AMN Healthcare Services, Inc. — Q1 2021 Form 10-Q
Reporting period: Three months ended March 31, 2021; unaudited. AMN provides healthcare staffing and workforce solutions through nurse and allied, physician and leadership, and technology and workforce solutions segments. Comparisons are with Q1 2020 unless stated otherwise.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $885.9 million | $602.5 million | +47% |
| Gross profit / margin | $288.9 million / 32.6% | $202.1 million / 33.5% | Gross profit +43%; margin down 0.9 percentage points |
| Operating income / margin | $104.4 million / 11.8% | $35.7 million / 5.9% | Operating income nearly tripled |
| Net income | $70.4 million | $13.0 million | Up from prior-year level |
| Diluted EPS | $1.47 | $0.27 | — |
| Cash from operations | $39.1 million | $51.4 million | Down $12.2 million |
- Segment revenue: nurse and allied $656.7 million (+55%); physician and leadership $140.8 million (+2%); technology and workforce $88.5 million (+120%).
- Revenue growth reflected strong nurse demand and higher bill rates, growth in technology and workforce services, and $20.5 million of Stratus Video revenue. Excluding Stratus revenue, consolidated growth was 44%.
- Gross margin declined primarily because nurse and allied revenue growth came with lower bill-to-pay spreads. SG&A rose to $161.2 million but fell as a share of revenue to 18.2% from 24.3%.
- Cash from operations was pressured by higher accounts receivable and subcontractor receivables, which together increased $246.6 million between periods. DSO was 57 days, unchanged year over year.
Financial position and liquidity
- At March 31, cash and cash equivalents were $78.3 million; cash, cash equivalents and restricted cash totaled $150.7 million. Current assets were $830.4 million and current liabilities $599.0 million.
- Debt included $500 million of 4.625% senior notes due 2027, $350 million of 4.000% notes due 2029, and $55 million drawn on the revolving credit facility. The $250 million Additional Term Loan was repaid during Q1.
- AMN reported $321.1 million of available revolver capacity and said operating cash generation and available borrowings should fund operations and expected capital expenditures for the next 12 months and beyond.
- Investing activities provided $2.8 million, versus $492.1 million used in Q1 2020, when AMN paid for the Stratus Video acquisition. Q1 2021 capital expenditures were $11.6 million.
Outlook, risks and notable items
- Management described elevated, historically high nurse demand in late 2020 and early 2021, with demand easing from its peak but remaining above pre-pandemic levels. Nurse bill rates and wages remained well above prior-year levels but were trending down alongside demand. The company cited labor-market tightness, burnout, attrition and retirements as constraints on filling demand.
- Management reported recovery in physician and leadership demand and continued growth in language services. VMS demand and bill rates had eased from peak levels; management expected bill rates to continue declining through 2021. Vaccination-site staffing was expected to continue through all or most of 2021.
- Management estimated a 2021 annual effective tax rate of approximately 27%. No revenue or earnings guidance was provided in the supplied filing text.
- COVID-19 duration and effects on healthcare utilization, staffing demand, client liquidity and collections remain uncertain. Other identified risks include recruiting and retaining clinicians, pricing pressure, technology and cybersecurity issues, indebtedness, and legal and insurance exposures.
- In the Clarke wage-and-hour matter, the Ninth Circuit reversed the company’s summary judgment win and remanded the case; it denied rehearing on May 7, 2021. AMN intended to seek Supreme Court review. The company had increased related accruals by $20 million in Q4 2020 and stated potential loss could be up to $15 million above amounts accrued, excluding interest and penalties.
- After quarter-end, AMN completed its $42.5 million cash acquisition of Synzi and SnapMD on April 7, 2021. It had borrowed $45 million under the revolver on March 30 to fund the acquisition.
- AMN deferred $48.2 million of employer payroll taxes under the CARES Act, with half due by the end of 2021 and half by the end of 2022. Management said COVID-19 had not materially affected its estimates as of March 31, but those estimates could change.
Important facts for investors to verify
- Whether unusually high nurse demand and bill rates persist, and how their decline affects revenue growth and gross margins.
- Whether the substantial receivables increase converts to cash on schedule, and whether DSO or customer collection risk worsens.
- The ultimate exposure and timing in the Clarke and related wage-and-hour litigation, including any appeal and potential loss above recorded accruals.
- Post-acquisition performance of Synzi and SnapMD, and revolver usage and total debt following the acquisition.
- Whether COVID-related demand, vaccination work, client healthcare utilization and clinician availability develop as management described.