AMN Healthcare Services Inc Q3 2024 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Trevor Romeo - William Blair & Company - Analyst : First of all, Jeff, great working with you the couple of years, best of luck going forward. I wanted to, I guess, maybe first to circle back on the margin outlook. Maybe based on some of those comments at the end from Cary, I think we've heard a lot about gross margin pressure across the industry. It sounds like the guidance also includes some onetime benefit you called out, maybe excluding that, maybe it's in the 8% for EBITDA margin if that kind of makes sense. Just thinking ahead, if we don't see much improvement in gross margins, can you kind of talk about some of the puts and takes for SG&A going forward? Maybe for one, just how you plan to balance recruiter capacity and such. Ultimately, I guess, trying to get at whether you think sort of that maybe 8%, 9% is the new normal? Or just any thoughts on that would be really helpful.

Question: Trevor Romeo - William Blair & Company - Analyst : Okay. That's helpful. And then maybe hitting on that broader solutions point, on language services, I just wanted to ask on that, if that continues to, I guess, kind of become a larger part of the company from a revenue, but it seems like especially an EBITDA perspective. I was just wondering if you could share any updated metrics there maybe your growth outlook for, say, the medium term, including how much cross-selling runway you have left? And then also what kind of margins that business is running at nowadays? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00PM, AMN.N - Q3 2024 AMN Healthcare Services Inc Earnings Call

Question: Trevor Romeo - William Blair & Company - Analyst : But generally, double digits is still kind of what you're thinking for the near term?

Question: Trevor Romeo - William Blair & Company - Analyst : Got it. Okay. And then just maybe one really quick other one would be, I think you mentioned, Cary, the Street item is benefiting Q2 revenue -- our Q3 revenue by 2% for Nurse and Allied. Could you just expand on what those were?

Question: Mark Marcon - Robert W. Baird & Co., Inc. - Analyst : Jeff, best of luck in future endeavors. It's been a pleasure working with you over the last three years. I really appreciate all the help. Can we talk a little bit about where you really appreciate the guidance for the fourth quarter. If we just take a look at Travel Nursing, without that $45 million benefit for the -- for some of the labor disruption work, where would the fourth quarter guide be for just for travel nursing?

Question: Mark Marcon - Robert W. Baird & Co., Inc. - Analyst : Right. I got that, Randy. I just meant if we just look at just the pure travel nursing, what would the year-over-year decline be? Or said another way, what percentage of Nurse and Allied would you expect to be travel nursing?

Question: Mark Marcon - Robert W. Baird & Co., Inc. - Analyst : Okay. Great. That's really helpful. I appreciate that. And can you talk a little bit more about just what you're seeing, both in terms of the orders that you feel a relevant in fillable and pricing and also supply and thinking about beyond the fourth quarter as we start thinking out towards the first quarter, because in a certain sense, it seems like things are basing out and we're starting to hit a bottom. But there's a couple of elements that make you wonder a little bit about that. And so I'm just trying to get a better sense for how you're thinking about that when you parse through all of the elements and specifically with regards to Travel Nursing.

Question: Mark Marcon - Robert W. Baird & Co., Inc. - Analyst : Great. And then what's your expectation on the VMS side? Because that would also be an indicator with regards to what we're seeing with regards to general order levels because you're obviously filling your orders first. And then on the MSP side, how -- what are the trends there, just broadly speaking? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00PM, AMN.N - Q3 2024 AMN Healthcare Services Inc Earnings Call

Question: Mark Marcon - Robert W. Baird & Co., Inc. - Analyst : Great. And then one last one. When we take a look at the deleveraging that you're experiencing in terms of the SG&A and the margin profile there. Does that -- is that partially because you're maintaining some capacity with the thought that, hey, we're getting some stabilization? And do you feel like you've got excess capacity at this point in terms of recruiters, account managers, et cetera? And if so, how should we think about the incremental margins when things eventually turn.

Question: AJ Rice - UBS - Analyst : A couple of ones, and then I want to just ask you about '25, make sure I get the run rate we're exiting the year at. But specifically, you're saying you picked out your net wins on MSP, but we're also talking about increased competition on the bill pay spread and other places. Is there anything about the MSP economics that's become more competitive, is the competitive landscape reflecting itself in competition for MSPs as well? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00PM, AMN.N - Q3 2024 AMN Healthcare Services Inc Earnings Call

Question: AJ Rice - UBS - Analyst : Okay. And on the locums business, I think you mentioned the specialty mix dynamics was having some impact on margin. Can you comment on what types of its you're making, where the strength in placements is right now in locums and maybe elaborate a little more on that if I got it right, that's a margin pressure?

Question: AJ Rice - UBS - Analyst : Okay. Last question for me would relate to the comments you made, and obviously, doing math on the fly always gets me in trouble. But you're saying, I think if you take out the strike revenue for the fourth quarter and have run rate and you apply like an 8% EBITDA margin to that would sort of suggest on an annualized basis, you're jumping off at a $200 million EBITDA run rate. And now I know Randy just said that if you could get the international back, that would be 100 basis points, which would make a difference. But is that the jumping off point? And then are there obvious places to look for improved performance off of that exit year run rate from '24 to '25?

Question: Tobey Summer - Truist Securities, Inc. - Analyst : I wanted to ask something about orders. What's the change in the volume of orders that are coming in around the prevailing bill rates of travelers you have on assignment today? I just want to make sure that we're trafficking and sort of data and we're not -- that's more indicative of demand that could reasonably be filled instead of also including outlier rates that are too low to be profitably filled? Maybe you've already kind of scrubbed the data and you're conveying it that way, I just don't know.

Question: Tobey Summer - Truist Securities, Inc. - Analyst : So when you convey the percentage change in orders compared in the prior periods of pre-pandemic, are you adjusting and filtering out orders that are sort of at a nonsensical price to the market conditions?

Question: Tobey Summer - Truist Securities, Inc. - Analyst : Okay. Maybe what's a fair conversion kind of assumption from EBITDA to free cash? And how do you see CapEx because we just had some pretty heavy lifting for CapEx and with declining margins? I'm just trying to refine what the free cash profile looks like at the company. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00PM, AMN.N - Q3 2024 AMN Healthcare Services Inc Earnings Call

Question: Tobey Summer - Truist Securities, Inc. - Analyst : If I may sneak one more in. Under the last -- I guess, the last 1.5 years or so, you've kind of reengaged from a sales perspective with the market and customers that you kind of were calling on, unified a bunch of brands. What sort of traction are you seeing related to that? And is it sort of fully in the business as of the third quarter? Or do you still think that you're in the ramping stage of that reengagement process with noncore customers from three or four years ago.

Question: Joanna Gajuk - BofA Global Research - Analyst : So maybe first, a follow-up, maybe I missed it. But when it comes to the demand trends, I know you compared it to 2019, but did you talk about I guess, year to date or sequentially where you're seeing the demand? And I guess, as it relates also to seasonal orders, any commentary there?

Question: Joanna Gajuk - BofA Global Research - Analyst : Okay. That's helpful. And I guess another follow-up on the discussion on the gross margins. So you're saying that the rates are stable, but there's still this pressure on compensation. So how do you expect this to play out into next year? I understand there could be some mix benefit if this international business comes back and such. But kind of just on maybe just the nurse piece, how you expect the gross margin? Because also you talked about competition there. So is there any indication of any change in competition as it like easing that pressure?

Question: Joanna Gajuk - BofA Global Research - Analyst : Right. I understand. And if I may squeeze a last one on the -- when you were talking about competition and some people leaving the market or not offering that particular service up, do you expect maybe some assets to be picked up as in like consolidation? Is there something that you would be interested in? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00PM, AMN.N - Q3 2024 AMN Healthcare Services Inc Earnings Call

Question: Brian Tanquilut - Jefferies - Analyst : Maybe just a question on -- Cary, on seasonal placements, just to follow up on Joanne's question. I don't think we've touched on kind of like commentary, qualitative commentary in terms of expectations for Q1. How should we be thinking about that progression from Q4 to Q1, given what you're seeing with seasonal orders heading into this quarter end to next?

Question: Brian Tanquilut - Jefferies - Analyst : Maybe I'll follow up on that, right, tying back to AJ's question from earlier. I mean if we look at your implied guidance for Q4 and then adjust for that seasonal factor of Q4 and Q1, we're landing at roughly a $200 million run rate. So just curious what would be the missing pieces to get to a number that grows that significantly from that sort of run rate?

Question: Constantine Davides - JMP Securities - Analyst : One follow-up on the international business. Did you provide a run rate on how that business performed in the third quarter? And Cary, just updated thoughts on when you say it tapers out second quarter '25, you could just give a little bit more color there on where you think that bottoms? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00PM, AMN.N - Q3 2024 AMN Healthcare Services Inc Earnings Call

Question: Constantine Davides - JMP Securities - Analyst : And then Cary, just following up on this notion that you alluded to, just top line having an average of 10 solutions. Can you just talk about how you maybe broadly define discrete solution, how that penetration has changed in the past year or two? And I guess, where are the best opportunities to further penetrate those clients entering 2025?

Question: Constantine Davides - JMP Securities - Analyst : And are those businesses -- those clients that sort of have that -- those 9 or 10 solutions, are you seeing that they're just inherently more sticky than the rest of your book?

Question: Jeff Silber - BMO Capital Markets - Analyst : I know it's late. I'll just ask one. And maybe a stupid question, so forgive me. You've talked a few times about, I guess, the imbalance between what the providers are willing to pay, what the clinicians are willing to accept. Is there anything you or anybody else in the industry can proactively do to narrow that gap? Or is it just something we have to wait for the market to kind of work itself out?

Question: Bill Sutherland - The Benchmark Company LLC - Analyst : Best wishes, Jeff. I'll keep it brief, too. Maybe ask two. Following up on Jeff's question about the hospital kind of mindset here as we head into the winter flu season. And patient census assuming a kind of a normal season, do you -- is there a sense that they've got more flexibility that they can work with in-house and they're pretty happy with their retention and hiring? Or is there a sense that this is maybe the thing that switches particularly given where the premiums are right now for travelers and others.

Question: Bill Sutherland - The Benchmark Company LLC - Analyst : Got you. And last one, SG&A, the assumptions or kind of where you're seeing it this quarter, did that require any more headcount actions? Or do you plan any further actions as you head into the new year? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. NOVEMBER 07, 2024 / 10:00PM, AMN.N - Q3 2024 AMN Healthcare Services Inc Earnings Call