Q4 2022 AMN Healthcare Services Inc Earnings Call
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Good day and welcome to the a M and health care fourth quarter 2022 earnings call. At this time all participants are in a listen only mode. After the speaker presentation, there will be a question and answer session.
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Now I'd like to hand, the conference over to your Speaker, Mr. Randle Reece Senior director of Investor Relations. Please go ahead Sir.
Good afternoon, everyone.
Welcome to Aon, and healthcare's fourth quarter and full year 2022 earnings call.
A replay of this webcast will be available at IR Dot M. In health care Dot com following the conclusion of this call.
Various remarks, we make during this call about future expectations projections trends plans events or circumstances constitute forward looking statements.
These statements reflect the company's current beliefs based upon information currently available to it.
Our actual results may differ materially from those indicated by these forward looking statements because of various factors and cautionary statements, including those identified in our most recently filed forms 10-K and 10.
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 informs.
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 am in health care Dot com.
On the call today are Terry Graves, Chief Executive Officer, Jeff Knudson, Chief Financial Officer, Kelly Rakowski Group, President and C. O O that's strategic talent solutions.
And Landry ceded group, President and C O olive nursing and Allied solutions.
Taylor, President and C O L. A physician and leadership solutions is unavailable today.
I will now turn the call over to Kerry.
Thank you Randy and welcome everyone I want to begin by expressing my gratitude for the warm welcome I've received by the Ameren team our board of directors investors and analysts at our client since my time as CEO began in late November .
The past few months have more than confirmed all the reasons why I joined a M.
A M N stands at the Nexus of health care and talent, where we make an increasingly valuable difference in the quality and finally a cure.
My experience running large client centric service delivery businesses that combined organic growth in acquisitions positions me well to help guide and then through its next phase of growth.
And so everybody says they have a great company culture <unk> truly has something special.
Our entire leadership team is committed to living in a M and different every day and making sure we create great long term opportunities for everyone in our organization.
I'm, especially grateful to report good news in my first conference call with outstanding fourth quarter result, and a strong first quarter outlook.
Thank you to our health care professionals and team members for making a valuable impact for our clients in 2022 with more than 250000 placements as our country manage through the pandemic.
I am proud of how we are partnering with clients to optimize their labor costs, producing bill rate as the urgency of demand moderated and investing in tech enabled solutions to help our clients transform care delivery model and manage their workforces over the long term.
We remain the preferred partner for health care clients with our MSP and Vms program managing more than $12 billion of labor spend in 2022.
And then as a preferred employer for health care professionals and corporate team members as demonstrated by several recent accolades, we received including the diversity equity and inclusion of warrants from the National Association of corporate directors and being named to the Bloomberg gender equality index for our commitment to gender equality in equity for a SEC.
Last year in a row.
Over the past year as we manage through extremely high demand. We were looking ahead and anticipating a moderation with the wind down of the pandemic.
Our business has exceeded the expectations, we laid out a year ago.
Our high level of performance is apparent in our latest financial results and outlook for the current quarter fourth quarter revenue was 1.13 billion with adjusted EBITDA of $175 million.
Every business segment exceeded guidance and what continues to be a fast changing market.
Nurse and Allied segment revenue was ahead of expectations in the fourth quarter nearly flat with the third quarter, despite lower labor disruption revenue.
The moderation of Bill rate was somewhat less than we had anticipated with the segment average bill rate coming in 23% lower than the first quarter peak.
Demand for travel nursing remains above 2019 levels, even after the health care sector maintained an impressive pace of permanent hiring over the past statements.
Our allied business had 6% year over year revenue growth with a 3% sequential increase.
The team did a phenomenal job pivoting focus from pandemic related specialties.
Therapy and other areas.
For the first quarter of 2023, we expect revenue in nursing and Allied solutions to be stable sequentially and down 32% to 34% year over year against our most difficult comparison of the year.
In our physician and leadership solutions segment fourth quarter revenue was slightly better than our guidance.
Locum Tenens is operating at a consistently high level with four consecutive quarters over $100 million of revenue.
Interim leadership and <unk> achieved record high revenue for the year.
As we expected demand for interim leadership and search was lower in the fourth quarter as some clients focused on short term cost savings.
In the first quarter, we project revenue in physician and leadership solutions to be down 10% to 12% year over year.
Excluding the pandemic related business revenue would be flat to prior year.
Demand is well above pre pandemic levels for locum Tenens and.
Physician permanent placement.
Okay.
And technology and workforce solutions revenue grew 14% year over year better than our guidance of about 7% growth.
Our language services business was the primary driver of the outperformance.
Since <unk> acquired the company in 2020 language services has doubled its revenue.
Great example of how we can add value with acquisitions.
It is further evidence of our commitment to innovation supporting quality patient care and making a positive impact to the communities we serve.
In 2022 alone, we enhance the health care experience outcomes for patients and over $15 million interaction.
Also in this segment Vms revenue continued its moderation in line with our expectation.
For the first quarter, we expect revenue and technology and workforce solutions to be down 10% to 12% year over year due to lower Vms revenue.
Now I'll turn over the call to Jeff for more details about our results and outlook after which I will return to provide a glimpse at our focus areas for 2023 and beyond.
Thank you Carrie and good afternoon, everyone.
Fourth quarter revenue of 112, 6 billion was 4% above the high end of our guidance range with all three segments contributing to the outperformance.
Consolidated revenue was down 17% year over year and 1% sequentially.
Excluding labor disruption revenue consolidated revenue was in line with the prior quarter.
Gross margin for the quarter was 33, 3%.
140 basis points higher than prior year, and down 50 basis points sequentially.
Year over year, the margin was higher due to our revenue mix shift toward higher margin businesses.
Sequentially the margin was lower due to the typical seasonal revenue mix shift towards staffing.
Consolidated SG&A expenses were $219 million or 19, 5% of revenue compared with $239 million or 17, 5% of revenue in the year ago quarter, and $215 million or 18, 9% of revenue in the previous quarter.
Okay.
SG&A expenses were lower year over year, primarily due to lower employee related expenses, given less revenue and more normal operating conditions.
Higher allowances for credit losses, and legal reserve expenses drove the increase in SG&A compared with the prior quarter.
Adjusted SG&A, excluding certain nonrecurring expenses and stock based compensation expense was $202 million this quarter or 17, 9% of revenue compared with 212 million or 15, 6% of revenue in the year ago quarter.
The increase in adjusted SG&A margin came from less operating leverage on lower revenue.
In the fourth quarter nurse and Allied revenue was 825 million, 24% lower than prior year and slightly down sequentially.
Average bill rate was lower by 2% quarter over quarter and average hours down 1%.
Offsetting 3% higher volume.
Our travel nurse revenue was down 24% versus prior year.
And flat sequentially.
Allied revenue was 195 million growing 6% from the prior year and 3% above prior quarter.
Nursing Allied gross margin of 26, 6% was 40 basis points lower than prior year and prior quarter the.
The year over year change was caused by less labor disruption revenue lower average hours and higher insurance expenses, partially offset by improvement in the bill pay spread.
Sequentially the margin decrease stemmed primarily from a favorable workers compensation adjustments that occurred in Q3 segment operating margin of 12, 7% was 370 basis points lower than prior year, and 120 basis points lower than prior quarter, reflecting the higher allowances for <unk>.
Losses.
Physician and leadership solutions revenue in the fourth quarter was $168 million two.
<unk>, 2% higher year over year and down 4% sequentially.
Locum Tenens revenue was $103 million, 4% higher than prior year or growing by 13% excluding pandemic related revenue.
Interim leadership revenue increased 4% from prior year and was down 5% from prior quarter.
Search revenue declined 10% from prior year and was down 13% sequentially.
Gross margin for this segment was 35% 100 basis points higher than prior quarter and down 10 basis points year over year.
The sequential margin increase was primarily due to higher gross margin for locum tenens, partially offset by mix.
Segment operating margin was 16, 7%.
Up 510 basis points from last year, and up 310 basis points sequentially.
The higher profit margin came primarily from a lower allowance for credit losses, and a favorable actuarial adjustment.
Technology and workforce solutions revenue was $133 million in the fourth quarter growing 14% year over year and down 1% sequentially.
Language services stood out with revenue of $58 million, which grew 23% year over year and 5% quarter over quarter.
Vms revenue of $55 million grew 5% year over year and was down 9% from prior quarter as we had expected.
Segment gross margin was 73, 3% up 130 basis points over prior year and down 230 basis points sequentially.
The year over year and sequential changes track revenue comparisons for the higher margin Vms business.
Segment operating margin of 52% was up 280 basis points year over year and down 250 basis points sequentially.
Consolidated fourth quarter, adjusted EBITDA of $175 million was lower by 22% year over year and down 4% from the prior quarter.
Adjusted EBITDA margin of 15, 5% was 80 basis points lower year over year and down 50 basis points sequentially.
We reported net income of 82 million and diluted earnings per share of $1 88 in the quarter.
Adjusted earnings per share was $2 48.
Compared with $2 95 in the year ago quarter.
Days sales outstanding came in better than expected at 55 days four days less than the prior quarter and two days higher than prior year.
Operating cash flow for the quarter was $115 million and capital expenditures were $25 million.
As of December 31, we had cash and equivalents of $65 million long term debt of $850 million and a net leverage ratio of one times to one.
Recapping financial highlights for the full year 2022, we reported revenue of 524 billion, a 32% year over year increase in net income of $444 million, which grew 36% compared with 2021.
Adjusted EBITDA was $847 million up 33% from prior year.
Full year adjusted EBITDA margin of 16, 1% was 20 basis points higher year over year.
GAAP EPS was $9 90.
Up 45% year over year.
Adjusted EPS was $11 90.
Higher than prior year by 48%.
<unk> benefited from our repurchases of $577 million in stock during the year.
Full year cash flow from operations was $654 million, which included a 24 million payment of deferred payroll taxes from the cares Act.
Adjusting for the cares act repayment nearly 80% of our adjusted EBITDA was converted into cash flow from operations.
Capital expenditures totaled $76 million.
Since the end of 2020 to two events have bolstered our capital strategy we.
We obtained an expansion of our revolving line of credit, adding $350 million of borrowing capacity to total $750 million with its 10 or extend it to 2028.
The interest rate for the expanded facility is in line with previous terms.
In addition, the board of directors expanded our share repurchase authorization by $500 million.
Since our last earnings call, we bought back two 4 million shares of stock for $275 million. The latest authorization gives us a total of $551 million in potential buybacks.
Now looking at first quarter 2023 guidance, we project consolidated revenue to be in a range of one one to 113 billion down 27% to 29% over prior year.
Gross margin is projected to be 32, six to 33, 1%.
Reported SG&A expenses are projected to be $18 three to 18, 8% of revenue.
Operating margin is expected to be 11 to 11, 7% and.
And adjusted EBITDA margin is expected to be 15, four to 15, 9%.
Average diluted shares outstanding are projected to be $42 million, reflecting our recent share repurchase activity.
Yes.
Other first quarter guidance details can be found in today's earnings release.
Last quarter, we talked about 2023, returning to a normal seasonal pattern.
Our fourth quarter results and first quarter outlook came in stronger than we had expected with higher bill rates being a key driver.
After the Q1 strength current business trends suggest a decline in nurse and Allied revenue for Q2 that is greater than normal seasonality.
While demand is still above pre pandemic levels, we have seen some clients pursue near term cost savings and reduced utilization of contingent staff lay.
Labor market conditions remained very tight with high vacancies in attrition and we believe staffing demand will go back up over the summer in line with normal seasonality.
And now I'd like to hand, the call back to Kerry.
Jeff while the health care sector hired more than 9 million people in 2022 that hiring three resulted in a net employment increase of less than 800000.
Competition for talent remains intact and wage inflation is elevated.
Voluntary turnover remains at the highest level in more than 20 years and conditions are most difficult for our clients and acute care.
Recognizing these enduring issues. We are focused on four key areas that we believe will drive long term value for all our stakeholders.
We will continue to be the preferred partner for health care organizations as they optimize their workforce strategy to meet continued long term increases in utilization.
Our solutions that is comprehensive and differentiated and will be more so with our internal investments and acquisition strategy.
We see great opportunity, both in better serving current clients and winning new clients.
On that path, we will strengthen our ability to go to market as one Amen building brand equity and making it easier for clients and health care professionals to work with us.
We are already gaining traction on initiatives to improve our speed to deliver while maintaining our industry leading quality.
As demand has receded from its extreme high our MSP strategy better positions us to gain share.
Second we are expanding our efforts to ensure amgen is the preferred employer for health care professionals and team members.
These programs include new initiatives on workplace flexibility.
During competitive pay and benefits at all level career, pathing, and mentoring and industry leadership and diversity equality equity and inclusion.
Our health care professionals benefit from having the largest selection of job opportunities in the industry easily accessed through mobile technology.
Third we want to keep building our diversified portfolio is expanding and improving total talent solutions for healthcare.
Our strategy is to aggressively increased technology enablement and every aspect of AML.
Our claim will allocate approximately 2% of revenue to capital expenditures with a heavy focus on digital innovation.
These investments will improve outgrowth of our existing solutions and add new technology led solutions to keep up with the challenge of delivering care amidst the sustained mismatch of supply and demand.
We are continuing to invest in digital first initiatives such as <unk> passport, our always on connection with more than 170000 nurses and growing.
And finally, we are committed to being good stewards of capital.
Our capital expenditures more than doubled over the past three years, enabling us to lead our industry and technology improvements.
We have built a company with high quality of earnings and strong free cash flow that give us strategic options.
With a strong balance sheet and expanded borrowing capacity, we have the framework and flexibility to make attractive acquisitions, while also repurchasing stock, which we believe is a great investment opportunity.
Now, let's please open the call for questions.
Thank you as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced.
Your question. Please press star one again due to time restraints, we ask that you. Please limit yourself to one question and one follow up question. Please standby, while we compile the Q&A roster.
And our first question will come from the line of Kevin Fischbeck with Bank of America. Please go ahead.
Great. Thanks.
Yes.
Basically flat earnings sequentially Q1 speaks to some stability there, but theres always seasonality I know from Q4 to Q1.
I think the big debate right now which is kind of.
With the new normal is in your view around health care staffing demand was really helpful to hear your comments about the seasonal drop into Q2, but.
Your view on Q2 change is it more about Q1 being higher than it is about Q2 being lower and I guess, maybe it should be here kind of again Q to Q.
Hey, David from where you were when you were giving guidance last time.
Hi, Kevin Thanks for the question, maybe what we'll do is I'll turn it over to Jeff will talk a little bit about the patterning of Q1 Q2.
And then Landry and I can talk a little bit more broadly about demand.
Yes, Kevin So the first quarter guidance is higher than what we would've originally thought really primarily driven from higher bill rates and thats, partially driven by mix with some higher rate orders that will be rolling off at the end of Q1. So.
As a result, we are expecting a higher than normal sequential decline in nurse and Allied revenue from Q1 to Q2, and if we just step back and think about Q2.
Going into the year, we would have expected the second quarter to be the lowest revenue and EBITA margin quarter of the year and that is still the case.
On the nurse and Allied side, we would normally expect a 6% sequential decline in the second quarter looking at historical patterns and Thats normalized for labor disruption driven by the winter orders winding down in that 6% would be driven by equal declines in both volume.
And bill rates.
As the bill rates were higher in both the fourth and the first quarter.
We do now expect a high single digit bill rate decline in the second quarter again, primarily driven by that mix influence from Q1 and the normal seasonality and then we would expect the second quarter sequential volume decline to be higher than our historical seasonality.
But less than the bill rate declines.
Hey, Kevin if we kind of step back and take the demand question. Let me kind of give you a perspective on what we see is the shape of demand and some of the factors around supply that we're seeing and then I'll have landry comment a little bit more on what we've been seeing more recently.
So if I go back into the onset of the pandemic.
It really accelerated and existing supply demand imbalance across the health care workforce.
And as we've moderated down from the emergency demand levels. We saw during the pandemic, we still have an enduring structural change in the supply of and demand for these health care professional so the things that we are seeing and continuing to track is youre seeing continued utilization demand.
Growing so I think people are pegging, it somewhere kind of five plus percent annually.
The new supply, especially of nurses is not keeping up with these increases.
And he already constrained supply of the health care professionals, who are being impacted by retirement. So the same demographics that are driving some of the increases in demand are also driving the accelerated retirement.
Some of our health care professionals.
And we also continue to see bedside clinician.
Moving and taking less stressful jobs and healthcare and elsewhere.
Beyond these supply demand enduring imbalances.
We're seeing compensation expectation that have increased across all economic sectors as high inflation has put upward pressure on wages.
And so that really was happening throughout the pandemic. So the conversations we've been talking to our clients about it how do we help them.
Track and retain the workforce they need.
To serve their patients in a cost effective way.
So enduring structural supply demand imbalance.
Continued upward.
Leaving point from the pandemic of pressure on wages.
And I'll turn it over to Landry to talk a little bit about what we're seeing more recently.
Yes, Hi, Kevin.
We do as of today, we continue to see travel nurse and allied demand that is above pre pandemic levels.
Is down from some of the highs that we saw in the industry during some of those major COVID-19 spikes.
You really have to think about at the peak a lot of that demand as what we would kind of characterize it irrelevant and it never did get filled by the overall industry.
Demand demand spiking because of the extreme need that exists there and the inadequate labor supply that exists we've.
We've been predicting all along that we wouldn't have as high a demand whenever things settled down.
Demand still would be higher than pre pandemic levels just to some of those due to the some of those universal issues.
On the labor within healthcare.
<unk> seen a couple of reports out.
Their on demand in the marketplace that reflect what others might be seeing in the industry and while our demand is down as I just mentioned our decline has not been as steep as what some of those reports suggest.
There's a couple of reasons for that I think one reason is that we stayed true to our MSP customers over the past few years and also the AA and maintain really did not chase any of the kind of what we would consider short term business over the past couple of years.
A lot of our conversations right now with clients are about reducing cost but.
The reality is that there.
Our facilities remain highly understaffed even today.
Bill rates they've moderated for the most part so clients are looking for decreases in their order volume really to try to accomplish a lot of their contingent labor expense targets and then if you look at some of the underlying underlying drivers of supply and demand. We expect that the pullback is going to be pretty short term.
It's really just overall not sustainable.
The marketplace. So we do expect to see a healthy demand environment as we progress throughout the year.
There's quite a bit of levers that we're pulling right now things like increasing our MSP MSP fill rates and then also returning our internal capture some historical levels, we saw that dip a little bit throughout the pandemic whenever demand was really high and we were highly reliant on our supplier partners and then the last thing that I have mentioned that we also have <unk>.
Opportunities are focusing more on our non MSP.
We had previously been deep prioritizing over the past couple of years.
Okay, that's fantastic.
One more I guess, Gary whenever there's a new CEO I always looking to see kind of what they're focusing more on now and I guess in your prepared comments. This <unk>.
It was one thing kind of stuck out to me anyway to size kind of what you see the opportunity and how we should think about.
What that could mean.
Yes, let me thanks, Kevin Let me give you a little bit of perspective at a macro level.
We continue on these calls throughout the year, our continue to put color on it.
So one.
I know theres going to be a very physical representation of that where you will start to see our brands come together. So we will literally look more cohesive and integrated as one company, but really a lot of the things that we are working incredibly hard on and will continue to throughout the year is how do we.
Actually make all the part across AMM work more seamlessly together. So there's a lot of implications for work that we're doing to streamline our processes across our <unk> solution set to streamline our platform.
So a lot of what we want one on one <unk> to feel like is to feel easier to do business with both for all of our clients for our clinicians and very importantly.
Team members.
If I gave you an example of what I would expect it to start changing in terms of the shape of our financial.
As a proxy right now if you looked at our 30 largest client.
Of our <unk> solution, we have an average of eight.
And so obviously if you went much much further across our client base and then kind of did the math around our 'twenty solutions, there is tremendous opportunity for us.
To further penetrate those client relationships and we'll have more success in doing that if we have created a real and meaningful value proposition.
That's compelling to them.
Thanks.
Thank you one moment for our next question.
That will come from the line of a J rice with credit Suisse. Your line is open.
Hi, everybody.
And congratulations Gary.
The first quarter here.
Let me just maybe drill down a little bit further on some of the stuff Atlanta was saying so if you look at your MSP accounts I know in the peak you were having to you couldnt fill all the orders the entire industry Couldnt go all of yours, which you were sub countering dragging out a meaningful percentage.
If you look at say Q3 to Q4.
Are you stepping up.
The percentage that you are filling of those open orders.
Meaningfully or is it still a fair number of that are.
Sub contracted and potentially even going unfilled among your MSP accounts.
Okay.
Yes.
Thank you for that you got our strategy, what we are doing throughout the pandemic and also around what we have been doing subsequently I'll, let landry kind of kick off and then and then Kelly can talk a little bit about our broader MSP strategy.
Yes, so I'm going to I'm going to turn that one over to Kelly, but I was just going to mentioned a J. Both Q3 and Q4 is strong so we're living in really high demand in the fourth quarter.
And so those you'd have to look at that as being pretty flat and then.
Right now our focus is on increasing that as we progress through Q1, and then going into Q2, and we are seeing increases on that but I will let kelly provide a little bit more detail, yes, hey, Jay just to build on that certainly favorable trends for us as.
Those demand that demand lower from Q4 to Q1.
Fulfillment as well as some increase incremental increases in our internal capture we will remain our model will remain.
A combination of Amazon's ability to fulfill on behalf of our clients, but also the strength of our supplier network, which is critical for us to achieve that.
All fulfillment as well as augment our capabilities and regional our specialized areas.
We were very fortunate to have the strength of our suppliers throughout COVID-19, that's why our clients so that that strategy won't change.
Although we do have opportunities to grow that and it also creates additional capacity for us is we're seeing.
Pretty strong.
And from a new business and pipeline perspective, a J. So we've been very active in the market. We added a few new.
MSP has in the last couple of quarters and a healthy pipeline for US here starting the year. So we will continue to grow our client base and again the strength of our network.
A key part of that growth.
Okay, and then just to follow up with another comment you guys were making.
So when you think about what happened in the pandemic you had some new competitors come in and grab some marginal share.
There was always like.
You said you had emphasized your MSP accounts and some of the other ones probably got less focus.
As you are thinking about having the opportunity to go back after some of that business.
How sticky is it with the new competitors.
People are you finding that people are willing to come back to you pretty easily and I wondered also whether it might create some opportunities on.
On the M&A side I know traditionally a lot of your M&A has been adjacent businesses, but I wondered if there were opportunities emerging.
In the core travel nursing Allied and Locums business as you might look at.
Hey, Jay this is landry I can start with it.
So we've never the non MSP business, we never left it we just be prioritized. It in we still nothing changed in our relationships we were very transparent with.
Whether those are direct contracts or where we have third party to some of those.
Maybe other MSP or Vms holders out in the marketplace. So.
There was nothing that was being hidden we were trying to find other solutions to try to help even some of those different types of clients out whether that was through our vms system or our local business or some other businesses. So all of those contracts still exists we still get those orders, we can just prioritize them higher with our order rate.
<unk> numbers.
The short term business that I was referring to that was just more of that.
Kind of state contracts for some of the facilities that we're setting up for vaccine centers or standup hospitals or FEMA.
Some of those other programs that we thought would go away at some point and they and they in fact have so I think our strategy is staying highly focused on our MSP customers as seen in the retention rate of our MSP customers.
In the long run has has and will continue to play out well for us.
Okay.
Carrier last comment around as I reflect on some of the new business and new strategic relationships, we're bringing and we are seeing some early traction as we.
Go to market with a more comprehensive solution set and really emphasizing that and clients looking for more solutions as they face a challenging market. So we have seen is one early indicator of the number of service lines per contract is going up with our new business versus in the past, where we started with contract.
And saw growth over time, so well.
We will expect to see that trend continue as well.
Hey, Jay on the M&A side.
We expect M&A to continue to be an important part of our growth strategy.
And so you should expect us to have a proactive focus.
On M&A, especially as ways that we think it can help us serve our clients more effectively.
We will look at strategic fit we will look at financial fit we will look at cultural fit quality of management.
We'll look at more traditional staffing asset. We also will look at and have a focus on tech enabled solutions.
What I would say from kind of what we have seen standpoint last year, we were probably unbiased saw more traditional staffing asset.
I know, it's relatively early in the year, but we're seeing.
Relatively more tech enabled solutions.
Okay, great. Thanks, a lot.
That will come from the line of Tobey Sommer with Julien Your line is open.
Thank you.
Wanted to.
See if you could spend some time, giving us some more color on Vms and MSP trends.
In particular, if you could touch on the.
What seems like rapid adoption of.
Vendor neutral.
MSP and Vms solutions.
And maybe also speak to it.
Any.
Timing of Recompete for your larger Msp's. Thank you.
Hey, Tim.
Tobey.
Turn it over to Kelly in a second but as a framework for this conversation.
We have very intentionally built.
A broad set of capabilities, we know that clients have different needs and they have different strategies for how they want to manage that.
Our workforce recruiting retention staffing strategies.
So think of this as Kelly talked about some of those trends that.
We really do look at it and we start with the client need and then we work around from that and how we can be helpful to them and how they want to execute that strategy. So Kelly I'll turn it over to you to talk about some of those trends, yes, hi, Tobey.
I would say.
I'm not sure we're seeing some of those those trends I will say.
It's pretty typical that we typically see on any given year.
From our own mix of business now changed a little bit during COVID-19 aside and look at our pipeline over the last two years.
2021, we saw heavier.
Sure.
<unk>.
Mix of technology only solutions now we started to see that come back. So I would say our pipeline today is more heavily weighted toward full MSP program.
And also we see because we have multiple Vms solutions and such a large client base nearly 500 typically in any given year, we will see some transition from clients, who wanted to take their business in house and Conversely, those who want to transition from a in house solution into our.
MSP program. So we've had both of those.
Layout in our client base and again I would say that is pretty typical to what we've seen in the past.
We are seeing of course clients wanted to add to their ability to have more flexible type solutions inside their workforce I would say, it's more of an and.
These travel nurse or things like internal flow pool, you did see some internal agency activity, where they're using vms.
Vms solutions to help accommodate that and certainly we are partnering with them.
And highly customized ways to meet their local needs on the second part of your question Tobey around our outlook for our renewals of contracts again, we had a very strong retention rate last year, we have a very typical renewal period.
As we look at our contracts coming to terms, we have a very strong outlook. This year for renewals in fact, we've got several already in verbal.
Contracted this year or so.
Nothing is accelerating that are really changing that in a lot of the catch up that had happened from delays during COVID-19 have played out contracting over the past year.
Thanks for my follow up I wanted to see if I could get you to talk about why you think demand rebounds in the summer.
<unk>.
And for travel nurse and.
Merely a reflection of reliance on history of.
A product of conversations and what customers are telling you sort of.
How do you get to that conclusion.
I think it really goes back to a combination of some of the comments that Jeff Landry and I are making so if you look at it from a macro standpoint, and just look at the structural imbalance in supply and demand.
Against the backdrop of.
And there's a whole we just published some research on this just on timing until and continued delays in access.
No that the demand continues to.
Pent up and as much as clients right now are extremely focused on cost containment.
Also are very focused on how are they going to staff to meet their demand. So it's a combination of what we're seeing structurally.
And second that.
We have seen seasonal patterns, typically where you start to get winter orders as you go through the summer. So it's really a combination of both of those things.
Yes, Tobey I would just add is.
It really is not sustainable.
The lower demand.
It is purely a CFO decision right now we're not seeing it from CMS goes we're not seeing it from unit managers, it's purely a financial decision. They are still understaffed nothing has changed there and the reality is that our Q1 volumes are good. It's just the demand has been pulled back that's the solution that they are thinking.
Our cost savings.
They haven't felt the pain right. So our clinicians are still there right now.
And so whenever those clinicians start coming off it will get noisy their internal staff will be getting noisy that we'll experience even higher turnover and it is.
We saw that throughout the pandemic pandemic, but we've also seen this over the last 15 years, it's just not sustainable whenever there is a shortage within a facility. It's a core decision not to have the labor.
And so it allows them to last part that I would add that I know, we've talked about particularly over the past.
12 to 18 months is when you look at really kind of the fragile state of the workforce. So we do a biannual survey of nurses and we'll publish it and May I just got some of the data over the past 24 hours and if you look at the macro level satisfaction levels.
Nursing career current nursing job.
We saw it drop down to 71%.
That number had been between 80 and 85% for a decade.
So when you look at.
Very high turnover rate.
Satisfaction levels going down there is this balance of for a lot of our clients how do they find the balance between the cost containment, but also making sure that from a workplace standpoint.
They have an environment that is going to be able to retain and keep keep their precious staff.
Thank you.
Thank you one moment for our next question.
And that will come from the line of Tim Mulrooney with William Blair. Your line is open.
Terry Jeff Kelly Landry good afternoon.
Good afternoon.
Okay.
So there's a lot of moving parts here with first quarter expected to be stronger second quarter expected to be lower than normal. So I just wanted to ask it a different way.
Last quarter.
Good out a framework for 2023 of more than $4 billion in annualized revenue at 15% EBITDA margins.
Bill your expectation today.
Yes, Tim So you're right. The first quarter guidance is higher than what we had thought and again thats, primarily driven from higher bill rates.
And Thats Whats also driving our expectation for.
A lower Q2.
And that higher than normal sequential decline, we talked about earlier, but given everything that Landry just talked about with demand increasing in the second half and we also believe that bill rates off of that Q2 level will follow a.
Normal seasonal pattern into Q2.
If that normal seasonality plays out in the second half, we would see a path to that full year expectation that we laid out in the last call.
Okay. Thanks.
Last few years.
Building on that.
You provided an expectation where you think bill rates ultimately settle as you exit the year what is your expectation.
<unk>.
The exits in 'twenty three.
They really haven't because they were higher in the fourth quarter and the first quarter than we thought and then with that high single digit decline into the second quarter Theres still exiting the year with where we originally thought it would be it just they werent there in the fourth quarter and the first quarter.
Okay. Thank you.
Thank you one moment our next question.
And that will come from the line of Mark Marcon with.
Robert W. Baird. Your line is open.
Hey, good afternoon everybody.
With regards to just the fourth quarter the rearview mirror.
You mentioned, some credit adjustments with regards to nursing Allied.
And the operating margin for the fourth quarter, Jeff what what was that exactly what happened.
Yes, so there was a reserve for credit losses or bad debts, Mark there is.
One specific <unk>.
<unk> account that we have concerns about.
Also just given the macro environment. We also took a slightly larger than normal general reserve for expected credit losses, and that impacted nurse and allied primarily.
Okay is what drove those dollars.
And that MSP account is a.
One large one or is it.
Relatively well contained.
It's relatively well contained and it's not one of our larger accounts.
Okay great.
Really appreciate.
The forward look into Q2, that's extremely helpful.
Terry Jeff Kudos team for both.
Disclosing what youre seeing now as it relates to that and it does sound like a lot of that is basically the change in terms of the bill rates and it sounds like basically in Q4 in Q1, the bill rates are higher due to certain specialties that are.
That are being utilized to a greater extent what specialties are you seeing that.
Our.
Our high Bill rate specialties that.
We're a little bit higher than expected in terms of utilization in Q4 and Q1.
Why would that drop off more than usual going into Q2.
Yes, so going into the fourth quarter, our expectation for bill rates was that they would decline in the mid single digits.
They ended up coming down 2% over Q3 levels, and then really the higher bill rate specialties as a driver of why they increase sequentially.
Into the first quarter and Thats really just about a number of urgent needs to orders that we received that carried a higher bill rate.
From a mix standpoint drove bill rates up in the first quarter and then those will predominantly roll off by the end of the first quarter as we exit into Q2.
Great and then if I could just sheet and just ask one more just how much variance are you seeing in terms of the behavior. Among your Youre 30 largest clients in terms of how they are they're treating the need for.
Cost discipline versus.
Managing.
The workload on the on the floors.
Okay.
Hi, Mark it's Kelly.
Chuckling, a little bit because we have a lot of variation just in the makeup of those 30 across the country different sizes different settings different communities that they serve so on one hand, it's difficult to sort of peg.
Consistency, but I will say from a <unk>.
General.
<unk> talked about it.
Turning off of peaks up very high volume.
There is still the sensitivity around the financials well I think the industry is particularly the hospital industry started to see some improvement in their bottom line coming out of December there is still considerable financial strain on our systems and they're looking to their largest line item.
Their labor expenses.
To be able to manage that going forward. So.
I'd say there is still that sensitivity to cost management, largely doing that through bill rates through some of the.
Urgent needs that Jeff just referred to we are seeing.
Then turned to us to help them with predictive planning noodles.
Utilizing our.
Permanent resources to help them backfill so that they can bring back down those vacancy rates.
More normal levels, so high sensitivity still the cost at the same time still a need around fulfillment.
Andrey mentioned there its.
Still need the nurses and allied professionals on the floor as theirs.
Challenges around retention, we hear <unk> talk about.
I don't have a recruitment challenge I have a retention challenge I need to keep the people I have and we know the biggest factor to retention is creating a safe positive work environment. So they are not.
They don't want to relinquish the use of contingent staff. So our team just continue to work with them on all fronts, helping them from a short term perspective manage those costs, but also by bringing to bear other capabilities in parts of our solution to help them with with the long term. So I think that's probably a very broad brush universal.
<unk>.
Kind of lay of the landmark.
I appreciate that Kelly thank you.
Thank you one moment for our next question.
And that will come from the line of Jeff Silber with BMO capital markets. Your line is open.
Hey, this is Ryan on for Jeff I, just wanted to ask a quick question on the check in workforce.
Curious what the drivers are for the segment for the year as you lap some challenging comps and some headwinds in Vms and.
Do you think the language service business can continue its strong trajectory and really drive the segment is going forward. Thank you.
Yes, Thanks, Ryan I would say.
When you look at the year over year.
Comparisons for the rest of the year that we would still expect language services to be growing in that high teens rate as we move through the rest of the year. As you noted Vms will have some very tough comp.
Comparisons, particularly in the Q2 beyond Q1 into Q2 and Q3 timeframe.
And they'll also be challenge sequentially in the second quarter as some of these bill rate dynamics that we've talked about on nurse and Allied play out in the front half of the year.
And I'll just add Ryan on language services I mean, you heard Cary mentioned, we celebrated their three year anniversary with <unk>. This week.
That team just continues to deliver very high quality services very strong retention of clients as well as kind of in account growth. So we still see organic growth patterns for that business within their existing account base as they are.
Increased adoption of the model.
In cases, where we have accounts, where we might be working with health systems on a few of their hospitals. They see our results and they continue to expand and we have a strong pipeline and new acquisition. There is still an opportunity to grow within our MSP base. So just a shout out to that team for their.
The tremendous value that they bring to their customers and we're just thrilled to have them as part of Amen.
Sure. Thank you and just as my follow up.
Some of the clinicians rolling off in the second quarter and CFO Grumblings about cost I was just wondering if there's any room to move bill rates lower offer any concessions to kind of ease the financial burden. Some providers for later in the year and then are you expecting normal seasonality to return in the second half.
Okay.
The bill rate is a tricky one because we saw bill rates go down.
On our orders not necessarily on our placements throughout.
The bill rates on the placements to go down, but the orders went down to a level last year.
It was negatively impacting.
Fill rates because of the low pay so that's why we've got some confidence in where we think that the.
The bill rates are going to normalize.
So it's a little bit tricky, one I think the better thing is to go and offer more solutions to.
To help with the overall labor problems so.
Whether that's offering some rps solutions or.
More local float pool type of solutions that.
It's not new.
Brand, new but clients are looking to try all sorts of new things right now.
And then I think your other part of your question had to do with the second half of the.
Seasonality on the seasonality we are expecting the second half of the year to play out which would mean Q3 would typically be up.
Modestly over Q2, and then a little bit of a stronger growth in the fourth quarter over Q3 levels.
Thank you. Thank you gentlemen, one moment for our next question.
And that will come from the line of Todd Phillips with Jefferies. Your line is open.
Hey, good afternoon, guys its Brian until it.
I guess my question for the team there's a lot of chatter around the competitive dynamics in this space, where some of your competitors are talking about expectations for.
A good bit of incremental decline in bill rates go forward or their predictions. So just curious what youre seeing in the market in terms of the competition and what Youre hearing in terms of is there a potential for price aggressiveness from some of the players in the market at this point.
So hey, this is Landry, Brian Jeff mentioned that we are anticipating that sequential decline in bill rate from Q1 to Q2.
From what we're seeing from the competition. There there is some pockets of small competitors out there that might make.
Our margin move or a bill rate move.
Not something that we've seen as of right now from any of our large competitors.
Got it okay. Thank you that's all.
Thank you and speakers I'm showing no further questions in the queue. At this time I would now like to turn the call back over to management for any closing remarks.
Thank you before we say our final Goodbye I know, we talked quite a bit about a couple of our businesses. We didn't talk as much about pls.
So I just wanted to give them a big recognition for as you go and look at throughout 2022.
Had just a terrific year, including in the Locums business four consecutive quarters of hitting over $100 million of revenue.
And so deserves it deserves a special shout out thank.
Thank you all for being with US we appreciate all the questions and all the interest.
I'm going to end with how I started which is I could not be more thrilled to be part of this wonderful team and I am looking forward to spending time with all of you in the coming weeks and months.
Thank you all for participating. This concludes today's program you may now disconnect.
The conference will begin shortly to raise and lower Johan during Q&A, you can dial star one one.
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