AMN Healthcare Services Inc

Thank you for standing by, and welcome to AMN Healthcare's third quarter 2022 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 1-1 on your telephone. I would now like to hand the call over to Randall Reese, Senior Director of Investor Relations. Please go ahead.

Good afternoon, everyone. Welcome to AMN Healthcare's third quarter 2022 earnings call. A replay of this webcast will be available at ir.amnhealthcare.com following the conclusion of this call. Details, there is not an audio replay, excuse me. 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 because 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 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 ir.amnhealthcare.com. On the call today are Susan Salka, Chief Executive Officer, Jeff Knudson, Chief Financial Officer, Kelly Rakowski, Group President and Chief Operating Officer of Strategic Talent Solutions, and Landry Seedig, Group President and Chief Operating Officer of Nursing and Allied Solutions. James Taylor, President and Chief Operating Officer of Physician and Leadership Solutions, would normally be joining us. that he is representing AMN today on the president's panel about the future of healthcare workforce solutions at the SAA conference. I will now turn the call over to Susan.

Thank you so much, Randy, and welcome everyone. We have many topics to share and celebrate today, but I'll start with one reflection as I begin my 84th and last Ernie's call. When AMN went public 21 years ago, we were a single service travel nursing company. And while it's still our largest business today, there's no doubt we've come a long way in building a healthier, more diverse, and impactful company over those years. In addition to being the most comprehensive staffing provider, we've also become the leader in workforce solutions and technology platforms in healthcare. Our stock has risen about 650%. And for the last decade, we've been consistently in the top quartile of delivering total shareholder returns. Most importantly, we positively impacted millions of patients' and families' lives, and we're proud to be a national leader in diversity, equity, equality, and inclusion, and a recognized contributor to our communities. AMN is stronger than ever before, and we have tremendous opportunities ahead to make a greater impact for all of our stakeholders. We have incredible strength, stability, and diversity of experience across our leadership team, and these are the people driving the results you see today. This gives me great confidence as I pass the CEO baton to Kerry Grace later this month. Kerry is the perfect leader to build upon the strong culture and foundation we have created at AMN. Our team is very excited to begin working with her and continue the momentum we have in the market. And I know you will enjoy getting to know her in the coming months too. Now let's turn to our results and the trends we think are most important to our future. As we've discussed before, a great confluence of pressures caused healthcare staffing demand to reach unprecedented levels last fall and winter. Our team has worked closely with clients to bring the unusually high pay and bill rates down as quickly and smoothly as possible as demand pulled back but remains well above pre-pandemic levels. Throughout 2022, we have been proactive and transparent in communicating the expected decline in revenue after the first quarter peak. While we are above our earlier expectations, we believe things have generally played out as we anticipated. During the third quarter, all three of our business segments again exceeded revenue expectations, and we are pleased with our trajectory in the fourth quarter. Since February, we had a $1 billion revenue target with a 15% adjusted EBITDA margin for the fourth quarter, and our guidance today is comfortably ahead of these targets. In times when many companies struggled for visibility, we maintained our strong track records of setting reasonable expectations and performing well against them. Third quarter revenue was $1.14 billion with adjusted EBITDA of $182 million. Revenue was 20% lower than the second quarter, caused mainly by the anticipated decline in our largest segment, nurse and allied solution. Nurse and allied segment revenue was $828 million in the third quarter, 32% higher year over year and declining 25% sequentially. Travel nurse revenue grew 31% year over year and was down 25% from the prior quarter. Demand for travel nursing remains well above pre-pandemic levels with strength across all specialties. In addition, our supply of candidates, including new applicants, remains stronger than pre-pandemic levels. And we have the benefit of a significant number of candidates that have been added to our network over the last two years. An increased preference among clinicians for flexibility, coupled with the investments we are making in our digital capabilities, gives us confidence in our ability to attract clinicians for the future. Our allied business had an 8% sequential revenue decline and 39% year-over-year growth. Areas of strength included imaging and therapy. For the fourth quarter, we expect revenue in nurse and allied solutions to be down 7% sequentially and approximately 29% year-over-year due primarily to the reduction in bill rates we've discussed. We project sequential growth in volume in the fourth quarter, offset by seasonally lower hours and a flattening in bill rates. In our physician and leadership solution segment, third quarter revenue was $175 million, showing 16% growth over the prior year, slightly better than our guidance. Our search businesses led the segment with 21% revenue growth, with locum tenants up 19% and interim leadership growing 9%. In the fourth quarter, we project revenue in physician and leadership solutions to be flat versus prior year. Excluding pandemic-related business, revenue would be up approximately 6% year-over-year. Demand remains strong and well above pre-pandemic levels for locum tenens and physician permanent placement. Some healthcare organizations are streamlining leadership and non-clinical roles to reduce costs, and this has affected short-term demand for interim and permanent leadership. In the long run, we expect turnover in leadership positions to remain relatively high, continuing to drive demand. In our technology and workforce solution segment, we continue to build our leadership position. For the last 12 months, our MSP and VMS growth spend under management was over $12 billion. AMN's VMS, workforce optimization, and RPO offerings, in which we have invested heavily in the last decade, are critical solutions to help clients address the labor challenges of today and tomorrow. And as you know, two and a half years ago, we added language services. Collectively, these solutions further differentiate AMN in the marketplace with innovative technology platforms, helping to improve access and quality of care while also reducing costs. In the third quarter, technology and workforce solution segment revenue of $135 million grew 35% year-over-year, better than our guidance of 30%. VMS revenue beat expectations at $60 million, up 80% over prior year, but down from $75 million in the prior quarter. Consistent with our travel nurse business, the sequential decline in VMS was driven by lower volume and bill rates. VMS, language services, workforce optimization, and RPO solutions exceeded our growth expectations for the quarter. We continue to grow our customer base across this segment. Our VMS business, which offers three unique platforms, now serves over 500 clients. Our RPO client base has doubled compared with pre-pandemic, and language services has grown volumes 70% in the last two years. For the fourth quarter, we expect revenue in technology and workforce solutions to grow approximately 10% year over year, with similar increases in all major business lines. Continued investment in all of our offerings, both improving our existing capabilities and creating new ones, has never been more important. As our country's demand for healthcare services is increasing with an aging population and the aftermath of the pandemic, The healthcare community is faced with workforce shortages far worse than previously seen or anticipated. These shortages are expected to last for many years to come. As a result, healthcare organizations are adjusting their models, expecting that a greater percentage of their clinical labor will come from contingent staffing. This is a great topic for Kelly to expand upon in today's Q&A session because we are working extensively with our clients and industry groups to address this crisis. At the same time, we are committed to helping ensure that a career in healthcare is fulfilling and sustainable. Supporting clinicians with wellness, resiliency, and mental health services is just as important as rewarding them with appropriate compensation for the hard and highly skilled work they do every day for our loved ones. It is exciting to imagine the wonders that healthcare organizations and professionals will do in the coming years, and I'm confident that AMN will play an increasingly important role. In just a few minutes, Kelly Landry will join us for the Q&A session. For now, though, I will turn the call over to our colleague, Jeff, who will provide more insights on our financial results.