AMN Healthcare Services Inc

Ladies and gentlemen, thank you for standing by, and welcome to the AMN Healthcare second quarter 2019 earnings call. At this time, all lines are in a listen-only mode, and later we will conduct a question-and-answer session. If you would like to ask a question on today's conference, you can press star then 1 on your touch-tone phone. And as a reminder, today's call is being recorded. I would now like to turn the call over to our host, Randall Reese, Director of Investor Relations. Please go ahead.

Good afternoon, everyone. Welcome to AMN Healthcare's second quarter 2019 earnings call. A replay of this webcast will be available until August 20th 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. As we head into the second half of the year, we are very pleased to share good news with you regarding AMN's performance and the positive impact being made by our team members all across the country. Our financial results exceeded our guidance for the quarter, driven by strength in Nurse and Allied, although several of our businesses also beat expectations. And we are excited about the early contributions from our latest acquisition, Advanced Medical, who joined the AMN family in mid-June. We are seeing the union of Advanced and AMN pay off even at this early stage. The advanced team is doing a wonderful job delivering to their clients and expanding business across all of the markets they serve. Their school-based therapy solutions continue to perform very well and are poised to achieve or exceed the growth we expected for the upcoming school year. In addition, the infusion of travel nurse and allied orders from AMN MSPs coupled with their highly capable recruiters has enabled the team to help AMN serve these clients during this time of high demand. This was an ideal time for AMN to bring on the expertise of the advanced team. In addition to their performance, I've been very impressed and inspired by their enthusiasm for community service and harnessing our greater resources to make a positive impact. As we think about our market environment today, we are very optimistic. Demand across most of our businesses is strong and in several cases showing signs of increasing need for AMN's expertise. Competition for skilled clinical talent is intense and staffing demand is even higher than it was last quarter across nearly all of our divisions. Turnover and vacancies throughout healthcare remain at record levels and labor tension continues as many clinicians are frustrated by being asked to cover higher than usual workloads. Consolidation and increasing complexity in managing healthcare labor drives demand for more comprehensive workforce solutions and pushes AMN to continuously enhance our capabilities. This is most visible in our MSP-related business, where we had another quarter of double-digit revenue growth. The need for outsourced staffing and workforce optimization is stronger than we have ever seen. And with AMN's successful track record and significant delivery capabilities, we continue to win new clients as well as expand existing relationships. We have signed several new and expanded MSP contracts this year, which we expect to add nearly $200 million of annualized gross spend under management at maturity. Now let's review our latest results and outlook. Second quarter consolidated revenue of $535 million was our second highest on record. Gross margin was 33.5% and adjusted EBITDA was $67 million or 12.5% of revenue. Our nurse and allied segment posted revenue of $332 million flat year over year, which was better than guidance due to higher labor disruption revenue and $5 million from the advanced acquisition. Revenue for our largest business, Travel Nurse Staffing, grew 2% year-over-year on an organic basis. Growth was driven by volume, with average bill rates relatively flat on a year-over-year basis. Demand for Travel Nurses continued to grow since we last shared our performance in early May. Today, demand for travel nurses is more than 20% higher than prior year, and the growth is in all types of clients, including our MSP clients, direct, and third party. Adding to our confidence is the fact that we have begun to receive the seasonal winter needs for assignments starting in the fourth and first quarters. In most cases, clients are indicating their contingent staffing needs in the future, will be greater than or close to the same as last year. As we look forward to the third quarter, we are beginning to see pricing improve, with our revenue per day expected to be above prior year. This is a very good sign that the higher levels of demand are also making way for some positive movement in pricing, which allows us to increase pay rates to attract and convert candidates. Allied staffing remained exceptionally strong, even as comps got tougher in the second quarter. This team is really firing on all cylinders, and we were excited to see 9% organic revenue growth in the second quarter. The greatest increase is in the imaging, respiratory, and laboratory specialties, which is very helpful since the availability of this talent is slightly more accessible than in therapy. Client needs are very robust and we foresee solid growth continuing in this division. As we look to the third quarter for the nurse and allied segment, we expect revenue to be up 16 to 18% year over year, including a full quarter from the addition of advanced, with organic growth in the mid single digits. In the locum tenens segment, second quarter revenue was in line with our expectations at 82 million. Although still below prior year, we continue to make steady progress after our process and technology changes. Our new hiring and training programs have gone well. In fact, in recent weeks, our newer recruiters contributed 16% to placement activity, and our tenured staff is nearly reaching the productivity levels that we had a year ago. For the third quarter, locum tenants' revenue looks to be flat to slightly up sequentially, which would result in an improving year-over-year comparison. We believe that locum's revenue will hit year-over-year growth by mid to late fourth quarter. Second quarter revenue in our other workforce solution segment was $121 million, showing year-over-year growth of 3%. Our leadership and search division, which is comprised of interim leadership and permanent placement solutions, makes up about half of this segment's revenue. This group grew revenue 4% year over year and 7% sequentially. We are excited about the momentum that they have in this business and how the collective team is elevating the conversation and the strategic approach with our clients. Within our mid-revenue cycle business, The integration of our med partners in peak brands is progressing very nicely, and I'm impressed with their new go-to-market strategy and collaboration with our other businesses. Although revenue is still lower year over year, there are more favorable trends as we head into the third quarter. Other workforce solutions also includes our VMS and Avantis businesses, which had solid second quarter growth with expectations of continued growth through the remainder of the year. In the third quarter, total revenue for the other workforce solutions segment is expected to be up approximately 3% year over year with growth in most businesses. Before I turn the call over to Brian, I'd like to take a moment to thank our thousands of corporate team members and healthcare professionals who pour their hearts and their talents into helping our clients and their patients every single day. The biggest reason for AMN's success is the quality of our people and the passion they have for making a positive impact. A great example of this kind of impact that we can make with our clients and our clinicians is our upcoming medical and community mission trip to Guatemala. For the seventh consecutive year, I'll soon be joining AMN-sponsored doctors, nurses, and other team members to provide medical care, and install smoke-free stoves and water filters and support local schools in the most impoverished areas of the country. During our week together, we will be fortunate to serve over 1,000 Guatemalan patients and families. This is just one of the many ways that AMN strives to use our resources to help others and to make a difference. Now I'll turn the call over to Brian for a financial update after which Kelly, Ralph, and Dan will join us for the Q&A session.