AMN Healthcare Services, Inc. — FY2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. The filing also reports unaudited fourth-quarter results. AMN provides healthcare staffing and workforce solutions, including temporary and permanent placement, managed services, language interpretation, and workforce technology.
Financial performance
| Metric | FY2020 | FY2019 | Change |
|---|---|---|---|
| Revenue | $2,393.7 million | $2,222.1 million | Up 8%; excluding acquisition revenue, down 1% |
| Gross profit / margin | $791.8 million / 33.1% | $743.5 million / 33.5% | Profit up 6%; margin down 0.4 percentage points |
| Operating income / margin | $149.3 million / 6.2% | $176.9 million / 8.0% | Down 16% |
| Net income | $70.7 million | $114.0 million | Down 38% |
| Diluted EPS | $1.48 | $2.40 | Down 38% |
| Operating cash flow | $256.8 million | $224.9 million | Up $32.0 million |
| Capital expenditures | $37.7 million | $35.2 million | Up $2.5 million |
Revenue growth reflected $194.2 million of incremental revenue from acquisitions and stronger nurse and allied staffing, partly offset by lower physician and leadership revenue. Higher amortization, acquisition and integration expenses, legal costs, and interest expense weighed on earnings. Consolidated gross margin declined primarily because of lower nurse staffing bill-to-pay spreads and higher workers’ compensation costs.
Fourth quarter: Revenue was $631.3 million versus $586.9 million in Q4 2019. Gross profit was $207.5 million versus $197.1 million; net income was $9.3 million versus $27.5 million. Q4 2020 earnings included a $20.0 million increase in legal accruals.
Segments and material changes
- Nurse and allied solutions: Revenue increased 9% to $1,699.3 million. Excluding the Advanced acquisition, average bill rates rose approximately 15%, while average professionals on assignment declined 12%; labor disruption revenue fell approximately $29 million.
- Physician and leadership solutions: Revenue decreased 17% to $466.6 million, mainly due to COVID-related cancellations and delayed hiring. Locum tenens days filled fell 13%.
- Technology and workforce solutions: Revenue increased 135% to $227.8 million, largely from Stratus Video, b4health, and Silversheet acquisitions and organic VMS growth.
- MSP arrangements accounted for approximately 50% of consolidated revenue, compared with 45% in 2019. Kaiser Foundation Hospitals and affiliates represented approximately 14% of consolidated revenue.
- The company acquired Stratus Video for approximately $485.6 million in February 2020. Its year-end balance sheet included $864.5 million of goodwill and $564.9 million of net intangible assets; no impairment was recorded.
Liquidity, debt, and capital resources
Cash and cash equivalents were $29.2 million at year-end, down from $83.0 million; cash, cash equivalents, and restricted cash totaled $84.0 million. Current assets were $533.7 million and current liabilities were $423.0 million. Operating cash flow was $256.8 million; investing cash outflow was $538.2 million, including $476.5 million for acquisitions; financing cash inflow was $211.5 million.
Debt carrying value, net of unamortized fees and premium, was $862.6 million, versus $617.2 million a year earlier. At year-end, principal outstanding included $500 million of 4.625% notes due 2027, $350 million of 4.000% notes due 2029, and $21.9 million under the additional term loan. The company redeemed its $325 million 5.125% notes due 2024 and reported $378.1 million of available Senior Credit Facility capacity, after letters of credit. The term loan was repaid in January 2021. Management said cash from operations and available borrowing capacity should be sufficient for operations and expected capital expenditures for the next 12 months and beyond. Debt covenants restrict certain actions; the company reported compliance at year-end.
Outlook, commentary, and key risks
- Management provided no formal financial guidance in the supplied filing text. It reported historically high nurse and certain allied demand in December 2020, followed by a decline as COVID-19 hospitalizations eased; bill rates remained above historical levels but had begun to trend down.
- Healthcare utilization remained below pre-pandemic levels for many services, weighing on several business lines. Management expected vaccination-site staffing and management support to continue through all or most of 2021, while noting that the pandemic’s duration and business effects remained uncertain.
- COVID-19 risks include demand volatility, clinician burnout and staffing constraints, workers’ compensation and health costs, and client payment delays. The allowance for credit losses on accounts receivable rose to $7.0 million from $3.3 million.
- In February 2021, the Ninth Circuit reversed summary judgment for AMN in the Clarke wage-and-hour matter and remanded the case. AMN said it intended to appeal. The company recorded an additional $20.0 million accrual in Q4 2020 and disclosed possible losses of up to $15.0 million beyond amounts accrued, excluding interest and penalties.
- Other material risks include reliance on Kaiser, competition for clinicians, client consolidation and pricing pressure, regulatory and worker-classification exposure, cybersecurity and technology disruption, and substantial debt and interest-rate exposure.
Investor verification priorities
- Review the legal accrual, the Clarke and related wage-and-hour cases, and the disclosed potential additional loss of up to $15.0 million.
- Assess whether nurse demand and bill rates remain elevated, and how quickly they normalize as COVID-19 conditions change.
- Verify acquisition contribution, integration costs, and the assumptions supporting Stratus Video’s intangible asset valuations and goodwill.
- Monitor debt balances, covenant headroom, available revolver capacity, and debt-service costs after the 2020 refinancing activity.
- Track Kaiser’s 14% revenue concentration, receivable collection trends, and workers’ compensation and other insurance reserves.