AMN Healthcare Services, Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Unaudited results; comparisons are with the corresponding 2022 periods. AMN provides healthcare staffing and workforce solutions through nurse and allied, physician and leadership, and technology and workforce solutions segments.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $991.3 million | $1,426.6 million | $2,117.5 million | $2,979.1 million |
| Gross profit / margin | $330.3 million / 33.3% | $460.2 million / 32.3% | $699.1 million / 33.0% | $956.4 million / 32.1% |
| Operating income / margin | $91.7 million / 9.2% | $183.5 million / 12.9% | $217.3 million / 10.3% | $391.5 million / 13.1% |
| Net income | $60.9 million | $123.8 million | $145.0 million | $269.8 million |
| Diluted EPS | $1.55 | $2.77 | $3.58 | $5.87 |
Q2 revenue declined 31% year over year, while net income fell about 51%. For the first half, revenue declined 29% and net income 46%. Gross margin improved in both periods, but operating and net margins contracted as lower revenue and higher SG&A, depreciation and amortization, and interest costs weighed on results. Q2 SG&A was $201.8 million, or 20.4% of revenue, versus $244.4 million, or 17.1%, a year earlier.
- Segment trends, Q2: Nurse and allied revenue fell 37% to $689.0 million, primarily reflecting lower bill rates, fewer travelers, reduced billable hours, and less labor-disruption work. Physician and leadership revenue was nearly flat at $176.2 million; locum tenens grew about 15%, offset by declines in interim leadership and search. Technology and workforce revenue fell 16% to $126.1 million: VMS declined 38%, while language services grew 19%.
- First-half segment revenue: Nurse and allied fell 35% to $1,513.5 million; physician and leadership fell 4% to $342.0 million; technology and workforce fell 11% to $262.0 million.
Cash flow, debt and liquidity
- First-half operating cash flow was $241.1 million, down from $424.7 million. Investing used $54.9 million, including $43.9 million of capital expenditures; financing used $247.7 million.
- At June 30, cash and cash equivalents were $7.0 million; current assets were $807.2 million and current liabilities $673.7 million. Restricted cash and investments were reported separately and are not all freely available.
- Debt included $190.0 million drawn on the revolving facility and $850.0 million principal on senior notes ($500.0 million due 2027 and $350.0 million due 2029). The $750.0 million secured revolver had $539.2 million available. Its maturity was extended to February 2028.
- AMN repurchased $424.7 million of shares in the first half, including a $200.0 million accelerated share repurchase (ASR) funded with revolver borrowings. The ASR’s final share or cash settlement remained pending.
Outlook, commentary and risks
- Management said travel nurse demand remained below pre-pandemic levels as healthcare clients hired permanent staff and reduced contingent-labor use. Nurse and allied bill rates declined year over year and quarter over quarter; management expected rates and clinician compensation to stabilize in 2023 above pre-pandemic levels.
- Management expected strong locum tenens demand to continue in Q3 2023. Interim leadership and search demand was weaker. Language-services utilization increased, but competitive pressures caused significant margin compression; VMS was expected to track nurse and allied trends.
- No consolidated revenue or earnings guidance is provided in the filing. Management estimated a 27% annual effective tax rate for 2023.
- Credit risk increased: the allowance for credit losses was $36.4 million, up from $31.9 million at year-end. The filing cites concern about a specific customer’s ability to pay and broader macroeconomic uncertainty.
- AMN had accrued $62.0 million for the Clarke wage-and-hour matter and was awaiting court approval of a settlement. A separate Woehrle settlement received court approval and was paid in Q2. The filing also identifies staffing demand, client cost-containment, recruitment and retention, technology and cybersecurity, legal exposure, and debt as risks.
Investor verification priorities
- Track travel nurse volumes and bill rates, and whether demand stabilizes as management anticipated.
- Verify segment-level recovery or further weakness, especially in VMS, language-services margins, and physician staffing.
- Monitor customer collections, the specific customer credit exposure, and operating cash flow conversion.
- Review revolver utilization, debt costs, and the final settlement of the $200 million ASR.
- Confirm court approval and final cost of the Clarke settlement, and monitor other legal and insurance contingencies.