UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
____________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2024
| OR | |||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File No.: 001-16753
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||
Registrant’s Telephone Number, Including Area Code: (866 ) 871-8519
____________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | ||||||||||||||||||||||
| Smaller reporting company | Emerging growth company | |||||||||||||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No x
As of May 7, 2024, there were 37,997,167 shares of common stock, $0.01 par value, outstanding.
Auditor Name: KPMG LLP Auditor Location: San Diego, California Auditor Firm ID: 185
TABLE OF CONTENTS
| Item | Page | |||||||
| PART I - FINANCIAL INFORMATION | ||||||||
| 1. | ||||||||
| 2. | ||||||||
| 3. | ||||||||
| 4. | ||||||||
| PART II - OTHER INFORMATION | ||||||||
| 1. | ||||||||
| 1A. | ||||||||
| 2. | ||||||||
| 3. | ||||||||
| 4. | ||||||||
| 5. | ||||||||
| 6. | ||||||||
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except par value)
| March 31, 2024 | December 31, 2023 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowances of $ | |||||||||||
| Accounts receivable, subcontractor | |||||||||||
| Prepaid expenses | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Restricted cash, cash equivalents and investments | |||||||||||
Fixed assets, net of accumulated depreciation of $ | |||||||||||
| Other assets | |||||||||||
| Goodwill | |||||||||||
Intangible assets, net of accumulated amortization of $ | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued expenses | $ | $ | |||||||||
| Accrued compensation and benefits | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Revolving credit facility | |||||||||||
| Notes payable, net of unamortized fees and premium | |||||||||||
| Deferred income taxes, net | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
Treasury stock, at cost; | ( | ( | |||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
1
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited and in thousands, except per share amounts)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenue | $ | $ | |||||||||
| Cost of revenue | |||||||||||
| Gross profit | |||||||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative | |||||||||||
| Depreciation and amortization (exclusive of depreciation included in cost of revenue) | |||||||||||
| Total operating expenses | |||||||||||
| Income from operations | |||||||||||
| Interest expense, net, and other | |||||||||||
| Income before income taxes | |||||||||||
| Income tax expense | |||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income: | |||||||||||
| Unrealized gains on available-for-sale securities, net, and other | |||||||||||
| Other comprehensive income | |||||||||||
| Comprehensive income | $ | $ | |||||||||
| Net income per common share: | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | $ | $ | |||||||||
| Weighted average common shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
2
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited and in thousands)
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | ( | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock | — | — | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Equity awards vested, net of shares withheld for taxes | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | ( | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2023 | $ | $ | ( | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Equity awards vested, net of shares withheld for taxes | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
Shares purchased under employee stock purchase plan | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | ( | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization (inclusive of depreciation included in cost of revenue) | |||||||||||
| Non-cash interest expense and other | |||||||||||
| Change in fair value of contingent consideration liabilities | |||||||||||
| Increase in allowance for credit losses and sales credits | |||||||||||
| Provision for deferred income taxes | ( | ( | |||||||||
| Share-based compensation | |||||||||||
| Loss on disposal or impairment of long-lived assets | |||||||||||
| Net loss on investments in available-for-sale securities | |||||||||||
| Net loss (gain) on deferred compensation balances | ( | ||||||||||
| Non-cash lease expense | ( | ( | |||||||||
| Changes in assets and liabilities, net of effects from acquisitions: | |||||||||||
| Accounts receivable | ( | ||||||||||
| Accounts receivable, subcontractor | ( | ||||||||||
| Income taxes receivable | |||||||||||
| Prepaid expenses | ( | ( | |||||||||
| Other current assets | ( | ||||||||||
| Other assets | |||||||||||
| Accounts payable and accrued expenses | ( | ( | |||||||||
| Accrued compensation and benefits | ( | ( | |||||||||
| Other liabilities | ( | ||||||||||
| Deferred revenue | |||||||||||
| Net cash provided by operating activities | |||||||||||
Cash flows from investing activities: | |||||||||||
| Purchase and development of fixed assets | ( | ( | |||||||||
| Proceeds from sale and maturity of investments | |||||||||||
| Payments to fund deferred compensation plan | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
4
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
Cash flows from financing activities: | |||||||||||
| Payments on revolving credit facility | ( | ( | |||||||||
| Proceeds from revolving credit facility | |||||||||||
Repurchase of common stock (1) | ( | ||||||||||
| Payment of financing costs | ( | ||||||||||
| Cash paid for shares withheld for taxes | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | ( | ||||||||||
| Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | |||||||||
Cash paid for interest (net of $ | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Supplemental disclosures of non-cash investing and financing activities: | |||||||||||
| Purchase of fixed assets recorded in accounts payable and accrued expenses | $ | $ | |||||||||
| Excise tax payable on share repurchases | $ | $ | |||||||||
| Right-of-use assets obtained in exchange for operating lease liabilities | $ | $ | |||||||||
(1) The difference between the amount reported for the three months ended March 31, 2023 and the corresponding amount presented in the condensed consolidated statements of stockholders’ equity is due to accrued excise tax payable on share repurchases recorded within treasury stock.
See accompanying notes to unaudited condensed consolidated financial statements.
5
AMN HEALTHCARE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheets and related condensed consolidated statements of comprehensive income, stockholders’ equity and cash flows contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”), which are unaudited, include the accounts of AMN Healthcare Services, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all entries necessary for a fair presentation of such unaudited condensed consolidated financial statements have been included. These entries consisted of all normal recurring items. The results of operations for the interim period are not necessarily indicative of the results to be expected for any other interim period or for the entire fiscal year or for any future period.
The unaudited condensed consolidated financial statements do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). Please refer to the Company’s audited consolidated financial statements and the related notes for the fiscal year ended December 31, 2023, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission on February 22, 2024 (the “2023 Annual Report”).
The preparation of financial statements in conformity with U.S. GAAP requires management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, the Company evaluates its estimates, including those related to goodwill and intangible assets purchased in a business combination, asset impairments, accruals for self-insurance, contingent liabilities such as legal accruals, and income taxes. The Company bases these estimates on the information that is currently available and on various other assumptions that it believes are reasonable under the circumstances. Actual results could differ from those estimates under different assumptions or conditions.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments and restricted investments with an original maturity of three months or less to be cash equivalents and restricted cash equivalents, respectively. Cash and cash equivalents include currency on hand, deposits with financial institutions, money market funds and other highly liquid investments. Restricted cash and cash equivalents primarily include cash, corporate bonds and commercial paper that serve as collateral for the Company’s captive insurance subsidiary claim payments. See Note (7), “Fair Value Measurement” for additional information.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying condensed consolidated balance sheets and related notes to the amounts presented in the accompanying condensed consolidated statements of cash flows.
| March 31, 2024 | December 31, 2023 | ||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash and cash equivalents (included in other current assets) | |||||||||||
| Restricted cash, cash equivalents and investments | |||||||||||
| Total cash, cash equivalents and restricted cash and investments | |||||||||||
| Less restricted investments | ( | ( | |||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
The Company maintains its cash and restricted cash in bank deposit accounts primarily at large, national financial institutions, which typically exceed federally insured limits. The Company has not experienced any losses in such accounts.
Accounts Receivable
The Company records accounts receivable at the invoiced amount. Accounts receivable are non-interest bearing. The Company maintains an allowance for expected credit losses based on the Company’s historical write-off experience, an
6
assessment of its customers’ financial conditions and available information that is relevant to assessing the collectability of cash flows, which includes current conditions and forecasts about future economic conditions.
The following table provides a reconciliation of activity in the allowance for credit losses for accounts receivable:
| 2024 | 2023 | ||||||||||
| Balance as of January 1, | $ | $ | |||||||||
| Provision for expected credit losses | |||||||||||
| Amounts written off charged against the allowance | ( | ( | |||||||||
| Balance as of March 31, | $ | $ | |||||||||
2. ACQUISITIONS
The Company accounted for the acquisition set forth below using the acquisition method of accounting. Accordingly, the Company recorded the tangible and intangible assets acquired and liabilities assumed at their estimated fair values as of the date of acquisition. Since the date of acquisition, the Company has revised the allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on the analysis of the information that has been made available through March 31, 2024. The goodwill recognized for the acquisition is attributable to expected growth as the Company leverages its brand and diversifies its services offered to clients, including potential revenue growth and margin expansion. The Company did not incur any material acquisition-related costs.
MSDR Acquisition
On November 30, 2023, the Company completed its acquisition of MSI Systems Corp. and DrWanted.com LLC (together, “MSDR”), two healthcare staffing companies that specialize in locum tenens and advanced practice. The initial purchase price of $292,818 consisted entirely of cash consideration paid upon acquisition. The acquisition was funded through borrowings under the Company’s $750,000 secured revolving credit facility (the “Senior Credit Facility”). The results of MSDR have been included in the Company’s physician and leadership solutions segment since the date of acquisition.
The preliminary allocation of the $292,818 purchase price consisted of (1) $45,547 of fair value of tangible assets acquired, which included $643 cash received, (2) $23,707 of liabilities assumed, (3) $92,000 of identified intangible assets, and (4) $178,978 of goodwill, of which $92,438 is deductible for tax purposes. The provisional items include the final working capital settlement and the assessment of additional information to finalize the measurement of certain assets acquired and liabilities assumed, which primarily consist of income tax matters, operating leases and insurance reserves. The intangible assets acquired have a weighted average useful life of approximately seven years . The following table summarizes the fair value and useful life of each intangible asset acquired as of the acquisition date:
| Fair Value | Useful Life | ||||||||||||||||
| (in years) | |||||||||||||||||
| Identifiable intangible assets | |||||||||||||||||
| Customer relationships | $ | ||||||||||||||||
| Tradenames and trademarks | |||||||||||||||||
Staffing databases | |||||||||||||||||
| $ | |||||||||||||||||
7
3. REVENUE RECOGNITION
Revenue primarily consists of fees earned from the temporary staffing and permanent placement of healthcare professionals, executives, and leaders (clinical and operational). The Company also generates revenue from technology-enabled services, including language interpretation and vendor management systems, and talent planning and acquisition services, including recruitment process outsourcing. The Company recognizes revenue when control of its services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services. Revenue from temporary staffing services is recognized as the services are rendered by clinical and non-clinical healthcare professionals. Under the Company’s managed services program (“MSP”) arrangements, the Company manages all or a part of a customer’s supplemental workforce needs utilizing its own network of healthcare professionals along with those of third-party subcontractors. Revenue and the related direct costs under MSP arrangements are recorded in accordance with the accounting guidance on reporting revenue gross as a principal versus net as an agent. When the Company uses subcontractors and acts as an agent, revenue is recorded net of the related subcontractor’s expense. Revenue from permanent placement and recruitment process outsourcing services is recognized as the services are rendered. Depending on the arrangement, the Company’s technology-enabled service revenue is recognized either as the services are rendered or ratably over the applicable arrangement’s service period.
The Company’s customers are primarily billed as services are rendered. Any fees billed in advance of being earned are recorded as deferred revenue. While payment terms vary by the type of customer and the services rendered, the term between invoicing and when payment is due is not significant.
The Company has elected to apply the following practical expedients and optional exemptions related to contract costs and revenue recognition:
•Recognize incremental costs of obtaining a contract with amortization periods of one year or less as expense when incurred. These costs are recorded within selling, general and administrative expenses.
•Recognize revenue in the amount of consideration that the Company has a right to invoice the customer if that amount corresponds directly with the value to the customer of the Company’s services completed to date.
•Exemptions from disclosing the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts for which revenue is recognized in the amount of consideration that the Company has a right to invoice for services performed and (iii) contracts for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation.
See Note (5), “Segment Information,” for additional information regarding the Company’s revenue disaggregated by service type.
4. NET INCOME PER COMMON SHARE
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net income | $ | $ | |||||||||
| Net income per common share - basic | $ | $ | |||||||||
| Net income per common share - diluted | $ | $ | |||||||||
| Weighted average common shares outstanding - basic | |||||||||||
| Plus dilutive effect of potential common shares | |||||||||||
| Weighted average common shares outstanding - diluted | |||||||||||
The dilutive effect of potential shares primarily includes outstanding share-based awards, which consists of restricted stock units, performance restricted stock units, and obligations under the Company’s employee stock purchase plan (the “ESPP”). Share-based awards to purchase 408 and 243 shares of common stock were not included in the above calculation of diluted net income per common share for the three months ended March 31, 2024 and 2023, respectively, because the effect of these instruments was anti-dilutive.
8
5. SEGMENT INFORMATION
The Company’s operating segments are identified in the same manner as they are reported internally and used by the Company’s chief operating decision maker for the purpose of evaluating performance and allocating resources. The Company has three reportable segments: (1) nurse and allied solutions, (2) physician and leadership solutions, and (3) technology and workforce solutions. The nurse and allied solutions segment includes the Company’s travel nurse staffing (including international nurse staffing and rapid response nurse staffing), labor disruption staffing, local staffing, international nurse and allied permanent placement, and allied staffing (including revenue cycle solutions) businesses. The physician and leadership solutions segment includes the Company’s locum tenens staffing, healthcare interim leadership staffing, executive search, and physician permanent placement businesses. The technology and workforce solutions segment includes the Company’s language services, vendor management systems, workforce optimization, and outsourced solutions businesses.
The Company’s chief operating decision maker relies on internal management reporting processes that provide revenue and operating income by reportable segment for making financial decisions and allocating resources. Segment operating income represents income before income taxes plus depreciation, amortization of intangible assets, share-based compensation, interest expense, net, and other, and unallocated corporate overhead. The Company’s management does not evaluate, manage or measure performance of segments using asset information; accordingly, asset information by segment is not prepared or disclosed.
The following table provides a reconciliation of revenue and operating income by reportable segment to consolidated results and was derived from each segment’s internal financial information as used for corporate management purposes:
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Revenue | |||||||||||
| Nurse and allied solutions | $ | $ | |||||||||
| Physician and leadership solutions | |||||||||||
| Technology and workforce solutions | |||||||||||
| $ | $ | ||||||||||
| Segment operating income | |||||||||||
| Nurse and allied solutions | $ | $ | |||||||||
| Physician and leadership solutions | |||||||||||
| Technology and workforce solutions | |||||||||||
| Unallocated corporate overhead | |||||||||||
| Depreciation and amortization | |||||||||||
| Depreciation (included in cost of revenue) | |||||||||||
| Share-based compensation | |||||||||||
| Interest expense, net, and other | |||||||||||
| Income before income taxes | $ | $ | |||||||||
The following table summarizes the activity related to the carrying value of goodwill by reportable segment:
| Nurse and Allied Solutions | Physician and Leadership Solutions | Technology and Workforce Solutions | Total | ||||||||||||||||||||
| Balance, January 1, 2024 | $ | $ | $ | $ | |||||||||||||||||||
| Goodwill adjustment for MSDR acquisition | |||||||||||||||||||||||
| Balance, March 31, 2024 | $ | $ | $ | $ | |||||||||||||||||||
| Accumulated impairment loss as of December 31, 2023 and March 31, 2024 | $ | $ | $ | $ | |||||||||||||||||||
9
Disaggregation of Revenue
The following tables present the Company’s revenue disaggregated by service type:
| Three Months Ended March 31, 2024 | |||||||||||||||||||||||
| Nurse and Allied Solutions | Physician and Leadership Solutions | Technology and Workforce Solutions | Total | ||||||||||||||||||||
| Travel nurse staffing | $ | $ | $ | $ | |||||||||||||||||||
| Labor disruption services | |||||||||||||||||||||||
| Local staffing | |||||||||||||||||||||||
| Allied staffing | |||||||||||||||||||||||
| Locum tenens staffing | |||||||||||||||||||||||
| Interim leadership staffing | |||||||||||||||||||||||
| Temporary staffing | |||||||||||||||||||||||
| Permanent placement | |||||||||||||||||||||||
| Language services | |||||||||||||||||||||||
| Vendor management systems | |||||||||||||||||||||||
| Other technologies | |||||||||||||||||||||||
| Technology-enabled services | |||||||||||||||||||||||
| Talent planning and acquisition | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| Nurse and Allied Solutions | Physician and Leadership Solutions | Technology and Workforce Solutions | Total | ||||||||||||||||||||
| Travel nurse staffing | $ | $ | $ | $ | |||||||||||||||||||
| Labor disruption services | |||||||||||||||||||||||
| Local staffing | |||||||||||||||||||||||
| Allied staffing | |||||||||||||||||||||||
| Locum tenens staffing | |||||||||||||||||||||||
| Interim leadership staffing | |||||||||||||||||||||||
| Temporary staffing | |||||||||||||||||||||||
| Permanent placement | |||||||||||||||||||||||
| Language services | |||||||||||||||||||||||
| Vendor management systems | |||||||||||||||||||||||
| Other technologies | |||||||||||||||||||||||
| Technology-enabled services | |||||||||||||||||||||||
| Talent planning and acquisition | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
10
6. NOTES PAYABLE AND CREDIT AGREEMENT
On February 10, 2023, the Company entered into the third amendment to its credit agreement (the “Third Amendment”). The Third Amendment provides for, among other things, the following: (i) an extension of the maturity date of the Senior Credit Facility to February 10, 2028, (ii) an increase of the Senior Credit Facility from $400,000 to $750,000 , and (iii) a transition from LIBOR to a Secured Overnight Financing Rate (“SOFR”)-based interest rate. Additional information regarding the Senior Credit Facility and the amended credit agreement is disclosed in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of the 2023 Annual Report.
7. FAIR VALUE MEASUREMENT
The Company’s valuation techniques and inputs used to measure fair value and the definition of the three levels (Level 1, Level 2, and Level 3) of the fair value hierarchy are disclosed in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (3), Fair Value Measurement” of the 2023 Annual Report. The Company has not changed the valuation techniques or inputs it uses for its fair value measurement during the three months ended March 31, 2024.
Assets and Liabilities Measured on a Recurring Basis
From time to time, the Company invests a portion of its cash and cash equivalents in non-federally insured money market funds that are measured at fair value based on quoted prices, which are Level 1 inputs.
The Company has a deferred compensation plan for certain executives and employees, which is composed of deferred compensation and all related income and losses attributable thereto. The Company’s obligation under its deferred compensation plan is measured at fair value based on quoted market prices of the participants’ elected investments, which are Level 1 inputs.
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||
| Commercial paper | $ | $ | |||||||||
| Corporate bonds | |||||||||||
| Total classified as restricted cash equivalents | $ | $ | |||||||||
| Commercial paper | $ | $ | |||||||||
| Corporate bonds | |||||||||||
| Total classified as restricted investments | $ | $ | |||||||||
The following table presents information about the above-referenced assets and liabilities and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:
| Fair Value Measurements as of March 31, 2024 | Fair Value Measurements as of December 31, 2023 | ||||||||||||||||||||||||||||||||||||||||||||||
| Assets (Liabilities) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||
| Deferred compensation | $ | ( | $ | $ | $ | ( | $ | ( | $ | $ | $ | ( | |||||||||||||||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||||||||||||||||||||||||||
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Assets Measured on a Non-Recurring Basis
The Company applies fair value techniques on a non-recurring basis associated with identifiable intangible assets acquired through acquisitions and valuing potential impairment losses related to its goodwill, indefinite-lived intangible assets, long-lived assets, and equity investments.
The fair value of identifiable intangible assets are determined using either the income approach (the relief-from-royalty method, multi-period excess earnings method or with-and-without method) or the cost approach (replacement cost method). These valuation approaches use a combination of assumptions, including Level 3 inputs, such as (i) forecasted revenue, growth rates and customer attrition rates, (ii) forecasted operating expenses and profit margins, and (iii) royalty rates and discount rates used to present value the forecasted cash flows.
The Company evaluates goodwill and indefinite-lived intangible assets annually for impairment and whenever events or changes in circumstances indicate that it is more likely than not that an impairment exists. The Company determines the fair value of its reporting units based on a combination of inputs, including the market capitalization of the Company, as well as Level 3 inputs such as discounted cash flows, which are not observable from the market, directly or indirectly. The Company determines the fair value of its indefinite-lived intangible assets using the income approach (relief-from-royalty method) based on Level 3 inputs.
There were no
Fair Value of Financial Instruments
The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even though these instruments are not recognized at fair value in the consolidated balance sheets. The fair value of the Company’s 4.625 % senior notes due 2027 (the “2027 Notes”) and 4.000 % senior notes due 2029 (the “2029 Notes”) was estimated using quoted market prices in active markets for identical liabilities, which are Level 1 inputs. The carrying amounts and estimated fair value of the 2027 Notes and the 2029 Notes are presented in the following table. See additional information regarding the 2027 Notes and the 2029 Notes in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of the 2023 Annual Report.
| As of March 31, 2024 | As of December 31, 2023 | ||||||||||||||||
| Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||
| 2027 Notes | $ | $ | $ | $ | |||||||||||||
| 2029 Notes | |||||||||||||||||
8. INCOME TAXES
The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. With few exceptions, as of March 31, 2024, the Company is no longer subject to state, local or foreign examinations by tax authorities for tax years before 2011, and the Company is no longer subject to U.S. federal income or payroll tax examinations for tax years before 2020.
The Company believes its liability for unrecognized tax benefits and contingent tax issues is adequate with respect to all open years. Notwithstanding the foregoing, the Company could adjust its provision for income taxes and contingent tax liability based on future developments.
9. COMMITMENTS AND CONTINGENCIES
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Legal Proceedings
From time to time, the Company is involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. These matters typically relate to professional liability, tax, compensation, contract, competitor disputes and employee-related matters and include individual, representative and class action lawsuits, as well as inquiries and investigations by governmental agencies regarding the Company’s employment and compensation practices. Additionally, some of the Company’s clients may also become subject to claims, governmental inquiries and investigations, and legal actions relating to services provided by the Company’s healthcare professionals. Depending upon the particular facts and circumstances, the Company may also be subject to indemnification obligations under its contracts with such clients relating to these matters. The Company accrues for contingencies and records a liability when management believes an adverse outcome from a loss contingency is both probable and the amount, or a range, can be reasonably estimated. Significant judgment is required to determine both probability of loss and the estimated amount. The Company reviews its loss contingencies at least quarterly and adjusts its accruals and/or disclosures to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, or other new information, as deemed necessary. The most significant matters for which the Company has established loss contingencies are class and representative actions related to wage and hour claims under California and Federal law. Specifically, among other claims in these lawsuits, it is alleged that certain expense reimbursements should be considered wages and included in the regular rate of pay for purposes of calculating overtime rates.
On May 26, 2016, former travel nurse Verna Maxwell Clarke filed a complaint against AMN Services, LLC, in California Superior Court in Los Angeles County. The Company removed the case to the United States District Court for the Central District of California (Case No. 2:16-cv-04132-DSF-KS) (the “Clarke Matter”). The complaint asserts that, due to the Company’s per diem adjustment practices, traveling nurses’ per diem benefits should be included in their regular rate of pay for the purposes of calculating their overtime compensation. On June 26, 2018, the district court denied the plaintiffs’ Motion for Summary Judgment in its entirety, and granted the Company’s Motion for Summary Judgment with respect to the plaintiffs’ per diem and overtime claims. The plaintiffs filed an appeal of the judgment relating to the per diem claims with the Ninth Circuit Court of Appeals (the “Ninth Circuit”). On February 8, 2021, the Ninth Circuit issued an opinion that reversed the district court’s granting of the Company’s Motion for Summary Judgment and remanded the matter to the district court instructing the district to enter partial summary judgment in favor of the plaintiffs. On August 26, 2021, the Company filed a Petition for Writ of Certiorari in the United States Supreme Court seeking review of the Ninth Circuit’s decision, which was denied on December 13, 2021. The Company has reached an agreement to settle this matter in its entirety, which was preliminarily approved in the fourth quarter of 2023. The Company expects final approval at the end of the second quarter of 2024. Accordingly, the Company has recorded an accrual for this matter amounting to $62,000 .
The Company is currently unable to estimate the possible loss or range of loss beyond amounts already accrued. Loss contingencies accrued are included in accounts payable and accrued expenses and other long-term liabilities in the consolidated balance sheets.
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10. BALANCE SHEET DETAILS
The consolidated balance sheets detail is as follows:
| March 31, 2024 | December 31, 2023 | |||||||||||||
| Other current assets: | ||||||||||||||
| Restricted cash and cash equivalents | $ | $ | ||||||||||||
| Income taxes receivable | ||||||||||||||
| Other | ||||||||||||||
| Other current assets | $ | $ | ||||||||||||
| Fixed assets: | ||||||||||||||
| Furniture and equipment | $ | $ | ||||||||||||
| Software | ||||||||||||||
| Leasehold improvements | ||||||||||||||
| Accumulated depreciation | ( | ( | ||||||||||||
| Fixed assets, net | $ | $ | ||||||||||||
| Other assets: | ||||||||||||||
| Life insurance cash surrender value | $ | $ | ||||||||||||
| Operating lease right-of-use assets | ||||||||||||||
| Other | ||||||||||||||
| Other assets | $ | $ | ||||||||||||
| Accounts payable and accrued expenses: | ||||||||||||||
| Trade accounts payable | $ | $ | ||||||||||||
| Subcontractor payable | ||||||||||||||
| Accrued expenses | ||||||||||||||
| Loss contingencies | ||||||||||||||
| Professional liability reserve | ||||||||||||||
| Other | ||||||||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||||||||
| Accrued compensation and benefits: | ||||||||||||||
| Accrued payroll | $ | $ | ||||||||||||
| Accrued bonuses and commissions | ||||||||||||||
ESPP contributions | ||||||||||||||
| Workers compensation reserve | ||||||||||||||
| Deferred compensation | ||||||||||||||
| Other | ||||||||||||||
| Accrued compensation and benefits | $ | $ | ||||||||||||
| Other current liabilities: | ||||||||||||||
| Income taxes payable | $ | $ | ||||||||||||
| Client deposits | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Deferred revenue | ||||||||||||||
| Other | ||||||||||||||
| Other current liabilities | $ | $ | ||||||||||||
| Other long-term liabilities: | ||||||||||||||
| Workers compensation reserve | $ | $ | ||||||||||||
| Professional liability reserve | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Other | ||||||||||||||
| Other long-term liabilities | $ | $ | ||||||||||||
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto and other financial information included elsewhere herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023, filed with the Securities and Exchange Commission (“SEC”) on February 22, 2024 (“2023 Annual Report”). Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are “forward-looking statements.” See “Special Note Regarding Forward-Looking Statements.” We undertake no obligation to update the forward-looking statements in this Quarterly Report. References in this Quarterly Report to “AMN Healthcare,” the “Company,” “we,” “us” and “our” refer to AMN Healthcare Services, Inc. and its wholly owned subsidiaries.
Overview of Our Business
We provide technology-enabled healthcare workforce solutions and staffing services to healthcare organizations across the nation. The Company provides access to a comprehensive network of healthcare professionals through its recruitment strategies and breadth of career opportunities. The Company helps providers optimize their workforce to reduce complexity and increase efficiency. The Company’s total talent solutions include managed services programs, clinical and interim healthcare leaders, temporary staffing, permanent placement, executive search, vendor management systems, recruitment process outsourcing, predictive modeling, language services, revenue cycle solutions, and other services. Clients include acute-care hospitals, community health centers and clinics, physician practice groups, retail and urgent care centers, home health facilities, schools and many other healthcare settings.
We conduct business through three reportable segments: (1) nurse and allied solutions, (2) physician and leadership solutions, and (3) technology and workforce solutions. For the three months ended March 31, 2024, we recorded revenue of $820.9 million, as compared to $1,126.2 million for the same period last year.
Nurse and allied solutions segment revenue comprised 63% and 73% of total consolidated revenue for the three months ended March 31, 2024 and 2023, respectively. Through our nurse and allied solutions segment, we provide hospitals and other healthcare facilities with a comprehensive managed services solution in which we manage and staff all the temporary and permanent nursing and allied staffing needs of a client. We also provide revenue cycle solutions, which include skilled labor solutions for remote medical coding, clinical documentation improvement, case management, and clinical data registry, and provide auditing and advisory services. A majority of our placements in this segment are under our managed services solution, however, we also provide traditional direct nurse and allied healthcare staffing solutions of variable assignment lengths.
Physician and leadership solutions segment revenue comprised 23% and 15% of total consolidated revenue for the three months ended March 31, 2024 and 2023, respectively. Through our physician and leadership solutions segment, we place physicians of all specialties, as well as dentists and advanced practice providers, with clients on a temporary basis, generally as independent contractors. We also recruit physicians and healthcare leaders for permanent placement and place interim leaders and executives across all healthcare settings. The interim healthcare leaders and executives we place are typically placed on contracts with assignment lengths ranging from a few days to one year.
Technology and workforce solutions segment revenue comprised 14% and 12% of total consolidated revenue for both of the three months ended March 31, 2024 and 2023, respectively. Through our technology and workforce solutions segment, we provide hospitals and other healthcare facilities with a range of workforce solutions, including: (1) language services, (2) software-as-a-service (“SaaS”)-based VMS technologies through which our clients can self-manage the procurement of contingent clinical labor and their internal float pool, (3) workforce optimization services that include consulting, data analytics, predictive modeling, and SaaS-based scheduling technology, and (4) recruitment process outsourcing services in which we recruit, hire and/or onboard permanent clinical and nonclinical positions on behalf of our clients.
Operating Metrics
In addition to our consolidated and segment financial results, we monitor the following key metrics to help us evaluate our results of operations and financial condition and make strategic decisions. We believe this information is useful in understanding our operational performance and trends affecting our businesses.
•Average travelers on assignment represents the average number of nurse and allied healthcare professionals on assignment during the period, which is used by management as a measure of volume in our nurse and allied solutions segment;
•Bill rates represent the hourly straight-time rates that we bill to clients, which are an indicator of labor market trends and costs within our nurse and allied solutions segment;
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•Billable hours represent hours worked by our healthcare professionals that we are able to bill on client engagements, which are used by management as a measure of volume in our nurse and allied solutions segment;
•Days filled is calculated by dividing total locum tenens hours filled during the period by eight hours, which is used by management as a measure of volume in our locum tenens business within our physician and leadership solutions segment;
•Revenue per day filled is calculated by dividing revenue of our locum tenens business by days filled for the period, which is an indicator of labor market trends and costs in our locum tenens business within our physician and leadership solutions segment; and
•Minutes represent the time-based utilization of interpretation services that we are able to bill our clients, which are used by management as a measure of volume in our language services business within our technology and workforce solutions segment.
Recent Trends
From late 2020 through most of 2022, the COVID-19 pandemic resulted in historically high demand for and utilization of our nurses, allied healthcare professionals and vendor-neutral VMS technologies supporting the placement of these professionals. Since 2022, healthcare organizations have aggressively hired permanent staff and focused on cost containment and alternative staffing models that enable them to reduce utilization of contingent labor. As a result, industry demand and demand in our travel nurse business has declined significantly to below pre-pandemic levels and we saw this trend continue in the first quarter of 2024. In our allied staffing business, demand continues to be above pre-pandemic levels, and certain specialties such as therapy and imaging are up significantly year over year, offsetting the decline in laboratory and other specialties involved in treating COVID-19 patients.
In our nurse and allied solutions segment, we have seen a decrease in overall staffing volume from prior year and prior quarter primarily due to lower travel nurse demand. Bill rates in the first quarter were relatively flat to prior quarter, but down year-over-year.
In our physician and leadership solutions segment, demand for our locum tenens staffing business declined from prior year and prior quarter. Certified registered nurse anesthetists (CRNAs) continue to be the largest specialty for our locum tenens staffing business. Revenue per day filled increased in the first quarter as compared to the prior year and prior quarter. Demand for our interim leadership business is leveling out after several quarters of decline. Demand for our physician permanent placement and executive search businesses continues to be soft as some healthcare organizations streamlined leadership roles, deferred hiring decisions, or increased insourcing.
In our technology and workforce solutions segment, our language services business continued to experience increased utilization in our existing clients and growth from new clients. Volumes in our VMS business followed similar trends, although to a greater extent, as our nurse and allied solutions segment, declining from historic highs. Bill rates continued to decrease in the first quarter.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to intangible assets purchased in a business combination, asset impairments, accruals for self-insurance, compensation and related benefits, accounts receivable, contingencies and litigation, contingent consideration (“earn-out”) liabilities associated with acquisitions, and income taxes. We base these estimates on the information that is currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could vary from these estimates under different assumptions or conditions. If these estimates differ significantly from actual results, our consolidated financial statements and future results of operations may be materially impacted. There have been no material changes in our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our 2023 Annual Report.
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Results of Operations
The following table sets forth, for the periods indicated, selected unaudited condensed consolidated statements of operations data as a percentage of revenue. Our results of operations include three reportable segments: (1) nurse and allied solutions, (2) physician and leadership solutions, and (3) technology and workforce solutions. The MSDR acquisition impacts the comparability of the results between the three months ended March 31, 2024 and 2023. See additional information in the accompanying Note (2), “Acquisitions.” Our historical results are not necessarily indicative of our future results of operations.
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Unaudited Condensed Consolidated Statements of Operations: | |||||||||||
| Revenue | 100.0 | % | 100.0 | % | |||||||
| Cost of revenue | 68.6 | 67.2 | |||||||||
| Gross profit | 31.4 | 32.8 | |||||||||
| Selling, general and administrative | 21.3 | 18.3 | |||||||||
| Depreciation and amortization | 5.2 | 3.3 | |||||||||
| Income from operations | 4.9 | 11.2 | |||||||||
| Interest expense, net, and other | 2.1 | 1.0 | |||||||||
| Income before income taxes | 2.8 | 10.2 | |||||||||
| Income tax expense | 0.7 | 2.7 | |||||||||
| Net income | 2.1 | % | 7.5 | % | |||||||
Comparison of Results for the Three Months Ended March 31, 2024 to the Three Months Ended March 31, 2023
Revenue. Revenue decreased 27% to $820.9 million for the three months ended March 31, 2024 from $1,126.2 million for the same period in 2023, attributable to a decline in organic revenue across our segments with the greatest decline in our nurse and allied solutions segment.
Nurse and allied solutions segment revenue decreased 37% to $519.3 million for the three months ended March 31, 2024 from $824.5 million for the same period in 2023. The $305.2 million decrease was primarily attributable to a 24% decrease in the average number of travelers on assignment, an approximately 15% decrease in the average bill rate, and a 3% decrease in billable hours.
Physician and leadership solutions segment revenue increased 14% to $188.8 million for the three months ended March 31, 2024 from $165.8 million for the same period in 2023. The $23.0 million increase was attributable to higher revenue in our locum tenens business, which was partially offset by lower revenue in our interim leadership, physician permanent placement and executive search businesses. Revenue in our locum tenens business grew approximately 36% during the three months ended March 31, 2024 primarily due to additional revenue of $37.1 million in connection with the MSDR acquisition and a 10% increase in the revenue per day filled on an organic basis, partially offset by an 8% decrease in the number of days filled on an organic basis. Our interim leadership business experienced a 25% decline and our physician permanent placement and executive search businesses declined 29% during the three months ended March 31, 2024, primarily due to lower demand.
Technology and workforce solutions segment revenue decreased 17% to $112.8 million for the three months ended March 31, 2024 from $136.0 million for the same period in 2023. The $23.2 million decrease was primarily attributable to a decline within our VMS and outsourced solutions businesses, partially offset by growth within our language services business. Revenue for our VMS business declined 46% for similar reasons as nurse and allied solutions segment revenue and our outsourced solutions business experienced a 49% decline primarily due to lower demand, while our language services business grew 16% primarily due to a 19% increase in minutes during the three months ended March 31, 2024.
For the three months ended March 31, 2024 and 2023, revenue under our MSP arrangements comprised approximately 48% and 57% of our consolidated revenue, 70% and 74% of our nurse and allied solutions segment revenue, 13% and 21% of our physician and leadership solutions segment revenue, and 3% and 2% of our technology and workforce solutions segment revenue, respectively.
Gross Profit. Gross profit decreased 30% to $257.5 million for the three months ended March 31, 2024 from $368.8 million for the same period in 2023, representing gross margins of 31.4% and 32.8%, respectively. The decline in consolidated
17
gross margin for the three months ended March 31, 2024, as compared to the same period in 2023, was primarily due to (1) a lower margin in our technology and workforce solutions segment primarily due to a change in sales mix resulting from lower revenue in our VMS business and its higher margins as compared to our other businesses within the segment and (2) lower margins in our nurse and allied solutions and physician and leadership solutions segments driven by higher clinician compensation. The overall decline was partially offset by a change in sales mix resulting from lower revenue in our nurse and allied solutions segment. Gross margin by reportable segment for the three months ended March 31, 2024 and 2023 was 25.1% and 25.9% for nurse and allied solutions, 31.6% and 35.2% for physician and leadership solutions, and 59.9% and 71.4% for technology and workforce solutions, respectively.
Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses were $174.8 million, representing 21.3% of revenue, for the three months ended March 31, 2024, as compared to $205.6 million, representing 18.3% of revenue, for the same period in 2023. The decrease in SG&A expenses was primarily due to $17.1 million of lower employee compensation and benefits (inclusive of share-based compensation), a $2.9 million decrease in the provision for expected credit losses, and an approximately $7.0 million decrease in other expenses associated with our revenue decline. The year-over-year increase in SG&A expenses in our physician and leadership solutions segment was driven by $7.5 million of additional SG&A expenses from the MSDR acquisition, partially offset by the aforementioned decreases. SG&A expenses broken down among the reportable segments, unallocated corporate overhead, and share-based compensation are as follows:
| (In Thousands) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Nurse and allied solutions | $ | 77,081 | $ | 99,997 | |||||||
| Physician and leadership solutions | 37,348 | 33,208 | |||||||||
| Technology and workforce solutions | 25,041 | 31,343 | |||||||||
| Unallocated corporate overhead | 27,633 | 30,733 | |||||||||
| Share-based compensation | 7,739 | 10,318 | |||||||||
| $ | 174,842 | $ | 205,599 | ||||||||
Depreciation and Amortization Expenses. Amortization expense increased 15% to $24.9 million for the three months ended March 31, 2024 from $21.7 million for the same period in 2023, primarily attributable to additional amortization expense related to the intangible assets acquired in the MSDR acquisition. Depreciation expense (exclusive of depreciation included in cost of revenue) increased 12% to $17.8 million for the three months ended March 31, 2024 from $15.9 million for the same period in 2023, primarily attributable to an increase in purchased and developed hardware and software placed in service for our ongoing technology investments to support our tech-centric total talent solutions initiatives and to optimize our internal front and back-office systems. Additionally, $1.8 million and $1.3 million of depreciation expense for our language services business is included in cost of revenue for the three months ended March 31, 2024 and 2023, respectively.
Interest Expense, Net, and Other. Interest expense, net, and other was $16.6 million during the three months ended March 31, 2024 as compared to $10.3 million for the same period in 2023. The increase was primarily due to a higher average debt outstanding balance during the three months ended March 31, 2024.
Income Tax Expense. Income tax expense was $6.0 million for the three months ended March 31, 2024 as compared to $31.3 million for the same period in 2023, reflecting effective income tax rates of 26% and 27% for these periods, respectively. The decrease in the effective income tax rate was primarily attributable to the recognition of $2.4 million of net discrete tax benefit during the three months ended March 31, 2024 compared to a $0.8 million net discrete tax benefit during the same period in 2023, in relation to income before income taxes of $23.3 million and $115.4 million for the three months ended March 31, 2024 and 2023, respectively. We currently estimate our annual effective tax rate to be approximately 31% for 2024. The 26% effective tax rate for the three months ended March 31, 2024 differs from our estimated annual effective tax rate of 31% primarily due to certain discrete tax benefits recognized during the three months ended March 31, 2024, in relation to income before income taxes.
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Liquidity and Capital Resources
In summary, our cash flows were:
| (In Thousands) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2024 | 2023 | ||||||||||
| Net cash provided by operating activities | $ | 81,386 | $ | 43,434 | |||||||
| Net cash used in investing activities | (21,399) | (32,431) | |||||||||
| Net cash used in financing activities | (38,973) | (44,457) | |||||||||
| Net increase (decrease) in cash, cash equivalents and restricted cash | $ | 21,014 | $ | (33,454) | |||||||
Historically, our primary liquidity requirements have been for acquisitions, working capital requirements, and debt service under our credit facilities and senior notes. We have funded these requirements through internally generated cash flow and funds borrowed under our credit facilities and senior notes.
As of March 31, 2024, (1) $425.0 million was drawn with $304.2 million of available credit under our $750.0 million secured revolving credit facility (the “Senior Credit Facility”), (2) the aggregate principal amount of our 4.625% senior notes due 2027 (the “2027 Notes”) outstanding was $500.0 million, and (3) the aggregate principal amount of our 4.000% senior notes due 2029 (the “2029 Notes”) outstanding was $350.0 million. We describe in further detail our Amended Credit Agreement (as defined below), under which the Senior Credit Facility is governed, the 2027 Notes, and the 2029 Notes in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of our 2023 Annual Report.
As of March 31, 2024, the total of our contractual obligations under operating leases with initial terms in excess of one year was $55.3 million. We describe in further detail our operating lease arrangements in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (5), Leases” of our 2023 Annual Report. We also have various obligations and working capital requirements, such as certain tax and legal matters, contingent consideration and other liabilities, that are recorded on our consolidated balance sheets. See additional information in the accompanying Note (7), “Fair Value Measurement,” Note (8), “Income Taxes,” Note (9), “Commitments and Contingencies,” and Note (10), “Balance Sheet Details.”
In addition to our cash requirements, we have a share repurchase program authorized by our board of directors, which does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time. See additional information in the accompanying Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds.”
We believe that cash generated from operations and available borrowings under the Senior Credit Facility will be sufficient to fund our operations and liquidity requirements, including expected capital expenditures, for the next 12 months and beyond. We intend to finance potential future acquisitions with cash provided from operations, borrowings under the Senior Credit Facility or other borrowings under our Amended Credit Agreement (as defined below), bank loans, debt or equity offerings, or some combination of the foregoing. The following discussion provides further details of our liquidity and capital resources.
Operating Activities
Net cash provided by operating activities for the three months ended March 31, 2024 was $81.4 million, compared to $43.4 million for the same period in 2023. The increase in net cash provided by operating activities was primarily attributable to (1) a decrease in accounts receivable and subcontractor receivables between periods of $106.9 million primarily due to declines in revenue and associate vendor usage during the three months ended March 31, 2024 along with timing of collections, and (2) an increase in accrued compensation and benefits between periods of $64.7 million primarily due to bonuses and commissions that were paid during the three months ended March 31, 2023. The overall increase in net cash provided by operating activities was partially offset by (1) a decrease in net income excluding non-cash expenses of $92.7 million primarily due to a decline in segment operating income across our segments, (2) a decrease in accounts payable and accrued expenses between periods of $23.4 million primarily due to a decline in associate vendor usage and timing of payments, and (3) a decrease in other liabilities between periods of $17.6 million primarily due to an increase in income taxes payable during the prior year resulting from the timing of income tax payments. Our Days Sales Outstanding (“DSO”) was 64 days at March 31, 2024, 70 days at December 31, 2023, and 55 days at March 31, 2023.
Investing Activities
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Net cash used in investing activities for the three months ended March 31, 2024 was $21.4 million, compared to net cash used in investing activities of $32.4 million for the same period in 2023. The decrease was primarily due to $4.5 million of payments to fund the deferred compensation plan during the three months ended March 31, 2024, as compared to $17.0 million of payments during the three months ended March 31, 2023. In addition, capital expenditures were $18.1 million and $17.5 million for the three months ended March 31, 2024 and 2023, respectively.
Financing Activities
Net cash used in financing activities during the three months ended March 31, 2024 was $39.0 million, due to repayments of $50.0 million under the Senior Credit Facility and $4.0 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards, partially offset by borrowings of $15.0 million under the Senior Credit Facility. Net cash used in financing activities during the three months ended March 31, 2023 was $44.5 million, due to (1) $174.7 million paid in connection with the repurchase of our common stock, (2) repayments of $70.0 million under the Senior Credit Facility, (3) $6.1 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards, and (4) $3.6 million payment of financing costs in connection with the Third Amendment (as defined below), all of which was partially offset by borrowings of $210.0 million under the Senior Credit Facility.
Amended Credit Agreement
On February 10, 2023, we entered into the third amendment to our credit agreement (the “Third Amendment”). The Third Amendment (together with the credit agreement as amended to date, collectively, the “Amended Credit Agreement”) provides for, among other things, an increase to the revolving commitments under the Senior Credit Facility to $750.0 million and an extension of the maturity date of the Amended Credit Agreement to February 10, 2028. Our obligations under the Amended Credit Agreement are secured by substantially all of our assets. We describe in further detail the terms of the Amended Credit Agreement in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of our 2023 Annual Report.
Letters of Credit
At March 31, 2024, we maintained outstanding standby letters of credit totaling $21.3 million as collateral in relation to our workers’ compensation insurance agreements and a corporate office lease agreement. Of the $21.3 million of outstanding letters of credit, we have collateralized $0.6 million in cash and cash equivalents and the remaining $20.8 million is collateralized by the Senior Credit Facility. Outstanding standby letters of credit at December 31, 2023 totaled $21.3 million.
Recent Accounting Pronouncements
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands the breadth and frequency of reportable segment disclosure requirements, primarily though enhanced disclosures about significant segment expenses. The new guidance requires public entities to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), the amount and composition of other segment items by reportable segment, any additional measures of a segment’s profit or loss used by the CODM when assessing performance and deciding how to allocate resources, and the CODM’s title and position. Additionally, public entities will be required to provide in interim periods all disclosures about a reportable segment’s profit or loss that are currently required annually by Topic 280. This standard is effective on a retrospective basis for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting this standard on our disclosures.
In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which is intended to enhance the transparency and decision-usefulness of income tax disclosures. The new guidance addresses investor requests for enhanced income tax information primarily through requiring disclosure of additional information about and further disaggregation of the rate reconciliation and income taxes paid. This standard is effective on a prospective basis for fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting this standard on our disclosures.
There have been no other new accounting pronouncements issued but not yet adopted that are expected to materially affect our consolidated financial condition or results of operations.
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Special Note Regarding Forward-Looking Statements
This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We base these forward-looking statements on our expectations, estimates, forecasts, and projections about future events and about the industry in which we operate. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “should,” “would,” “project,” “may,” variations of such words, and other similar expressions. In addition, any statements that refer to projections of demand or supply trends, financial items, anticipated growth, future growth and revenues, future economic conditions and performance, plans, objectives and strategies for future operations, expectations, or other characterizations of future events or circumstances are forward-looking statements. All forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Factors that could cause actual results to differ materially from those implied by the forward-looking statements in this Quarterly Report are set forth in our 2023 Annual Report and include but are not limited to:
•the duration and extent to which hospitals and other healthcare entities adjust their utilization of temporary nurses and allied healthcare professionals, physicians, healthcare leaders and other healthcare professionals and workforce technology applications as a result of the labor market or economic conditions;
•the ability of our clients to increase the efficiency and effectiveness of their staffing management and recruiting efforts, through predictive analytics, online recruiting, telemedicine or otherwise, and successfully hire and retain permanent staff, which may negatively affect our revenue, results of operations, and cash flows;
•the effects of the COVID-19 pandemic or any future pandemic or health crisis on our business, financial condition and results of operations;
•the severity and duration of the impact the COVID-19 pandemic or any future pandemic or health crisis, the Great Resignation, economic downturns, inflation, recession or slow recoveries have on the financial condition and cash flow of many hospitals and healthcare systems such that it impairs their ability to make payments to us, timely or otherwise, for services rendered;
•the extent to which a spike in the COVID-19 pandemic may disrupt our operations due to the unavailability of our employees or healthcare professionals because of illness, risk of illness, quarantines, travel restrictions, mandatory vaccination requirements, desire to travel and work on temporary assignments or other factors that limit our existing or potential workforce and pool of candidates;
•the effects of economic downturns, inflation, recession or slow recoveries, which could result in less demand for our services, increased client initiatives designed to contain costs, including reevaluating their approach as it pertains to contingent labor and managed services programs;
•any inability on our part to anticipate and quickly respond to changing marketplace conditions, such as alternative modes of healthcare delivery, reimbursement, or client needs and requirements;
•the negative effects that intermediary organizations may have on our ability to secure new and profitable contracts;
•the level of consolidation and concentration of buyers of healthcare workforce, staffing and technology solutions, which could affect the pricing of our services and our ability to mitigate concentration risk;
•any inability on our part to recruit and retain sufficient quality healthcare professionals at reasonable costs, which could increase our operating costs and negatively affect our business and profitability;
•any inability on our part to grow and operate our business profitably in compliance with federal and state regulation, including privacy laws, conduct of operations, costs and payment for services and payment for referrals as well as laws regarding employment and compensation practices and government contracting;
•any challenge to the classification of certain of our healthcare professionals as independent contractors, which could adversely affect our profitability;
•the effect of investigations, claims, and legal proceedings alleging medical malpractice, anti-competitive conduct, violations of employment, privacy and wage regulations and other legal theories of liability asserted against us, which could subject us to substantial liabilities;
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•any technology disruptions or our inability to implement new infrastructure and technology systems effectively may adversely affect our operating results and ability to manage our business effectively;
•any failure to further develop and evolve our current workforce solutions technology offerings and capabilities, which may harm our business and/or impact our ability to compete with new technologies and competitors;
•disruption to or failures of our SaaS-based or technology-enabled services, or our inability to adequately protect our intellectual property rights with respect to such technologies or sufficiently protect the privacy of personal information, could reduce client satisfaction, harm our reputation and negatively affect our business;
•security breaches and cybersecurity incidents, including ransomware, that could compromise our information and systems, which could adversely affect our business operations and reputation and could subject us to substantial liabilities;
•any inability on our part to quickly and properly credential and match quality healthcare professionals with suitable placements, which may adversely affect demand for our services;
•any inability on our part to continue to attract, develop and retain our sales and operations team members, which may deteriorate our operations;
•our increasing dependence on third parties, including offshore vendors, for the execution of certain critical functions;
•the loss of our key officers and management personnel, which could adversely affect our business and operating results;
•any inability to consummate and effectively incorporate acquisitions into our business operations, which may adversely affect our long-term growth and our results of operations;
•businesses we acquire may have liabilities or adverse operating issues, which could harm our operating results;
•any increase to our business and operating risks as we develop new services and clients, enter new lines of business, and focus more of our business on providing a full range of client solutions;
•any inability on our part to maintain our positive brand awareness and identity, which may adversely affect our results of operation;
•the expansion of social media platforms presents new risks and challenges, which could cause damage to our brand reputation;
•any recognition of an impairment to the substantial amount of goodwill or indefinite-lived intangibles on our balance sheet;
•our indebtedness, which could adversely affect our ability to raise additional capital to fund operations, limit our ability to react to changes in the economy or our industry, and expose us to interest rate risk to the extent of any variable rate debt;
•the terms of our debt instruments that impose restrictions on us that may affect our ability to successfully operate our business; and
•the effect of significant adverse adjustments to our insurance-related accruals on our balance sheet, which could decrease our earnings or increase our losses and negatively impact our cash flows.
Item 3. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, and commodity prices. During the three months ended March 31, 2024, our primary exposure to market risk was interest rate risk associated with our variable interest debt instruments and our investment portfolio. A 100 basis point increase in interest rates on our variable rate debt would not have resulted in a material effect on our unaudited condensed consolidated financial statements for the three months ended March 31, 2024. A 100 basis point change in interest rates as of March 31, 2024 would not have resulted in a material effect on the fair value of our investment portfolio. For our investments that are classified as available-for-sale, unrealized gains or losses related to fluctuations in market volatility and interest rates are reflected within stockholders’ equity in accumulated other comprehensive loss in the consolidated balance sheets. Such unrealized gains or losses would be realized only if we sell the investments prior to maturity.
During the three months ended March 31, 2024, we generated substantially all of our revenue in the United States. Accordingly, we believe that our foreign currency risk is immaterial.
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Item 4. Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of March 31, 2024 were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Information with respect to this item may be found in the accompanying Note (9), “Commitments and Contingencies,” which is incorporated herein by reference.
Item 1A. Risk Factors
We do not believe that there have been any material changes to the risk factors disclosed in Part I, Item 1A of our 2023 Annual Report. The risk factors described in our 2023 Annual Report are not the only risks we face. Factors we currently do not know, factors that we currently consider immaterial or factors that are not specific to us, such as general economic conditions, may also materially adversely affect our business or our consolidated operating results, financial condition or cash flows.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
From time to time, we may repurchase our common stock in the open market pursuant to programs approved by our board of directors (the “Board”). On November 1, 2016, our Board authorized us to repurchase up to $150.0 million of our outstanding common stock in the open market. On November 10, 2021, February 17, 2022, June 15, 2022, and February 16, 2023, we announced increases to the repurchase program totaling $1,200.0 million. These increases brought the total authorization of the repurchase program to $1,350.0 million, of which $226.7 million remained as of March 31, 2024. Under the repurchase program announced on November 1, 2016 and the aforementioned increases (collectively, the “Company Repurchase Program”), share repurchases may be made from time to time, depending on prevailing market conditions and other considerations. The Company Repurchase Program has no expiration date and may be discontinued or suspended at any time.
During the three months ended March 31, 2024, we did not repurchase any shares of common stock. We describe in further detail the Company Repurchase Program and the shares repurchased thereunder in Part II, Item 5, “Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” and Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (10)(b), Capital Stock—Treasury Stock” set forth in our 2023 Annual Report.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
During the three months ended March 31, 2024, none
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Item 6. Exhibits
Exhibit Number | Description | |||||||
| 3.1 | ||||||||
| 31.1 | ||||||||
| 31.2 | ||||||||
| 32.1 | ||||||||
| 32.2 | ||||||||
| 101.INS | XBRL Instance Document.* | |||||||
| 101.SCH | XBRL Taxonomy Extension Schema Document.* | |||||||
| 101.CAL | XBRL Taxonomy Extension Calculation Linkbase Document.* | |||||||
| 101.DEF | XBRL Taxonomy Extension Definition Linkbase Document.* | |||||||
| 101.LAB | XBRL Taxonomy Extension Label Linkbase Document.* | |||||||
| 101.PRE | XBRL Taxonomy Extension Presentation Linkbase Document.* | |||||||
| * | Filed herewith. | |||||||
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
Date: May 9, 2024
| AMN HEALTHCARE SERVICES, INC. | ||||||||
/S/ CAROLINE S. GRACE | ||||||||
| Caroline S. Grace President and Chief Executive Officer (Principal Executive Officer) | ||||||||
Date: May 9, 2024
/S/ JEFFREY R. KNUDSON | ||
| Jeffrey R. Knudson Chief Financial Officer (Principal Financial and Accounting Officer) | ||
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