AMN Healthcare Services, Inc. — Q2 2021 Form 10-Q
Reporting period: Quarter and six months ended June 30, 2021. Amounts below are in millions unless otherwise stated. AMN provides healthcare staffing and workforce solutions across nurse and allied, physician and leadership, and technology and workforce solutions segments.
Financial performance
| Metric | Q2 2021 | Q2 2020 | Six months 2021 | Six months 2020 |
|---|---|---|---|---|
| Revenue | $857.4 | $608.4 | $1,743.4 | $1,210.8 |
| Gross profit / margin | $280.5 / 32.7% | $197.5 / 32.5% | $569.4 / 32.7% | $399.6 / 33.0% |
| Operating income / margin | $99.2 / 11.6% | $38.4 / 6.3% | $203.6 / 11.7% | $74.1 / 6.1% |
| Net income | $66.8 | $22.3 | $137.1 | $35.3 |
| Diluted EPS | $1.39 | $0.47 | $2.86 | $0.74 |
- Q2 revenue increased 41% year over year; six-month revenue rose 44%. Q2 net income increased to $66.8 million from $22.3 million.
- Q2 segment revenue: nurse and allied $624.5 million (+41%); physician and leadership $139.1 million (+28%); technology and workforce $93.9 million (+70%). For the first half, respective revenue was $1,281.1 million (+48%), $279.9 million (+14%), and $182.4 million (+91%).
- Q2 gross margin improved 0.2 percentage points, aided by sales mix, but six-month gross margin declined 0.3 points. Management cited lower nurse and allied bill-to-pay spreads; higher-margin technology revenue partly offset this pressure.
- Six-month operating cash flow was $210.6 million, versus $128.3 million in 2020. Investing activities used $53.6 million, including $41.3 million for acquisitions and $23.1 million of capital expenditures. Financing activities used $30.7 million. Cash, cash equivalents and restricted cash totaled $210.3 million at period-end; unrestricted cash and equivalents were $139.5 million.
- At June 30, notes payable were $841.7 million net of fees and premium. Principal outstanding comprised $500 million of 4.625% senior notes due 2027 and $350 million of 4.000% notes due 2029. The Additional Term Loan was repaid in Q1; the $400 million revolving facility had no borrowings and $378.1 million available. Management said operating cash flow and available revolver capacity should fund operations and expected capital expenditures for at least 12 months.
- Current assets were $790.1 million and current liabilities $582.6 million. DSO was 50 days, compared with 55 days at both December 31, 2020 and June 30, 2020.
Material changes and management commentary
- Staffing demand rebounded from the pandemic-related declines in 2020. Management reported historically high nurse demand since late 2020, elevated bill rates and wages, and difficulty recruiting enough professionals amid labor shortages, burnout, attrition and retirements. Average travelers on assignment rose 28% in Q2 and 16% for the first half; average bill rates rose approximately 10% and 25%, respectively.
- Physician and leadership demand returned to pre-pandemic levels overall, with strength in selected specialties. Technology and workforce growth reflected higher VMS utilization, language-services demand and outsourced solutions.
- Management cautioned that pandemic developments, staffing supply and professional burnout leave less visibility into future demand than before the pandemic. No specific revenue or earnings forecast was provided. The company estimated a 2021 annual effective tax rate of approximately 26%.
- AMN acquired Synzi and SnapMD on April 7, 2021 for a preliminary purchase price of $42.1 million net of a working-capital settlement. The virtual-care businesses are included in technology and workforce solutions from the acquisition date.
- COVID-era payroll-tax deferrals totaled $48.2 million at June 30, 2021; half is due by the end of 2021 and half by the end of 2022. The company reported no material off-balance-sheet arrangements and no impairment charges for the first half.
Risks, contingencies and unusual items
- In the Clarke wage-and-hour case, the Ninth Circuit reversed the district court’s summary judgment for AMN and remanded the case; rehearing was denied. AMN intends to seek Supreme Court review, but whether the Court will consider an appeal is uncertain. The company has accrued amounts for the matters described and said an additional loss of up to $15 million, excluding interest and penalties, could result beyond amounts accrued. The filing does not provide a clear total accrual for these cases.
- Key risks include COVID-related demand and workforce disruption, inability to recruit and retain healthcare professionals, wage and bill-to-pay spread pressure, client payment and collectability, legal and employment claims, cybersecurity and technology risks, acquisition integration, and substantial indebtedness. Management reported no material change to previously disclosed risk factors.
- Management identified working-capital movements as an important cash-flow factor: higher accounts receivable and subcontractor receivables used cash, partly offset by higher payables and accrued compensation. The increase in operating cash flow therefore reflects both improved earnings and timing/volume-related working-capital changes.
Important facts for investors to verify
- Whether unusually high nurse demand, bill rates and wages persist, and how staffing shortages affect placements, margins and service capacity.
- Whether gross-margin pressure from lower nurse and allied bill-to-pay spreads continues, and whether higher-margin technology revenue offsets it.
- Developments and potential financial exposure in the Clarke and related wage-and-hour litigation, including any appeal and the adequacy of recorded accruals.
- Cash conversion and working-capital trends, particularly receivables, subcontractor usage and payment timing.
- Debt repayment capacity, revolver availability, upcoming deferred payroll-tax payments, and integration and performance of Synzi/SnapMD.