AMN Healthcare Services Inc

Ladies and gentlemen, thank you for standing by, and welcome to the AMN Healthcare fourth quarter 2018 earnings call. At this time, all telephone participants are in a listen-only mode, and then later we will conduct a question-and-answer session. The instructions will be given at that time. If you should require any assistance during the call, you can press star, then zero on the phone keypad. As a reminder, the conference is being recorded online, I'll now turn the meeting over to our host, Director of Investor Relations, Mr. Randy Reese. Please go ahead, sir.

Good afternoon, everyone. Welcome to AMN Healthcare's fourth quarter and full year 2018 earnings call. A replay of this webcast will be available until February 28th at amnhealthcare.investorroom.com following the conclusion of this call. Details for the audio replay of the conference call are in our earnings release issued this afternoon. Various remarks we made during this call about future expectations, projections, plans, events, or circumstances constitute forward-looking statements. These statements reflect the company's current beliefs based upon information currently available to it. Our actual results may differ materially from those indicated by these forward-looking statements as a result of various factors, including those identified in our most recent Form 10-K and subsequent filings with the SEC. The company does not intend to update the guidance or any forward-looking statements provided today prior to its next earnings release. This call contains certain non-GAAP financial information. Information regarding and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and on our financial reports page at amnhealthcare.investorroom.com. On the call today are Susan Salka, Chief Executive Officer, Brian Scott, Chief Financial Officer, Ralph Henderson, President of Professional Services and Staffing, and Dan White, President of Workforce Solutions. I will now turn the call over to Susan.

Thank you so much, Randy. Happy Valentine's Day, everyone, and welcome to our earnings call. Looking back at 2018, the themes at AMN were leadership and investments in our future, some of which created disruption. Throughout the year, we further evolved our leadership position within the industry. That meant deepening our portfolio of solutions with internal investments and acquisitions. In the marketplace, we competed very well, and for the year, AMN won new MSPs amounting to $230 million in gross spend under management. Our ability to serve clients with deep and diverse workforce solutions has continued into 2019, and we are thrilled to announce that Tennant Healthcare has selected AMN to be the MSP provider for its regions in California and Arizona. Tenet is one of the largest health systems in the United States and we're seeking a total workforce solutions partner to achieve their patient care and efficiency goals. We will serve Tenet's contingent staffing needs for nursing, allied, and interim executives. The gross spend under management for this contract is estimated at $100 million, and we are targeting a go-live at the end of April. We recently launched several other new MSP clients that signed contracts in 2018 and have more in implementation now. Our delivery teams are poised to ensure that we meet or exceed the expectations of these new clients. Throughout the year, AMN continued to recruit strong, fresh leadership talent to our team to ensure we are evolving our strategy and delivery to clients. As we previously mentioned, we were fortunate to add Kelly Rakowski and Mark Hagan to our senior leadership team, bringing decades of broad healthcare and technology experience. Most recently, we welcomed Dr. Cole Edmondson as our new Chief Clinical Officer, replacing Dr. Marcia Fowler, who is retiring after a very successful 30-year career with AMN. I'd like to personally thank Marcia for all of her contributions and what she's done to help build this great organization and to build AMN's reputation as the quality leader in our industry. Dr. Edmondson comes to us as a highly experienced and successful clinical, operational, and strategic leader. He brings innovative insights on how we can best help our clients to achieve their patient care, talent, and financial goals. In 2018, we launched important investments and change initiatives, particularly in our locum tenens and local staffing businesses. Through these necessary transformations, we also had setbacks. In locum tenens, the problems are visible in our lower fourth quarter revenue and first quarter outlook. Last spring, we converted our locum tenens business to a more scalable operating model, including new front and back-end systems. The Salesforce-based system is powerful, but it has required several months of further configuration to make it easier to navigate. There were also issues with data migration from the three legacy systems. During this time, the necessity of maintaining good customer service slowed our sales productivity. Performance was also hindered by the fact that we got a bit behind in hiring new sales producers. We began to ramp up hiring in the third quarter and have accelerated that into the new year. We expect to begin benefiting from these new hires' productivity in the second half of 2019. Returning locum tenants to growth is our top priority. Locums is an attractive market that is of high strategic importance to our clients. Now let's review our latest results and outlook. Fourth quarter consolidated revenue of $529 million grew 4% year-over-year. Growth margin was 32.6% and adjusted EBITDA was $66 million or 12.6% of revenue. Our nurse and allied segment posted revenue of $329 million, which grew 2% year-over-year. Revenue for our largest business, travel nurse staffing, increased 2% year-over-year. Volume growth was relatively in line with our expectations. The year-over-year headwind of lower premium rate assignments lessened, and the average bill rate gap continued to improve. We knew that we would experience a difficult year-over-year comparison in nursing for the first quarter of 2019 due to the exceptionally high utilization of winter assignments and a very strong flu season last year. That comparison has proven to be even more difficult due to a reduction in utilization at one of our top clients. This reduction has nothing to do with AMN's service delivery, but rather specific census dynamics for this client. Excluding this impact, nurse staffing revenue is expected to be up about 5% year over year in the first quarter. Allied staffing continued its winning streak with revenue growing 8% year over year as volume was strong again in the fourth quarter. Order growth has continued to improve and booking trends support continued mid-single-digit growth or better. For the nurse and allied segment overall, we expect revenue to be down about 1% to 2% year over year in the first quarter due to the client-specific reduction I mentioned. Excluding this impact, the segment is expected to be up about 5%. In the locum tenens segment, fourth quarter revenue of $82 million was 24% lower year over year. We had expected revenue to be down about 12% to 14%. On top of the higher than expected attrition and lower productivity we experienced, there were also greater than expected declines in the emergency medicine and hospital specialties as clients reduced demand. Ralph and Brian can provide a bit more color for this segment in the Q&A as I'm sure many of you will have questions. On the bright side, our locums MSP business continues to add clients and is now 20% of segment revenue. We have seen stable client and clinician satisfaction scores indicating that we are taking care of our providers and clients despite the challenges. For the first quarter, locum tenens revenue is expected to be down year over year, similar to last quarter. Fourth quarter revenue in our other workforce solution segment was 117 million. Year over year growth was 48%, including our April acquisitions, and up 1% organically. Our interim leadership and permanent placement businesses comprise about 50% of this segment's revenue. These business lines collectively grew 15% year over year, with organic growth of 2% driven by permanent placement and RPO. Our mid-revenue cycle division produced $38 million of revenue in the fourth quarter. Medical coding revenue was slower than expected, offsetting growth in other specialties. Other workforce solutions also includes our VMS business, where revenue was down year-over-year in the fourth quarter. Trends for VMS have improved as 2019 gets underway. And finally, our workforce optimization and predictive analytics team at Avantis continues to make nice progress, with revenue up in the fourth quarter and growth continuing into 2019. Within our VMS and Avantis offerings, we continue to make important investments in mobile capabilities, analytics, and serving additional healthcare settings. In the first quarter, total revenue for the other workforce solutions segment is expected to be up about 40% overall due primarily to the acquisitions we made last April. In January, we added an innovative new offering to our workforce solutions, with the acquisition of SilverSheet. Our clients have repeatedly told us that one of their biggest workforce pain points is credentialing for their permanent staff. This is the process of reviewing and verifying a clinician's education and training, work experience, licensure, board certifications, and malpractice history. These are compliance verifications that need to be made upon hiring, but also on an ongoing basis while the clinician works at a facility. SilverSheet has created a cloud-based platform that gives healthcare organizations a completely digital credentialing process, which makes this process easier, faster, and more reliable. We're eager to support SilverSheet's fast growth and to integrate them into our solution set. We remain intent every day on earning our place as our client's strategic workforce partner. To do that, AMN must continue to add capabilities that address all aspects of healthcare labor, contingent and permanent. The people who make this future possible are the amazing AMN team members and healthcare professionals. We owe them our deepest gratitude for their talent, enthusiasm, and can-do attitude, even in times when we ask them to do more. Now I will turn the call over to Brian for a financial update, after which Ralph and Dan will join us for the Q&A session.