AMN Healthcare Services Inc

Ladies and gentlemen, thank you for standing by and welcome to the AMN Healthcare third quarter 2019 earnings call. At this time, everyone joining by phone is in a listen only or muted mode. And then later, we will conduct a question and answer session. Instructions will be given at that time. If you should require assistance during the call, you may press star then zero on your phone keypad. As a reminder, the conference is being recorded And I'll now turn the meeting over to our host, Director of Investor Relations and Strategy, Mr. Randy Reese. Please go ahead, sir.

Good afternoon, everyone. Welcome to AMN Healthcare's third quarter 2019 earnings call. A replay of this webcast will be available until November 14th 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. Happy Halloween, everyone, and welcome to our third quarter 2019 earnings call. We are two months from the close of what has been a very remarkable decade for Amen Healthcare and the industry in general. Over this span, we have recovered from a major downturn followed by a time of significant growth. The unprecedented aging population and a strong economy are creating new pressures on healthcare while increasing demand for clinicians and simultaneously constraining the labor supply. But without a doubt, the most important change in our industry during the last decade has been the adoption of workforce solutions and talent management tools. I am incredibly proud of how the AMN team rose to the occasion and elevated AMN to become healthcare's largest and most innovative talent solutions partner. Ten years ago, we had just a handful of managed services clients representing less than 2% of our revenue. This year, we have $1 billion, or nearly half of our revenue, generated through managed services clients. And the momentum continues, with 2019 already a record year for new contracts. We are certain that the future will bring healthcare transformation far beyond anything that we've already experienced. We know healthcare organizations and clinicians are innovating beyond the traditional models by using new technologies and care delivery settings. Though the healthcare sector races to change, the silver tsunami of the aging clinical population increases the difficulty of balancing labor supply with the increasing care demand. The opportunity to help healthcare providers innovate around talent strategies and care delivery offers great promise for the future of AMN. This challenges every AMN team member to anticipate, create, and redefine how we add value for our clients and clinicians as the leader in total talent management in healthcare. We don't see any end in sight for the strong demand environment we're in. If anything, it is likely to intensify as clinical labor shortages increase, which should bode well for our long-term growth opportunities. AMN produced very good financial results for the third quarter with growth in most service lines. The growth in our staffing businesses was moderated by a very tight labor market. As you would expect, we are intently focused on deploying new recruitment strategies and ramping up our recruiters to increase our fulfillment to meet this growing demand. Now, let's turn to our current results for the third quarter of 2019. I'm proud to report we reached a new record high in revenue at $568 million. Gross margin was a strong 33.5%. and adjusted EBITDA was $69 million, or 12.2% of revenue. Our nurse and allied segment delivered revenue of $363 million, which is 18% higher year over year, including 6% organic growth. Segment revenue was higher than expected from strength in our international and rapid response nursing businesses, and a solid contribution from our recent acquisition of Advanced Medical. Our largest business, Travel Nurse Staffing, grew 10% year over year with 4% organic growth. Growth came from a combination of higher volume, hours worked, and bill rate. Demand for travel nurses has remained strong for many months, currently more than 20% above prior year and at the highest levels we've seen since 2016. Bill rates have risen, but at modest levels, considering the extraordinary demand. Our experience has been that as this high demand environment continues, clients will respond with more attractive compensation packages. In fact, the increase we've seen in higher bill rate rapid response assignments is a very encouraging sign. Allied staffing was strong again in the third quarter, picking up to 11% organic revenue growth. Our new team members from ADVANCED also contributed $23 million to allied revenue in the quarter. ADVANCED is poised for robust growth in its schools business, with clinicians working in school settings up more than 50% year over year. Overall demand in allied is up year over year. However, the growth outlook in the next couple of quarters is somewhat tempered by lower staffing needs from our skilled nursing clients due to the recent implementation of the patient-driven payment model. In the fourth quarter, we expect nurse and allied segment revenue to be up 11% to 13% year-over-year, with organic results flat to up low single digits. In the locum tenens segment, third quarter revenue was slightly ahead of expectations at $84 million. The business has stabilized after disruption from process and technology changes made last year. Overall, demand is strong and the productivity of recruiters continues to improve, which should enable us to deliver growth in the next year. In the fourth quarter, we expect locum tenens revenue to follow normal seasonality being down 3 to 4% sequentially. Our other workforce solution segment recorded third quarter revenue of 121 million for year-over-year growth of 1%. The leadership and search division, which makes up more than half of this segment's revenue, had a strong quarter, delivering growth of 6% year-over-year. Each of the service lines in this division, which include interim leadership, physician perm placement, executive search, and RPO, all produced year-over-year growth in revenue. Revenue cycle solutions revenue was down about 10% year-over-year, but we do expect the relative performance to be slightly better in the fourth quarter. Our technology workforce solutions, which include our vendor management systems and Workforce optimization performed well and grew more than 10% year over year in the third quarter. For the fourth quarter, total revenue for the other workforce solution segment is expected to be up 4% to 5% year over year. We are proud to be in a market leadership position as we enter this new decade, and we look forward to innovating with our clients as their total talent management partner. Likewise, we continue to create innovative recruitment methods that can help our clinicians to achieve their career aspirations. I am grateful for the incredible talent of all of our team members engaged in AMN's evolution. The foundation of our business is the quality and commitment of our people. The strength of our culture and our team's desire to make a positive impact enables thousands of talented and committed healthcare professionals to care for patients. As a good example of this, we have several team members who are currently in Northern California helping our clients and clinicians as they deal with the wildfires. Every day we strive to make an impact through our work and in our communities in any way possible. 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.