AMN Healthcare Services Inc

and welcome to AMN HealthCare fourth quarter 2024 earnings 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 the question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. I would now like to turn the conference over to Randy. Sir, you may begin.

Good afternoon, everyone. Welcome to AMN HealthCare's fourth quarter and full year 2024 earnings call. A replay of this webcast will be available at .amnhhealthcare.com at the conclusion of this call. 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 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-GAP financial information. Information regarding and reconciliations of these non-GAP measures to the most directly comparable GAP measures are included in our earnings release and on our financial reports page at .amnhhealthcare.com. On the call with me today are Kerry Gray, President and Chief Executive Officer, and Brian Scott, Chief Financial and Operating Officer. I will now turn the call over to Kerry.

Thank you, Randy, and welcome to our quarterly conference call. We are pleased to report that AMN Healthcare ended 2024 with solid financial results, and that trend has continued as we started 2025. Fourth quarter revenue of $735 million was $30 million above the high end of our guidance range, and adjusted EBITDA of $75 million also exceeded expectations. Our nurse and allied solutions revenue was 6% above the high end of guidance, and the segment still beat by 1%, excluding upside in labor disruption revenue. Physician and leadership solutions revenue was on target, aided by outperformance from physician permanent placement. Technology and workforce solutions revenue was 4% better than guidance, as language services saw improved volume. During the quarter, we repaid $75 million in revolver debt, enabled by another quarter of strong cash flow. Our industry continues to see signs of stabilization. Consistent with last quarter, travel nurse orders remain above the April 2024 level, though still 20% below pre-pandemic. These orders typically trend down after November, and the drop this year is much less than in the past two years, and in line with pre-pandemic seasonality. Allied orders grew 7% year over year in the fourth quarter, with new orders up 20% year over year. Locum tenants demand was better than normal seasonality, rising 6% from Q3 to Q4. Staffing gross margins declined through 2024, and we are more recently seeing stabilization of margins across our staffing businesses. Unfilled orders and vendor neutral programs increased again in the fourth quarter, as candidates continue to pass over jobs with low pay rates, and more staffing firms resist the pressure to accept unprofitable margins. As 2025 unfolds, macro indicators tell us that after more than two years of stepped up hiring, the healthcare sector has erased the permanent staffing deficit that grew from 2020 to 2022. Wage inflation has remained high, especially for highly qualified professionals. Factors that caused our industry's trajectory to detach from labor market fundamentals have eased, as travel nurse utilization and bill rates have returned to normal levels. The next step would be to see client behavior to continue moving towards a renewed focus on long-term objectives for cost-effective flexibility. Hospitals experienced strong growth in patient volume last year, and recent analyst survey called for 3 to 4% admissions growth this year. To accommodate that volume growth, hospitals grew employment 4% in 2024, and at year end was 12% higher than the end of 2021, when workforce difficulties were most acute. Despite tactics to offset labor costs, hospital wage inflation moved back up to 5% in the fourth quarter of 2024. Healthcare organization managed wage pressures last year by reducing average hours worked across their workforce to their lowest level since 2013. Consistent with that, average hours for travelers also are at a 12-year low, which is negatively impacting the staffing industry's gross margin. In many instances of client needs, we can now demonstrate that travel nurses are an attractive alternative to using overtime, to leaving vacant positions open, and even to aggressive permanent hiring. As travel nurse staffing was 30% of our 2024 revenue, any demand recovery in this specialty would boost our efforts to return to growth. Since our last report, we have continued to see stable bill rates for nurse and allied staffing, and bill rates have continued to rise in locum tenants. For the nurse and allied segment, our first quarter outlook assumes volume down in the low single digits compared with the fourth quarter average, driven by expected lower international nurse assignments due to visa retrogression and lower utilization by a few of our large clients, mostly offset by growth in other MSP clients and direct and third party channels. For physician and leadership solutions, we expect first quarter revenues to be down slightly from the prior quarter. Our technology and workforce solutions outlook for the first quarter assumes a low single digit dip compared with Q4 due to lower VMS volume, with language services and outsourced solutions modestly up. Language services achieved our highest minutes delivered in Q4, and we expect to continue that trend in Q1. As the healthcare industry seeks long term solutions for its workforce needs, the AMN team is united behind our mission of innovation and service to healthcare professionals and the diverse organizations that provide care for millions of Americans. Clinicians and clients have made their voices clear. They want more choices, more visibility, and more control. We are uniquely positioned to provide information rich technology tools that give clients and healthcare professionals what they need now. In 2024, we launched and scaled best in class technology solutions that provide unprecedented visibility, cost control, mobility and efficiency in staffing management. By the end of the year, we had successfully rolled out our next generation VMS, ShiftWise Flex, to almost all our ShiftWise users. With its ease of use, automation of key functions, support for clinical and non-clinical roles, data packed market pricing surveillance, internal resource pool management, and more, ShiftWise Flex is poised to attract new clients in 2025 and beyond. Our market leading app for healthcare professionals, Passport, now enables clinicians to store their preferences and enabled by AI automatically apply for matching opportunities, a powerful advantage in competing for the most attractive position. Passport also supports locum tenants for the first time. We rolled out our next generation in-person interpreter scheduling system in our language services business, enabling convenient scheduling by location and language, broadening the capabilities of our interpretation platform. And we have raised the bar higher with WorkWise, which integrates our demand forecasting, staffing and sourcing, predictive scheduling and workforce management solutions into a powerful platform. Clients are increasingly looking for integrated technology solutions, and we are very pleased with the reception WorkWise has received from current and prospective clients. The recently launched event management capabilities of WorkWise have made AMM a more effective partner supporting clients during labor disruption events, where our scale and financial strength are also advantages. Technology innovations and operational scale drive our strategy to embrace all parts of our 41 billion addressable markets, enabling us to expand service offerings and capture share, not just in our MSPs, but also in the direct and third party channels. Our allied business has improved its direct market fill rates in recent months. Our locum's MSP volume is on an uptrend, which is being reinforced by the addition of locum support to shift-wise flex. In summary, AMM has evolved in many ways to identify and focus on the changing needs of clients and healthcare professionals. Though we provide 18 different solutions to thousands of clients, we work as one AMM, one highly flexible organization capable of delivering AMM service and value in a form that is customized to each client's unique situation. We have changed the way we operate, making it easier for clients to access our full range of solutions and easier for clinicians to access a broader set of opportunities. The more we enable client success in workforce management, the more AMM will be differentiated in the marketplace. We expect our client-centric strategy to get stronger over time, building long-term value for all our stakeholders. Now I'm thrilled to reintroduce Brian Scott, who will add his perspective on our results and outlook.

Thank you, Kari, and good afternoon, everyone. Let me start by saying how honored I am to be back at AMM. Although I'm still getting caught up on the changes in the organization and industry, it didn't take long for me to see that this team still has the same passion and values and is energized about our future. AMM has clearly made meaningful progress aligning under a unified -to-market strategy, using technology as a differentiated enabler, and improving our operational efficiency with speed replacement that is 33% faster than in 2019. However, we know there is still more opportunity to consistently use automation and process changes to drive speed and efficiency across our services, and we have the talent and strategy to make this happen. These efforts will underpin our ability to drive sustained growth and profitability to deliver value to our customers and shareholders. Kari and I look forward to providing future updates on our progress. Turning now to our results, fourth quarter consolidated revenue was $735 million, above the high end of guidance and consensus driven primarily by higher than expected labor disruption revenue in the nurse and allied segment. Revenue was down 10% from the prior year and up 7% sequentially. Consolidated gross margin for the fourth quarter was .8% at the high end of our guidance range. Year over year, gross margin decreased 210 basis points driven by lower margins across all three segments, partly offset by a favorable segment mix shift. Sequentially, gross margin was down 120 basis points due to lower margin in the nurse and allied segment, as well as an unfavorable segment mix shift. Consolidated expenses were 159 million or .6% of revenue compared with 185 million or .7% of revenue in the prior year and 150 million or .8% of revenue in the previous quarter. Adjusted SG&A, which excludes certain expenses, was $145 million in the fourth quarter or .8% of revenue compared with $159 million or .4% of revenue in the prior year period and $141 million or .5% of revenue in the previous quarter. The year over year decline in SG&A expenses reflected our efforts to reduce expenses along with the lower revenue. The quarter over quarter increase was driven primarily by unfavorable accruals from a state sales tax audit and professional liability, along with labor disruption support costs, partially offset by cost reduction efforts. Fourth quarter nurse and allied revenue was $455 million, down 15% from the prior year, primarily from lower volume and rates, partially offset by an increase in labor disruption revenue. Sequentially, segment revenue was up 14% as fourth quarter labor disruption revenue more than offset lower volume in travel nurse. The nurse and allied average bill rate was down 6% year over year and was flat, sequentially. Year over year segment volume decreased 22% and average hours work was down 1%. Sequentially, volume was flat while average hours work was down 2%. Travel nurse revenue in the fourth quarter was $230 million, a decrease of 35% from the prior year period and 6% from the prior quarter. Allied revenue in the quarter was $149 million, down 9% year over year and up 6% sequentially. Nurse and allied gross margin in the fourth quarter was 23.8%, a decrease of 170 basis points year over year and 120 basis points sequentially, primarily due to the decline in international nurse revenue. Segment operating margin of .6% decreased 310 basis points year over year and 20 basis points sequentially. The year over year decline was mainly due to lower gross margin, increased bad debt expense, and negative operating leverage. Moving to physician and leadership solution segment, fourth quarter revenue of $173 million increased 3% year over year, with the growth coming from the MSDR acquisition. Sequentially, revenue was down 4%, driven primarily by lower volume within the locums and interim businesses. Locum tenancy revenue in the quarter was $137 million, up 10% year over year, driven by the MSDR acquisition. Sequentially, revenue was down 4% in line with normal seasonality. Interim leadership revenue of $26 million decreased 11% from the prior year period and 9% sequentially due to lower volume and rates. Search revenue of $10 million was down 32% year over year and up 2% sequentially. Gross margin for the physician and leadership solution segment was 28.5%, down 480 basis points year over year, primarily attributable to a lower bill pay spread at locum tenants and an unfavorable revenue mix shift. Sequentially, gross margin increased 20 basis points. Segment operating margin was 9.8%, which decreased 320 basis points year over year, primarily due to the lower gross margin and a negative professional liability actuarial adjustment, partially offset by lower employee expenses and lower bad debt. Sequentially, operating margin decreased 20 basis points. Technology and workforce solutions revenue for the fourth quarter was $107 million, down 5% year over year, as growth in language services was more than offset by decreases in VMS and outsourced solutions. Sequentially, revenue was down 1%. Language services revenue for the quarter was $76 million, an increase of 12% year over year and 2% sequentially. VMS revenue for the quarter was $23 million, a decrease of 26% year over year and 10% sequentially. Segment gross margin was 57.3%, down 320 basis points from the prior year period, primarily due to the lower mix of VMS and outsourced solutions revenue, partially offset by margin improvements within language services. Sequentially, gross margin declined 60 basis points, mainly due to a revenue mix shift. Segment operating margin in the fourth quarter was 37.7%, an increase of 90 basis points from the prior year period, driven primarily by expense management, partially offset by the lower gross margin. Sequentially, the operating margin declined by 130 basis points on the lower gross margin and increased bad debt expense. Fourth quarter consolidated adjusted EBITDA was $75 million, down 20% year over year and up 2% sequentially. Adjusted EBITDA margin for the quarter of .2% was down 250 basis points from the prior year, primarily driven by lower gross margin and negative operating leverage. Sequentially, adjusted EBITDA margin was down 50 basis points due to the lower gross margin, partially offset by expense management. During the fourth quarter, we performed a quantitative impairment test of our goodwill. This assessment resulted in a non-cash impairment charge of $222 million, impacting the nurse and allied and physician and leadership solution segments. Net interest expense and other in the quarter was $23 million and included a $10 million non-cash charge related to the revaluation of minority equity investments. Fourth quarter net loss was $188 million, driven in large part by the non-cash goodwill impairment charge. This compared with net income of $12.5 million in the prior year and $7 million in the prior quarter. Fourth quarter gap diluted loss per share was $4.90. Adjusted earnings per share for the quarter was $0.75 compared with $1.32 in the prior year and $0.61 in the prior quarter. Day sales at standing for the quarter was 55 days, which was 15 days lower than a year ago. Sequentially, DSO improved by five days, in large part due to the upfront payment on labor disruption revenue recognized during the quarter. Operating cash flow in the fourth quarter was $73 million and capital expenditures were $16 million. As of December 31st, we had cash in equivalents of $11 million and long-term debt of $1.06 billion, including $210 million drawn on the revolving line of credit. We ended the year with a net leverage ratio of 3.0 times to 1. With a focus in 2024 on debt reduction, we paid down the revolver by $75 million in the quarter and $250 million for the full year. Recapping financial highlights for the full year of 2024, we reported revenue of $3 billion, a -over-year decrease of 21%. Gross margin for the year was 30.8%, a decrease of 220 basis points from the prior year. Adjusted EBITDA was $341 million, a decrease of 41% from the prior year. Full-year adjusted EBITDA margin of .4% was 390 basis points lower -over-year. For 2024, we reported a gap loss per share of $3.85, and adjusted EPS was $3.31, compared with the prior year gap EPS of $5.36 and adjusted EPS of $8.21. Full-year cash flow from operations was $320 million, and capital expenditures totaled $81 million. Moving now to first quarter guidance. We project consolidated revenue to be in a range of $660 million to $680 million, down 17% to 20% from the prior year period. This guidance includes an assumption of $24 million of labor disruption revenue. Gross margin is projected to be between .1% and 28.6%. Reported SG&A expenses are projected to be .2% to .7% of revenue. Operating margin is expected to be minus .3% to a positive .4%, and adjusted EBITDA margin is expected to be .7% to 8.2%. Additional first quarter guidance details can be found in today's earnings release. For modeling purposes, we anticipate full-year capital expenditures of $40-50 million, stock-based compensation expense of $35 million, and a non-gap tax rate of 26-28%. Before we open up the call for questions, I will hand the call back to Carrie.

Thank you, Brian, and welcome back. Before I open the call to Q&A, I want to thank Doug Wheat, our longtime chairman of our board of directors, who announced his retirement earlier this month and has become AMN Healthcare's board chair emeritus. Doug provided invaluable leadership and guidance to the company and management over the past 25 years, including helping take the company public 23 years ago. We thank Doug for his service to our organization and welcome Mark Valetta as the new board chairman. Mark has deep public company leadership and governance experience, both as a board member and as a CFO. Now, operator, please open the call for questions.

Thank you. Ladies and gentlemen, as a reminder to ask the question, please first start 1-1 on your telephone, then wait for your name to be announced. To withdraw your question, please restart 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Toby Summer with Truis. Your line is open.

Hey, good afternoon, everyone. This is Jasper, move on for Toby. I want to ask about gross margins in nursing allied. How are you thinking about the segment gross margins there in the first quarter? And can you maybe extrapolate for us how the labor structure revenue might influence that margin versus what otherwise might be comparable to a year ago? Thank you.

Hey Jasper, there's nothing like a welcome back to Brian and then a gross margin question in the first piece. So we'll talk a little bit about I think you got the big points that we're seeing. We obviously have a part of it that's mixed and particularly coming from headwinds that we have in international that we saw really throughout 2024 that will continue into 2025. So, Brian, if you want to maybe give them.

Yeah, thanks, Carrie. Jasper, thanks for the question. Yeah, there's a few parts on the gross margins, as you probably know, within nurse and Alex specifically, the margin in the fourth quarter at twenty twenty three point eight percent in part reflected some sales reserves reversals that we took in the fourth quarter that we had talked about on the last quarter. And so that that if you take that in the context of our two one guidance, we would have been closer to call twenty twenty two and a half. And so our expectation for for two one is relatively similar to the fourth quarter. And that's that's the team doing a really good job of looking at pay packages and negotiating and the trends we're seeing with with bill rates stabilizing in the last couple of quarters and expected to be up modestly in the first quarter. We're seeing pretty stable gross margin trends in the nurse and allied segment.

Excellent. You mentioned, you know, obviously the normalization

of the main conditions and the paired remarks, you know, Bill raised up a little bit in the first quarter. What do you think you need to see in the market to start growing the nurse now and buying sequentially this year?

Yeah, I think what we've seen and what we talked about this quarter and last quarter is a number of signs around normalization. And I think they really all speak to different parts of health care systems really getting back into much more of a normal mix between permanent, a layer of contingent staff and a layer of flexible staff. And so we've seen a lot of when you look at some of the things that would typically drive buying behavior normalization of premium. So, you know, our estimates today of premium spread over fully loaded labor costs is about 10 percent, the lower end of what you would have seen historically. And so what we want to see now, Jasper is, you know, if recent analysts reports are predicting patient demand increasing three to four percent, and you still see probably above average wage inflation in health care, you'd want to start seeing some of that play through in terms of, you know, orders then getting picked up as we go through the year to reflect some of those tailwinds.

Thank you.

Thank you. Please stand by for our next question. Our next question comes from the line of AJ Rice with UBS. Your line is open.

Hi, everybody. Just wondering if we've got the strike revenue, we've got other things going on in the fourth and first quarter, and then there's seasonality. I'm trying to understand how do you do you feel like you're seeing a normal pattern here that was similar to what you would have seen pre pandemic? Do you feel like there's still some softness and any any early thoughts about how the trajectory of the rest of the year for 25 might play out? What are you looking for in terms of revenue trends as we progress through the rest of the year?

You know, let me talk about what we've seen and then I can tag team with Brian on what we expect. We've seen a more return to normal. You know, if you look at normal being what we would have seen pre covid. And so, as an example, you know, and I talked about this in some of the opening remarks, we've seen order increases in nursing since last April. We would normally see from November until now a drop off of those orders. We saw that it was actually not as much as we had had seen pre covid. So, you're really starting to see for us more of that return to normal. Locums you typically see a little bit seasonality weakness at the end of the year. And so we don't have as much visibility as we would ideally like, but what we do have visibility in, we are seeing more normalcy as we enter 2025 than we have seen in the past couple of years.

Yeah, hey, Brian. Yeah, I mean, the fourth quarter, I think played out overall as expected. We see the labor disruption event went longer than we anticipated and that added some additional revenue in the fourth quarter and is flowing through into our first quarter guidance. If you try to strip that out of both quarters and also take out the kind of five million ish sales reserve reversal that we've talked about. You're we are looking at a little bit of a decline, probably in the midpoint of our guidance and Q1, you'll call it 15 to 20 20 million or so. And there's a few pieces there. I think to Kerry's point, I think we're seeing much more normalization. There's still some residual flow through of some of the changes with client behavior, some runoff from early, early client exits during 24. But for the most part, as we think about moving into Q1, seeing really good trends and locums, I think overall would expect that that business to be flat to slightly up in the first quarter, which is pretty normal for it to be up. We're still working through the integration, but the booking trends, especially the last few weeks have been really positive, which gives us confidence in verse with the first quarter, but also that we'd expect to see growth in the second quarter and beyond language services continues to to grow sequentially. The group before we expected to grow in Q1 and through the year international was still a bit of a headwind. Right. We talked about as we have retrogressing continuing, we have about a five million dollar 45 million dollar reduction expected sequentially in Q1. And then with the nurse and allied business, a little bit of a decline on the nursing side, as you see some of the winter orders start to roll off. But underneath that, there's still, I think, a more normal kind of buying behavior is just some of the seasonal impacts that are going on there. And then with VMS also down a little bit in the first quarter as well. Again, more reflective of the market environment and some some some client losses from 24 that just are kind of working their way through the system. So Q1, I think, sets a really good foundation for for 2025 and it's a good marker. That's right. And as we as we think about the rest of the year, we see good opportunities for for the businesses to grow and a lot of really good momentum in most of our service line.

Okay, that's great. Maybe if I follow up, I'll ask in the prepared remarks you mentioned and you mentioned a couple of times in answering the international headwind. Do you have a sense of what the international revenue head or impact would be? I think the impact 24 versus 25 overall, I'm sure it varies a little bit depending on how demand looks, but I'm just curious if they got a figure there. And then the other comment was made in the prepared remarks was about large client seemingly stepping back a little bit. Was that because they're doing it themselves? They've changed vendor. Are they having volume issues? What maybe flesh that out a little more?

Yeah, let me answer the first one. So what we would expect and very similar to what we talked about last quarter is if you look at our international business, so take full year 2023 before retrogressions started total revenue net business was that 225 million. We expect about a hundred million dollar revenue headwind between 2024 and 2025. About 60% of that age. A would be in 2024. And so we'd have the remainder of the headwind in 2025 and mostly in the first two quarters of 2025. And so we would expect after that that you would start to see that flatten out in the back half of the year. And then in two thousand twenty six, you would start to get growth in that business again. On your question from a client standpoint, we always like to give color about what we're seeing in some of our top clients. And so while we have seen the majority of our largest clients be relatively flat to growing, we still have a couple large clients that are reducing. Their their and it really is just a reflection of them getting back into a target mix of permanent and flexible and contingent staff. And isn't necessarily a commentary on changing models. It's just kind of where they are in that process.

Okay, thanks a lot.

Thank you. Please stand by for our next question. Our next question comes from the line of Jeff silver with capital market. Your line is open.

Thanks so much and welcome back, Brian. And actually, let me start with a question for you. I know it's been a few years since you left the company and I know things have changed a lot in the industry. But from your perspective, you know, what do you think you can do to help the company get back on track?

Well, thanks. It's good to be back. Well, I think I start with this. This team's already done a tremendous amount of work to get this company on track. So I'm here to do what I can to help that. But there's already been a tremendous amount of work laying that foundation. As I mentioned in my opening remarks, you know, that we've got to get a really fantastic team here. A great blend of folks that I've known for years that are still here, but also some really strong new talent that's been infused in the organization, which I think has been good because, as you said, the industry has changed a fair amount. But I'm already seeing a lot of really good work, you know, much more of a unified approach towards our clients have done it with both branding, but also just the way we operate internally, engage with our clients. And I think that's that's going to set us up well from just a technology point of view. There's been tremendous work that was needed. It was, I think, an acceleration of use of technology and digitization of our industry over the last several years. And so maybe a little bit of catch up here, but the team has done a lot to close that gap. Both the things you see externally with passport and shipwise flex, really, I think best in class solutions there internally with our upgrading our applicant tracking system. You know, our Amy web solution and then, you know, on the back office side, standardizing more of our businesses on a common ERP. All of that is going to help us become more efficient, have better speed to market, and then also deliver services that really resonate with clients and allow us to listen more. I think obviously when I when I left, we had a larger mix of our business tied to manage service programs. I think that's still a critically important part of the industry and and for clients that want that service. I think we deliver really well, but I think we're better position now to be able to meet clients that want more of a vendor neutral or a hybrid solution. And we can kind of walk that walk as well now and I see that across the organization. So I think we're I think we're laid a lot of the right foundation. I think this year is a year of execution and we're feeling good that we're going to, you know, we'll see the kind of benefits of those investments in our efforts as we move through the year.

All right, that's great to hear. Maybe I can just step back and ask a broader question in terms of the overall marketplace. Are you still seeing hospitals trying to reduce their contract labor? I know census is up and I know they're focused on full time employment, but I'm just wondering if you're still seeing pressure on that side of the house.

Yeah, what I would say is we're still seeing a focus on contract labor. It's not the cost savings lever that it was even a year ago, right? Especially if you as you've seen that, you know, the premium spread normalized as you've seen broadly utilization come down. Now, there are some systems that still are probably above where they want to be or where they were pre cobit that still need to come down. But I'd say what we're increasingly seeing is the end of they're still focused on that line item, but they're stepping back and looking at their overall workforce. And really wanting to have a partner who's going to help them with how they build high quality cost effective workforces to meet what they see as, you know, kind of increasing patient demand. So, yes, they're focused on it. They're increasingly focused on what is the next round of broader workforce solutions to help me sustainably build a workforce in the for the coming years.

I really appreciate the caller. Thanks so much.

Thank you. Please stand by for our next question. Our next question comes from the line of Joanna. Good you with Bank of America. Your line is open.

Oh, hi. Thank you. Thanks so much for taking the question. So I guess maybe a little bit on the last comment. And I remember on the call in the third quarter call you were talking about that you see some hospitals actually, you know, coming back and offering higher rates to be able to fill some of that. Are you have you seen more of it less of it or the same or how's that dynamic going on?

We, we will see particularly as the need for some of those clinicians, you know, get higher. You will see systems go back and adjust the rates to be able to fill those orders. I don't know if at this point, we've seen a significant uptick than what we were seeing at the end of of the year. But given some of my my earlier commentary about the increase in unfilled orders, you would look for more systems increasing their bill rates to get some of those orders crossed. You know, is one sign of just, you know, continuing stabilizing demand over the next quarter to.

OK, thanks for that. And another follow up on the comments about the Q1 versus Q2, like the moving pieces and appreciate, you know, the track learning and such. But then, you know, when we think about and there's obviously seasonality, that's what I'm headed with this EBITDA margin for Q1 guidance, because I guess last quarter you were kind of talking about maybe like eight and a half percent EBITDA margin in Q1 and growth from there. So now I guess you're guiding to a lower margin, despite the fact that there's some strike revenue in there and EBITDA. So is that sort of eight percent a better starting point and how we should think about kind of, you know, as the year goes on, how this EBITDA margin should be moving if, you know, assuming there's just normal seasonality?

Sure, yeah, thanks. I think that well said as far as Q1, I think that is a good starting point in that eight percent. And as we move through the year, the seasonality that we would expect to see in the second quarter, you know, typically nursing is down, nurse and allied are both down in a low single digits as we roll off winter assignments. And some of the schools impact on allied is again in the summer months, but we're also expecting growth in other businesses that are higher margin like locums and our interim and search business continued growth in language. So I think those will, some would expect them to offset each other some degree in the second quarter, but that mix of revenue should be favorable on the gross margin. As we continue to manage our GNA right now, I think that eight percent is a good, probably a good way to think about the first half of the year. And then as we move into the back half of the year, as we get, as we get growth come across all businesses, we should see continued improvement on our gross margin and then more operating leverage. And that's where we start to see that EBITDA margin lift in the back half of the year.

So that's another question, if I may, on the international business, because I appreciate your comments around your expectations, you know, first half and then second half. But is there any risk to this? I mean, is it sort of like things going to change come, you know, June 30th and then you can kind of be back to growing international business?

You know, so we've assumed some marginal improvement of the date moving forward. I think the date now is at December 2022. It's pretty modest. So if there was no movement, there might be some, you know, kind of marginal risk towards the back end of the year, smaller relative to what we've seen either in 2024, or what we expect in the first half. So we were giving you our outlook of what we have seen historically when you've gone through a retrogression period.

Yes, it's unlikely to be upside in 25. But again, we've got this pipeline that continues to build. So it's really just a function of timing. If we don't, you know, the dates move forward a little bit, I guess it won't have a meaningful impact on this year, but I will, it'll just accelerate the recovery in that business as we get into 26 and beyond.

Great. Thank you. Thanks for taking the question.

Thank you. Please stand by for our next question. Our next question comes from the line of Mark McCone with Robert W. Baird. Your line is open.

Hey, good afternoon. Thanks for taking my question and welcome back, Brian. Great to have you on the call. Mark, wondering if you can talk a little bit on technology and workforce solutions. What are you assuming in terms of VMS revenues for the first quarter? So it sounds like language is doing well. So I'm just trying to figure that part out.

Yeah, it's going to be likely a little bit under 20 million in the first quarter. So we see a little under 20 million in the first quarter. So we, you know, we've, as we talked about, just with some of the client transitions, you know, the timing of the way they end up rolling off is sometimes a little bit difficult to predict. So it actually took a little bit longer than the fourth quarter. It was actually a little bit of an upside for us in Q4. But as that settles out, that's where you're seeing a good, one more step down in the first quarter, as well as some volume declines as utilization has come down some. At this point, what we're seeing is that that should be kind of the low watermark. We've had some more recent client wins with shift-wise flex as those are getting implemented. And we, you know, stabilize with our current client base and then start to see some of these wins roll into 25. Within Q1 should be the low point and the team's doing everything they can to execute to start to see that grow as we move through the year.

Okay. And just in general, aside from the shift-wise transition, just in terms of just what you're seeing in terms of overall volumes across the MSP as well as the MS, the elements that you're not filling, how is that trending?

So if we look at kind of overall demand, and I would say this is true both in, you know, MSP for us, the shape of that looks a little bit different post-COVID because we had focused all of our supply into that market during COVID. So when you look at our MSP volume, they were naturally going to go down because our starting point was so high there. Everything that we've been doing, Mark, that Brian talked about earlier, to position ourselves in the non-MSP space has really been an opportunity for us. And so right now, if we looked in our nurse business and looked at the mix of where we're seeing demand, overall about 20% of our demand is coming from MSP and about 80% would be coming from non-MSP. And so it was incredibly important for us over the past two years to really reposition ourselves against that broader market because we see a lot of incremental demand opportunities for us that we have been taking advantage of. So we're seeing similar trends around overall demand increasing in the nurse space since last April. We've seen very healthy demand in allied, particularly as we started 2025, and similar for locum.

Great. And then kind of broader industry question. There's been some obvious signs of consolidation in terms of PCRN and IA. There's also been reports of some other companies in the space that might be looking for partners. And it seems like it would be natural to see a little bit of a shakeout and a little bit of consolidation just given what's happened to the overall demand level since 2020. And I was wondering if you could provide any commentary in terms of what you're seeing from a competitive dynamic perspective, both in terms of demand from hospitals and your competitive position and how that translates to pricing. But also, you know, in terms of are the clinicians, you know, appreciating, you know, your relative strength and what are you seeing from that perspective?

Yeah, I would say broadly about the competitive environment. And we draw different competitors depending on what solution you're talking about. But I would say there is consistently very strong competition across the space. If we look at Mark to the first part of your question about what we've seen in terms of recent consolidation, what we saw most acutely in the nursing space coming out of COVID is you really had excess competitive capacity that had been built when that TAM became so significant during COVID. And you started to see both between, you know, the recent acquisition announcement, but also even some players exiting the space or getting out of it. I think you've really started to see some of that excess capacity start to shake out a little bit from a nursing standpoint. I think what we're seeing from a client perspective is particularly as clients are stepping back and saying, I really want a partner who's going to help me think about how to build a sustainable workforce for the future, that the breadth and depth of our capabilities positions us very well for those conversations and to be that partner for them. So it's not just that we have the solutions that we have, it's that we have increasingly done a tremendous amount of work to make those solutions more integrated and more relevant to those clients. So we are seeing clients want how we are approaching the market from a total workforce standpoint. From a clinician standpoint, I'd say there's two pieces that we are seeing. One, throughout all of this, and we do think there's going to continue to be consolidation in this market, not the least of which is because you really need to be able to scale your technology investments. But clinicians and clients want choice and competition. And so from a clinician standpoint, it is also very beneficial for them to work with a player like us because we can support them in any type of role they want throughout their career. And so we are an appealing partner to them if they want to go on a contract assignment and then want to go permanent. We know them and we can and can help support them.

Right. Kerry, just to follow on on that, I mean, given the consolidation, it sounds like the competition is still tough. Or are you saying that there has been a little bit of a reduction in capacity and that your competitive position is appreciably better because of some of the exits that have occurred?

Yeah, I think it's too early for some of the exits. I think a lot of that news is much more recent, so I don't know that we've seen an impact yet of that. I'll kind of take the competition in kind of two phases. One is we still see very significant competition around getting new clients. And so coming out of out of code, this really has been, you know, for most parts of our business, a demand environment and getting access to that demand look, it's a little bit different. But we really do see very strong competition there on the supply side. We have seen, especially with bill rate stabilizing. We have seen competitors be very rational and they're not going to go and fill orders that are not priced appropriately or priced where, you know, it's going to be unprofitable for them, which is why we suspect we're seeing an increase in unfilled orders. So it's still a very competitive environment, but you have a underpinning of rational decisions that competitors are making, particularly on the supply side.

That's very helpful. Thank you so much.

Thank you. Please stand by for our next question. Our next question comes from the line of Jack's 11 with Jeffery. Your line is open.

Hey, thanks for the question. A lot of mine been asked already. So maybe a pretty quick one. You gave some color around the margin impacts from the labor disruption revenue when you guided for Q. Apologies if I missed it, but could you just help me see if they can frame that out in terms of gross margin adjusted even in the one Q guide.

As it relates to the labor disruption. I mean, it doesn't mean it's it's not a material difference in the margin on on the labor disruption revenue. So it's really we're getting the flow through obviously through to even doubt, but it's particularly as it relates to gross margin. It's not. It's not really a notable impact on Q four or Q one. The bigger influences are around either mixed changes within the segments or between the segments and a consolidated basis. Some some headwind from from the international decline that does have a higher margin. And then on the Q four, we mentioned the sales sales reserve adjustment. Those are the bigger influence strike strike itself. The labor disruption events have been they're pretty similar in the margin. And it's just it's just adding revenue and and a flow through of EBITDA that you know, the outperformance in the fourth quarter. That was you know, that was the largest part of it. It was also though we had better performance than in a couple of other businesses, including our business and interim interim business and areas that flow through with nice high margin. But that it wasn't labor disruption itself that had a big influence on the gross margin.

Okay, got it. Really appreciate that. Helpful. One quick follow up. I guess just taking the business at face value where you sit in the first quarter. I was hoping you could give a little color maybe on how you're thinking about free cash flow conversion for free cash generation. I guess I'm just trying to square. You had some of the benefit in in Q four that probably reverses, but on a normalized basis, sort of how we should think about converting cash going forward. Thanks.

Yeah, I mean, I think we've typically talked that the free cash flow conversion in the in the kind of 60s range, I would still use that as a good marker. We've we've adjusted our capex this year. You know, to reflect the current environment and revenue and expected EBITDA. So that that I think is still a good a good marker to use for for new modeling.

That help. That's great. Yeah, thanks very much. Appreciate it.

Thank you. Please stand by for our next question. Our next question comes from the line of travel. Romeo with William Blair. Your line is open.

Hi, good afternoon. Thanks so much for taking the questions and welcome back to Brian. Really good to have you back on these calls. Just a couple of quick ones left for me. I think, you know, one, we talked about order volumes already a bit, but I was wondering if you could talk about your your travel around assignment volumes and maybe how they've transitioned from the end of the year, to the end of the year, how they've turned into a monthly basis. And I think last quarter you had some positive momentum, maybe in September. So, just wondering how maybe the last four months have gone from from a TWA perspective.

Yeah, if you kind of pick up from where we had talked about before, and if I looked at total travelers for nursing allied, the one headwind that I would say, which is reflective of some of the comments that we talked about with international, is you do see a headwind in the nursing business of international travelers coming off. What you would have seen as we ended the year is you would have seen a slight increase in total travelers. And then as you go over into the first quarter, you would see, I'd say, a slight decrease of when you look at winter orders. Typically two-thirds of the winter orders are in Q4, with about a third in Q1. And so there's a slight offset

to that. Got it. Thanks, Kari. That's helpful. And then just one other quick one. I was wondering what kind of demand you're seeing in your school staffing business. I think that's an area we've kind of heard some positive trends from others recently. I think there's been a couple acquisitions in that area lately. So just wondering if you could give a bit more color on what you're seeing there.

Yeah. We love the school's business, and we're off to a good start in 2025. We had some headwinds in 2024. There were some budget cuts kind of coming out of COVID that affected some of the districts and the schools that we supported, and some consolidation of programs at a district level that affected a couple clients. But if we look at 2025 and how we're starting in terms of upcoming bookings, we're off to a good start.

Yeah, it's always a business where the booking activity we're in now is impacting the fall of this year. And so as we look at our recent booking trends, we're running ahead of this time last year. So that gives us a good degree of confidence that as we get into the 25 fall school year, our volume is expected to be higher than it was in the 24 school year.

And the other part, Trevor, that I would say is we introduced Televate, which is a great technology for us to be able to do virtual support. And so that has gone over very well, especially as we started the bookings for the upcoming school year.

All right. Thank you both very much. Thank you.

Ladies and gentlemen, I'm showing no further questions than the queue. I would now like to turn the call back over to Kerry for closing remarks. Great.

Thank you. We appreciate your continued interest in AMN healthcare. And I want to have a special thank you to all of our corporate and clinical employees who work hard every day to enable patient care. Thank you. Ladies and gentlemen, that concludes

today's conference call. Thank you for your participation. You may now disconnect.