AMN Healthcare Services Inc

Ladies and gentlemen, thank you for standing by. Welcome to the AMN Healthcare First Quarter 2019 Earnings Call. At this time, everyone joining by phone will be in a listen-only or muted mode, and then later we will conduct a question-and-answer session. If you do have a question, you may press star then 1 on your touchtone phone, and you may remove yourself from the question queue at any time by pressing the pound key. If you are using a speakerphone, please pick up the handset before pressing the numbers. Once again, if you are getting into the question queue, you would press star then one on the phone keypad. If you do need operator assistance at any time during the call, you may press star and then zero on the telephone keypad. As a reminder, the conference is being recorded. 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 first quarter 2019 earnings call. A replay of this webcast will be available until May 16th 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 make 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, Kelly Rakowski, President of Leadership and Search, 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. We are grateful that you could all join us today and glad to have some positive news to share. We're pleased to announce financial results that are above our guidance for the first quarter, with all segments performing slightly better than our expectations. We're optimistic that many of the positive themes that you'll hear from us today will carry forward through the remainder of the year. We're also thrilled to discuss our recent announcement regarding the execution of an agreement to acquire Advanced Medicals. which is one of the top allied therapy staffing companies in our industry. Advanced also has a strong position in the placement of nurses in some of the most critical and chronic shortage specialties our clients need. They have made particular strides in growing their capabilities in the delivery of therapy services in schools. They serve school districts across the country and have extended their delivery through the launch of a teletherapy technology platform This acquisition will bring complementary offerings and the ability to increase the talent network to serve our collective clients. We are also very excited about the talented team at Advance. The organization, led by Jennifer Fuccelli, is one of the most innovative and entrepreneurial teams I've ever met. We share common values and the passion, drive, and genuine caring for patients. This is an opportune time to bring the ADVANCED organization into the AMN family as we see the demand for travel therapy and nursing grow. ADVANCED has a team of extremely capable recruiters and account managers to ensure we are serving these clients well and exceeding their expectations. They also have built a strong client base that presents an opportunity for us to introduce AMN's portfolio of workforce solutions. The acquisition will go through the normal HSR regulatory review, and we expect to close the transaction by early June. Until then, the organizations will remain separate. However, we have begun planning for a post-close integration. Brian will share more color on this transaction later on. Now getting back to our results and the market environment. The labor market continues to be tight within healthcare, with vacancies at all-time highs, and turnover in the double digits for many organizations. In addition, while healthcare hiring is up, the leakage from attrition means that many healthcare organizations struggle to meet their desired staffing levels. We've seen orders rising in many of our staffing businesses with particular strength in travel nursing, allied and interim leadership. Another key theme is that healthcare systems and large enterprises are searching for sophisticated partners who can help them address workforce management strategies. AMN has a strong track record of delivering results with such large, complex organizations. So far in 2019, we have signed new MSP and expanded several existing MSP relationships, totaling over $150 million in gross spend under management. with excellent service line and geographical mix. The pipeline for the future is also strong, as we have eight new clients in contracting that will add another $160 million of gross spend to our portfolio. We certainly do not win all opportunities. However, we're very pleased with and proud of the strategic partnerships we are building. Now let's review our latest results and outlook. First quarter consolidated revenue of $532 million grew 2% year-over-year. Growth margin was 33.2%, and adjusted EBITDA was $66 million, or 12.4% of revenue. Our nurse and allied segment posted revenue of $337 million, which was flat year-over-year, despite comparing against a very strong quarter a year ago. Revenue for our largest business, travel nurse staffing, was flat year over year. However, this is a better story than the numbers might suggest. The year over year comparison in nursing revenue was particularly difficult due to a surge in winter assignments and a very strong flu season in the first quarter of 2018. In addition to these tough comps, we mentioned when we gave guidance that one of our largest clients had a reduction in demand. Excluding this one client, travel nurse staffing revenue grew about 5% year-over-year in the first quarter. Demand in travel nursing continued to strengthen as we exited the first quarter, and today it's at the highest levels we've seen in two years. In fact, travel nurse orders are currently up more than 25% compared to prior years. Allied staffing continued its winning streak with revenue growing 10% year over year on strong volume and improved trends in our therapy business and continued strength in our imaging lab and respiratory disciplines. Order growth and bookings lead us to expect continued mid-single-digit growth or better in the second quarter. We have several new MSP clients being launched throughout 2019, and most of these include nursing and allied services. Based on the positive environment and these great MSP client additions, we expect demand to remain strong as the year progresses. Even though we're in a supply-constrained environment, we should be able to drive volume growth and see some modest pricing expansion. As we look to the second quarter for this segment, we expect total nurse and allied revenue to be down 3% to 4% year over year, This negative variance is completely driven by a $25 million labor disruption event in the second quarter of 2018. Excluding this prior year event, this segment is expected to be up about 4%. In the locum tenens segment, first quarter revenue was slightly better than we expected at $80 million. This is still 22% below prior year as we continue to work our way out of the disruption created by process and technology changes we made last year. On this call, I'm glad to say we can talk more now about progress. Productivity, as measured by weekly net days booked, stabilized in the first quarter, and April was further improved. Our total demand within this segment remains strong, but there are specialties like emergency medicine and hospitalists that remain significantly under prior year. One area of particular strength is our locums MSP performance, where both new demand and fill rates are above prior year. We have increasing confidence that our locums team is on track for improved performance. For the second quarter, locum tenants revenue is expected to grow about 2% sequentially, but will still be down significantly year over year. First quarter revenue in our other workforce solution segment was $115 million. Year-over-year growth was flat organically and up 42%, including our April 2018 acquisition. Our interim leadership and permanent placement businesses comprise about half of this segment's revenue. These business lines collectively grew 10% year-over-year with the organic comparison flat. The pipeline and placement activity for interim leadership and physician perm has grown as we've progressed through the year, and we expect both to deliver year-over-year growth in the second quarter. Kelly Rakowski, who joined AMN as our first President of Leadership and Search Solutions last year, is here with us today to help answer any questions that you might have about these businesses. She has done a terrific job bringing the teams together to develop a unified go-to-market strategy, and we are certainly benefiting from her knowledge of the healthcare industry and how we can become an even more consultative partner for our clients. Welcome to your first earnings call, Kelly. Other workforce solutions also includes our VMS business, where revenue was flat year over year in the first quarter. However, trends have also improved here, and we expect year-over-year growth in the second quarter. Our workforce optimization and predictive analytics team at Avantis reported another solid quarter of growth, improving both revenue and EBITDA year-over-year. This growth was driven by several client expansions and new client wins. In the second quarter, total revenue for the other workforce solution segment is expected to be up 1% to 2% year-over-year, with growth in most business lines somewhat offset by a small decline in mid-revenue cycles. As we think about characterizing the industry environment and AMN's position, I would offer these thoughts. Our market appears to be relatively strong, with demand up across most business lines. And while there's always concern of a future economic downturn that could change this environment, our current order trends and last week's GDP numbers suggest that a slowdown is not likely to occur in the near term. Second, the growing complexity and size of healthcare organizations require them to seek equally sophisticated and innovative partners. AMN's suite of solutions puts us in a unique position to be that strategic partner. Our continued success in winning new clients and expanding existing relationships is a positive indicator that we have the right solutions for this transformative time in healthcare. Third, we continue to take a caring and disciplined approach to how we grow the AMN enterprise to serve all of our stakeholders. This year, we are making important investments in our businesses to ensure that we have the technology platforms and digital capabilities to engage and serve our clients and healthcare professionals. We are also further evolving AMN's work environment and adding resources to develop our team and ensure they are reaching their goals. All of these investments are made to fuel organic growth. We are also deploying capital in new and expanded capabilities through acquisitions, like Silver Sheet in advance, using our balance sheet to further diversify and strengthen our offerings. AMN Healthcare has a long history of innovating, and delivering increasing value to our clients, healthcare professionals, and our team members. Anyone who knows AMN Healthcare well knows that we are a purpose-driven organization and committed to making a positive impact through our time, our talents, and resources. As a trusted partner in the care of patients and families, we are on the same journey as our clients to deliver the best patient outcomes possible and to lower costs, increase healthcare equality, and improve the experience of healthcare professionals. At AMN, we also take our passion and purpose beyond our core services into the local communities and to support important social issues. We take pride in doing our part as a national leader in diversity and inclusion, gender equality, and serving others in need through community service. I'm particularly proud that AMN is an active partner with global leaders on these issues such as the Bloomberg Gender Equality Index, the Human Rights Campaign, the 30% Club, and our investors such as the Hermes SDG Fund. We've been able to partner with these and several other organizations to sharpen our focus and learn best practices from other companies who are making a positive impact in these critical social issues. So when you think of AMN Healthcare, I hope you recognize that we are an organization with a dual purpose, to make a positive healthcare and social impact, and to deliver attractive returns for our shareholders. Now I will turn the call over to Brian for a financial update, after which Kelly, Ralph, and Dan will join us for the Q&A session.