Q3 2022 AMN Healthcare Services Inc Earnings Call
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The conference will begin shortly.
As Johan during Q&A, you can dial star one one.
[music].
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Okay.
Yeah.
Thank you for standing by and welcome to <unk>.
Health Care's third quarter 2022 earnings call at this time, all participants are in a listen only mode.
After the speaker's presentation, there will be a question and answer session to ask a question. During the session you will need to press star one one on your telephone.
I would now like to hand, the call over to Randall Reece Senior director of Investor Relations. Please go ahead.
Good afternoon, everyone.
Welcome to Amarin Healthcare's third quarter 2022 earnings call a replay of this webcast will be available at <unk>.
And then health care Dot com following the conclusion of this call.
Detail.
There is not an audio replay.
Various remarks, we make during this call about future expectations for Jack so trends plans events or circumstances.
It will contain forward looking statements.
These statements reflect the company's current beliefs based upon information currently available to it.
Our actual results may differ materially from those indicated by these forward looking statements.
Because of various factors and cautionary statements, including those identified in our most recently filed forms 10-K 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 this.
Next earnings release.
This call contains certain non-GAAP financial information.
Information regarding and reconciliations of these non-GAAP measures.
For the most directly comparable GAAP measures.
Included in our earnings release and on our financial reports page at IR <unk> health care Dot com.
On the call today are Susan <unk>, Chief Executive Officer, Jeff.
Jeff Knudson, Chief Financial Officer.
Kelly Rakowski group, President and Chief operating officer of strategic talent solutions.
And Landry <unk> group, President and Chief operating officer of nursing and Allied solution.
James Taylor, President and Chief operating Officer physician and leadership solutions would normally be joining us, but he is representing a M. Today on a precedent panel about the future of health care workforce solutions.
Conference I will now turn the call over to Susan. Thank you so much Randy and welcome everyone. We have many topics to share and celebrate today, but I'll start with one reflection as I begin my 84th and last earnings call.
When and then went public 21 years ago, we were a single service travel nursing company and while it's still our largest business today, there's no doubt we've come a long way in building a healthier more diverse and impactful company over those years.
In addition to being the most comprehensive staffing provider. We've also become the leader in workforce solutions and technology platforms in health care, our stock has risen about 650% and for the last decade, we've been consistently in the top quartile of delivering total shareholder return.
Most.
Importantly, we positively impact millions of patients and families line and we're proud to be a national leader in diversity equity equality and inclusion in our recognized contributor into our communities.
It's stronger than ever before and we have tremendous opportunities ahead to make a greater impact for all of our stakeholders.
Incredible strength stability and diversity of experience across our leadership team and these are the people driving the results you see today.
This gives me great confidence as I pass the CEO baton to carry grades later this month.
He is the perfect leader to build upon its strong culture and foundation. We have created and then our team is very excited to begin working with her and continue the momentum we have in the market and I know you will enjoy getting to know her in the coming months too.
Now, let's turn to our results and the trends, we think are most important to our future.
As we discussed before a great confluence of pressures cost health care staffing demand to reached unprecedented levels last fall and winter.
Our team has worked closely with clients to bring the unusually high pay and bill rates down as quickly and smoothly as possible as demand pulled back but remains well above pre pandemic level.
Throughout 2022, we have been proactive and transparent and communicating the expected decline in revenue after the first quarter peak well.
Well, we are above our earlier expectations. We believe things are generally played out as we anticipated.
During the third quarter, all three of our business segments again exceeded revenue expectations and we are pleased with our trajectory in the fourth quarter.
Since February we had a $1 billion revenue target with a 15% adjusted EBIT margin for the fourth quarter and our guidance today is comfortably ahead of these targets in.
In times when many companies struggle for visibility, we maintained our strong track record of setting reasonable expectations and performing well against them.
Third quarter revenue was 1.14 billion with adjusted EBITDA of $182 million revenue was 20% lower than the second quarter caused mainly by the anticipated decline in our largest segment nurse and allied solution.
Nurse and Allied segment revenue was 828 million in the third quarter, 32% higher year over year and declining 25% sequentially.
Travel nurse revenue grew 31% year over year and was down 25% from the prior quarter demand for travel nursing remains well above pre pandemic levels with strength across all specialties. In addition, our supply of candidates, including new applicants remained strong.
Her than pre pandemic level, and we have the benefit of a significant number of candidates that have been added to our network over the last two years and.
An increased preference among clinicians for flexibility coupled with the investments we are making in our digital capabilities gives us confidence in our ability to attract clinicians for the future.
Our allied business had an 8% sequential revenue decline and 39% year over year growth areas of strength included imaging and therapy for.
For the fourth quarter, we expect revenue in nurse and Allied solutions to be down, 7% sequentially and approximately 29% year over year due primarily to the reduction in bill rates we've discussed.
We project sequential growth in volume in the fourth quarter offset by seasonally lower hours and a flattening in bill rates.
In our physician and leadership solutions segment third quarter revenue was 175 million showing a 16% growth over the prior year slightly better than our guidance.
Our search business is led the segment with 21% revenue growth with locum Tenens up 19% and interim leadership growing 9%.
In the fourth quarter, we project revenue in physician and leadership solutions to be flat versus prior year excluding.
Excluding pandemic related business revenue would be up approximately 6% year over year demand remains strong and well above pre pandemic levels for locum tenens and physician permanent placement somehow.
Some health care organizations are streamlining leadership and non clinical rules to reduce costs and this has affected short term demand for interim and permanent leadership in the long run we expect turnover in leadership positions to remain relatively high continuing to drive demand.
In our technology and workforce solutions segment, we continue to build our leadership position for the last 12 months, our MSP and Vms gross spend under management with over $12 billion.
A M N V M S workforce optimization and RP O offerings in which we have invested heavily in the last decade, our critical solutions to help clients address the labor challenges of today and tomorrow.
And as you know two and a half years ago, we added language services.
Collectively these solutions further differentiate and win in the marketplace with innovative technology platforms, helping to improve access and quality of care, while also reducing costs.
In the third quarter technology, and workforce solutions segment revenue of $135 million grew 35% year over year better than our guidance of 30%.
Vms revenue beat expectations at $60 million up 80% over prior year, but down from $75 million in the prior quarter.
Consistent with our travel nurse business the sequential decline in Vms was driven by lower volume and bill rate.
Vms language services workforce optimization, and Rps solutions exceeded our growth expectations for the quarter, we continue to grow our customer base across this segment, our Vms business, which offers three unique platforms now serves over 500 clients our R. P O.
Client base has doubled compared with pre pandemic and language services has grown volume 70% in the last two years.
For the fourth quarter, we expect revenue in technology and workforce solutions to grow approximately 10% year over year with similar increases in all major business lines.
Continued investment in all of our offerings, both improving our existing capabilities and creating new ones has never been more important as our country's demand for health care services is increasing with an aging population and the aftermath of the pandemic. The health care community is faced with workforce shortages.
Far worse than previously seen oriented to paint. It. These shortages are expected to last for many years to come as a result healthcare organizations are adjusting their models expecting that a greater percentage of their clinical labor will come from contingent staffing. This is a great topic for Kelly to expand upon.
In today's Q&A session, because we are working extensively with our clients and industry groups to address this crisis.
At the same time, we are committed to helping ensure that a career in healthcare is fulfilling and sustainable supporting clinicians with wellness resiliency and mental health services is just as important as rewarding them with appropriate compensation for the hard and highly skilled work. They do every day for our loss.
One it.
It is exciting to imagine the wonders that health care organizations and professionals will do in the coming years and I'm confident that a M and will play an increasingly important role.
Just a few minutes 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 insights on our financial results.
Thank you Susan and good afternoon, everyone.
Third quarter revenue of 1.139 billion was 3% above the high end of our guidance range drill.
Driven by outperformance from all three segments.
Consolidated revenue increased 30% year over year and decreased 20% sequentially.
Excluding labor disruption revenue consolidated revenue decreased 17% sequentially.
Gross margin for the quarter was 33, 8%.
100 basis points lower than prior year, and up 150 basis points from the prior quarter.
Year over year, the margin was lower primarily from higher clinician compensation and less average hours work and nurse staffing.
Partially offset by higher margins in our technology and workforce solutions business.
Sequentially the margin was higher due to a favorable clinician pay package and a favorable revenue mix shift.
Consolidated SG&A expenses were $215 million or 18, 9% of revenue compared with $174 million or 19, 8% of revenue in the year ago quarter, and $244 million or 17, 1% of revenue in the previous quarter.
SG&A expenses increased year over year, primarily associated with revenue growth, including the hiring rewarding and supporting our team members.
Adjusted SG&A, excluding certain nonrecurring expenses and stock based compensation expense was 204 million this quarter or 17, 9% of revenue compared with 168 million or 19, 2% of revenue in the year ago quarter.
The improvement in adjusted SG&A margin came from operating leverage on the revenue growth.
On a sequential basis, adjusted SG&A was lower by $24 million.
Less variable compensation from lower revenue.
In the third quarter nurse and Allied revenue was $828 million 30.
32% higher than prior year and down 25% from prior quarter.
As we expected the third quarter experienced the largest sequential decline in average bill rate down 14%.
Our travel nurse business grew revenue, 31% over prior year and declined 25% sequentially.
Allied revenue was 190 million growing 39% from the prior year and down 8% from the second quarter.
Nurse and Allied gross margin of 27% was 230 basis points lower than prior year and up 130 basis points sequentially.
The year over year change was due mainly to lower labor disruption revenue.
Sequentially the margin increase stemmed primarily from favorable changes in clinician compensation and favorable labor disruption margin.
Segment EBITDA margin of 13, 9% was 90 basis points lower than prior year.
70 basis points lower than prior quarter.
Year over year, lower gross margin was partially offset by the SG&A leverage from higher revenue.
Physician and leadership solutions revenue in the third quarter was $175 million.
16% higher year over year and flat sequentially.
Locum Tenens revenue was $106 million, 19% higher than prior year.
Interim leadership revenue increased 9% from prior year and both were flat sequentially.
Search revenue increased 21% from prior year and was down 3% sequentially.
Gross margin for this segment was 34% 80 basis points lower than the prior year and down 20 basis points sequentially.
The year over year margin decline was primarily due to lower gross margin for locum tenens due to an unfavorable specialty mix.
Segment EBITDA margin was 13, 6% up 80 basis points from last year and up 220 basis points sequentially.
The year over year increase in EBITDA margins was primarily due to SG&A leverage on higher revenue.
Technology and workforce solutions revenue was $135 million in the third quarter growing 35% year over year and down 10% from the prior quarter.
CMS revenue of $60 million grew 80% year over year and was down 20% quarter over quarter.
Segment gross margin of 75, 6% was up from a year ago margin of 69, 4% and down 270 basis points sequentially.
Year over year increase was due to the growth of the higher margin BNS business.
Segment EBITDA margin of 52, 7% was up 550 basis points year over year and down 250 basis points sequentially.
Consolidated third quarter, adjusted EBITDA of $182 million was higher by 31% year over year and down 22% sequentially.
Adjusted EBITDA margin of 16% was 20 basis points higher year over year and down 30 basis points from the second quarter.
We reported net income of 92 million and diluted earnings per share of $2.10 in the quarter adjust.
Adjusted earnings per share was $2 57.
Compared with $1 73 in the year ago quarter.
Days sales outstanding was 59 days, one day less than the prior year and nine days higher than last quarter when collections were unusually strong.
Operating cash flow for the quarter was $114 million and capital expenditures were $20 million.
As of September 30, we had cash and equivalents of $156 million long term debt of $850 million and a leverage ratio of <unk>.
Eight times to one.
Now turning to fourth quarter guidance, we are projecting consolidated revenue to be in a range of 1.05 to 1.08 billion down 21% to 23% over prior year.
Trends and do not anticipate any major changes in our end markets.
And now I would like to hand, the call back to Susan for closing remarks, as after 32 years of incredible service. This is our last earnings call.
Susan on behalf of the entire <unk> team, we would like to express our sincere gratitude for the impact you have made in our communities and on all of our professional and personal lives.
Thank you so much jazz and thanks to everyone, who extended their their congratulations man and gravity inside anything I've achieved as a complete reflection of all of the team <unk> and then our clients are clinicians and I have to say, even our analysts and our shareholders.
And the last 21 years as a public company I've learned a great deal from you and some have you been around with me that long and I really want to thank you for your support of Amen and your confidence in me and the leadership team.
Many of you have supported us through some ups and downs, but you've also understood that we were on our long term mission, yes, with an important strategy to make an impact in the healthcare world, but also to ensure that we're a purpose driven so too and socially responsible organization and and I think you know that you are in good hands.
Great Hearts, and great mine's going forward and none of those things will change.
Over the last 30 years I have just had the privilege of working with and watching also the great work of our clients and clinicians and they are very much. The beacon of how we have built M N to serve them better so that they can do what they do best and that is care for our loved ones.
I will never forget when one of almonds nurses healthcare from my dad. After he had a stroke and she was part of the team that helped to save his life.
It's been an honor every day to support our clients and clinicians and my admiration for them and what they do and how much they give to the community everyday will never ever fading in similarly.
You know are passionate and talented team at am and they have been a constant source of inspiration and learning we have a purpose at ammon of helping to achieve personal and professional goals. They certainly helped me achieve my personal and professional goals and it's been an honor and a privilege to help in any way.
Hey, individuals and teams to pursue their goals and we have a very diverse and inclusive culture that I think you know is very deliberate on our part. It makes this unique it makes us strong and I know that that attention to our culture and the importance of diversity and inclusion will can.
<unk> forward with this leadership team and certainly under Kerry's leadership as well.
We work hard, but we have a heck of a lot of fun along the way and part of that fund is also reaching out into the communities, both near and far and making sure that we're doing our part to help people outside the walls of our business and that great work will continue it's one of my greatest joys about how <unk> has been built in.
By our culture.
And of course, I wouldn't want to lead up leave out our board of directors, who provided many years of guidance and support and particularly our chairman Doug Who's been my most important venture for over 20 years I would not be the CEO leader I am today without his guidance so huge banks to all of our directors current and past.
And then if you were here you know that we refer to each other and our group as a family and we take care of each other professionally personally through many events good times challenging times and I really can't imagine my life I don't want to imagine it without and then I've spent more years raising.
And then I have my own kids, who are now amazing young adults themselves forging their way through the world and making an impact and I want to take a moment to thank them Saint My incredible husband, Scott My mom and Dad, who always support me put up with me always showed up for am and we're all in.
This amazing mission, it's been an incredible journey for all of us.
So over the last few weeks some people asked me more often if I'm sad to leave am N. After so many years.
And of course, I have to say, there's a little bit of sadness and knowing that I won't get that daily fulfillment, it's sort of a selfish thing, but you know I get tremendous fulfillment and inspiration out of working with such a talented caring group of people, but at the same time I am bursting with pride, So I can't help but have a <unk>.
Huge smile on my face and in my heart, because it's almost like being that proud dad or mom. When you feel that your child is soaring in making a positive impact in this world beyond anything that you could contribute. Additionally.
And I have much to look forward to myself spending more time with my incredible family.
So I will always be a friend and a supporter of am N and everyone knows that I will do anything I can to achieve permission from the sidelines.
As proud as I am of am and today I truly believe our best and brightest days in our greatest impact or in the years to come and it's in great hands and with that we will open up the call to questions.
<unk> as a reminder to ask a question you will need to press star one on your telephone.
<unk> one one on your telephone to ask a question.
Could you. Please ask one question and one follow up too.
Will you stay and bought while we compile Q and a.
Roster.
Thank you. Our first question comes from the line Mark Marshall.
Robert W Bird and company. Please go ahead.
Good afternoon, everybody have the first and foremost Susan I, just wonder extend my best wishes.
Gratulation Sean.
Incredible.
You know accomplishment in terms of what you've done with or your modem. It's been a pleasure following the company for the last 15 16 years now.
And it's clearly in great great shape going forward.
No that you're gonna continue to do really fantastic things.
And your future years.
Help society. So congrats on everything both in terms of the financial performance, but also the societal benefits are that the companies provided can you talk a little bit with regards to just.
The guidance with regards to the fourth quarter.
Particularly in terms of nurse <unk>.
It sounds like Bill Richardson would actually be a little bit better.
25% year over year for the fourth quarter, if I heard correctly and we're basically looking at a 29% sequential decline in terms of the are in terms of the revenue.
And so I was wondering as it relates to that how much are we thinking and I'm up year over year in terms of the 29 per cent decline.
We heard the volumes are gonna be up what are some of the things that could cause nurse and I'd like to do a little bit better.
Then what you're guarding four I'm wondering you know.
We've been a lot of stuff in the in the media about pediatric respiratory illnesses. There's concerns about the flu what order some of the potential puts and takes it could make that that guidance a little bit conservative.
And then the follow up is basically.
A little bit more thoughts with regards to how you were thinking about 2023.
Raising the guidance for the 4.26 billion in 15.3 per cent EBITDA margins. Thank you.
Sure Martha I'll start so the 25% on the bill rate is off of the first quarter P and not a year over year number as we look.
<unk>, we do expect volumes and nurse and Allied.
To be up over Q3, and then bill rates down sequentially approximately mid single digits, we have seen a flat in the bill rates since the September time frame.
We do anticipate or project that they'll continue to decline towards the end of the quarter or so.
<unk> remained flat through the end of the year that could provide a little bit of upside to our December revenue projections.
So those are the main post in case and then when I would also just point out that when you think about the year over year revenue decline in nursing allies, we only have 8 million of labor disruption revenue in the fourth quarter guide and Thats, comparing again $85 million.
Last year, so the best plan into that larger percentage decline on a year over year basis.
I'll toss over Landry on the flute question, Yeah, Hey markets Landry so on the fluids and we went back and looked at a lot of our historical trends and whenever there was.
Spikes in the flu and tons of yours that it wasn't spike in so much and we really haven't seen anything historically no big changes of how that impacts our business. So local staffing does have a little bit of an impact they it's not because they're seeing flu patient, it's more because they're helping out a couple of our class.
<unk> with the administration of flu vaccines. So we typically see that every year anyway, but.
Looking back at historical there's no no strong correlation.
The fourth quarter, even the first quarter volume performance based on what the National flu is doing.
We are seeing all the same stuff that you probably are on the news about how bad the flu season can be and then you hear about RSA did you hear about COVID-19.
We're actually hoping that that doesn't happen.
The team and our clients have worked pretty hard to get get bill rates are more than normal level and I think that would kind of just set us off track. If we have to go up and down again through another another spike so for many reasons actually hope that we don't we don't see any sort of spike from the combination of those three things, but if you're related.
Specifically to what was being regarding the flu in the past don't really expect any any major changes.
And I have nothing to add to that Mark Edison. Thank you for your very kind comments I feel quite honored to have known you and work with you through the years. Thank you Mark August on your 23 question.
I would just say with the flattening in the bill rates that we've seen post September and where demand nauseous within nurse, an ally, but across pls and the revenue growth that we're seeing in technology and workforce solutions.
Think that's what gave us the confidence to talk about annualize in the fourth quarter number and then from the EBITDA improvement I would just say.
On the heels of generating 33.8% gross margin in the third quarter. The mid point of the guys being slightly beneath that in the fourth quarter.
The midpoint of our fourth quarter gross margin guidance 140 basis points, approximately better than where we were in the first half. So we have seen a nicer improvement and gross margins into the back half of the year and that's partially driven by nursing al items improvement that bill pay spread we've seen but also with mix with the technology.
Workforce solution segment, and we don't see those trends changing as we move into the first part of 2003.
That's perfect. Thank you very much Susan all the best.
Thank you Mark you as well.
Thank you. Our next question comes from the line of Kevin Fischbeck Bank of America Securities. Please go ahead.
Good afternoon actually this is Joanna <unk>, putting in for Kevin today. So thanks for taking the questions and so then again congratulations we'll definitely think unless you're on calls accomplishes, but I hope you will hear from you two different channels at this time I'm sure. We will so congrats again and just a question here.
So we talk about the <unk>.
<unk> and you mentioned that.
Potential that we have a <unk> you know another spike either either help these different Friday <unk>.
Right, but I guess that will also drive some potentially higher demand, but still.
You feel like.
Got that that does the solution is here to keep that the goes I slowly. So I'm just going to comment on the potential hired a minor you see are you seeing any of this already happening or not yet.
Yes. So this is lander again, so my first comment.
Necessarily thinking that there would be a spike in demand do too.
Any sort of loose by for Covid Spike.
None of our projections are based on that just because of some of the things we've seen in prior years, where those things did not create.
Despite so.
Hoping that that does not occur so nothing assumed in anything that we went over it through our prepared remarks.
Now demand for travel nursing and Allied it right now it is it is much stronger than it was before the pandemic. If you look at it on a year over year basis. It is down this time last year. It was the highest that we had ever seen on record.
The United States going through one of the biggest surges of Covid at that point.
So we continue to to be in this robust demand environment, a couple of areas that would be down a little bit more as you would expect that the ICU in respiratory.
So you would expect that just from where we were in prior year, but there's some other areas like therapy. As an example, with very robust right now so I'm hearing a lot of cost pressure from our clients, but in the same breath, they still desperately need the staff and so that's why we're seeing the high demand that we are.
Waiting for my follow up to the comment.
Made into prefer to Max's onto your expectations for great great a per cent of labor to come from contract labor over time.
Too bad pain.
Also hearing you know potentially some nurse's actions attorney permanent job. So I don't know if there's any quality you you hear from your clients.
Or from the menu seed there in terms of this dynamic happening or what are you, saying that it's it's just a minute.
And so you know given the overall shortages.
Mental contract Claver was anticipate that seemed like it's maybe some people think thank you.
Hi, Great question. This is Kelly a few things you know as we think about the market in general and it certainly still volatile and settling down but it settled in I think as we've talked with clients walking the halls.
Two week engaging with other industry partners.
The industry itself is still considering that should be a crisis and has won most of our clients stay persisting for multiple years and so while yes, you do have some we're getting some success filling vacancies the gap between hires and vacancies continued to persist at very high levels.
So some of the modelling that we would have generally heard from our clients is that they they see their core staffing able to fulfill about 60% of their role. They think another 20% will come from their contingent staff, whether that's S or sometimes you are looking to increase their <unk>.
The ability within their own staffing and then there's another 20% that quite honestly is unaccounted for and so they are looking to other solutions. They are looking at ways that they can change their care model, they're looking at ways that they can augment.
<unk> met with technology, we are working with them on a daily basis, helping them do a better job of <unk>.
Predicting their demand and planning for their supply in different ways and utilizing their staff in different ways. So our workforce optimization solutions that we've been engaged with clients for over a decade.
Are very impactful and important today as they try to manage through the significant gaps and of course, what we're trying to do is Landry mentioned is continue to fill their gaps first and foremost.
Through our travel and and her damn and local support as well at the same time being highly aware of the cost pressures that they're under.
And then long term looking at different care model is augmented by technology by virtual health and if you look at things like our language services salute.
Solutions, where we've adapted to a much more efficient model utilizing a virtual remote solution for a lot of their language services, it's that kind of innovation, where we're at the table with our with our clients and industry partners thinking about those long term solutions, but certainly in the next two to three years <unk>.
A contingent staff, we expect in our clients expect will stay at the levels that we're seeing today, while we also help them with those permanent backfills using our Rps solutions are international solutions.
So I'll sum it up to say, they're looking at it at all up from all France, given the level of prices in gap that they are facing.
And can I assist you.
Oh.
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Our next question comes from the line of a Jerry Rice of credit Suisse.
Please go ahead.
Thanks, Hi, everybody and best wishes, Susan I always think about.
The way you manage the coverage through the credit crisis of O eight O nine and the challenges that presented and how huge pivoted and.
Made a number of opportunistic acquisitions in the sewing years has made a M. In the company. It is today and so.
Congratulations on a great ruins.
What I think about your comments earlier in the year and as you pointed out you've been probably.
Closer to woods played out.
Anybody.
Providers et cetera.
What are the things I know you guys said earlier in the year is your thoughts of fourth quarter would be the sort of bottoming out and that you would then.
Maybe in return to normalize type of growth or more of a <unk>.
Traditional backdrop is that still your view or is at this point now where maybe we've got some more decline in the first six months of next year on the phone bill rates maybe.
Maybe it's so tight that will go faster, which what is your view on sort of where the market is in terms of normalizing.
Yes, we would expect.
This has been our view for some time to return so generally a normal seasonal pattern in the <unk> in 2023 off of each fourth quarter numbers. So.
Will the bill rates be seasonally high in Q1, and Q4 and could they step back a little bit from these levels and the second and third quarter uninsured, but we're we're sitting right now for what we see from the September numbers to where we're at right now.
We think the worst is behind us from.
911, or 14% sequential decline.
That we've seen and we think the fourth quarter for all intents and purposes outside of seasonal fluctuations next year.
That we've reached the bottom.
Okay, and maybe just as a follow up I know.
Long term viewed as a partner for nurses in with the MSP program over the last number of years you become a partner for your hospital.
Lines as well, obviously, we're seeing downgrades with hospitals hospitals struggling.
We're seeing.
A lot of cross currents between the economy.
The bill rates coming down I guess I would be interested just in a little more commentary on.
You're talking about 20%, where they don't know how they are going to fill it are you engage with them on trying to come up with solutions on the health system side and what are some of those things looking like and then on the coalition side do you sense any.
Eggs.
Maybe I need to go back to my permanent placement or this may not last or is that just off the table with the conditions at this point.
Hey, Dave Kelly I'll start and then Landry can build in on the on the nursing and supply side. So just so you know.
I'll expand a little bit on what we're seeing from the from the hospitals and health systems and it is a huge challenge right now.
We have incredible empathy for our clients and they continue everyday to fulfill their mission of serving their communities.
So there there's multiple different approaches that they're taking you know first and foremost is trying.
Trying to backfill for those vacancies it as challenging as we're engaged with them.
Yeah.
Heard about the increase we've had in our recruitment process outsourcing in our international solutions, we're trying to bring in more perm nurses for every place that we fell there's two to three new requisitions coming through so they're not really getting ahead as much as they need to in that area.
And again, our fulfillment becomes really important for them because it is making the difference.
Not only in how their staffing, but will they be able to maintain their service levels.
We're seeing the ultimate difficult decisions of some hospitals.
Deciding to closed down services, either temporarily or permanently or moving those around in the case of health systems are really looking at their capacity to be able to manage more cost effectively and.
Create different pockets of access, but that's going to leave access challenges for other parts of the community. So we're doing everything we can to stay very aligned with their high critical needs. So they can avoid that those ultimate decision.
And everywhere in between his way they look too you know how do they optimize their current staff and not only are they dealing with a shortage, but there are also facing new worker preferences. So they have a younger.
Population of of nurses.
They are.
Employing who have an experience gap to them they want a different type of flexibility in their work processes. So some of it's also about how did they meet their needs and changed our staffing models also looking at creating more team based care, which will create more need in our allied in para professionals.
Looking at technology to see how that will augment not only their insights in decision, making and planning, but also into the care models things like virtual care telehealth.
It is going to provide maybe some changes in how care is received and all of those areas are robust portfolio and both those tried and true solutions that we've had for years as well as some of the newer ones, we've acquired or we're bringing those to the table as we innovate alongside of our clients in another industry partners and that's going to.
Take some time a day some of those.
We can get the short term support but some of those are going to be multiyear transformational solutions that they will adopt.
Okay that is <unk> on the on the coalition side. So it's still very interest in travel and work them temporary assignments for us.
There is a couple of different preferences. If the conditions are looking for and paid is just one of those preferences address supply.
Actually location and flexibility are right there.
In terms of their preferences whenever they're thinking about what type of job if they want to work. So of course failure. The factor in some in some conditions might say that that's one of the most important factors, but if you look at our pay rates is still generally going to be higher than what they can make it a permanent job. So you combine that with all the different law.
Patients that they have available to them the flexibility of them being able to go and work a temporary assignment and then take some and there is much needed time off between assignment.
We think we're to a pretty good spot or new applicants and the third quarter are actually the second highest Q3 on record and so the only two three that was higher was Q3 of last year, but as you recall best whenever our demand was a record high so.
We feel really good about our supply numbers the tools that we're using to drive the supply to us and the investments that we're making.
And their experience to retain them.
Okay, great. Thanks, a lot.
Thank you a J.
Thank you. Our next question comes from Jeff Silver Ah BMO capital markets. Please go ahead.
Apologies sandbox.
Okay Mister Sylvia Your line is open. Please please proceed.
Hi can you hear me now.
Yes, we can.
Susan I, just I'm, just saying I really wanted to wish you congratulations on with the rest of US are you.
You really had a great run and you're going to be sorely missed thanks, Ross or anything you've done.
Thank you, Jeff depending on Ah really and.
And spun spend time yeah.
Absolutely so I'd hate to take this as a segue into a negative question, but.
You have an economic slowdown.
How would that impact your annual prior downturns, we've seen a supply of nurses increased leaning nurses that were working part time had come back into the workforce you expect something similar like that if we do go into a recession.
We really don't just not to the extent that you saw previously and and it's not just what we think it's what generally being discussed amongst healthcare leaders could you guys pay nursing executives and those that are leaning similar to the nursing schools and and the reason is because of the the.
Vast shortage that we have on the starting point of what we have in terms of the shortfall in clinicians we were at a much different starting point when we had the last contraction in terms of the shortage of clinicians I think at the time it was well under 100000 and today, we're starting with something probably.
North of 400000, no one knows for sure because it's difficult to get real time information, but that shortage is actually expected to be close to a million nurses in the next few years, if there's not some sort of changed I guess, a good news in this negative and arguing perhaps if there is a recession that could keep the <unk>.
Shortage at this level versus having to get significantly worse over time and so the starting point is one issue. The second is what clinicians have been through the last two and a half years I mean, it really is a form of PTSD and probably not just because of the last two and a half years.
As a profession many of them were all ready yet that breaking point not feeling and I think we're getting to support our respect that they needed not the levels of compensation that they needed and then you later the pandemic on top of that and of course accelerated exaggerated the shortage and also I think really <unk>.
Trained send the resolve of nurses that left the profession at least left the bedside part of healthcare is strengthened their resolve that they really don't want to remain in that setting for a whole variety of reasons. So.
So you may have Retype may have gone into another type of role within health care. There are many non bedside clinical rules in healthcare and those will probably continue is they've moved on to them and some of them left the professional together so while the difficult to model exactly if you'd kind of tree.
<unk> those different factors the general thinking as we won't see the same supply elasticity that we saw during that same financial contraction.
Okay that was very helpful. My follow up questions in a different area I think you mentioned in your prepared remarks.
That some of your.
Hospital clients were streamlining I think was the word you used a leadership position from some nonclinical physician I know, it's a relatively small piece of the business, but if we can just get a little bit more color on that that would be great. Thanks, yeah.
Yeah sure so any probably read news articles and heard on other earnings reports that hospitals are looking for any opportunity to reduce costs.
Not in the patient.
Contact rules Nonclinical rules are those that are truly supporting patients on a minute by minute basis, so that means administrative roles and leadership role and so while most leaders would indicate that there's already a lot of burnout amongst the leadership ranks, which is why you saw very high attrition in the last.
Couple of years among leaders there are still cutting more than trying to re distribute that work or restructure and reorganize the way that they manage their operations I can tell you. There was a lot of concern amongst the healthcare organizations about.
What the outcome of that will be because something has to continue and it'll probably just create more burn out as it does in the clinical front, but I think they're just doing what they can within.
An environment, where their their financial picture is not looking good today and not going to look better necessarily next year. So I think they're just trying to to cut anywhere they can probably hoping it's relatively short term, but for now it's the place they can cut without directly affecting patient care, so with that said.
Brought down the demand in our interim leadership business as well as in the executive search business.
So we are feeling the effects of that with less borders still more than we can fill so there are certainly opportunity for us to make placements even with less demand. There. We think relatively short term in nature based on what clients are saying, but it could last through the next year or so and.
We've got to do a better job fulfilling filling the orders that we have.
Okay. It's very helpful. Thank you so much.
Thank you. Our next question comes from Toby Summer of Truth Securities. Please go ahead.
Thank you.
Susan.
Really well rounded impact during your career.
Not so much reminded of a specific business events, but.
The colorful wall of photos you had from your different trips to Guatemala, and the wide smiles on those so congrats.
Congratulations.
I wanted to ask a question about.
Your client relationships and.
Mood and.
The sort of tenor of those if this has been a stressful.
Two and a half year period.
Scenes from the outside that you're really rallied to support your largest customers as best you are able.
What is the the mood.
Between them and yourselves as you have.
Have pricing come down and and kind of look towards whatever this new normal is thanks.
<unk> Kelly.
I Love that question about the mood I will say it has.
Lot of dimensions to it and I've had the good fortune as.
A lot of hospitals have at least reopened to non patient care visitors to actually get out and about and spend time in their hallways talking through strategy and you are right and that we are very proud of what we have done to stick by our clients.
Through the pandemic.
I have hospital CEO stop me in and remind me to share with our whole team that they would not have been able to make it through the pandemic without our support so.
That is still a pervasive sentiment.
Knowing what we had to do too.
To scale, our services and provide them with quality and high highly competent clinicians. During this hard time at the same time, there has certainly been a stress.
And then.
The need to reduce costs.
Given that has become a pretty significant increase for them and their salary or wages and benefits. So.
We've also have done everything that we can to help them reduce those costs reduce those bill right. Obviously, you see that.
And the trend, but we've also done that in a way that continues to help them make sure that they can attract the talent that they need so it's been particularly in our most strategic clients.
Very.
Deliberate and thoughtful strategy, we provide them with market data both nationally with locally we're providing them more and more analytics reporting and insights to guide them through that decision, making they're.
They're very appreciative, the same kind of transparency that we share we help give them a perspective on the future. So that they can plan accordingly, not only for the cost for where they need to fill those gaps.
So I would say in our partnerships have been strengthened more and more and then the more that we can.
Bring our capabilities our expertise in our portfolio to them to help them think about that long term they.
They see us trying to help manage the utilization to appropriate level. They know what that does to.
Our staffing business is that they also recognize the value of what we can bring more broadly so that has been very positive it's allowed us to maintain high.
High retention rates of our clients and most of the discussions we're having around long term futures and what we can do so while there I won't.
Sugar coat that there is not still constraints driven by the financial situation very.
Very highly productive relationships and appreciation for.
What we've been able to do over the last couple of years.
Follow up I'd like to get your opinion on the company's positioning to do.
Deliver clinicians.
It sort of different.
Cost structures internally as more and more technology is rolled out in the staffing staffing industry and some players try to.
Have a more quote unquote tech enabled approach.
As a company kind of well positioned to strap.
Stratify, how it delivers those services and our company.
To deliver a ton of a different price points.
Yes, Toby I think is Susan I think we are I know, we are moving more and more in that direction every day as we've invested heavily in technology, 80% of our Capex and goes towards technology, whether that new client clinician facing things like passport, but also improving and.
Streamlining integrating our own internal systems, so that we can make it as frictionless and efficient as possible and the more that we can do that and still create a positive experience maybe it's a lighter touch experienced for some clinicians our clients that don't feel like they need quite as much.
Then we can pass that along and different pricing over time I don't think that we are there yet we are seeing greater utilization of things like passport, where we are matching tens of thousands of jobs every month and we have 160000 I'm very active users on passport who can.
Not only manage existing assignments, then do things that they used to have the email or goodness faster or conveyed for somebody to manually input now they can just upload it directly much like you do your online banking. So I think if we continue down that road will be able to.
Better and better stratify, the the different kind of offerings as to allegations, 90% digital therefore, it's this kind of offering or this is a everything digitally assistant now.
Or this is a higher touch where you may have clients and clinicians that want that so I would say, we're very well positioned because of the resources that we have because of the talent that we have we've been working at this a long time and making investments in our digital forefront we want it to be scalable I think one of the things you've probably heard Toby with similar needs.
Newer companies that have popped up over the last few years, who may be initially claimed to be all digital is then they realize oh well, maybe it's not that easy there are actually does need to be somebody who make sure that the clinician has a license or his credentials or whatever it may be and so it ends up being a little more labor actually probably.
Lot more labor intensive than they expect so because what they built maybe wasn't as scalable. So we want to make sure that the investments, we're making match the scale not only that we are today, but but where we're going we see ourselves as being absolutely on the forefront of digital innovation.
We also have more systems.
That need to be probably.
Integrated into that digital interface. So we're on a journey and I'd say, we're very very well positioned to get there and we have again the talents and the resources, we should be moving faster than anybody else in the market and having a better client and clinician experienced than anyone else.
Thank you.
Thank you.
Our next question comes from a line of Tim Moroni of William Blair. Please go ahead.
Yeah. Good afternoon first of all Susan just wanted us controlling my congratulations on your tender to abandon good luck on your next adventure.
Thanks, So much Tim appreciate all your support.
Of course.
So.
First.
We saw some cases of health care operators reporting third quarter earnings were contract labor costs actually increase sequentially from the second quarter to the third quarter. Just curious if you were seeing that as well if you actually saw a pickup in volumes with some of your larger clients because you moved through the third quarter.
Or if volumes were more of a sequential declined throughout the quarter.
Hey, Kenneth Landry.
If you looked at a client by client you would certainly see some put some pace so.
A few large clients that we have today.
For a fact that the <unk>.
Trim look quite a bit different it could be due to their population.
Could be due to where they are geographically it could be due to.
Remember network and what they need to do within our network. So there were different puts and takes in.
In the quarter amid epic you asked about volumes, specifically as we move through the third quarter.
And.
I think it was mid two three when we started to speak volumes in both our travel hersom Lf businesses come back up.
Got it that's helpful. Every thank you and then finally from me.
Touched on this briefly in your prepared remarks, but Susan this is really only our only opportunity to ask this publicly so just curious.
Why you think Terry Grace is the right person to move forward to the next level just just drawing.
On her experience and capabilities, where she came from and why that's a good sit here. Thank you.
Yeah, no. Thanks for asking Tim and we had many fantastic candidates.
One of the reasons that perhaps of just a tad longer than maybe people thought that it would but it was a good problem to have in Indiana.
Board felt and I feel that Kerry is an excellent cultural match for the organization, which is very important that we have a leader that is.
Going to continue to build upon and evolve the foundation that has made and then so strong because our strategy will change and the investments we make what the needs of our clients will change at night, and we built a great muscle and being able to change and she will bring a fresh perspective, but something that probably shouldn't change a lot.
Is the strong culture and values of the organization. So I feel very confident that she will be attitude to that she has a proven track record to drive enterprise growth through a diverse portfolio of solutions at scale and we felt that was important to have someone who's been.
Where we want to go whether it be new product launches.
Looking at our enterprise client team and strategy team has done a great job of evolving the app that we probably have additional room as we continue to segment our market and think about how we serve different clients differently and just the previous question around digital how do we think about the digital staffing versus a.
More full service gapping, so having someone like her who has already gone through a transformation like that where he helped rationalize a variety of global test platforms, and and created scale and and really went through a digital transformation for both.
Clients and their customers was I think an important feather in her cap because it's in very critical to our strategy in as much as we have a terrific team I think a fresh perspective on how someone who comes from a human capital and talent industry would approach things outside of <unk>.
Direct healthcare is I think really valuable experience for us.
Got it hopefully that's helpful. Thank you Tim.
Thank you at this time I'd like to turn the call back over to Susan's Alco for closing.
Closing remarks Madam.
Thank you so very much we appreciate you joining us today and.
The team will look forward to updating you along with carry on our next earnings call and thanks again for the support everyone's provided and then Anthony over the years went to provide.
This concludes today's conference call. Thank you for participating you may now disconnect.
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