Q1 2022 AMN Healthcare Services Inc Earnings Call
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.
In our earnings release.
And on our financial reports page at IR Dot <unk> and health care Dot com.
On the call today are Susan <unk>, Chief Executive Officer, Jeff Knudson, Chief Financial Officer, Kelly Rakowski Group, President and COO of strategic talent solutions Landry.
President and COO of nursing and Allied solutions and.
And James Taylor Group, President and CEO of physician and leadership solutions.
I will now turn the call over to Susan. Thank you so much Randy and welcome everyone. We're very grateful that you are here with us today and pleased to be able to share. Some good news we are reporting strong results and our positive outlook very consistent with what we discussed on our last earnings call over the <unk>.
Last two years, the dedicated <unk> team and our health care professionals enabled in all our response to the pandemic.
And now we are seeing light at the end of the tunnel. However, the pandemic has taken a significant toll on the health care workforce and in particular frontline clinicians.
The extreme shortages of healthcare professionals have been accelerated and exacerbated in a way that we could not have foreseen. We are now in a situation that requires new methods of how the health care community approaches staffing and support of our workforce.
A little over a decade ago, and then identified the need and opportunity to bring workforce solutions into healthcare and create efficiencies for our clients clinicians and the industry.
And other innovative partners paves the way for technology enabled solutions.
Our MSP relationships and the diversification of our revenue mix have reduced our risk exposure to market and economic fluctuations all stakeholders benefited from these evolutionary leap and with Amazon as the leader in total talent solutions, our shareholders certainly experienced a significant benefit.
<unk>.
I believe we are at the beginning of another evolutionary time in our industry health.
Healthcare job openings stand at an unprecedented two nine times the number of monthly hires.
Clinicians are insisting on more flexibility and higher compensation as well as faster more digital seamless experience.
These factors clients are re imagining their staffing paradigm.
<unk> is well positioned to deliver what health care professionals and clients need and want in the coming years.
Prior to the pandemic <unk> was already making significant investments in our digital platforms and tech enabled solutions.
Over the past two years, we had supercharged those investments and launched several new capabilities. Our conversations with clients. Today include questions like how can they embrace the changing preferences of a younger workforce how can they attract clinicians from outside the region and how can they embrace the local <unk>.
Rational who want flexibility to work across multiple facilities and get experiences to advance their careers.
These all pose significant challenges for the health care ecosystem, but also great opportunities for those organizations able and willing to collaborate and drive innovation.
<unk> is the only organization capable of delivering large scale managed services programs as well as providing three of the top Vms platform. Just this week. We were again named the number one healthcare MSP provider by HR Roe today.
We hit a new record high in the first quarter at an annualized rate of approximately $15 billion in Vms and MSP gross spend under management.
Will this run rate will come down as pricing returns to a sustainable level. We believe these relationships and the volume opportunity will largely continue into the future.
Kerr employers are increasingly requesting our comprehensive solutions to address the recruitment and staffing challenges the power of our diversified solutions allows us to help clients with temporary permanent short term and long term workforce challenges, we are clearly differentiated by our unmatched port.
Folio of more than 20 distinct workforce solutions working closely with clients to address their complex labor needs.
Over the last few years, our clients have increased the number of <unk> solutions. They use today Almond top 30 clients use on average eight of our solutions, which represents great progress, but also gives us tremendous growth potential.
Before we talk more about the future I'd like to first recognize the outstanding achievements of Ameren team in the first quarter consolidated revenue for the quarter was 155 billion and adjusted EBITDA was $258 million both record levels.
Our nurse and Allied solutions segment reported revenue of 123 billion with growth of 87% year over year travel nurse staffing grew by 95% year over year due to both volume and bill rate growth driven by higher compensation for clinicians.
Allied staffing revenue increased by 64% year over year in the first quarter, including a more than 40% growth in volume imaging lab respiratory and therapy were all strong.
As we projected we and we are very pleased to see the crisis demand has subsided since the peak earlier in the year.
And the nurse and Allied segment, we are now seeing a more normalized demand level, which is still more than 80% higher than the same time period before the pandemic.
This also means compensation expectations have come down and resulting bill rates have reduced this is in line with where we thought we would be as we move through the second quarter.
Based on this we expect our nurse and Allied segment revenue to grow approximately 70% year over year in the second quarter.
More than half of our growth is coming from increased volume of clinicians on assignment.
Our physician and leadership solutions segment reached a new record with first quarter revenue of $180 million up 28% year over year locum tenants had its highest quarterly revenue ever reaching $113 million with 30% year over year growth.
Our business grew 60% year over year, while pandemic related revenue was down.
<unk> leadership also had record revenue with mid teens growth year over year <unk>.
Physician and executive search revenue grew an impressive 46% year over year in the first quarter.
New physician searches remains strong and the pipeline for mid level, an executive search is strong bolstered by multi search opportunities from larger clients.
In the second quarter of 2022, we expect revenue for the physician and leadership search solutions leadership solutions segment to grow approximately 20% year over year.
Our technology and workforce solutions segment reached another new high with first quarter revenue of $145 million up 64% year over year.
The greatest portion of revenue growth came from our Vms technology business.
<unk> services and recruitment process outsourcing also delivered strong growth as clients are requesting more diversified solution in.
In the second quarter of 2022, we expect technology and workforce solutions segment revenue to be up about 45% year over year.
With most of the pandemic behind us and certainly many lessons learned and relationships strengthened our focus is on how we make a greater impact and deliver greater value for all stakeholders in the future.
Pandemic accelerated workforce and market changes that would have otherwise taken many years to unfold.
Because of the strategic actions, we took during the pandemic and then moves forward in a better position ever before we swiftly embraced operational changes and made technology investments that are making it faster more agile and empowered with real time views of health care professionals and clients.
We proved our business and our team can scale effectively across a wide range of market conditions.
And we showed that we can manage strong growth, while increasing our commitment to ambitious environmental social and governance goals.
Get market drivers give our industry a long term growth opportunity.
Man is uniquely positioned to excel in the market with the power of our diversified portfolio R.
Our team our leadership and our culture are exceptionally strong and we have strengthened our customer intimacy, giving us great insight into what clients knee from us now and in the future.
In just a few minutes James Kelly and 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 insight into our financial results.
Thank you Susan and good afternoon, everyone.
First quarter revenue of 1.53 billion was 3% above the high end of our guidance range driven by outperformance from all three segments.
Consolidated revenue increased to 75% year over year and 14% sequentially excluding.
Excluding labor disruption revenue consolidated revenue grew 22% sequentially.
Gross margin for the quarter was 32% 60.
60 basis points lower than prior year, and up 10 basis points sequentially.
Year over year margin was lower from higher clinician compensation and nurse staffing and a revenue mix shift towards our lower margin staffing businesses.
Consolidated SG&A expenses were $258 million or 16.6% of revenue compared with $161 million or 18.2% of revenue in the year ago quarter, and $239 million or 17.5% of revenue in the previous quarter.
SG&A expenses increased year over year and sequentially, primarily due to higher expenses for growing rewarding and supporting our team members.
Adjusted SG&A, excluding certain nonrecurring expenses and stock based compensation expense was 239 million this quarter or $15, 4% of revenue compared with $148 million or 16.8% of revenue in the year ago quarter. The.
The improvement and SG&A margin came from operating leverage on the revenue growth, partially offset by higher growth related expenses.
On a sequential basis, adjusted SG&A was higher by $27 million due to a higher team member related expenses.
And the first quarter nursing Allied revenue was 122 $8 billion.
87% higher than prior year, and up 14% sequentially or.
Our travel nurse business grew revenue, 95% over prior year and 27% sequentially.
Travelers on assignment grew 42% year over year.
Demand for travel nurses hit a record high level in January as a result travel nurse volume grew 20% sequentially.
Allied revenue was $214 million growing 64% from the prior year and up 16% sequentially.
Allied volume was up 41% over prior year.
Nursing Allied gross margin of $26, 2% was 70 basis points lower than prior year and down 80 basis points sequentially. The.
The crisis, driven spike in demand drove pay expectations faster than bill right.
As a result compensation for healthcare professionals increased as a percent of revenues by 520 basis points year over year.
This increase was partially offset by improved leverage over housing travel and other expenses as well as favorable workers compensation reserve and health insurance costs.
The sequential declining gross margin is primarily due to the heightened margin labor disruption revenue in the fourth quarter of 2021 that did not recur in the first quarter of 2022.
Segment EBITDA margin of $15, 9% was 40 basis points higher than prior year, and 50 basis points lower than prior quarter. These.
These comparisons were affected by lower gross margin, partially offset by the SG&A leverage from higher revenue.
Physician and leadership solutions revenue in the first quarter was $180 million <unk>.
28% higher year over year and up 10% sequentially.
Locum Tenens revenue was $113 million, 30% higher than prior year and up 13% sequentially.
Interim leadership revenue increased 14% from the prior year and was up 2% sequentially.
Search revenue increased 46% from prior year and was up 8% sequentially.
Gross margin for this segment was 35%.
200 basis points lower than the prior year and down 10 basis points sequentially.
A year over year margin decline was primarily due to revenue mix changes and lower gross margins for locum tenants in the interim leadership.
Segment EBIT margin was 11, 4% down 370 basis points from last year, and 20 basis points sequentially.
The sequential and year over year decline in EBIT margin was primarily due to a lower gross margin as well as a higher performance and incentive compensation accrual.
Technology and workforce solutions revenue was $145 million in the first quarter growing 64% year over year and 23% sequentially.
Mmm revenue of $75 million grew 136% year over year, and 43% sequentially driven by a significant increase in gross spend under management.
All other service lines in the segment achieved strong revenue growth on a year over year basis.
Segment gross margin was 76, 7% up.
From the year ago margin of 67, 7% and up to 470 basis points sequentially due to growth of the higher margin Vms business.
Segment EBIT margin of $54, 4% was up 690 basis points year over year, and 700 basis points sequentially.
Consolidated first quarter, adjusted EBITDA of $258 million was higher by 83% year over year and 16% sequentially.
Adjusted EBITDA margin of 16.6% was 70 basis points higher year over year, and better by 30 basis points sequentially.
We reported net income of $146 million and diluted earnings per share of $3.09 in the quarter.
Justin earnings per share was $3 49.
Compared with one dollar and 70 cents.
And the year ago quarter.
Days sales outstanding was 57 days in line with the prior year and four days higher than last quarter due to the cadence of billings through the quarter.
Operating cash flow for the quarter was very strong at $200 million and capital expenditures or $14 million as.
As of March 31, we had cash and equivalents of $113 million long term debt of $850 million and a net leverage ratio of one time to one.
From a capital allocation perspective, the company used $228 million of cash to repurchase 2.3 million shares of our stock in the quarter as.
As of March 31, $250 million remained under our stock repurchase authorization with a strong balance sheet and ample liquidity. We remained focused on internal investments as well as our acquisition pipeline are.
Our priority is to add more technology enabled solutions and select staffing assets that would improve our sustainable revenue growth and profit margins.
Now turning the second quarter guidance.
We are projected to consolidated revenue to be in a range of $134 billion to $138 billion up 56% to 61% over prior year.
Revenue guidance includes $65 million to $70 million of labor disruption revenue, which amounts to approximately 7% of the year over year revenue growth.
Second quarter gross margin is projected to be $31, 5% to 32%.
Reported SG&A expenses are projected to be $16, 4% to 16.9% of revenue.
Operating margin is expected to be $12, 5% to 13% and adjusted EBITDA margin is expected to be $15, 8% to 16.3%.
Other second quarter DT guidance details can be found in today's earnings release.
Our guidance carries a message that the second quarter is playing out the way we had expected excluding the labour disruption revenue. We continue to expect our third and fourth quarters to settle out around 1 billion of quarterly revenue at 15% adjusted EBITDA margins.
For nurse and Allied the average bill rate was up low double digits sequentially in the first quarter and bill rates Plateaued in March we.
We expect low double digit declines for bill right sequentially in the second quarter.
Based on current placements and rate changes, we have seen thus far we expect for the third quarter to have the largest sequential decline and build rates.
Our expectation remains that we will exit the year with nursing Allied bill rates stabilizing at approximately 35% lower than the first quarter level.
Our outlook for nursing Allied volumes and Bill rates is based on our efforts working with clients to determine their needs and expectations through the rest of the year.
This fourth quarter view represents average annual bill right growth of about 8% compared with pre pandemic levels.
We believe this is reasonable considering that hospital industry wages rose 10% in 2021.
And in the fourth quarter of 2021 nurse compensation in the U S rose at an annualized rate of 11%.
As we sat on our previous call after our business levels out in the second half of 2022, we expect a more normalized sequential growth trend off the queue for base.
According to CMS projections healthcare spending is expected to grow 5% to 6% in 2023 in an environment, where the workforce is not expanding fast enough to serve that need.
A recent report by the conference Board warns that healthcare labor shortages will not improve but worsen over the next decade.
In addition to the underlying staffing needs. This creates our portfolio of diversified solutions enables us to continue to help clients and also deliberate growth in the coming years.
And now we would like to open the call for questions.
Thank you.
We will now begin the question and answer session.
To ask a question you May press star one on your telephone keypad.
If you're using a speaker phone please pick up.
Pressing the keys.
If anytime you question has been a test and you would like to withdraw your question.
<unk> starting team.
The first question we have from the same lines comes from <unk>.
That's true of Securities.
New line is Nathan.
Hey, good afternoon. This is Jasper Bedbound for Toby I was just hoping you could speaking nursing gross margins as we started to see the market normalize it that dati to recapture some that that bill pay spread and how long do you think it would take to replace a book and get to a kind of pre COVID-19 gross margin.
Yes, Jasper this is John I would say with the demand.
We saw in Q1, we did see some erosion in some of those assignments will spill over into Q2, obviously with bill rates coming down we are seeing improvement, which we would expect to see more fully in the back half.
On a consolidated basis the improvement we are seeing in queue to sequentially is impacted by the workers comp adjustments in Q1, as we roll over those in the second quarter, but with like I said, we would expect to see more improvement as we reprice into the back half.
Alright. So then can you just quantify the expected decline in billing rates for the third quarter I think you mentioned any.
And he changed how you're thinking about nursing allied volumes over the balance of the year.
Yeah. So we said we would expect low double digit declines in the second quarter and that we would expect the third quarter to be steeper than that.
From a volume perspective ill, let landry give a little bit more color, but we would expect overall in the second quarter to be flattish.
To the first quarter.
And then just some normal seasonality trends into the back half.
Yeah, just don't travel nursing, specifically there so the first of the second quarter, we're seeing a bit of a mix changed there and I'll explain that a little bit. So just our traditional travel nursing volume, which is that typical 13 week to 26 week assignment. So that's growing nicely sequentially from Q1 to two two.
And then also the international business is growing nicely from Q1 to two to the offset to that would be some lower volume in the second quarter for a crisis placement. So of course, the first quarter saw quite a bit of that and those are not continuing into the second quarter. So whenever you combine those that's where we get to that Q1 Q2 weeks.
<unk> pretty flat volumes sequentially.
Yeah.
That that makes sense.
Last question for me I was just hoping you could update us on your tech investments.
Are there any kind of updated metrics around the adoption of of almond passport they could quantify.
Quantify the progress you're making there.
Absolutely.
Continue to add more features and functionality, which drives efficiency certainly for the clinician eating them and ask them for our team members and we think that certainly contributing to the productivity improvement network seeing across the board both for recruiters.
Also for Senator support staff that now doesn't have to touch.
The transaction that needs to be dealt with.
Manually.
And we now have 125000 users on passport I think the last time, we reported it was around 100 pounds. So really great progress in that utilization and we expect to continue to see certainly more going forward, but we also continued roll it out across different business lines as we continue.
To add more functionality.
Thanks for taking the questions.
And can you Jackson.
The next question comes from a gay rights credit yes.
<unk>.
Hi, everyone.
Just.
Wondering if you could give us an update on your.
Fill the orders that you have are you seeing.
The ability to fill more orders today or do you still have about the same percent that are going on sale, just did a quarter or two ago.
Hi, AJ, it's Kelly rakowski.
Further question, we as demand levels have started to come down.
We are seeing increases in our fell right, but we're still at demand levels that are elevated from from pre pandemic. So we certainly striving to increase us fell right for our clients and continue.
Use our strong network of supplier partners as well as we're filling those rates.
For the clientele getting better I think is the is the.
The message they're.
Still some room for improvement and we expect us to continue to improve.
As demand right.
Check it online.
And I think during the heat of.
<unk> the last three quarters, you've talked about the fact that.
Your MSP clients, obviously have taken priority and there's been some non them SP customers <unk> scored.
That you've had.
It couldn't prioritize W. A been able to move.
To build more of those orders are you seeing some of those people decide now that they need to go ahead and.
Enter into an M. S. D are you seeing activity around the MSP.
Contracting pickup.
Hey, Dave Landry I'll think the first part of that and then maybe Kelly.
What we're hearing from customers about entering into a new MSP relationship.
Yeah, you're right so over the pandemic whenever demand was so high we had shifted most of our recruitment resources and account management resources to focus on our MSP customers and we've changed that slightly demand is still elevated so there's still.
Plenty support needed at our MSP customers.
But.
To your point within the kind of direct and third party, there's quite a bit of demand. There. So we've opened those up a little bit more we never fully closed them. We did support those clients where appropriate during the pandemic, but demand is still remained elevated and our MSP demand is elevated so we still need to make sure that we're.
Focused on those most important customers.
And as Elvis AD from what we're seeing in the market. We are seeing a increase in our pipeline and particularly for our full MSP solutions. If you look back a year ago, and even a quarter ago. We are seeing more on the percentage of our new opportunities the vendor neutral and administer through our technology.
<unk> technology platforms. So now we are seeing more clients interested in a full service MSP and our ability to add more.
The capacity to do that has improved as well. So yes. We are seeing demand. We had Q1 with slightly head from a sales perspective are seeing even a stronger <unk> ahead of us.
Okay, maybe a last question on the.
Emanate pipeline.
I think the last quarter, you guys talked about potentially.
Potentially broadening the scope being open potentially too.
Even the.
Ah staffing acquisitions again any update on what you are seeing out there there is likely to be opportunities over the near to the intermediate term.
Yes, I would say if you were to look back a year ago, the M&A pipeline.
Certainly more active than it was from our perspective <unk>.
Probably a little distorted towards the staffing assets right now than those tech enabled solutions, but we're still.
<unk> healthy activities, there as well and that's really what we're we're focusing our efforts in the near term.
Okay. Thanks, a lot.
Thank you.
We now have Tim Marini of William that peace.
Go ahead, when you're ready.
Yeah. Good afternoon, just a housekeeping question first I want to make sure I heard you correctly during the Q&A did you say.
With a nurse and Allied segment, you expect volumes essentially flat sequentially from the first quarter to the second quarter.
Yes, and that is a combination of traveling nurse being our longer term 13 to 26 week assignment International Mercy.
Some areas of ally not.
And then offset by the shorter crisis assignment that are typically more kind of four to six weeks, maybe eight and those are typically at the higher bill right. So not surprisingly we saw a lot of that disproportionately in the first quarter selling those on wine with.
Seeing a decrease in that volume, but more of a long term assignment.
Ones that are growing into the second quarter.
Did you have a little bit of headwind with squirrels, which tend to fall off at the end of the second quarter as well, but that's pretty minor.
Got it got it thank you.
So then based on your guide for the back half of the year that billion dollar run Murray per quarter I assume that means you're done expect volumes to tick down.
Somewhat morse sequentially from the first half of the year into the second half of the year.
Thinking about Pac correctly or is it mostly driven by bill right.
Bill right, Tim is by far and away the largest driver of that decline in the revenue base in the back half of the year.
Okay. Thank you.
And then maybe one more or is this more of just a high level of thing, but I wanted to hear you guys have the opinion on this.
We've noticed an uptick in.
Money being raised for tech startups for the per Diem R and market it seems like more and more smart money's being deployed in the space, but.
Per diem is only a small piece of your business today I'm just curious why Amen Hasnt also made a bigger pushing this area given your strong relationships with healthcare systems across the country.
A structural reason why you've kind of avoided getting bigger in this area of the market.
Alright, I mentioned earlier that one of the the.
The challenges and I think opportunities that clients are discussing with assets, how do they better optimize that local labor force and talent pool not just the the clinicians that are currently working for them, but the broader may be regional talent pool that is available and there's a few interesting things go.
On already where either hospitals has created a new version of a float for where clinicians can actually float from facility to facility. It's something that we've helped clients to do in the past.
Even perhaps bringing in traveling that can be a part of that phone call. The discussion is more how do we help them manage that because they aren't structurally set up nor have the technology and the expertise TB running an operation like that until the technologies that we can bring to the table both.
Existing things that we we have in place that could be utilized for management of the local.
So-called float pool of clinicians that perhaps travel from system to system and facilities facility.
That's more where we're working with them in is on that technology workforce and management solution as opposed to just providing the people and we can provide the people as well and augment what they have that <unk>.
First objective is really to optimize.
The talent pool that already exists.
Within a region. So we think that's probably the more strategic partnership for us.
We can grow our local staffing capability and we will do it if that's the best solution for them, but they are really seeking more of the tech enabled solutions in our expertise so hopefully that helps to answer that.
It does thank Susan I appreciate it.
Thank you Kim.
We now have kids with respect and Thanks America. Please go ahead and and I just came from.
Hi, Good afternoon actually this is sat Joanna <unk> today. So thanks for taking the question here I guess, it's just a follow up on something that I guess, we were discussing last quarter, but in any update it I would like to hear now it's.
You mentioned this again right in terms of the nurses and other staff.
In health care people looking for flip flexibility <unk> trying to different jobs. This gig economy <unk> entering the husker state.
Well no.
But at the same time, we hear from a different types of providers that even though they expect at.
At least some of those employees collect what do you see no socal travel.
Travel assignments cause stomach, sometimes they didn't really travel anywhere they stay in the local market, but they expected.
Please to come back fulltime. So have you seen any of this already happening where you kind of have some of your nurses going back to permanent jobs.
So it's hard to tell exactly where they go and they'll tell you. There's a couple of metrics that we watch internally as it relates to.
Some of our turnover our retention metrics. So the first one would be cancellations.
The cancellation front, we're seeing cancellations buyer clinicians that would have been pre pandemic levels, if not slightly below prepay endemic levels. So.
Certainly not seeing any clinicians cancel at a higher rate and then another another metric to call out is that we we watched for many years or rebook retention. So it's the retention of our conditioned as well as extensions of their current assignment and if you took the first quarter of the first quarter was actually a full 6%.
Six percentage points above Q1 prior year for our retention. So conditions are staying with us at a faster rate or a higher rate than they were before Q1 of last year was a little bit sore, but still Q1 of this year, if you compared it to all the historical numbers. It would have been the strongest Q1 average that we've seen.
So.
Certainly not not seeing that again, it's kind of hard to know where the conditions are goin' whenever they are not taken assignment from us.
You mentioned that kind of younger demographic or gig economy.
Our conditions that are working for US right now we're seeing the biggest growth of conditions that are under 35 years old.
Actually 50% of our overall clinicians that are working for us are under 35, but whenever we are looking at those numbers something else stood out which is.
Our our largest decline actually the only bucket the declined as conditions that are 61 years old or greater.
So again, we don't know exactly where they went but I think that speaks to they likely retired they left the workforce, which aligns pretty well with some of the public reports that we've seen.
I think at the other end of that kind of metric spectrum is how many people are applying with us in coming in to travel nursing, our ally and as we first quarter certainly with a very high point a lot of interest in the crisis assignments that even in April we still have very high new applet.
Patients slow and packet above prior year, and well above pre pandemic levels. So I think that's indicative that there's still a great interest in coming into the industry.
Yes. Thank you thanks for the scholar and thanks for sharing some mucus metrics <unk> one of the questions that everybody's trying to figure out whether someone is.
Nurses is going to come back. So that's so thanks for sharing the call data from you. Thank you.
Your next question comes from.
<unk> <unk> <unk>.
Jeffrey.
Brian Jason.
Okay.
Hi, Thanks, good afternoon.
My first question is Susan and you're prepared to like you talked about the bill right with a discussion with you guys are having with the hospital. So just curious with those conversations are like I mean, do you think that the hospitals acknowledge that.
We're going to exit the year at 35% lower than Q1, that's that's the right number or is there a lot of pushback, they're just curious looked at what those conversations her license.
I'm going to ask my colleagues to join in hearing enrollment data at a high level to answer the question that the conversations are don't stop filling the jobs that we have today, because we still have very elevated needs and we don't see that changing any time soon and in fact, they acknowledged that the.
Shortages are likely going to get worse now for the next year, maybe not as extreme as going out into even future years.
Jeff reference the conference Board study that was just put out that call that healthcare as the highest risk worsening shortages across almost all categories and that aligns to exactly what we hear from our clients and so yes. They are very concerned about getting costs down and and bill rates are.
Part of that.
They are also very concerned about getting their current and future job spilled, which is why there's so many conversations also around or multiple solutions, particularly I would say the longer term solutions things like international nursing, which is at an all time high in demand.
Even within our current placement businesses arpino business and and how do they set up a more efficient effective model and how can they come to more of a single partner, who can help them strategize, we're doing a lot more planning with our clients.
Two alpha understand what their needs are not just today, but in the future, but then it translates to okay. How can we navigate this year.
And part of that navigation is understanding their staffing needs, which again very elevated now kind of goes down likely to go up.
And how do we get the bill right down along with that cell with our most strategic clients our team laid out.
A roadmap of where we think we are going it aligns with their demand need is this can be a little different from client to client and we lay out what we think we can accomplish from a rate reduction standpoint, So I would say, it's more of a collaborative discussion because ultimately they decide where the rates are but it's more of a collaborative.
Discussion on on whereas the staffing demand going to be for them and for.
Hospitals across the country and how does that translate into getting down to these numbers and yes. We have put these numbers in front of them and at this point. This is how we're trying to triangulate where that that right will come out.
Got it and then definitely follow up to that.
As we think about supply.
What are you seeing as bill rate slowed down in terms of nurses staying in attempt.
World versus going back to Perm, and how are you driving supply growth or market share gains.
If that's the case as the theoretically the pool shrinks with that sort of dynamic.
Well, we don't think it's.
Shrinking I just mentioned that we're getting even more applications in on a year over year basis.
And it's two on a physician front as well, which is part of what's driving the fantastic results within our local news and and interim leadership and then Landry mentioned earlier.
Our our nurses and our actually staying with us and you want to recap a bit of what you share. It if there's any other color.
Yes, Brian I mean, it's just.
Ah retention numbers are rebeck numbers are extension numbers are all still high.
And in many cases above even pre pandemic numbers, which were were healthy.
As you can imagine how some of these rates are happening mid contract. So we'd like to see it on new placements and we'd like to see it.
An extension, but some of them are happening bid contract the team's doing a great job working with the nurses to bring those rates down it's of course, helping our clientele right now with their.
Cost pressures that they're seeing within their health systems.
And for the most part nurses nurses and allied professionals in those cases, where we had to bring him down our very understanding so they get it they know that the environment today is a lot different than what it was in December or January .
The hospitals were full of very sick COVID-19 patients.
Gotcha, Okay, and then last question for me as I think about the $1 billion <unk>.
Run rate with a 15% margin.
And given the backdrop that you just gave them the CMS projections on growth rates do you still believe that that's probably the right bass lines that we grow off of.
Like at a low double digit rate going forward is that is that the right way you were thinking about the loss of your view of the company.
Yes, when we think about growing off that Q4 run right. So obviously, we think pricing and volumes will stabilize in the fourth quarter of this year.
As we move through the year, we also expect our internal capture rate on MSP orders.
To recover and we don't believe the shortage of clinicians will change dramatically.
Between so I think when you couple that with the CMS that we think.
That's the right way for us to frame of 2023, and where we see <unk>.
Playing out off of that fourth quarter run right.
Alright got it thank you.
We now have seven.
<unk> well Thank Smart company. Please go ahead when you're ready.
Hey, Thanks for everybody.
I was thinking about this issue about the nurse preferences as well [laughter], obviously top of the line and Susan I was curious if you guys about a survey some of your.
Permissions or you've seen the third party that.
Can I have some.
<unk>.
The reasons these would be new travelers for instance that they've started to travel.
And I guess, maybe if there's a certain type that.
Started to travel because of the crisis rates.
Have you seen anything to kind of link orders.
What's most important to you.
So.
Landry mentioned, we are seeing this younger demographic come in which.
I think it's not surprising.
The younger generation once more flexibility even outside of healthcare and so that's a trend that we expect to continue and if you are in a permanent job you're not necessarily getting that flexibility. In fact, you might feel even more beholden to pick up the overtime any extra shifts.
And do the same for your colleagues that.
That you work with and will be with for years to come. So we think there is this generational preference that's pulling through and will likely continue to see that grow over time. Other reasons why people come to travel is they want to get rejuvenated, they're burned out they're frustrated where they are they want to continue to learn and grow.
And enhance their skills and their career, but they are not feeling like they can do it in their current environment and in fact, because they are under staffed in the current environment. That's just burning amount even more so they wanted to go to a place where they feel that they can deliver great care learned but also not quite have that burn out fast.
Effect and there's always other personal reasons, it's not always about the money in the career, sometimes there's just personal things that they want a change in their life. So those things haven't seemed to change a lot I will say that generational preference aspects has probably been the more recent driver and then those individuals.
That have been introduced to travel because of the pandemic that may be thought before it wasn't something they could or should do have now seen that it's a real possibility I can't tell you how many nurses iPad and you said I'm never going back to a permanent job because I know that I can do what I love to do and make good money and just keep traveling so it's not going to be the majority.
But if we did move the needle a bit you remember we've got a little over 1.7 million nurses working in hospitals and.
And quite knows what the travel nurse number is but it's definitely less than 5% probably less than 4% of that population. So it doesn't take much to increase the size of our industry and the pool of <unk>.
Clinician neurosis in particular that want to come into the industry.
If we just increased it two or 3% that would be meaningful because that would increase our industry supplied by Amelia was 50%.
So I would think of it in that way I know, there's a lot of focus on you know how many people are going back but in the scheme of things.
With one 7 million nurses working in hospitals.
Just a few thousand more come to travel, it's not probably going to change the hospitals dynamic that much but it could be very positive for our industry and I know a lot of focus is on the right and.
And the cost of labor.
But don't forget that the greatest cause of labor by far, particularly interesting. It's the permanent workforce and is Jeff mentioned permanent wages went up in the latest survey by 10% after being fairly anaemic up until 2019, I don't think the days at 2% wage increase.
Are going to fly anymore for nurses in particular, probably not for many healthcare professions, particularly if you believe some of the projections like the conference Board put out about these or seeing shortages. So I think we are in for many years of higher than previously normal wage increases for permanent nurses and that is.
By far the bigger cost.
Factor for hospitals, if you're just extrapolate the numbers of that 1.7 million nurses and the average nurses, making roughly 85% to 90000 a year.
That hits about $150 billion being spent in nurse wages. So for every percent that they go up.
It's one 5 billion, maybe close to $2 billion, which is why it is very challenging for for them for hospitals to increase your wages, even if they want to and I really think many of them want to but it's such a huge proportion of their budget.
It's very challenging so even if we settle in at these rates that are 35% lower than today, it's remember for a small percentage of the workforce. So even if the travel nurse at the end of the day cost, 10% to 40% more fully burdened than a permanent nervous at that point.
Only a higher premium on four or 5% of the workforce not on the entire one $7 million. So I noticed a little more than you asked that I just trying to help people see the forest through the trees here and and understand that it's really the bigger negative how can we help our clients be efficient.
<unk> and optimize their total workforce and not just yet.
Yes, we'll be focused on what we can do to make travel nursing most efficient and at the right sustainable Bill right, but the bigger opportunity in need is really across the broader workforce.
Yeah I got it.
That's a great color Susan.
Think what we're all kind of reacting to us.
Couple of health systems.
Great first quarters in the in terms of emergency me put a lot of blame on that.
Increase in the percentage of contract labor they had in the quarter and that they're vowing to get it back to.
What is a normal levels are and we wonder about the demand impact of that on your business.
I think it.
What you just said reflects the fact that.
It's kind of an easy answer they can give you right now for how they're going to fix things, which is probably not the real answer right.
So.
The.
One one other follow up I had just I'm curious in the quarter first quarter, what percentage of the assignments were crisis, if there's a way to five minutes.
We don't really provide and carve it out that way external lease I'd be a little hesitant to provide that level of detail. Okay. Maybe.
Figure out how we can get a little color blind Parbat apologize. It I don't think we have carpet out that way in the past.
Okay.
And last one actually one more in the second half so the takeaway in nursing Allied is that right.
Still obviously trending down to more normal levels volumes, you think are <unk>.
Parking seasonality volume fairly stable quarter.
Quarter over quarter for the rest of the year.
Apart from seasonality that's correct, though.
Okay.
Thanks, everybody have a good evening.
Thank you Bill.
Thank you.
Now have Andre Childness trunk and say please go ahead when you're ready.
This is <unk>. Thank you can take our questions. So you've been pretty successful over the past few years cross selling adding different solutions will cross selling it to your client base.
You talk to the clients now use a different solutions could you sellout breakout how that was or what that was a couple of years ago and others trended what opportunities are you. Most excited for in terms of cross selling back on the base. What's your strategy there and go to market strategy and what's your targets you know a coupla years down the road in terms of how many solutions you think.
Top clients will be using.
Yeah, Great question and thank you for picking up on that and it's certainly been a part of our strategy not only for for us as an opportunity for growth and extending our business across our our top client, but also for our clients as they seek.
More comprehensive strategies as we've been talking about the complexity of the challenges certainly require them to look at many different levers around not only their contingent staff utilization had effectively build that into their workforce plans, but also to help them.
Permanent side across all of their workforce capabilities. So.
That increase up to eight and that's an average some of our client is nearly all of our solutions.
On an annual basis so.
We've been seeing from a trend perspective.
Number one as they look for more cost containment strategy is bringing more service lines like our Nonclinical services like our locums like our internal leadership, where they see though the better and more effective ways to bring them the quality staff they needed and.
And under a managed programme.
We've seen a real appetite and increase slightly and particularly with our renewals as well and adding more of those service lines and then beyond that as they look for workforce optimization and planning that Susan talked about how can they have.
Better internal utilization of flexible programs <unk>.
Helping them with more predictive modeling and staffing around that.
We're strategizing with them on a long term basis around where we can innovate and help them bring those solutions to them.
So that they can meet the total need I think one of the areas. We are seeing some increase is a particularly on our physician services and James maybe you can talk a little bit about.
Or look on strategies around adding those for Msp's and what we're seeing there. Thank you Kelly.
I think Kelly is spot on in a sense of our clients are looking for the total workforce Seleucid enough emendation with just out of their portfolio of some of the some metrics that sit behind the we estimate this with inside of the Pls business that we've captured or a third of our plan for 2022 already in the first quarter centered on really building on.
<unk> activity, we have had 100% retention from both our local client and our interim client of 2021, and that's given us until when as well as we think about total workforce solution and then also at the end of the day are we are new into the journey book Tos standpoint in the sense of building MSP. Our goal is to drive the percentage of where it is.
Today in W. Within the next three years and I think that by doing that it will offer both for the client and provider a better experience and more solutions.
Great. Thank you and just one right from me. So you had a really strong no cash flow in the quarter, you've got accounts receivables of nearly $1.3 billion, which you're gonna harvest you over the next 12 to 24 months you clearly bought back over $200 million of shows on a quarterly and you emphasize your cat.
The allegations strategy is but could you provide a little bit more detail about what thought process went into the buy bags and how you would think about that going forward, obviously understanding that the emphasis is on investing internally and organic growth as well as potentially M&A, but just some thought there would be great. Thank you.
Yeah Andre banks.
So first and foremost we want to make sure that we're investing in the business from our Capex standpoints and we're continually focusing on our digital offering looking to drive efficiencies in productivity. There we think.
$70 million to $75 million annual range, but that's the right level of Capex.
For the business today and so after we do that we are going to look to grow the business and organically through M&A in absent any compelling opportunities. There we will opportunistically repurchase shares obviously $200 million of cash flow in the quarter is an extraordinary.
Cash flow quarter for us, but we're also setup given our receivable profile as you mentioned to have an incredibly strong free.
Free cash flow year in 2022, and so will be active on M&A prompt, but will also <unk>.
Continue to look at share repurchases in the absence of any M&A transactions.
Great. Thank you so much.
Do you have any further questions at this time, so I'd like to <unk> <unk> to some closing remarks.
Wonderful. Thank you breaker and thank you everyone for joining us to ask are great discussion and we look forward to updating you on our progress on our next earnings call.
Mhm.
Thank you for joining this does conclude today's cool you may now disconnect your lines and enjoy the rest of your day.
[noise].