AMN Healthcare Services, Inc. — Q1 2024 Form 10-Q
Reporting period: Three months ended March 31, 2024. AMN provides technology-enabled healthcare workforce solutions and staffing through nurse and allied, physician and leadership, and technology and workforce solutions segments. Unless noted, financial amounts below are in millions of dollars.
Financial results
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Revenue | $820.9 | $1,126.2 | Down 27% |
| Gross profit / margin | $257.5 / 31.4% | $368.8 / 32.8% | Profit down 30%; margin down 1.4 points |
| Operating income / margin | $39.9 / 4.9% | $125.7 / 11.2% | Income down 68% |
| Net income | $17.3 | $84.1 | Down 79% |
| Diluted EPS | $0.45 | $2.02 | Down 78% |
| Operating cash flow | $81.4 | $43.4 | Up $38.0 |
Cost of revenue was 68.6% of revenue versus 67.2% a year earlier. SG&A declined to $174.8 million from $205.6 million, but rose as a share of revenue to 21.3% from 18.3%. Interest expense, net, and other increased to $16.6 million from $10.3 million, primarily due to higher average debt outstanding. The effective tax rate was 26%; management estimates an approximately 31% annual effective tax rate for 2024.
Segment performance and material changes
| Segment | Revenue | Year-over-year change | Segment operating income |
|---|---|---|---|
| Nurse and allied solutions | $519.3 | Down 37% | $53.3, versus $113.4 |
| Physician and leadership solutions | $188.8 | Up 14% | $22.2, versus $25.1 |
| Technology and workforce solutions | $112.8 | Down 17% | $44.3, versus $67.0 |
The nurse and allied decline reflected a 24% decrease in average travelers on assignment, an approximately 15% decrease in average bill rates, and a 3% decrease in billable hours. Locum tenens revenue grew approximately 36%, including $37.1 million from the MSDR acquisition; organic days filled fell 8%, while organic revenue per day filled rose 10%. Language services revenue grew 16%, while VMS revenue declined 46%. Segment operating income is a company-defined measure and is not consolidated operating income.
Consolidated gross margin contracted primarily from lower VMS contribution and higher clinician compensation. The November 2023 MSDR acquisition affects year-over-year comparability and added locum tenens revenue; its preliminary purchase accounting included $179.0 million of goodwill.
Cash, debt and liquidity
- Operating cash flow was $81.4 million; investing cash outflow was $21.4 million and financing cash outflow was $39.0 million. Capital expenditures were $18.1 million. Operating cash flow less capital expenditures was approximately $63.2 million.
- Cash and cash equivalents were $50.6 million at quarter-end. Cash, cash equivalents and restricted cash reported for cash-flow purposes totaled $129.3 million; this excludes $14.4 million of restricted investments.
- Debt included $425.0 million drawn on the $750.0 million secured revolving facility and $850.0 million principal amount of senior notes: $500.0 million due 2027 and $350.0 million due 2029. The filing reports $304.2 million of available revolver capacity. Revolver maturity is February 2028.
- Accounts receivable, net, was $578.6 million; DSO was 64 days, compared with 70 days at December 31, 2023 and 55 days a year earlier. Management believes operating cash flow and available revolver borrowings will meet operating and liquidity needs, including expected capital expenditures, for the next 12 months and beyond.
Outlook, risks and contingencies
The filing provides no quantitative revenue or earnings guidance. Management reported that travel nurse demand remained below pre-pandemic levels and continued to decline; allied demand remained above pre-pandemic levels, with strength in some therapy and imaging specialties. Locum tenens demand declined, interim leadership demand was leveling out, and permanent placement and executive search demand remained soft. Language services utilization and new-client growth were positive, while VMS volumes and bill rates weakened.
Key risks include continued healthcare-client cost containment and reduced contingent staffing, recruiting and retention challenges, client payment and concentration risks, technology and cybersecurity incidents, regulatory and employment-related claims, acquisition integration, impairment of goodwill or intangibles, debt and interest-rate exposure, and changes in insurance accruals. The company reported no material change to the risk factors in its 2023 Form 10-K.
AMN recorded a $62.0 million accrual for the Clarke wage-and-hour matter settlement; preliminary approval was received in Q4 2023, and the company expected final approval at the end of Q2 2024. The filing states that possible loss beyond the amount accrued cannot currently be estimated. No material impairment charges were recorded in the quarter. Disclosure controls were assessed as effective, with no material change in internal control over financial reporting reported.
Important facts for investors to verify
- Whether staffing demand, bill rates and margins stabilize, particularly in travel nursing and VMS.
- Whether the Clarke settlement receives final approval and whether additional exposure arises beyond the $62.0 million accrual.
- MSDR’s ongoing contribution to revenue, margins, cash generation and debt levels, and finalization of its purchase accounting.
- Revolver availability, debt-service capacity and cash conversion, including the effect of working-capital timing.
- Progress toward the approximately 31% estimated 2024 tax rate and the factors behind quarterly discrete tax benefits.