AMN Healthcare Services, Inc. — FY 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022. This annual filing reports full-year results, not standalone fourth-quarter results. Amounts are in U.S. dollars.
Business context
AMN provides healthcare staffing, managed workforce programs, recruitment, language interpretation, and workforce technology services. Its three reportable segments are nurse and allied solutions; physician and leadership solutions; and technology and workforce solutions. Approximately 64% of consolidated revenue flowed through managed services program (MSP) relationships in 2022. Kaiser Foundation Hospitals and affiliates represented approximately 18% of consolidated revenue.
Key financial results
| Metric | FY 2022 | FY 2021 |
|---|---|---|
| Revenue | $5.243 billion | $3.984 billion |
| Gross profit / margin | $1.717 billion / 32.7% | $1.310 billion / 32.9% |
| Income from operations / margin | $647.1 million / 12.3% | $478.0 million / 12.0% |
| Net income / margin | $444.1 million / 8.5% | $327.4 million / 8.2% |
| Diluted EPS | $9.90 | $6.81 |
| Net cash from operating activities | $653.7 million | $305.4 million |
| Capital expenditures | $75.8 million | $53.6 million |
Revenue rose 32%, and net income rose 36%. Nurse and allied revenue increased 33% to $3.983 billion; physician and leadership revenue increased 17% to $697.9 million; technology and workforce revenue increased 41% to $562.8 million. Growth in nurse and allied solutions reflected a 23% increase in average travelers on assignment and approximately 14% higher average bill rates, partly offset by 2% fewer billable hours.
Consolidated gross margin edged down from 32.9% to 32.7%. Management attributed pressure primarily to higher clinician compensation and segment mix, partly offset by improved technology and workforce solutions margins. SG&A was $936.6 million, or 17.9% of revenue, versus $730.5 million, or 18.3%, in 2021. The 2022 credit-loss provision increased substantially, primarily due to concerns about a specific customer and broader collection uncertainty.
Balance sheet, debt and liquidity
At December 31, 2022, cash and cash equivalents were $64.5 million, down from $180.9 million a year earlier. Total assets were $2.888 billion; current assets were $1.094 billion and current liabilities $857.9 million. Debt principal totaled $850 million: $500 million of 4.625% notes due 2027 and $350 million of 4.000% notes due 2029. Carrying debt, net of unamortized fees and premium, was $843.5 million. The $400 million revolving facility had no borrowings at year-end and $378.6 million available after letters of credit.
Cash used in financing was $591.9 million, principally reflecting $576.8 million of share repurchases. Operating cash flow increased substantially year over year, although the comparison was affected by prior-year working-capital movements and timing of collections and payments. Management said operating cash flow and available credit should fund operations and liquidity needs for the next 12 months and beyond.
Changes, outlook and notable items
- Nurse wages and bill rates peaked in the first quarter of 2022 and declined during the remainder of the year, while remaining above prior-year and pre-pandemic levels. Management expected them to stabilize above pre-pandemic levels entering 2023.
- Management reported continued strong locum tenens demand and expected strength in the first quarter of 2023. Interim leadership demand softened in the second half of 2022. Recruitment process outsourcing demand remained strong.
- The filing provides no quantified full-year 2023 revenue or earnings guidance. Management’s demand and rate commentary is directional, not formal financial guidance.
- AMN acquired Connetics in May 2022 for an initial purchase price of approximately $78.8 million, including estimated contingent consideration, expanding international nurse and allied permanent-placement services.
- In February 2023, after year-end, AMN amended its credit agreement: the revolving facility increased to $750 million, maturity extended to February 2028, and the facility transitioned to SOFR-based pricing. AMN also authorized an additional $500 million of repurchases and reported $100.0 million of repurchases through February 22, 2023.
- Legal contingencies included wage-and-hour class actions. Accruals for the cited matters totaled $46.2 million; the company said it could not estimate possible losses beyond accrued amounts. A separate travel-nurse matter had a settlement agreement awaiting court approval.
- Professional liability reserves totaled $44.0 million. KPMG identified the reserve, particularly estimates for incurred-but-not-reported claims, as a critical audit matter. KPMG issued unqualified opinions on the financial statements and internal control over financial reporting.
Principal risks
Key risks include normalization or further declines in staffing demand and bill rates; hospital cost pressures and pricing negotiations; clinician recruitment and retention; customer concentration, including Kaiser; customer credit and collection risk; employment, wage-and-hour, malpractice and other litigation; healthcare staffing regulation and independent-contractor classification; cybersecurity and technology outages; and debt service, variable-rate exposure and covenant restrictions. The company reported compliance with credit-agreement financial tests at year-end.
Facts investors should verify
- Whether staffing volumes, bill rates and clinician compensation stabilized as management expected, and how those trends affected margins after year-end.
- The specific-customer credit exposure, the elevated credit-loss allowance, and subsequent collections and days sales outstanding.
- Kaiser’s ongoing revenue contribution and the potential financial impact of any reduction in that relationship.
- Current debt, revolver availability, SOFR borrowing costs, covenant headroom and the cash allocation trade-off between repurchases, acquisitions and debt reduction.
- Developments in wage-and-hour litigation, professional liability claims and the assumptions underlying related reserves.
- Post-year-end results and integration progress for Connetics, as well as the realized returns on substantial 2022 share repurchases.