Q2 2023 AMN Healthcare Services Inc Earnings Call
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Good day, and thank you for standing by.
Welcome to aim in healthcare second quarter 2023 earnings call.
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I'd now like to hand, the conference over to your speaker today.
Randy Reece senior senior director of Investor Relations.
Good afternoon, everyone welcome to <unk> Healthcare's second quarter 2023 earnings call.
A replay of this webcast will be available at IR Dot AML health care Dot com following the conclusion of this call.
Various remarks, we make during this call about future expectations projections trends planned 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-Q, our earnings release and subsequent filings with the SEC. The company does not intend to update guidance.
Any forward looking statements provided today prior to its next earnings release.
This call contains certain non-GAAP financial information information regarding and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and on our financial reports page at IR Dot <unk> health care Dot com.
On the call today are Kerry Grace, Chief Executive Officer, Jeff Knudson, Chief Financial Officer, Landry, <unk> group, President and CEO of nursing and Allied solutions, and James Taylor, President and CEO physician and leadership solutions I will now turn the call over to Kerry.
Thank you Randy and welcome everyone. Let me begin by expressing my gratitude for the remarkable efforts of our health care professional and team members.
Empower our mission to improve access and quality of healthcare throughout the country.
As we have successfully done in the past and then balancing the demands of short term business conditions against the pursuit of long term value for our stakeholders.
Health care organizations need more powerful strategies and tools to deal with complex labor needs that are growing faster than the supply of workers.
We believe strongly in these market dynamics and are investing to address the current and future health care environment.
To meet these needs, we have ramped internal investments in technology, and bringing all of our solutions together.
Our industry, leading mobile App and then passport has surpassed 200000 users and now engages most of our health care professionals on assignment.
Our language services platform now has API integration with leading electronic medical record system, enabling faster and easier connections with are medically qualified interpreters.
And the early reception to shift wide ciudadano, our market, leading Vms platform has been very favorable.
In the near term, we are managing through a demand environment than in our nurse and Allied solutions segment has remained low as the health care sector has moved toward a new normal for total labor costs.
Overall demand for travel nurse staffing is low as clients try to regain a sustainable balanced a permanent and contingent staff.
This year has been harder to predict as clients are focused on accelerating short term cost management as well as looking at long term ways to rebuild their workforce.
Our outlook for third quarter revenue in nurse and Allied is approximately $65 million lower than consensus.
As we progress through the second quarter demand for contingent labor from our large MSP clients with lower than we had assumed.
They increase the pace of permanent hiring and we proactively partnered with them on temp to Perm conversions and their overall cost management goals.
We are continuing to position our organization to serve our clients in the way they want whether it is supporting a self managed operation vendor neutral MSP staffing led MSP or the many other solutions we have to offer clients.
We have improved our internal fill rates on MSP throughout this year.
In addition, we have invested in our Vms technology to make them more adaptable to individual client needs if they choose to exercise more internal control over their program.
Current and prospective clients continue to be open to new solutions that will help them rebuild and manage their workforce.
We have ramped sales and marketing efforts to take advantage of this opportunity not just for staffing led MSP, but also in pursuit of direct and vendor neutral MSP.
We feel good about the sales pipeline, we have developed as we finished the year and how it will impact 2024 and thereafter.
For our physician solutions locum tenants and permanent placement.
Needs remains strong and we are working to bolster the sustainability of our growth trajectory.
Locum tenants had record high revenue in the second quarter growing 15% year over year, while also producing strong profitability.
Demand in our interim leadership and permanent placement businesses has been affected by clients cost control effort.
So perm demand seemed to have stabilized.
We are pleased that the Pls segment was able to make impressive year over year progress on gross and operating margins, despite flat revenue and a mixed headwind.
Our technology and workforce solutions segment saw revenue decline from Q1 to Q2 as Vms track the softer staffing market.
As expected profit margins in that segment are lower with a revenue mix shift towards language solutions.
That business grew revenue, 19% year over year and the segment as a whole continued to have a favorable impact on our consolidated profit margins.
As we have noted clients have reacted to the post pandemic environment by stepping up permanent hiring and seeking change in how they manage labor flexibility.
Overall, we see an environment in which labour supply will still be challenged to deal with growth in health care utilization as well as improving the overall well being and engagement of health care professionals.
We think our broad and deep set of solutions and technology platforms.
<unk> us well to serve the needs of clients and clinicians now and for the long term.
<unk> is managing through this environment realigning talent and adjusting cost appropriately to protect margins, while also sustaining important strategic investment initiatives.
In recent weeks, our nurse and Allied solutions segment successfully completed a major upgrade of its back office technology platform to better serve our internal growth objectives, and our health care professionals.
The success and scale of this technology transition set new standards for how we manage change at am.
In many aspects, we accelerated our pace of technology enablement and this process will continue into 2024 with lasting benefits for our solutions clients health care professionals and team members.
Our long track record in technology enabled solutions such as Vienna.
Workforce analytics and broad based staffing strengthens our positioning with clients who want more comprehensive solutions.
Now I'll turn over the call to Jeff for the details about our results and outlook after which I will return with some final comments.
Thank you Terry and good afternoon, everyone.
Current quarter revenue of $991 million was near the high end of our guidance range driven by outperformance in locum tenants.
Consolidated revenue was down 31% from the second quarter of 2022.
Sequentially as anticipated revenue was down 12% as clients expense management continued to drive demand levels lower than the expected step down in bill rates within nurse and Allied and Vms.
Gross margin for the quarter was 33, 3% just below our guidance range.
Compared with the prior year period gross margin was up 100 basis points, primarily due to a favorable revenue mix shift and margin improvements within the nurse and Allied segment, partially offset by margin contraction within technology and workforce solutions.
Sequentially gross margin increased 50 basis points.
Consolidated SG&A expenses were $202 million, including a nonrecurring legal settlement or 24% of revenue compared with $244 million or 17, 1% of revenue in the prior year period, and $206 million or $18 three <unk>.
<unk> of revenue in the previous quarter.
The decrease in SG&A expenses year over year was primarily driven by lower employee expenses consistent with the current demand environment.
Sequentially lower business volumes led to lower employee expenses, along with lower bad debt reserve and professional liability insurance expenses.
Adjusted SG&A, which excludes certain nonrecurring expenses and stock based compensation expense was $170 million in the second quarter or 17, 1% of revenue compared with $229 million or 16% of revenue in the prior year period.
The increase in adjusted SG&A margin as a percentage of revenue year over year was mainly driven by lower revenue.
In the second quarter nurse and Allied revenue was $689 million down 37% from the near record revenue in the prior year period sequentially.
Sequentially segment revenue was down 16% driven by lower volume in bill rates.
Average bill rate was down 19% year over year and down 6% sequentially.
Year over year volume was down 17% and average hours worked were down 3%.
Sequentially volume was down 10% and average hours were down 2%.
Travel nurse revenue during the second quarter was $477 million, a decrease of 39% from the prior year period and 19% from the prior quarter.
Allied revenue during the quarter was $182 million down 12% year over year and 7% sequentially.
Nurse and Allied gross margin during the second quarter was 26, 7%, which increased 100 basis points from the prior year period and grew 80 basis points sequentially.
The year over year increase in gross margin was primarily due to normalization of the bill pay spread.
Segment operating margin of 14, 9% increased 30 basis points year over year due to higher gross margin, partially offset by lower SG&A leverage.
Sequentially operating margin increased 110 basis points, driven by lower bad debt reserve and professional liability expense.
Continuing with the physician and leadership solutions segment second quarter revenue of $176 million was flat year over year and up 6% sequentially.
Locum Tenens revenue in the quarter was 122 million, a 15% increase from the prior year and up 14% sequentially.
Interim leadership revenue of $36 million decreased 24% from the prior year period and was down 10% from the prior quarter.
Search revenue of $18 million dropped 19% from the prior year and was down 5% sequentially.
Interim and search revenue were down year over year, primarily due to lower demand as healthcare systems continue to focus on cost containment measures.
Gross margin for the physician and leadership solutions segment was 35, 1%.
Up 90 basis points year over year, and down 10 basis points sequentially.
The margin increase year over year was primarily due to improved gross margin for locum tenants, partially offset by the revenue mix within the segment.
Segment operating margin was 15%, which increased an impressive 360 basis points year over year due to lower SG&A expenses and gross margin improvement.
Sequentially operating margin decreased 10 basis points.
Technology and workforce solutions revenue during the second quarter was $126 million.
<unk>, 16% year over year and 7% sequentially.
Language services generated revenue of $64 million, an increase of 19% year over year and 3% quarter over quarter.
Vms revenue for the quarter was $47 million, a decrease of 38% year over year and 14% sequentially.
Segment gross margin was 66, 7% down from 78, 3% and 71, 4% in the prior year and prior quarter respectively.
<unk> decrease in gross margin year over year and sequentially was primarily due to a revenue mix shift away from high margin Vms and a lower gross margin and language services.
Segment operating margin in the second quarter was 44, 1% compared with 55, 2% in the prior year driven by lower gross margin.
Sequentially segment operating margin decreased 520 basis points.
Second quarter consolidated adjusted EBITDA was 162 million, a decrease of 30% year over year and 10% sequentially.
Adjusted EBITDA margin of 16, 3% was flat year over year and up 40 basis points sequentially.
Second quarter, net income was $61 million down 51% year over year and down 28% sequentially.
Second quarter GAAP diluted earnings per share was $1 55 in the quarter adjust.
Adjusted earnings per share for the quarter was $2 38.
Compared to $3 31 in the prior year period, and $2 49 in the prior quarter.
Days sales outstanding was 53 days two days lower than the prior quarter and three days higher than the prior year when collections were very strong.
Operating cash flow for the second quarter was $198 million and capital expenditures were $26 million.
As of June 30, we had cash and equivalents of $7 million long term debt of 1.04 billion, including a $190 million draw on our revolving line of credit and a net leverage ratio of one five times to one.
As you May recall, we announced a $200 million accelerated share repurchase program on our previous earnings call, which began in the second quarter.
During the quarter, we repurchased two 4 million shares of stock for a total of $250 million.
In total year to date as of June 30, we have bought back $4 1 million shares of stock for a total of $425 million.
As of today $227 million was outstanding on the repurchase program authorized by our board of directors.
Moving to the <unk> third quarter 2023 guidance.
We project consolidated revenue to be in a range of $840 million to $860 million down 24% to 26% from the prior year period.
Gross margin is projected to be between $33, three and 33, 8%.
Reported SG&A expenses are projected to be $19, 8% to 23% of revenue.
Operating margin is expected to be eight eight to nine 4% and adjusted EBITDA margin is expected to be 14, 3% to 14, 8%.
Average diluted shares outstanding are projected to be approximately $38 6 million.
Additional third quarter guidance details can be found in today's earnings release.
As Carey mentioned utilization from our top clients is lower than we anticipated which is reflected in our third quarter guidance.
Order trends have been stable for three months and clients have indicated they will place winter needs orders within the next few weeks.
As such we expect nurse and Allied revenue in the fourth quarter to grow modestly over the third quarter level.
The physician and leadership solutions and technology and workforce solutions segments should see seasonal revenue declines in the mid single digits.
As we have noted clients have reacted to the post pandemic environment by stepping up permanent hiring and seeking change and how they manage labor flexibility.
The result has been a surge of new opportunities along with greater client turnover within the industry.
The near term impact is visible and continued soft demand from our MSP clients and a lesser impact from turnover.
These client transitions went largely as expected in recent months and we're not the drivers of change in our 2023 expectations.
And now I'd like to hand, the call back to Kerry.
Thank you Jeff this quarter, we say farewell to two of the people who helped to build Amazon and the concept of total talent solutions in healthcare.
Denise Jackson, our corporate Secretary and Chief Legal Officer is retiring after 23 years of making a profound impact on the <unk> family.
Denise was instrumental in bringing <unk> from its IPO to becoming an industry leader in corporate governance. Her first conviction determination and relentless dedication ensured that our culture embodies diversity equity equality and inclusion.
Denise provided well for her succession. He has mentored Whitney Lachlan her successor for 17 years, and we are excited to see how Whitney built underneath his legacy.
Thank you Denise and congratulation to Whitney.
Landry's, Inc joined <unk> in 2008 as part of an acquisition.
We always want acquisitions to bring in leadership talent and Landry is a brilliant example of how that should work.
He was instrumental in the growth in our travel nurse and Allied businesses.
He became the leader of our nurse and Allied solutions segment in March 2020, right at the beginning of the pandemic.
Landry kept his team together during the pandemic with his unique blend of business acumen, and faithful leadership and a personal charm that no one who met him will forget.
Landrieu, leaving the staffing industry for another opportunity that is very special program.
We are grateful for his efforts to prepare his successor.
Robin Johnson is currently preparing to take over leadership of nurse and Allied at this critical time in our evolution.
I am excited about the depth of leadership talent, we have built and will continue to build a amazon to bring the best to our clients and health care professionals and a changing industry ecosystem.
Now operator, please open the call for questions.
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Yes.
Our first question comes from a J rice of credit Suisse financial services.
Hi, everybody just.
Technical to make sure I understand the Q3.
It sounds like you're looking for nurse and allied revenues to be down about 20% if I've got that right from Q3 to Q1.
Q2 to Q3 I know in Q2 that the volumes were down about 10% of the bill rate were down about 8% in the same category can you give us a sense of where you think thats split falls out in Q3 between what Youre seeing in volume decline versus what Youre seeing in bill rate decline.
Yeah, Hey, Jay the volume decline in nurse and Allied in Q3 would be down low double digits sequentially.
Then the bill rate, we had originally expected bill rates to be down.
Mid single digits in Q3 over Q2, and slightly stronger than that may be down 7% to 8% Q.
Q3 over Q2 on the bill rate side.
Okay, and then just stepping back with the broader question I think.
Your principal public peer at least.
Yesterday described there what they were seeing in the market heading into the third quarter is.
Ability at the current bill rates to find staff to fill positions it sounds like youre, putting more of the emphasis on the.
The demand side that maybe at least I interpreted that they were.
I don't know if theres any way to comment on that you are saying that your order trends been steady for three months I guess.
Some would suggest that the orders are there I guess, but anyway.
Do you have any takeaway that's open ended question, but.
To sort of characterize it from a demand versus supply challenged market.
Hey, a J, let me give a general comment and then I'll turn it over to landry's to fill in some detail.
I think overall.
We're seeing the same thing across the market and there's probably a nuanced just in terms of.
Our business is an end and the mix of some of our businesses.
But what we talked about last quarter and nurse and Allied is that we had started to see some modest growth often early April trough.
We continue to see that growth into June and we expected it to continue into Q3.
What we saw is that after the increases that we saw going into June it really flattened out.
And so the teams for us with a change in utilization.
With our largest clients.
So it wasn't a supply challenge it really was a utilization.
Lower than expected from some of our largest clients.
And if we go forward into what we have seen in some of the patterning that Jeff mentioned in his opening comment.
We have gotten some early indications from clients about winter needs and based on the on those indications we would expect that we would see.
A little bit back to some normal season seasonal patterning some growth from Q3 to Q4.
Maybe I don't know if you want to yes, hey, Jase Landry, so ahmet pay front. So pay of course Thats just one factor that these clinicians are considering wherever.
Whenever they are looking at our job accepting our jobs I think we might have said in the past really location is the number one preference that the most important.
There's other things work life balance flexibility of the job the facilities reputation and working conditions. So there is a lot of different factors.
And we do see certain customers right now that are posting orders that we would consider below market rates and we do see that those go unfilled for the most part but that that dynamic that's not new I mean, we've seen that over many years, where you have a portion of beneath the go go unfilled.
A lot of our kind of more strategic and larger clients. They are posting orders at what we would consider market rate.
Those customers are experiencing high fill rates are getting their jobs filled.
So really the reason for some of the softer volumes that we're seeing going into Q3.
More of a demand story for us just not being quite as robust as what we'd like to like to see and then I guess the last thing that I had mentioned is just applications. Our new application stats are still really really strong. So there is still a lot of interest in travel.
They still remain much higher than what we ever saw pre pandemic.
Okay. Thanks, a lot.
Okay, one moment for our next question.
Okay.
Okay. Our next question is from Jeff Silber of BMO capital markets.
Okay.
Thanks, so much given the environment I'm just curious what your company has been doing with internal head count has there been any changes in should we expect future changes.
Yes, thanks for the question.
As you know one.
Ameren has done extremely well.
Over its history is be able to flex up and flex down in different environment.
And so as we saw lower demand.
Really as you entered less last year entered this year.
We have managed our internal resources and head count Accordingly, So if you look from the beginning of the year until what we would expect in the third quarter.
We'll be down around 9% from a head count standpoint.
And we do that we have programs that we've put in place around managing that through normal attrition and performance management.
One thing I would note is.
From a producer standpoint, we have intentionally kept.
Our producers.
Because we expect demand to increase as we get into the fourth quarter and into next year and we wanted to be ready for that.
And Jeff I would just add.
At the midpoint of the Q3 guide.
Although with revenue coming down as we move through the year adjusted SG&A as a percent of sales has increased but the absolute dollars have come down sequentially every quarter since the first quarter and we would expect that trend to continue into the fourth quarter.
Okay that is very helpful.
My next question May be long I apologize about it but I wanted to talk about labor disruption. So.
First epic I don't know if it had any impact on the second quarter, if youre expecting any impact in the third quarter, but more importantly.
And this may be more anecdotal than anything else I live in Central New Jersey, one of our large hospitals, Robert Wood, Johnson and I haven't seen the news today, but the nurses were expected to go on strike Tomorrow.
And one of the issues was that they wanted to hospitals to reduce their contract labor spend.
Obviously, it's self serving but I don't remember seeing that kind of pressure from the nurses themselves.
Is this something thats happening elsewhere does that.
Produced another headwind for your business.
Yes, I would say, yes, I mean for us we.
Had about $5 million in labor disruption revenue in the second quarter.
There is nothing that we're servicing our clients on from a labor disruption front in the third quarter. So there is zero and revenue embedded in the Q3 guide.
And Jeff I would say overall, we havent heard that as a theme from our from clients.
Okay, maybe one off here. Thank you so much.
Okay, one moment for our next question.
Okay.
Our next question from Trevor Romero Romeo sorry of William Blair.
Hi, good afternoon. Thanks, so much for taking the questions.
One.
I appreciate the commentary on winter order indications kind of giving you confidence in Q4 growing sequentially for nurse and Allied solutions I guess as you look kind of forward based on what Youre seeing and hearing now does it feel like there is potential for further softness in either bill rates or volumes.
Next year after the winter or does it kind of feel like Q3 of this year will truly be the trough for the travel business and this demand kind of cycle and hospitals are comfortable with where they stand.
In terms of contract labor.
Yes, let me let me give you some macro comments and then I'll, let landry and Jeff timing, a little bit on what we could expect to see from us.
Our bill rate and I think we talked a bit about what we expect to see from a demand standpoint.
If you look at the macro thesis that we've talked about for some time.
That remains intact and so on the one side, we expect to continue to see an increase in overall healthcare demand utilization.
Demographics, the number of factors going into that and you will continue to have supply constraint.
And so we expect for there to continue to be demand across the board.
For the services, we provide everything from workforce planning into how we operationalize their workforce strategies of which contingent staffing is a piece of that.
If you look at on average.
What you have seen and I think this has been reinforced in the commentary from some of the public company Hospital system.
They've got on average youre getting back into a range of normal on contingent labor.
The caveat that I would put to that is.
Clients are at different paces of change in getting there. So while we have clients that have gotten down into what they would consider some of their target rate. We have other clients that still are at high levels for a variety of reasons and so when we think about what that looks like this year really has been one.
How do we get back into more of a normal sustainable workforce framework, but we expect that we will continue to see.
The supply demand imbalance, creating a need for our broad based services as we go forward.
Yes, and Trevor on the bill rate side.
Expectations for the fourth quarter.
Fill rates would be down low single digits off of Q3 levels.
That would put the 2023 accident rate call it somewhere in the 30% to 33% above pre pandemic levels or a 7% CAGR from 2019 and.
That's very much in line with where.
From a CAGR standpoint were annualized nurse wage inflation is running since 2019, so that.
It gives us confidence about that.
The starting point for Bill rates as we think about 'twenty four.
Yes understood. Thanks for that color and then just kind of wanted to touch on the Locums business, which I think you highlighted as a revenue record our revenue a record revenue quarter.
In the second quarter I was wondering if are you seeing broad based increases in demand across the Locums book or any particular specialties driving the strength and then given the strength in Q2 for Locums I guess, how do you reconcile that with the Q3 guide of Pls segment kind of being down 3% to 5%.
Hey, as I turn that over to James to give some color I wanted just underscore and congratulate our entire Luca team for the quarter. It was it was extraordinary.
James you want to talk a little bit about what you are seeing sure. Thank you Kari and like keurig, we'd like to thank the locums team as well and specifically under <unk> leadership. The team has leaned in and really lose the values of who we are as in Oregon as an organization. They do outstanding work as you think about the Locums business, our local market is very strong.
Ma'am perspective, but we're still at one five times to pre COVID-19 levels and that demand is really driven.
Is up quarter over quarter and year over year from a specific specialties of <unk> advanced practice primary care in surgery and it continues to surge and continues to move forward.
I think I will.
Sure.
We will state is that when you think about our results. Our results for Q2, we have record high in revenue of 14, 3% sequentially up 15% over year over year up in revenue and other favorable metrics that we have from a demand from fuel rate from both spread.
And revenues day feel all of those metrics were up both quarter over quarter and year over year team focusing upon our clients and helping our clients to meet their demand and because when we meet their demand and put positions in place those are revenue generating positions that help our clients to be able to meet their financial numbers and we do that through leveraging.
Our MSP and thinking about total talent solutions. So the locums team keeps leveraging our MSP and.
Leveraging our total talent solutions I think that we're well positioned market is very high in demand and the team is delivering against that demand.
And on the guide Trevor I would just add and the expectation for low comes in Q3.
It would be pretty flattish sequentially over Q2, and that should still be up low teens on a year over year basis, and then where you are facing some headwinds within interim and search demand trends remain soft there is hospital systems continue with their cost containment measures.
We would expect both of those businesses to be down approximately 10%.
Quarter over quarter in Q3.
Got it okay. Thank you that was helpful. I appreciate all the color.
Okay, one moment for our next question.
Next question is from Brian <unk> of Jefferies.
Hey, good afternoon guys.
I guess my first question would just be any color you can share with us about.
Just the competitive environment, I mean, theres a lot of chatter about msp's moving around and you talked about.
Vendor neutral agreements and wins in that area as well. So just maybe any color you can share on what that environment looks like today.
Yeah.
Let me start with.
Something I mentioned in the last call that we have seen continue.
As you really look at what we're seeing with clients overall coming out of the pandemic.
For three years, they were heads down focused on dealing with the surge in demand and challenges in our workforce and so we have seen them come out of the pandemic with a huge need around how do I find solutions that are going to help me with transparency cost containment.
And building a sustainable workforce.
And so we've seen that continue.
As an overall theme and a bigger openness across the board for clients to try solutions that are going to help them achieve that.
There's been conversations around MSP Vms, obviously, we are major players in both of them.
We look at it as what clients need and we wrap our solutions around them. We haven't seen one model change one competitor change about what clients are coming from or going to I think the overall theme. We're seeing is clients are looking for a way that they can sustain.
<unk> build a workforce to serve their needs.
And so if you go back and look at what we're seeing overall from a competitive market. It's a competitive market. So it was competitive during the pandemic and as you've gone into this period of lower demand.
That competition has intensified.
We think we are well positioned as we as clients look for a variety of solutions because of the breadth of what we provide.
To be in a very good position to be helped to help clients regardless of whether they want an MSP relationship a vendor neutral relationship.
Or any of the other solutions that we provide.
One other thing.
And one other thing I should mention.
Ryan is if we look year over year at our MSP pipeline, our pipeline is 300% higher than this time last year.
Got it Okay. That's awesome I guess my follow up yes.
Yes related as well I mean, as a J mentioned earlier I mean, one of your competitors is talking about challenges with mercury and whatnot, but they called out the tightening of spreads between bill rate and take rate and as I look at your margins in.
There is an ally for the quarter, obviously, you're not showing any deterioration. So maybe just curious what your outlook is for margins going forward gross margins and nurse and allied given those commentaries.
We would expect nurse and allied gross margins in the fourth quarter Thats typically seasonally low.
For us Brian just because of the hours worked and the Q3 level it should be pretty comparable to where we were in Q2.
Got it thank you.
Okay. Thank you one moment for our next question.
Okay.
Next question is from Kevin Fischbeck Bank of America.
Great. Thanks.
I wanted to ask about.
What you guys believe your visibility is into Q4 trends because I guess this is now two quarters, where both you and your public competitor have have taken down guidance.
For the year and so it seems like the market's influx and it's kind of hard to hit with what seems to be a moving target.
Because I think last quarter you both sounded like confident that things were firming I guess is there a reason to believe that the data point youre getting today are better or more informed data points of what you saw at this point last year or whether things are still in flux and visibility is still kind of below average.
Yeah, Kevin I would say for us, we would really say that.
Behavior, among our top clients was very different than what we had seen historically, we've talked many times.
About how we thought this year, one return to some level of normal seasonal patterns.
And we did assume a partial recovery and then we saw utilization decline into the third quarter as it relates to Q4.
We do believe that the stability that we've seen in the demand trends over the past three months.
As well as the indications that we've received from our clients on their winter order needs is what gives us that visibility into Q4 and that nurse and allied revenue will increase sequentially.
Over Q3, and that Q3 will be the trough within nurse and Allied.
Okay I guess.
I guess, maybe your commentary is a little bit different than theirs, but I guess the competitor was kind of saying that there were a lot of orders that were coming in below kind of market rates and just not being filled I don't want to call them Phantom orders, but kind of.
Orders that.
Potentially the hospital never fully expect it to be filled I just want to make sure that I have read to be the orders in your view, what kind of orders that makes sense at or near market rates that youre seeing firming and it's not there's no mixing kind of.
How are those.
Those orders are looking in whether you've got real confidence that they're actually syllable orders.
Hey, Kevin It's Landry, so I don't disagree with the other public competitor that.
If some of those orders had higher pay rate that they would go at a higher fill rate.
So I don't disagree with that the thing that's always been a component in the marketplace and what we see on those orders that are going unfilled at not disproportionate to what we would've seen before.
So that's why we believe.
The mix of those orders and based on what the Bill rates are what the market is.
As demanding in what clinicians are demanding that we need some more demand.
Like Gary and Jeff both mentioned it leveled out.
And we've seen the list of winter needs from our clients from some of our top client.
It's not official but those list show us that the demand that will be coming in for winter needs, which means Q4 and into Q1.
Is at or above what we saw last year.
Okay, and then maybe just last question I guess.
Historically as we've thought about how this year was trending and then we thought about 2024, you guys seem to be guiding to like Q4 numbers, probably take that annualize it and that's a good base to think about for next year, if I hear what you're saying about nurse and allied being up and youre going to see the divisions being down that Q4 revenue.
Raul might be flattish to maybe slightly up.
Which would.
Puts you.
You don't want to get three five type base for annualized does that is that the right way to think about the jumping off point into next year or is there something wrong with that.
It's directionally correct, Kevin I would say you could think about the back half run rates certainly on the.
Top line.
Smooth out some of that seasonality, particularly with mpls and gws.
As well as on the margin side.
Okay. So the back half of this year guidance annualized and then from there.
You would think.
Gross.
And bill rates.
And billable hours.
Hence.
Rates will depend on inflation, but we would probably envision them being pretty flattish next year off of those Q4 levels.
I think Karen spoke about the depth of the MSP pipeline, obviously, we have a tailwind.
Within Locums as well as language services as well and then.
The marketplace client churn could potentially.
Be a headwind as well.
Okay perfect. Thank you.
One moment for our next question.
Okay.
Our next question comes from Tobey Sommer of <unk> Securities.
Thanks.
With another three months at the firm Carrie maybe could you share.
Bit more with us about how you may shape the business.
In the portfolio.
As the business looks to be stabilizing towards year end.
Yeah.
Thank you and I think hope.
Hopefully you have gotten this done both in terms of.
What we've done from a leadership standpoint as well as.
Areas of emphasis that we have underscored over the past couple of quarters.
We look at our portfolio is being very well positioned in a period of extraordinary change.
With our clients in EMEA overall health care workforce ecosystem.
Areas of focus for us number one.
Particularly during this period of inflection will be on our customers.
And by customers it will be both on the client side and on the clinician side.
On the client side.
We'll continue to drive towards a total talent solutions.
Solution set for them, starting with how we help them in overall workforce planning, which is an incredibly high interest and be able to operationalize that plan through our broad set of solutions.
All of that both in terms of how we interface with them and also what we do on our own platform will have increasing degrees of integration on the technology side.
On the clinician side and we mentioned this in the opening comments about passport, we continue to want to support our producers in their relationships with their clinician and making it easy 24, 7% for our clinicians to have access to a wider range of capabilities through passport, obviously that has gone very well we have over two.
<unk> hundred thousand clinicians on that on that App.
Second Big area of focus is all the efforts around <unk> and how we continue to strongly grow both organically and through M&A, but have a platform that's going to benefit from the growth that we have both organic and inorganic has brand component.
Operate our company more effectively client centricity about how we approach the clients and truly wrap our entire set of solutions around them.
Third Big component is technology, which I think you've heard me talk about over the past two quarters and you should expect that to continue we are accelerating our thing and digital.
And then the last two pieces are.
We have grown very successfully in the past as part of our overall strategy through M&A, we expect the M&A market and opportunities.
<unk> continued to accelerate as we leave the year and get into next year, and we would expect to participate in that and then finally all of that will be.
Underpinned by our foundation, and our culture around dei inclusion attracting and retaining the best talent.
I appreciate that.
I was wondering.
How do you explain the rapid growth in Stratus when Ed.
At a foundational level it doesn't it looks like the <unk>.
I made it.
English speaking population growth has been as robust, but what are the what are the factors contributing to.
To that rapid growth.
In recent years as well as so far this year.
Yes, it's a good question.
There's a couple of things if you look at the overall.
Profit pool for that we are growing faster and I think there is a couple of factors one in terms of.
How our clients are utilizing that service.
There are some clients who are actually doing it in house people. So I think there is one is its not necessary not necessarily that.
We are taking share away and theirs.
A bigger influx of.
A population that their primary language is not English is that they've been served in different ways and probably not as efficiently within the health systems in the past until I think this is part of the strategy of how you ensure that you are operating your workforce as effectively as possible.
Second piece is we started to introduce that solution set into our MSP and so a very big part of <unk> value proposition is how do we put our entire solution set into our MSP relationships. Just during the course of this year, we've made progress from having an average of eight of our solutions into our top clients to having <unk>.
And our language services are a big part of that.
Final piece that I'll mention Tobey is.
We have a video solution and what we have seen is that that solution has.
<unk> proposition that is attractive to clients and so we think that has also been a part of our outsized growth relative to the market.
Thank you.
Okay. Thank you one moment for our next question.
Next question is from Bill Sutherland of the benchmark company.
Well thanks, everybody.
And thinking about the Locums space, which has been very very strong.
For you and others.
What do you think would be the limiting factors on growth there and what's a reasonable kind of.
Looking over the horizon, a little bit as far as the.
A sustainable disciplined growth.
Okay. So first of all I. Appreciate your question in the local marketplace from a demand standpoint as you heard me mentioned earlier is the demand is still at one five times of pre Covid levels. I believe that that will continue to remain where it is when you think about the demand coming in from the consumer meeting care you think.
About the aging population in six out of 10 with a chronic disease and by 2034, you have people that are more over 65% youre going to have under 17, and then also wait times to actually get into the health care systems are those wait times are actually going up so I think the demand will remain pretty constant.
The limiting factor will be the supply and the number of positions that we have within the marketplace to be able to deliver against that hence where we come in I think play a significant role in delivering total talent solution and really thinking through how do we help our clients to have revenue generating.
That help them to be able to manage their bottom line, but also to provide care for the patients that are meeting that so at this point I think we have to think through how do we solve for that could be a very perfect storm more people needing care with less positions to be able to deliver against that and I think we play.
A very significant role in helping with that.
Yes.
And.
When you think about resuming M&A.
Are you thinking more about adding to your toolkit solutions or are you thinking more about bench increases to Princeton scenario strong like locums.
I would say.
What we look at it.
And so you should expect us to look at <unk>.
Solutions that are going to mirror, what we're seeing and anticipate to see in terms of future client needs.
Enabled solutions language services and what we did there is probably.
A great example of what we would continue to look for in the future and then when we look at areas like James This is talking about and where we think we have an opportunity to accelerate demand. We will always look at those areas as well.
Jeff what would you add about M&A.
Alright.
The pipeline right now I would say.
As we're starting to see more tech enabled assets.
Market's been pretty slow the last 18 months, so we're seeing activity pick up there.
As well as within changes area on the Pos side not as much in the pipeline on the travel nurse or Allied side.
Okay. Thanks, everybody.
Alright. Thank you one moment for final question here.
This question is from Andre children's of Baird.
Hey, this is Andre on for Mark Mark on Thank you for taking our questions. So I'll just have one.
Quick follow up on the last comment you made with the tech enabled assets can you first talk about.
Some of the multiples or valuations youre seeing on some of those.
Companies are for sale and then also.
Additionally on capital allocation can you talk about maybe your appetite for further share repurchases and how you view your leverage ratio. Thanks.
Andre Let me take the first part of that and then I'll, let Jeff talk about repurchases.
What we are hearing is that some of the.
Tech enabled solutions.
There is an expectation as we get through the year that there is a bit of an understanding that some of those assets have been revalued.
Since what we might have seen so while we haven't seen a number of those asset trade over the past couple of quarters, we would expect that there would be some.
Expectations that those valuations would look more like what you've seen.
The broader market.
Trade at so our expectation is we not only see more but the valuation levels that could make it interesting.
On the on the repurchase side, Jeff I'll, let you talk I'll, just say Andre obviously the balance sheet.
US a tremendous amount of flexibility right now levered at one five times.
We did enter into the $200 million ASR this quarter.
That could on an outside date be completed as late as November .
As early at the Counterparties discretion sometime in the third quarter. So again that brought our full year share repo in the air share repurchases.
425 million, we think thats pretty close to the right number for calendar 'twenty three and then moving into.
24, and beyond obviously M&A would be our first priority for capital deployment, and then absent anything compelling on the M&A front.
We'll look to return capital to shareholders and repurchase shares.
Great. Thank you for all the color.
Okay.
Okay. Thank you for your question.
Seeing no further questions at this time I would now like to turn the conference back to Kerry Grace for closing comments.
I appreciate that I always thank our amazing <unk> team members and clinicians and I just want to leave by calling out for.
A special thank you to Landry and Denise.
And what they did to build and then and to be incredible company. It is today and a huge congratulations to Robyn and Whitney on their new roles.
As always we appreciate your interest in Ameren.
Thank you all.
Thank you. This concludes today's conference call. Thank you for participating you may now disconnect.
Thank you operator.
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