AMN Healthcare Services, Inc. — FY 2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. This is an annual filing; the provided filing text does not give a separate standalone fourth-quarter income statement.
Business context
AMN provides healthcare staffing, talent planning and acquisition, and workforce technology services. Its three reportable segments are nurse and allied solutions; physician and leadership solutions; and technology and workforce solutions. Temporary staffing and related services remain the largest part of the business, while MSP relationships accounted for approximately 56% of consolidated revenue, up from 50% in 2020.
Financial performance
Amounts below are in millions, except per-share data and percentages.
| Metric | FY 2021 | FY 2020 |
|---|---|---|
| Revenue | $3,984.2 | $2,393.7 |
| Gross profit / gross margin | $1,309.6 / 32.9% | $791.8 / 33.1% |
| Operating income / operating margin | $478.0 / 12.0% | $149.3 / 6.2% |
| Net income / net margin | $327.4 / 8.2% | $70.7 / 3.0% |
| Diluted earnings per share | $6.81 | $1.48 |
| Cash from operating activities | $305.4 | $256.8 |
| Cash used in investing activities | $107.4 | $538.2 |
| Cash from (used in) financing activities | $(34.9) | $211.5 |
- Revenue increased 66%, primarily from organic growth across segments and $23.4 million of additional revenue from the Stratus Video, Synzi and SnapMD acquisitions.
- Nurse and allied revenue was $2,990.1 million, up 76%; physician and leadership revenue was $594.2 million, up 27%; technology and workforce revenue was $399.9 million, up 76%.
- Nurse and allied growth reflected approximately 31% higher average bill rates, 28% more travelers on assignment, and a $103.0 million increase in labor disruption revenue. The segment represented 75% of company revenue, versus 71% in 2020.
- Gross margin edged down to 32.9% from 33.1%, reflecting segment and service mix. SG&A declined to 18.3% of revenue from 23.0%, supporting higher operating margin.
Financial position, debt and liquidity
- At December 31, 2021, cash and cash equivalents were $180.9 million; current assets were $1,349.1 million and current liabilities were $969.4 million.
- Notes payable, net of unamortized fees and premium, totaled $842.3 million. Principal debt was $500 million of 4.625% notes due 2027 and $350 million of 4.000% notes due 2029. No term-loan balance remained.
- The $400 million secured revolving facility had $378.6 million available after letters of credit at year-end and matures in February 2025. Management said operating cash flow and available borrowing capacity should cover expected needs for the next 12 months and beyond.
- Operating cash flow increased year over year, while accounts receivable rose substantially with higher revenue and subcontractor usage. Days sales outstanding improved to 53 from 55.
- Capital expenditures were $53.6 million, mainly for technology and systems. Acquisition cash spending was $41.3 million, compared with $476.5 million in 2020.
Material changes, outlook and notable items
- Management reported historically high nurse and allied demand during 2021, with demand across segments above pre-pandemic levels. Nurse wages and client bill rates remained well above prior-year levels amid labor shortages and clinician attrition.
- Management expects demand and bill rates, particularly in nurse and allied solutions, to decline from pandemic-era highs as the pandemic subsides, but expects demand to remain above pre-pandemic levels. The filing provides no quantitative earnings or revenue guidance.
- Labor disruption services generated $110.5 million in 2021, compared with $7.1 million in 2020. These services can require rapid deployment and involve substantial client deposits and working-capital movements.
- AMN acquired virtual-care businesses Synzi and SnapMD in April 2021 for an initial cash purchase price of $42.2 million. The acquisition added $27.2 million of goodwill.
- The company paid a $17.0 million fee to modify and terminate portions of its San Diego office lease; the modification reduced remaining lease payments. It also changed the useful lives of certain trade names, including $89.4 million of assets previously treated as indefinite-lived, increasing future amortization.
- The company accrued $37.2 million for significant wage-and-hour matters. A separate class action had a preliminary settlement agreement, with final settlement not expected until the fourth quarter of 2022; the company said it could not estimate possible losses beyond recorded accruals.
- Kaiser Foundation Hospitals and affiliates represented approximately 17% of consolidated revenue, up from 14% in 2020. This concentration makes retention and service levels for that client material to results.
- The board increased the share-repurchase authorization by $150 million in November 2021 and approved a further $300 million increase in February 2022. The company repurchased $2.7 million of shares during 2021; it does not currently expect to pay cash dividends.
Risks and controls
Key risks include a post-pandemic decline in staffing demand or bill rates; clinician shortages, burnout and wage inflation; client and Kaiser concentration; pricing pressure and healthcare-system consolidation; employment classification, wage-and-hour and malpractice claims; cybersecurity, privacy and technology disruptions; and debt covenant, interest-rate and liquidity risks. AMN reported compliance with its credit-agreement financial tests at year-end. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting. The audit identified the $41.7 million professional-liability reserve, particularly incurred-but-not-reported claims, as a critical audit matter involving significant estimation judgment.
Important facts for investors to verify
- Whether elevated nurse staffing demand, bill rates and wages persist, and how quickly they normalize as COVID-related demand recedes.
- Whether the large receivables and subcontractor balances convert to cash as expected, given the substantial increase in revenue and vendor usage.
- Progress and final outcomes of the Clarke and Woehrle wage-and-hour matters, including whether liabilities exceed the $37.2 million accrued.
- Exposure to Kaiser, which contributed about 17% of revenue, and the effect of client concentration or contract changes.
- Debt maturities, facility availability, covenant headroom and the company’s capital allocation decisions, including subsequent share repurchases.
- Performance and integration of acquisitions, as well as future amortization expense following the trade-name useful-life revisions.