AMN Healthcare Services, Inc. — Q3 2021 Form 10-Q
Business and period: Healthcare staffing and workforce-solutions provider, reporting the three and nine months ended September 30, 2021. Comparisons are with the corresponding 2020 periods. Figures below are in millions except per-share amounts.
Financial performance
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Revenue | $877.8 | $551.6 | $2,621.2 | $1,762.4 |
| Gross profit / margin | $305.9 / 34.8% | $184.6 / 33.5% | $875.3 / 33.4% | $584.2 / 33.1% |
| Operating income / margin | $105.8 / 12.1% | $46.5 / 8.4% | $309.4 / 11.8% | $120.6 / 6.8% |
| Net income | $74.0 | $26.1 | $211.2 | $61.4 |
| Diluted EPS | $1.54 | $0.55 | $4.40 | $1.29 |
Revenue rose 59% in Q3 and 49% year to date; net income rose 184% and 244%, respectively. Q3 revenue growth was broad-based: nurse and allied solutions +64%, physician and leadership +38%, and technology and workforce solutions +67%. Higher traveler counts, bill rates, labor-disruption work, and technology/workforce services contributed. Nurse and allied remained the largest segment, at $627.0 million of Q3 revenue.
Cash flow and liquidity: Nine-month operating cash flow was $227.4 million versus $217.0 million. Investing used $79.0 million, including $38.7 million of capital expenditures and $41.3 million for acquisitions; financing used $31.2 million. Cash and cash equivalents were $137.0 million at September 30, versus $29.2 million at year-end 2020. DSO was 60 days, compared with 55 at year-end. Management said operating cash generation and available revolver borrowings should fund operations and expected capital expenditures for at least 12 months.
Debt: Notes payable had a carrying amount of $842.0 million. The company had $500 million of 4.625% notes due 2027 and $350 million of 4.000% notes due 2029 outstanding. No revolver amount was drawn; $379.2 million was available. The $250 million term loan was repaid in Q1.
Changes, outlook, and notable items
- Margins improved year over year, particularly in Q3, aided by labor-disruption revenue, a favorable workers’ compensation reserve adjustment, and a greater contribution from higher-margin technology and workforce solutions. Nine-month SG&A declined to 18.8% of revenue from 22.4%.
- Management described staffing demand as historically high and above pre-pandemic levels across segments. Nurse supply constraints, burnout, attrition, and elevated wages and bill rates limited the ability to fully meet demand. Management expected strong ongoing demand in several businesses but provided no numerical financial guidance.
- Synzi and SnapMD were acquired in April 2021 for approximately $42.1 million net of a working-capital settlement. The acquisition added $28.1 million of goodwill and $12.4 million of identified intangible assets.
- A San Diego office lease modification included a $17.0 million termination fee; remaining payments under the modified terms are $9.6 million, compared with $62.5 million before modification.
- The company reported $48.5 million of deferred employer payroll taxes under the CARES Act, with half due by the end of 2021 and half by the end of 2022.
- Wage-and-hour litigation remains a contingency. In the Clarke matter, the Ninth Circuit ruled against the company on per-diem overtime claims; the company petitioned the U.S. Supreme Court. The filing says a loss could be up to $15 million above amounts accrued, excluding penalties. A separate Woehrle matter had a preliminary settlement agreement, with final settlement not expected until Q4 2022.
- COVID-19 effects, staffing availability and costs, client payment/collection risk, litigation, technology and cybersecurity, acquisition execution, and indebtedness are among the disclosed risks. No material goodwill or other impairment charges were recorded in the first nine months.
Investor verification points
- Check whether elevated temporary-staffing demand and bill rates persist, and whether AMN can recruit enough clinicians to meet demand without margin pressure.
- Monitor receivables, DSO, and working-capital needs as revenue and subcontractor usage grow.
- Track the Clarke and Woehrle proceedings, settlement timing, and any changes to accrued or potential losses.
- Review debt maturities, revolver availability, and the planned repayment timing for deferred payroll taxes.
- Assess the contribution and integration of Synzi/SnapMD and whether recent earnings benefited from unusual reserve adjustments or other nonrecurring items.