Q4 2024 AMN Healthcare Services Inc Earnings Call
I would now like to turn the conference over to Randy.
Speaker Change: Sir you may begin.
Randy: Good afternoon, everyone.
Speaker Change: Welcome to <unk> healthcare's fourth quarter and full year 2024 earnings call.
Randy: A replay of this webcast will be available.
Randy: Mmm healthcare dot com at the conclusion of this call.
Randy: Remarks, we make during this call about future expectations projections trends plans events or circumstances.
Randy: Forward looking statements.
Randy: Statements reflect the company's current beliefs based upon information currently available to it.
Randy: Our actual results may differ materially from those indicated by these forward looking statements.
Randy: Various factors and cautionary statements.
Randy: Including those identified in our most recently filed Form 10-K, and 10-Q, our earnings release and subsequent filings with the SEC.
Randy: <unk> does not intend to update guidance or any forward looking statements provided today prior to its next earnings release.
Randy: This call contains certain non-GAAP financial information.
Randy: Information regarding and reconciliations of these non-GAAP measures.
Randy: Most directly comparable GAAP measures.
Randy: Included in our earnings release and on our financial reports page at IR Dot EMA and health care Dot com.
Speaker Change: On the call with me today are Kerry Gray, President and Chief Executive Officer, Brian Scott, Chief Financial and operating Officer, I will now turn the call over to Kerry.
Kerry Gray: Thank you Randy and welcome to our quarterly conference call. We are pleased to report the AML healthcare ended 2024 with solid financial results and that trend has continued as we started 2025.
Kerry Gray: Fourth quarter revenue of $735 million with $30 million above the high end of our guidance range and adjusted EBITDA of 75 million also exceeded expectations.
Kerry Gray: Our nurse and Allied solutions revenue was 6% above the high end of guidance.
Kerry Gray: And the segment still beat by 1%, excluding upside and labor disruption revenue.
Oh.
Kerry Gray: Justin and leadership solutions revenue was on target aided by outperformance from physician permanent placement.
Kerry Gray: Technology and workforce solutions revenue was 4% better than guidance as language services saw improved volume.
Kerry Gray: During the quarter, we repaid $75 million in revolver debt enabled by another quarter of strong cash flow.
Kerry Gray: Our industry continues to see signs of stabilization.
Kerry Gray: Consistent with last quarter travel nurse orders remained above the April 2024 level, there's still 20% below pre pandemic.
Kerry Gray: These orders typically trend down after November and the drop this year is much less than in the past two years and in line with pre pandemic seasonality.
Kerry Gray: Allied orders grew 7% year over year in the fourth quarter with new orders up 20% year over year.
Kerry Gray: Locum tenants demand was better than normal seasonality rising 6% from Q3 to Q4.
Kerry Gray: Staffing gross margins declined through 2024.
Kerry Gray: And we are more recently seeing stabilization of margins across our staffing business.
Kerry Gray: Unfilled orders and vendor neutral programs increased again in the fourth quarter as candidates continue to pass through her job with low pay rate.
Kerry Gray: And more staffing firms resist the pressure to accept unprofitable margin.
Kerry Gray: As 2025 unfold.
Kerry Gray: Macro indicators tell us that after more than two years of stepped up hiring the health care sector has erased the permanent staffing deficit that grew from 2020 to 2022.
Kerry Gray: Wage inflation has remained high especially for highly qualified professionals.
Kerry Gray: Factors that caused our industry's trajectory to detached from labor market fundamentals have eased as travel nurse utilization and bill rate have returned to normal levels.
Kerry Gray: The next step would be to see client behavior to continue moving towards that renewed focus on long term objectives for cost effective flexibility.
Kerry Gray: Hospitals experienced strong growth in patient volume last year, and recent analysts survey call for 3% to 4% admissions growth this year.
Kerry Gray: To accommodate that volume growth hospitals grew employment, 4% in 2024 and at year end was 12% higher than the end of 2021, when workforce difficulties, where most acute.
Kerry Gray: Despite tactics to offset labor cost hospital wage inflation moved back up to 5% in the fourth quarter of 2024.
Kerry Gray: Health care organizations manage wage pressures last year by reducing average hours worked across their workforce to their lowest level since 2013.
Kerry Gray: Consistent with that.
Average hours per travelers also are at a 12 year low.
Speaker Change: He is negatively impacting the staffing industry's gross margin.
Speaker Change: In many instances of client needs. We can now demonstrate the traveling nurses are an attractive alternative to using overtime.
Speaker Change: Leaving vacant positions open and even to across the permanent hiring.
Speaker Change: As travel nurse staffing was 30% of our 2020 for revenue.
Speaker Change: Any demand recovery in this specialty would boost our efforts to return to growth.
Speaker Change: Since our last report we have continued to see stable bill rates for nurse and Allied staffing and bill rates have continued to rise and locum tenens.
Speaker Change: For the nurse and Allied segment, our first quarter outlook assumes volume down in the low single digits compared with the fourth quarter average driven by expected lower international nurse assignments due to visa retrogression.
Speaker Change: And lower utilization by a few of our large clients.
Speaker Change: Mostly offset by growth in other MSP clients and direct and third party channel.
Speaker Change: For physician and leadership solutions, we expect first quarter revenue to be down slightly from the prior quarter.
Speaker Change: Our technology and workforce solutions outlook for the first quarter assumes a low single digit depth compared with Q4 due to lower Vms volume with language services and outsourced solutions modestly up.
Speaker Change: Language services achieved our highest minutes delivered in Q4, and we expect to continue that trend in Q1.
Speaker Change: As the healthcare industry six long term solutions for its workforce needs. The <unk> team is United behind our mission of innovation and service to health care professionals and the diverse organizations that provide care for millions of Americans.
Speaker Change: Clinicians and clients have made their voices clear.
Speaker Change: They want more choices more visibility and more control.
Speaker Change: We are uniquely positioned to provide information rich technology tools that give clients and health care professionals, what they need now.
Speaker Change: In 2024, we launched and scaled best in class technology solutions that provide unprecedented visibility.
Speaker Change: Cost control mobility and efficiency in staffing management.
Speaker Change: By the end of the year, we have successfully rolled out our next generation BMS shipped twice.
Speaker Change: Almost all our ship twice users.
Speaker Change: With its ease of use automation of key functions.
Speaker Change: The port for clinical and non clinical role Dave.
Speaker Change: Data packed market pricing surveillance internal resource pool management and more.
Speaker Change: <unk> is poised to attract new clients in 2025 and beyond.
Speaker Change: Our market, leading app for health care professionals passport.
Speaker Change: Now enables clinicians to store their preferences.
Speaker Change: And enabled by AI automatically apply for matching opportunities.
Speaker Change: Powerful advantage in competing for the most attractive position.
Speaker Change: Passport also supports locum tenants for the first time.
Speaker Change: We rolled out our next generation in person interpreter scheduling system in our language services business.
Speaker Change: Enabling convenient scheduling by location and language.
Speaker Change: Broadening the capabilities of our interpretation platform.
Speaker Change: And we have raised the bar higher with worldwide, which integrates our demand forecasting staffing and sourcing predictive scheduling and workforce management solutions into a powerful platform.
Speaker Change: Clients are increasingly looking for integrated technology solutions.
Speaker Change: We're very pleased with the reception <unk> received from current and prospective clients.
Speaker Change: The recently launched event management capabilities of worldwide have made am at a more effective partner supporting clients during labor disruption event.
Speaker Change: Where our scale and financial strength are also advantages.
Speaker Change: Technology innovation and operational scale drive our strategy to embrace all parts of our $41 billion addressable market.
Speaker Change: Enabling us to expand service offerings and capture share.
Not just in our MSP, but also in the direct and third party channels.
Speaker Change: Our allied business has improved its direct market fill rates in recent months.
Speaker Change: Our Locums MSP volume is on an uptrend, which is being reinforced by the addition of local support to shift widespread.
In summary.
Speaker Change: <unk> has evolved in many ways to identify and focus on the changing needs of clients and healthcare professionals.
Speaker Change: So we provide 18 different solutions to thousands of clients we have.
Speaker Change: Work as one a M. One highly flexible organization capable of delivering <unk> service and value in a form that is customized to each client's unique situations.
Speaker Change: We have changed the way, we operate making it easier for clients to access our full range of solutions and easier for clinicians to access a broader set of opportunities.
Speaker Change: The more we enable client success and workforce management, the more <unk> will be differentiated in the marketplace.
Speaker Change: We expect our client centric strategy to get stronger over time building long term value for all our stakeholders.
Now I am thrilled to reintroduce Brian Scott to add his perspective on our results and outlook.
Brian Scott: Thank you Carrie and good afternoon, everyone. Let me start by saying how honored I am to be back at Amgen.
Brian Scott: Although I am still getting caught up on the changes in the organization in the industry.
Brian Scott: Didn't take long for me to see that this team still has the same passion and values and is energized about our future.
Brian Scott: Amazon has clearly made meaningful progress aligning under a unified go to market strategy.
Using technology as a differentiator enabler.
Brian Scott: And improving our operational efficiency with speed to placement that is 33% faster than in 2019.
Brian Scott: However, we know there is still more opportunity to consistently use automation and process changes to drive speed and efficiency across our services.
Brian Scott: We have the talent and strategy to make this happen.
These efforts will underpin our ability to drive sustained growth and profitability.
Brian Scott: Their value to our customers and shareholders.
Speaker Change: Gary and I look forward to providing future updates on our progress.
Speaker Change: Turning now to our results fourth quarter consolidated revenue was $735 million.
Speaker Change: Above the high end of guidance and consensus driven primarily by higher than expected labor disruption revenue in the nurse and Allied segment.
Speaker Change: Revenue was down 10% from the prior year and up 7% sequentially.
Speaker Change: Consolidated gross margin for the fourth quarter was 29, 8% at the high end of our guidance range.
Speaker Change: Year over year gross margin decreased 210 basis points, driven by lower margins across all three segments.
Speaker Change: Partly offset by a favorable segment mix shift.
Speaker Change: Sequentially gross margin was down 120 basis points due to lower margin in the nurse and Allied segment as well as an unfavorable segment mix shift.
Speaker Change: Consolidated SG&A expenses were $159 million or 21, 6% of revenue.
Speaker Change: Paired with $185 million or 22, 7% of revenue in the prior year.
Speaker Change: At $150 million or 21, 8% of revenue in the previous quarter.
Speaker Change: Adjusted SG&A, which excludes certain expenses was $145 million in the fourth quarter or 19, 8% of revenue.
Speaker Change: Compared with $159 million or 19, 4% of revenue in the prior year period, and $141 million or 25% of revenue in the previous quarter.
Speaker Change: The year over year decline in SG&A expenses reflected our efforts to reduce expenses along with a lower revenue.
Speaker Change: The quarter over quarter increase was driven primarily by unfavorable accruals from a state sales tax audit and professional liability.
Speaker Change: Along with labor disruption support costs partially.
Speaker Change: Offset by cost reduction efforts.
Speaker Change: Fourth quarter nurse and Allied revenue was $455 million down 15% from the prior year, primarily from lower volume and rates.
Speaker Change: Partially offset by an increase in labor disruption revenue.
Speaker Change: Sequentially segment revenue was up 14% at fourth quarter labor disruption revenue more than offset lower volume in travel nurse.
Speaker Change: The nurse and Allied average bill rate was down 6% year over year and was flat sequentially.
Speaker Change: Okay.
Speaker Change: Year over year segment volume decreased 22% and average hours worked was down 1%.
Speaker Change: Sequentially volume was flat while average hours worked was down 2%.
Speaker Change: Travel nurse revenue in the fourth quarter was $230 million, a decrease of 35% from the prior year period and 6% from the prior quarter.
Speaker Change: Allied revenue in the quarter was $149 million down 9% year over year and up 6% sequentially.
Speaker Change: Nurse and Allied gross margin in the fourth quarter was 23, 8%.
Speaker Change: The decrease of 170 basis points year over year, and 120 basis points sequentially, primarily due to the decline in international nurse revenue.
Speaker Change: Segment operating margin of eight 6% decreased 310 basis points year over year, and 20 basis points sequentially.
Speaker Change: The year over year decline was mainly due to lower gross margin increased bad debt expense and negative operating leverage.
Speaker Change: Moving to physician and leadership solutions segment fourth quarter revenue of $173 million increased 3% year over year with growth coming from the <unk> acquisition.
Speaker Change: Sequentially revenue was down 4% driven primarily by lower volume within our Locums and interim businesses.
Speaker Change: Welcome Tennant's revenue in the quarter was $137 million up 10% year over year, driven by the <unk> acquisition.
Speaker Change: Sequentially revenue was down 4% in line with normal seasonality.
Speaker Change: And our leadership revenue of $26 million decreased 11% from the prior year period, and 9% sequentially due to lower volume and rate.
Speaker Change: Search revenue of $10 million was down 32% year over year and up 2% sequentially.
Speaker Change: Gross.
Speaker Change: For the physician and leadership solutions segment was 28, 5% down 480 basis points year over year, primarily attributable to a lower bill pay spread in locum tenants.
Speaker Change: Unfavorable revenue mix shift.
Speaker Change: Sequentially gross margin increased 20 basis points.
Speaker Change: Segment operating margin was nine 8%, which decreased 320 basis points year over year, primarily due to the lower gross margin and a negative professional liability actuarial adjustment.
Speaker Change: Partially offset by lower employee expenses and lower bad debt.
Speaker Change: Sequentially operating margin decreased 20 basis points.
Speaker Change: Technology and workforce solutions revenue for the fourth quarter was $107 million down 5% year over year as growth in language services was more than offset by decreases in Vms and outsource solutions.
Speaker Change: Sequentially revenue was down 1%.
Speaker Change: Language services revenue for the quarter was $76 million, an increase of 12% year over year and 2% sequentially.
Speaker Change: Vms revenue for the quarter was $23 million, a decrease of 26% year over year and 10% sequentially.
Speaker Change: Segment gross margin was 57, 3% down 320 basis points from the prior year period, primarily due to the lower mix of Vms and outsource solutions revenue, partially offset by margin improvements within language services.
Speaker Change: Sequentially gross margin declined 60 basis points, mainly due to a revenue mix shift.
Speaker Change: Segment operating margin in the fourth quarter was 37, 7% an.
Speaker Change: An increase of 90 basis points from the prior year period.
Speaker Change: Driven primarily by expense management, partially offset by the lower gross margin.
Speaker Change: Sequentially, the operating margin declined by 130 basis points on a lower gross margin and increased bad debt expense.
Speaker Change: Fourth quarter consolidated adjusted EBITDA was $75 million.
Speaker Change: Down 28% year over year and up 2% sequentially.
Speaker Change: Adjusted EBITDA margin for the quarter up 10, 2% was down 250 basis points from the prior year, primarily driven by lower gross margin and negative operating leverage.
Speaker Change: Sequentially adjusted EBITDA margin was down 50 basis points due to the lower gross margin, partially offset by expense management.
Speaker Change: During the fourth quarter, we performed a quantitative impairment test of our goodwill.
Speaker Change: This assessment resulted in a noncash impairment charge of $222 million impacting the nurse and Allied and physician and leadership solutions segment.
Speaker Change: Net interest expense and other in the quarter was 23 million and included a $10 million noncash charge related to the revaluation of minority equity investments.
Speaker Change: Fourth quarter net loss was $188 million driven in large part by the noncash goodwill impairment charge.
This compared with net income of $12 5 million in the prior year and $7 million in the prior quarter.
Speaker Change: Fourth quarter GAAP diluted loss per share was $4 90.
Adjusted earnings per share for the quarter was <unk> 75.
Speaker Change: Compared with $1 32 in the prior year and 61 in the prior quarter.
Speaker Change: Days sales outstanding for the quarter was 55 days, which was 15 days lower than a year ago.
Speaker Change: Sequentially CSS.
Speaker Change: DSO improved by five days in large part due to the upfront payment on labor disruption revenue recognized during the quarter.
Speaker Change: Operating cash flow in the fourth quarter was $73 million and capital expenditures were $16 million.
Speaker Change: As of December 31, we had cash and equivalents of $11 million in long term debt of $1 6 billion, including $210 million drawn our revolving line of credit.
Speaker Change: We ended the year with a net leverage ratio of three times to one.
Speaker Change: With a focus in 2024 on debt reduction, we paid down the revolver by $75 million in the quarter and $250 million for the full year.
Speaker Change: Recapping, our financial highlights for the full year of 2024, we reported revenue of $3 billion a year over year decrease of 21%.
Speaker Change: Gross margin for the year was 38% a decrease of 220 basis points from the prior year.
Speaker Change: Adjusted EBITDA was $341 million, a decrease of 41% from the prior year.
Speaker Change: Full year adjusted EBITDA margin of 11, 4% was 390 basis points lower year over year.
Speaker Change: For 2024, we reported a GAAP loss per share of $3 85.
Speaker Change: And adjusted EPS was $3 31.
Speaker Change: Compared with the prior year GAAP EPS of $5 36.
Speaker Change: And adjusted EPS of $8 21.
Speaker Change: Full year cash flow from operations was $320 million and capital expenditures totaled $81 million.
Speaker Change: Moving now to first quarter guidance, we project consolidated revenue to be in a range of $660 million to $680 million.
Speaker Change: Down 17% to 20% from the prior year period.
Speaker Change: This guidance includes an assumption of $24 million of labor disruption revenue.
Speaker Change: Gross margin is projected to be between $28, one and 28, 6%.
Speaker Change: Reported SG&A expenses are projected to be 22, 2% to 22, 7% of revenue.
Speaker Change: Operating margin is expected to be minus <unk> three to a positive 4%.
Speaker Change: Adjusted EBITDA margin is expected to be seven 7% to eight 2%.
Speaker Change: Additional first quarter guidance details can be found in today's earnings release.
Speaker Change: For modeling purposes, we anticipate full year capital expenditures of $40 million to $50 million.
Speaker Change: Based compensation expense of $35 million.
Speaker Change: And our non-GAAP tax rate of 26% to 28%.
Speaker Change: Okay.
Kerry Gray: Before we open up the call for questions I will hand, the call back to Kerry.
Kerry Gray: Thank you, Brian and welcome back.
Kerry Gray: Before I open the call to Q&A I want to thank Doug we are long time, chairman of our board of directors, who announced his retirement earlier this month and has become a Amen Healthcare's Board Chair Emeritus.
Kerry Gray: Doug provided invaluable leadership and guidance to the company and management over the past 25 years, including helping take the company public 23 years ago.
Kerry Gray: We thank Doug for his service to our organization and welcome Mark <unk> as the New Board Chairman.
Speaker Change: Mark has deep public company leadership and governance experience, both as a board member and as the CFO.
Speaker Change: Now operator, please open the call for questions.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw your question. Please press star one again.
Speaker Change: Please standby, while we compile the Q&A roster.
Speaker Change: Our first question comes from the line of Tobey Sommer with choice Youre line is open.
Tobey Sommer: Hey, good afternoon, everyone. This.
Josh: This is Josh for move on for Tobey.
Speaker Change: Ask about gross margins in nurse and Allied how are you thinking about the segment gross margins there in the first quarter.
Speaker Change: Can you maybe extrapolate for us how the labor.
Speaker Change: <unk> revenue might influence that margin versus what otherwise might be comparable to a year ago. Thank you.
Speaker Change: Hey, Jeff where there's nothing like a welcome back Brian than a gross margin question.
Speaker Change: And the first piece that we'll talk a little bit about I think you've got the big points that we're seeing we obviously have a part of it it's mix and.
Speaker Change: Particularly coming from headwinds that we have in international that we saw really throughout 2024 that will continue.
Speaker Change: Two 2025, so Brian do you want to maybe give them.
Brian Scott: Yes, Thanks Kerry Jesper thanks for the question.
Brian Scott: Yes, there's a few moving parts on the gross margin as you probably know.
Brian Scott: Within nurse and Allied specifically the <unk>.
Brian Scott: In the fourth quarter 2023, 8%.
Brian Scott: In part reflected some sales reserves reversals that we took in the fourth quarter that we had talked about.
Brian Scott: In the last quarter, and so that that could take that in the context of our Q1 guidance, we would've been closer to call. It 2022, and a half and so our expectation for for Q1 is relatively similar.
Brian Scott: To the fourth quarter and Thats.
Brian Scott: The team did a really good job of looking at pay packages and negotiating on the trends, we're seeing with with bill rates.
Brian Scott: Stabilizing in the last couple of quarters.
Brian Scott: It would be up modestly in the first quarter, we're seeing pretty stable gross margin trends in the nurse and Allied segment.
Brian Scott: Thanks, Glenn you mentioned, obviously, the normalization of demand conditions in the prepared remarks, you talked a little bit.
Brian Scott: First quarter, what do you think you'd need to see in the market to start growing the nurse and allied volume sequentially. This year.
Brian Scott: Yes, I think what we've seen and what we've talked about this quarter and last quarter is a number of signs around normalization and I think they really all speak to different parts of.
Brian Scott: Healthcare.
Systems really getting back into.
Brian Scott: Much more of a normal mix between permanent a layer contingent staff in a layer of flexible staff.
Brian Scott: And so we've seen a lot of when you look at some of the things that would typically drive buying behavior normalization of premium so.
Brian Scott: Our estimate today of premium.
Brian Scott: Spread over fully loaded labor cost is about 10% the lower end of what you would have seen historically and so what we want to see know Jasper is.
Brian Scott: If recent analyst reports are predicting patient demand, increasing 3% to 4% and you still see probably above average wage inflation.
Brian Scott: In healthcare you would want to start seeing some of that play through in terms of orders than getting picked up as we go through the year to reflect some of the tailwind.
Brian Scott: Okay.
Brian Scott: Got it thank you.
Brian Scott: Thank you.
Brian Scott: Please standby for our next question.
Speaker Change: Our next question comes from the line of a J rice with UBS. Your line is open.
Speaker Change: Hi, everybody just wondering if.
Speaker Change: We've got the strike revenue, we've got other things going on in the fourth and first quarter and then there is seasonality I'm trying to understand how the U S.
Speaker Change: Do you feel like Youre seeing a normal pattern here there was similar to what you would have seen pre pandemic.
Speaker Change: <unk>.
Speaker Change: There is still some softness in any any early thoughts about how the trajectory of the rest of the year for 25 might play out what are you looking for.
Speaker Change: In terms of revenue trends as we progress through the rest of the year.
Speaker Change: Let me talk about what we've seen and then I can tag team with Bryan on what we expect.
Speaker Change: We've seen.
Speaker Change: A more return to normal if you look at normal being what we would have seen pre COVID-19.
Speaker Change: And so as an example.
Speaker Change: And I talked about this in some of the opening remarks, we have seen order increases in.
Speaker Change: Nursing since last April we would normally see from November until now.
Speaker Change: Drop off of those orders, we saw that it was actually not as much as we had seen pre COVID-19.
Speaker Change: Youre really starting to see for us more of that return to normal Locums, you typically see a little bit of seasonality weakness at the end of the year.
Speaker Change: And so we.
Speaker Change: We don't have as much visibility as we would ideally like but what we do have visibility in.
Speaker Change: We are seeing more normalcy.
Speaker Change: As we enter 2025.
Speaker Change: We have seen in the past couple of years.
Speaker Change: Yeah, Hey, Jay it's Brian.
Speaker Change: Yes, I mean, the fourth quarter I think played out overall.
Speaker Change: As expected.
Speaker Change: The labor disruption event went longer than than we anticipated in that.
Speaker Change: Added some additional revenue in the fourth quarter and is flowing through into our fourth and first quarter guidance.
Speaker Change: You try to strip it out about quarters and also take out that kind of $5 million ish sales reserve reversal that we've talked about.
Speaker Change: We are looking at a little bit of a decline probably in the midpoint of our guidance in Q1, you will call it 15% to 20 20 million or so.
Speaker Change: And there's a few pieces there I think to Gary's point, Nick we're seeing much more normalization there still some residual flow through.
Speaker Change: Some of the changes in client behavior.
Runoff from Ehrlich early client.
Speaker Change: During 'twenty four but for the most part as we think about as Reuben into Q1, seeing really good trends in Locums I think overall, we'd expect that that business to be flat to slightly up in the first quarter, which is pretty normal for it to be up we're still working through the MSC, our integration, but the booking trends.
Speaker Change: Over the last few weeks have been really positive, which gives us confidence and for the first quarter, but also that we would expect to see growth in the second quarter and beyond language services continues to grow sequentially. The growth before we expect it to grow in Q1 and through the year.
Speaker Change: International is still a bit of a headwind right. We talked about is as we have retrogression, continuing we have about a $5 million $45 million reduction expected sequentially in Q1.
Speaker Change: And then with the nurse and Allied business, a little bit of a decline on the nursing side as you see some of the winter orders start to roll off but underneath that there is still I think a more normal kind of buying behavior through some of the seasonal impacts that are going on there and then with BMS also down a little bit in the first quarter as well again more reflective of the market environment in <unk>.
Speaker Change: Some.
Speaker Change: Some some client losses from 24 that are kind of working their way through the system. So Q1, I think that's a really good foundation.
Speaker Change: For for 2025% is a good marker X that strike and as we as we think about the rest of the year.
Speaker Change: We see good opportunities for the businesses to grow and a lot of really good momentum in most of our service lines.
Speaker Change: Okay.
Speaker Change: Great maybe my follow up I'll ask.
Speaker Change: In the prepared remarks, you mentioned and you've mentioned a couple of times in answering.
Speaker Change: The international headwinds.
Speaker Change: Do you have a sense of what the international revenue.
Speaker Change: Our impact would be EBITDA impact.
Four versus 25 overall im sure it varies a little bit depending on how demand looks but I'm just curious if they've got a figure there and then the other comment was made in the prepared remarks was about large client.
Speaker Change: Seemingly stepping back a little bit was that because theyre doing it themselves they've changed vendor or are they having volume issues, what maybe flesh that out a little more yes.
Speaker Change: Yeah, Let me answer the first one so.
Speaker Change: What we would expect them very similar to what we talked about last quarter is if you look at our international business. So take full year 2023 before retrogression started total revenue net business was up $225 million.
Speaker Change: We expect about 100 million dollar revenue.
Speaker Change: Wind beats.
Between 2024 and 2025.
Speaker Change: About 60% of that AJ would be in 2024, and so we'd have the remainder of the headwind in 2025 and mostly in the first two quarters.
Speaker Change: Of 2025.
Speaker Change: And so we would expect after that.
You would start to see that flatten out.
Speaker Change: In the back half of the year and then in 2026, you would start to get growth in that business again.
Speaker Change: On your question from a client standpoint.
Speaker Change: I'd like to give color about what we're seeing in some of our top clients.
So while we have seen the majority of our largest MSP clients be relatively flat to growing we still have a couple of large clients that are reducing.
Speaker Change: They're there.
Speaker Change: And it really is just a reflection of them getting back into a target mix of permanent and flexible and contingent staff.
Speaker Change: And isn't necessarily a commentary on changing models, it's just kind of where they are in that process.
Speaker Change: Okay. Thanks, a lot.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our.
Speaker Change: Question comes from the line of Jeff Silber with BMO capital markets. Your line is open.
Jeff Silber: Thanks, So much and welcome back Brian and actually let me start with a question for you.
Jeff Silber: Been a few years since you left the company and I know things have changed a lot in the industry, but from your perspective.
Speaker Change: What do you think you can do to help the company get back on track.
Speaker Change: Well. Thanks, it's good to be back well I think I'd start with this team has already done a tremendous amount of work ticket. This company on track. So I'm here to do what I can to help out but theres already been a tremendous amount of work laying that foundation.
Speaker Change: As I mentioned in my opening remarks that we've got.
Speaker Change: Really fantastic team here.
Speaker Change: A great blend of folks that I've known for years that are still here, but also some really strong new talent has been infused in the organization, which I think has been good because as you said the industry has changed a fair amount.
Speaker Change: I'm already seeing a lot of really good work.
Speaker Change: Much more of a unified approach towards our clients we've done it with both branding, but also just the way we operate internally engage with our clients and I think that that's going to set us up well.
Speaker Change: From a technology point of view there has been tremendous work.
Speaker Change: That was there was needed there was I think an acceleration of the use of technology and digitization of our industry of the last several years and so maybe a little bit of catch up here, but the team has done a lot to close that gap.
Speaker Change: Both of the things you see externally with passport and <unk> flex.
Speaker Change: Well I think best in class solutions, there on internally with our upgrading our applicant tracking system.
Speaker Change: Amy Web solution and then.
Speaker Change: And the back office side standardizing more of our businesses on a common ERP all of that is going to help us become more efficient.
Speaker Change: Our speed to market.
Speaker Change: And then also deliver services that really resonate with clients and allow us to listen more I think obviously when I. When I left we had a larger mix of our business tied to managed service programs I think thats still a critically important part of the industry and for clients that want that service I think we delivered really well, but I think we're better positioned now to be able to meet clients that want more of a.
Speaker Change: <unk> neutral or a hybrid solution and we can kind of walk.
Speaker Change: That work is well now and I see that across the organization. So I think we're I think we're late a lot of the right Foundation I think this year is a year of execution and we're feeling good that we're going to we will see the kind of the benefits of those investments in our efforts as we move through the year.
Speaker Change: Alright, thats great to hear maybe I can just step back and that the broader question in terms of the overall marketplace.
Speaker Change: Are you still seeing hospitals trying to reduce their contract labor.
Speaker Change: Census is up and I know, they're focused on full time employment it but I'm just wondering if youre still seeing pressure on that side of the house.
Speaker Change: Yes.
Speaker Change: What I would say is.
Speaker Change: We're still seeing a focus on contract labor.
Speaker Change: The cost savings lever that it was even a year ago, right, especially of us as <unk> seen.
Speaker Change: The premium spread normalized as you've seen broadly utilization come down now there are some systems that still are probably above where they want to be or where they were pre COVID-19.
Speaker Change: Thats still need to come down, but I'd say, what we're increasingly seeing is the end of they're still focused on that line item, but they're stepping back and looking at their overall workforce and really wanting to have a partner who is going to help them with how they build high quality <unk>.
Speaker Change: Cost effective workforces to meet what they see as kind of increasing patient demand. So.
Speaker Change: Yes, they're focused on it.
Speaker Change: We're increasingly focused on what is the next round of broader workforce solutions to help me sustainably build a workforce in the for the coming years.
Speaker Change: All right really appreciate the color. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Joanna <unk> with Bank of America. Your line is open.
Oh, hi, Thank you. Thanks, so much for taking the question. So I guess, maybe a little bit on the on the last comment.
Speaker Change: I remember.
Speaker Change: The call on the third quarter call you were talking about or that you're seeing some hospitals actually.
Speaker Change: Coming back on like offering higher range to be able to shell formal thoughts are you have you seen more of our Luxembourg same or has that dynamic going on.
Speaker Change: We will see particularly as <unk>.
Speaker Change: The need for some of those <unk>.
Speaker Change: <unk>.
Speaker Change: Get higher you will see systems go back and adjust bill rates to be able to fill those orders I don't know if at this point, we've seen a significant uptick than what we were seeing at the end of the year.
Speaker Change: But given some of my my earlier commentary about the increase in unfilled orders.
Speaker Change: You would look for.
Speaker Change: More systems, increasing their bill rates.
Speaker Change: Some of those orders Kraft.
Speaker Change: As one sign of just continuing stabilizing demand over the next quarter or two.
Speaker Change: Okay. Thanks for that and another follow up on them.
Speaker Change: Comments about Q1 versus Q2 like the moving pieces and appreciate it.
Speaker Change: The truck revenue and such but then when we think about and there is obviously seasonality so that's where I'm headed.
Speaker Change: EBIT margin for Q1 guidance, because I guess last quarter, you were kind of talking about maybe eight.
800 <unk>.
EBITDA margin in Q1 and grow from there.
Speaker Change: So now I guess, you're guiding to a lower margin. Despite the fact that there is some strike revenue in there on EBITDA.
Speaker Change: So is that sort of 8% a better starting point and how we should think about kind of the year goes on how does.
Speaker Change: EBITDA margins should be moving if assuming that's just normal seasonality.
Speaker Change: Sure Yeah. Thanks.
Speaker Change: I think that well set as far as Q1, I think that is a good starting point in that 8%.
Speaker Change: And as we move through the year the seasonality that we would expect to see in the second quarter typically nursing is down nurse and allied are both down low single digits as we.
Speaker Change: Roll off winter winter assignments.
And some of the schools impact on Allied as you get into the summer months, but we're also expecting growth and other businesses that are higher margin like locums and our interim and search business continued growth in language. So I think those will look somewhat expected them to offset each other to some degree in the second quarter.
Speaker Change: That mix of revenue should be favorable on the gross margin and as we continue to manage our G&A right now I think that that 8% is a good probably a good way to think about the first half of the year and then as we move into the back half of the year as we get as we get growth kind of across all businesses. We.
Speaker Change: We should see continued improvement on our gross margin and then more operating leverage and that's where we'd start to see that EBITDA margin lift in the back half of the year.
Speaker Change: So that's a factor back Sir another question, if I may on the international business.
Speaker Change: I appreciate your comments around your expectations first happened in the second half, but is there any risk to this I mean is it sort of like things is going to change the outcome you know June 30th.
Speaker Change: Then you can kind of get back to growing international business.
So we've assumed some marginal improvement of the date moving forward I think the date now as at December 2022.
It's pretty modest.
Speaker Change: So if there was no movement, there might be some kind of marginal.
Speaker Change: Risk towards the backend of the year.
Speaker Change: Smaller relative to what we've seen either in 2024 or what we expect in the first half.
Speaker Change:
Speaker Change: So we're giving you our outlook of what we have seen historically when you've gone through a retrogression period, yes.
Speaker Change: Yes.
Speaker Change: Okay.
Speaker Change: In 25, but again, we've got this pipeline that continues to build so it's really just a function of timing if we don't.
States move forward a little bit.
Speaker Change: It won't have a meaningful impact on this year, but it will it will just accelerate the recovery in that in that business as we get into 2016 and beyond.
Speaker Change: Great. Thank you thanks for taking the question.
Speaker Change: Okay.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Mark Mccollum with Robert W. Baird. Your line is open.
Mark Mccollum: Hey, good afternoon. Thanks for taking my question and welcome back Brian Great to have you on the call.
Mark.
Wondering if you can talk a little bit on technology and workforce solutions. What are you assuming in terms of BMS revenues for the first quarter.
Mark Mccollum: So it sounds like language is doing well, so I'm just trying to figure that part out.
Mark Mccollum: Yes, it's going to be likely a little bit under $20 million in the first quarter.
Mark Mccollum: So we actually realized.
Mark Mccollum: Under $20 million in the first quarter Joe.
Mark Mccollum: <unk>.
Mark Mccollum: As we've talked about with just with some of the client transitions the timing of the way. They end up rolling off is sometimes a little bit difficult to predict so it actually took a little bit longer in the fourth quarter. It was it was actually a little bit of an upside for us in Q4, but as that as that settles out thats, where youre seeing.
Mark Mccollum: Now one more step down in the first quarter as well as some volume declines as utilization has come down some.
Mark Mccollum: At this point, what we're seeing is that that should be kind of the low the low watermark. We've had some more recent client wins with <unk> flex as those are getting implemented.
Mark Mccollum: And we stabilized with our current client base and then start to see some of these wins roll ended into 25 with a Q1 should be the low point and then it.
Mark Mccollum: It seems doing everything they can to execute to start to see that grow as we move most of the year.
Okay.
Mark Mccollum: Just in general aside from the shift wise transition just in terms of.
Mark Mccollum: Just what youre seeing in terms of overall volumes across the MSP as well as Vms.
Mark Mccollum: Elements that youre not showing.
Mark Mccollum: How is that trending.
Mark Mccollum: So if we look at kind of overall demand.
Mark Mccollum: And I would say this is true both in.
Mark Mccollum: MSP for us the shape of that looks a little bit different post COVID-19, because we had focused all of our supply.
Mark Mccollum: That market during Covid. So when you look at our MSP volumes they were naturally going to go down because our starting point was so high there.
Mark Mccollum: Everything that we've been doing mark that Brian talked about earlier positioning ourselves in the non MSP space has really been an opportunity for us.
Mark Mccollum: And so right now as we look in our nurse business and looked at the mix of where we're seeing demand.
Mark Mccollum: Overall about 20% of our demand is coming from MSP and about 80% will be coming from non MSP.
Mark Mccollum: And so it was incredibly important for us over the past two years to really.
Reposition ourselves against that broader market, because we see a lot of incremental demand opportunities for us that we have been taking advantage of.
Mark Mccollum: So we're seeing similar trends around overall demand increasing in the nurse space since last April.
Mark Mccollum: We've seen very healthy demand in in alloy, particularly as we started 2025 and similar for locum.
Mark Mccollum: Great and then kind of a broader.
Mark Mccollum: Industry question. There is there's been some obvious signs of consolidation in terms of.
Mark Mccollum: <unk>.
Mark Mccollum: Theres also been reports of some other companies.
Mark Mccollum: In the space.
Mark Mccollum: Might be looking for partners.
Mark Mccollum: And it seems like it would be natural to see a little bit of a shakeout in a little bit of consolidation just given what's.
Mark Mccollum: What's happened to the overall demand levels since since 2020.
Mark Mccollum: I was wondering if you could provide any commentary on what in terms of what youre seeing from a competitive dynamic perspective, both in terms of demur.
Mark Mccollum: Demand from hospitals and your competitive position.
Mark Mccollum: And how that translates to pricing, but also.
Mark Mccollum: In terms of.
Mark Mccollum: Are the clinicians appreciating.
Speaker Change: Youre relative strength and what are you seeing from that perspective.
Speaker Change: Yeah, I would say broadly about the competitive environment.
Speaker Change: And we draw a different competitors, depending on what solution, you're talking about but I would say there is consistently very strong competition across the space.
Mark Mccollum: If we look at Mark to the first part of your question about what we've seen in terms of recent consolidation.
Speaker Change: What we saw.
Speaker Change: Most acutely in the nursing space coming out of Covid is you really had excess competitive capacity that had been built when that Tam became so significant during COVID-19.
Speaker Change: And you started to see both between the recent acquisition.
Speaker Change: Announcement, but also even some players exiting the space.
Speaker Change: We're getting out of it I think you've really started to see some of that excess capacity start to shake out a little bit.
Speaker Change: From a nursing standpoint, what we're seeing from a client perspective.
Speaker Change: <unk>.
Speaker Change: Particularly as clients are stepping back and saying I really want a partner who is going to help me think about how to build a sustainable workforce for the future.
Speaker Change: The breadth and depth of our capabilities positions us very well for those conversations and can be that partner for them. So it's not just that we have the solutions that we have is that we have increasingly.
Speaker Change: Done a tremendous amount of work to make those solutions more integrated and more relevant to those clients. So we are seeing clients want how we are approaching the market from a total workforce standpoint.
Speaker Change: From a clinician standpoint.
Speaker Change: I'd say theres two pieces that we are seeing one.
Speaker Change: Throughout all of this and we do think there is going to continue to be consolidation in this market not the least of which is because you really need to be able to scale your technology investments.
Speaker Change: But clinicians and clients want choice and competition and so.
Speaker Change: From a clinician standpoint.
Speaker Change: It is also very beneficial for them to work with a player like us because we can support them in any type of role they want throughout their career and so we are an appealing partner to them. If they want to go on a contract assignment and then want to go permanent.
Speaker Change: We know them and we can and can help support them.
Speaker Change: Great.
Speaker Change: To follow on on that.
Speaker Change: Given the consolidation it sounds like.
Speaker Change: It sounds like the competition is still tough or or are you, saying that.
Speaker Change: Has been a little bit.
Speaker Change: A reduction in capacity.
Speaker Change: That you are.
Speaker Change: But your competitive position is is appreciably better because of that because of the.
Speaker Change: Some of the exits that occurred.
Yes, I think it's too early for some of the exits I think a lot of that.
Speaker Change: News is much more recent so I don't know that we've seen an impact yet of that.
Speaker Change: I'll kind of take the competition.
Speaker Change: And in two phases. One is we still see very significant competition around getting new clients.
Speaker Change: And so coming out of out of Covid. This really has been.
Speaker Change: For most parts of our business a demand environment and getting access to that demand Lucas is a little bit different.
Speaker Change: But.
Speaker Change: We really do see very strong competition there.
Speaker Change: On the supply side, we have seen especially with bill rates.
Speaker Change: <unk>.
Speaker Change: We have seen competitors be very rational.
Speaker Change: And they're not going to go and fill orders that are not priced appropriately priced.
Speaker Change: It's going to be unprofitable for them.
Speaker Change: This is why we suspect we're seeing an increase in unsold order. So it's still a very competitive environment, but how the underpinning of rational decisions that.
Speaker Change: The competitors are making particularly on the supply side.
Speaker Change: That's very helpful. Thank you so much.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Jack <unk> with Jefferies. Your line is open.
Speaker Change: Hey, Thanks for the question a lot of mine have been asked already so maybe a pretty quick one you.
Speaker Change: Give some color around that.
Speaker Change: The margin impacts from the labor disruption revenue when you guided for Q apologies, if I missed it but could you just.
Speaker Change: Help me.
Speaker Change: Can frame that out in terms of gross margin adjusted EBITDA and <unk> guidance.
Speaker Change: As it relates to the labor disruption.
Speaker Change: Alright.
Speaker Change: It doesn't mean, there's not a material difference in the margin on on the labor disruption revenue.
Speaker Change: It's really we're getting the flow through obviously through to EBITDA, but let's see.
Speaker Change: As it relates to gross margin, it's not it's not really a notable impact on Q4 or Q1.
Speaker Change: Bigger influences are around either mix changes within the segments or between the segments on a consolidated basis. Some some headwind from the international decline that does have a higher margin and then on the Q4, we mentioned.
Speaker Change: Sales sales reserve adjustments those are the bigger influence strike strike itself the labor disruption events have been.
Pretty similar on the margin and as just et cetera.
Speaker Change: Revenue in.
Speaker Change: Flow through of EBITDA that the outperformance in the fourth quarter EBITDA was that was the largest part of it. There was also though we had better performance than in a couple of other businesses, including our BNS business and.
Speaker Change: And our interim business in areas that floated with heightened ISI margin.
Speaker Change: But that it wasn't labor disruption itself that had a big influence on the gross margin.
Speaker Change: Okay got it really appreciate that's helpful. One quick follow up.
Speaker Change: I guess, just taking the business at face value, where you sit in the first quarter I.
Speaker Change: I was hoping you could give a little color maybe on how you are thinking about.
Speaker Change: Free cash flow conversion to free cash generation I guess I'm just trying to square you had some of the benefit in Q4 that probably reverses, but on a normalized basis sort of how we should think about converting cash going forward. Thanks.
Speaker Change: Yes, I mean, I think we've typically talked that the free cash flow conversion in the sixties range I would still use that as a good marker.
Speaker Change: We have adjusted our Capex this year.
Speaker Change: To reflect the current environment revenue and expected EBITDA. So that that I think is still a good a good marker to use for for any modeling.
That helps.
Speaker Change: That's great. Thanks, very much appreciate it guys.
Speaker Change: Thank you.
Speaker Change: Please standby for our next question.
Speaker Change: Our next question comes from the line of Trevor Romeo with William Blair. Your line is open.
Trevor Romeo: Hi, good afternoon. Thanks, so much for taking the questions and welcome back to Brian really good to have you back on these calls.
Trevor Romeo: Just a couple of quick ones left from me I think when we talk about order volumes already a bit but I was wondering if you could talk about your your trouble around assignment volumes and maybe how they trended on a monthly basis I think last quarter you had some positive momentum maybe in September. So just wondering how maybe the last four months have gone from a Coa perspective.
Trevor Romeo: Yes, if you if you kind of pick up from where we had talked about before and if I looked at total travelers for nurse and Allied the one headwind that I would say, which is reflective of some of the comments that we talked about with international is you do see a headwind.
Trevor Romeo: In the nursing business of international travelers.
Trevor Romeo: Coming off what you would what you would have seen as we got as we ended the year as you would have seen a slight increase.
Trevor Romeo: In total travelers and then as you go over into the first quarter you would see.
Speaker Change: I'd say, a slight decrease because when you look at winter orders typically two thirds of the winter orders are in Q4 with about a third in Q1.
Trevor Romeo: Yeah.
Trevor Romeo: And so theres a thing.
Speaker Change: Got it. Thanks Kerry that's helpful. And then just one other quick one I was wondering what kind of demand youre seeing in your school staffing business.
Speaker Change: It's an area, we've kind of heard some positive trends from some others recently I think theres been a couple of acquisitions in that area lately. So just wondering if you could give a bit more color on what you're seeing there. Thanks.
Speaker Change: Yeah.
Speaker Change: The schools business.
Speaker Change: We're off to good start in 2025.
We had some headwinds in 2024.
Speaker Change: There were some budget cuts kind of coming out of Covid that affected some of the districts and the schools that we supported and some consolidation of programs.
Speaker Change: At a district level that affected a couple of clients, but if we look at 2025.
Speaker Change: And how we're starting in terms of upcoming bookings.
Speaker Change: We're off to a good start.
Speaker Change: Yes, it's always a business where you're booking activity we're in now.
Speaker Change: How is impacting the fall of this year and so as we look at our recent booking trends, where we're running ahead of this time last year. So that gives us a good degree of confidence that as we get into the end of the 25 fall school year, our volume is expected to be higher than it was in the.
Speaker Change: 20, <unk> and the other part cover those days.
Speaker Change: We introduced <unk>, which is a <unk>.
Speaker Change: Great technology for us to be able to do virtual support and so that has gone over very well, especially as we started the bookings for the upcoming school year.
Speaker Change: Alright, Thank you both very much.
Speaker Change: Thanks Robert.
Speaker Change: You.
Kerry Gray: Ladies and gentlemen, im showing no further questions in the queue I would now like to turn the call back over to Kerry for closing remarks.
Speaker Change: Great.
Speaker Change: Thank you. We appreciate your continued interest in <unk> health care and I want to have a special thank you to all of our corporate and clinical employees, who work hard every day to enable patient care.
Speaker Change: Thank you.
Speaker Change: Ladies and gentlemen that concludes today's conference call. Thank you for your participation you may now disconnect.
Speaker Change: Okay.
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