AMN Healthcare Services Inc

Good day and thank you for standing by. Welcome to the AMN Healthcare's first quarter 2024 earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Randall Reese, Senior Director of Investor Relations. Please go ahead.

Good afternoon, everyone. Welcome to AMN Healthcare's first quarter 2024 earnings call. A replay of this webcast will be available at ir.amnhealthcare.com at the conclusion of this call. 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 in 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 Kerry Grace, President and Chief Executive Officer, and Jeff Knusten, Chief Financial Officer. I will now turn the call over to Kerry.

Thank you, Randy, and welcome to our earnings call. I want to first express my gratitude for the AMN healthcare professionals and team members in the U.S. and around the world for their strong commitment and tireless efforts in the first quarter of 2024 in furthering our mission of empowering the future of care, and especially to our wonderful nurses as we recognize them during National Nurses Month for the extraordinary role they play in healthcare. First quarter revenue of $821 million was in line with expectations, with earnings coming in ahead of consensus estimates. Several of our businesses displayed positive trends, including language services and locum tenens. Our second quarter revenue guidance for the two business segments other than nurse and allied is in line with consensus. Healthcare organizations' focus on reducing contingent labor continues to depress demand for our largest business, nurse staffing. We expect nurse and allied segment revenue in the second quarter of 2024 to be down 14 to 16% from the first quarter, with nurse staffing declining more than the overall segment. Other AMN service lines have been affected by the labor cost squeeze in healthcare, including VMS, RPO, and SEARCH. Interim leadership, while down year over year, shows sequential revenue growth for the first time in six quarters. International nurse staffing revenue in Q1 dropped as expected by 11% sequentially and 7% year over year, due to the State Department's constraints on new visa applications. We continue to see strong client demand for international nurses. Trends in our allied business are favorable for some specialties. In the first quarter, we saw good year-over-year growth in volume and net weeks booked for therapy and imaging. Our school's business grew on assignment headcount 20% year-over-year. These growing segments were more than offset by decline in lab and especially respiratory, where volume was off 50% from the year-ago quarter late in the pandemic. As we have discussed in previous quarters, we see clients focused on both near-term labor cost spend as well as implementing new models to sustainably address increasing patient demand. Based on the latest client feedback, the majority of our top MSPs have indicated they have reached or cut below their targets for contingent nurse labor spending. Indications from smaller clients are that their progress on contingent nurse labor spending lags the largest systems by a couple of quarters. In the first quarter of this year, the four public hospital companies averaged spending 43.7% of revenue on salaries, wages, and benefits. compared with 45.4% for the same quarter five years ago. These figures are consistent with our view that the largest health systems have made substantial progress on labor cost control, with some moving to grow in a cost-effective manner to meet increasing utilization. We remain convinced that in the long run, growing patient demand across many different sites of care relative to a finite supply of healthcare professionals will drive greater opportunity for both nurses, physicians, and other professionals and the workforce technology solutions that help optimize labor utilization and cost. In line with these trends, we are actively partnering with our clients and prospects to develop and implement workforce models that help them improve efficiency and automation and reduce labor costs using our technology and network of healthcare professionals. We expect the low-demand environment to continue for some of our businesses, such as Travel Nurse, VMS, RPO, and Search. In anticipation of these trends, we are managing second-quarter SG&A expenses, excluding share-based compensation, acquisition-related integration other costs, to be approximately 10 million lower than the first quarter. Working against lower revenue and gross margin headwinds, we are targeting an adjusted EBITDA margin for Q2 that is in line with analysts' estimates. We have reduced headcount to align with the lower demand we have seen in some of our service lines. In addition, we have taken other actions to restrain spending where appropriate. We have reduced our CapEx spending plans for 2024 by approximately 20% to a range of $65 to $70 million for the year, prioritizing spend on key areas of growth and focus with our clients. This includes rolling out the next generation of our industry-leading vendor-neutral platform, ShiftWise Flex, to current and new clients. We have successfully migrated clients representing 36% of shift-wise VMS spend onto Flex in the first quarter and are targeting 70% by the end of the year. Our CapEx plan also includes continued investment in our language services business, which grew 16% year over year. Our industry-leading clinical staffing app, AMN Passport, is contributing a rising percentage of our applicants filling high-need jobs. ShiftWise Flex, Passport, and Language Services account for nearly half of our cap expense. Our OneAMN transformation strategy is also proceeding well, with some promising gains visible this quarter. New technology and internal process improvements have greatly accelerated our speed in fulfilling orders. which was challenging for us during the pandemic. These changes have cut our order to book time in travel nurse and allied staffing in half and enabled us to improve our position in the vendor neutral market. At our largest third party client, where we had ranked outside the top 15 suppliers a year ago, AMN has improved to the number three ranking among vendors. Our new SmartSquare mobile app, which enables advanced self-scheduling capability, reached more than 90,000 clinicians in the first 45 days after launch. And the SmartSquare workforce optimization platform is ranked best in the class survey again this year. These outcomes are important milestones for our intermediate and long-term growth prospects. All these strategic changes were necessary to restore the ability of AMN to gain market share and serve a fast-changing market that demands broader and more cost-effective solutions to the unique workforce conditions in healthcare, which is expected to be a leading growth sector for the U.S. economy in the coming decades. The physician and leadership solutions and technology and workforce solutions segment have attained some stability in revenue outlook after a solid first quarter. AMN is making early gains in reopening our sales engine to the whole healthcare staffing market, and we are seeing our VMS sales pipeline build and progress. With all we have done and have in progress, AMN will be in a better competitive position as the most aligned total talent solutions partner for healthcare professionals and the employers who depend on them when staffing demand comes back. We are also demonstrating the ability to right-size our organization in concert with market demand. Our business mix is more diversified now than in past cycles, helping AMN maintain profit margins that are higher than AMN experienced in other market downturns. We are managing through short-term risks while building for sustainable long-term growth of a talent-rich, values-based organization serving an important mission for all our stakeholders. AMN is proud to have been recognized this month in Becker's Top 150 Places to Work. Our team members have admirably led through this difficult environment while keeping our strong values and mission at the center of everything we do. Now, I'll turn the call over to Jeff for more details about our results and outlook.