryllium proposal that today's convention is being recording.

I would now for illustration to manus nan telephone complete to your speaker Mr. Randle Reece, Senior Director of Investor Relations. Please spell up sir.

Randle Reece

Good afternoon, everyone. Welcome to AMN Healthcare’s 4th fourth and afloat twelvemonth 2022 net call. A replay of this webcast will beryllium disposable astatine pursuing nan conclusion of this call.

Various remarks we make during this telephone astir early expectations, projections, trends, plans, events aliases circumstances represent forward-looking statements. These statements bespeak nan company’s existent beliefs based upon accusation presently disposable to it.

Our existent results whitethorn disagree materially from those indicated by these forward-looking statements, because of various factors and cautionary statements, including those identified successful our astir precocious revenge forms 10-K and 10-Q, our net merchandise and consequent filings pinch nan SEC. The institution does not intend to update guidance aliases immoderate forward-looking statements provided coming anterior to its adjacent net release.

This telephone contains definite non-GAAP financial information. Information regarding and reconciliations of these non-GAAP measures to nan astir straight comparable GAAP measures are included successful our net merchandise and connected our financial reports page astatine

On nan telephone coming are Cary Grace. Chief Executive Officer, Jeff Knudson, Chief Financial Officer; Kelly Rakowski, Group President and COO of Strategic Talent Solutions; and Landry Seedig, Group President and COO of Nursing and Allied Solutions. James Taylor, President and Chief Operating Officer of Physician and Leadership Solutions, successful unavailable today.

I will now move nan telephone complete to Cary.

Cary Grace

Thank you, Randle, and invited everyone. I want to statesman by expressing my gratitude for nan lukewarm invited I person received by nan AMN team, our committee of directors, investors and analysts and our clients since my clip arsenic CEO began successful precocious November. The past fewer months person much than confirmed each nan reasons why I joined AMN.

AMN stands astatine nan nexus of healthcare and talent, wherever we make an progressively valuable quality successful nan value and timeliness of care. My acquisition moving ample customer centered work transportation businesses that harvester integrated maturation and acquisitions positions maine good to thief guideline AMN done its adjacent shape of growth.

And though everybody says they person a awesome institution culture, AMN genuinely has thing special. Our full activity squad is committed to unrecorded successful nan AMN quality each day, and making judge we create awesome semipermanent opportunities for everyone successful our organization.

I'm particularly grateful to study bully news successful my first AMN convention telephone pinch outstanding 4th fourth results, and a beardown first 4th outlook. Thank you to our healthcare professionals and squad members for making a valuable effect for our clients successful 2022, pinch much than 250,000 placements arsenic our state managed done nan pandemic.

I americium proud of really we are partnering pinch clients to optimize their labour costs, reducing measure rates arsenic nan urgency of request moderated and investing successful tech-enabled solutions to thief our clients toggle shape attraction transportation models and negociate their workforces complete nan long-term. We stay nan preferred partner for healthcare clients pinch our MSP and BMS programs managing much than $12 cardinal of labour spent successful 2022.

AMN is simply a preferred employer for healthcare professionals and firm squad members, arsenic demonstrated by respective caller accolades we received, including nan Diversity Equity and Inclusion grant from nan National Association of Corporate Directors and being named to nan Bloomberg Gender Equality Index for our committedness to gender equality and equity for a sixth twelvemonth successful a row.

Over nan past year, arsenic we managed done highly precocious demand, we were looking ahead, anticipating a moderation pinch nan upwind down of nan pandemic, our businesses exceeded nan expectations we laid retired a twelvemonth ago.

Our precocious level of capacity is evident successful our latest financial results and outlook for nan existent quarter. Fourth 4th gross was $1.13 cardinal pinch adjusted EBITDA of $175 million. Every business conception exceeded guidance and what continues to beryllium a accelerated changing market.

Nurse and Allied conception gross was up of anticipation since nan 4th quarter, astir level pinch nan 3rd 4th contempt little labour disruption revenue. The moderation of measure rates was somewhat little than we had anticipated, pinch a conception mean measure complaint coming successful 23% little than nan first 4th peak.

As expected measurement successful recreation caregiver was higher than nan 3rd 4th offset by nan little mean measure rate. Demand for recreation nursing remains supra 2019 levels, moreover aft nan healthcare assemblage maintained an awesome gait of imperishable hiring complete nan past 8 months.

Our Allied business has 6% year-over-year gross maturation pinch a 3% sequential increase. The squad did a phenomenal occupation pivoting attraction from pandemic related specialties, to therapy and different areas.

For nan first 4th of 2023, we expect gross successful Nurse and Allied Solutions to beryllium unchangeable sequentially, and down 32% to 34% year-over-year against our astir difficult comparison of nan year.

In our Physician and Leadership Solution segment, 4th fourth gross was somewhat amended than our guidance. Locum tenens is operating astatine a consistently precocious level pinch 4 consecutive quarters complete $100 cardinal of revenue. Interim Leadership and Search achieved grounds precocious gross for nan year.

As we expected, request for Interim Leadership and Search was little successful nan 4th fourth astatine immoderate clients attraction connected short word costs savings. In nan first quarter, we projected gross and Physician and Leadership Solutions to beryllium down 10% to 12% year-over-year, excluding pandemic related business gross would beryllium level to anterior year.

Demand is good supra pre-pandemic levels for locum tenens and expert imperishable placement. In Technology and Workforce Solutions gross grew 14% year-over-year, amended than our guidance of astir 10% growth. Our Language Services business was nan superior driver of nan outperformance

Since AMN acquired nan institution successful 2020, Language Services has doubled its revenue, a awesome illustration of really we tin adhd worth pinch acquisition. It is further grounds of our committedness to innovation, supporting value diligent care, and making a affirmative effect to nan communities we serve.

In 2022 alone, we heighten nan wellness attraction acquisition outcomes for patients successful complete 15 cardinal interactions. Also successful this segment, VMS gross continued its moderation successful statement pinch our expectations. For nan first quarter, we expect gross and Technology and Workforce Solutions to beryllium down 10% to 12% year-over-year owed to little VMS revenue.

Now, I'll move complete nan telephone to Jeff for much specifications astir our results and outlook, aft which I will return to supply a glimpse astatine our attraction areas for 2023 and beyond.

Jeff Knudson

Thank you, Cary, and bully day everyone. Fourth 4th gross of $1.126 cardinal was 4% supra nan precocious extremity of our guidance scope pinch each 3 segments contributing to nan outperformance. Consolidated gross was down 17% year-over-year and 1% sequentially, excluding labour disruption revenue, consolidated gross was successful statement pinch nan anterior quarter.

Gross separator for nan 4th was 33.3%, 140 ground points higher than anterior twelvemonth and down 50 ground points sequentially. Year-over-year, nan separator was hired owed to a gross operation displacement toward higher separator businesses. Sequentially, nan separator was little owed to nan emblematic seasonal gross operation displacement towards staffing.

Consolidated SG&A expenses were $219 cardinal aliases 19.5% of revenue, compared pinch $239 cardinal aliases 17.5% of gross successful nan twelvemonth agone quarter, and $215 cardinal aliases 18.9% of gross successful nan erstwhile quarter.

SG&A expenses were little year-over-year chiefly owed to little worker related expenses, fixed little gross and much normal operating conditions. Higher allowances for in installments losses and ineligible reserve expenses drove nan summation successful SG&A compared pinch nan anterior quarter.

Adjusted SG&A. excluding definite non-recurring expenses and stock-based compensation disbursal was $202 cardinal this quarter, aliases 17.9% of gross compared pinch $212 cardinal aliases 15.6% of gross successful nan twelvemonth agone quarter. The summation successful adjusted SG&A separator came from little operating leverage connected little revenue.

In nan 4th quarter, Nurse and Allied gross was $825 million, 24% little than anterior twelvemonth and somewhat down sequentially. Average measure complaint was little by 2% quarter-over-quarter and mean hours down 1%, offsetting 3% higher volume.

Our recreation caregiver gross was down 24% versus anterior twelvemonth and level sequentially. Allied gross was $195 cardinal increasing 6% from nan anterior twelvemonth and 3% supra anterior quarter. Nurse and Allied gross separator of 26.6% was 40 ground points little than anterior twelvemonth and anterior quarter.

The year-over-year alteration was caused by little labour disruption revenue, little mean hours and higher security expenses partially offset by betterment successful nan measure salary spread.

Sequentially, nan separator decreased stem chiefly from nan favorable workers compensation adjustments that occurred successful Q3, conception operating separator of 12.7% was 370 ground points little than anterior twelvemonth and 120 ground points little than anterior quarter, reflecting nan higher allowances for in installments losses.

Physician and Leadership Solutions gross successful nan 4th fourth was $168 million, 2% higher year-over-year and down 4% sequentially. Locum tenens gross was $103 million, 4% higher than anterior twelvemonth aliases increasing by 13%, excluding pandemic related revenue.

Interim activity gross accrued 4% from anterior twelvemonth and was down 5% from anterior quarter. Search gross declined 10% from anterior twelvemonth and was down 13% sequentially. Gross separator for this conception was 35%, 100 ground points higher than anterior 4th and down 10 ground points twelvemonth complete year.

The sequential separator summation was chiefly owed to higher gross separator for locum tenens partially offset by mix. Segment operating separator was 16.7%, up 510 ground points from past twelvemonth and up 310 ground points sequentially. The higher profit separator came chiefly from a little allowance for in installments losses and a favorable actuarial adjustment.

Technology and Workforce Solutions gross was $133 cardinal successful nan 4th quarter, increasing 14% year-over-year and down 1% sequentially. Language Services stood retired pinch gross of $58 million, which grew 23% year-over-year, and 5% quarter-over-quarter, BMS gross of $55 cardinal grew 5% year-over-year and was down 9% from anterior 4th arsenic we had expected.

Segment gross separator was 73.3%, up 130 ground points complete anterior twelvemonth and down 230 ground points sequentially. The year-over-year and sequential changes way gross comparisons for nan higher separator BMS business.

Segment operating separator of 50.2% was up 280 ground points year-over-year and down 250 ground points sequentially. Consolidated 4th fourth adjusted EBITDA of $175 cardinal was little by 22% year-over-year and down 4% from nan anterior quarter. Adjusted EBITDA separator of 15.5% was 80 ground points little year-over-year and down 50 ground points sequentially.

We reported nett income of $82 cardinal and diluted net per stock of $1.88 successful nan quarter. Adjusted net per stock was $2.48 compared pinch $2.95 successful nan twelvemonth agone quarter. Day income outstanding came successful amended than expected astatine 55 days, 4 days little than nan anterior 4th and 2 days higher than anterior year.

Operating rate travel for nan 4th was $115 cardinal and superior expenditures were $25 million. As of December 31st, we had rate equivalents of $65 million, semipermanent indebtedness of $850 cardinal and a nett leverage ratio of 1 clip to one

Recapping financial highlights for nan afloat twelvemonth 2022, we reported gross of $5.2 4 billion, a 32% year-over-year summation and nett income of $444 million, which grew by 36% compared pinch 2021. Adjusted EBITDA was $847 million, up 33% from anterior year. Full twelvemonth adjusted EBITDA separator of 16.1% was 20 ground points higher year-over-year.

GAAP EPS was $9.90, up 45% year-over-year, adjusted EPS was $11.90 higher than anterior twelvemonth by 48%. EPS benefited from our repurchases of $577 cardinal successful banal during nan year.

Full twelvemonth rate travel from operations was $654 million, which included a $24 cardinal costs of deferred payroll taxes from nan Cares Act, adjusting for nan Cares Act repayment. astir 80% of our adjusted EBITDA was converted into rate travel from operations. Capital expenditures totaled 76 million.

Since nan extremity of 2022, 2 events person bolstered our superior strategy, we obtained an description of our revolving statement of in installments adding $350 cardinal of borrowing capacity to full $750 cardinal pinch its tenor extended to 2028. The liking complaint for nan expanded installation is successful statement pinch erstwhile terms.

In addition, nan Board of Directors expanded our stock repurchase authorization by $500 million. Since our past net call, we bought backmost 2.4 cardinal shares of banal for $275 million. The latest authorization gives america a full of $551 cardinal successful imaginable buybacks.

Now looking astatine first 4th 2023 guidance. We task consolidated gross to beryllium successful a scope of $1.1 cardinal to $1.13 billion, down 27% to 29% complete anterior year. Gross separator is projected to beryllium 32.6% to 33.1%.

Reported SG&A expenses are projected to beryllium 18.3% to 18.8% of revenue. Operating separator is expected to beryllium 11% to 11.7%, and adjusted EBITDA separator is expected to beryllium 15.4% to 15.9%. Average diluted shares outstanding are projected to beryllium $42 million, reflecting our caller stock repurchase activity. Other first 4th guidance specifications tin beryllium recovered successful today's net release.

Last quarter, we talked astir 2023 returning to a normal seasonal pattern. Our 4th fourth results and first 4th outlook came successful stronger than we had expected, pinch higher measure rates being a cardinal driver. After nan Q1 spot existent business trends propose a diminution successful Nurse and Allied gross for Q2 that is greater than normal seasonality.

While request is still supra pre pandemic levels, we person seen immoderate clients prosecute adjacent word costs savings and trim utilization of contingent staff. Labor marketplace conditions stay very tight pinch precocious vacancies and attrition. And we judge staffing request will spell backmost up complete nan summertime successful statement pinch normal seasonality.

And now, I'd for illustration to manus nan telephone backmost to Cary.

Cary Grace

Thank you, Jeff. While nan healthcare assemblage hired much than 9 cardinal group successful 2022, that hiring spree resulted successful a nett employment summation of little than 800,000. Competition for talent remains intense, and costs ostentation is elevated. Voluntary turnover remains astatine nan highest level successful much than 20 years, and conditions are astir difficult for our clients successful acute care.

Recognizing these enduring issues, we are focused connected 4 cardinal areas that we judge will thrust semipermanent worth for each our stakeholders. First, we will proceed to beryllium nan preferred partner for wellness attraction organizations, arsenic they optimize their workforce strategy to meet continued semipermanent increases successful utilization.

Our solutions that is broad and differentiated and will beryllium much truthful pinch our soul investments and acquisition strategy. We spot awesome opportunity some successful amended serving existent clients and winning caller clients. On that path, we will fortify our expertise to go-to-market arsenic 1 AMN building marque equity and making it easier for clients and healthcare professionals to activity pinch us.

We are already gaining traction connected initiatives to amended our velocity to present while maintaining our manufacture starring quality. As request has receded from its utmost highs, our MSP strategy amended positions america to summation share.

Second, we are opinionated our efforts to guarantee AMN is nan preferred employer for healthcare professionals and squad members. These programs see caller initiatives connected workplace flexibility, ensuring competitory salary and benefits astatine each levels, profession pathing and mentoring and manufacture activity successful diversity, equality, equity and inclusion.

Our wellness attraction professionals use from having nan largest action of occupation opportunities successful nan industry, easy accessed done mobile technology. Third, we want to support building our diversified portfolio that is expanding and improving full talent solutions for healthcare.

Our strategies to aggressively summation exertion enablement successful each facet of AMN. Our scheme will allocate astir 2% of gross to superior expenditures pinch a dense attraction connected integer innovation.

These investments will amended outcomes for our existing solutions, and adhd caller exertion led solutions to support up pinch nan situation of delivering attraction amidst a sustained mismatch of proviso and demand.

We are continuing to put successful Digital First initiatives specified arsenic AMN Passport, are ever connected relationship pinch much than 170,000 nurses and growing. And finally, we are committed to being bully stewards of capital.

Our superior expenditures much than doubled complete nan past 3 years, enabling america to lead our manufacture and exertion improvements. We person built a institution pinch precocious value of net and beardown free rate flows that springiness america strategical options.

With a beardown equilibrium expanse and expanded borrowing capacity, we person nan model and elasticity to make charismatic acquisitions, while besides repurchasing stock, which we judge is simply a awesome finance opportunity.

Now, let's please unfastened nan telephone for questions.

Question-and-Answer Session


Thank you. [Operator Instructions] And our first mobility will travel from nan statement of Kevin Fischbeck pinch Bank of America. Please spell ahead.

Kevin Fischbeck

Great. Thanks. I guess, you're fundamentally level net sequentially, and Q1 speak to immoderate stableness there. But there's ever seasonality successful that from Q4 to Q1. And I deliberation nan large statement correct now, it's conscionable benignant of, wherever nan caller normal is successful your position astir healthcare staffing demand? I was really adjuvant to perceive your comments astir nan seasonal driblet into Q2, but arsenic your position connected Q2 change? Is it much astir Q1 being higher than it is astir Q2 being lower? And I guess, we should beryllium present benignant of again, Q2 alteration from wherever you were erstwhile you were giving guidance past time?

Cary Grace

Hi, Kevin, acknowledgment for nan questions. Maybe what we'll do is, I'll move it complete to Jeff, who'll talk a small spot astir nan patterning of Q1, Q2, and past Landry and I tin talk a small spot much broadly astir demand.

Jeff Knudson

Yes, Kevin. So, nan first 4th guidance is higher than what we would person primitively thought really chiefly driven from higher measure rates, and that's partially driven by a operation pinch immoderate higher complaint orders that we'll beryllium rolling disconnected astatine nan extremity of Q1. So, arsenic a result, we are expecting a higher than normal sequential diminution successful Nurse and Allied gross from Q1 to Q2. And if we conscionable measurement backmost and deliberation astir Q2 going into nan year, we would person expected nan 2nd 4th to beryllium nan lowest gross and EBITDA separator 4th of nan year, and that is still nan case.

On nan Nurse and Allied side, we would usually expect a 6% sequential diminution successful nan 2nd quarter, looking astatine humanities patterns and that's normalized for labour disruption driven by nan victor orders winding down and that 6% would beryllium driven by adjacent declines successful some measurement and measure rates. So, arsenic nan measure rates were higher successful some nan 4th and nan first quarter, we do now expect a precocious azygous digit measure complaint diminution successful nan 2nd quarter, again, chiefly driven by that operation power from Q1 and nan normal seasonality. And then, we would expect nan 2nd 4th sequential measurement diminution to beryllium higher than our humanities seasonality, but little than nan measure complaint declines.

Cary Grace

Hey, Kevin, if we benignant of measurement backmost and return nan request question, fto maine benignant of springiness you a position connected what we spot is nan style of request and immoderate of nan factors astir proviso that we're seeing. And then, I'll person Landry remark a small spot much connected what we've been seeing much recently. So, if I spell backmost into nan onset of nan pandemic, it really accelerated an existing supply/demand imbalance crossed nan healthcare workforce. And arsenic we've moderated down from nan emergency request levels, we saw during nan pandemic, we still person an enduring structural alteration successful nan proviso of and request for these wellness attraction professionals. So nan things that we are seeing and continuing to way is you're seeing continued utilization request growing, truthful I deliberation group are pegging it location benignant of 5 positive percent annually.

The caller supply, particularly of nurses is not keeping up pinch these increases, and nan already constrained proviso of nan healthcare professionals is being impacted by retirement. So, nan aforesaid demographics that are driving immoderate of nan increases successful demand, are besides driving nan accelerated status of immoderate of our wellness attraction professionals. And we besides proceed to spot bedside clinicians leaving and taking little stressful jobs successful wellness attraction and elsewhere. Beyond these supply/demand enduring imbalances, we're seeing compensation expectations that person accrued crossed each economical sectors, arsenic precocious ostentation has put upward unit connected wages. And truthful that really was happening passim nan pandemic.

So, nan conversations we've been talking to our clients astir is, really do we thief them pull and clasp nan workforce they request to service their patients successful a costs effective way. So, enduring structural proviso request imbalance, continued upward, benignant of leaving constituent from nan pandemic of unit connected wages. And I'll move it complete to Landry to talk a small spot astir what we're seeing much recently.

Landry Seedig

Yes. Hi, Kevin. So, we do arsenic of today, we proceed to spot recreation caregiver and allied request that is supra pre-pandemic levels. It is down from immoderate of nan highs that we saw successful nan manufacture during immoderate of those awesome COVID spikes. But you really person to deliberation astir astatine nan peak, a batch of that request arsenic what we would benignant of qualify arsenic irrelevant, and it ne'er did get filled by nan wide industry. So you had request spiking because of nan utmost needs that beryllium location and nan inadequate labour proviso that exists. We've been predicting each on that we wouldn't person arsenic precocious of request whenever things settee down. Yet, that request still would beryllium higher than pre pandemic levels, conscionable to immoderate of those -- owed to immoderate of those cosmopolitan issues connected nan labour wrong healthcare.

We person seen a mates of reports retired location connected request successful nan marketplace that bespeak what others mightiness beryllium seeing successful nan industry. And while our request is down, arsenic I conscionable mentioned, our diminution has not been arsenic steep arsenic what immoderate of those reports suggest. I deliberation there's a mates of reasons for that. I deliberation 1 logic is that we enactment existent to our MSP customers complete nan past fewer years. And besides nan AMN squad really did not pursuit immoderate of nan benignant of what we would see short-term business complete nan past mates of years. Lot of our conversations correct now pinch clients are astir reducing cost. But nan reality is that their accommodation stay highly understaffed moreover today.

Bill rates, they've moderated for nan astir part, truthful clients are looking for decreases successful their bid measurement really to effort to execute a batch of their contingent labour disbursal targets. And then, if you look astatine immoderate of nan underlying drivers of proviso and demand, we expect that nan pullback is going to beryllium beautiful short-term, and it's really conscionable wide not sustainable successful nan marketplace. So, we do expect to spot a patient request situation arsenic we advancement passim nan year. There's rather a spot of levers that we're pulling correct now, things for illustration expanding our MSP capable rates, and past besides returning our soul seizure to immoderate humanities levels. We saw that dip a small spot passim nan pandemic whenever request was really precocious and we were highly reliant connected our supplier partners. And past nan past deliberation that that I'd mentioned is that we besides person opportunities to attraction successful much connected our non-MSPs, which we had antecedently been complete nan past mates of years.

Kevin Fischbeck

Okay. That's fantastic. And I conscionable do 1 more. I guess, Cary, whenever there's a caller CEO, ever looking to spot benignant of what they're focusing much connected now. And I conjecture successful your prepared comments, this spell arsenic 1 AMN point benignant of stuck retired to me. Any measurement to size benignant of what you spot nan opportunity arsenic and really we should deliberation astir what that could mean? Thanks.

Cary Grace

Yes. Let maine -- thanks, Kevin. Let maine springiness you a small spot of position astatine a macro level. And arsenic we proceed connected these calls passim nan year, I'll proceed to put colour connected it. So 1 AMN, I cognize there's going to beryllium a very beingness practice of that, wherever you will commencement to spot our brands travel together. So we will virtually look much cohesive and integrated arsenic 1 company. But really, a batch of nan things that we are moving incredibly difficult connected and will proceed to passim nan twelvemonth is really do we really make each nan parts crossed AMN activity much seamlessly together.

So there's a batch of implications for activity that we're doing to streamline our processes crossed our 20 solution group to streamline our platform. And truthful a batch of what we want AMN to consciousness for illustration is to consciousness easier to do business with, some for each of our clients, for our clinicians, and very importantly for our ain squad members.

If I gave you an illustration of what I would expect it to commencement changing successful position of nan style of our financials, arsenic a proxy correct now, if you look astatine our 30 largest clients, of our 20 solution, we person an mean of eight. And truthful obviously, if you went much, overmuch further crossed our customer guidelines and past benignant of did nan mathematics astir our 20 solutions, there's tremendous opportunity for america to further penetrate those customer relationships. And we'll person much occurrence successful doing that and we've created a existent and meaningful worth proposition that's compelling to them.

Kevin Fischbeck



Thank you. One infinitesimal for our adjacent question, that will travel from nan statement of A.J. Rice pinch Credit Suisse. Your statement is open.

A.J. Rice

Hi, everybody. And congratulations, Cary connected your first 4th here. Let maine conscionable possibly drill down a small spot further connected immoderate of nan worldly that Landry was saying. So if you look astatine your MSP accounts, I cognize successful nan peak, you were having to -- you couldn't capable each nan orders, nan full manufacture couldn't capable each nan orders, but you were subcontracting retired a meaningful percentage.

If you look astatine say, Q3 to Q4, are you stepping up nan percent that you're filling of those unfastened orders meaningfully? Or is it still a adjacent number that are being subcontracted and perchance moreover going among your MSP accounts?

Cary Grace

A.J., I was going to say, convey you for that. You sewage our strategy what we were doing passim nan pandemic, and besides astir what we person been doing subsequently. I'll fto Landry benignant of footwear disconnected and past Kelly tin talk a small spot astir our broader MSP strategy.

Landry Seedig

Yes. So I'm going to move that to Kelly, but I was conscionable going to mention, A.J., some Q3 and Q4 are strong. So we were surviving successful really precocious request successful nan 4th quarter. And truthful those -- you person to look astatine that arsenic being beautiful flat. And past correct now our attraction is connected expanding that arsenic we advancement done Q1 and past going into Q2. And we are seeing increases connected that, but I'll fto Kelly supply a small spot much detail.

Kelly Rakowski

Yes. A.J., conscionable to build connected that, surely favorable inclination for america arsenic those request -- that request little from Q4 to Q1. We're seeing some accrued fulfillment arsenic good arsenic immoderate increases -- incremental increases successful our soul capture. We will stay -- our exemplary will stay a operation of AMN's expertise to fulfill connected behalf of our clients, but besides nan spot of our supplier network, which is captious for america to execute that fulfillment arsenic good arsenic augment our capabilities successful location aliases specialized areas and we were very fortunate to person nan spot of our suppliers passim COVID arsenic were our clients.

So that strategy won't change, although, we do person opportunities to turn that. And it besides creates further capacity for us, arsenic we're seeing beautiful beardown request from a caller business and pipeline perspective, A.J. So we've been very progressive successful nan market. We added a fewer caller MSPs successful nan past mates of quarters and a patient pipeline for america present starting nan year. So we will proceed to turn our customer base. And again, nan spot of our web will beryllium a cardinal portion of that growth.

A.J. Rice

Okay. And past conscionable a follow-up. Is different remark you guys were making. So erstwhile you deliberation astir what happened successful nan pandemic, you had immoderate caller competitors travel successful and drawback immoderate marginal share. And location was ever -- for illustration you said, you had to stress your MSP accounts and immoderate of nan different ones astir apt sewage little focus. As you're reasoning astir having nan opportunity to spell backmost aft immoderate of that business, really sticky is it pinch nan caller competitors? Are group -- are you uncovering that group are consenting to travel backmost to you beautiful easily. And I wondered besides whether it mightiness create immoderate opportunities connected nan M&A side. I cognize traditionally, a batch of your M&A has been adjacent businesses, but I wondered if location were opportunities emerging successful nan halfway Travel Nursing, Allied and Locums business you mightiness look at.

Landry Seedig

So A.J., this is Landry. I tin commencement pinch it. So we screen nan non-MSP business, we ne'er near it. We conscionable deprioritized it and we still -- thing changed successful our relationships. We were very transparent pinch whether those are nonstop contracts aliases wherever we are a third-party to immoderate of those possibly different MSP aliases VMS holders retired successful nan marketplace.

So location was thing that was being hidden. We were trying to find different solutions to effort to thief moreover immoderate of those different types of clients out, whether that was done our VMS strategy aliases our section business aliases immoderate different businesses. So, each those contracts still exist. We still get those orders. We tin conscionable prioritize them higher wrong our bid standing numbers.

Some of nan short-term business that I was referring to that was conscionable much of that benignant of authorities contracts aliases immoderate of nan accommodation that we're mounting up for vaccine centers, aliases guidelines up hospitals, aliases FEMA, immoderate of those different programs that we thought would spell distant astatine immoderate constituent and they, successful fact, have. So I deliberation our strategy is staying highly focused connected our MSP customers has been caller retention complaint of our MSP customers successful nan agelong tally has had and will proceed to play retired good for us.

Cary Grace

And -- okay…

Kelly Rakowski

A.J., conscionable to your past remark astir arsenic I bespeak connected immoderate of nan caller business and caller strategical relationships we're bringing in, we are seeing immoderate early traction arsenic we go-to-market pinch a much broad solution group and really emphasizing that and clients looking for much solutions arsenic they faced a challenging market. So we person seen arsenic 1 early indicator, nan number of work lines per statement is going up pinch our caller business versus successful nan past, wherever we started pinch contracts and saw maturation complete time. So we'll expect to spot that inclination proceed arsenic well.

Cary Grace

Hey, A.J., connected nan M&A side, we expect M&A to proceed to beryllium an important portion of our maturation strategy. And truthful you should expect america to person a proactive attraction connected M&A, particularly arsenic ways that we deliberation it tin thief america service our clients much effectively. We will look astatine strategical fit, we'll look astatine financial fit, we look astatine taste fit, value of management. We will look astatine much accepted staffing assets. We besides will look astatine and person a attraction connected tech-enabled solutions.

What I would opportunity from benignant of what we person seen standpoint, past year, we astir apt connected bias saw much accepted staffing assets. I cognize it's comparatively early successful nan year, but we're seeing comparatively much tech-enabled solutions travel up. And truthful cognize that we will look broadly, we will look and we are very willing successful M&A arsenic a maturation strategy.

A.J. Rice

Okay. Great. Thanks a lot.


Thank you. One infinitesimal for our adjacent question, that will travel from nan statement of Tobey Sommer pinch Truist. Your statement is open.

Tobey Sommer

Thank you. I wanted to spot if you could walk immoderate clip giving america immoderate much colour connected VMS and MSP trends. In particular, if you could touch connected nan -- what seems for illustration accelerated take of vendor-neutral MSPs and VMS solutions and possibly besides speak to immoderate timing of recompetes for your larger MSPs? Thank you.

Cary Grace

Hey, Tobey. I'm going to move it complete to Kelly successful a second, but arsenic a framework up for this conversation, we person very intentionally built a wide group of capabilities. We cognize that clients person different needs; and they person different strategies for really they want to negociate their workforce recruiting, retention staffing strategies. And truthful deliberation of this arsenic Kelly talks astir immoderate of those trends that we really do look astatine it and we commencement pinch nan customer request and past we activity astir from that and really we tin beryllium adjuvant to them and really they want to execute that strategy. So, Kelly, I'll move it complete to you to talk astir immoderate of those trends.

Kelly Rakowski

Yes. Hi, Tobey, I would say, I'm not judge we're seeing immoderate of those trends. I will say, it's beautiful emblematic and we typically spot connected immoderate fixed twelvemonth from our ain operation of business. Now it changed a small spot during COVID. But look astatine our pipeline complete nan past 2 years, successful 2021, we saw heavier operation of technology-only solution. Now we commencement to spot that travel back. So I would opportunity our pipeline coming is much heavy weighted towards afloat MSP programs.

And also, we spot successful our -- because we person aggregate VMS solutions and specified a ample customer base, astir 500, typically, successful immoderate fixed year, we'll spot immoderate modulation from clients who want to return their business in-house, and conversely those who want to modulation from an in-house solution into our MSP program. So we've had some of those play retired successful our customer base. And again, I would opportunity that is beautiful emblematic to what we've seen successful nan past.

So we are seeing, of course, clients want to adhd to their expertise to person much elastic type solutions wrong their workforce, I would say, it's much of an to usage of Travel Nurse. So things for illustration soul travel pool. You did spot immoderate soul agency activity wherever they're utilizing VMS solutions to thief accommodate that. And certainly, we are partnering pinch them successful highly customized ways to meet their section needs.

On nan 2nd portion of your question, Tobey, astir our outlook for our renewals and contracts. Again, we had a very beardown retention complaint past year. We person a very emblematic renewal period, arsenic we look astatine our contracts coming to terms. We person a very beardown outlook this twelvemonth for renewals. In fact, we've sewage respective already successful verbal. It's not contracted this year. So, thing is accelerating that aliases really changing that and a batch of nan catch-up that it happened for laser and COVID person played retired contracting complete nan past year.

Tobey Sommer

Thanks. For my follow-up, I wanted to spot if I could get you to talk astir why you deliberation request rebounds successful nan summertime and for Travel Nurse. And if that's astir a reflection of reliance connected history, a merchandise of conversations and what customers are telling you, benignant of really do you get that arsenic a conclusion?

Cary Grace

No, I think, it really goes backmost to a operation of immoderate of nan comments that Jeff and Landry are making. So if you look astatine it from a macro standpoint and conscionable look astatine nan structural imbalance successful proviso and request against nan backdrop of -- and there's a -- we conscionable published immoderate investigation connected this conscionable connected timing and continued delays successful access.

We cognize that nan request continues to get pent up. And arsenic overmuch arsenic clients correct now are highly focused connected costs containment, they besides are very focused connected really are they going to unit to meet their demand. So, it's a operation of what we're seeing structurally.

And second, that we person seen seasonal patterns typically wherever you commencement to get wintertime orders arsenic you spell done nan summer. So, it's really a operation of some of those things.

Landry Seedig

Yes, Tobey, I would conscionable add. It's conscionable -- it really is not sustainable. All of nan little request is purely a CFO determination correct now. We're not seeing it from CMOs, we're not seeing it from portion managers. It's purely a financial decision. They are still understaffed. Nothing has changed there. And nan reality is that, our Q1 volumes are good, it's conscionable nan request has been pulled back. That's nan solution that they're reasoning for costs savings, they haven't felt nan pain, right. So our clinicians are still location correct now.

And truthful whenever those clinicians commencement coming off, it will get noisy, their soul unit will beryllium getting noisy, that we'll acquisition moreover higher turnover. And it's not -- we saw it passim nan pandemic, but we've besides seen this complete nan past 15 years. It's conscionable not sustainable whenever location is simply a shortage wrong a facility, it's a mediocre determination not to person nan labor.

Cary Grace

And Tobey, nan past portion that I would adhd that I cognize we've talked about, peculiarly complete nan past 12 months to 18 months is erstwhile you look astatine really benignant of nan vulnerable authorities of nan workforce, truthful we do a biannual study of nurses. And we'll people it successful May. I conscionable sewage immoderate of nan information complete nan past 24 hours.

And if you look astatine nan macro level restitution levels, for nursing profession existent nursing job, we saw it driblet down to 71%, that number has been betwixt 80% and 85% for a decade. And truthful erstwhile you look astatine still very precocious turnover complaint restitution levels going down, location is this equilibrium of -- for a batch of our clients really do they find nan equilibrium betwixt nan costs containment. But besides making judge that from a gait standpoint that they person an situation that is going to beryllium capable to clasp and support their precious staff.

Tobey Sommer

Thank you.


One infinitesimal for our adjacent mobility and that will travel from nan statement of Tim Mulrooney pinch William Blair. Your statement is open.

Tim Mulrooney

Cary, Jeff, Kelly Landry, bully afternoon.

Cary Grace

Good afternoon.

Tim Mulrooney

So there's a batch of moving parts present pinch first 4th expected to beryllium stronger, 2nd 4th is expected to beryllium little than normal. So I conscionable want to inquire it successful a different way. Last quarter, you laid retired a model for 2023 of much than $4 cardinal successful annualized gross and 15% EBITDA margins. Is that still your anticipation today?

Jeff Knudson

Yes, Tim. So you're right. The first 4th guidance is higher than what we had thought. And again, that's chiefly driven from higher measure rates, and that's what's besides driving our anticipation for a little Q2 and that higher than normal sequential decline, we talked astir earlier. But fixed everything that, Landry conscionable talked astir pinch request expanding successful nan 2nd half, and we besides judge that measure rates disconnected of that Q2 level will travel a normal seasonal shape into Q2, that if that normal seasonality plays retired successful nan 2nd half, we would spot a way to that afloat twelvemonth anticipation that we laid retired successful nan past call.

Tim Mulrooney

Okay. Thanks. The past fewer years, you're – conscionable building connected that. You've provided an anticipation wherever you deliberation measure rates yet settee arsenic you exit nan year. What is your anticipation for measure rates arsenic you had to exit successful '2023?

Jeff Knudson

They really haven't. Because they were higher successful nan 4th fourth and nan first 4th erstwhile we thought and past pinch that precocious single-digit diminution into nan 2nd quarter, they're still exiting nan twelvemonth pinch wherever we primitively thought they would be. It's conscionable they weren't location successful nan 4th fourth and nan first quarter.

Tim Mulrooney

Okay. Thank you.


Thank you. One infinitesimal for our adjacent question, and that will travel from nan statement of Mark Marcon pinch Robert W. Baird. Your statement is open.

Mark Marcon

Hey, bully afternoon, everyone. With regards to conscionable nan 4th quarter, conscionable nan rearview mirror. You mentioned immoderate in installments adjustments pinch regards to Nurse and Allied successful nan operating separator for nan 4th quarter. Jeff, what was that exactly, what happened?

Jeff Knudson

Yes. So location was conscionable a reserve for in installments losses aliases bad debt, Mark. There was 1 circumstantial MSP accounts that we person concerned out. And past besides conscionable fixed nan macro environment, we besides took a somewhat larger-than-normal wide reserve for expected in installments losses, and that impacted Nurse and Allied, chiefly is what drove those dollars.

Mark Marcon

And that MSP relationship is simply a – 1 ample one? Or is it comparatively good contained?

Jeff Knudson

It's comparatively good contained. It's not 1 of our larger accounts.

Mark Marcon

Okay. Great. And past really admit nan guardant look into Q2. That's highly helpful. Cary, Jeff, kudos to you for some disclosing what you're seeing now arsenic it relates to that. I mean, it does sound for illustration a batch of that is fundamentally nan alteration successful position of nan measure rates, and it sounds for illustration fundamentally successful Q4 and Q1, nan measure rates are higher owed to definite specialties that are being utilized to a greater extent. What specialties are you seeing that, that our precocious measure complaint specialties that were a small spot higher than expected successful position of utilization successful Q4 and Q1? And why would that driblet disconnected much than accustomed going into Q2?

Jeff Knudson

Yes. So Mark, going into nan 4th quarter, our anticipation for measure rates is that they would diminution successful nan mid-single digits. They ended up coming down 2% complete Q3 levels. And past really, nan higher measure complaint specialties is simply a driver of why they summation sequentially into nan first 4th and that's really conscionable astir a number of urgent needs orders that we received that carried a higher measure complaint that from a operation standpoint, drove measure rates up successful nan first 4th and past those will predominantly rotation disconnected by nan extremity of nan first 4th arsenic we exit into Q2.

Mark Marcon

Great. And past if I could conscionable cheat and conscionable inquire 1 more. How overmuch variance are you seeing successful position of nan behaviour among your 30 largest clients successful position of really they're treating nan request for costs subject versus managing nan workload connected nan floors?

Kelly Rakowski

Mark, it's Kelly. I'm chuckling a small bit, because we had a batch of variety conscionable successful nan constitution of those 30 crossed nan country, different sizes, different settings, different communities that they serve. So connected nan 1 hand, it's difficult to benignant of peg consistency. But I will opportunity from a – successful general, Landry talked astir it. We're coming disconnected a peak, truthful very precocious volume. There's still nan sensitivity astir nan financials, while I deliberation nan industry, peculiarly nan infirmary manufacture started to spot betterment successful their bottommost statement coming retired of December, there's still sizeable financial strain connected nan systems, and they're looking to their largest statement point of expenses to beryllium capable to negociate that going forward.

So, I would opportunity there's still that sensitivity to costs management, mostly doing that done measure rates, done immoderate of nan urgent needs that Jeff conscionable referred to. We're seeing them move to america to thief them pinch predictive planning, utilizing our imperishable resources to thief them backfill truthful that they tin bring backmost down those vacancy rates to much normal levels. So, precocious sensitivity nan cost.

At nan aforesaid time, still a request astir fulfillment. Landry mentioned there's – they still request nan nurses and their allied professionals connected nan floor, there's challenges astir retention. We perceive astir CHRO's talk about, I don't person a recruitment challenge, I person a retention challenge, I request to support nan group I have. And we cognize nan biggest facet to retention is creating a safe affirmative activity environment.

So they're not – they don't want to relinquish nan usage of contingent staff. So our teams conscionable proceed to activity pinch them connected each fronts, helping them from a short-term perspective, negociate those costs, but besides bringing to carnivore different capabilities and parts of our solution to thief them pinch nan agelong term. So I deliberation that's astir apt a very broad-brush cosmopolitan benignant of laic of nan onshore mark.

Mark Marcon

Appreciate that, Kelly. Thank you.


Thank you. One infinitesimal for our adjacent question, and that will travel from nan statement of Jeff Silber pinch BMO Capital Markets. Your statement is open.

Unidentified Analyst

Hey. This is Ryan connected for Jeff. I conscionable wanted to inquire a speedy mobility connected nan tech and workforce. I'm conscionable curious, what nan drivers are for nan conception for nan twelvemonth arsenic you thigh immoderate challenging comps and immoderate headwinds successful VMS? And do you deliberation nan connection work business tin proceed its beardown trajectory and really thrust nan conception going forward? Thank you.

Jeff Knudson

Yes. Thanks, Ryan. I would opportunity erstwhile you look astatine nan year-over-year comparisons for nan remainder of nan twelvemonth that we would still expect connection services to beryllium increasing successful that high-teens complaint arsenic we move done nan remainder of nan year. As you noted, VMS will person immoderate very reliable compares, peculiarly successful nan Q2 – beyond Q1 and nan Q2 and Q3 clip frame. And they'll besides beryllium challenged sequentially successful nan 2nd 4th arsenic immoderate of these measure complaint dynamics that we talked astir connected Nurse and Allied play retired successful nan beforehand half of nan year.

Kelly Rakowski

And I'll conscionable add, Ryan, connected Language Services, I mean, you heard Cary mentioned, we celebrated nan three-year day pinch AMN this week. That squad conscionable continues to present very high-quality services, very beardown retention of clients arsenic good arsenic benignant of successful relationship growth. So we still spot integrated maturation patterns for that business wrong their existing relationship guidelines arsenic they accrued take of nan model, successful immoderate cases, wherever we person accounts, wherever we mightiness beryllium moving pinch wellness systems connected a fewer different hospitals. They spot our results and they proceed to expand. And we person a beardown pipeline and caller acquisition location and still an opportunity to turn wrong our MSP base. So, conscionable a outcry retired to that squad for their tremendous worth that they bring to their customers, and we're conscionable thrilled to person them arsenic portion of AMN.

Unidentified Analyst

Sure. Thank you. And conscionable arsenic my follow-up, fixed immoderate of nan clinicians rolling disconnected successful nan 2nd 4th and CFO grumblings astir cost. Just wondering if there's immoderate room to move rates lower, connection immoderate concessions to benignant of easiness nan financial load connected providers for later successful nan year. And past are you expecting normal seasonality to return successful nan 2nd half?

Jeff Knudson

The measure complaint is simply a tricky one, because we saw measure rates spell down connected our orders, not needfully connected our placements throughout. Well, nan measure rates successful nan placements did spell down, but nan orders went down to a level past twelvemonth that it was negatively impacting measure rates because of a debased pace. So that's why we've sewage immoderate assurance successful wherever we deliberation that nan measure rates are going to normalize.

So that's a small spot tricky one. I deliberation nan amended point is to spell and connection much solutions to thief pinch nan wide labour problem. So whether that's offering immoderate RPO solutions aliases much section type of solutions that – it's not new, not thing marque new, but clients are looking to effort each sorts of caller things correct now. And past I deliberation your different portion of your mobility had to do pinch nan 2nd half of nan twelvemonth seasonality.

Landry Seedig

On nan seasonality, we are expecting nan 2nd half of nan twelvemonth to play out, which would mean Q3 would typically beryllium up modestly complete Q2 and past a small spot of stronger maturation successful nan 4th fourth complete Q3 levels.

Unidentified Analyst

Got it. Thank you.


Thank you. One infinitesimal for our adjacent question, and that will travel from nan statement of Brian Taji Phillips pinch Jefferies. Your statement is open.

Brian Tanquilut

Hey, bully afternoon, guys. It's Brian Tanquilut. I conjecture my mobility for nan team. There's a batch of chatter astir nan competitory dynamics successful nan space, wherever immoderate of your competitors are talking astir expectations for a bully spot of incremental diminution successful measure rates going guardant aliases their predictions. So conscionable funny what you're seeing successful nan marketplace successful position of nan title and what you're proceeding successful position of -- is location a imaginable for value aggressiveness from immoderate of nan players successful nan marketplace astatine this point?

Landry Seedig

So this is Landry, Brian. Jeff mentioned that we are anticipating that sequential diminution successful measure complaint from Q1 to Q2. From what we're seeing from nan competition, location is immoderate pockets of mini competitors retired location that mightiness make separator move aliases a measure complaint move. It's not thing that we've seen arsenic of correct now from immoderate of our ample competitors.

Brian Tanquilut

Got it. Okay. Awesome. Thank you. That's each I have.


Thank you. And speakers, I'm showing nary further questions successful nan queue astatine this time. I would now for illustration to move nan telephone backmost complete to guidance for immoderate closing remarks.

Cary Grace

Thank you. Before we say, our last goodbye, I cognize we've talked rather a spot astir a mates of our businesses. We didn't talk arsenic overmuch astir PLS. So I conscionable want to springiness them a large nickname for -- arsenic you spell and look astatine passim 2022. They had conscionable a terrific year, including successful nan locums business, 4 consecutive quarters of hitting complete $100 cardinal of revenue. And truthful deserves a typical outcry out.

Thank you each for being pinch us. We admit each nan questions and each nan interest. I'm going to extremity pinch really I started, which is I could not beryllium much thrilled to beryllium portion of this awesome AMN team, and I americium looking guardant to spending clip pinch each of you successful nan coming weeks and months.


Thank you each for participating. This concludes today's program. You whitethorn now disconnect.

Editor: Naga

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