AMN Healthcare Services Inc

Ladies and gentlemen, thank you for standing by, and welcome to AMN Healthcare's second quarter 2020 earnings call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star and then one on your telephone. Please be advised that today's conference call is being recorded, and if you require any further assistance, please press star zero. I would now like to hand the conference over to Randall Reese, Director of Investor Relations. Thank you. Please go ahead.

Good afternoon, everyone. Welcome to AMN Healthcare's second quarter 2020 earnings call. A replay of this webcast will be available 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, trends, 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 and cautionary statements including those identified in our most recently filed forms 10-K and 10-Q, our earnings release, 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, Group President and COO of Strategic Talent Solutions, Landry Seedig, Group President and COO of Nursing and Allied Solutions, and Dr. Cole Edmondson, Chief Experience and Clinical Officer. I will now turn the call over to Susan.

Thank you so much, Randy, and welcome everyone to our second quarter 2020 conference call. Since the beginning of March, the nation and the healthcare industry have been reeling from the onset of the COVID-19 pandemic. In the early stages of the crisis, The healthcare industry was grappling with the surge of COVID-19 patients and managing through a shutdown of non-emergency care. The AMN team rose to this challenge and pivoted to help healthcare professionals and organizations. We quickly expanded existing services and launched new solutions to help the healthcare sector handle waves of dramatic change. But the greatest impact was made by our healthcare professionals. who have been on the front lines caring for patients throughout the crisis. They have borne the greatest burden and AMN has dedicated even more resources to support them and understand their challenges. We recently completed a survey of nurses across the country that provided further insights into their experience and intentions. To that end, we invited our colleague, Dr. Cole Edmondson, AMN's Chief Experience and Clinical Officer to answer any questions about what we are doing to support our healthcare professionals and our current engagement with clients. Today, the outlook for the U.S. economy and healthcare remains clouded. COVID-19 has spread and surged in states that were little affected three months ago. Many healthcare organizations have resumed the full spectrum of care with patient volumes in an uptrend, but still below pre-crisis levels. AMN has adjusted to this dynamic environment and our business is positioned better than ever to handle this demand volatility and capture long-term growth opportunities. With our country under pressure from a pandemic and social upheaval, it's vitally important that AMN demonstrates our commitment to our core values. We are fortifying our actions supporting social justice and diversity goals with even greater urgency. AMN Healthcare has a long-standing commitment to diversity, equity, equality, and inclusion. Our values inherently include the need to fight systemic racism and biases. And during this important time, we've taken action to increase our investments and activities both internally and externally. As one example, recently AMN extended financial support to 100 historically underrepresented businesses to attain diverse supplier certification. We have also amplified our sensitivity training and leadership development programs to foster an even more diverse and inclusive workforce. Our seven employee resource groups have been critical in ensuring we are educating ourselves and taking specific actions as a leader in our industry but also as individuals who want to do our part to affect positive change. During this time of turmoil, we also find that our clients are maintaining their long-term vision despite the near-term headwinds. Our strategic accounts team has been highly engaged with health systems that are looking for more complete and robust solutions to their talent challenges. They also want a strategic workforce partner who is serious about social issues and collaborating to create more meaningful change. In recent months, we were pleased to be awarded several new or expanded strategic relationships covering many of our service lines, and we are excited about the increased opportunities to make a difference on the front lines of healthcare. Now let's turn to second quarter financial results and business trends. Revenue in the second quarter set another record high for the company at $608 million, with adjusted EBITDA of $81 million. Our nurse and allied segment produced revenue of $444 million, up 21% year-over-year, with 13% organic growth. Our largest business, travel nurse staffing, grew 41% year-over-year. Allied staffing revenue was up 10% year-over-year due to last year's acquisition of Advanced Medical. Organic revenue for Allied was down 13%, due in large part to weakness in physical therapy demand. In the third quarter, nurse and Allied solutions revenue is expected to be down approximately 10% from prior year. Travel nurse staffing revenue is expected to be higher by 3 to 5% over prior year, with lower volumes offset by higher rates and hours worked. Over the last six weeks, travel nurse orders have risen from a combination of a recovery in hospital census and resurgence of COVID-19 activity in many states. Current travel nurse orders are significantly above prior year. Allied revenue is expected to be lower than prior year in the third quarter by 27% to 29%. Allied demand has picked up in the last few weeks, which we expect to drive improving volumes as we move through the third quarter. Our physician and leadership solution segment recorded second quarter revenue of $109 million, which was down 24% year over year. Within this segment, locum tenens saw a revenue decline of 25% year over year, driven by cancellations related to the pandemic. Advanced practice revenue was up year over year, but that was more than offset by declines in other specialties. More recently, we've begun to see some increased demand for other disciplines as non-emergency care has continued to recover. The second largest part of this segment, our interim leadership business, had a revenue decline of 17% year-over-year in the second quarter. Revenue for our permanent placement businesses fell by a combined 34% year-over-year in the second quarter as many search engagements were put on hold and new search needs declined. Though business trends have stabilized, we expect third-quarter revenue for physician and leadership solutions to be down year-over-year by nearly 30%. Our third segment, technology and workforce solutions, reported revenue of $55 million, up 123% year-over-year, including the acquisitions of Stratis Video in February and Before Health in December. Organic revenue was up 3% year-over-year, Our VMS business grew 15% year-over-year in the second quarter with 5% organic growth. Stratus contributed $28 million of revenue in the quarter and recovered more quickly than we had anticipated when we provided guidance. After a slow start, minutes billed increased throughout the second quarter and exceeded pre-COVID-19 levels by late June. Our language interpretation services are particularly important at this time because they provide critical support for at-risk patient populations across the country. For the third quarter, we expect technology and workforce solutions revenue to be up approximately 140% year-over-year, including about $35 million from the Stratus and B4 Health acquisitions. we expect organic revenue to be down slightly year over year in this segment. As we anticipated an overall revenue decline from the second to the third quarter, we began taking cost savings actions. As a result, even with the lower expected revenue, we anticipate that our adjusted EBITDA margin will remain above 13%. This kind of performance would not have been possible without the important technology investments we have made over the past few years and the strategic shift toward total talent solutions that AMN made over a decade ago. We are continuing to make these important investments, including our digital capabilities that create a more positive experience for our clients and healthcare professionals and enable further efficiencies. Beyond the third quarter, uncertainties remain about the state of the U.S. economy, healthcare demand, and public policy. We can assure you this, however. The AMN team is committed to helping healthcare professionals and our clients navigate through this fast-changing environment, bringing the strongest set of total talent solutions in the industry. We, along with our extensive network of strategic partners, will continue to work tirelessly to meet the ongoing need for quality healthcare professionals. Our amazing AMN team members are the lifeblood of these solutions, and every day I am so impressed with their energy, creativity, and commitment. Even though we're all working remotely from one another, we have actually grown closer as a team in these past few months. I recognize how much everyone has been asked to change the way they do business, and I want our remarkable team to know that their efforts are greatly appreciated and essential. In addition, one of the many things I love about the AMN inclusive culture is how supportive and engaged our family and friends are in our mission. So I want to extend a huge thanks to the spouses, partners, parents, children, and other family and friends of our team members, of our healthcare professionals. Your support also makes a very positive impact. And a special shout out and happy 10th anniversary to my wonderful husband, Scott, who has been so supportive to me and the AMN family. I promise I'll be home at a decent time after our analyst calls to toast and to celebrate with you. In a few minutes, Kelly Landry and Dr. Cole will join us for the Q&A session, but for now, I will turn the call over to Brian, who will provide more insight into our financial results.