Q2 2022 AMN Healthcare Services Inc Earnings Call
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Good day, and thank you for standing by.
Thanks to the amine healthcare second quarter 2022 earnings conference call.
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I would now like to hand, the conference over to your moderator today Randle Reece Senior director of Investor Relations. Please go ahead.
Good afternoon, everyone.
Welcome to <unk> Healthcare's second quarter 2022 earnings call.
A replay of this webcast will be available at IR Dot <unk> health care Dot com.
Following the conclusion of this call.
Details for the audio replay of the conference call or in our earnings release issued this afternoon.
Various remarks, we make during this call about future expectations projections trends.
Events or circumstances.
Forward looking statements.
These statements reflect the company's current beliefs.
Upon the information currently available to it.
Our actual results may differ materially from those indicated by these forward looking statements because of various factors and cautionary statements, including those identified in our most recently filed forms 10-K and 10-Q.
Our earnings release, and subsequent filings with the SEC.
The company does not intend to update guidance or any forward looking statements provided today prior to its next earnings release.
This call contains certain non-GAAP financial information.
Information regarding and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and on our financial reports page at IR Dot Ams healthcare Dot com.
On the call today are Susan Soccer, Chief Executive Officer, Jeff Knudson, Chief Financial Officer, Kelly Rakowski Group, President and Chief operating officer of strategic talent solution Landry CD, <unk> group, President and CEO of nursing and Allied solutions.
And James Taylor Group, President and CEO of physician and leadership solutions.
I'll now turn the call over to Susan. Thank you so much Randy and welcome everyone.
The second quarter, the Ameren team, our health care professionals and our partner once again delivered outstanding and critical service for our clients.
70000 quality healthcare workers placed by Amazon and our supplier partners in the quarter cared for many thousands of patients across the U S.
While the health care staffing industry is a small fraction of the overall workforce. Our contributions are very meaningful and will become even more sound. As these labor shortages are expected to worsen and persist for years to come.
Healthcare delivery model that is highly dependent on the skills passion and many hours worked by clinicians is being tested beyond its limits open.
Open healthcare jobs in the U S continue to pace beyond two five times the number of hires each month and there is no quick fix.
Health care organizations are challenged to resume full capacity of patient care, including our backlog of surgeries.
Most all are dealing with a high number of vacancies attrition rates and intense competition and hiring all amidst rising costs across their delivery system.
In past times, one response to cost pressures would be to reduce contingent and permanent staff, but that's not a viable option when they are already understaffed.
<unk> there is some cost relief due to bill rates declining in the travel nurse market as we expected it would.
Last winter the urgency of the market's need for contingent labor reached an extreme level and now the excessive demand for last minute staffing has mostly subsided with more time to recruit and place healthcare professionals, we are helping clients maintain their contingent workforce.
We're also reducing the cost.
This progress will be more fully visible in our third quarter results, where we are guiding revenue to be about 23% lower than our second quarter. This is better than the expectations. We laid out in February .
The strong demand we are continuing to experience across all businesses gives us confidence we will exit 2022, with an annualized revenue run rate of more than $4 billion.
So now let's talk about the quarter that we just finished.
Our strong second quarter results delivered revenue of 143 billion with an adjusted EBITDA of $233 million. This was slightly stronger than we expected with revenue up 66% over prior year and 8% lower than the first quarter due primarily.
Two the expected decline in nurse Bill rates.
All three of our operating segments exceeded expectations, which shows the breadth of how our clients engage us for comprehensive short and long term talent solutions.
Nurse and Allied solutions segment revenue was $1 1 billion up 76% year over year.
Travel nurse staffing revenue grew 70% year over year balanced between volume and bill rate growth.
Like staffing grew revenue, 54% year over year, driven mainly by higher volume revenue growth was similarly strong in therapy imaging and laboratory specialties.
As anticipated at the beginning of the second quarter demand for travel nurses and a few allied modalities decline from the all time high in Q1 as of quarter progressed demand grew significantly due to the persistent vacancies and labor shortages faced by healthcare organizations.
At these high levels of demand and the trajectory of bill rates for future placements. We believe the average bill rate will bottom out slightly higher than we previously expected.
We were thrilled to welcome the kinetics team to the <unk> family during the quarter with the demand for international clinicians at record level, we know that theyre successful sourcing and direct hire model will be a well timed auction for clients.
This team will continue to be led by the same outstanding leaders, who built the business and we will take it to the next level within Ameren.
For the third quarter, we expect nurse and allied revenue to grow 24% to 28% year over year with the increase coming primarily from a higher number of clinicians on assignment.
Physician and leadership solutions recorded second quarter revenue of 176 million, 26% higher than a year ago locum tenens revenue growth improved to 36% year over year overcoming the N a pandemic related assignments earlier in the year.
<unk> <unk>.
Demand is strong across all specialties and one notable trend is the growth in our primary care telehealth placements with clients.
Interim leadership delivered another record quarter, and physician and executive search revenue posted outstanding 28% growth.
Our physician Perm team reached an all time high for placements more and more <unk> is partnering with health care organizations on large multi search long term engagements.
In the third quarter, we expect physician and leadership solutions revenue to grow approximately 15% year over year.
Technology and workforce solutions hit another record with second quarter revenue of $149 million up 59% year over year, our Vms technology business led the growth again with revenue up 144% versus prior year based on higher volume.
And fees.
Language services and <unk> were also nicely ahead of expectations.
The growth in these higher margin service and technology businesses gives us confidence in our ability to expand <unk> margins over time.
Third quarter revenue for technology, and workforce solutions is projected to grow approximately 30% year over year as Vms revenue moderate along with market wide trend.
As we have expected for several quarters. The Q3 revenue decline is mostly driven by nurse and Allied where pandemic related crisis compensation and bill rates have come down the largest sequential step down in bill rates for clinicians on assignment is occurring in the third quarter.
Over the last 18 months, we have invested heavily in our client and clinician relationships our team our technology and our communities that level of spending naturally steps down as business moves closer to the new normal we have planned well in anticipation of these changes in the <unk>.
Market and our team has positioned us to absorb a decrease in revenue without a need to reduce staff. In fact, we are still recruiting to build the strongest team possible.
We are more enthusiastic than ever about the long term potential for <unk> to be an even greater innovator and contributor as the health care system deals with higher demand and difficult labor supply.
Whatever comes our way I know the <unk> team is more than up to the challenge and we will always lean on the foundation of our values and inclusive culture to make a difference.
The heart and soul of Amgen is stronger than ever which is evident in our outstanding results. We reported today, but it is also evident in the personal and professional support our colleagues give to one another each and every day.
And just a few minutes James Kelly on Landry will join us for the Q&A session for now, though I would like to turn the call over to our colleague, Jeff who will provide more insight on our financial results.
Thank you Susan and good afternoon, everyone.
Second quarter revenue of 143 billion was 4% above the high end of our guidance range driven by outperformance from all three segments.
Consolidated revenue increased 66% year over year and decreased 8% sequentially.
Excluding <unk> 3 million of labor disruption revenue consolidated revenue decreased 14% sequentially.
Gross margin for the quarter was 32, 3% 40 basis points lower than prior year and up 30 basis points sequentially.
Year over year, our margin was lower from less hours and nurse staffing and a revenue mix shift towards our lower margin staffing businesses.
Sequentially, our revenue mix change was favorable to gross margin.
Consolidated SG&A expenses were $244 million or 17, 1% of revenue.
Paired with $157 million or 18, 3% of revenue in the year ago quarter.
258 million or 16, 6% of revenue in the previous quarter.
SG&A expenses increased year over year, 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 $229 million this quarter or 16% of revenue compared with $148 million or 17, 2% of revenue in the year ago quarter.
Improvement in <unk> margin came from operating leverage on the revenue growth.
On a sequential basis, adjusted SG&A was lower by $11 million due to lower performance compensation.
In the second quarter nurse and Allied revenue was $1 1 billion, 76% higher than prior year and down 10% sequentially.
Our travel nurse business grew revenues, 70% over prior year and declined 20% sequentially.
Travelers on assignment grew 33% year over year and declined 3% sequentially.
Allied revenue was 207 million growing 54% from the prior year and down 3% sequentially.
Allied volume was up 34% over prior year and down 2% sequentially.
Nurse and Allied gross margin of 25, 7% was 90 basis points lower than prior year and down 50 basis points sequentially.
The year over year change was due mainly to higher compensation for clinicians.
Sequentially the margin decline stemmed primarily from lower hours and higher insurance costs, partially offset by labor disruption revenue.
And favorable changes in negotiated package.
Segment EBITDA margin of 14, 6% was 30 basis points higher than prior year, and 130 basis points lower than prior quarter.
Year over year, lower gross margin was more than offset by the SG&A leverage from higher revenue.
Physician and leadership solutions revenue in the second quarter was $176 million.
<unk>, 6% higher year over year and down 2% sequentially.
Welcome Tennant's revenue was 106 million, 36% higher than prior year and down 6% sequentially.
Welcome to $14 million less endemic related revenue in the second quarter versus the first.
Core revenue grew 8% sequentially.
Interim leadership revenue increased 8% from prior year and was up 7% sequentially.
<unk> revenue increased 28% from prior year and was down 1% sequentially.
Gross margin for this segment was 34, 2%.
240 basis points lower than the prior year and down 90 basis points sequentially.
The year over year margin decline was primarily due to revenue mix changes and lower gross margins for locum Tenens and interim leadership.
Segment EBITDA margin was 11, 4% down 430 basis points from last year and flat sequentially.
The year over year decline in EBITDA margin was primarily due to a lower gross margin as well as the higher performance compensation accruals.
Technology and workforce solutions revenue was $149 million in the second quarter growing 59% year over year and up 3% sequentially.
Vms revenue of 75 million grew 144% year over year and was flat sequentially.
Language services and <unk> also exceeded our growth expectations for the quarter.
Segment gross margin was 78, 3%.
From the year ago margin of 67, 7% and up 160 basis points sequentially.
The year over year increase was due to the growth of the higher margin BNS business.
Segment EBITDA margin of 55, 2% was up 980 basis points year over year, and 80 basis points sequentially.
Consolidated second quarter, adjusted EBITDA of $233 million was higher by 74% year over year and down 10% sequentially.
Adjusted EBITDA margin of 16, 3% was 70 basis points higher year over year and down 30 basis points sequentially.
We reported net income of $124 million and diluted earnings per share of $2 77 in the quarter.
Adjusted earnings per share was $3 31.
Compared with $1 64 in the year ago quarter.
Days sales outstanding was 50 days in line with the prior year.
Seven days lower than last quarter due to strong collections and the cadence of revenue through the quarter.
Operating cash flow for the quarter was very strong at $224 million and capital expenditures were $17 million.
As of June 30, we had cash and equivalents of $79 million long term debt of $850 million.
And our net leverage ratio of <unk> nine times to warm.
From a capital allocation perspective, the company used $174 million of cash to repurchase one 9 million shares of our stock in the quarter at an average price of $92 and 65.
As of June 30th $326 million remaining under our stock repurchase authorization.
We continued our acquisition strategy in the second quarter with the purchase of <unk>, a fast growing high margin business that helps us better address client needs for permanent recruitment of international nurses and allied professionals.
The acquisition was completed in mid May.
Added $2 million of revenue in the quarter.
Now turning to third quarter guidance we.
We are projecting consolidated revenue to be in a range of 1.08 to 111 billion up 23% to 26% over prior year.
This revenue guidance includes $7 million of labor disruption revenue.
Third quarter gross margin is projected to be 33 to 33, 5%.
At the midpoint consolidated gross margin would be approximately 100 basis points higher than the second quarter levels.
This increase is due to improvement in nurse and Allied.
Along with a favorable revenue mix shift.
Reported SG&A expenses are projected to be 18 to 18, 5% of revenue as we've moved some operating leverage.
The expected lower bill rates.
Operating margin is expected to be 11, 8% to 12, 4% and adjusted EBITA margin is expected to be 15, 5% to 16%.
Other third quarter guidance details can be found in today's earnings release.
On <unk> call. We said, we expected the average bill rate for nurse and Allied to decline in the low double digits sequentially in the second quarter with the largest drop coming in the third quarter.
<unk> average bill rate for Q2 came in at 9% lower than the first quarter and we still expect the third quarter experienced the largest sequential decline of the year.
Our current expectation is that we will exit the year with nurse and Allied bill rates stabilizing at approximately 30% lower than the first quarter level.
Better than our prior expectation of 35% below the Q1 peak.
The trends across our business segments give us confidence that fourth quarter revenue will come in greater than $1 billion with an adjusted EBITDA margin of at least 15%.
And now we'd like to open the call for questions.
As a reminder to ask a question you will need to press star one on your telephone.
In the interest of time, we ask that you. Please limit yourself to one question and one follow up.
Please standby, while we compile the Q&A roster.
Our first question comes from Tim Mulrooney with William Blair. Your line is now open.
Even Jeff Kelly, Andrew James Good afternoon.
Hello there.
So two quick questions. So as I look at your volume numbers, CIC nurse and Allied travelers on assignment was down.
Only 4% sequentially from the first quarter I think you telegraphed some expected moderation in volumes for a while now and I'm curious, how you're thinking about nurse and allied volume cadence as we move through the third and fourth quarters of this year.
Hey, Tim is it guys Landry yes.
<unk>.
The Q2 to Q3 of course.
Jeff mentioned, we've got a revenue decline there primary driver there is the bill rates that are declining.
And then outside of that yes, we do have some volume declined sequentially from Q2 to Q3.
Part of that typically you would see some seasonal declines, but if you go back both during the pandemic as well as before the.
Pandemic, we would see those seasonal declines and we're seeing that same thing or expecting that same thing today as we look to Q3.
Part of that though is schools so.
Just seasonally that volume will decline and then another thing that we're seeing is that our clinicians.
Immune to some of the burn out that's taken place in the marketplace, whether youre work in Perm or travel.
<unk>, we are experiencing some of that so they're taking a little bit of time off we actually have a metric that we track and attracts the time off.
Off between assignments and we can see that that metric has increased so it so they're taking a little bit longer break a little bit longer vacation. So you add all those things together and that's what you get on the Q2 to Q3 and then sequentially from Q3 to Q4, we expect volumes to come back up.
Come back up Okay alright.
What we have in our model I'll update that thank you Landry and then just one more you know one of your competitors reported results yes.
Yesterday, saying that bill rates are coming down a little faster than pay rates, which are squeezing our margins.
Are you seeing the same thing in your travel nurse business and if so is that a dynamic you expect to play out for a few more quarters or is that not necessarily something that you are seeing.
Yes, Tim This is Jeff I would say when you look at our second quarter over first quarter gross.
<unk> that was primarily.
Driven by revenue mix.
However, within nurse and Allied we.
We did see lower hours coming off of the Q1 peak and we also had some worker's comp insurance true ups in the quarter. There was some favorability in Q2 over Q1 from a sequential perspective, both due to the labor disruption revenue as well as some modest impacts from negotiated.
Moving forward into the third quarter, we said that we expect consolidated gross margins to be up roughly 100 basis points again, thats driven by a shift in the revenue mix with the bill rate declines, but there again, there is some favorability and that negotiated package within nurse and allied as well.
And Tim just a little more clarity on the reduction in bill rates and I think you're maybe referring to specifically if a bill rate is reduced in the middle of an assignment.
We typically will peg the pay rate to that and bill rate. So if a client provides their appropriate notice in the middle of an assignment that the rate is going to change then we will have that conversation with the nurse.
You talk about whether they want to stay at that lower rate or perhaps they can move to a different assignment and because of.
The vast orders that we have across the country oftentimes moving is a better option for them. So.
That's how we manage it.
We don't expect to feel gross margin compression from that specific issue that you're referring to.
That's great color. Thank you. Thank.
Thank you Tim.
Thank you and our next question comes from Kevin Fischbeck with Bank of America. Your line is now open.
Great. Thanks, I, just wonder if you could provide a little more color.
The increase during the quarter about new orders that you mentioned.
It sounds like Youre expecting that out is unusually strong.
Could you maybe help us put some context to the magnitude of that versus what you would normally see.
Obviously, it was happening as Covid started to increase again, how are you thinking about how much of that is.
That burn out dynamic and shorter dynamic versus hospitals may be afraid of COVID-19, creating an issue and trying to put in orders in front of that.
So great question will give color on that I'm pretty sure you're referring to <unk>, but I'd like for Landry to also give some color on the Allied business and then perhaps James can talk about our physician and leadership businesses as well as demand trends.
Hey, Kevin it's Landry.
So I guess first off kind of starting with the end. There you had mentioned how much of the increase right now might be related to the COVID-19 Spike that we're seeing and we don't we don't correlate any of it really.
As it relates to the Covid fight.
What we're hearing from our clients is that it is the shortages that they are dealing with so right now travel nurse and Allied demand is currently today more than two times.
Count of demand that we would've seen before the pandemic at the same time period on.
On the travel nursing side, specifically, we did see those declines coming off those really high numbers that we saw at the very beginning of the year and then demand declined through April and then over the last 13 weeks, we have seen sequential increases every single week for the past 13 weeks. So right now demand for travel nursing, it's actually more than 80.
Spent since the low point that we saw at the beginning of the second quarter.
James Thank.
Thank you Andrew attached to what Lindsey stand concerning the physician leadership, we're expecting our demand to remain high across all the majority of our physician and leadership solutions businesses even as.
Covid related projects as they demand diminishes just buy some perspective here locums quarter to demand in terms of gross space available, but was up 75% year over year, specifically driven by primary PRC RMA surgery hospital in dentistry, and our interim business our engagements reached 490.
Two which is the highest ever which was 7% higher year over year, and 5% higher sequentially and our search business. We continue to see strong pipeline across the practices. The leadership pipeline also was up high single digits over a quarter over quarter and our physician Perm business is up also high single digits sequentially.
<unk>, our fill rates were very strong in both Perm, our interim business and also our search business. They are achieving high single digits and sequentially quarter over quarter, but we do see a decrease in from a fill rate standpoint in our locums business and thats purely driven by the high demand that we have in the locals business and.
The strength that we have on supply.
That's all helpful I guess.
Given that.
It seems it sounds like you guys expect a bigger decline until rates in Q3 than in Q2, even though demand has been.
<unk> consistently increasing throughout Q2, I think it kind of.
Giving you a bigger buffer into Q3, it's a wire bill rates going to drop even faster in Q3 than Q2, given the ramp in demand. Thanks.
Hey, Kevin It's Landry again.
Theres a lag there and so maybe I can just speak to a correlation between fill rates and bill rates together and we have been.
<unk> that these bill rates would come down from the peaks that we saw in the first quarter really had bill rate months of course in the February March timeframe.
And that's exactly what's been happened in the trajectory as we mentioned it is not as steep as what we thought that it might be.
Might have been and then with the bill rates coming down of course, we've also seen the pay rates come down and those have now come down to a point to where we're starting to see it have a negative impact on fill rates. So.
That's why we think that we've actually probably hit an inflection point at this point. So it takes a little bit of time for all of that to work its way through and the trend a little bit too early to call, but that's what it looks like what's happening out in the marketplace, which is leading us to make the statement and kind of updating our number for Q4 that Jeff mentioned.
Kevin the other bit of information that might give you some insight into our confidence is that we are getting our winter orders in there fairly dwarfed by the large number of orders that we already have but as we're getting those orders in there and really a strong if not <unk>.
Stronger than prior years and the rate are largely in line and even some client clients talking about higher rates. So I think that's another sign that we've probably seen that trough in rates now we'll be booking those people into the fourth quarter, but as we look at our <unk>.
All right transfer travelers on assignment going into the fourth quarter Theyre looking stable too.
In some cases, a little stronger based on the very least stable.
Alright, great. Thank you.
Thank you.
Okay.
Operator.
And our next question comes from a J Rice with credit Suisse. Your line is open.
Hi, everybody.
Number of questions that could ask I'll.
I'll focus in on.
When you look at where your contracts are rolling over in July the bill rates on those.
Is that about where you are assuming the whole quarter plays out are you still.
Well above and have leeway for to drop further in fourth quarter to get to the numbers you're putting out today.
Yes, Hey, Jay as we think about moving through the third quarter, there were still expecting sequential declines.
Every month, all the way through September and then a very modest decline in the bill rates and into the fourth quarter to settle out at that 30% below.
The Q1 peak.
But to be granted most of those people are already booked.
And have either started their assignment, which.
Which is why we haven't been visibility or they're soon to start their assignment.
Okay got you and of course, that's true.
The other thing I was going to ask you is about.
The perception was hospitals were.
Getting all this COVID-19 relief money cares act add on payments Medicare sequestration relief.
They were plowing that back in to get nurses to make sure they could fill.
Meet their demand and we are willing to pay very high prices a lot of that money is rolling off.
Now and I know they need the nurses, but we've seen a little bit nursing homes aren't a big customer for you all but some of the people that deal with nursing home future admittedly in worse shape and hospitals are saying bid nursing homes or just.
Theyre going with us without frankly in some cases.
And to the point of pushing the limit on staffing levels at all I don't think hospitals are at that point, but I wonder.
What is your conversation with them about the pain factor, we've seen some downgrades of major health systems, we've seen at least one large system announced that they've swung to a loss now.
What are you hearing from your customers about not just their desire obviously to have nurses, but.
What's the pain level that they're feeling as this COVID-19 money runs off.
So this is Susan I'll start and then have Kelly jump in since chief talking with clients much more on a daily basis about these exact issues, but I would say that there was more optimism within the healthcare community back in maybe the March April timeframe.
<unk>.
They could use some of the extra money to recruit and retain clinicians and curb the attrition and the vacancy which is why our orders declined some of it was just the crisis assignments falling off and some of it was their optimism that they can put a dent in their bag.
And it just didn't really come to fruition to the level that they had expected and some of it is nurses not willing to come back into the employment market at all.
And certainly the cost to recruit them back in I talked about this on the last earnings call that it's a <unk>.
Very expensive proposition for hospital to permanently increase the compensation for their permanent staff. If you did 10% across all nurses working in hospitals you'd be at something like $15 billion. So it's just really quite cost prohibitive when their cost pressures are really all already so great.
So the conversation now is this is the new norm and they are looking for other mid and long term solutions to deal with it. So I will turn it over to Kelly and have our fill in how we are helping them do that yes. Thank you Susan Hi, Jay. Thank you had it exactly right I think there.
Level of optimism was met with some realities in the market.
Just the supply that was available to hire into full time staff. They are still experiencing levels of attrition due to burn out.
I think as Landry mentioned earlier I think the summer months are particularly challenging challenging as well too to hire a new so they are continuing to.
Attacked us from all fronts.
We've seen our RPM business increased due to that need for assistance in bringing in permanent staff are orders and placements are at an all time high for that business and we continue to add new clients.
Meeting that.
Assistance with talent acquisition.
We're continuing to look at how they optimize the workforce that they have certainly becoming more efficient in their processes as you mentioned trying to create.
Some more capacity and takeaway some of that constraint and then certainly they are still turning to our contingent workforce to help them.
And our local market as well as we see that in our in our travel needs I will say a JV level of.
Criticality, where we're seeing the need for predictive understanding of the supply because that is informing decisions were.
They may have to shut down services, either on a temporary or longer term basis.
Particularly in some of their procedural areas. So it's becoming very important that they have RF.
Our assistance.
Others around staffing notes, so that they're able to continue to keep their doors open services open to serve their communities.
Okay. Thanks, a lot.
Thank you and our next question comes from Brian <unk> with Jefferies. Your line is now open.
Hey, good afternoon, guys and congrats on the quarter.
Just to clarify on the comments you made and try to tie a few things together. So I think Susan you made a comment that the bottom.
You think that rates will bottom.
I guess just to clarify on the comments you made and try to tie a few things together. So I think Susan you made a comment that the bottom.
You think that rates will bottom out higher than you had previously expected so is that just.
Given the demand dynamic and then maybe just tying that to a comment that.
You guys made about how the run rate, it's still kind of like a $1 billion of run rate is still kind of like a $1 billion of revenue. So just trying to figure out how to put those two comments together when it sounds like youre expecting.
The bottom of rates to be higher than before.
Yes, Brian as Susan and I would say slightly higher we had said 35% below now were thinking closer to 30, and we get that visibility based on.
Where we've seen the stability in bill rates over the last several weeks and then starting to see future placements at that rate.
And most of the larger clients are discussing can we hold at this rate or do we need to go higher not do we need to go lower I think with the additional orders that Landry discussed rising so much through the second quarter and still coming in today I think there is a reality that.
You may need to and in some very targeted areas, even raise rate fitbit curbing their ability to deliver critical services. So I guess, that's why we get the confidence in where we think that we will so called bottom out.
You could argue we've sort of bottomed out now, but because of the lag Landry discussed those assignments that were booked and maybe started a few weeks or months ago. Those will play out and some clinicians haven't even started that were booked at higher rates and thats why there is a little bit of a slow going into the.
The fourth quarter.
Got you and then as I look at just the technology and work for our workforce solutions segment margins were obviously very strong.
Wondering how youre thinking about the sustainability, there or is there any call out.
Cleaning youre kind of like peak margins for that group.
Yeah.
Yes, I think what you need to keep in mind, there as we move through the back half of the year, our Vms business, we will start to see sequential revenue declines there in the third and fourth quarter at the same bill rate dynamics that impact nurse and allied make their way through the BMS business and Thats the highest margin business that we have.
Within this segment, so that will start to impact not only the gross margins, but the adjusted EBITDA margins into the back half.
Alright got it thanks guys.
Thank you.
Our next question comes from.
Brian Griffin with BMO capital markets. Your line is now open.
Actually I think it is Jeff Silber with BMO must have used the wrong <unk> sorry about that I. Appreciate you taking my question.
Susan I think in your prepared remarks, you talked about internal hiring I may have misheard you, but if that was true can you talk about where that hiring which division what type of physicians are you really focusing on right now.
Absolutely Jonathan and thanks for asking.
Physicians opened pretty much all across the organization.
You certainly have some amount of attrition, although I will say, our second quarter attrition was perhaps the lowest in our company history or as long as we've tracked it to this level of accuracy. So we're really pleased with where we are and our ability to develop and retain our SaaS and I think it also very much speaks to our culture.
<unk> desire to be a part of our mission and what we're trying to accomplish but with that said occasionally people. We see your hiring for that and then we're adding positions pretty much across all divisions and departments.
Certainly in our technology related divisions, where we're seeing some really nice growth we are adding and then even in our staffing businesses with the volume increases that Landry referred to and we are expecting volume increases over time and physician and leadership, we've got to have the trained recruiters and account.
Managers and staff there to support them so.
Really really across the company.
Okay. That's helpful.
As long as we're talking about recruiting maybe we can talk about your recruiting professionals.
I know, obviously, there's been a tremendous amount of volatility on the nurse and allied side.
At a high level are you seeing new types of travelers coming in specifically from a demographic perspective in terms of younger nurses traveling that they may not have traveled beforehand.
Yeah, Hey, Jeff It's Landry. So we don't we don't capture age at the time of application, but we do track it AD placement and we're certainly seeing a larger percentage of our overall new placements.
With clinicians that are under 40% so right now under under the age of 40. It makes up about two thirds of our new placements.
Also in the second quarter, we saw our largest increase in new placements for commissions that were actually between the age of 21 to 25. So.
That data does suggest that we're starting to see a shift towards a younger demographic.
What we've been talking about but we stay out in the market or other industries. Their preferences are to work in a more flexible work arrangement.
Alright, that's great to hear thanks, so much.
Okay.
Thank you as a reminder to ask a question you will need to press star one on your telephone.
Again that is star one on your telephone.
Our next question comes from Tobey Sommer with truth.
As you are.
Your line is open on the price.
Thank you.
I wanted to ask a follow up question on the pricing.
As you look at travel nurse pricing.
In terms of whatever visibility you do have at this point into the balance of the year.
When you make your comments or is that including winter needs and what seasonally can be higher priced.
Bill rates and assignments are you trying to normalize for that when you're rendering judgment in describing a bottom.
Thank you.
Yes, I would say, we did look at where those winter need orders were coming in and then we also looked at history and were quote unquote normal orders were in Q4 versus winter needs and.
And given the visibility that the winter needs for giving us that is why we made that commentary on the fourth quarter.
Okay. Thank you and then I wanted to ask a question about.
There's been a lot of.
Okay.
Labor disruptions and or <unk>.
Contract negotiations in recent months and I think theres more to pretty.
Pretty decent amount of activity for the balance of the year I've noticed as a results that the union agreements contemplate pretty significant.
Wage increases for full time staff not just mid single digits with high for a number of years.
When you step back and look at the labor complex as a whole full and part time.
Do you consider more rapid wage growth.
We're unionized employees could be supportive.
Or disruptive to pricing for travel nurses overtime.
We haven't really seen historically, Toby those negotiations and any resulting changes in comp structure be impactful or disruptive now it may be for that client, but it doesn't necessarily spillover and affect the entire nurse profession.
In an industry and of course, the numbers well about 20% of nurses fall under Union agreements. So maybe it's not surprising that it doesn't have an immediate or even long term effect when those things occur. So just because youre seeing an 8% increase or even a 10% increase at <unk>.
A particular facility or system.
I doubt that youre going to see that ripple across the entire health care ecosystem, because it just becomes very cost prohibitive.
A difficult equation for them to sustain especially when they have all other cost pressures.
So long way of saying I don't think it's going to be disruptive what it is as choline.
How much that nurses and other clinicians are empowered to pushback and demand changes that they think would be good for their profession and for patient care and oftentimes at the top of that list is staffing ratios and whether the regulated or not.
Clinicians, particularly nurses want to know that there is appropriate staffing in fact, if you put compensation aside.
Staffing levels are in.
And flexibility are two of the top things that clinicians are seeking.
And those things would be.
Net positive for us if they're being pushed to hold to higher levels of staffing ratios.
Thank you very much.
Thanks Tobey.
Thank you.
Our next question comes from.
Bill Sutherland with benchmark company. Your line is now open.
Hey, everybody was very suspenseful.
Okay.
Hey, How're you doing.
Susan I'll take on the supply issue I would like to see what Youre thinking.
Looking out over the horizon a bit.
And I know, there's some program expansion going on.
How do you think it kind of trends.
Far as supply finally, beginning to.
To expand a bit.
There is a lot of work being done.
To expand education.
They've prioritized nurses for visa has not given them a special visa prioritize them to try to get them through immigration and some sort of normal.
<unk> timeframe with that said it is going to be years years, and lowest healthcare leaders and nurse executives are thinking in the five to 10 year range before we'll see any.
Lessening in the shortage in fact, the common thinking and research papers that I read suggests it will get worse before it gets better because there really just is not a quick fix and it doesn't mean, we shouldnt be partnering and aligning with others to do things at <unk>.
<unk> with retaining the precious workforce that we have which is why <unk> is aligning with our clients in a variety of organizations and starting right at home with their own clinicians and providing them with support to make sure that they have whether it be mental health support wellness support rejuvenation resiliency.
They can stay in the workforce Landry mentioned earlier, they need more time off in between assignment. So we need to be supportive of that so we think we all need to do our part to try to retain the precious workforce that we have upskill their workforce that we have so we are working with some clients on some programs to try to get clinic.
<unk>, the specialty training that they need but yes.
I will say bill all of this is not going to fix anything in the near term. They are the right things to do they will make an impact but it won't be a measurable impact, it's really going to take a longer term.
Cycle right.
Alright.
Yes.
And.
Totally different topic of capital allocation.
How would you rank your priorities, but thank God knows the top priority.
Yes.
Jeff to address that.
Yeah. Thanks Bill.
So we are still very focused on executing against our M&A pipeline and all else being equal we would prefer to deploy our capital to our high margin accretive business absent anything compelling on the M&A front.
We'll look.
Repurchase shares Opportunistically I mean, we've spent we've deployed all over $400 million of capital in the first half of the year, including $174 million in the second quarter share repurchases and we still have $326 million left on our authorization and the balance sheet in great shape. There is no prepay.
That the leverage ratio below one time, then there's ample free cash flow coming in the back half of the year to not only support share repurchases, but also M&A.
M&A those two things are mutually exclusive.
I would expect your cash flows.
Chris quite materially over the next 12 months.
While our conversion ratio in the second quarter was about as good as it's been in quite some time, so that new best indicative that these revenues come down.
The free cash flow generation power of the company.
Company.
Great. Thanks, everybody.
Thank you I would now like to turn the conference back to Susan <unk> for closing remarks.
Thank you so much we very much appreciate you all being with US today and for your interest in Ameren and our mission and what we're accomplishing here again, it did call out to our amazing team members our clinicians in all of our partners.
We are all in this together and yes, making a significant impact, but we still have a lot ahead of us and so I just want to thank everybody for their hard work.
Yes.
This concludes today's conference call.
You for participating you may now disconnect.
The conference will begin shortly to raise Johan during Q&A, you can dial star one one.
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