UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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| ☒ | ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the fiscal year ended December 31, 20192022 |
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| ☐ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
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| For the transition period from to |
Commission File No.: 001-16753
AMN HEALTHCARE SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
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| Delaware | | 06-1500476 |
(State or Other Jurisdiction of
Incorporation or Organization)
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Identification No.)
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| 8840 Cypress Waters Boulevard | Suite 300 |
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| Dallas | Texas | 75019 |
| (Address of principal executive offices) | | (Zip Code) |
Registrant’s Telephone Number, Including Area Code: (866) (866) 871-8519
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Securities registered pursuant to Section 12(b) of the Act:
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| Title of Each Class | Trading Symbol | Name of each exchange on which registered |
| Common Stock, $0.01 par value | AMN | New York Stock Exchange |
Securities registered pursuant to Section 12(g) of the Act:
None.
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes x No ¨
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. Yes ¨ No x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one): |
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| Large Accelerated Filer | ☒ | | Accelerated filer | ☐ | | Non-accelerated filer | ☐ | |
| Smaller reporting company | ☐ | | Emerging growth company | ☐ | | | ☐ | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. Yes ☒ No ☐
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements. o
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No x
The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was last sold, or the average bid and asked price of such common equity, as of June 30, 2019,2022, was $2,500,498,215$4,731,008,379 based on a closing sale price of $54.25$109.71 per share.
As of February 20, 2020,2023, there were 46,854,21541,066,415 shares of common stock, $0.01 par value, outstanding.
Documents Incorporated By Reference: Portions of the registrant’s definitive proxy statement for the annual meeting of stockholders scheduled to be held on April 22, 2020May 17, 2023 have been incorporated by reference into Part III of this Form 10-K.
Auditor Name: KPMG LLP Auditor Location: San Diego, California Auditor Firm ID: 185
TABLE OF CONTENTS
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References in this Annual Report on Form 10-K to “AMN Healthcare,” “AMN,” the “Company,” “we,” “us” and “our” refer to AMN Healthcare Services, Inc. and its wholly owned subsidiaries. This Annual Report contains references to our trademarks and service marks. For convenience, trademarks, service marks and trade names referred to in this Annual Report do not appear with the ®, TM, or SM symbols, but the lack of references is not intended to indicate that we will not assert our right to these trademarks, service marks and trade names.
PART I
10-K Introduction
This section provides an overview of AMN Healthcare Services, Inc. It does not contain all of the information you should consider. Please read the entire Annual Report on Form 10-K carefully before voting or making an investment decision.
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| In Particular, Please See the Following Sections |
| Forward-Looking Statements | | Risk
Factors |
| | Risk
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| Management’s Discussion & Analysis | | Financial
Statements
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Index of frequently requested 10-K information
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| Five-Year Performance Graph | |
Selected Financial DataResults of Operations | |
Results of Operations | |
| Liquidity and Capital Resources | |
| Financial Statement Footnotes | |
Item 1. Business
Overview of Our Company and Business Strategy
We areAMN Healthcare empowers the future of care through the nation’s largest network of highly-qualified healthcare professionals. As the leader and innovator in total talent solutions for the healthcare sector in the United States.States, we tailor our solutions to our clients’ challenges and goals, and provide staffing, talent optimization strategies, and technology solutions aimed to support caregivers and improve patient outcomes. We are passionate about all aspects of our mission:mission to:
Create recruiting and retention solutions that help healthcare organizations cope with increasing supply and demand pressures caused by aging of the patient population and clinical labor force.
•Deliver the right talent and insights to help our clientshealthcare organizations optimize their workforce.
•Provide healthcare professionals opportunities to do their best work toward high-quality patient care.
•Create a values-based culture of innovation in which our team members can achieve their goals.
Our solutions enable our clients to optimize their workforce, simplify staffing complexity, increase efficiency, and elevate the patient experience. Our comprehensive suite of talent solutions provides management, staffing, recruitment, language services, technology, telehealth and virtual care management, analytics, and related services to build and manage all or part of our clients’ healthcare workforce needs. We offer temporary and permanent career opportunities to our healthcare professionals, from nurses, doctors, and allied health professionals to healthcare leaders and executives temporary, project, and permanent career opportunities.in a variety of settings across the nation.
Our strategy is designed to support growth in ourthe number and size of customer relationships and expansion of the markets we serve, while enhancing our profitability and operating leverage.serve. Driving increased adoption of our existing talent solutions through cross-selling will deepen and broaden our customer relationships. We will continue to innovate, develop and invest in
new, complementary service and technology solutions to our portfolio that optimize and manage our clients’ workforce, andenhance the patient experience, better engage our talent network.network and expand into different healthcare delivery settings. We expect this will helpenable us to expand our strategic customer relationships, to help clients address their workforce pain points, while driving more recurring revenue, with an improved margin mix that similar to our leadership in managed services programs (“MSP”), will be less sensitive to economic cycles.
Over the past decade, our business has evolved beyond traditional healthcare staffing and recruitment services; we have become a strategic total talent solutions partner with our clients. We expanded our portfolio to serve a diverse and growing set of healthcare talent-related needs. In addition to our healthcare professionaltraditional staffing and recruitment services, our suite of healthcare workforce solutions includes MSPs,managed services programs (“MSP”), vendor management systems (“VMS”), medical language interpretation services, predictive labor analytics, workforce optimization technology and consulting, clinical labor scheduling, recruitment process outsourcing (“RPO”), revenue cycle solutions, and credentialing software services, and virtual care management services. We enable clients to build, manage and optimize their healthcare talent to deliver great patient outcomes and experience.experiences. Our talent network includes thousands of highly skilled, experienced professionals who trust us to place them in environments that expand and leverage their qualifications and expertise.
When developing and acquiring talent solutions, both services and technology, we consider many important criteria: (1) identifying and addressing the most pressing current and future needs of our clients and talent network; (2) alignment with our core operations, expertise, and access to healthcare professionals; (3) ways to deepen and broaden our client and healthcare professional relationships; (4) talent and technology solutions that expand the markets we serve; and (5) businesses that reduce our sensitivity to economic cycles;cycles and (5) offerings that differentiate us from competitors.enhance our profitability.
Continuous improvement of our operations and business technology is a core component of our growth strategy and profitability goals. In 2015, we embarked on a multi-year investment in the modernization of our front office, back office and infrastructure domains. We also have accelerated the integration of technology-based solutions in our core recruitment processes through targeted investment in digital capabilities, mobile applications and data analytics. These innovationstechnology investments provide a more seamless and efficient workflow for our team members, our healthcare professionals and our clients. OurFor example, throughout 2022, we continued to add functionality to AMN Passport, our top clinician-rated mobile application. AMN Passport, which has more than 170,000 registered users and approximately 40,000 average monthly active users as of January 2023, provides a centralized experience for nurses and allied professionals to find, book and manage assignments, access time and pay details, and receive instantaneous alerts and updates, while also creating operational efficiencies through the ability to customize job preferences, store and manage credentials, electronically sign important documents and contact our dedicated recruiters. We believe our investments in technology systems will help us realize greater scale, agility, and cost efficiencies when implemented.efficiencies.
Successful implementationHuman Capital Management
Development of a broad base of healthcare professionals and corporate team members who feel valued, respected and supported is essential to driving shareholder value and achieving our long-term growth objectives. To support these objectives, our human capital management strategy focuses on talent acquisition, engagement, retention, diversity, equity, and inclusion, and employee well-being.
The strength of our human capital management strategy relieswas instrumental throughout the pandemic and continues to be foundational as we invest resources to address talent shortages, including the severe healthcare labor shortages faced by our clients. Our commitment to supporting our colleagues’ mental, physical, and economic well-being continued throughout 2022. We are working hard every day to ensure that all our team members and healthcare professionals have the resources available to help them navigate the continued challenges and stresses they face in large part uponthis environment. To reward our employees for their extraordinary efforts and dedication to advancing AMN Healthcare and supporting our clients and healthcare professionals during 2022, we paid one-time cash bonuses to our regular full-time and part-time employees. Also, for a portion of the superior executionyear, we waived healthcare insurance co-premiums for our eligible corporate team members and increased our 401(k) and deferred compensation matching contribution.
The care, support and safety of our key initiatives byfrontline healthcare professionals remains at the forefront for us. We have provided our management, saleshealthcare professionals with additional support through access to employee assistance programs, on demand mental health resources through nonprofit partners and operations teams. Accordingly,third-party vendors, sick pay while quarantined, wellness products and services to care for them while they are caring for our communities. Additionally, in 2022, our corporate clinician team members placed over 14,000 care calls to our healthcare professionals to assure they had the necessary support during this stressful time.
We also continued our AMN Healthcare Hardship Fund which began in 2021, providing financial support for team members experiencing extreme financial hardship and launched our AMN Caring for Caregivers Fund to provide similar support to our healthcare professionals. Through these funds, corporate team members and healthcare professionals can receive financial support for qualifying events such as life-threatening or serious illnesses, natural disasters, funeral costs, or other events causing financial strain. This support is in addition to the insurance and other benefits and employee assistance programs available to support our team members and healthcare professionals.
As of December 31, 2022, we had 4,230 corporate team members, which includes both full-time and part-time employees. During the fourth quarter of 2022, we had an average of (1) 15,183 nurses, allied and other healthcare professionals, (2) 451 executive and clinical leadership interim staff, and (3) 1,983 medically qualified interpreters working for us. This does not include independent contractors, such as our locum tenens and contract interpreters, who were not our employees in 2022.
Health and Safety
AMN is committed to providing comprehensive benefit options, including health insurance, a prescription drug benefit, life and disability insurance, and paid time off. We also provide a variety of other voluntary programs to support the health and well-being of our team members and their families, such as health and flexible spending accounts, family leave, adoption assistance, education assistance, retirement plans, employee assistance programs, and financial wellness programs.
To assure the health and safety of our corporate team members, we worked primarily in a remote work environment for over two years in response to the pandemic. In June 2022, as the pandemic subsided and workplace safety improved with the availability of vaccines, we carefully returned to the office in phases. In preparation, AMN implemented a COVID-19 prevention and response program designed to educate our team members on reporting protocols for positive cases and exposures, and outline the investigation and response protocol for identified cases in the workplace. We are committed to ensuring our offices are a safe place for our team members through continuing education and awareness, including supplemental health and safety training for team members that visit our offices and performing periodic assessments to identify and correct recognizable workplace hazards. We now have embraced a hybrid work environment with team members working a combination of in the office and virtually. Throughout these transitions, our team members have continued to support our clients and healthcare professionals with the highest level of service, regardless of their location and without disruption to our business operations.
As our corporate team members returned to an office environment, the health and safety of our team members remained paramount. We believe it is important to bring our teams together to instill and reinforce our values-based culture, provide an opportunity to build meaningful connections with each other and our communities and provide professional development and training opportunities. Our team members are dispersed across the country, and we have differentiatedoffices in Dallas, TX; San Diego, CA; Omaha, NE; Boca Raton and Clearwater, FL; Savannah, GA; and Hickory, NC.
Learning and Professional Development
AMN’s purpose is to help our employment value proposition to attractteam members and retain diverse and highly effective team members. We foster a growth-oriented, values-driven culture, talented leadership, and a collegial work environment that challenges and encourages us to develop and meethealthcare professionals achieve their personal and professional goals. To fulfill this purpose, we continue to make significant investments in our multi-faceted professional development programs.
We serve the clinical education needs of our healthcare professionals through a multi-pronged approach: pre-hire skills checklists to self-assess current clinical expertise, skills, and knowledge; pre-assignment knowledge assessments to test knowledge in a specialty practice area; pre-assignment required training; access to free continuing education courses while on assignment; and opportunities to transition into practice in specialty settings. Additionally, through our Chief Nurse Officer Academy, we provided leadership skills training to more than 100 aspiring nurse executives in 2022.
Throughout 2022, approximately 1,400 team members were promoted or transferred internally into new positions, representing one third of our corporate team members. Our professional development education assistance program provides reimbursement to our corporate team members to advance their knowledge and skills through certificate and degree programs. We offer leadership development curriculums led by our team of learning and talent development professionals for new leaders, called LEAD at AMN, as well as a leadership curriculum for our individual contributors who are seeking leadership positions, which we call our emerging leaders program. In 2022, we also partnered with a university to offer a virtual certificate program for high-potential leaders and expanded access to executive coaching programs. Additionally, we provide a mentorship program to provide a larger group of our team members the opportunity to connect with others across the company to support their development, strengthen their skills, and deepen relationships. Nearly 10% of our team members participated in the mentoring program during 2022 as either a mentor or mentee. These programs are supplemented with professional development resources from third-party vendors and our corporate memberships in large industry associations, to which every team member has access.
Our training and development programs include curriculum that promotes and nurtures our values-based culture and commitment to ethics, compliance and diversity, equity and inclusion (as detailed more specifically below). Substantially all of our people leaders completed our inclusive leaders curriculum and, in 2022, we had a 96% completion rate for our ethics and compliance training program, which includes, but is not limited to, training on our Code of Conduct, harassment prevention and cybersecurity.
Diversity, Equality, Equity and Inclusion
At AMN our diversity, equality, equity and inclusion (“DEI”) philosophy is grounded in the belief that we should respect all voices, seek diverse perspectives, and succeed when we act together as a positive force for all of humanity. We have the opportunity to influence each other, our industry, and our communities by fostering a diverse team. We are committed to fosteringactively engaging in building an organization and maintainingsociety where equality is the norm, equity is achieved, and inclusion is universal so that we may all thrive. Our diverse workforce and inclusive environment drives the innovation and better outcomes that have made us the leader in total talent solutions.
We are committed to driving DEI at AMN and throughout our value chain and industry. We believe strongly that cultivating a diverse, equitable and inclusive workforce enables us to recruit and retain the best talent, and to develop that talent so that we can best address the evolving needs of our stakeholders.
To achieve a diverse workforce that drives innovationreflects the communities that we serve, we are committed to sourcing candidates from historically underrepresented groups and better business outcomes through capitalizing on the differing backgrounds, experiences,have focused recruitment efforts to hire team members from a variety of backgrounds. In 2022, we launched a corporate fellowship program with Hiring Our Heroes, a veterans organization, and perspectivesexpanded our partnerships with Historically Black Colleges and Universities Career Development Marketplace and early talent platform Handshake. We track our hiring, promotion, retention and engagement rates to inform our overall progress in attainment of our workforce goals. Our commitment to equity extends to our compensation philosophy and our leadership development strategy, including identifying high-potential diverse talent within the Company.
While the diverse backgrounds and experiences we seek are broad, here is a snapshot of the diversity of our corporate team members. Asmembers as of January 2020, 65%2023: 69% of our team members are women, 62%women; 63% of our supervisor through senior manager roles are held by women, 44%women; 56% of our board of directors are women, 32%women; 45% of our team members are non white, andpeople of color; our team is 56%58% Millennials, 35%31% Generation X, 6% Baby Boomers, and 9% Baby Boomers.5% Generation Z; and team members self-identified as veterans, disabled, and LGBTQ+, each representing approximately 2% to 3% of our team. We have offices acrossincreased the country to draw talented professionalspercentage representation of our team members and service our national baseleaders from historically underrepresented groups by 11% and 12%, respectively, since 2019.
Each of clients and healthcare professionals. In 2018,the last six years, AMN was recognized on the Fortune 100 Fastest Growing Companies list and was also named to the 2019 Human Rights Campaign Corporate Equality Index. We werehas been named to the Bloomberg Gender-Equality Index. AMN has received a top ranking – 95 out of 100 – in the Human Rights Campaign Foundation’s Corporate Equality Index in each of the last four years. AMN also received the 2022 National Association of Corporate Directors Diversity, Equity and Inclusion Award for 2019public companies in the mid-cap category, which recognizes top companies and 2020. AMN continuestheir boards in leveraging the power of diversity, equality, equity and inclusion to be recognizedenhance their organization and create long-term, measurable benefit for all stakeholders. We believe that human capital management infrastructure, including our DEI commitment, is fundamental to our continued recognition as one of America’s Most Responsible Companies by Newsweek in each of the last four years.
Team Member Communication and Engagement
Team member engagement and wellness is of critical importance to our success. In 2022, we continued to prioritize engaging with our team members through monthly town halls and an enterprise-wide company meeting with our chief executive officer and other senior executives.
In addition, in 2022, we continued our focus on increasing opportunities for team members to build connections with colleagues through our growing number of employee resource groups (“ERG”). Best practice research indicates that team member engagement and retention is positively impacted if team members are connected to peers who share their viewpoints and backgrounds and leaders who are invested in their success. We have invested in and dedicated resources to build an inclusive infrastructure to support our ERGs. These resource groups continue to grow and foster engagement through their close alignment with the diverse interests and backgrounds of our team members. During 2022, we increased the number of ERGs from eight to ten, and 39% of our corporate team members are members of at least one ERG. Each of our ERGs is sponsored by one or more members of our executive team.
To assess the engagement of our team members and take action to mitigate risks associated with a leading employerlack of engagement and turnover, in 2022 we conducted an engagement survey of our team members early in the year followed by a shorter pulse survey later in the year. The engagement and pulse surveys had participation rates of roughly 80% and engagement scores exceeded the benchmark scores. The engagement results were discussed with our board of directors and informed our annual human capital strategic planning initiatives for 2023. Team member engagement helps to strengthen our retention rate, which was recognized among87% in 2022, our highest in the 2019 Becker’s Hospital Review Top 150 Places to Work in Healthcare and 2019 National Best & Brightest Companies to Work For lists.past five years.
Our Services
In 2019,2022, we conducted our business through three reportable segments: (1) nurse and allied solutions, (2) locum tenensphysician and leadership solutions, and (3) othertechnology and workforce solutions. We set forthdescribe each segment’s revenue and operating incomeresults under “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations.” Through our businessOur go-to-market strategy blends solutions from all three reportable segments, we provide our healthcare clients with a wide range of workforce solutionscombining staffing, talent planning and staffing services as set forth below.acquisition, and technology-enabled solutions.
Workforce Staffing
(1) Travel Nurse Staffing. We provide clientsoffer a range of specialty recruitment and temporary assignment lengths for nursing. A rigorous quality process ensures that each nursing candidate possesses the necessary training, licensure, and clinical competencies needed for a client facility. Nurse staffing solutions that we offer include (a) travel nurse staffing which are typically for a 13-week assignment but can support a wide range of assignment lengths, (b) international nurse staffing for which we recruit registered nurses from outside of the United States on long-term contracts ranging from
24 to 36 months (or for direct placement with nurses, most of themour clients), (c) crisis nurse staffing (commonly referred to as critical staffing and rapid response nursing) for which we quickly coordinate and deploy registered nurses to workprovide temporary assignments under our flagship brand, American Mobile,assistance during critical periods such as well as under our Onward Healthcare, Nurses Rx,unexpected specialty gaps and Advanced brands. Assignments in acute-care hospitals,urgent needs, including teaching institutions, trauma centerspandemic surges, natural disasters and community hospitals, comprise the majority of our assignments. The length of the assignment varies with a typical travel nurse assignment of 13 weeks. Under our O’Grady-Peyton brand, we also recruit nurses internationally from English speaking countries who immigrate to the United States under a permanent resident visa (Green Card) and who typically work for us for a period of 24 months.
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(2) | Rapid Response Nurse Staffing and Labor Disruption Services.We provide a shorter-term staffing solution of typically up to eight weeks under our NurseChoice and HealthSource Global Staffing brands to address hospitals’ urgent need for registered nurses. NurseChoice and HealthSource Global Staffing recruit and place nurses who can begin assignments within one to two weeks in contrast to the three to five week lead time that
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may be required for travel nurses. We also provideother emergency situations, (d) labor disruption servicesstaffing for which we provide crucial support for clients involved in strikes of nurses and allied professional staff, and (e) local staffing of all nursing specialties, often in support of our MSP clients, covering short-term assignments with same-day shifts that potentially last for several weeks.
(2)Allied Staffing.We provide allied health professionals to acute-care hospitals and other healthcare facilities such as skilled nursing facilities, rehabilitation clinics, schools, and pharmacies. Allied health professionals include such disciplines as physical therapists, respiratory therapists, occupational therapists, medical and radiology technologists, lab technicians, speech pathologists, rehabilitation assistants and pharmacists. Our solutions for schools feature an advanced teletherapy platform, Televate, and qualified school speech-language pathologists, psychologists, nurses, social workers, and other care providers who provide customized care and interactive learning plans to engage students.
(3)Revenue Cycle Solutions. AMN Revenue Cycle Solutions provides skilled labor solutions for remote medical coding, clinical documentation improvement, case management, and clinical data registry, and also provide auditing and advisory services.
(4)Physician and Advanced Practice Staffing. We provide locum tenens staffing services through which we offer clients thousands of physicians of all specialties and advanced practice and other clinicians. Typically on an independent contractor basis, locum tenens professionals are placed on temporary assignments with all types of healthcare organizations throughout the United States, including hospitals, health systems, medical groups, occupational medical clinics, psychiatric facilities, government institutions and insurance companies. We also offer full-service, permanent physician search across many specialties and modalities, specializing in recruiting and placing top physicians and advanced practitioner talent in jobs across the country.
(5)Interim Leadership Staffing.We provide executive and clinical leadership interim staffing. Practice areas include senior healthcare executives, physician executives, chief nursing officers and other clinical and operational leaders. Interim leaders provide strategic guidance and assist in setting short and long-term goals to offer immediate support, maintain momentum, and contribute leading practices and perspectives. Our interim leaders enjoy the flexibility of a consulting role with the stability of full-time employment.
(6)Executive Search and Academic Leadership. We provide executive leadership search services across the healthcare industry with areas of focus including academic medical centers and children’s hospitals nationwide. This business line provides us greater access to the “C-suite” of our clients and prospective clients, which we believe helps improve our visibility as a strategic partner to them and helps provide us with cross-selling opportunities.
Talent Planning & Acquisition
(7)Managed Services Programs.Many of our clients and prospective clients use a number of healthcare staffing agencies to fulfill their healthcare professional needs. We offer a comprehensive managed services program, in which we manage all or a portion of a client’s contingent staffing needs. Through our MSPs, we place our own healthcare professionals and utilize other staffing agencies to fulfill the client’s needs. We believe an MSP optimizes our clients’ staffing models, increasing efficiencies and often providing cost savings while enhancing the patient experience. We often use our own VMS technology as part of our MSPs, which we believe further enhances the value of our service offering. In 2022, we had approximately $5.3 billion in spend under management through our HealthSource Global Staffing brand.
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(3) | Local, or Per Diem, Staffing. Through our Nursefinders brand, we provide our clients local staffing, often in support of our MSP clients. Local staffing involves the placement of locally-based healthcare professionals on daily shift work on an as-needed basis. Hospitals and healthcare facilities often give only a few hours’ notice of their local staffing assignments that require a turnaround from their staffing agencies of generally less than 24 hours.
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(4) | Locum Tenens Staffing. We place physicians of all specialties, advanced practice clinicians and dentists on an independent contractor basis on temporary assignments with all types of healthcare organizations throughout the United States, including hospitals, health systems, medical groups, occupational medical clinics, psychiatric facilities, government institutions and insurance companies. We recruit these professionals nationwide and typically place them on assignment lengths ranging from a few days up to one year. We market these services through our Staff Care and Locum Leaders brands.
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(5) | Allied Staffing.We provide allied health professionals under the Med Travelers, Club Staffing and Advanced brands to acute-care hospitals and other healthcare facilities such as skilled nursing facilities, rehabilitation clinics, schools, and retail and mail-order pharmacies. Allied health professionals include such disciplines as physical therapists, respiratory therapists, occupational therapists, medical and radiology technologists, lab technicians, speech pathologists, rehabilitation assistants and pharmacists.
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(6) | Revenue Cycle Solutions. Our AMN Revenue Cycle Solutions brand provides skilled labor solutions for remote medical coding, clinical documentation improvement, case management, and clinical data registry, and also provides auditing and advisory services. Clients include hospitals and physician medical groups nationwide.
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(7) | Physician Permanent Placement Services. We provide retained search, physician permanent placement services to hospitals, healthcare facilities and physician practice groups throughout the United States through our Merritt Hawkinsbrand.
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(8) | Interim Leadership Staffing and Executive Search Services.Under the brand name B.E. Smith, we provide executive and clinical leadership interim staffing, healthcare executive search services and advisory services. Practice areas include senior healthcare executives, physician executives, chief nursing officers and other clinical and operational leaders. We also provide physician executive leadership search services focused on serving academic medical centers and children’s hospitals nationwide. This business line provides us greater access to the “C-suite” of our clients and prospective clients, which we believe helps improve our visibility as a strategic partner to them and helps provide us with cross-selling opportunities.
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(9) | Recruitment Process Outsourcing. We offer our clients RPO services, customized to their particular needs, in which we recruit, hire and/or onboard permanent clinical and nonclinical positions on behalf of the client. Our RPO program leverages our expertise and support systems to replace or complement a client’s existing internal recruitment functions for permanent hiring needs, providing cost-effective flexibility to our clients to determine how to best obtain and use recruiting resources.
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(10) | Managed Services Programs.Many of our clients and prospective clients use a number of healthcare staffing agencies to fulfill their healthcare professional needs. We offer a comprehensive managed services program, in which we manage all or a portion of a client’s staffing needs. This service includes both the placement of our own healthcare professionals and the utilization of other staffing agencies to fulfill the client’s staffing needs. We believe an MSP increases efficiencies and cost savings for our clients and facilities staffing optimization. We often use our own VMS technology as part of our MSP, which we believe further enhances the value of our service offering. In 2019, we had approximately $1.4 billion in annualized gross billings under management under our MSPs and approximately 45%MSPs and approximately 64% of our consolidated revenue flowed through MSP relationships, which has steadily increased over the past decade.
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(11) | Vendor Management Systems.Some clients and prospective clients prefer a vendor-neutral VMS technology that allows them to self-manage procurement of contingent clinical labor and their internal float pool. We provide three software as a service (“SaaS”)-based VMS technologies, ShiftWise, Medefis and b4health, to clients that desire this option. Our VMS technologies provide, among other things, control over a wide variety of tasks via a single system and consolidated reporting. In 2019, we had approximately $1.2 billion in annualized gross billings flow through our VMS programs, for which we typically earn a 4-5% fee.
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(12) | Workforce Optimization Services.We provide workforce optimization services, including consulting, data analytics, predictive labor demand modeling and SaaS-delivered scheduling technology. Our Avantas business provides proprietary scheduling software, Smart Square, which uses predictive analytics to create better, more
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accurate and timely staffing plans for a client, which has been demonstratedsteadily increased over the past decade. Together with the vendor-neutral spend through our VMS programs (as discussed below), we had approximately $12.1 billion of spend under management during 2022.
(8)Recruitment Solutions. We partner with clients to reducestreamline their permanent workforce planning and recruitment process through one efficient, agile solution. Our recruitment solutions, which many refer to as RPO, are customized to the client’s particular needs, in which we recruit, hire and/or onboard permanent clinical and nonclinical positions on their behalf. We provide technology and data intelligence that enable sustainable, long-term improvement and offer flexible solution options, agile, scalable processes in our pay-for-performance model.
Technology
(9)Language Interpretation. AMN Language Services provides healthcare interpretation services via proprietary platforms that enable video remote interpretation, over the phone interpretation, onsite interpretation, and telehealth interoperability, with more than 250 health systems, more than 2,000 hospitals, and thousands of clinics using our solutions. These services are all supported by proprietary technology platforms, which enable real-time routing of video and audio calls, drive client efficiency with an in-person scheduling mobile application, and power interoperability with multiple telehealth platforms and EMRs.
(10) Vendor Management Systems.Some clients and prospective clients prefer a client’svendor-neutral VMS technology that allows them to self-manage the procurement of contingent clinical labor and their internal float pool. If clients use other staffing companies (associate vendors), our software as a service (“SaaS”)-based VMS technologies help them track and efficiently organize their staffing process. Our current VMS products are ShiftWise, Medefis and b4health. Our VMS technologies provide, among other things, control over a wide variety of tasks via a single system and consolidated reporting. In 2022, we had approximately $6.7 billion in gross spend flow through our VMS programs, for which we typically earn a fee as a percentage of spend.
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(13) | Credentialing Services
(11) Scheduling and Staff Planning.We offer Smart Square, healthcare scheduling software that combines demand forecasting (predictive analytics) with robust scheduling functionality, enterprise transparency, patented open shift management, and business intelligence tools all-in-one application. The SaaS platform provides fast implementations and is utilized in acute care, clinics, ancillary, long-term care and senior care settings. We also provide consulting services to our clients to evaluate their staffing spend and offer recommendations for savings by optimizing workforce and scheduling capabilities.
(12) Credentialing. We provide an all-in-one credentialing solution, Silversheet, to help our clients maintain a healthy and compliant facility. This software solution is designed to help facilities credential smarter and faster through automating tedious tasks, preventing errors, and centralized credentialing.
(13) Post-Acute and Home Health Virtual Care. We provide an end-to-end solution that enables regional and community hospitals, multi-practice physician groups, retail and urgent care clinics, and behavioral health practices to deliver virtual care via a single platform. The easy-to-use HIPAA-compliant platform expands our capabilities with a “platform-plus-providers” experience that helps healthcare organizations provide 24/7 patient care (including after hours and weekend support) and remote patient monitoring virtually. The white-labeling feature enables an organization’s brand to be showcased on the virtual care platform, boosting patient awareness and engagement.
We typically experience modest seasonal fluctuations during our fiscal year, and they tend to vary among our businesses and reportable segments. These fluctuations can vary slightly in intensity from year to year.
. Through our acquisition of Silversheet, we provide innovative credentialing software solutions to clinicians and healthcare enterprises. Silversheet’s products help reduce the complexity and challenges of the clinician credentialing process, enhance our clients’ ability to provide safe, effective, and high-quality medical care for patients, and greatly improve the clinician experience.
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(14) | Digital Staffing. Through investment in new technologies, we are streamlining the match of the right clinicians to the right assignment to meet the on-demand needs of our clients. The AMN Hub mobile application allows nurses and allied professionals to quickly search hundreds of jobs, book multiple shifts that match their qualifications and availability, and receive instantaneous shift confirmation, helping our clients quickly fill workforce gaps.
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(15) | Flex Pool Management. We offer an innovative and comprehensive workforce solution that provides technology and services to build and manage dedicated resource pools. This regional workforce model utilizes standardized processes, integrated systems, and advanced scheduling technology to mobilize clinicians and meet the growing demand of our MSP clients.
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Our Healthcare Professionals
The recruitment of a sufficient number of qualified healthcare professionals to work on temporary assignments and for placement at healthcare organizations is critical to the success of our business. Healthcare professionals choose temporary assignments for a variety of reasons that include seeking flexible work opportunities, exploring diverse practice settings, building skills and experience by working at prestigious healthcare facilities, avoiding the demands and political environment of working as permanent staff, working through life and career transitions, and as a means of access into a permanent staff position.
We recruit our healthcare professionals, depending on the particular service line, under the following brands: AMN Healthcare, American Mobile, Nursefinders, NurseChoice, NursesRx, HealthSource Global Staffing, Onward Healthcare, O’Grady Peyton International, Connetics, Med Travelers, Club Staffing, Advanced, Onward Healthcare,Staff Care, B.E. Smith, O’Grady Peyton International, Staff Care, Locum Leaders,and Merritt Hawkins, and AMN Revenue Cycle Solutions.Hawkins. Our multi-brand recruiting strategy is supported by innovative and effective digital-first marketing programs that focus on lead management, including our digital presence on websites, social media, and mobile applications. Word-of-mouth referrals from the thousands of current and former healthcare professionals we have placed enhance our effectiveness at reaching healthcare professionals. While we are committed to this multi-brand strategy, we regularly assess our brands to drive brand clarity and maximize efficiencies.
Our process to attract and retain healthcare professionals for temporary assignments and permanent placement depends on (1) offering a large selection of assignments and placements in a variety of geographies and settings with opportunities for career development, (2) creating attractivecompetitive compensation packages, (3) developing passionate, knowledgeable recruiters and service professionals who understand the needs of our healthcare professionals and provide a personalized approach, and (4) maintaining a reputation for service excellence. The attractive compensation, benefits and reimbursement package that we
provide our temporary healthcare professionals includes a competitive wage, professional development opportunities, professional liability insurance, 401(k) plan, and health insurance. In addition, we may provideinsurance and reimbursements for housing, meals and incidentals, travel and housing, or we may provide company housing if a healthcare professional elects not to receive reimbursement.expenses.
Our Geographic Markets and Client Base
During each of the past three years, (1) we generated substantially all of our revenue in the United States and (2) substantially all of our long-lived assets were located in the United States. We typically generate revenue in all 50 states. During 2019,2022, the largest percentages of our revenue were concentrated in California, New YorkTexas and Texas.Florida.
More than half of our temporary and contract healthcare professional assignments occur at acute-care hospitals. In addition to acute-care hospitals, we provide services to sub-acute healthcare facilities, physician groups, rehabilitation centers, schools, home health service providers and ambulatory surgery centers. Our clients include many of the largest and most prestigious and progressive health care systems in the country, include Kaiser Foundation Hospitals, Providence Health & Services, CommonSpirit Health, LifePoint Health, Stanford Hospital and Clinics, PeaceHealth, MedStar Health, and Tenet Health.country. Kaiser Foundation Hospitals (and its affiliates), to whom we provide clinical managed services, comprised approximately 13%18% of our consolidated revenue and 18%22% of our nursingnurse and allied solutions segment’ssegment revenue for the twelve monthsfiscal year ended December 31, 2019.2022. No other client healthcare system or single client facility comprised more than 3%6% of our consolidated revenue for the twelve monthsfiscal year ended December 31, 2019.2022.
Our Industry
The primary healthcare service markets in which we compete are U.S. temporary and contract healthcare staffing, workforce solutions and executive search. Staffing Industry Analysts (“SIA”) estimates that the segments of the healthcare staffing markets in which we primarily operate have an aggregate 2019 estimated market size of $17.5 billion, of which travel nurse, per diem nurse,managed service programs, locum tenens, and allied healthcare comprise $5.6 billion, $3.7 billion, $4.0 billion and $4.2 billion, respectively.language services. We also operate within the interim leadership, executive search, physician permanent placement, RPO, VMS, revenue cycle solutions,telehealth technology, and workforce optimization and consulting services markets. We estimate the market size of these additional segments to be at least $5.0 billion in 2020.
Industry Demand Drivers
Many factors affect the demand for contingent and permanent healthcare talent, which, accordingly, affects the size of the markets in which we primarily operate. Of these many factors, we believe the following serve as some of the most significant drivers of demand.
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• | •Economic Environment and Employment Rate. Demand for our services is affected by growth of the U.S. economy and the U.S. economy, which influences the employment rate. Growth in real U.S. gross domestic product generally drives rising employment rates. Favorable macro drivers typically result in increased demand for our services. Generally, we believe a positive economic environment and growing employment rate. Growth in real U.S. gross domestic product generally drives rising employment rates. Favorable macro drivers typically result in increased demand for our services. Generally, we believe a positive economic environment and low unemployment lead to increasing demand for healthcare services. As employment levels rise, healthcare facilities, like employers in many industries, experience higher levels of employee attrition and find it increasingly difficult to obtain and retain permanent staff. •Supply of Healthcare Professionals. While reports differ on the existence and extent of current and future healthcare professional shortages, many regions of the United States are experiencing a shortage of physicians and nurses that we believe will persist in the future. According to the Association of American Medical Colleges, the physician shortage is projected to be between 38,000 and 124,000 physicians by 2034. In nursing, McKinsey & Company estimates a nationwide shortage of between 200,000 and 450,000 nurses available for direct patient care by 2025. We believe the nursing shortage has been exacerbated by the COVID-19 pandemic through nurse burnout, attrition, and retirements. Demand for our services is positively correlated with activity in the permanent labor market. When nurse vacancy rates increase, temporary nurse staffing orders typically increase as well. •General Demand for Healthcare Services. Changes in demand for healthcare services, particularly at acute healthcare hospitals and other inpatient facilities, like skilled nursing facilities, affect the demand for our services. According to the U.S. Department of Health and Human Services, with the passage of the Affordable Care Act, the uninsured population declined by more than 18 million people between 2010 and 2018. Growth of the insured population contributed to a relatively sharp increase in national healthcare expenditures beginning in 2014. Additionally, the U.S. population continues to age, and medical technology advances are contributing to longer life expectancy. A pronounced shift in U.S. age demographics is expected to boost growth of health expenditures, projected by the Centers for Medicare & Medicaid Services at a 5.1% annual rate on average from 2021-2030. According to the U.S. Census Bureau, the number of adults age 65 or older is on pace to grow an estimated 30% between 2020 and 2030. People over 65 are three times more likely to have a hospital stay and twice as likely to visit a physician office compared with the rest of the population. These dynamics could place upward pressure on demand for the services we provide in the coming years. Not only does the age-demographic shift affect healthcare services demand, it also complicates the supply of skilled labor, as an increasing number of clinicians are aging out of the workforce. Additionally, the COVID-19 pandemic resulted in an increase in hospitalizations, vaccinations and testing across the country. This additional demand for healthcare services resulted in an increased demand for our services, especially in our nurse and allied solutions segment. We expect demand for these |
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• | Supply of Healthcare Professionals. While reports differ on the existence and extent of current and future healthcare professional shortages, many regions of the United States are experiencing a shortage of physicians and nurses that we believe will persist in the future. According to the Association of American Medical Colleges, the physician shortage is expected to range from 46,900 to 121,900 physicians by 2032. In nursing, geographic and specialty-based shortages are also expected through 2030. Demand for our services is positively correlated with activity in the permanent labor market. When nurse vacancy rates increase, temporary nurse staffing orders typically increase as well.
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• | General Demand for Healthcare Services. Changes in demand for healthcare services, particularly at acute healthcare hospitals and other inpatient facilities, like skilled nursing facilities, affect the demand for our services. According to the U.S. Department of Health and Human Services, with the passage of the Affordable Care Act, the uninsured population declined by more than 18 million people between 2010 and 2018. Growth of the insured population contributed to a relatively sharp increase in national healthcare expenditures beginning in 2014. Additionally, the U.S. population continues to age, and medical technology advances are contributing to longer life expectancy. A pronounced shift in U.S. age demographics is expected to boost growth of health expenditures, projected by the Centers for Medicare & Medicaid Services at a 5.5% annual rate from 2018-2027. According to the U.S. Census Bureau, the number of adults age 65 or older is on pace to grow an estimated 38% between 2015 and 2025. People over 65 are three times more likely to have a hospital stay and twice as likely to visit a physician office compared with the rest of the population. These dynamics could place upward pressure on demand for the services we provide in the coming years. Not only does the age-demographic shift affect healthcare services demand, it also complicates the supply of skilled labor, as an increasing number of clinicians are aging out of the workforce.
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• | Adoption of Workforce Solutions. We believe healthcare organizations increasingly seek sophisticated, innovative and economically beneficial total talent solutions that improve patient outcomes. We believe the prevalence of workforce solutions, such as MSP, VMS, RPO and workforce optimization tools, in the healthcare industry is still underpenetrated in comparison with non-healthcare sectors. During 2019, approximately 45% of our consolidated revenues were generated through MSP relationships, which we estimate is higher than our competitors. The talent shortage and significance of clinical labor in healthcare facilities’ cost structures may accelerate the adoption of strategic outsourced workforce solutions, which could place upward pressure on demand for the services we provide.
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•Adoption of Workforce Solutions. We believe healthcare organizations increasingly seek sophisticated, innovative and economically beneficial total talent solutions that improve patient experience and outcomes. We believe the prevalence of workforce solutions, such as MSP, VMS, RPO and workforce optimization tools, in the healthcare industry is still underpenetrated in comparison with non-healthcare sectors. During 2022, approximately 64% of our consolidated revenues were generated through MSP relationships, which we estimate is higher than our competitors.
Industry Competition
The healthcare staffing and workforce solutions industry is highly competitive. We compete in national, regional and local markets for healthcare organization clients and healthcare professionals. We believe that our comprehensive suite of total talent solutions, our commitment to quality and service excellence, our execution capabilities, and our national footprint create a compelling value proposition for our existing and prospective clients that give us distinct, scalable advantages over smaller, local and regional competitors and companies whose servicesolution offerings, sales and execution capabilities are not as robust. The breadth of our servicestalent solutions allows us to provide even greater value through a more strategic consultative and solution-orientedconsultative approach to our clients. In addition, we believe that our size, scale and sophisticated candidate acquisition processes give us access to a larger pool of available, high qualityhighly-qualified candidates than most of our competitors, while substantial word-of-mouth referral networks and recognizable brand names enable us to attract, engage, and grow a diverse, high-quality network of healthcare professionals.
Larger firms, such as us, also generally have a deeper, more comprehensive infrastructure with a more established operating model and processes that provide the long-term stability and foundation for quality standards recognition, such as the Joint Commission staffing agency certification and National Committee for Quality Assurance Credentials Verification Organization certification. In its ratings for both MSPs and total workforce solutions, HRO Today namedrecognized AMN Healthcare as the number one position among all MSP providers in size of deals, andtop-ranking healthcare workforce provider based on overall capabilities; we also were honored in the Baker’s Dozen for quality of services, breadth of services and overall MSP capabilities. Once again, Staffing Industry Analysts recognized AMN’s U.S. industry leadership naming us as the largest temporary healthcare staffing firm, the largest travel nurse staffing provider and the largest allied healthcare staffing provider.size of deals.
We are the largesta leading provider of nurse, allied and allied healthcarelocum tenens staffing in the United States. In the nurse and allied healthcare staffing, business, we compete with a fewseveral national competitors together with numerous smaller, regional and local companies. We believe we are the third largest provider of locum tenens staffing services in the United States. The locum tenens staffing market consists of many small- to mid-sized companies with only a relatively small number of national competitors of which we are one. The healthcare interim leadership staffing, healthcare executive search services, and physician permanent placement services and mid-revenue cycle staffing markets, where we believe we hold leading positions, are also highly fragmented and consist of many small- to mid-sized companies that do not have a national footprint. We also believe we have a market-leading share in managed services solutions, including VMS and MSP, and healthcare language interpretation services. Our leading competitors vary by segment and include Aya Healthcare, CHG Healthcare Services, Jackson Healthcare, Medical Solutions, RightSourcing, Cross Country Healthcare, Aya Healthcare, HealthTrust Workforce Solutions, Ingenovis Health, Jackson Healthcare, Loyal Source, Maxim Healthcare Services, Medical Solutions, Teleperformance, and WittKieffer. When recruiting for healthcare professionals, in addition to other executive search and staffing firms, we also compete with hospital systems that have developed their own recruitment departments.
Licensure For Our Business
Some states require state licensure for businesses that employ, assign and/or place healthcare professionals. We believe we are currently licensed in all states that require such licenses and take measures to ensure compliance with all state licensure requirements. In addition, the healthcare professionals who we employ or independently contract with are required to be individually licensed or certified under applicable state laws. We believe we take appropriate and reasonable steps to validate that our healthcare professionals possess all necessary licenses and certifications. We design our internal processes to ensure that the healthcare professionals that we directly place with clients have the appropriate experience, credentials and skills. Our travel nurse, and allied healthcare staffing divisions, all of ourand locum tenens brands and all of our local staffing officesdivisions have received Joint Commission certification. We have also obtained our Credentials Verification Organization certification from the National Committee for Quality Assurance.
EmployeesGovernment Regulation
AsWe are subject to the laws of December 31, 2019,the United States and certain foreign jurisdictions in which we operate and the rules and regulations of various governing bodies, which may differ among jurisdictions. Compliance with these laws, rules and regulation has not had, approximately 3,236 corporate employees. During the fourth quarterand is not expected to have, a material effect on our capital expenditures, results of 2019, we had an averageoperations, or competitive position.
Additional Information
We incorporated in the state of Delaware on November 10, 1997. We maintain a corporate website at www.amnhealthcare.com. We make available our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these reports, as well as proxy statements and other information free of charge through our website as soon as reasonably practicable after being filed with or furnished to the Securities and Exchange Commission (“SEC”). Such reports, proxy statements and other information are also available on the SEC’s website, http://www.sec.gov.
The information found on our website and the SEC’s website is not part of this Annual Report on Form 10-K or any other report we file with or furnish to the SEC.
Special Note Regarding Forward-Looking Statements
This Annual Report on Form 10-K, including the section entitled “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” contains, and certain oral statements made by management from time to time, may contain, “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), that are subject to safe harbors under the Securities Act and the Exchange Act. We base these forward-looking statements on our current expectations, estimates, forecasts and projections about future events and the industry in which we operate. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “should,” “would,” “project,” “may,” “could,” variations of such words and other similar expressions. In addition, statements that refer to projections of financial items; anticipated growth; future growth and revenue; future economic conditions and performance; plans, objectives and strategies for future operations; and other characterizations of future events or circumstances, are forward-looking statements. Our actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Factors that could cause actual results to differ from those implied by the forward-looking statements in this Annual Report on Form 10-K are described under the caption “Risk Factors” below, elsewhere in this Annual Report on Form 10-K and in our other filings with the SEC. Stockholders, potential investors, and other readers are urged to consider these factors in evaluating the forward-looking statements and cautioned not to place undue reliance on such forward-looking statements. The Company disclaims any obligation to publicly update such forward-looking statements to reflect subsequent events or circumstances.
Item 1A. Risk Factors
You should carefully read the following risk factors in connection with evaluating us and the forward-looking statements contained in this Annual Report on Form 10-K. Any of the following risks could materially adversely affect our business or our consolidated operating results, financial condition or cash flows, which, in turn, could cause the price of our common stock to decline. The risk factors described below and elsewhere in this Annual Report on Form 10-K are not the only risks we face. Factors we currently do not know, factors that we currently consider immaterial or factors that are not specific to us, such as general economic conditions, may also materially adversely affect our business or our consolidated operating results, financial condition or cash flows. The risk factors described below qualify all forward-looking statements we make, including forward-looking statements within this section entitled “Risk Factors.”
To develop and prioritize the following risk factors, we review risks to our business that are informed by our formal Enterprise Risk Management program, industry trends, the external market and financial environment as well as dialogue with leaders throughout our organization. Our risk factor descriptions are intended to convey our assessment of each applicable risk and such assessments are integrated into our strategic and operational planning.
Risk Factors that May Affect the Demand for Our Services
The widespread outbreak of illness or other public health crisis could have an adverse effect on our business, financial condition and results of operations.
We could be negatively affected by the widespread outbreak of an illness or any other public health crisis. The COVID-19 pandemic negatively impacted the global economy and created significant volatility and disruption of financial markets.
Demand for our staffing services and workforce technology solutions fluctuated over the course of the COVID-19 pandemic. Initially, in 2020, demand for some temporary healthcare professionals and services decreased as the demand for non-essential and elective healthcare was initially negatively impacted by the COVID-19 pandemic. During 2021, demand for nurse and allied healthcare professionals reached record highs and throughout 2021 and 2022 demand for most other types of healthcare professionals we work with returned to and has remained above pre-pandemic levels. However, if new variants emerge or an outbreak of a different illness emerges, demand may again decrease. As the pandemic has subsided, demand and bill rates, especially in our nurse and allied solutions businesses, have fluctuated from the levels seen during the pandemic. We
expect this decrease in demand will have a negative impact on our revenue, financial condition, and results of operations. However, we are unable to predict the duration and extent to which demand for our services could be negatively impacted by the COVID-19 pandemic or could be negatively impacted as the pandemic subsides.
In addition, the significant level of individuals who left the workforce, changed jobs and/or entered the “gig workforce” over the last two years may cause an increase in under- and uninsured patients, which generally results in a reduction in overall healthcare utilization and a decrease in demand for our services. We are unable to predict the duration and extent to which our businesses could be negatively impacted by this shift in the labor market.
The COVID-19 pandemic has disrupted, and any other future outbreak of illness or other public health crises or reemergence or future strain of COVID-19 may also disrupt, our operations due to the unavailability of our corporate team members or healthcare professionals due to illness, risk of illness, quarantines, travel restrictions, vaccine mandates or other factors that limit our existing or potential workforce and pool of candidates. In addition, we have and may in the future experience negative financial effects related to the COVID-19 pandemic due to higher workers’ compensation and health insurance costs, for which we are largely self-insured, and payroll costs associated with quarantine of our healthcare professionals. We may also be subject to claims regarding the health and safety of our healthcare professionals and our corporate team members.
The economic impact of the COVID-19 pandemic has negatively impacted the financial condition of many hospitals and healthcare systems. Our clients are facing cost pressures and in turn are looking to decrease expenses, including for contingent labor and other services. Demand for our services may be impacted by these cost pressures and we may be subject to claims from these clients relating to the ability to provide services under terms and conditions that they believe are fair and reasonable.
The extent of the impact of COVID-19 on our operational and financial performance will depend on future developments, including the duration and spread of COVID-19. Additionally, outbreaks of illness or public health crises other than COVID-19 could occur and may have similar or even more significant impact on our business.
Economic downturns, inflation and slow recoveries could result in less demand from clients and pricing pressure that could negatively impact our financial condition.
Demand for staffing services is sensitive to changes in economic activity. Many healthcare facilities utilize temporary healthcare professionals to accommodate an increase in hospital admissions. Conversely, when hospital admissions decrease in economic downturns or periods of high inflation, due to reduced consumer spending, the demand for our temporary healthcare professionals typically declines.
As economic activity slows, hospitals and other healthcare entities typically experience decreased attrition and reduce their use of temporary employees before undertaking layoffs of their regular employees, which results in decreased demand for many of our service offerings. In times of economic downturn and high unemployment rates,inflation, permanent full-time and part-time healthcare facility staff are generally inclined to work more hours and overtime, resulting in fewer available vacancies and less demand for our services. Fewer placement opportunities for our temporary clinicians, physicians and leaders also impairs our ability to recruit and place them both on a temporary and permanent basis.
In addition, many healthcare facilities utilize temporary healthcare professionals to accommodate an increase in hospital admissions. Conversely, when hospital admissions decrease in economic downturns, due to reduced consumer spending, a rise in unemployment causing an increase in under- and uninsured patients or other factors, the demand for our temporary healthcare professionals typically declines. This may have an even greater negative effect on demand for physicians in certain specialties such as surgery, radiology and anesthesiology. In addition, we may experience more competitive pricing pressure during periods of decreased patient occupancy and hospital admissions, negatively affecting our revenue and profitability.
During challenging economic times or in the event of a reduction or elimination of government assistance, our clients, in particular those that rely on state government funding, may face reduced demand for their services, reduced revenue, and issues gaining access to sufficient credit, which has resulted in and could in the future result in an impairment or further impairment of their ability to make payments to us, timely or otherwise, for services rendered. If that were to occur, we may further increase our allowance for doubtful accountsexpected credit losses and our days sales outstanding would be negatively affected.
If we are unable to anticipate and quickly respond to changing marketplace conditions, such as alternative modes of healthcare delivery, reimbursement and client needs, we may not remain competitive.
Patient delivery settings continue to evolve, giving rise to alternative modes of healthcare delivery, such as retail medicine, telemedicine and home health. In addition, changes in reimbursement models and government mandates are also impacting the healthcare environments.
Our success depends upon our ability to develop innovative workforce solutions, quickly adapt to changing marketplace conditions, such as reimbursement changes, and evolving client needs, comply with new federal or state regulations and differentiate our services and abilities from those of our competitors. The markets in which we compete are highly competitive, and our competitors may respond more quickly to new or emerging client needs and marketplace conditions. The development
of new service lines and business models requires close attention to emerging trends and proposed federal and state legislation related to the healthcare industry. If we are unable to anticipate changing marketplace conditions, adapt our current business model to adequately meet changing conditions in the healthcare industry and develop and successfully implement innovative services, we may not remain competitive.
Consolidation of healthcare delivery organizations could negatively affect pricing of our services and increase our concentration risk.
HealthcareConsolidation of healthcare delivery organizations are consolidating, providingprovides them with greater leverage in negotiating pricing for services. Consolidations may also result in us losing our ability to work with certain clients because the party acquiring or consolidating with our client may have a previously established service provider they elect to maintain. In addition, we have seen anour clients may increase in our clients’their use of intermediaries such as vendor management service companies and group purchasing organizations that may also provide organizationsenhance their bargaining power or clients with enhanced bargaining power.a larger network of healthcare professionals may develop their own temporary staffing models. These dynamics each separately or together could negatively affect pricing for our services and our ability to maintain certain clients.
Hospital concentration coupled with our success in winning managed services contracts means our revenues from some larger health systems have grown and may continue to grow substantially relative to our other revenue sources. For example, Kaiser Foundation Hospitals (and its affiliates) (collectively, “Kaiser”) comprised approximately 13%18% of our consolidated revenue in 2019.2022. If we were to lose Kaiser as a client or were unable to provide a significant amount of services to Kaiser, whether directly or as a subcontractor, such loss may have a material adverse effect on our revenue, results of operations and cash flows.
Intermediary organizations may impede our ability to secure new and profitable contracts with our clients.
Our business depends upon our ability to maintain our existing contracts and secure new, profitable contracts. Outside of our managed services contracts, our client contracts are not typically exclusive and our clients are generally free to offer temporary staffing assignments to our competitors. Additionally, our clients may choose to purchase these services through intermediaries such as group purchasing organizations or competitors offering MSP services, with whom we establish relationships in order to continue to provide our staffing services to certain healthcare facilities. These intermediaries may negatively affect our ability to obtain new clients and maintain our existing client relationships by impeding our ability to access and contract directly with clients and may also negatively affect the profitability of these client relationships. In addition, our inability to establish relationships with these intermediaries may result in us losing our ability to work with certain healthcare facilities.
The ability of our clients to increase the efficiency and effectiveness of their staffing management and recruiting efforts may affect the demand for our services whichthat could negatively affect our business.
If our clients are able to increase the effectiveness of their staffing and recruitment functions through analytics, automation or otherwise, their need for our services may decline. With the advent of technology and more sophisticated staffing management and recruitment processes, including internal “travel” and other healthcare staffing models, clients may be able to successfully increase the efficiency and effectiveness of their internal staffing management and recruiting efforts, through more effective planning and analytic tools, internet- or social media-based recruiting or otherwise. Such new technologies and processes could reduce the demand for our services, which could negatively affect our business.
The repeal or significant erosion of the Patient Protection and Affordable Care Act (“ACA”) without a corresponding replacement may negatively affect the demand for our services.
In 2010, the adoption of the ACA brought significant reforms to the health care system that included, among other things, a requirement that all individuals have health insurance (with limited exceptions). As a result of the ACA, the uninsured population has declined by more than 20 million through 2017. In December 2017, the individual mandate was repealed.significantly. If the individual mandate repeal orthere is a rollback of other aspects of the ACA, such as Medicaid expansion, actually leadsit may lead to a significant reduction in demand for the healthcare services and the demand for our services may decline. If members of the investor community believe that a further repeal of, or significant changes to, the ACA are forthcoming, including court rulings repealing the entire ACA, it may have negative effect on the price of our common stock.
Regulatory and Legal Risk Factors
We are subject to federal and state healthcare industry regulation including conduct of operations, costs and payment for services and payment for referrals as well as laws regarding government contracting.
The healthcare industry is subject to extensive and complex federal and state laws and regulations related to conduct of operations, costs and payment for services and payment for referrals. We provide workforce solutions and services on a contract basis to our clients, who pay us directly. Accordingly, Medicare, Medicaid and insurance reimbursement policy changes generally do not directly impact us. Nevertheless, reimbursement changes in government programs, particularly Medicare and Medicaid, can and do indirectly affect the demand and the prices paid for our services. For example, our clients could receive reduced or no reimbursements because of a change in the rates or conditions set by federal or state governments, which would negatively affect the demand and the prices for our services. Moreover, our hospital, healthcare facility and physician practice group clients could suffer civil and criminal penalties, and be excluded from participating in Medicare, Medicaid and other healthcare programs for failure to comply with applicable laws and regulations, which may negatively affect our profitability.
A portion of our hospital and healthcare facility clients are state and federal government agencies, where our ability to compete for new contracts and orders, and the profitability of these contracts and orders, may be affected by government legislation, regulation or policy. Additionally, in providing services to state and federal government clients and to clients who participate in state and federal programs, we are also subject to specific laws and regulations, which government agencies have broad latitude to enforce. If we were to be excluded from participation in these programs or should there be regulatory or policy changes or modification of application of existing regulations adverse to us, it would likely materially adversely affect our brand, business, results of operations and cash flows.
We are also subject to certain laws and regulations applicable to recruitment and employment placement agencies with which we must comply in order to continue to conduct business in that particular state.
The challenge to the classification of certain of our healthcare professionals as independent contractors could adversely affect our profitability.
We treat physicians and certain advanced practitioners, such as certified nurse anesthetists, nurse practitioners and physician assistants, as independent contractors. Federal or state taxing authorities may take the position that such professionals are employees exposing us to additional wage and insurance claims and employment and payroll-related taxes. A reclassification of our locum tenens clinicians to employees from independent contractors could result in liability that would have a significant negative impact on our profitability for the period in which such reclassification was implemented, and would require changes to our payroll and related business processes, which could be costly. In addition, many states have laws that prohibit non-physician owned companies from employing physicians, referred to as the “corporate practice of medicine.” If our independent contractor physicians were classified as employees in states that prohibit the corporate practice of medicine, we may be prohibited from conducting our locum tenens staffing business in those states under our current business model, which may have a substantial negative effect on our revenue, results of operations and profitability.
Investigations, claims and legal proceedings alleging medical malpractice, anti-competitive conduct, violations of employment, privacy and wage regulations and other theories of liability asserted against us could subject us to substantial liabilities.
Like all employers, we must also comply with various laws and regulations relating to employment and pay practices and from time to time may be subject to individual and class action lawsuits related to alleged wage and hour violations under California and Federal law. We are subject to possible claims alleging discrimination, sexual harassment and other similar activities in which we or our hospital and healthcare facility clients and their agents have allegedly engaged. We are also subject to examination of our payroll practices from various federal and state taxation authorities from time to time. While we believe that our employment and pay practices materially comply with relevant laws and regulations, interpretations of these laws change.Because of the nature of our business, the impact of these employment and payroll laws and regulations may have a more pronounced effect on our business. There is a risk that we could be subject to payment of significant additional wages, insurance and employment, and payroll-related taxes and sizeable statutory penalties negatively impacting our financial position, results of operations and cash flows. These laws and regulations may also impede our ability to grow the size and profitability of our operations. In addition, our involvement in these matters and any related adverse rulings may result in increased costs and expenses, cause us from time to time to significantly increase our legal accruals and/or modify our pay practices, all of which would likely have an adverse impact on our financial performance and profitability.
We, along with our clients and healthcare professionals, are subject to investigations, claims and legal actions alleging malpractice or related legal theories. At times, plaintiffs name us in these lawsuits and actions regardless of our contractual obligations, the competency of the healthcare professionals, the standard of care provided by the healthcare professionals, the quality of service that we provided or our actions. In certain instances, we are contractually required to indemnify our clients against some or all of these potential legal actions.
Like all employers, we must also comply with various laws and regulations relating to employment and pay practices. We are also subject to certain laws and regulations applicable to recruitment and employment placement agencies with which we must comply in order to continue to conduct business in that specific state. We are also subject to possible claims alleging discrimination, sexual harassment and other similar activities in which we or our hospital and healthcare facility clients and their agents have allegedly engaged. We are also subject to examination of our payroll practices from various federal and state taxation authorities from time to time. Because of the nature of our business, the impact of these employment and payroll laws and regulations may have a more pronounced effect on our business. There is a risk that we could be subject to payment of significant additional wages, insurance and employment, and payroll-related taxes and sizeable statutory penalties negatively impacting our financial position, results of operations and cash flows. These laws and regulations may also impede our ability to grow the size and profitability of our operations.
As we grow and increase our leadership position, we are at greater risk for anti-competitive conduct claims such as violation of federal and state antitrust laws and unfair business practices arising from our agreements with our employees, contractors, clients and vendors.
The size and nature of our business requires us to collect substantial personal information of healthcare professionals and other team members that is subject to a myriad of privacy-related laws from multiple jurisdictions that regulate the use and disclosure of such information. In addition, many of our healthcare professionals have access to client proprietary information systems and patient confidential information. We may be required to incur significant costs to comply with mandatory privacy and security standards and protocols imposed by law, regulation, industry standards or contractual obligations with our clients. In addition, an inherent risk of the collection and access to such information includes possible claims from unintentional or intentional misuse, disclosure or use of this information. Such claims may result in negative publicity, injunctive relief, criminal investigations or charges, civil litigation, payment by us of monetary damages or fines, or other adverse effects on our business, which may be material.
We are also subject to certain laws and regulations applicable to recruitment and employment placement agencies with which we must comply in order to continue to conduct business in that specific state.
As we grow and increase our leadership position, we are at greater risk for anti-competitive conduct claims and investigations, such as violation of federal and state antitrust laws, unfair business practices and “price-gouging.” An environment of high-demand for healthcare staffing support coupled with the healthcare labor shortage, especially with respect to nurse and allied healthcare professionals, has led and may continue to lead to higher wages for healthcare professionals and higher costs to our clients for healthcare staffing. This may lead to claims and investigations into pricing and competitive conduct in the healthcare staffing industry. While we believe that our business practices, including pricing and competitive conduct, comply with all applicable laws and regulations, we may nonetheless be subject to inquiries, claims or investigations which could negatively impact our reputation and business.
We maintain various types of insurance coverage for thesemany types of claims, including professional liability, errors and omissions, employment practices and cyber, through commercial insurance carriers and a wholly-owned captive insurance company.company and for other claims such as wage and hour practices and competition actions, we are uninsured. The cost of defending such claims, even if groundless, could be substantial and the associated negative publicity could adversely affect our ability to attract, retain and place qualified employees and healthcare professionals in the future. We may also experience increased insurance premiums and retention and deductible accruals that we may not be able to pass on to our clients, thereby
reducing our profitability. Moreover, our insurance coverage and reserve accruals may not be sufficient to cover all claims against us.
We are subject to federal and state healthcare industry regulation including conduct of operations, costs and payment for services and payment for referrals as well as laws regarding government contracting.
The healthcare industry is subject to extensive and complex federal and state laws and regulations related to conduct of operations, costs and payment for services and payment for referrals. We provide talent solutions and technologies on a contract basis to our clients, who pay us directly. Accordingly, Medicare, Medicaid and insurance reimbursement policy changes generally do not directly impact us. Nevertheless, reimbursement changes in government programs, particularly Medicare and Medicaid, can and do indirectly affect the demand and the prices paid for our services. For example, our clients could receive reduced or no reimbursements because of a change in the rates or conditions set by federal or state governments that would negatively affect the demand and the prices for our services. Moreover, our hospital, healthcare facility and physician practice group clients could suffer civil and criminal penalties, and be excluded from participating in Medicare, Medicaid and other healthcare programs for failure to comply with applicable laws and regulations that may negatively affect our profitability.
A portion of our hospital and healthcare facility clients are state and federal government agencies, where our ability to compete for new contracts and orders, and the profitability of these contracts and orders, may be affected by government legislation, regulation or policy. Additionally, in providing services to state and federal government clients and to clients who participate in state and federal programs, we are also subject to specific laws and regulations, which government agencies have broad latitude to enforce. If we were to be excluded from participation in these programs or should there be regulatory or policy changes or modification of application of existing regulations adverse to us, it would likely materially adversely affect our brand, business, results of operations and cash flows.
We are also subject to certain state laws and regulations applicable to “nursing pools” with which we must comply in order to continue to conduct business in that particular state. Increased regulation relating to healthcare staffing agencies has increased the operational and administrative requirements and increased the cost to provide various of our services in certain states. If regulation of our services continues to increase it could have a negative impact on our ability to profitably provide services in some states. We may also be subject to state laws that impose caps or other limitations on amounts that may be charged to clients for certain types of healthcare staffing, which in turn impacts the wages paid to healthcare professionals and may impact our ability to attract healthcare professionals to assignments in these states. In addition, it is generally our practice to pass along the increased costs associated with higher wages for healthcare professionals on to our clients. If new or additional caps or other price limitations were imposed that prevented us from passing these increased costs on or if the amount that we were able to pass on to our clients, it would likely have an adverse impact on our financial performance and profitability.
The challenge to the classification of certain of our healthcare professionals as independent contractors could adversely affect our profitability.
Historically, we have treated our locum tenens, which include physicians and certain advanced practitioners, such as certified nurse anesthetists, nurse practitioners and physician assistants, as independent contractors. Certain state laws regarding classification of independent contractors have been modified in the past few years and as a result, we have altered our classification of certain locum tenens providers in certain instances.Other states and/or the Federal government may choose to adopt similar restrictions that may require us to expand our employee classifications for locum tenens. If this occurs, it could increase our employee costs and expenses and could negatively impact our profitability.
In addition, Federal or state taxing authorities may take the position that locum tenens are employees exposing us to additional wage and insurance claims and employment and payroll-related taxes. A reclassification of our locum tenens to employees from independent contractors could result in liability that would have a significant negative impact on our profitability for the period in which such reclassification was implemented, and would require changes to our payroll and related business processes, which could be costly. In addition, many states have laws that prohibit non-physician owned companies from employing physicians, referred to as the “corporate practice of medicine.” If our independent contractor physicians were classified as employees in states that prohibit the corporate practice of medicine, we may be prohibited from conducting our locum tenens staffing business in those states under our current business model, which may have a substantial negative effect on our revenue, results of operations and profitability.
Risk Factors Related to Our Operations, Personnel and Information Systems
Our inability to implement new infrastructure and technology systems and technology disruptions may adversely affect our operating results and ability to manage our business effectively.
We have technology, operations and human capital infrastructures to support our existing business. Our ability to deliver services to our clients and to manage our commercial technologies, internal systems and data depends largely upon our access to and the performance of our management information and communications systems, including our VMS, client relationship management systems and client/healthcare professional-facing self-service websites. These technology systems also maintain accounting and financial information upon which we depend to fulfill our financial reporting obligations. We must continue to invest in this infrastructure, and we are in the midst of a multi-year plan to upgrade and convert our infrastructure, back office and front office network platforms to support our growth, enhance our management and utilization of data and improve our efficiency.
Implementing new systems is costly and involves risks inherent in the conversion to a new technology platform, including loss of information, disruption to our normal operations, changes in accounting procedures and internal control over financial reporting, as well as problems achieving accuracy in the conversion of electronic data. Failure to properly or adequately address these issues could result in increased costs, loss of clients and talent, the diversion of management’s and employees’ attention and resources and could materially adversely affect our operating results, internal controls over financial reporting and
ability to manage our business effectively. Furthermore, if we are unable to continue to improve our technology and operations processes to gain efficiency and support our growth, our financial results will be adversely affected.
Additionally, the current legacy systems are subject to other non-environmental risks, including technological obsolescence for which there may not be sufficient redundancy or backup. These systems, and our access to these systems, are not impervious to floods, fire, storms, or other natural disasters, or service interruptions. There also is a potential for intentional and deliberate attacks to our systems, which may lead to service interruptions, data corruption or data theft. If our current or planned systems do not adequately support our operations, are damaged or disrupted or if we are unable to replace, repair, maintain or expand them, it may adversely affect our business operations and our profitability.
If we do not continue to recruit and retain sufficient quality healthcare professionals at reasonable costs, it could increase our operating costs and negatively affect our business and our profitability.
We rely significantly on our ability to recruit and retain a sufficient number of healthcare professionals who possess the skills, experience and licenses necessary to meet the requirements of our clients. With a currentrising clinician burnout rates resulting from the COVID-19 pandemic, an ongoing shortage of certain qualified nurses and physicians in many areas of the United States and the historically low unemployment rates for nurses and physicians, competition for the hiring of these professionals remains intense. Our ability to recruit temporary and permanent healthcare professionals may be exacerbated by continued low levels of unemployment.
We compete with healthcare staffing companies, recruitment and placement agencies, including online staffing and recruitment agencies, and with hospitals, healthcare facilities and physician practice groups to attract healthcare professionals based on the quantity, diversity and quality of assignments offered, compensation packages, the benefits that we provide and speed and quality of our service. We rely on our human capital intensive, relationship-oriented approach and national infrastructure to enable us to compete in all aspects of our business. We must continually evaluate and expand our healthcare professional network to serve the needs of our clients.
The costs of recruitment of quality healthcare professionals and providing them with attractivecompetitive compensation packages may be higher than we anticipate, or we may be unable to pass these costs on to our hospital and healthcare facility clients, which may reduce our profitability. Moreover, if we are unable to recruit temporary and permanent healthcare professionals, our service execution may deteriorate and, as a result, we could lose clients. clients or not meet our service level agreements with these clients that have negative financial repercussions.
Our inability to recruit temporaryimplement new infrastructure and permanenttechnology systems and technology disruptions may adversely affect our operating results and ability to manage our business effectively.
We have technology, operations and human capital infrastructures to support our existing business. Our ability to deliver services to our clients and to manage our commercial technologies, internal systems and data depends largely upon our access to and the performance of our management information and communications systems, including our SaaS-based solutions, client relationship management systems and client/healthcare professional-facing self-service websites. These technology systems also maintain accounting and financial information upon which we depend to fulfill our financial reporting obligations. We must continue to invest in this infrastructure to support our growth, enhance our management and utilization of data and improve our efficiency.
Upgrading current systems and implementing new systems is costly and involves inherent risks, including loss of information, disruption to our normal operations, changes in accounting procedures and internal control over financial reporting, as well as problems achieving accuracy in the conversion of electronic data. Failure to properly or adequately address these issues could result in increased costs, loss of clients, healthcare professionals and talent, the diversion of management’s and employees’ attention and resources and could materially adversely affect our growth, financial and operating results, internal controls over financial reporting and ability to manage our business effectively.
Additionally, the current legacy systems are subject to other non-environmental risks, including technological obsolescence for which there may not be exacerbated by continued low levels of unemployment.sufficient redundancy or backup. These systems, and our access to these systems, are not impervious to floods, fire, storms, or other natural disasters, or service interruptions. There also is a potential for intentional and deliberate attacks to our systems, including ransomware, that may lead to service interruptions, data corruption, data theft or data unavailability. If our current or planned systems do not adequately support our operations, are damaged or disrupted or if we are unable to replace, repair, maintain or expand them, it may adversely affect our business operations and our profitability.
Our business could be harmed if we fail to further develop and evolve our current workforcetalent solutions technology offerings and capabilities.
To achieve our strategic objectives and to remain competitive, we must continue to develop and enhance our workforcetalent solutions technology offerings and capabilities. This may require the acquisition of equipment and software and the development of new proprietary software and capabilities, either internally or through independent consultants.consultants, which may require significant investment of capital. If we are unable to design, develop, acquire, implement and utilize, in a cost-effective manner, technology and information systems that provide the capabilities necessary for us to compete effectively, or for any
reason any interruption or loss of our information processing capabilities occurs, this could harm our business, results of operations and financial condition.
Disruption to or failures of our SaaS-based technologyor technology-enabled services, or our inability to adequately protect our intellectual property rights with respect to such technologytechnologies, could reduce client satisfaction, harm our reputation and negatively affect our business.
The performance, reliability and security of our technology-enabled services, including our language interpretation services and SaaS-based technologies, such as AMN Language Services, ShiftWise, Medefis, andb4health, Avantas Smart Square, Silversheet and Synzi are critical to such offerings’ operations, reputation and ability to attract new clients. Some of our clients rely on our SaaS-based technologytechnologies to perform certain of their operational functions. Accordingly, any degradation, errors, defects, disruptions or other performance problems with our SaaS-based technologytechnologies could damage our or our clients’ operations and reputations and negatively affect our business. If any of these problems occur, our clients may, among other things, terminate their agreements with us or make indemnification or other claims against us, which may also negatively affect us.
Additionally, if we fail to protect our intellectual property rights adequately with respect to our SaaS-based technology,technologies, our competitors might gain access to it, and our business might be harmed. Moreover, if any of our intellectual property rights associated with our SaaS-based technology, including our newly developed vendor management platforms,technologies are challenged by others or invalidated through litigation, and defending our intellectual property rights might also entail significant expense. Accordingly, despite our efforts, we may be unable to prevent third parties from using or infringing upon or misappropriating our intellectual property with respect to our SaaS-based technology,technologies, which may negatively affect our business as it relates to our SaaS-based and technology-enabled service offerings.
Security breaches and cybersecurity incidents could compromise our information and systems adversely affecting our business operations and reputation subject us to substantial liabilities.
Security breaches, including cyber incidents can result from deliberate attacks or unintentional events. These incidents can include, but are not limited to, gaining unauthorized access to digital systems for purposes of misappropriating assets or sensitive information, ransomware attacks, corrupting data, or causing operational disruption. In the ordinary course of our business, we collect and store sensitive data, such as our proprietary business information and that of our clients as well as personally identifiable information of our healthcare professionals and employees,team members, including full names, social security numbers, addresses, birth dates and payroll-related information, in our data centers, on our networks and in hosted SaaS-based solutions provided by third parties. Our employees and third-party vendors may also have access to, receive and use personal health information in the ordinary course of our business. The secure access to, processing, maintenance and transmission of this information is critical to our operations.
Despite our security measures and business controls, our information technology and infrastructure, including the third party SaaS-based technology in which we store personally identifiable information and other sensitive information of our healthcare professionals and employees, may be vulnerable to attacks by hackers, breached due to third-party vendor and/or employee error, malfeasance or other disruptions such as ransomware or subject to the inadvertent or intentional unauthorized release of information. The Company has experienced cyber threats resulting in immaterial cyber incidents and expects cyber threats to continue with varying levels of sophistication. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and may not immediately produce signs of intrusion, we may be unable to anticipate these incidents or techniques, timely discover them, or implement adequate preventative measures. Our information technology and other security protocols may not provide sufficient protection, and as a result a security reach could compromise our networks and significant information about us, our employees, healthcare professionals, patients or clients may be accessed, disclosed, lost or stolen. In a situation such as ransomware attack, our access to critical business information and ability to conduct business may be interrupted or impaired.
Any such access, disclosure or other loss of information could (1) result in legal claims or proceedings, liability under laws that protect the privacy of personal information and regulatory penalties, (2) disrupt our operations and the services we provide to our clients and (3) damage our reputation, any of which could adversely affect our profitability, revenue and competitive position.
The inability to quickly and properly credential and match quality healthcare professionals with suitable placements may negatively affect demand for our services.
Our success depends on the quality of our healthcare professionals and our ability to quickly and efficiently assist in obtaining licenses and privileges for our healthcare professionals. The speed with which our healthcare professionals can obtain
the appropriate licenses, and we can credential them depends in part, on state licensing laws. Roughly 3035 states are part of the Enhanced Nurse Compact and over 20 states are part of the Physical Therapy Licensure Compact and Interstate Medical Compact Acts. A decline or change in interstate compact laws can impact our business.
Our ability to ensure the quality of our healthcare professionals also relies heavily on the effectiveness of our data and communication systems as well as properly trained and competent operational employeesteam members that credential and match healthcare professionals in suitable placements.placements and third-party vendors that provide ancillary services. We also rely on the accuracy and credibility of information provided by licensing bodies and educational institutions. An inability to properly credential, match, and monitor healthcare professionals for acceptable credentials, experience and performance may cause clients to lose confidence in our services whichthat may damage our brand and reputation and result in clients opting to utilize competitors’ services or rely on their own internal resources. The costs toand speed with which we provide these credentialing services impact the revenue and profitability of our business.
Our operations may deteriorate if we are unable to continue to attract, develop and retain our sales and operations team members.
Our success depends heavily upon the recruitment, performance and retention of diverse sales and operations team members who share our values, passion and commitment to customer focus. The number of individuals who meet our qualifications for these positions is limited, and we may experience difficulty in attracting qualified candidates, especially as we diversify our offerings and our business becomes more complex. In addition, we commit substantial resources to the training, development and support of our team members. Competition for qualified sales and operational team members in the line of business in which we operate is strong, and we may not be able to retain a sufficient number of team members after we have expended the time and expense to recruit and train them. In addition, these team members may leave to establish competing businesses.
We are increasingly dependent on third parties for the execution of certain critical functions.
We have outsourced and offshored certain critical applications or business processes to external providers, including cloud-based, credentialing and data processing services. We exercise care in the selection and oversight of these providers. However, the failure or inability to perform or adhere to law, regulation and our policies on the part of one or more of these critical suppliers or perform the services in a timely manner could cause significant disruptions and increased costs to our business as well as reputational damage.
The loss of key officers and management personnel could adversely affect our business and operating results.
We believe that the success of our business strategy and our ability to maintain our recent levels of profitability depends on the continued employment of our senior executive team. We have an employment agreement with Susan R. Salka,All of our President and Chief Executive Officer, through May 4, 2021, which is renewable on an annual basis. Other executive members of the management teamofficers are employees at will with standard severance agreements. If members of our executive team become unable or unwilling to continue in their present positions, our business and financial results could be adversely affected.
Our inability to maintain our positive brand awareness and identity may adversely affect our results of operations.
We have invested substantial amounts in acquiring, developing and maintaining our brands, and our success depends on our ability to maintain positive brand awareness identities for existing servicesacross business lines and effectively buildingbuild up or consolidate our brand awareness and image for new services. Many of our brands have strong recognition within their applicable markets. We cannot assure that additional expenditures, and our continuing commitment to marketing and improving our brands and executing on our brand and marketing strategies, including changes in brand names, consolidation of brands, or other rebranding efforts to improve the association of our brands with one another, will have the desired effect on our brands’ value whichand may adversely affect our results of operations.operations and also result in an impairment of the fair market value of intangible assets associated with acquired tradenames. In addition, our brands may suffer reputational damage that could negatively affect our short- and long-term financial results. The poor performance, reputation or negative conduct of competitors may have a spillover effect adversely affecting the industry and our brand.
The expansion of social media platforms presents new risks and challenges that can cause damage to our brand and reputation.
There has been an increase in the use of social media platforms, including blogs, social media websites and other forms of internet-communication in our industry that allows access to a broad audience of interested parties. The inappropriate and/or unauthorized use of certain media vehicles by our clients, vendors, employees and contractors could increase costs, cause damage to our brand, or result in information leakage that could lead to legal implications, including improper collection and/or dissemination of personally identifiable information of candidates and clients. In addition, negative or inaccurate posts or comments about us on any social networking website could damage our reputation, brand image and goodwill.
Our inability to consummate and effectively incorporate acquisitions into our business operations may adversely affect our long-term growth and our results of operations.
We invest time and resources in carefully assessing opportunities for acquisitions, and acquisitions are a key component of our growth strategy. We have made acquisitions in the past several years to broaden the scope and depth of our talent solutions. If we are unable to consummate additional acquisitions, we may not achieve our long-term growth goals.
Despite diligence and integration planning, acquisitions still present certain risks, including the time and economic costs of integrating an acquisition’s technology, control and financial systems, unforeseen liabilities, and the difficulties in bringing together different work cultures and personnel. Difficulties in integrating our acquisitions, including attracting and retaining talent to grow and manage these acquired businesses, may adversely affect our results of operations.
Businesses we acquire may have liabilities or adverse operating issues which could harm our operating results.
Businesses we acquire may have liabilities or adverse operating issues, or both, that we either fail to discover through due diligence or underestimate prior to the consummation of the acquisition. These liabilities and/or issues may include the acquired business’ failure to comply with, or other violations of, applicable laws, rules, or regulations or contractual or other obligations or liabilities. As the successor owner, we may be financially responsible for, and may suffer harm to our reputation or otherwise be adversely affected by, such liabilities and/or issues. These and any other costs, liabilities, issues, and/or disruptions associated with any past or future acquisitions could harm our reputation and operating results.
In addition, future acquisitions are accompanied by the risk that the obligations and liabilities of an acquired company may not be adequately reflected in the historical financial statements of that company and the risk that those historical financial statements may be based on assumptions that are incorrect or inconsistent with our assumptions or approach to accounting policies. Any of these material obligations, liabilities or incorrect or inconsistent assumptions could adversely impact our results of operations and financial condition.
As we develop new services and clients, enter new lines of business, and focus more of our business on providing a full range of talent solutions, the demands on our business and our operating risks may increase.
As part of our corporate strategy, we plan to extend our services to new healthcare settings, clients, and new lines of business. As we focus on developing new services, capabilities, clients, practice areas and lines of business, and engage in business in new geographic locations, our operations may be exposed to additional as well as enhanced risks.
In particular, our growth efforts place substantial additional demands on our management and other team members, as well as on our information, financial, administrative, compliance and operational systems. We may not be able to manage these demands successfully. Growth may require increased recruiting efforts, increased regulatory and compliance efforts, increased business development, selling, marketing and other actions that are expensive and entail increased risk. We may need to invest more in our people and systems, controls, compliance efforts, policies and procedures than we anticipate. As our business continues to evolve and we provide a wider range of services, we will become increasingly dependent upon our employees, particularly those operating in business environments less familiar to us. Failure to identify, hire, train and retain talented employees who share our values could have a negative effect on our reputation and our business.
The demands that our current and future growth place on our people and systems, controls, compliance efforts, policies and procedures may exceed the benefits of such growth, and our operating results may suffer, at least in the short-term, and perhaps in the long-term.
The use of social media platforms presents risks and challenges that can cause damage to our brand and reputation.
The extensive use of social media platforms, including blogs, social media websites and other forms of internet-communication in our industry allows access to a broad audience of interested parties. The inappropriate and/or unauthorized use of certain media vehicles by our clients, vendors, employees and contractors could increase costs, cause damage to our brand, or result in information leakage that could lead to legal implications, including improper collection and/or dissemination of personally identifiable information of candidates and clients. In addition, negative or inaccurate posts or comments about us on any social networking website could damage our reputation, brand image and goodwill.
We maintain a substantial amount of goodwill and indefinite-lived intangiblesintangible assets on our balance sheet that may decrease our earnings or increase our losses if we recognize an impairment to goodwill or indefinite-lived intangibles.intangible assets.
We maintain goodwill on our balance sheet, which represents the excess of the total purchase price of our acquisitions over the fair value of the net assets and indefinite-lived intangiblesintangible assets we acquired. We evaluate goodwill and indefinite-lived intangiblesintangible assets for impairment annually or when evidence of potential impairment exists.exists, respectively. If we identify an impairment, we record a charge to earnings. An impairment charge to goodwill or indefinite-lived intangiblesintangible assets would decrease our earnings or increase our losses, as the case may be.
Risk Factors Related to Our Indebtedness and Other Liabilities
Our indebtedness could adversely affect our ability to raise additional capital to fund our operations, limit our ability to react to changes in the economy or our industry, and expose us to interest rate risk to the extent of any variable rate debt.
As of December 31, 2019,2022, our total indebtedness, lessnet of unamortized fees and premium, equaled $617.2$843.5 million. Our substantialamount of indebtedness could have important consequences, including:
increasingincrease our vulnerability to adverse economic, industry or competitive developments, including:
•requiring a portion of our cash flows from operations to be dedicated to the payment of principal and interest on our indebtedness, therefore reducing our ability to use our cash flows to fund operations, capital expenditures and future business opportunities,
•making it more difficult for us to satisfy our obligations with respect to our indebtedness,
•restricting us from making strategic acquisitions or causing us to make non-strategic divestitures,
•limiting our ability to obtain additional financing for working capital, capital expenditures, product and service development, debt service requirements, acquisitions, and general corporate or other purposes, and
•limiting our flexibility in planning for, or reacting to, changes in our business or market conditions and placing us at a competitive disadvantage compared to our competitors who are less leveraged and who, therefore, may be able to take advantage of opportunities that our substantial indebtedness may prevent us from exploiting.pursuing.
Our ability to service our indebtedness will depend on our ability to generate cash in the future. We cannot provide assurance that our business will generate sufficient cash flow from operations or that future borrowings will be available in an amount sufficient to enable us to service our indebtedness or to fund other liquidity needs. Additionally, if we are not in compliance with the covenants and obligations under our debt instruments, we would be in default, and the lenders could call the debt, which would have a material adverse effect on our business. And in certain instances, our debt instruments may limit our ability to redeem or prepay some or all of the outstanding principal amount prior to maturity, or in other instances, require the payment of premium in excess of the principal amount.
The terms of our debt instruments impose restrictions on us that may affect our ability to successfully operate our business.
Our debt instruments contain various covenants that could adversely affect our ability to finance our future operations or capital needs and to engage in other business activities that may be in our best interest. These covenants limit our ability to, among other things:
•incur or guarantee additional indebtedness or issue certain preferred equity,
•pay dividends on, redeem, repurchase, or make distributions in respect of our capital stock, prepay, redeem, or repurchase certain debt or make other restricted payments,
•make certain investments,
•create, or permit to exist, certain liens,
•sell assets,
•enter into sale/leaseback transactions,
•enter into agreements restricting restricted subsidiaries’ ability to pay dividends or make other payments,
•consolidate, merge, sell, or otherwise dispose of all or substantially all of our assets,
•enter into certain transactions with affiliates, and
•designate restricted subsidiaries as unrestricted subsidiaries.
Our ability to comply with these covenants may be affected by events beyond our control, such as prevailing economic conditions and changes in regulations, and if such events occur, we cannot be sure that we will be able to comply. A breach of these covenants could result in a default under our debt instruments (including as a result of cross-default provisions) and, in the case of our senior credit facility under our credit agreement, permit the lenders thereunder to cease making loans to us. If there were an event of default under any of our debt instruments, holders of such defaulted debt could cause all amounts borrowed under the applicable instrument to be due and payable immediately. Our assets or cash flow may not be sufficient to repay borrowings under our outstanding debt instruments in the event of a default thereunder.
In addition, the restrictive covenants in our credit agreement require us to maintain specified financial ratios and satisfy other financial condition tests. Although we were in compliance with the financial ratios and financial condition tests set forth in our credit agreement on December 31, 2019,2022, we cannot provide assurance that we will continue to be. Our ability to meet
those financial ratios and tests will depend on our ongoing financial and operating performance, which, in turn, will be subject to economic conditions and to financial, market, and competitive factors, many of which are beyond our control. A breach of any of these covenants could result in a default under our credit agreement (and our other debt instruments to the extent the default triggers a cross default provision) and, in the case of the revolver under our credit agreement, permit the lenders thereunder to cease making loans to us. Upon the occurrence of an event of default under the credit agreement, the lenders could elect to declare all amounts outstanding thereunder to be immediately due and payable and terminate all commitments to extend further credit. Such action by the lenders could cause cross-defaults under our other debt instruments.
Variable rate indebtedness subjects us to interest rate risk, which could cause our debt service obligations to increase significantly.
Borrowings under our credit agreement are at variable rates of interest and expose us to interest rate risk. IfAs interest rates increase, our debt service obligations on certain of our variable rate indebtedness will increase even though the amount borrowed remains the same, and our net income and cash flows, including cash available for servicing our indebtedness, will correspondingly decrease.same. In addition, in July 2017,on March 5, 2021, the U.K. Financial Conduct Authority announced that it intends to stop collecting LIBOR rates from banks after 2021. The announcement indicates that1-week and 2-week USD LIBOR will not continuecease publication after December 31, 2021, and that 1-month, 3-month, 6-month and 1-year USD LIBOR will cease publication after June 30, 2023. As a result, we have transitioned to exist on the current basis. We are unable to predict the effect of any changes to LIBOR, the establishment and success of any alternative reference rates, or any other reforms to LIBOR or any replacement of LIBOR that may be enactedSecured Overnight Financing Rate (“SOFR”) in the United Kingdom or elsewhere. Such changes, reforms or replacements relatingthird amendment to LIBOR could have an adverse impact on the market for or value of any LIBOR-linked securities, loans, derivatives or other financial instruments or extensions ofour credit held by us. As such, LIBOR-related changes could affect our overall results of operations and financial condition.agreement.
We have substantial insurance-related accruals and legal accruals on our balance sheet, and any significant adverse adjustments may decrease our earnings or increase our losses and negatively impact our cash flows.
We maintain accruals related to legal matters, our captive insurance company and self-insured retentions for various lines of insurance coverage, including professional liability, employment practices, health insurance and workers compensation on our balance sheet. We determine the adequacy of our accruals by evaluating legal matters, our historical experience and trends, related to both insurance claims and payments, information provided to us by our insurance brokers, attorneys, third-party administrators and actuarial firms as well as industry experience and trends. If such information collectively indicates that our accruals are understated, we provide for additional accruals; a significant increase to these accruals would decrease our earnings.
| |
Item 1B. | Unresolved Staff Comments |
Item 1B. Unresolved Staff Comments
None.
Item 2. Properties
We lease all of our properties, which consist of office-type facilities. We believe that our leased space is adequate for our current needs and that we can obtain adequate space to meet our foreseeable business needs. We have pledged substantially all of our leasehold interests to our lenders under our credit agreement to secure our obligations thereunder. We set forth below our principal leased office spaces as of December 31, 20192022 together with our business segments that utilize them:
|
| | | | |
| Location | Square Feet |
| Dallas, Texas (all segments) | 108,502 | |
| San Diego, California (all segments) | 175,67251,002 |
|
Dallas, Texas (all segments) | 108,502 |
|
See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (5), Leases.”
From timeItem 3. Legal Proceedings
Information with respect to time, we are involved in various lawsuits, claims, investigations and proceedings that arise in the ordinary course of business. These matters typically relate to professional liability, tax, wage and hour, contract, competitor disputes and employee-related matters and include individual and collective lawsuits, as well as inquiries and investigations by governmental agencies regarding our employment practices and other compliance practices. Additionally, some of our clientsthis item may also become subject to claims, governmental inquiries and investigations and legal actions relating to services provided by our healthcare professionals. Depending upon the particular facts and circumstances, we may also be subject to indemnification obligations under our contracts with such clients relating to these matters. We record a liability when management believes an adverse outcome from a loss contingency is both probable and the amount, or a range, can be reasonably estimated. Significant judgment is required to determine both probability of loss and the estimated amount. We review our loss contingencies at least quarterly and adjust our accruals and/or disclosures to reflect the impact of negotiations, settlements, rulings, advice of legal counsel or other new information, as deemed necessary. The most significant matters for which we have established loss contingencies are class actions related to wage and hour claims under California and Federal law. Specifically, among other claims in these lawsuits, it is alleged that certain expense reimbursements should be included in the regular rate of pay for purposes of calculating overtime rates, and that employees were not afforded required breaks or compensated for all time worked. While we believe that our wage and hour practices conform with law in all material respects, litigation is always subject to inherent uncertainty, and we are not able to reasonably predict if any matter will be resolved in a manner that is materially adverse to us beyond the amounts accrued. See additional informationfound in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (12), Commitments and Contingencies.Contingencies,” which is incorporated herein by reference.
With regard to outstanding loss contingencies as of December 31, 2019, we believe that such matters will not, either individually or in the aggregate, have a material adverse effect on our business, consolidated financial position, results of operations or cash flows.
| |
Item 4. | Mine Safety Disclosures |
Item 4. Mine Safety Disclosures
Not applicable.
PART II
| |
Item 5. | Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |
Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Our common stock trades on the New York Stock Exchange under the symbol “AMN.” As of February 20, 2020,2023, there were 18 stockholders of record of our common stock, one of which was Cede & Co., a nominee for The Depository Trust Company. All of our common stock held by brokerage firms, banks and other financial institutions as nominees for beneficial owners are considered to be held of record by Cede & Co., which is considered to be one stockholder of record. A substantially greater number of holders of our common stock are “street name” or beneficial holders, whose shares are held of record by banks, brokers and other financial institutions. Because such shares are held on behalf of stockholders, and not by the stockholders directly, and because a stockholder can have multiple positions with different brokerage firms, banks and other financial institutions, we are unable to determine the total number of stockholders we have without undue burden and expense.
During the fiscal year ended December 31, 2019,2022, we did not sell any equity securities that were not registered under the Securities Act.
From time to time, we may repurchase our common stock in the open market pursuant to programs approved by our Board.board of directors (the “Board”). We may repurchase our common stock for a variety of reasons, such as acquiring shares to offset dilution related to equity-based incentives and optimizing our capital structure. On November 1, 2016, ourthe Board authorized us to repurchase up to $150.0 million of our outstanding common stock in the open market. On November 10, 2021, February 17, 2022 and June 15, 2022, we announced increases to the repurchase program totaling $700.0 million for a total of $850.0 million of repurchase authorization as of December 31, 2022. Under the repurchase program announced on November 1, 2016 (theand the aforementioned increases (collectively, the “Company Repurchase Program”), share purchasesrepurchases may be made from time to time, beginning in the fourth quarter of 2016, depending on prevailing market conditions and other considerations. The Company Repurchase Program has no expiration date and may be discontinued or suspended at any time. Additionally, we or our affiliates may, at any time and from time to time, seek to retire or purchase our outstanding debt through cash purchases and/or exchanges for equity or debt, in open-market purchases, privately negotiated transactions or otherwise. Such repurchases or exchanges, if any, will be upon such terms and at such prices as we may determine, and will depend on prevailing market conditions, our liquidity requirements, contractual restrictions and other factors. The amounts involved may be material.
During 2018,As of December 31, 2022, we have repurchased 1,236,4388.2 million shares of our common stock at an average price of $54.17$84.85 per share excluding broker’s fees, resulting in an aggregate purchase price of $67.0 million.
$698.6 million, since 2016. During 2019,2022, we purchased 395,212repurchased 5.6 million shares of common stock at an average price of $47.30$102.16 per share excluding broker’s fees, resulting in an aggregate purchase price of $18.7$576.8 million. See “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (10)(b), Capital Stock—Treasury Stock.” The following table presents the detail of shares repurchased during 2019.2022. All share repurchases reflected in the table belowto date were made under the Company Repurchase Program, which is the soleonly repurchase program of the Company currently in effect.
|
| | | | | | |
| | | | | |
Period | Total Number of Shares (or Units) Purchased | Average Price Paid per Share (or Unit) | Total Number of Shares (or Units) Purchased as Part of Publicly Announced Program | Maximum Dollar Value of Shares (or Units) that May Yet Be Purchased Under the Program |
| February 1 - 28, 2019 | 22,900 |
| $50.50 | 22,900 |
| $48,405,129 |
| March 1 - 31, 2019 | 355,417 |
| $47.16 | 355,417 |
| $31,631,647 |
| April 1 - 30, 2019 | 16,895 |
| $45.80 | 16,895 |
| $30,857,280 |
| | |
| | |
| |
| Total | 395,212 |
| $47.30 | 395,212 |
| $30,857,280 |
| | | | | | | | | | | | | | | | | | | | | | | |
| Period | Total Number of Shares (or Units) Purchased | | Average
Price Paid
per Share
(or Unit) | | Total Number of
Shares (or Units)
Purchased as Part of
Publicly Announced
Program | | Maximum Dollar
Value of Shares (or Units)
that May Yet Be
Purchased Under the Program |
| January 1 - 31, 2022 | 690,783 | | | $97.98 | | 690,783 | | | $ | 110,467,685 | |
| February 1 - 28, 2022 | 648,346 | | | $99.67 | | 648,346 | | | $ | 345,825,167 | |
| March 1 - 31, 2022 | 958,545 | | | $99.79 | | 958,545 | | | $ | 250,144,621 | |
| April 1 - 30, 2022 | 104,843 | | | $101.59 | | 104,843 | | | $ | 239,490,711 | |
| May 1 - 31, 2022 | 1,771,240 | | | $92.12 | | 1,771,240 | | | $ | 76,278,235 | |
| June 1 - 30, 2022 | — | | | $0.00 | | — | | | $ | 326,278,235 | |
| July 1 - 31, 2022 | — | | | $0.00 | | — | | | $ | 326,278,235 | |
| August 1 - 31, 2022 | — | | | $0.00 | | — | | | $ | 326,278,235 | |
| September 1 - 30, 2022 | — | | | $0.00 | | — | | | $ | 326,278,235 | |
| October 1 - 31, 2022 | — | | | $0.00 | | — | | | $ | 326,278,235 | |
| November 1 - 30, 2022 | 1,006,756 | | | $119.76 | | 1,006,756 | | | $ | 205,682,254 | |
| December 1 - 31, 2022 | 463,774 | | | $117.01 | | 463,774 | | | $ | 151,402,100 | |
| | | | | | | |
| Total | 5,644,287 | | | $102.16 | | 5,644,287 | | | $ | 151,402,100 | |
We have not paid any dividends on our common stock in the past and currently do not expect to pay cash dividends or make any other distributions on common stock in the future. We expect to retain our future earnings, if any, for use in the operation and expansion of our business, to pay down debt and potentially for share repurchases. Any future determination to pay dividends on common stock will be at the discretion of our board of directorsthe Board and will depend upon our financial condition, results of operations, capital requirements and such other factors as the boardBoard deems relevant. In addition, our ability to declare and pay dividends on our common stock is subject to covenants restricting such actions in the instruments governing our debt. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” and “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement.”
The information required by Item 201(d) of Regulation S-K is incorporated by reference to the 2020 Annual Meeting Proxy Statement (as definedtable set forth in Item 10 below) under the heading “Equity Compensation Plan Information at December 31, 2019.”
12 of this Annual Report on Form 10-K.
Performance Graph
This performance graph shall not be deemed “filed” with the SEC or subject to Section 18 of the Exchange Act, nor shall it be deemed incorporated by reference in any of our filings under the Exchange Act or the Securities Act.
The graph below compares the total return on our common stock with the total return of (i) the NYSE Composite Index, and (ii) the Russell 2000 Index, (iii) the Dow Jones US Business Training & Employment Agencies Index (“BTEA”), and (iv) the S&P Healthcare Services Select Industry Index (“SPSIHP”), assuming an investment of $100 on December 31, 20142017 in our common stock and the stocks comprising the NYSE Composite Index, the Russell 2000 Index, the BTEA, and the stocks comprisingSPSIHP, respectively.
The Russell 2000 Index and the
BTEA.
|
| | | | | | | | | | | | | | | | | |
| | 12/31/14 | | 12/31/15 | | 12/31/16 | | 12/31/17 | | 12/31/18 | | 12/31/19 |
| AMN Healthcare Services, Inc. | 100.00 |
| | 158.42 |
| | 196.17 |
| | 251.28 |
| | 289.08 |
| | 317.91 |
|
| NYSE Composite | 100.00 |
| | 95.91 |
| | 107.36 |
| | 127.46 |
| | 116.06 |
| | 145.66 |
|
| BTEA | 100.00 |
| | 99.08 |
| | 89.89 |
| | 119.65 |
| | 89.27 |
| | 112.74 |
|
| |
Item 6. | Selected Financial Data |
You should readSPSIHP have been added to the selected financial and operating data presented below in conjunction with “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 8. Financial Statements and Supplementary Data” below. We derive our statements of operations dataperformance graph for the yearsfiscal year ended December 31, 2019, 20182022 and 2017,we plan to include them in future filings. The Russell 2000 Index is a widely used broad-based market index that we believe more accurately represents companies of comparable market capitalization. Additionally, we believe that the SPSIHP is a more accurate representation of a published industry index that includes companies engaged in businesses similar to ours. Accordingly, we plan to discontinue the use of the NYSE Composite Index and the balance sheet data at December 31, 2019 and 2018 from the audited financial statements included elsewhereBTEA in this Annual Report on Form 10-K. We derive the statementsfuture filings.
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| 12/31/17 | | 12/31/18 | | 12/31/19 | | 12/31/20 | | 12/31/21 | | 12/31/22 |
| AMN Healthcare Services, Inc. | 100.00 | | | 115.05 | | | 126.52 | | | 138.58 | | | 248.39 | | | 208.77 | |
| NYSE Composite | 100.00 | | | 91.05 | | | 114.28 | | | 122.26 | | | 147.54 | | | 133.75 | |
| Russell 2000 | 100.00 | | | 88.99 | | | 111.70 | | | 134.00 | | | 153.85 | | | 122.41 | |
| BTEA | 100.00 | | | 74.61 | | | 94.22 | | | 99.70 | | | 136.41 | | | 94.30 | |
| SPSIHP | 100.00 | | | 103.02 | | | 122.78 | | | 164.29 | | | 180.72 | | | 145.15 | |
Item 6. [Reserved]
We completed our acquisitions of (1) Onward Healthcare, including its two wholly-owned subsidiaries, Locum Leaders and Medefis, on January 7, 2015, (2) The First String Healthcare on September 15, 2015, (3) Millican on October 5, 2015, (4) B.E. Smith on January 4, 2016, (5) HealthSource Global on January 11, 2016, (6) Peak Health on June 3, 2016, (7) Phillips DiPisa and Leaders For Today on April 6, 2018, (8) MedPartners on April 9, 2018, (9) Silversheet on January 30, 2019, (10) Advanced on June 14, 2019 and (11) b4health on December 19, 2019. Our acquisitions affect the comparability of the selected financial data of the applicable pre-acquisition and post-acquisition time periods.
We have not paid any cash dividends during the past five fiscal years.
|
| | | | | | | | | | | | | | | | | | | |
| | Fiscal Years Ended December 31, |
| | 2019 | | 2018 | | 2017 | | 2016 | | 2015 |
| | ( in thousands, except per share data) |
| Consolidated Statements of Operations: | | | | | | | | | |
| Revenue | $ | 2,222,107 |
| | $ | 2,136,074 |
| | $ | 1,988,454 |
| | $ | 1,902,225 |
| | $ | 1,463,065 |
|
| Cost of revenue | 1,478,642 |
| | 1,439,691 |
| | 1,344,035 |
| | 1,282,501 |
| | 993,702 |
|
| Gross profit | 743,465 |
| | 696,383 |
| | 644,419 |
| | 619,724 |
| | 469,363 |
|
| Operating expenses: | | | | | | | | | |
| Selling, general and administrative | 508,030 |
| | 452,318 |
| | 399,700 |
| | 398,472 |
| | 319,531 |
|
| Depreciation and amortization | 58,520 |
| | 41,237 |
| | 32,279 |
| | 29,620 |
| | 20,953 |
|
| Total operating expenses | 566,550 |
| | 493,555 |
| | 431,979 |
| | 428,092 |
| | 340,484 |
|
| Income from operations | 176,915 |
| | 202,828 |
| | 212,440 |
| | 191,632 |
| | 128,879 |
|
| Interest expense, net, and other | 28,427 |
| | 16,143 |
| | 19,677 |
| | 15,465 |
| | 7,790 |
|
| Income before income taxes | 148,488 |
| | 186,685 |
| | 192,763 |
| | 176,167 |
| | 121,089 |
|
| Income tax expense | 34,500 |
| | 44,944 |
| | 60,205 |
| | 70,329 |
| | 39,198 |
|
| Net income | $ | 113,988 |
| | $ | 141,741 |
| | $ | 132,558 |
| | $ | 105,838 |
| | $ | 81,891 |
|
| Net income per common share: | | | | | | | | | |
| Basic | $ | 2.44 |
| | $ | 2.99 |
| | $ | 2.77 |
| | $ | 2.21 |
| | $ | 1.72 |
|
| Diluted | $ | 2.40 |
| | $ | 2.91 |
| | $ | 2.68 |
| | $ | 2.15 |
| | $ | 1.68 |
|
| Weighted average common shares outstanding: | | | | | | | | | |
| Basic | 46,704 |
| | 47,371 |
| | 47,807 |
| | 47,946 |
| | 47,525 |
|
| Diluted | 47,593 |
| | 48,668 |
| | 49,430 |
| | 49,267 |
| | 48,843 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | As of December 31, |
| | 2019 | | 2018 | | 2017 | | 2016 | | 2015 |
| | (in thousands) |
| Consolidated Balance Sheet Data: | | | | | | | | | |
| Cash and cash equivalents | $ | 82,985 |
| | $ | 13,856 |
| | $ | 15,147 |
| | $ | 10,622 |
| | $ | 9,576 |
|
| Total assets | 1,931,646 |
| | 1,492,721 |
| | 1,253,957 |
| | 1,186,881 |
| | 880,432 |
|
| Total notes payable, including current portion, less unamortized discount and fees | 617,159 |
| | 320,607 |
| | 319,843 |
| | 362,942 |
| | 135,990 |
|
| Total stockholders’ equity | 736,742 |
| | 638,990 |
| | 562,527 |
| | 449,383 |
| | 347,860 |
|
| |
Item 7. | Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
You should read the following discussion in conjunction with our consolidated financial statements and the notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K. Certain statements in this “Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations” are “forward-looking statements.” See “Special Note Regarding Forward-Looking Statements” under Item 1, “Business.” We intend this MD&A section to provide you with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. The following sections comprise this MD&A:
•Overview of Our Business
•Operating Metrics
•Recent Trends
•Results of Operations
•Liquidity and Capital Resources
•Off-Balance Sheet and Other Financing Arrangements
•Contractual Obligations
•Critical Accounting Policies and Estimates
•Recent Accounting Pronouncements
Overview of Our Business
We provide healthcare workforce solutions and staffing services to healthcare facilities across the nation. As an innovative total talent solutions partner, our managed services programs, or “MSP,” vendor management systems, or “VMS,” workforce consulting services, predictive modeling, staff scheduling, telehealth services, credentialing services, revenue cycle solutions, language interpretation services and the placement of physicians, nurses, allied healthcare professionals and healthcare leaders into temporary and permanent positions enable our clients to successfully reduce staffing complexity, increase efficiency and lead their organizations within the rapidly evolving healthcare environment.
For the year ended December 31, 2019,2022, we recorded revenue of $2,222.1$5,243.2 million, as compared to $2,136.1$3,984.2 million for 2018.2021. We recorded net income of $114.0$444.1 million for 2019,2022, as compared to $141.7$327.4 million for 2018.2021. Nurse and allied solutions segment revenue comprised 64%76% and 61%75% of total consolidated revenue for the years ended December 31, 20192022 and 2018,2021, respectively. Locum tenensPhysician and leadership solutions segment revenue comprised 15%13% and 18%15% of total consolidated revenue for the years ended December 31, 20192022 and 2018,2021, respectively. OtherTechnology and workforce solutions segment revenue comprised 21%11% and 21%10% of total consolidated revenue for the years ended December 31, 20192022 and 2018,2021, respectively. For a description of the services we provide under each of our business segments, please see, “Item 1. Business—Our Services.”
We believe we have becomeare recognized as the market-leading innovator in providing healthcare talent solutions in the United States. We seek to advance our market-leading position through a number of strategies that focus on market penetration, expansion of our talent solutions, increasing operational efficiency and scalability and increasing our supply of qualified healthcare professionals. Our market growth strategy continues to focus on broadening and investing, both organically and through strategic acquisitions, in service and technology offerings beyond our traditional temporary staffing and permanent placement services, to include more strategic and recurring revenue sources from innovative workforcetalent solutions offerings such as MSP, VMS, credentialing, workforce optimization services,service, and other technology-enabled services, which generally operate at higher margins than our traditional healthcare staffing businesses.services. We also seek strategic opportunities to expand into complementary service offerings to our staffing businesses that leverage our core capabilities of recruiting and credentialing healthcare professionals.
As part of our long-term growth strategy to add value for our clients, healthcare professionals, and stockholders, on December 19, 2019, JuneMay 13, 2022, April 7, 2021, and February 14, 2019, January 30, 2019, April 9, 2018 and April 6, 2018,2020, we acquired b4health, Advanced, Silversheet, MedPartners HIM (“MedPartners”)Connetics, Synzi (including its wholly-owned subsidiary SnapMD), and Phillips DiPisa and Leaders For Today (“PDA” and “LFT”)Stratus Video (which we have since rebranded as AMN Language Services), respectively. b4health is an innovative technology company and a leading provider of a web-based internal float pool management solution and VMS for healthcare facilities. Advanced is a national healthcare staffing company thatConnetics specializes in placing therapists and nurses across multiple settings, including hospitals, schools, clinics, skilled nursing facilities, and home health. Silversheet provides innovative credentialing software solutions to clinicians and healthcare enterprises. MedPartners provides revenue cycle solutions, including case management, clinical documentation improvement, medical coding and registry services to hospitals and physician medical groups nationwide. PDA and LFT offer a range of leadership staffingthe direct hire recruitment and permanent placement
solutions for of international nurse and allied health professionals with healthcare facilities in the healthcare industry.United States. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (2), Acquisitions.” In addition, on February 14, 2020, we completed the acquisition of Stratus Video. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (14), Subsequent Events.”
Operationally, our strategic initiatives focus on investing in and further developing our processes and systems to achieve market leading efficiency and scalability, which we believe will provide operating leverage as our revenue grows. From a healthcare professional supply perspective, we continue to invest in new candidate recruitment and engagement initiatives and technologies to access and effectively utilize our network of qualified healthcare professionals to capitalize on the demand growth we are experiencing which we expect to continue in the future due to the combined effects of healthcare reform, the aging population and labor shortages within certain regions and disciplines.
Over the last several years, we have worked to execute on our management strategies and intend to continue to do so in the future. Over the past five years, we have grown our business both organically and as a result of a number of acquisitions.
We typically experience modest seasonal fluctuations during our fiscal year and they tend to vary among our business segments. These fluctuations can vary slightly in intensity from year to year. Over the last fourpast five years, steadily and progressively increasing demand muted some of the effects of these quarterly fluctuations.fluctuations have been muted in our consolidated results.
In addition to our consolidated and segment financial results, we monitor the following key metrics to help us evaluate our results of operations and financial condition and make strategic decisions. We believe this information is useful in understanding our operational performance and trends affecting our businesses.
•Average travelers on assignment represents the average number of nurse and allied healthcare professionals on assignment during the period, which is used by management as a measure of volume in our nurse and allied solutions segment;
•Bill rates represent the hourly straight-time rates that we bill to clients, which are an indicator of labor market trends and costs within our nurse and allied solutions segment;
•Billable hours represent hours worked by our healthcare professionals that we are able to bill on client engagements, which are used by management as a measure of volume in our nurse and allied solutions segment;
•Days filled is calculated by dividing total locum tenens hours filled during the period by eight hours, which is used by management as a measure of volume in our locum tenens business within our physician and leadership solutions segment; and
•Revenue per day filled is calculated by dividing revenue of our locum tenens business by days filled for the period, which is an indicator of labor market trends and costs in our locum tenens business within our physician and leadership solutions segment.
Recent Trends
Demand for our temporary and permanent placement staffing services is driven in part by U.S. economic and labor trends. U.S. Bureau of Labor Statistics survey data reflect near record levels of healthcare job openingstrends, and quits. We view these data, along with a 50-year-low unemployment ratesince early 2020 through present, the COVID-19 pandemic and continued economic growth, as positive trendsthe “Great Resignation” have impacted demand. Since late 2020, we have been experiencing historically high demand for the healthcare staffing industry. These positive macroeconomicnurses and labor trends have created a highly competitive labor market forallied healthcare professionals and our clinician supply, particularly in nursing, has not kept pace with growth in clientcurrent demand because wage growth for contingent clinicians has not kept pace with that of permanent clinicians.across all segments and business lines is above pre-COVID-19 levels.
Consolidation within the healthcare industry is creating larger, more sophisticated and complex health systems. We believe consolidation has elevated the need for strategic talent solutions partners capable of addressing their recruiting, staffing and workforce optimization goals. Given the increasing need for partners capable of offering a comprehensive workforce solution, we continue to see the benefits of our total talent solutions strategy, particularly with our MSPs. As a result of our ongoing focus on these strategic MSP relationships, the percentage of our staffing revenue derived from our MSP clients continues to increase. We believe these strategic, longer-term relationships will continue to comprise a greater proportion of revenue in our staffing businesses.
Indemand above pre-pandemic levels across our nurse and allied solutions segment overall demand is strongdriven by vacancies resulting from burnout, attrition, and atretirements. The wages for nurses and the highest levels seen since 2016. A tight labor market and modest growth incorresponding bill rates is impactingwe charge our abilityclients peaked in the first quarter of 2022. Bill rates and clinician compensation declined during the rest of the year, but remained well above prior year and pre-pandemic levels. We expect bill rates and clinician compensation to recruit enough nurses to meet the increased demand. Our allied staffing business continues to have strong overall demand resulting in steady organic revenue growth. However, we have recently experienced a decline instabilize above pre-pandemic levels entering 2023.
In our physician and leadership solutions segment, demand for therapistsour locum tenens business exceeded pre-pandemic levels throughout all of 2022. We expect continued strong demand for locums tenens staffing in the first quarter of 2023. Our interim leadership business saw all time high demand in the second half of 2021 and the first half of 2022. Demand softened for that business in the second half of 2022 as some healthcare organizations streamlined leadership roles to reduce costs.
In our technology and workforce solutions segment, our language services business continued to experience increased utilization due to a shift to more virtual interpretation during the pandemic and labor shortages. Bill rates and volumes declined in our VMS business from skilled nursing facility clients resulting from recently implemented Medicare reimbursement changes. Accesspeak levels in the first quarter, but still remained well above pre-pandemic levels. We anticipate bill rates to additional supply offollow similar trends as our nurse and allied healthcare professionals from the Advanced acquisition has helped us better address our clients’ staffing demands.solutions segment and stabilize well above pre-pandemic levels as we enter 2023.
The demand environment for locum tenens is also generally favorable, althoughour recruitment process outsourcing services remained strong as clients look for solutions to help address the increased labor shortages and the need to address vacancies in their permanent roles and challenges with staffing their internal recruiting teams. In the current constrained labor market, we expect an elevated level of demand for hospitalistsas compared to pre-pandemic.
As our businesses have continued to grow, we have increased our sales and emergency room physicians significantly declined over the past 12 months. Our locum tenens segment has stabilized after disruption resulting from process and technology changes made during 2018, and recruiter productivity continues to improve.
In our otheroperations workforce solutions segment, better demand and placements in the interim leadership and physician permanent placement divisions and growth in our technology workforce solutions are driving improved segment performance. Our revenue cycle solutions division has experienced a revenue decline in recent quarters due mainly to organizational changes made to support our long-term goclients and healthcare professionals. We have also increased spending to market strategy, but we expect improved performance from growing opportunities to servesupport our MSP customers.current team members and retain talent.
Results of Operations
The following table sets forth, for the periods indicated, certain statements of operations data as a percentage of revenue. Our results of operations include three reportable segments: (1) nurse and allied solutions, (2) locum tenensphysician and leadership solutions, and (3) othertechnology and workforce solutions. The acquisitions during 20192022, 2021 and 20182020 impact the comparability of the results between the years presented. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (2), Acquisitions.” Our historical results are not necessarily indicative of our results of operations to be expected in the future.
|
| | | | | | |
| | Years Ended December 31, | |
| | 2019 | | 2018 | | 2017 | |
| Consolidated Statements of Operations: | | | | | | |
| Revenue | 100.0 | % | 100.0 | % | 100.0 | % |
| Cost of revenue | 66.5 | | 67.4 | | 67.6 | |
| Gross profit | 33.5 | | 32.6 | | 32.4 | |
| Selling, general and administrative | 22.9 | | 21.2 | | 20.1 | |
| Depreciation and amortization | 2.6 | | 1.9 | | 1.6 | |
| Income from operations | 8.0 | | 9.5 | | 10.7 | |
| Interest expense, net, and other | 1.3 | | 0.8 | | 1.0 | |
| Income before income taxes | 6.7 | | 8.7 | | 9.7 | |
| Income tax expense | 1.6 | | 2.1 | | 3.0 | |
| Net income | 5.1 | % | 6.6 | % | 6.7 | % |
| | | | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, | |
| | 2022 | | 2021 | | 2020 | |
| Consolidated Statements of Operations: | | | | | | |
| Revenue | 100.0 | | % | 100.0 | | % | 100.0 | | % |
| Cost of revenue | 67.3 | | | 67.1 | | | 66.9 | | |
| Gross profit | 32.7 | | | 32.9 | | | 33.1 | | |
| Selling, general and administrative | 17.9 | | | 18.3 | | | 23.0 | | |
| Depreciation and amortization | 2.5 | | | 2.6 | | | 3.9 | | |
| Income from operations | 12.3 | | | 12.0 | | | 6.2 | | |
| Interest expense, net, and other | 0.7 | | | 0.9 | | | 2.4 | | |
| Income before income taxes | 11.6 | | | 11.1 | | | 3.8 | | |
| Income tax expense | 3.1 | | | 2.9 | | | 0.8 | | |
| Net income | 8.5 | | % | 8.2 | | % | 3.0 | | % |
Comparison of Results for the Year Ended December 31, 20192022 to the Year Ended December 31, 20182021
Revenue. Revenue increased 4%32% to $2,222.1 million for 2019 from $2,136.1$5,243.2 million for 2018,2022 from $3,984.2 million for 2021, primarily attributable to additional revenue of $117.6 million from our PDA, LFT, MedPartners, Silversheet and Advanced acquisitions and higher organic revenue inacross our nurse and allied solutions segment, partially offset by lower revenue in our locum tenens solutions segment. Excluding the additional revenue from acquisitions, revenue decreased 1%.segments.
Nurse and allied solutions segment revenue increased 9%33% to $1,420.0 million for 2019 from $1,306.5$3,982.5 million for 2018.2022 from $2,990.1 million for 2021. The $113.4$992.4 million increase was primarily attributable to additional revenuea 23% increase in the average number of $82.3 million in connection with the Advanced acquisitiontravelers on assignment and a 1%an approximately 14% increase in the average bill rate, partially offset by a 2% decrease in billable hours during the year ended December 31, 2019.2022.
Locum tenensPhysician and leadership solutions segment revenue decreasedincreased 17% to $324.7$697.9 million for 20192022 from $393.4$594.2 million for 2018.2021. The $68.7$103.7 million decreaseincrease was primarily attributable to growth in our core businesses across the segment, partially offset by lower COVID-19 project work. Revenue in our locum tenens business grew approximately 21% during 2022 primarily due to a 17% decrease14% increase in the number of days filled.filled and a 6% increase in the revenue per day filled, which was driven by growth in core demand and volume over pre-pandemic levels. Our interim leadership business experienced an approximately 9% growth, while our physician permanent placement and executive search businesses grew 19% during 2022.
OtherTechnology and workforce solutions segment revenue increased 9%41% to $477.5 million for 2019 from $436.2$562.8 million for 2018. Of the $41.32022 from $399.9 million for 2021. The $163.0 million increase $35.3 million was attributable to additional revenue in connection with the PDA, LFT, MedPartners and Silversheet acquisitions, with the remainder primarily attributable to growth inwithin our permanent placement, VMS and organic interimlanguage services businesses during 2022. Revenue growth for our VMS and language services businesses was 79% and 19%, respectively, during 2022.
For 2022 and 2021, revenue under our MSP arrangements comprised approximately 64% and 56% of our consolidated revenue, 81% and 71% for nurse and allied solutions segment revenue, 18% and 15% for physician and leadership businesses, partially offset by a decline insolutions segment revenue, and 2% and 2% of our organictechnology and workforce solutions segment revenue, cycle solutions business during the year ended December 31, 2019.respectively.
Gross Profit. Gross profit increased 7%31% to $743.5 million for 2019 from $696.4$1,716.7 million for 2018,2022 from $1,309.6 million for 2021, representing gross margins of 33.5%32.7% and 32.6%32.9%, respectively. The decline in consolidated gross margin for the year ended December 31, 20192022 was positively impacted byprimarily due to (1) a higher grosslower margin in our nurse and allied solutions segment driven by higher labor disruption margin, higher other workforce solutions gross margin,clinician compensation, (2) a change in sales mix resulting from higher revenue in our physician permanent placement business model that prompted a $4.3 million classification of certain recruiter compensation expenses to SG&A that was previously in cost of revenue,nurse and a favorableallied solutions segment, mix shift. These positive factors were partially offset byand (3) a lower margin in our physician and leadership solutions segment driven by higher compensation and a change in specialty mix in our locum tenens and interim leadership businesses. The overall decline was partially offset by (1) a higher margin in our technology and workforce solutions segment primarily due to a change in sales mix resulting from increased revenue in our VMS business and its higher margins as compared to our other businesses within the segment and (2) a change in sales mix resulting from higher revenue in our technology and workforce solutions segment. Gross margin by reportable segment for 20192022 and 20182021 was 28.0% 26.3%
and 27.2%27.4% for nurse and allied solutions, 27.4%34.5% and 28.6%35.8% for locum tenensphysician and leadership solutions, and 53.8%76.0% and 52.4%69.4% for othertechnology and workforce solutions, respectively. The year-over-year gross margin decline in the locum tenens solutions segment was primarily driven by an increase in non-billable expenses and lower perm conversion fees.
Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses were $508.0$936.6 million, representing 22.9%17.9% of revenue, for 2019,2022, as compared to $452.3$730.5 million, representing 21.2%18.3% of revenue, for 2018.2021. The increase in SG&A expenses was primarily due to $25.2$138.3 million of additional SG&A expenses from the PDA, LFT,
MedPartners, Silversheethigher employee compensation and Advanced acquisitions,benefits (inclusive of share-based compensation), a $22.4 million increase related to acquisition, integration, changes in the fair value of earn-out liabilities from acquisitions, and extraordinary legal expenses, a $5.4$26.4 million increase in share-based compensation expense, and the above-mentioned $4.3 million classification of certain recruiter compensation expenses to SG&A that was previously in cost of revenue. The increase was partially offset by an additional $3.3 million of favorable actuarial-based decreases in our professional liability reservesprovision for expected credit losses, and a $12.1$26.8 million increase in legal accruals during the year ended December 31, 2018. The year-over-year increase in SG&A expenses in the nurse and allied solutions segment was primarily driven by $11.8 million of additional expenses from the Advanced acquisitionprofessional services and other expenses associated with therelated to our revenue growth. The decrease in the locum tenens solutions segment was primarily driven by lower employee and related expenses associated with the revenue decline. The increase in the other workforce solutions segment was primarily driven by $13.4 million of additional expenses from the PDA, LFT, MedPartners and Silversheet acquisitions and other expenses associated with the revenue growth. The increase in unallocated corporate overhead was primarily attributable to higher acquisition, integration, changes in the fair value of earn-out liabilities from acquisitions, and extraordinary legal expenses, partially offset by an increase in the legal accrual during 2018. SG&A expenses broken down among the reportable segments, unallocated corporate overhead, and share-based compensation are as follows:
| | | | (In Thousands) Years Ended December 31, | | (In Thousands)
Years Ended
December 31, |
| | 2019 | | 2018 | | 2022 | | 2021 |
| Nurse and allied solutions | $ | 197,823 |
| | $ | 172,055 |
| Nurse and allied solutions | $ | 471,489 | | | $ | 358,092 | |
| Locum tenens solutions | 63,787 |
| | 71,189 |
| |
| Other workforce solutions | 146,716 |
| | 123,823 |
| |
| Physician and leadership solutions | | Physician and leadership solutions | 148,619 | | | 131,228 | |
| Technology and workforce solutions | | Technology and workforce solutions | 132,733 | | | 92,498 | |
| Unallocated corporate overhead | 83,463 |
| | 74,436 |
| Unallocated corporate overhead | 153,669 | | | 123,416 | |
| Share-based compensation | 16,241 |
| | 10,815 |
| Share-based compensation | 30,066 | | | 25,217 | |
| | $ | 508,030 |
| | $ | 452,318 |
| | $ | 936,576 | | | $ | 730,451 | |
Depreciation and Amortization Expenses. Amortization expense increased 51%32% to $36.5$83.1 million for 20192022 from $24.2$63.0 million for 2018,2021, primarily attributable to (1) $14.6 million of additional amortization expensesexpense from the assignment of useful lives to certain tradenames and trademarks intangible assets that were previously not subject to amortization effective December 31, 2021 and (2) $3.0 million of additional amortization expense related to the intangible assets acquired in the PDA, LFT, MedPartners, SilversheetConnetics and Advanced acquisitions and the shortened useful life of the tradename intangible asset acquired in the MedPartners acquisition.Synzi acquisitions. Depreciation expense (exclusive of depreciation included in cost of revenue) increased 29%31% to $22.0$49.9 million for 20192022 from $17.0$38.1 million for 2018,2021, primarily attributable to an increase in purchased and developed hardware and software placed in service for our ongoing information technology investments to support our total talent solutions initiatives and to optimize our internal front and back office information technology initiatives.back-office systems. Additionally, $4.1 million and $2.5 million of depreciation expense for our language services business is included in cost of revenue for 2022 and 2021, respectively.
Interest Expense, Net, and Other. Interest expense, net, and other, was $28.4$40.4 million for 20192022 as compared to $16.1$34.1 million for 2018.2021. The increase is primarily due to (1) higher average debt outstanding balance for the year ended December 31, 2019, which resulted from (a) borrowings used to finance the Silversheet and Advanced acquisitions and (b) the consummation of the issuance and sale of our 2027 Notes (as defined below in this Item 7) in October 2019, and (2) $7.3a $3.4 million of gainsloss related to the change in fair value of an equity investment during 2022 and a $6.7 million gain related to the year ended December 31, 2018.change in fair value of an equity investment during 2021.
Income Tax Expense. Income tax expense was $34.5$162.7 million for 20192022 as compared to $44.9$116.5 million for 2018,2021, reflecting effective income tax rates of 23.2%27% and 24.1%26% for these periods, respectively. The decreaseincrease in the effective income tax rate was partiallyprimarily attributable to the impactrecognition of net discrete tax expense recorded for certainof $1.7 million during 2022 compared to $3.4 million of net discrete tax benefits of $7.3 million and $4.4 millionrecognized during 2021, in relation to income before income taxes of $148.5$606.7 million and $186.7$443.9 million for 20192022 and 2018,2021, respectively. The discrete tax benefits are related to equity awards vested and exercised and fair value changes in the cash surrender value of Company Owned Life Insurance (“COLI”). The decrease in the rate was partially offset by an increase in certain fringe benefits and disallowed performance based compensation for covered employees (Chief Executive Officer, Chief Financial Officer and the top three highest paid executive officers). See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Income Taxes, and Note (1), Summary of Significant Accounting Policies.”
Comparison of Results for the Year Ended December 31, 20182021 to the Year Ended December 31, 20172020
We describe in detail the comparison of results for the years ended December 31, 20182021 and 20172020 in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of Results for the Year Ended December 31, 20182021 to the Year Ended December 31, 2017”2020” of our 20182021 Annual Report on Form 10-K.
Liquidity and Capital Resources
In summary, our cash flows were:
|
| | | | | | | | | | | |
| | Year Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| | (in thousands) |
| Net cash provided by operating activities | $ | 224,862 |
| | $ | 226,993 |
| | $ | 160,518 |
|
| Net cash used in investing activities | (291,824 | ) | | (279,337 | ) | | (35,361 | ) |
| Net cash provided by (used in) financing activities | 136,599 |
| | 37,511 |
| | (77,193 | ) |
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| | (in thousands) |
| Net cash provided by operating activities | $ | 653,733 | | | $ | 305,356 | | | $ | 256,826 | |
| Net cash used in investing activities | (170,710) | | | (107,402) | | | (538,172) | |
| Net cash provided by (used in) financing activities | (591,865) | | | (34,895) | | | 211,486 | |
Historically, our primary liquidity requirements have been for acquisitions, working capital requirements, and debt service under our credit facilities and senior notes. We have funded these requirements through internally generated cash flow and funds borrowed under our credit facilities. During the fourth quarterfacilities and senior notes.
As of 2019, we paid off the remaining balance of our term debt. At December 31, 2019,2022, (1) zerono amount was drawn with $382.6$378.6 million of available credit under the Senior Credit Facility (as defined below), (2) the aggregate principal amount of our 5.125% senior notes due 2024 (the “2024 Notes”)2027 Notes (as defined below) outstanding equaled $325.0was $500.0 million, and (3) the aggregate principal amount of our 4.625% senior notes due 2027 (the “2027 Notes”)2029 Notes (as defined below) outstanding equaled $300.0was $350.0 million. We describe in further detail our Amended Credit Agreement (as defined below), under which our Senior Credit Facility is governed, the 20242027 Notes, and the 20272029 Notes in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement.”
In addition to our cash requirements, we have a share repurchase program authorized by our board of directors, which does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time. See additional information in “Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” and “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (10)(b), Capital Stock—Treasury Stock.”
We believe that cash generated from operations and available borrowings under our Senior Credit Facility will be sufficient to fund our operations and liquidity requirements, including expected capital expenditures, for the next 12 months and beyond. We intend to finance potential future acquisitions with cash provided from operations, borrowings under our Senior Credit Facility, or other borrowingborrowings under our Amended Credit Agreement, bank loans, debt or equity offerings, or some combination of the foregoing. The following discussion provides further details of our liquidity and capital resources.
Operating Activities
Net cash provided by operating activities for 2019, 20182022, 2021 and 20172020 was $224.9$653.7 million,, $227.0 $305.4 million and $160.5$256.8 million, respectively. The decreaseincrease in net cash provided by operating activities for 20192022 from 20182021 was primarily attributable to (1) an increase in net income taxesexcluding non-cash expenses of $205.4 million primarily due to improved operating results in our nurse and allied solutions and technology and workforce solutions segments, (2) a decrease in accounts receivable and subcontractor receivables between periods of $19.6$614.2 million primarily due to an overpayment of estimated tax in 2017 that offset income tax liability in 2018, (2) anthe significant increase in the receivables balance in the prior year, which was due to increases in revenue and associate vendor usage in the prior year along with timing of collections, and (3) decreases in prepaid expenses and other current assets between periods of $18.0$112.6 million and $39.8 million, respectively, primarily due to higher contributions to the deferred compensation plan as compared toprepayments made in the prior year and (3)refunds received in the current year by third-party vendors related to labor disruption services. The overall increase in net cash provided by operating activities was partially offset by (1) a decrease in other liabilities between periods of $249.3 million primarily due to cash paid for income taxes and client deposits related to labor disruption services that were returned during the current year, which was partially offset by the payment of a lease termination fee during 2021, (2) a decrease in accounts payable and accrued expenses between periods of $15.2$207.3 million primarily due to the increase in associate vendor usage during the prior year and timing of payments, and settlement payments of two legal matters. The overall(3) a decrease was partially offset by (1) a increase in accrued compensation and benefits between periods of $22.5$139.7 million primarily due to higher contributions to the deferred compensation plan as compared to the prior year (2) a decreaseincreases in accounts receivablepay rates, billable hours, and subcontractorthe average number of travelers on assignment in our nurse and allied solutions segment and increased employee compensation and benefits in 2021, and (4) an increase in income taxes receivable between periods of $16.3 million due to improved collections, and (3) an increase in other liabilities between periods of $2.9$15.5 million primarily due to timingan overpayment of payments.estimated taxes during 2022. Our Days Sales Outstanding was 55 and 6453 days at December 31, 20192022 and December 31, 2018,2021, respectively.
Investing Activities
Net cash used in investing activities for 2019, 20182022, 2021 and 20172020 was $291.8$170.7 million,, $279.3 $107.4 million and $35.4$538.2 million, respectively. The year-over-year increase from 20182021 to 20192022 in net cash used in investing activities was primarily attributable to (1) $247.9$69.6 million used for acquisitions in 20192022 as compared to $217.4$41.3 million used for acquisitions in 20182021 and (2) $2.6$21.5 million moreof payments made during 2019 as compared to 2018 to fund the deferred compensation plan. The increase was partially offset by (1) net proceeds of restricted investments related to our captive insurance company of $5.8 millionplan during 2019,2022 as compared to a net purchase of $8.8$7.6 million during 2018 and (2) no new equity investments in 2019, as compared to $6.1 million paid during 2018. Capital2021. In addition, capital expenditures were $35.2$75.8 million,, $35.2 $53.6 million and $26.5$37.7 million for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, respectively. Our capital expenditures in recent years were primarily related to ongoing information technology investments to support the growth of the businessour total talent solutions initiatives and to standardizeoptimize our internal front and back office information technology platforms.back-office systems.
Financing Activities
Net cash (used in) provided by financing activities for 2019, 2018 and 2017 was $136.6 million, $37.5 million and ($77.2 million), respectively. Net cash provided by (used in) financing activities for 20192022, 2021 and 2020 was primarily$(591.9) million, $(34.9) million and $211.5 million, respectively. Net cash used in financing activities for 2022 was due to $300.0 million of gross proceeds received in connection with the issuance and sale of the 2027 Notes and borrowings of $101.0 million under the Senior Credit Facility (as defined below), partially offset by (1) the repayment of $221.0 million under the Senior Credit Facility, (2) $18.7
$576.8 million paid in connection with the repurchase of our common stock (3) $5.2 million of financing costs paid in connection with the Amended Credit Agreement and the issuance and sale of the 2027 Notes, (4) $5.7 million of prior acquisition contingent consideration earn-out payments, and (5) $13.8$15.1 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards. Net cash used in financing activities for 2021 was primarily due to (1) repayments of $70.0 million under the Senior Credit Facility (as defined below) and $21.9 million under the Additional Term Loan (as defined below), (2) $7.2 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards, and (3) $3.1 million of acquisition earn-out payments, partially offset by borrowings of $70.0 million under the Senior Credit Facility.
Amended Credit Agreement
On February 9, 2018, we entered into a credit agreement (the “New Credit Agreement”) with several lenders to provide for a $400.0 million secured revolving credit facility (the “Senior Credit Facility”) to replace our then-existing credit agreement. The Senior Credit Facility includes a $50.0 million sublimit for the issuance of letters of credit and a $50.0 million sublimit for swingline loans. On June 14, 2019, we entered into the first amendment to the New Credit Agreement (the “First Amendment”) to provide for, among other things, a $150.0 million secured term loan credit facility (the “Term Loan” and, together). In connection with our issuance of the SeniorExisting 2027 Notes (as defined below), we used a portion of the proceeds to repay our entire indebtedness under the Term Loan during the fourth quarter of 2019. On February 14, 2020, we entered into the second amendment to the New Credit Facility,Agreement (the “Second Amendment”) to provide for, among other things, a $250.0 million secured term loan credit facility (the “Additional Term Loan”). During the “Credit Facilities”first quarter of 2021, we repaid the remaining balance of our Additional Term Loan.
On February 10, 2023, we entered into the third amendment to the New Credit Agreement (the “Third Amendment”). The FirstThird Amendment (together with the New Credit Agreement, the First Amendment and the Second Amendment, collectively, the “Amended Credit Agreement”) also extended the maturity date ofprovides for, among other things, an increase to the Senior Credit Facility to be coterminous with$750.0 million. The Senior Credit Facility includes a $125.0 million sublimit for the Term Loan.issuance of letters of credit and a $75.0 million sublimit for swingline loans. Our obligations under the Amended Credit Agreement are secured by substantially all of our assets. The terms of the Amended Credit Agreement, including maturity dates, payment and interest terms, are described in further detail in “Item
8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement.”
In connection with our issuance and sale of the 2027 Notes, we used a portion of the proceeds to repay our entire indebtedness under the Credit Facilities. On February 14, 2020, we entered into the second amendment to the New Credit Agreement (the “Second Amendment”) to provide for, among other things, an additional $250.0 million secured term loan facility. For more detail regarding the Second Amendment, please see “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement.”
4.625% Senior Notes Due 2027
On October 1, 2019,August 13, 2020, AMN Healthcare, Inc., a wholly owned subsidiary of the Company, completed the issuance and sale of an additional $200.0 million aggregate principal amount of 4.625% senior notes due 2027 (the “New 2027 Notes”), which were issued at a price of 101.000% of the aggregate principal amount. The New 2027 Notes were issued pursuant to the existing indenture, dated as of October 1, 2019, under which we previously issued $300.0 million aggregate principal amount of 4.625% senior notes due 2027 (the “Existing 2027 Notes” and together with the New 2027 Notes, the “2027 Notes”). The New 2027 Notes will be treated as a single series with the Existing 2027 Notes and will have the same terms (other than issue price, issue date and the date from which interest accrues) as those of the Existing 2027 Notes. The 2027 Notes will mature on October 1, 2027. Interest on the 2027 Notes is payable semi-annually in arrears on April 1 and October 1 of each year, commencing AprilOctober 1, 2020.2020 with respect to the New 2027 Notes. The 2027 Notes are fully and unconditionally and jointly guaranteed on a senior unsecured basis by us and all of our subsidiaries that guarantee the Amended Credit Agreement.
On and after October 1, 2022, we may redeem all or a portion of the 2027 Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed in percentages of principal amount on the redemption date) set forth below, plus accrued and unpaid interest, if any, to (but excluding) the redemption date, if redeemed during the twelve month period commencing on October 1 of the years set forth below:
| | | | | | | | |
| Period | Redemption
Price |
| 2022 | | 102.313 | % |
| 2023 | | 101.156 | % |
| 2024 and thereafter | | 100.000 | % |
Prior to October 1, 2022, we may also redeem 2027 Notes with the net cash proceeds of certain equity offerings in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the 2027 Notes issued, at a redemption price (expressed as a percentage of principal amount) of 104.625% of the principal amount thereof plus accrued and unpaid interest, if any, to (but excluding) the applicable redemption date.
In addition, we may redeem some or all of the 2027 Notes prior to October 1, 2022 at a redemption price equal to 100% of the principal amount of the 2027 Notes redeemed, plus accrued and unpaid interest thereon, if any, to (but excluding) the applicable redemption date, plus a “make-whole” premium based on the applicable treasury rate plus 50 basis points.
Upon the occurrence of specified change of control events as defined in the indenture governing the 2027 Notes, we must offer to repurchase the 2027 Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to (but excluding) the purchase date.
The indenture governing the 2027 Notes contains covenants that, among other things, restrict our ability to:
•sell assets,
•pay dividends or make other distributions on capital stock, make payments in respect of subordinated indebtedness or make other restricted payments,
•make certain investments,
•incur or guarantee additional indebtedness or issue preferred stock,
•create certain liens,
•enter into agreements that restrict dividends or other payments from our restricted subsidiaries,
•consolidate, merge or transfer all or substantially all of our assets,
•engage in transactions with affiliates, and
•create unrestricted subsidiaries.
These covenants are subject to a number of important exceptions and qualifications. The indenture governing the 2027 Notes contains affirmative covenants and events of default that are customary for indentures governing high yield securities. The 2027 Notes and the guarantees are not subject to any registration rights agreement.
We used the proceeds from the issuance and sale of the New 2027 Notes to (1) repay $149.1$200.0 million of our existingindebtedness under the Additional Term Loan during the third quarter of 2020.
4.000% Senior Notes Due 2029
On October 20, 2020, AMN Healthcare, Inc., a wholly owned subsidiary of the Company, completed the issuance of $350.0 million aggregate principal amount of 4.000% Senior Notes due 2029 (the “2029 Notes”). The 2029 Notes will mature on April 15, 2029. Interest on the 2029 Notes will be payable semi-annually in arrears on April 15 and October 15 of each year, commencing April 15, 2021.
At any time and from time to time on and after April 15, 2024, we will be entitled at our option to redeem all or a portion of the 2029 Notes upon not less than 10 nor more than 60 days’ notice, at the redemption prices (expressed in percentages of principal amount on the redemption date) set forth below, plus accrued and unpaid interest, if any, to (but excluding) the redemption date (subject to the right of holders of record of the 2029 Notes on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve month period commencing on April 15 of the years set forth below:
| | | | | | | | |
| Period | Redemption
Price |
| 2024 | | 102.000 | % |
| 2025 | | 101.000 | % |
| 2026 and thereafter | | 100.000 | % |
At any time and from time to time prior to April 15, 2024, we may also redeem 2029 Notes with the net cash proceeds of certain equity offerings in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the 2029 Notes issued, at a redemption price (expressed as a percentage of principal amount) of 104.000% of the principal amount thereof plus accrued and unpaid interest, if any, to (but excluding) the applicable redemption date.
In addition, we may redeem some or all of the 2029 Notes at any time and from time to time prior to April 15, 2024 at a redemption price equal to 100% of the principal amount of the 2029 Notes redeemed, plus accrued and unpaid interest thereon, if any, to (but excluding) the applicable redemption date, plus a “make-whole” premium based on the applicable treasury rate plus 50 basis points.
Upon the occurrence of specified change of control events as defined in the indenture governing the 2029 Notes, we must offer to repurchase the 2029 Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to (but excluding) the purchase date.
The indenture governing the 2029 Notes contains covenants that, among other things, restricts our ability to:
•sell assets;
•pay dividends or make other distributions on capital stock, make payments in respect of subordinated indebtedness or make other restricted payments;
•make certain investments;
•incur or guarantee additional indebtedness or issue preferred stock;
•create certain liens;
•enter into agreements that restrict dividends or other payments from our restricted subsidiaries to us;
•consolidate, merge or transfer all or substantially all of their assets;
•enter into transactions with affiliates; and
•create unrestricted subsidiaries.
These covenants are subject to a number of important exceptions and qualifications. The indenture governing the 2029 Notes contains affirmative covenants and events of default that are customary for indentures governing high yield securities. The 2029 Notes and the guarantees are not subject to any registration rights agreement.
We used the proceeds from the issuance of the 2029 Notes, along with cash generated from operations, to (1) redeem all of our outstanding $325.0 million aggregate principal amount of 2024 Notes on November 4, 2020, (2) pay the associated redemption premium and all accrued and unpaid interest on the 2024 Notes, (3) repay $146.0$40.0 million under ourthe Senior Credit Facility, and (3)(4) pay fees and expenses related to the transaction.transaction during the fourth quarter of 2020.
Letters of Credit
AtAs of December 31, 2019,2022, we maintained outstanding standby letters of credit totaling $19.8$22.0 million as collateral in relation to our workers compensation insurance agreements and a corporate office lease agreement. Of the $19.8$22.0 million of outstanding letters of credit, we have collateralized $2.3$0.6 million in cash and cash equivalents and the remaining $17.4$21.4 million is collateralized by the Senior Credit Facility. Outstanding standby letters of credit at December 31, 20182021 totaled $17.6$23.6 million.
Off-Balance Sheet and Other Financing Arrangements
At December 31, 2019 and 2018, we did not have any off-balance sheet arrangement that has or is reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.
Contractual Obligations
The following table summarizes our contractual obligations as of December 31, 2019 (in thousands):
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fiscal Year |
| | 2020 | | 2021 | | 2022 | | 2023 | | 2024 | | Thereafter | | Total |
| Notes payable (1) | $ | 43,007 |
| | $ | 50,079 |
| | $ | 51,210 |
| | $ | 50,765 |
| | $ | 375,341 |
| | $ | 539,363 |
| | $ | 1,109,765 |
|
| Senior Credit Facility (2) | 5,498 |
| | 6,232 |
| | 6,232 |
| | 6,232 |
| | 6,249 |
| | 175,752 |
| | 206,195 |
|
| Operating lease obligations (3) | 18,651 |
| | 18,599 |
| | 18,227 |
| | 17,895 |
| | 16,711 |
| | 33,666 |
| | 123,749 |
|
| Total contractual obligations | $ | 67,156 |
| | $ | 74,910 |
| | $ | 75,669 |
| | $ | 74,892 |
| | $ | 398,301 |
| | $ | 748,781 |
| | $ | 1,439,709 |
|
| |
(1) | Amounts represent contractual amounts due under (a) the 2024 Notes and 2027 Notes, including interest based on the fixed rates of 5.125% and 4.625%, respectively, and (b) the term loan secured under the Second Amendment on February 14, 2020, including interest based on the rate in effect at December 31, 2019. |
| |
(2) | Amounts represent contractual amounts to be repaid under the Senior Credit Facility for borrowings made on February 14, 2020, including interest based on the rate in effect at December 31, 2019. |
| |
(3) | Amounts represent minimum contractual amounts with initial lease terms in excess of one year, including any leases that were signed, but not yet commenced as of December 31, 2019 that create significant obligations. We have assumed no escalations in rent other than as stipulated in lease agreements. |
In addition to the above disclosed contractual obligations, the unrecognized income tax benefits, including interest and penalties, was $5.4 million at December 31, 2019. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Income Taxes.”
Critical Accounting Policies and Estimates
Our critical accounting policies are described in Note (1) to our audited consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K. Critical accounting policies are those that we believe are both important to the portrayal of our financial condition and results and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and base them on the information that is currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could vary from these estimates under different assumptions or conditions. We believe that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements:
Goodwill and Indefinite-lived Intangible Assets
Our business acquisitions typically result in the recording of goodwill and other intangible assets. The determination of the fair value of such intangible assets involves the use of appropriate valuation techniques and requires management to make estimates and assumptions that affect our consolidated financial statements. Significant judgments required to estimate the fair values include estimated future cash flows, growth rates, customer attrition rates, brand awareness and discount rates. Changes in these estimates and assumptions could materially affect the determination of fair value for each intangible asset. Management may engage independent third-party specialists to assist in determining the fair values. For intangible assets purchased in a business acquisition, the estimated fair values of the assets received are used to establish their recorded values, which may become impaired in the future.
In accordance with accounting guidance on goodwill and other intangible assets, we perform annual impairment analysis to assess the recoverability of goodwill and indefinite-lived intangible assets. We assess the impairment of goodwill of our reporting units and indefinite-lived intangible assets annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable. We may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, we determine that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the quantitative impairment test is unnecessary. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. Valuation techniques consistent with the market approach and income approach are used to measure the fair value of each reporting unit. Significant judgments are required to estimate the fair value of reporting units including estimating future cash flows, and determining appropriate discount rates, growth rates, company control premium and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit. We perform our annual impairment test on October 31 of each year. We last performed a quantitative impairment test of our goodwill in the first quarter of 2020 and the estimated fair value of each reporting unit exceeded the respective carrying value by more than 100 percent. As of December 31, 2022, we do not have any indefinite-lived intangible assets.
Intangible assets with estimable useful lives are required to be amortized over their respective estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment evaluation is based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely independent of other groups of assets and liabilities. We assess potential impairments to intangible assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recovered. Our judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of our businesses, market conditions and other factors. Although there are inherent uncertainties in this assessment process, the estimates and assumptions we use, including estimates of future cash flows, volumes, market penetration and discount rates, are consistent with our internal planning. If these estimates or their related assumptions change in the future, we may be required to record an impairment charge on all or a portion of our long-lived intangible assets. Furthermore, we cannot predict the occurrence of future impairment-triggering events nor the impact such events might have on our reported asset values. Future events could cause us to conclude that impairment indicators exist and that long-lived intangible assets associated with our acquired businesses are impaired.
Professional Liability Reserve
We maintain an accrual for professional liability that we include in accounts payable and accrued expenses and other long-term liabilities in our consolidated balance sheets. We determine the adequacy of thisour accrual for professional liability by evaluating our historical experience and trends, loss reserves established by our insurance carriers, management and third-party administrators, and our independent actuarial studies. We obtain actuarial studies on a semi-annual basis that use our historical claims data and industry data to assist us in determining the adequacy of our reserves each year.accrual. For periods between the actuarial studies, we record our accruals based on loss rates provided in the most recent actuarial study and management’s review of loss history. Expense recognized for accruals (inclusive of actuarial-based decreases) was $7.2 million, $7.2 million and $6.0 million for the years ended December 31, 2022, 2021 and 2020, respectively.
Our accrual for professional liability includes provisions for estimated incurred but not yet reported (“IBNR”) losses and known claims (“case reserves”), as well as losses covered by excess insurance carriers (“excess liability”). The following table presents the case reserves, IBNR losses and excess liability as estimated by the most recently obtained actuarial study that make up our accrual for professional liability as of December 31, 2022 and 2021 (in thousands):
| | | | | | | | | | | |
| December 31, |
| | 2022 | | 2021 |
Case reserves (1) | $ | 8,450 | | | $ | 10,407 | |
IBNR losses (1) | 25,176 | | | 23,027 | |
Excess liability (2) | 10,344 | | | 8,237 | |
| Total accrual | $ | 43,970 | | | $ | 41,671 | |
(1) The provisions for case reserves and estimated IBNR losses are presented net of excess liability.
(2) The accrual for losses recoverable from excess insurance carriers is recorded on the consolidated balance sheets with a corresponding recoverable asset.
We determine estimated IBNR losses by developing our historical loss data to its ultimate level (“ultimate losses”) and subtracting incurred losses to date; the remainder is IBNR losses. We determine ultimate losses through the use of several actuarial methods, including (but not limited to) loss development methods and Bornhuetter Ferguson methods. These methods use our specific historical claims data related to paid losses and loss adjustment expenses, historical and current case reserves, reported and closed claim counts, and industry and other data. The actuarial assumptions used in the aforementioned methods include paid and incurred loss development patterns, our growth and mix of business, inflation, law changes, and claim frequency and severity trends.
We consider the frequency and severity of claims to be significant assumptions in estimating our accrual for professional liability. A 10% change in the expected frequency is within a reasonable range of possibilities and would increase or reduce the accrual estimate by approximately $2.0 million. A 10% change in the expected claim severity is within a reasonable range of possibilities and would increase or reduce the accrual estimate by approximately $4.0 million. Additionally, the average time period between the occurrence and final resolution of our professional liability claims is approximately 5 years; however, the facts and circumstances of individual claims could result in a timeframe that significantly varies from this average. The ultimate settlements of our professional liability claims may vary significantly from our estimates if future changes in claim frequency or severity differ from historical trends and actuarial assumptions, which could have a material effect on our consolidated financial condition or results of operations.
Contingent Liabilities
From time to time, weWe are involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. These matters typically relate to professional liability, tax, compensation, contract, competitor disputes and employee-related matters and include individual and class action lawsuits, as well as inquiries and investigations by governmental agencies regarding the Company’s employment and compensation practices. Additionally, some of our clients may also become subject to claims, governmental inquiries and investigations and legal actions relating to services provided by our healthcare professionals. From time to time, and depending upon the particular facts and circumstances, we may be subject to indemnification obligations under our contracts with such clients relating to these matters.
We cannot predict with assurance the outcome of claims brought against us. Certain of the above-referenced matters may include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated. In assessing the probability of loss and the estimated amount, we consider the following factors, among others: (a) the nature of the matter and any related facts, circumstances and data; (b) the progress of the case; (c) the opinions or views of legal counsel and other advisers; (d) our experience, and the experience of other entities, in similar cases; (e) how we intend to respond to the matter; and (f) reasonable settlement values based on the foregoing factors. Significant judgment is required to determine both probability and the estimated amount.amount and the final outcome may ultimately be materially different. Where a range of loss can be reasonably
estimated with no best estimate in the range, we record the minimum estimated liability. We review these provisions at least quarterly and adjust these provisions accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. We generally record changes in accruals related to legal matters in selling, general and administrative expenses in the consolidated statements of comprehensive income. The most significant matters for which the Company has established accruals in connection with loss contingencies are class actions related to wage and hour claims under California and Federal law.
We believe that the amount or estimable range of reasonably possible loss beyond the accruals that we have established, will not, either individually or in the aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows with respect to loss contingencies for legal and other contingencies as of December 31, 2019.2022. However, the outcome of litigation is inherently uncertain. Therefore, if one or more of these legal matters were resolved against us for amounts in excess of management’s expectations, our results of operations and financial condition, including in a particular reporting period, could be materially adversely affected.
Income Taxes
We evaluate our unrecognized tax benefits in accordance with the guidance for accounting for uncertainty in income taxes. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement.
Recent Accounting Pronouncements
In June 2016,October 2021, the FASB issued ASU 2016-13, “Measurement of Credit Losses on Financial Instruments.” The standard introduces new accounting models for determining and recognizing credit losses on certain financial instruments based on an estimate of current expected credit losses and is effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We have adopted this standard effective January 1, 2020 using the modified retrospective transition method and will recognize the cumulative effect of adopting this guidance as an adjustment to our
opening balance of retained earnings, net of tax, primarily related to short-term accounts receivable, which we expect to be immaterial to our consolidated financial statements. Prior periods will not be retrospectively adjusted.
In January 2017, the FASB issued ASU 2017-04, “Simplifying the Test for Goodwill Impairment.” The standard simplifies the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, any goodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Further, the guidance eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. This standard is effective for annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019, with early adoption permitted for impairment tests performed after January 1, 2017. We have adopted this standard effective January 1, 2020 and do not expect the adoption to have a material impact on our consolidated financial statements.
In August 2018, the FASB issued ASU 2018-13, “Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement.” The standard modifies the current disclosure requirements on fair value measurements and is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. We have adopted this standard effective January 1, 2020 and will include the required disclosures beginning in our Quarterly Report on Form 10-Q for the quarter ended March 31, 2020.
In August 2018, the FASB issued ASU 2018-15, “Customer’s2021-08, “Business Combinations (Topic 805): Accounting for Implementation Costs Incurred in a Cloud Computing Arrangement That Is a Service Contract.” The standard aligns the requirements for capitalizing implementation costs incurred in a cloud computing arrangement service contractContract Assets and Contract Liabilities from Contracts with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software. The new guidance requires the capitalized implementation costs to be recorded as an other asset and the related amortization of those costs to be recorded in operating expenses. This standard is effective on a prospective or retrospective basis for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019, with early adoption permitted. We have adopted this standard prospectively effective January 1, 2020 and do not expect the adoption to have a material impact on our consolidated financial statements.
In December 2019, the FASB issued ASU 2019-12, “Simplifying the Accounting for Income Taxes.” The standard is expected to reduce cost and complexity related to accounting for income taxes. The new guidance eliminates certain exceptions and clarifies and amends existing guidance to promote consistent application among reporting entities. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020, with early adoption permitted. Depending on the amendment, adoption may be applied on a retrospective, modified retrospective or prospective basis. We are currently evaluating the impact of adopting this standard on our consolidated financial statements.
In January 2020, the FASB issued ASU 2020-01, “Clarifying the Interactions between Topic 321, Topic 323, and Topic 815.Customers.” The new guidance clarifieswill require companies to apply the interactions between accounting standardsdefinition of a performance obligation under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities, such as deferred revenue, relating to contracts with customers that applyare acquired in a business combination. Under existing guidance, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at their acquisition-date fair values in accordance with ASC Subtopic 820-10, Fair Value Measurements—Overall. Generally, this new guidance will result in the acquirer recognizing acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree prior to equity investments without readily determinable fair values. Specifically, it addresses the accounting for the transition into and out of the equity method.acquisition under ASC Topic 606. This standard is effective on a prospective basis for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2020,2022, with early adoption permitted. We are currently evaluating the effect of adoptinghave adopted this standard on our consolidated financial statements, buteffective January 1, 2023 and do not expect the adoption to have a material impact.impact on our consolidated financial statements.
There have been no other new accounting pronouncements issued but not yet adopted that are expected to materially affect our consolidated financial condition or results of operations.
| |
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk |
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates and commodity prices. During 2019,2022, our primary exposure to market risk was interest rate risk associated with our variable interest debt instruments.instruments and our investment portfolio. A 100 basis point increase in interest rates on our variable rate debt would not have resulted in a material effect on our consolidated financial statements for 2019. 2022. A 100 basis point change in interest rates as of December 31, 2022 would not have resulted in a material effect on the fair value of our investment portfolio. For our investments that are classified as available-for-sale, unrealized gains or losses related to fluctuations in market volatility and interest rates are reflected within stockholders’ equity in accumulated other comprehensive income (loss) in the consolidated balance sheets. Such unrealized losses would be realized only if we sell the investments prior to maturity.
During 2019,2022, we generated substantially all of our revenue in the United States. Accordingly, we believe that our foreign currency risk is immaterial.
| |
Item 8. | Financial Statements and Supplementary Data |
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Report of Independent Registered Public Accounting Firm
TheTo the Stockholders and Board of Directors
AMN Healthcare Services, Inc.:
Opinion on the Consolidated FinancialFinancial Statements
We have audited the accompanying consolidated balance sheets of AMN Healthcare Services, Inc. and subsidiaries (the “Company”)Company) as of December 31, 20192022 and 2018,2021, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three‑year period ended December 31, 2019,2022, and the related notes (collectively, the “consolidatedconsolidated financial statements”)statements). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20192022 and 2018,2021, and the results of its operations and its cash flows for each of the years in the three‑year period ended December 31, 2019,2022, in conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB), the Company’s internal control over financial reporting as of December 31, 2019,2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, and our report dated February 24, 202022, 2023 expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.
Change in Accounting Principle
As discussed in Note 1 to the consolidated financial statements, the Company has changed its method of accounting for leases as of January 1, 2019, due to the adoption of Accounting Standards Update 2016-02, Leases, and related amendments.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit MattersMatter
The critical audit mattersmatter communicated below are mattersis a matter arising from the current period audit of the consolidated financial statements that werewas communicated or required to be communicated to the audit committee and that: (1) relaterelates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit mattersmatter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit mattersmatter below, providing a separate opinionsopinion on the critical audit mattersmatter or on the accounts or disclosures to which they relate.it relates.
Evaluation of accrual for professional liabilityProfessional Liability Reserve
As discussed in Note 11(j) and 6 to the consolidated financial statements, the Company uses actuarial expertise to estimate expected losses fordetermines their professional liability claims based on statistical analysis ofaccrual by evaluating historical experience, trends, loss reserves, and industry data.actuarial studies. As of December 31, 2019,2022, the Company recorded an accrual for professional liabilities of $42.5 million.liability reserves totaling $43,970 thousand.
We have identified the evaluation of the accrual for professional liability reserve as a critical audit matter. ComplexA high degree of complex and subjective auditor judgment, including the involvement of actuarial professionals with specialized skills and knowledge, was required in evaluating the Company’s actuarial estimates and assumptions, specifically estimates for incurred but not reported claims. Changes in the actuarial estimates or assumptions could have a significant impact on the liability recognized.
The following are the primary procedures we performed to address this critical audit matter includedmatter. We evaluated the following. Wedesign and tested the operating effectiveness of certain internal controls overrelated to the Company’s process to estimate the accrual for professional liability including controls overreserve. This included a control related to the selection of expected loss rates and tracking of historical claims data.ultimate losses used in the estimates for incurred but not reported claims. We tested the key inputs to determine the incurred but not reported estimate. This included testing
data used by the Company’s actuarial specialist to determine the expected loss rates, specifically claims history used in the actuarial models, for consistency with the actual claims incurred and paid by the Company. We also involved actuarial professionals with specialized skills and knowledge, who assisted in:
assessing the objectivity and actuarial expertise of the Company’s specialist;
comparing the methodologies used by the Company’s actuarial specialist to generally accepted actuarial methodologies; and
in evaluating the Company’s actuarial estimates and assumptions, specifically loss development factors and expected loss rates, by comparing them to the Company’s historical data, and industry and regulatory trends.
Evaluation of fair value of intangible assets in acquisition of Advanced Medical
As discussed in Note 2 to the consolidated financial statements, the Company acquired Advanced Medical Personnel Services, Inc. (Advanced Medical) on June 14, 2019 for an initial purchase price of $211.8 million, which included cash consideration of $201.1 million. In connection with the acquisition, the Company recorded various intangible assets, including customer relationships and tradenames and trademarks (collectively, the intangible assets). The acquisition-date fair value for the intangible assets was $78.0 million as of June 14, 2019.
We identified the evaluation of fair value of the intangible assets acquired in the Advanced Medical transaction as a critical audit matter. There was a high degree of subjectivity in determining the assumptions used in the valuation model for each acquired intangible asset. The discounted cash flow model included the following internally-developed assumptions for which there was limited observable market information, and the calculated fair value of such assets was sensitive to possible changes to these key assumptions:
Revenue growth rates
Trade name royalty rate
Annual customer attrition rate
Earnings before interest, tax, depreciation, and amortization (EBITDA) margins
Weighted-average cost of capital (WACC), including the discount rate
The primary audit procedures we performed to address this critical audit matter included the following. We tested certain internal controls over the Company’s acquisition-date valuation process, including controls over the development of the key assumptions. We evaluated the Company’s forecasted revenue growth rates by comparing forecasted growth assumptions to those of Advanced Medical’s peers and industry reports. We compared (a) the Advanced Medical’s forecasted revenue growth rates and EBITDA margins to historical actual results for Advanced Medical and the Company, and (b) forecasted annual customer attrition rate to historical customer sales data. In addition, we involved valuation professionals with specialized skills and knowledge, who assisted in:
Assessing the qualifications of the Company’s valuation specialist;
Assessing the appropriateness of the methodologies used to value the intangible assets;
Evaluating the Company’s forecasted tradename royalty rate to trademark licensing transactions for similar intellectual property;
Evaluating the Company’s WACC, including the discount rate, by comparing it against a discount rate range that was independently developed using publicly available market data for comparable peers; and
Developing an estimate of the acquisition-date fair value of the intangible assets using the Company’s cash flow forecast and an independently developed discount rate and comparing the results of the estimate to the Company’s fair value estimate.
We have served as the Company’s auditor since 2000.
San Diego, California
February 24, 2020
AMN HEALTHCARE SERVICES, INC.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value)
|
| | | | | | | |
| | December 31, 2019 | | December 31, 2018 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 82,985 |
| | $ | 13,856 |
|
| Accounts receivable, net of allowances of $8,027 and $10,560 at December 31, 2019 and 2018, respectively | 352,685 |
| | 365,871 |
|
| Accounts receivable, subcontractor | 72,714 |
| | 50,143 |
|
| Prepaid expenses | 11,669 |
| | 12,409 |
|
| Other current assets | 40,446 |
| | 39,887 |
|
| Total current assets | 560,499 |
| | 482,166 |
|
| Restricted cash, cash equivalents and investments | 62,170 |
| | 59,331 |
|
| Fixed assets, net of accumulated depreciation of $132,900 and $114,413 at December 31, 2019 and 2018, respectively | 104,832 |
| | 90,419 |
|
| Operating lease right-of-use assets | 89,866 |
| | — |
|
| Other assets | 120,254 |
| | 96,152 |
|
| Goodwill | 595,551 |
| | 438,506 |
|
| Intangible assets, net of accumulated amortization of $151,417 and $114,924 at December 31, 2019 and 2018, respectively | 398,474 |
| | 326,147 |
|
| Total assets | $ | 1,931,646 |
| | $ | 1,492,721 |
|
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable and accrued expenses | $ | 156,140 |
| | $ | 149,603 |
|
| Accrued compensation and benefits | 170,932 |
| | 135,059 |
|
| Current portion of operating lease liabilities | 13,943 |
| | — |
|
| Deferred revenue | 11,788 |
| | 12,365 |
|
| Other current liabilities | 25,302 |
| | 10,243 |
|
| Total current liabilities | 378,105 |
| | 307,270 |
|
| Revolving credit facility | — |
| | 120,000 |
|
| Notes payable, less unamortized fees | 617,159 |
| | 320,607 |
|
| Deferred income taxes, net | 46,618 |
| | 27,326 |
|
| Operating lease liabilities | 91,209 |
| | — |
|
| Other long-term liabilities | 61,813 |
| | 78,528 |
|
| Total liabilities | 1,194,904 |
| | 853,731 |
|
| Commitments and contingencies |
|
| |
|
|
| Stockholders’ equity: | | | |
| Preferred stock, $0.01 par value; 10,000 shares authorized; none issued and outstanding at December 31, 2019 and 2018 | — |
| | — |
|
| Common stock, $0.01 par value; 200,000 shares authorized; 49,283 issued and 46,722 outstanding at December 31, 2019 and 48,809 issued and 46,643 outstanding at December 31, 2018 | 493 |
| | 488 |
|
| Additional paid-in capital | 455,193 |
| | 452,730 |
|
| Treasury stock, at cost (2,561 and 2,166 shares at December 31, 2019 and 2018, respectively) | (119,143 | ) | | (100,438 | ) |
| Retained earnings | 400,047 |
| | 286,059 |
|
| Accumulated other comprehensive income | 152 |
| | 151 |
|
| Total stockholders’ equity | 736,742 |
| | 638,990 |
|
| Total liabilities and stockholders’ equity | $ | 1,931,646 |
| | $ | 1,492,721 |
|
| | | | | | | | | | | |
| December 31, |
| 2022 | | 2021 |
| ASSETS | | | |
| Current assets: | | | |
| Cash and cash equivalents | $ | 64,524 | | | $ | 180,928 | |
| Accounts receivable, net of allowances of $31,910 and $6,838 at December 31, 2022 and 2021, respectively | 675,650 | | | 789,131 | |
| Accounts receivable, subcontractor | 268,726 | | | 239,719 | |
| Prepaid expenses | 18,708 | | | 72,460 | |
| Other current assets | 66,037 | | | 66,830 | |
| Total current assets | 1,093,645 | | | 1,349,068 | |
| Restricted cash, cash equivalents and investments | 61,218 | | | 64,482 | |
| Fixed assets, net of accumulated depreciation of $227,617 and $189,954 at December 31, 2022 and 2021, respectively | 149,276 | | | 127,114 | |
| Operating lease right-of-use assets | 16,266 | | | 27,771 | |
| Other assets | 155,750 | | | 156,670 | |
| Goodwill | 935,364 | | | 892,341 | |
| Intangible assets, net of accumulated amortization of $361,327 and $278,249 at December 31, 2022 and 2021, respectively | 476,832 | | | 514,460 | |
| Total assets | $ | 2,888,351 | | | $ | 3,131,906 | |
| LIABILITIES AND STOCKHOLDERS’ EQUITY | | | |
| Current liabilities: | | | |
| Accounts payable and accrued expenses | $ | 476,452 | | | $ | 425,257 | |
| Accrued compensation and benefits | 333,244 | | | 354,381 | |
| | | |
| Current portion of operating lease liabilities | 8,090 | | | 11,383 | |
| Deferred revenue | 11,825 | | | 15,950 | |
| Other current liabilities | 28,322 | | | 162,419 | |
| Total current liabilities | 857,933 | | | 969,390 | |
| | | |
| Notes payable, net of unamortized fees and premium | 843,505 | | | 842,322 | |
| Deferred income taxes, net | 22,713 | | | 47,814 | |
| Operating lease liabilities | 9,360 | | | 13,364 | |
| Other long-term liabilities | 111,206 | | | 96,989 | |
| Total liabilities | 1,844,717 | | | 1,969,879 | |
| Commitments and contingencies | | | |
| Stockholders’ equity: | | | |
| Preferred stock, $0.01 par value; 10,000 shares authorized; none issued and outstanding at December 31, 2022 and 2021 | — | | | — | |
| Common stock, $0.01 par value; 200,000 shares authorized; 50,109 issued and 41,879 outstanding at December 31, 2022 and 49,849 issued and 47,263 outstanding at December 31, 2021 | 501 | | | 498 | |
| Additional paid-in capital | 501,674 | | | 486,709 | |
| Treasury stock, at cost; 8,230 and 2,586 shares at December 31, 2022 and 2021, respectively | (698,598) | | | (121,831) | |
| Retained earnings | 1,240,996 | | | 796,946 | |
| Accumulated other comprehensive loss | (939) | | | (295) | |
| Total stockholders’ equity | 1,043,634 | | | 1,162,027 | |
| Total liabilities and stockholders’ equity | $ | 2,888,351 | | | $ | 3,131,906 | |
See accompanying notes to consolidated financial statements.
AMN HEALTHCARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands, except per share amounts)
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Revenue | $ | 2,222,107 |
| | $ | 2,136,074 |
| | $ | 1,988,454 |
|
| Cost of revenue | 1,478,642 |
| | 1,439,691 |
| | 1,344,035 |
|
| Gross profit | 743,465 |
| | 696,383 |
| | 644,419 |
|
| Operating expenses: | | | | | |
| Selling, general and administrative | 508,030 |
| | 452,318 |
| | 399,700 |
|
| Depreciation and amortization | 58,520 |
| | 41,237 |
| | 32,279 |
|
| Total operating expenses | 566,550 |
| | 493,555 |
| | 431,979 |
|
| Income from operations | 176,915 |
| | 202,828 |
| | 212,440 |
|
| Interest expense, net, and other | 28,427 |
| | 16,143 |
| | 19,677 |
|
| Income before income taxes | 148,488 |
| | 186,685 |
| | 192,763 |
|
| Income tax expense | 34,500 |
| | 44,944 |
| | 60,205 |
|
| Net income | $ | 113,988 |
| | $ | 141,741 |
| | $ | 132,558 |
|
| | | | | | |
| Other comprehensive income (loss): | | | | | |
| Foreign currency translation and other | 1 |
| | 263 |
| | (98 | ) |
| Cash flow hedge, net of income taxes | — |
| | — |
| | (15 | ) |
| Other comprehensive income (loss) | 1 |
| | 263 |
| | (113 | ) |
| | | | | | |
| Comprehensive income | $ | 113,989 |
| | $ | 142,004 |
| | $ | 132,445 |
|
| | | | | | |
| Net income per common share: | | | | | |
| Basic | $ | 2.44 |
| | $ | 2.99 |
| | $ | 2.77 |
|
| Diluted | $ | 2.40 |
| | $ | 2.91 |
| | $ | 2.68 |
|
| Weighted average common shares outstanding: | | | | | |
| Basic | 46,704 |
| | 47,371 |
| | 47,807 |
|
| Diluted | 47,593 |
| | 48,668 |
| | 49,430 |
|
| | | | | | |
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| Revenue | $ | 5,243,242 | | | $ | 3,984,235 | | | $ | 2,393,714 | |
| Cost of revenue | 3,526,558 | | | 2,674,634 | | | 1,601,936 | |
| Gross profit | 1,716,684 | | | 1,309,601 | | | 791,778 | |
| Operating expenses: | | | | | |
| Selling, general and administrative | 936,576 | | | 730,451 | | | 549,747 | |
| Depreciation and amortization (exclusive of depreciation included in cost of revenue) | 133,007 | | | 101,152 | | | 92,766 | |
| Total operating expenses | 1,069,583 | | | 831,603 | | | 642,513 | |
| Income from operations | 647,101 | | | 477,998 | | | 149,265 | |
| Interest expense, net, and other | 40,398 | | | 34,077 | | | 57,742 | |
| Income before income taxes | 606,703 | | | 443,921 | | | 91,523 | |
| Income tax expense | 162,653 | | | 116,533 | | | 20,858 | |
| Net income | $ | 444,050 | | | $ | 327,388 | | | $ | 70,665 | |
| | | | | |
| Other comprehensive loss: | | | | | |
| Unrealized losses on available-for-sale securities, net, and other | (644) | | | (335) | | | (112) | |
| Other comprehensive loss | (644) | | | (335) | | | (112) | |
| | | | | |
| Comprehensive income | $ | 443,406 | | | $ | 327,053 | | | $ | 70,553 | |
| | | | | |
| Net income per common share: | | | | | |
| Basic | $ | 9.96 | | | $ | 6.87 | | | $ | 1.49 | |
| Diluted | $ | 9.90 | | | $ | 6.81 | | | $ | 1.48 | |
| Weighted average common shares outstanding: | | | | | |
| Basic | 44,591 | | | 47,685 | | | 47,424 | |
| Diluted | 44,870 | | | 48,045 | | | 47,690 | |
| | | | | |
See accompanying notes to consolidated financial statements.
AMN HEALTHCARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
Years Ended December 31, 2019, 20182022, 2021 and 20172020
(in thousands)
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional Paid-in Capital | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| | Shares | | Amount | | Shares | | Amount | |
| Balance, December 31, 2016 | 48,055 |
| | $ | 481 |
| | $ | 452,491 |
| | (443 | ) | | $ | (13,261 | ) | | $ | 9,671 |
| | $ | 1 |
| | $ | 449,383 |
|
| Repurchase of common stock into treasury | — |
| | — |
| | — |
| | (487 | ) | | (20,164 | ) | | — |
| | — |
| | (20,164 | ) |
| Equity awards vested and exercised, net of shares withheld for payroll taxes | 356 |
| | 3 |
| | (9,377 | ) | | — |
| | — |
| | — |
| | — |
| | (9,374 | ) |
| Share-based compensation | — |
| | — |
| | 10,237 |
| | — |
| | — |
| | — |
| | — |
| | 10,237 |
|
| Comprehensive income (loss) | — |
| | — |
| | — |
| | — |
| | — |
| | 132,558 |
| | (113 | ) | | 132,445 |
|
| Balance, December 31, 2017 | 48,411 |
| | $ | 484 |
| | $ | 453,351 |
| | (930 | ) | | $ | (33,425 | ) | | $ | 142,229 |
| | $ | (112 | ) | | $ | 562,527 |
|
| Repurchase of common stock into treasury | — |
| | — |
| | — |
| | (1,236 | ) | | (67,013 | ) | | — |
| | — |
| | (67,013 | ) |
| Equity awards vested and exercised, net of shares withheld for payroll taxes | 398 |
| | 4 |
| | (11,436 | ) | | — |
| | — |
| | — |
| | — |
| | (11,432 | ) |
| Cumulative-effect adjustment from adoption of the new revenue recognition standard | — |
| | — |
| | — |
| | — |
| | — |
| | 2,089 |
| | — |
| | 2,089 |
|
| Share-based compensation | — |
| | — |
| | 10,815 |
| | — |
| | — |
| | — |
| | — |
| | 10,815 |
|
| Comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 141,741 |
| | 263 |
| | 142,004 |
|
| Balance, December 31, 2018 | 48,809 |
| | $ | 488 |
| | $ | 452,730 |
| | (2,166 | ) | | $ | (100,438 | ) | | $ | 286,059 |
| | $ | 151 |
| | $ | 638,990 |
|
| Repurchase of common stock into treasury | — |
| | — |
| | — |
| | (395 | ) | | (18,705 | ) | | — |
| | — |
| | (18,705 | ) |
| Equity awards vested and exercised, net of shares withheld for payroll taxes | 474 |
| | 5 |
| | (13,778 | ) | | — |
| | — |
| | — |
| | — |
| | (13,773 | ) |
| Share-based compensation | — |
| | — |
| | 16,241 |
| | — |
| | — |
| | — |
| | — |
| | 16,241 |
|
| Comprehensive income | — |
| | — |
| | — |
| | — |
| | — |
| | 113,988 |
| | 1 |
| | 113,989 |
|
| Balance, December 31, 2019 | 49,283 |
| | $ | 493 |
| | $ | 455,193 |
| | (2,561 | ) | | $ | (119,143 | ) | | $ | 400,047 |
| | $ | 152 |
| | $ | 736,742 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Common Stock | | Additional
Paid-in
Capital | | Treasury Stock | | Retained Earnings | | Accumulated Other Comprehensive Income (Loss) | | Total |
| | Shares | | Amount | | Shares | | Amount | |
| Balance, December 31, 2019 | 49,283 | | | $ | 493 | | | $ | 455,193 | | | (2,561) | | | $ | (119,143) | | | $ | 400,047 | | | $ | 152 | | | $ | 736,742 | |
| | | | | | | | | | | | | | | |
| Equity awards vested and exercised, net of shares withheld for taxes | 331 | | | 3 | | | (6,932) | | | — | | | — | | | — | | | — | | | (6,929) | |
| Cumulative-effect adjustment from adoption of the credit loss standard, net of tax | — | | | — | | | — | | | — | | | — | | | (1,154) | | | — | | | (1,154) | |
| Share-based compensation | — | | | — | | | 20,465 | | | — | | | — | | | — | | | — | | | 20,465 | |
| Comprehensive income (loss) | — | | | — | | | — | | | — | | | — | | | 70,665 | | | (112) | | | 70,553 | |
| Balance, December 31, 2020 | 49,614 | | | $ | 496 | | | $ | 468,726 | | | (2,561) | | | $ | (119,143) | | | $ | 469,558 | | | $ | 40 | | | $ | 819,677 | |
| Repurchase of common stock into treasury | — | | | — | | | — | | | (25) | | | (2,688) | | | — | | | — | | | (2,688) | |
| Equity awards vested, net of shares withheld for taxes | 235 | | | 2 | | | (7,234) | | | — | | | — | | | — | | | — | | | (7,232) | |
| | | | | | | | | | | | | | | |
| Share-based compensation | — | | | — | | | 25,217 | | | — | | | — | | | — | | | — | | | 25,217 | |
| Comprehensive income (loss) | — | | | — | | | — | | | — | | | — | | | 327,388 | | | (335) | | | 327,053 | |
| Balance, December 31, 2021 | 49,849 | | | $ | 498 | | | $ | 486,709 | | | (2,586) | | | $ | (121,831) | | | $ | 796,946 | | | $ | (295) | | | $ | 1,162,027 | |
| Repurchase of common stock into treasury | — | | | — | | | — | | | (5,644) | | | (576,767) | | | — | | | — | | | (576,767) | |
| Equity awards vested, net of shares withheld for taxes | 260 | | | 3 | | | (15,101) | | | — | | | — | | | — | | | — | | | (15,098) | |
| | | | | | | | | | | | | | | |
| Share-based compensation | — | | | — | | | 30,066 | | | — | | | — | | | — | | | — | | | 30,066 | |
| Comprehensive income (loss) | — | | | — | | | — | | | — | | | — | | | 444,050 | | | (644) | | | 443,406 | |
| Balance, December 31, 2022 | 50,109 | | | $ | 501 | | | $ | 501,674 | | | (8,230) | | | $ | (698,598) | | | $ | 1,240,996 | | | $ | (939) | | | $ | 1,043,634 | |
See accompanying notes to consolidated financial statements.
AMN HEALTHCARE SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| Cash flows from operating activities: | | | | | |
| Net income | $ | 444,050 | | | $ | 327,388 | | | $ | 70,665 | |
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation and amortization (inclusive of depreciation included in cost of revenue) | 137,111 | | | 103,697 | | | 94,187 | |
| Non-cash interest expense and other | 5,330 | | | (4,067) | | | 4,349 | |
| Write-off of fees on credit facilities and senior notes | — | | | 158 | | | 4,956 | |
| Change in fair value of contingent consideration | (2,930) | | | — | | | 4,900 | |
| Increase in allowance for credit losses and sales credits | 57,999 | | | 6,263 | | | 6,535 | |
| Provision for deferred income taxes | (24,615) | | | (16,287) | | | (21,628) | |
| Share-based compensation | 30,066 | | | 25,217 | | | 20,465 | |
| Net loss (gain) on deferred compensation balances | (526) | | | 20 | | | 1,646 | |
| Loss on disposal or sale of fixed assets | 1,560 | | | 2,707 | | | 4,322 | |
| Net loss (gain) on investments in available-for-sale securities | 749 | | | (52) | | | (109) | |
| Non-cash lease expense | 5,497 | | | 3,806 | | | (589) | |
| Changes in assets and liabilities, net of effects from acquisitions: | | | | | |
| Accounts receivable | 57,921 | | | (419,533) | | | (7,338) | |
| Accounts receivable, subcontractor | (29,007) | | | (165,734) | | | (1,271) | |
| Income taxes receivable | (8,875) | | | 6,591 | | | (412) | |
| Prepaid expenses | 53,806 | | | (58,788) | | | (1,342) | |
| Other current assets | 17,775 | | | (21,999) | | | 2,322 | |
| Other assets | 210 | | | 3,262 | | | 3,220 | |
| Accounts payable and accrued expenses | 48,782 | | | 256,118 | | | 5,562 | |
| Accrued compensation and benefits | (10,506) | | | 129,235 | | | 25,856 | |
| Other liabilities | (126,566) | | | 122,685 | | | 41,640 | |
| Deferred revenue | (4,098) | | | 4,320 | | | (1,119) | |
| Restricted investments balance | — | | | 349 | | | 9 | |
| Net cash provided by operating activities | 653,733 | | | 305,356 | | | 256,826 | |
| Cash flows from investing activities: | | | | | |
| Purchase and development of fixed assets | (75,831) | | | (53,573) | | | (37,702) | |
| Purchase of investments | (13,152) | | | (60,719) | | | (48,311) | |
| Proceeds from sale and maturity of investments | 14,384 | | | 57,660 | | | 32,800 | |
| | | | | |
| Purchase of equity investment | — | | | (500) | | | — | |
| Proceeds from sale of equity investment | 68 | | | 78 | | | 527 | |
| Purchase of convertible promissory notes | — | | | — | | | (490) | |
| Payments to fund deferred compensation plan | (21,518) | | | (7,565) | | | (7,171) | |
| Cash paid for initial direct costs | — | | | (1,429) | | | — | |
| Cash paid for acquisitions, net of cash and restricted cash received | (69,570) | | | (41,264) | | | (476,491) | |
| Cash paid for other intangibles | (5,091) | | | (90) | | | (1,400) | |
| Cash received for working capital adjustments for prior year acquisitions | — | | | — | | | 66 | |
| Net cash used in investing activities | (170,710) | | | (107,402) | | | (538,172) | |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Cash flows from operating activities: | | | | | |
| Net income | $ | 113,988 |
| | $ | 141,741 |
| | $ | 132,558 |
|
| Adjustments to reconcile net income to net cash provided by operating activities: | | | | | |
| Depreciation and amortization | 58,520 |
| | 41,237 |
| | 32,279 |
|
| Non-cash interest expense and other | 1,984 |
| | (4,841 | ) | | 2,231 |
|
| Change in fair value of contingent consideration | 7,178 |
| | (2,400 | ) | | 184 |
|
| Increase in allowances for doubtful accounts and sales credits | 6,275 |
| | 9,006 |
| | 10,339 |
|
| Provision for deferred income taxes | 913 |
| | (667 | ) | | 5,607 |
|
| Share-based compensation | 16,241 |
| | 10,815 |
| | 10,237 |
|
| Loss on disposal or sale of fixed assets | 484 |
| | 117 |
| | 227 |
|
| Write-off of fees on credit facilities | 594 |
| | 574 |
| | — |
|
| Amortization of discount on investments | (298 | ) | | (202 | ) | | (127 | ) |
| Non-cash lease expense | 5 |
| | — |
| | — |
|
| Changes in assets and liabilities, net of effects from acquisitions: | | | | | |
| Accounts receivable | 28,278 |
| | (1,453 | ) | | (18,858 | ) |
| Accounts receivable, subcontractor | (22,571 | ) | | (9,131 | ) | | 8,221 |
|
| Income taxes receivable | (4,464 | ) | | 15,099 |
| | (15,537 | ) |
| Prepaid expenses | 774 |
| | 4,465 |
| | (2,316 | ) |
| Other current assets | 2,847 |
| | (1,259 | ) | | 4,301 |
|
| Other assets | (12,751 | ) | | 5,239 |
| | (5,406 | ) |
| Accounts payable and accrued expenses | 1,925 |
| | 17,154 |
| | (7,862 | ) |
| Accrued compensation and benefits | 32,758 |
| | 10,252 |
| | 13,430 |
|
| Other liabilities | (6,090 | ) | | (8,980 | ) | | (8,442 | ) |
| Deferred revenue | (1,806 | ) | | 319 |
| | (548 | ) |
| Restricted investments balance | 78 |
| | (92 | ) | | — |
|
| Net cash provided by operating activities | 224,862 |
| | 226,993 |
| | 160,518 |
|
| Cash flows from investing activities: | | | | | |
| Purchase and development of fixed assets | (35,218 | ) | | (35,206 | ) | | (26,529 | ) |
| Purchase of investments | (26,309 | ) | | (33,824 | ) | | (15,096 | ) |
| Proceeds from maturity of investments | 32,135 |
| | 25,000 |
| | 20,301 |
|
| Equity investment | — |
| | (6,100 | ) | | (2,000 | ) |
| Payments to fund deferred compensation plan | (12,507 | ) | | (9,917 | ) | | (10,537 | ) |
| Purchase of convertible promissory note | (779 | ) | | (750 | ) | | — |
|
| Cash paid for acquisitions, net of cash received | (247,906 | ) | | (217,360 | ) | | — |
|
| Cash paid for other intangibles | (1,240 | ) | | (1,180 | ) | | — |
|
| Cash paid for other liabilities, working capital adjustments and holdback liability for prior year acquisitions | — |
| | — |
| | (1,500 | ) |
| Net cash used in investing activities | (291,824 | ) | | (279,337 | ) | | (35,361 | ) |
| | | | Years Ended December 31, | | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 | | 2022 | | 2021 | | 2020 |
| Cash flows from financing activities: | | | | | | Cash flows from financing activities: | | | | | |
| | Payments on term loans | (150,000 | ) | | — |
| | (44,063 | ) | Payments on term loans | — | | | (21,875) | | | (228,125) | |
| Proceeds from term loan | 150,000 |
| | — |
| | — |
| |
| Proceeds from term loans | | Proceeds from term loans | — | | | — | | | 250,000 | |
| Payments on revolving credit facility | (221,000 | ) | | (75,000 | ) | | — |
| Payments on revolving credit facility | — | | | (70,000) | | | (245,000) | |
| Proceeds from revolving credit facility | 101,000 |
| | 195,000 |
| | — |
| Proceeds from revolving credit facility | — | | | 70,000 | | | 245,000 | |
| Proceeds from senior notes | 300,000 |
| | — |
| | — |
| Proceeds from senior notes | — | | | — | | | 552,000 | |
| Redemption of senior notes | | Redemption of senior notes | — | | | — | | | (333,330) | |
| Repurchase of common stock | (18,705 | ) | | (67,013 | ) | | (20,164 | ) | Repurchase of common stock | (576,767) | | | (2,688) | | | — | |
| Payment of financing costs | (5,223 | ) | | (2,331 | ) | | — |
| Payment of financing costs | — | | | — | | | (11,508) | |
| Earn-out payments for prior acquisitions | (5,700 | ) | | (1,713 | ) | | (3,677 | ) | |
| Proceeds from termination of derivative contract | — |
| | — |
| | 85 |
| |
| Earn-out payments to settle contingent consideration liabilities for prior acquisitions | | Earn-out payments to settle contingent consideration liabilities for prior acquisitions | — | | | (3,100) | | | (10,622) | |
| | Cash paid for shares withheld for taxes | (13,773 | ) | | (11,432 | ) | | (9,374 | ) | Cash paid for shares withheld for taxes | (15,098) | | | (7,232) | | | (6,929) | |
| | Net cash provided by (used in) financing activities | 136,599 |
| | 37,511 |
| | (77,193 | ) | Net cash provided by (used in) financing activities | (591,865) | | | (34,895) | | | 211,486 | |
| Effect of exchange rate changes on cash | 1 |
| | 263 |
| | (98 | ) | Effect of exchange rate changes on cash | — | | | (335) | | | (112) | |
| Net increase (decrease) in cash, cash equivalents and restricted cash | 69,638 |
| | (14,570 | ) | | 47,866 |
| Net increase (decrease) in cash, cash equivalents and restricted cash | (108,842) | | | 162,724 | | | (69,972) | |
| Cash, cash equivalents and restricted cash at beginning of year | 84,324 |
| | 98,894 |
| | 51,028 |
| Cash, cash equivalents and restricted cash at beginning of year | 246,714 | | | 83,990 | | | 153,962 | |
| Cash, cash equivalents and restricted cash at end of year | $ | 153,962 |
| | $ | 84,324 |
| | $ | 98,894 |
| Cash, cash equivalents and restricted cash at end of year | $ | 137,872 | | | $ | 246,714 | | | $ | 83,990 | |
| | Supplemental disclosures of cash flow information: | | | | | | Supplemental disclosures of cash flow information: | |
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 17,817 |
| | $ | — |
| | $ | — |
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 13,337 | | | $ | 39,865 | | | $ | 20,052 | |
| Cash paid for interest (net of $536, $460 and $188 capitalized in 2019, 2018 and 2017, respectively) | $ | 23,730 |
| | $ | 21,283 |
| | $ | 17,936 |
| |
| Cash paid for interest (net of $703, $349 and $389 capitalized in 2022, 2021 and 2020, respectively) | | Cash paid for interest (net of $703, $349 and $389 capitalized in 2022, 2021 and 2020, respectively) | $ | 37,518 | | | $ | 38,085 | | | $ | 22,652 | |
| Cash paid for income taxes | $ | 37,747 |
| | $ | 30,593 |
| | $ | 73,746 |
| Cash paid for income taxes | $ | 213,807 | | | $ | 106,379 | | | $ | 46,258 | |
| Acquisitions: | | | | | | Acquisitions: | | | | | |
| Fair value of tangible assets acquired in acquisitions, net of cash received | $ | 29,660 |
| | $ | 24,026 |
| | $ | — |
| |
| Fair value of tangible assets acquired in acquisitions, net of cash and restricted cash received | | Fair value of tangible assets acquired in acquisitions, net of cash and restricted cash received | $ | 2,604 | | | $ | 1,906 | | | $ | 35,733 | |
| Goodwill | 157,036 |
| | 97,910 |
| | — |
| Goodwill | 42,990 | | | 27,193 | | | 268,971 | |
| Intangible assets | 107,580 |
| | 122,110 |
| | — |
| Intangible assets | 40,200 | | | 12,440 | | | 228,000 | |
| Liabilities assumed | (31,148 | ) | | (16,586 | ) | | — |
| Liabilities assumed | (8,224) | | | (275) | | | (56,213) | |
| Earn-out liabilities | (15,222 | ) | | (10,100 | ) | | — |
| |
| | Contingent consideration liabilities | | Contingent consideration liabilities | (8,000) | | | — | | | — | |
| Net cash paid for acquisitions | $ | 247,906 |
| | $ | 217,360 |
| | $ | — |
| Net cash paid for acquisitions | $ | 69,570 | | | $ | 41,264 | | | $ | 476,491 | |
| Supplemental disclosures of non-cash investing and financing activities: | | | | | | Supplemental disclosures of non-cash investing and financing activities: | | | | | |
| Purchase of fixed assets recorded in accounts payable and accrued expenses | $ | 2,301 |
| | $ | 1,706 |
| | $ | 2,962 |
| Purchase of fixed assets recorded in accounts payable and accrued expenses | $ | 5,643 | | | $ | 3,719 | | | $ | 3,103 | |
See accompanying notes to consolidated financial statements.
AMN HEALTHCARE SERVICES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2019, 20182022, 2021 and 20172020
(in thousands, except per share amounts)
(1) Summary of Significant Accounting Policies
(a) General
AMN Healthcare Services, Inc. was incorporated in Delaware on November 10, 1997. AMN Healthcare Services, Inc. and its subsidiaries (collectively, the “Company”) provide healthcare workforce solutions and staffing services at acute and sub-acute care hospitals and other healthcare facilities throughout the United States.
(b) Principles of Consolidation
The accompanying consolidated financial statements include the accounts of AMN Healthcare Services, Inc. and its wholly-owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation.
(c) Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make a number of estimates and assumptions relating to the reporting of assets and liabilities and the disclosure of contingent assets and liabilities at the dates of the financial statements and the reported amounts of revenue and expenses during the reporting periods. On an ongoing basis, the Company evaluates its estimates, including those related to goodwill and indefinite-lived intangible assets, professional liability reserve, contingent liabilities such as legal accruals, and income taxes. The Company bases these estimates on the information that is currently available and on various other assumptions that it believes are reasonable under the circumstances. Actual results could differ from those estimates under different assumptions or conditions.
(d) Cash and Cash Equivalents
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents include currency on hand, deposits with financial institutions, money market funds, commercial paper and other highly liquid investments. See Note (3), “Fair Value Measurement” for additional information.
(e) Restricted Cash, Cash Equivalents and Investments
Restricted cash and cash equivalents primarily representincludes cash, corporate bonds and money market funds on deposit with financial institutions and investments represents commercial paper that servesserve as collateral for the Company’s outstanding letters of credit and captive insurance subsidiary claim payments. See Note (3), “Fair Value Measurement” and Note (8), “Notes Payable and Credit Agreement” for additional information.
The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the accompanying consolidated balance sheets and related notes to the amounts presented in the accompanying consolidated statements of cash flows.
|
| | | | | | | |
| | December 31, 2019 | | December 31, 2018 |
| Cash and cash equivalents | $ | 82,985 |
| | $ | 13,856 |
|
| Restricted cash and cash equivalents (included in other current assets) | 18,393 |
| | 26,329 |
|
| Restricted cash, cash equivalents and investments | 62,170 |
| | 59,331 |
|
| Total cash, cash equivalents and restricted cash and investments | 163,548 |
| | 99,516 |
|
| Less restricted investments | (9,586 | ) | | (15,192 | ) |
| Total cash, cash equivalents and restricted cash | $ | 153,962 |
| | $ | 84,324 |
|
| | | | | | | | | | | |
| | December 31, 2022 | | December 31, 2021 |
| Cash and cash equivalents | $ | 64,524 | | | $ | 180,928 | |
| Restricted cash and cash equivalents (included in other current assets) | 37,225 | | | 29,262 | |
| Restricted cash, cash equivalents and investments | 61,218 | | | 64,482 | |
| Total cash, cash equivalents and restricted cash and investments | 162,967 | | | 274,672 | |
| Less restricted investments | (25,095) | | | (27,958) | |
| Total cash, cash equivalents and restricted cash | $ | 137,872 | | | $ | 246,714 | |
(f) Fixed Assets
The Company records furniture, equipment, leasehold improvements and capitalized software at cost less accumulated amortization and depreciation. The Company records equipment acquired under finance leases at the present value of the future
minimum lease payments. The Company capitalizes major additions and improvements, and it expenses maintenance and repairs when incurred. The Company calculates depreciation on furniture, equipment and technology and software using the straight-line
method based on the estimated useful lives of the related assets (three(typically three to ten years). The Company depreciates leasehold improvements and equipment obtained under finance leases over the shorter of the term of the lease or their estimated useful lives. The Company includes depreciation of equipment obtained under finance leases with depreciation expense in the accompanying consolidated financial statements.
The Company capitalizes costs it incurs to develop software during the application development stage. Application development stage costs generally include costs associated with software configuration, coding, installation and testing. The Company also capitalizes costs of significant upgrades and enhancements that result in additional functionality, whereas it expenses as incurred costs for maintenance and minor upgrades and enhancements. The Company amortizes capitalized costs using the straight-line method over three to ten years once the software is ready for its intended use.
The Company reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset group to the future undiscounted net cash flows that are expected to be generated by the asset group. If such asset group is considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset group exceeds the fair value of the asset group. The Company reports assets to be disposed of at the lower of the carrying amount or fair value less costs to sell.
(g) Leases
The Company recognizes operating lease right-of-use assets and liabilities at commencement date based on the present value of the future minimum lease payments over the lease term. Leases with an initial term of 12 months or less are not recorded on the balance sheet in accordance with the short-term lease recognition exemption. The Company applies the practical expedient to not separate lease and non-lease components for all leases that qualify.qualify and uses its incremental borrowing rate as the discount rate to measure its lease liabilities. The incremental borrowing rate is determined for each operating lease based on the Company’s borrowing capabilities over a similar term of the lease arrangement, which is estimated by utilizing the Company’s credit rating and the effects of full collateralization. Lease expense is recognized on a straight-line basis over the lease term. See Note (5), “Leases,” for additional information.
(h) Goodwill
The Company records as goodwill the portion of the purchase price that exceeds the fair value of net assets of entities acquired. The Company evaluates goodwill annually for impairment at the reporting unit level and whenever circumstances occur indicating that goodwill may be impaired. The Company may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the quantitative impairment test is unnecessary. The performance ofIf the quantitative impairment test involves a two-step process. The first step ofreporting unit does not pass the test involves comparing the fair value of the Company’s reporting units withqualitative assessment, then the reporting unit’s carrying amount, including goodwill. The Company generally determines the fair value of its reporting units using a combination of the income approach (using discounted future cash flows) and the market valuation approach. If the carrying amount of a Company’s reporting unit exceedsis compared to its fair value, the Company performs the second step of the test to determine the amount of impairment loss. The second step of the test involves comparing the implied fair value of the Company’s reporting unit’s goodwill with the carrying amount of that goodwill.value. The amount by which the carrying value of the goodwill exceeds its implied fair value if any, is recognized as an impairment loss.
(i) Intangible Assets
Intangible assets consist of identifiable intangible assets acquired through acquisitions, which include tradenames and trademarks, customer relationships, staffing databases, developed technology and non-compete agreements. The fair value of identifiable intangible assets are determined using either the income approach (relief-from-royalty method or multi-period excess earnings method) or the cost approach (replacement cost method). The Company amortizes intangible assets, other than tradenames and trademarksthose with an indefinite life, using the straight-line method over their useful lives. The Company amortizes non-compete agreements using the straight-line method over the lives of the related agreements. The Company reviews for impairment intangible assets with estimable useful lives whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.
The Company does not amortize indefinite-lived tradenames and trademarksintangible assets and instead reviews them for impairment annually. The Company may first perform a qualitative assessment to determine whether it is more likely than not that an indefinite-lived intangible asset is impaired. If, after assessing the totality of events and circumstances, the Company determines that it is more likely than not that the indefinite-lived intangible asset is not impaired, no quantitative fair value measurement is necessary. If a quantitative fair value measurement calculation is required for an indefinite-lived intangible
asset, the Company compares its fair value with its carrying amount. If the carrying amount exceeds the fair value, the Company records the excess as an impairment loss.
(j) Insurance Reserves
The Company maintains an accrual for professional liability that is included in accounts payable and accrued expenses and other long-term liabilities in the consolidated balance sheets. The expense is included in the selling, general and administrative expenses in the consolidated statement of comprehensive income. The Company determines the adequacy of this accrual by evaluating its historical experience and trends, loss reserves established by the Company’s insurance carriers, management and third-party administrators, and independent actuarial studies. The Company obtains actuarial studies on a semi-annual basis that use the Company’s actual claims data and industry data to assist the Company in determining the adequacy of its reserves each year. For periods between the actuarial studies, the Company records its accruals based on loss rates provided in the most recent actuarial study and management’s review of loss history and trends. In November 2012, the Company established a captive insurance subsidiary, which provides coverage, on an occurrence basis, for professional liability within its nurse and allied solutions segment. Liabilities include provisions for estimated losses incurred but not yet reported (“IBNR”), losses, as well as provisions for known claims. IBNR reserve estimates involve the use of assumptions that are primarily based upon historical loss experience, industry data and other actuarial assumptions. The Company maintains insurance programs through its wholly-owned captive insurance subsidiary, which primarily provides coverage, on an occurrence basis, for professional liability within its nurse and allied solutions segment. In addition, the Company maintains excess insurance coverage through a commercial carrier for losses above the per occurrence retention. Losses covered by excess insurance are included in the accrual for professional liability, as the Company remains liable to the extent commercial carriers do not meet their obligations.
The Company maintains an accrual for workers compensation, which is included in accrued compensation and benefits and other long-term liabilities in the consolidated balance sheets. The expense relating to healthcare professionals is included in cost of revenue, while the expense relating to corporate employees is included in the selling, general and administrative expenses in the consolidated statement of comprehensive income. The Company determines the adequacy of this accrual by evaluating its historical experience and trends, loss reserves established by the Company’s insurance carriers and third-party administrators, and independent actuarial studies. The Company obtains actuarial studies on a semi-annual basis that use the Company’s payroll and historical claims data, as well as industry data, to determine the appropriate reserve for both reported claims and IBNR claims for each policy year. For periods between the actuarial studies, the Company records its accruals based on loss rates provided in the most recent actuarial study.
(k) Revenue Recognition
Revenue primarily consists of fees earned from the temporary staffing and permanent placement of healthcare professionals, executives, and executives as well asleaders (clinical and operational). The Company also generates revenue from the Company’s software as a service (“SaaS”)-based technologies,technology-enabled services, including itslanguage interpretation and vendor management systems, and its scheduling software. Revenue is recognizedtalent planning and acquisition services, including recruitment process outsourcing. The Company recognizes revenue when control of theseits services is transferred to theits customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services. Revenue from temporary staffing services is recognized as the services are rendered by clinical and non-clinical healthcare professionals. Under the Company’s managed services program (“MSP”) arrangements, the Company manages all or a part of a customer’s supplemental workforce needs utilizing its own network of healthcare professionals along with those of third-party subcontractors. Revenue and the related direct costs under MSP arrangements are recorded in accordance with the accounting guidance on reporting revenue gross as a principal versus net as an agent. When the Company uses subcontractors and acts as an agent, revenue is recorded net of the related subcontractor’s expense. Revenue from executive search, physician permanent placement and recruitment process outsourcing services is recognized as the services are rendered. TheDepending on the arrangement, the Company’s SaaS-basedtechnology-enabled service revenue is recognized either as the services are rendered or ratably over the applicable arrangement’s service period. See additional information below regarding the Company’s revenue disaggregated by service type.
The Company’s customers are primarily billed as services are rendered. Any fees billed in advance of being earned are recorded as deferred revenue. While payment terms vary by the type of customer and the services rendered, the term between invoicing and when payment is due is not significant. During the year ended December 31, 2019, previously deferred revenue recognized as revenue was $9,972.
The Company recognizes assets from incremental costs to obtain a contract with a customer and costs incurred to fulfill a contract with a customer, which are deferred and amortized using the portfolio approach on a straight line basis over the average period of benefit consistent with the timing of transfer of services to the customer. Aggregate expense for these costs was $11,369 for the year ended December 31, 2019.
The Company has elected to apply the following practical expedients and optional exemptions related to contract costs and revenue recognition:
•Recognize incremental costs of obtaining a contract with amortization periods of one year or less as expense when incurred. These costs are recorded within selling, general and administrative expenses.
•Recognize revenue in the amount of consideration to whichthat the Company has a right to invoice the customer if that amount corresponds directly with the value to the customer of the Company’s services completed to date.
•Exemptions from disclosing the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts for which revenue is recognized in the amount of consideration to whichthat the Company has a right to invoice for services performed and (iii) contracts for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation.
(l) Accounts Receivable
The Company records accounts receivable at the invoiced amount. Accounts receivable are non-interest bearing. The Company maintains an allowance for doubtful accountsexpected credit losses based on the Company’s historical write-off experience, and an assessment of its customers’ financial conditions and available information that is relevant to assessing the collectability of cash flows, which includes current conditions and forecasts about future economic conditions.
The Company also maintainsfollowing table provides a salesreconciliation of activity in the allowance for expected credit losses for accounts receivable: | | | | | | | | | | | |
| 2022 | | 2021 |
| Balance as of January 1, | $ | 6,838 | | | $ | 7,043 | |
| | | |
| Provision for expected credit losses | 27,622 | | | 1,206 | |
| Amounts written off charged against the allowance | (2,550) | | | (1,411) | |
| | | |
| Balance as of December 31, | $ | 31,910 | | | $ | 6,838 | |
The provision for expected credit losses for the year ended December 31, 2022 was primarily the result of recent developments that raised concern with a specific customer’s ability to reserve for potential credits issuedmeet its financial obligations, and uncertainty regarding the collectability of cash flows from other customers due primarily to customers, which is based on the Company’s historical experience. The Company has not experienced material bad debts or sales adjustments during the past three years.current macroeconomic outlook.
(m) Concentration of Credit Risk
The majority of the Company’s business activity is with hospitals located throughout the United States. Credit is extended based on the evaluation of each entity’s financial condition. One customer primarily within the Company’s nurse and allied solutions segment comprised approximately 13%18%, 17% and 14% of the consolidated revenue of the Company for each of the fiscal years ended December 31, 2019, 20182022, 2021 and 2017.2020, respectively.
The Company’s cash and cash equivalents and restricted cash, cash equivalents and investments accounts are financial instruments that are exposed to concentration of credit risk. The Company maintains most of its cash, cash equivalents and investment balances with high-credit quality and federally insured institutions. However, cash equivalents and restricted cash equivalents and investment balances may be invested in a non-federally insured money market accountfunds, commercial paper and commercial paper.corporate bonds. As of December 31, 20192022 and 2018,2021, there were $62,170$162,967 and $59,331,$274,672, respectively, of cash, cash equivalents and restricted cash, cash equivalents and investments, a portion of which was invested in a non-federally insured money market fundfunds, commercial paper and commercial paper.corporate bonds. See Note (3), “Fair Value Measurement,” for additional information.
(n) Income Taxes
The Company records income taxes using the asset and liability method. Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in the period the changes are enacted. In assessing the realizability of deferred tax assets, the Company considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. The Company considers the scheduled reversal of deferred tax liabilities (including the impact of available carryback and carryforward periods), projected future taxable income, and tax-planning strategies in making this assessment. The Company recognizes the effect of income tax positions only if it is more likely than not that such positions will be sustained. Recognized income tax positions are measured at the largest amount that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense.
(o) Fair Value of Financial Instruments
The carrying amounts of the Company’s cash equivalents and restricted cash equivalents and investments approximate their respective fair values due to the short-term nature and liquidity of these financial instruments. The fair value of the Company’s equity investment is determined by using prices for identical or similar investments of the same issuer, which is more fully described in Note (3), “Fair Value Measurement.” As it relates to the Company’s 20242027 Notes and 20272029 Notes (as both defined in Note (8) and Note (3), respectively, below), fair value disclosure is detailed in Note (3), “Fair Value Measurement.” See Note (8), “Notes Payable and Credit Agreement,” for additional information. The fair value of the Company’s long-term portion of the Company’s insuranceself-insurance accruals cannot be estimated because the Company cannot reasonably determine the timing of future payments.
(p) Share-Based Compensation
The Company accounts for its share-based employee compensation plans by expensing the estimated fair value of share-based awards on a straight-line basis over the requisite employee service period, which typically is the vesting period, except for awards granted to retirement-eligible employees, which are expensed on an accelerated basis. Restricted stock units
(“RSUs”) typically vest at the end ofover a three-year vesting period, however, 33% of the awards may vest on the 13th month anniversary of the grant date and 34% on the second anniversary of the grant date if certain performance targets are met.period. Share-based compensation cost of RSUs is measured by the market value of the Company’s common stock on the date of grant, and the Company records share-based compensation expense only for those awards that are expected to vest. Performance restricted stock units (“PRSUs”) primarily consist of PRSUs that contain a performance conditionconditions dependent on defined targets of the Company’s adjusted EBITDA, margin during the third year of the three-year vesting period, with a range of 0% to 175%200% of the target amount granted to be issued under the award. Share-based compensation cost for these PRSUs is measured by the market value of the Company’s common stock on the date of grant, and the amount recognized is adjusted for estimated achievement of the performance conditions. A limited amount of PRSUs contain a market condition dependent upon the Company’s relative and absolute total stockholder return over a three-year period, with a range of 0% to 175% of the target amount granted to be issued under the award. Share-based compensation cost for these PRSUs is measured using the Monte-Carlo simulation valuation model and is not adjusted for the achievement, or lack thereof, of the performancemarket conditions.
(q) Net Income per Common Share
Share-based awards to purchase 43, 2319, 33 and 2041 shares of common stock for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, respectively, were not included in the calculation of diluted net income per common share because the effect of these instruments was anti-dilutive.
The following table sets forth the computation of basic and diluted net income per common share for the years ended December 31, 2019, 20182022, 2021 and 2020, respectively:
and 2017, respectively: | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| Net income | $ | 444,050 | | | $ | 327,388 | | | $ | 70,665 | |
| | | | | |
| Net income per common share - basic | $ | 9.96 | | | $ | 6.87 | | | $ | 1.49 | |
| Net income per common share - diluted | $ | 9.90 | | | $ | 6.81 | | | $ | 1.48 | |
| | | | | |
| Weighted average common shares outstanding - basic | 44,591 | | | 47,685 | | | 47,424 | |
| Plus dilutive effect of potential common shares | 279 | | | 360 | | | 266 | |
| Weighted average common shares outstanding - diluted | 44,870 | | | 48,045 | | | 47,690 | |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Net income | $ | 113,988 |
| | $ | 141,741 |
| | $ | 132,558 |
|
| | | | | | |
| Net income per common share - basic | $ | 2.44 |
| | $ | 2.99 |
| | $ | 2.77 |
|
| Net income per common share - diluted | $ | 2.40 |
| | $ | 2.91 |
| | $ | 2.68 |
|
| | | | | | |
| Weighted average common shares outstanding - basic | 46,704 |
| | 47,371 |
| | 47,807 |
|
| Plus dilutive effect of potential common shares | 889 |
| | 1,297 |
| | 1,623 |
|
| Weighted average common shares outstanding - diluted | 47,593 |
| | 48,668 |
| | 49,430 |
|
See Note (10), “Capital Stock” for additional information regarding share repurchases that occurred after December 31, 2022.
(r) Segment Information
The Company’s operating segments are identified in the same manner as they are reported internally and used by the Company’s chief operating decision maker for the purpose of evaluating performance and allocating resources. The Company has 3three reportable segments: (1) nurse and allied solutions, (2) locum tenensphysician and leadership solutions, and (3) othertechnology and workforce solutions. The nurse and allied solutions segment consists ofincludes the Company’s travel nurse allied, local and labor disruptionstaffing (including international nurse staffing and rapid response nurse staffing), labor disruption staffing, local staffing, international nurse and allied permanent placement, allied staffing and revenue cycle solutions businesses. The locum tenensphysician and leadership solutions segment consists ofincludes the Company’s locum tenens staffing, business. The other workforce solutions segment consists of the following Company businesses (i) physician permanent placement services, (ii) healthcare interim leadership staffing, and executive search, and physician
permanent placement businesses. The technology and workforce solutions segment includes the Company’s language services, (iii) vendor management systems (iv) recruitment process outsourcing, (v) education, (vi) revenue cycle solutions, (vii)(“VMS”), workforce optimization, services,virtual care, credentialing solutions, and (viii) credentialing services.outsourced solutions businesses.
The Company’s chief operating decision maker relies on internal management reporting processes that provide revenue and operating income by reportable segment for making financial decisions and allocating resources. Segment operating income represents income before income taxes plus depreciation, amortization of intangible assets, share-based compensation, interest expense, net, and other, and unallocated corporate overhead. The Company’s management does not evaluate, manage or measure performance of segments using asset information; accordingly, asset information by segment is not prepared or disclosed.
The following table provides a reconciliation of revenue and operating income by reportable segment to consolidated results and was derived from each segment’s internal financial information as used for corporate management purposes: | | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| Revenue | | | | | |
| Nurse and allied solutions | $ | 3,982,453 | | | $ | 2,990,103 | | | $ | 1,699,311 | |
| Physician and leadership solutions | 697,946 | | | 594,243 | | | 466,622 | |
| Technology and workforce solutions | 562,843 | | | 399,889 | | | 227,781 | |
| $ | 5,243,242 | | | $ | 3,984,235 | | | $ | 2,393,714 | |
| Segment operating income | | | | | |
| Nurse and allied solutions | $ | 576,226 | | | $ | 461,311 | | | $ | 232,005 | |
| Physician and leadership solutions | 92,331 | | | 81,439 | | | 62,342 | |
| Technology and workforce solutions | 299,390 | | | 187,578 | | | 93,212 | |
| 967,947 | | | 730,328 | | | 387,559 | |
| Unallocated corporate overhead | 153,669 | | | 123,416 | | | 123,642 | |
| Depreciation and amortization | 133,007 | | | 101,152 | | | 92,766 | |
| Depreciation (included in cost of revenue) | 4,104 | | | 2,545 | | | 1,421 | |
| Share-based compensation | 30,066 | | | 25,217 | | | 20,465 | |
| Interest expense, net, and other | 40,398 | | | 34,077 | | | 57,742 | |
| Income before income taxes | $ | 606,703 | | | $ | 443,921 | | | $ | 91,523 | |
The following tables present the Company’s revenue disaggregated by service type: | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2022 |
| | Nurse and Allied Solutions | | Physician and Leadership Solutions | | Technology and Workforce Solutions | | Total |
| Travel nurse staffing | $ | 2,912,677 | | | $ | — | | | $ | — | | | $ | 2,912,677 | |
| Labor disruption services | 112,160 | | | — | | | — | | | 112,160 | |
| Local staffing | 142,724 | | | — | | | — | | | 142,724 | |
| Allied staffing | 806,491 | | | — | | | — | | | 806,491 | |
| Locum tenens staffing | — | | | 428,133 | | | — | | | 428,133 | |
| Interim leadership staffing | — | | | 184,819 | | | — | | | 184,819 | |
| Temporary staffing | 3,974,052 | | | 612,952 | | | — | | | 4,587,004 | |
| Permanent placement | 8,401 | | | 84,994 | | | — | | | 93,395 | |
| Language services | — | | | — | | | 216,120 | | | 216,120 | |
| Vendor management systems | — | | | — | | | 265,525 | | | 265,525 | |
| Other technologies | — | | | — | | | 29,553 | | | 29,553 | |
| Technology-enabled services | — | | | — | | | 511,198 | | | 511,198 | |
| Talent planning and acquisition | — | | | — | | | 51,645 | | | 51,645 | |
| Total revenue | $ | 3,982,453 | | | $ | 697,946 | | | $ | 562,843 | | | $ | 5,243,242 | |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Revenue | | | | | |
| Nurse and allied solutions | $ | 1,419,965 |
| | $ | 1,306,516 |
| | $ | 1,238,543 |
|
| Locum tenens solutions | 324,653 |
| | 393,366 |
| | 430,615 |
|
| Other workforce solutions | 477,489 |
| | 436,192 |
| | 319,296 |
|
| | $ | 2,222,107 |
| | $ | 2,136,074 |
| | $ | 1,988,454 |
|
| Segment operating income | | | | | |
| Nurse and allied solutions | $ | 199,806 |
| | $ | 183,427 |
| | $ | 182,792 |
|
| Locum tenens solutions | 25,108 |
| | 41,348 |
| | 51,422 |
|
| Other workforce solutions | 110,225 |
| | 104,541 |
| | 81,154 |
|
| | 335,139 |
| | 329,316 |
| | 315,368 |
|
| Unallocated corporate overhead | 83,463 |
| | 74,436 |
| | 60,412 |
|
| Depreciation and amortization | 58,520 |
| | 41,237 |
| | 32,279 |
|
| Share-based compensation | 16,241 |
| | 10,815 |
| | 10,237 |
|
| Interest expense, net, and other | 28,427 |
| | 16,143 |
| | 19,677 |
|
| Income before income taxes | $ | 148,488 |
| | $ | 186,685 |
| | $ | 192,763 |
|
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2021 |
| | Nurse and Allied Solutions | | Physician and Leadership Solutions | | Technology and Workforce Solutions | | Total |
| Travel nurse staffing | $ | 2,168,507 | | | $ | — | | | $ | — | | | $ | 2,168,507 | |
| Labor disruption services | 110,520 | | | — | | | — | | | 110,520 | |
| Local staffing | 124,977 | | | — | | | — | | | 124,977 | |
| Allied staffing | 586,099 | | | — | | | — | | | 586,099 | |
| Locum tenens staffing | — | | | 352,650 | | | — | | | 352,650 | |
| Interim leadership staffing | — | | | 170,236 | | | — | | | 170,236 | |
| Temporary staffing | 2,990,103 | | | 522,886 | | | — | | | 3,512,989 | |
| Permanent placement | — | | | 71,357 | | | — | | | 71,357 | |
| Language services | — | | | — | | | 180,891 | | | 180,891 | |
| Vendor management systems | — | | | — | | | 148,532 | | | 148,532 | |
| Other technologies | — | | | — | | | 29,043 | | | 29,043 | |
| Technology-enabled services | — | | | — | | | 358,466 | | | 358,466 | |
| Talent planning and acquisition | — | | | — | | | 41,423 | | | 41,423 | |
| Total revenue | $ | 2,990,103 | | | $ | 594,243 | | | $ | 399,889 | | | $ | 3,984,235 | |
The Company offers a comprehensive managed services program, in which the Company manages all or a portion of a client’s contingent staffing needs. This service includes both the placement of the Company’s own healthcare professionals and the utilization of other staffing agencies to fulfill the client’s staffing needs. See additional information in (j), “Revenue Recognition.” For the years ended December 31, 2019, 2018 and 2017, revenue under the Company’s managed services program arrangements comprised approximately 63%, 62% and 58% for nurse and allied solutions revenue, 23%, 17% and 13% for locum tenens solutions revenue and 8%, 7% and 8% for other workforce solutions revenue, respectively.
| | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2020 |
| | Nurse and Allied Solutions | | Physician and Leadership Solutions | | Technology and Workforce Solutions | | Total |
| Travel nurse staffing | $ | 1,230,396 | | | $ | — | | | $ | — | | | $ | 1,230,396 | |
| Labor disruption services | 7,137 | | | — | | | — | | | 7,137 | |
| Local staffing | 53,218 | | | — | | | — | | | 53,218 | |
| Allied staffing | 408,560 | | | — | | | — | | | 408,560 | |
| Locum tenens staffing | — | | | 277,428 | | | — | | | 277,428 | |
| Interim leadership staffing | — | | | 130,800 | | | — | | | 130,800 | |
| Temporary staffing | 1,699,311 | | | 408,228 | | | — | | | 2,107,539 | |
| Permanent placement | — | | | 58,394 | | | — | | | 58,394 | |
| Language services | — | | | — | | | 116,054 | | | 116,054 | |
| Vendor management systems | — | | | — | | | 69,756 | | | 69,756 | |
| Other technologies | — | | | — | | | 23,557 | | | 23,557 | |
| Technology-enabled services | — | | | — | | | 209,367 | | | 209,367 | |
| Talent planning and acquisition | — | | | — | | | 18,414 | | | 18,414 | |
| Total revenue | $ | 1,699,311 | | | $ | 466,622 | | | $ | 227,781 | | | $ | 2,393,714 | |
(s) Recently Adopted Accounting Pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) 2016-02, “Leases.” This standard requires organizations that lease assets to recognize the assets and liabilities created by those leases. The standard also requires disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. A modified retrospective transition approach is required, applying the standard to all leases existing at the date of initial application. In addition, the FASB has also issued several amendments to the standard, which clarify certain aspects of the guidance, including an optional transition method for adoption of this standard, which allows organizations to initially apply the new requirements at the effective date, recognize a cumulative effect adjustment to the opening balance of retained earnings, and continue to apply the legacy guidance in Accounting Standards Codification (“ASC”) 840, Leases, including its disclosure requirements, in the comparative periods presented. The new standard provides a number of optional practical expedients in transition. The Company elected the ‘package of practical expedients’, which permits organizations not to reassess under the new standard prior conclusions about lease identification, lease classification and initial direct costs. The Company did not elect to use the hindsight practical expedient to determine the lease term or evaluate impairment for existing leases.
The Company adopted ASU 2016-02 effective January 1, 2019, using the optional transition method described above. The Company recognized the cumulative effect of adopting this guidance as an adjustment as of the effective date, primarily related to the recognition of lease liabilities of $114,807 and corresponding right-of-use assets of $99,525 for existing operating leases. The Company also derecognized existing deferred rent liabilities of $15,302. These adjustments had no effect on opening retained earnings and prior periods were not retrospectively adjusted and continue to be reported in accordance with ASC 840. The new standard also provides practical expedients for an organization’s ongoing accounting. The Company elected the short-term lease recognition exemption and the practical expedient to not separate lease and non-lease components for all leases that qualify. The adoption did not have a material effect on the Company’s results of operations.
There were no other material impacts to the Company’s consolidated financial statements as a result of adopting these updated standards.
(2) Acquisitions
As set forth below, the Company completed 5 acquisitions from January 1, 2017 through December 31, 2019. The Company accounted for each acquisition set forth below using the acquisition method of accounting. Accordingly, itthe Company recorded the tangible and intangible assets acquired and liabilities assumed at their estimated fair values as of the applicable date of acquisition. Since the applicable date of acquisition, the Company has revised the allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on analysis of information that has been made available through December 31, 2019.2022. The allocations will continue to be updated through the measurement period, if necessary. For each acquisition,The goodwill recognized for these acquisitions is attributable to expected growth as the Company did not incur any materialleverages its brand and diversifies its services offered to clients, including potential revenue growth and margin expansion. The Company recognizes acquisition-related costs.costs in selling, general and administrative expenses in the consolidated statements of comprehensive income.
b4healthConnetics Acquisition
On December 19, 2019,May 13, 2022, the Company completed its acquisition of B4Health,Connetics Communications, LLC (“b4health”Connetics”), an innovative technology companywhich specializes in the direct hire recruitment and a leading providerpermanent placement of a web-based internal float pool management solutioninternational nurse and vendor management system forallied health professionals with healthcare facilities.facilities in the United States. The initial purchase price of $23,006$78,764 included (1) $19,906$70,764 cash consideration paid upon acquisition, funded through cash on hand, and (2) a contingent earn-out paymentconsideration (earn-out payment) of up to $12,000$12,500 with an estimated fair value of $3,100$8,000 as of the acquisition date. The contingent earn-out payment is based on the operating results of b4healthConnetics for the twelve months ending DecemberMay 31, 2020.2023. The results of b4healthConnetics have been included in the Company’s other workforcenurse and allied solutions segment since the date of acquisition. During the fourth quarter of 2022, $231 was returned to the Company in respect of the final working capital settlement.
The preliminary allocation of the $23,006$78,533 purchase price, which was reduced by the final working capital settlement during the fourth quarter of 2022, consisted of (1) $1,169$3,567 of fair value of tangible assets acquired, which included $222$963 cash received, (2) $823$8,224 of liabilities assumed, (3) $9,000$40,200 of identified intangible assets, and (4) $13,660$42,990 of goodwill, all of which $34,990 is deductible for tax purposes. The intangible assets acquired have a weighted average useful life of approximately thirteen years. The following table summarizes the fair value and useful life of each intangible asset acquired as of the acquisition date:
| | | | | | | | | | | | | | | | | |
| | | Fair Value | | Useful Life |
| | | | | (in years) |
| Identifiable intangible assets | | | | |
| Customer relationships | | $ | 32,800 | | | 15 |
| Staffing database | | 4,200 | | | 5 |
| Tradenames and trademarks | | 3,200 | | | 5 |
| | | $ | 40,200 | | | |
Synzi and SnapMD Acquisition
On April 7, 2021, the Company completed its acquisition of Synzi Holdings, Inc. (“Synzi”) and its wholly-owned subsidiary, SnapMD, LLC (“SnapMD”). Synzi is a virtual care communication platform that enables organizations to conduct virtual visits and use secure messaging, text, and email for clinician-to-patient and clinician-to-clinician communications. SnapMD is a full-service virtual care management company, specializing in providing software to enable healthcare providers to better engage with their patients. The initial purchase price of $42,240 consisted entirely of cash consideration paid upon acquisition. The acquisition was funded primarily through borrowings under the Senior Credit Facility (as defined below). The results of Synzi and SnapMD have been included in the Company’s technology and workforce solutions segment since the date of acquisition. During the second quarter of 2021, $92 was returned to the Company in respect of the final working capital settlement.
The allocation of the $42,148 purchase price, which was reduced by the final working capital settlement and was finalized during the second quarter of 2022, consisted of (1) $2,757 of fair value of tangible assets acquired, which included $884 cash received, (2) $275 of liabilities assumed, (3) $12,440 of identified intangible assets, and (4) $27,226 of goodwill, of which $6,044 is deductible for tax purposes. The fair value of intangible assets primarily includes $3,000$10,890 of developed technology $4,000 of customer relationships, and $2,000$1,220 of trademarks with a weighted average useful life of approximately seven years.
AdvancedStratus Video Acquisition
On JuneFebruary 14, 2019,2020, the Company completed its acquisition of Advanced Medical Personnel Services, Inc. (“Advanced”),Stratus Video, a national healthcare staffingremote video interpreting company that specializes in placing therapistsprovides healthcare interpretation via remote video, over the phone, and nurses across multiple settings.onsite in-person, all supported by proprietary technology platforms. The initial purchase price of $211,743 included (1) $201,121$485,568 consisted entirely of cash consideration paid upon acquisition and (2) a contingent earn-out payment of up to $20,000 with an estimated fair value of $10,622 as of the acquisition date. The contingent earn-out payment is based on the operating results of Advanced for the twelve months ending December 31, 2019.acquisition. The acquisition was funded primarily through (1) borrowings under the Company’s $400,000 secured revolving credit facility (the “Senior Credit Facility”), provided for under a credit agreement (the “New Credit Agreement”), dated as of February 9, 2018, and (2) the FirstSecond Amendment (as defined in Note (8) below) to the New Credit Agreement, which provided $150,000$250,000 of additional available borrowings to the Company. The Senior Credit Facility, New Credit Agreement and the FirstSecond Amendment are more fully described in Note (8), “Notes Payable and Credit Agreement.” The results of AdvancedStratus Video have been included in the Company’s nursetechnology and alliedworkforce solutions segment since the date of acquisition. During the thirdsecond quarter of 2019,2020, an additional $73$99 of cash consideration was paid to the selling shareholders forin respect of the final working capital settlement. The Company incurred $11,467 of acquisition-related costs during the year ended December 31, 2020 as a result of its acquisition of Stratus Video.
The allocation of the $211,816$485,667 purchase price, which included the additional cash consideration paid for the final working capital settlement and was finalized during the first quarter of 2021, consisted of (1) $29,035 $44,092of fair value of tangible assets acquired, which included $2,497 cash and restricted$9,176 cash received, (2) $28,758$56,059 of liabilities assumed, (3) $91,700$228,000 of identified intangible assets, and (4) $119,839$269,634 of goodwill, of which $57,121$10,182 is expected to be deductible for tax purposes. The intangible assets acquired have a weighted average useful life of approximately nineseventeen years. The following table summarizes the fair value and useful life of each intangible asset acquired:
|
| | | | | | | |
| | | | Fair Value | | Useful Life |
| | | | | | (in years) |
| Identifiable intangible assets | | | | |
| | Customer Relationships | | $ | 68,000 |
| | 10 |
| | Tradenames and Trademarks | | 10,000 |
| | 5 |
| | Staffing Database | | 10,300 |
| | 10 |
| | Developed Technology | | 3,400 |
| | 3 |
| | | | $ | 91,700 |
| | |
Silversheet Acquisition
On January 30, 2019, the Company completed its acquisition of Silversheet, Inc. (“Silversheet”), which provides innovative software and services to reduce the complexities and challenges of the credentialing process for clinicians and healthcare organizations. The initial purchase price of $31,676 included (1) $30,176 cash consideration paid upon acquisition, funded primarily through borrowings under the Senior Credit Facility, and (2) a contingent earn-out payment of up to $25,000 with an estimated fair value of $1,500acquired as of the acquisition date. The contingent earn-out payment is based on (A) up to $6,000 based on the operating results of Silversheet for the twelve months ending December 31, 2019, and (B) up to $19,000 based on the operating results of Silversheet for the twelve months ending December 31, 2020. The results of Silversheet have been included in the Company’s other workforce solutions segment since the date of acquisition.
The allocation of the $31,676 purchase price consisted of (1) $2,826 of fair value of tangible assets acquired, which included $651 cash received, (2) $1,567 of liabilities assumed, (3) $6,880 of identified intangible assets, and (4) $23,537 of goodwill, none of which is deductible for tax purposes. The fair value of intangible assets primarily includes $5,300 of developed technology and $1,500 of trademarks with a weighted average useful life of approximately eight years.
MedPartners Acquisition
On April 9, 2018, the Company completed its acquisition of MedPartners HIM (“MedPartners”), which provides case management, clinical documentation improvement, medical coding and registry services to hospitals and physician medical groups nationwide. The initial purchase price of $200,933 included (1) $196,533 cash consideration paid upon acquisition, funded through borrowings under the Senior Credit Facility, (2) a contingent earn-out payment of up to $20,000 with an estimated fair value of $4,400 as of the acquisition date. The contingent earn-out payment is based on (A) up to $10,000 based on the operating results of MedPartners for the twelve months ending December 31, 2018, which resulted in no earn-out payment, and (B) up to $10,000 based on the operating results of MedPartners for the six months ending June 30, 2019, which resulted in no earn-out payment. The results of MedPartners have been included in the Company’s other workforce solutions segment since the date of acquisition. During the third quarter of 2018, $222 was returned to the Company for the final working capital settlement.
The allocation of the $200,711 purchase price, which was reduced by the final working capital settlement and finalized during the second quarter of 2019, consisted of (1) $28,508 of fair value of tangible assets acquired, which included $8,403 cash received, (2) $11,933 of liabilities assumed, (3) $103,000 of identified intangible assets, and (4) $81,136 of goodwill, all of which is deductible for tax purposes. The intangible assets acquired had a weighted average useful life of approximately sixteen years. The following table summarizes the fair value and useful life of each intangible asset acquired:
|
| | | | | | | |
| | | | Fair Value | | Useful Life |
| | | | | | (in years) |
| Identifiable intangible assets | | | | |
| | Tradenames and Trademarks | | $ | 46,000 |
| | 20 |
| | Customer Relationships | | 57,000 |
| | 12 |
| | | | $ | 103,000 |
| | |
| | | | | | | | | | | | | | | | | |
| | | Fair Value | | Useful Life |
| | | | | (in years) |
| Identifiable intangible assets | | | | |
| Customer relationships | | $ | 171,000 | | | 20 |
| Tradenames and trademarks | | 40,000 | | | 5 - 10 |
| Developed technology | | 16,000 | | | 5 |
| Interpreter database | | 1,000 | | | 4 |
| | | $ | 228,000 | | | |
During the third quarter of 2019,2020, the Company shortenedrevised the estimated useful lifelives for the tradenames and trademarks intangible assetassets as a result of its plan to rebrand the revenue cycle solutionslanguage interpretation business. Based on this change in circumstances since the date of acquisition, the Company determined that the remaining useful lifelives of this asset wasthe assets are five years and beganis amortizing itsthe remaining value on a straight-line basis over the remaining useful life.
Phillips DiPisaApproximately $116,054 of revenue and Leaders For Today Acquisition$20,164 of income before income taxes of Stratus Video were included in the consolidated statement of comprehensive income for the year ended December 31, 2020.
On April 6, 2018,Pro Forma Financial Information (Unaudited)
The following summary presents unaudited pro forma consolidated results of operations of the Company completed itsas if the acquisition of 2 related entities, Phillips DiPisa and Leaders For Today (“PDA and LFT”),Stratus Video had occurred on January 1, 2019, which offer a rangegives effect to certain adjustments, including acquisition-related costs of leadership staffing and permanent placement solutions for$14,468 that were reclassified from the healthcare industry.year ended December 31, 2020 to the year ended December 31, 2019. The initial purchase priceunaudited pro forma financial information is not necessarily indicative of $35,968 included (1) $30,268 cash consideration paid upon acquisition, funded through cash on hand, and (2) a contingent earn-out payment of up to $7,000 with an estimated fair value of $5,700the operating results that would have occurred had the acquisitions been consummated as of the acquisition date. The contingent earn-out paymentdate indicated, nor is based on the operating resultsit necessarily indicative of PDA and LFT for the twelve months ending December 31, 2018, which was settled in full during the second quarter of 2019. The results of PDA and LFT have been included in the Company’s other workforce solutions segment since the date of acquisition. During the third quarter of 2018, $465 was returned to the Company for the final working capital settlement.future operating results. | | | | | | | |
| Year Ended December 31, |
| 2020 | | |
| Revenue | $ | 2,407,586 | | | |
| Income from operations | 165,196 | | | |
| Net income | 81,422 | | | |
| | | |
| | | |
| | | |
The allocation of the $35,503 purchase price, which was reduced by the final working capital settlement and finalized during the second quarter of 2019, consisted of (1) $4,389 of fair value of tangible assets acquired, which included $351 cash received, (2) $4,779 of liabilities assumed, (3) $19,110 of identified intangible assets, and (4) $16,783 of goodwill, all of which is deductible for tax purposes. The fair value of intangible assets includes $5,400 of trademarks, $8,000 of customer relationships and $5,710 of staffing databases with a weighted average useful life of approximately twelve years.
(3) Fair Value Measurement
Fair value represents the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which the Company would conduct a transaction, in addition to the assumptions that market participants would use when pricing the related assets or liabilities, including non-performance risk.
A three-level hierarchy prioritizes the inputs to valuation techniques used to measure fair value and requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The three levels of the fair value hierarchy are as follows:
Level 1—Quoted prices in active markets for identical assets or liabilities.
Level 2—Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
Assets and Liabilities Measured on a Recurring Basis
The Company’s restrictedCompany invests a portion of its cash and cash equivalents that serve as collateral for the Company’s outstanding letters of credit typically consist ofin non-federally insured money market funds that are measured at fair value based on quoted prices, which are Level 1 inputs.
The Company’s obligation under its deferred compensation plan is measured at fair value based on quoted market prices of the participants’ elected investments, which are Level 1 inputs. The deferred compensation plan is more fully described in Note (9), “Retirement Plans.”
As of December 31, 2019, theThe Company’s restricted cash equivalents and investments that serve as collateral for the Company’s captive insurance company consist ofinclude commercial paper that is measured at observable market prices for identical securities that are traded in less active markets, which are Level 2 inputs. From time to time, the Company invests a portion of its cash and cash equivalents in commercial paper classified as Level 2 in the fair value hierarchy. Of the $59,243$31,536 commercial paper issued and outstanding as of December 31, 2019, $9,5862022, none had original maturities greater than three months, which were considered available-for-sale securities. As of December 31, 2018,months. Of the Company had $63,243$80,596 commercial paper issued and outstanding as of December 31, 2021, none had original maturities greater than three months.
The Company’s restricted cash equivalents and investments that serve as collateral for the Company’s captive insurance company also include corporate bonds that are measured using readily available pricing sources that utilize observable market data, including the current interest rate for comparable instruments, which are Level 2 inputs. As of December 31, 2022, the Company had $25,095 corporate bonds issued and outstanding, all of which $15,192 had original maturities greater than three months and were considered available-for-sale securities. The increase in commercial paperAs of December 31, 2021,the Company had $29,159 corporate bonds issued and outstanding, isof which $27,958 had original maturities greater than three months and were considered available-for-sale securities.
The fair value of our available-for-sale securities as of December 31, 2022, by remaining contractual maturities, are presented in the following table:
| | | | | |
| Fair Value |
| Due in one year or less | $ | 9,809 | |
| Due after one year through five years | 15,286 | |
| $ | 25,095 | |
Expected maturities may differ from stated due dates because borrowers may have the ability to additional restricted investments related to the captive insurance company.call or prepay obligations with or without call or prepayment penalties.
The Company’s contingent consideration liabilities are measured at fair value using probability-weighted discounted cash flow analysis or a simulation-based methodology for the acquired companies, which are Level 3 inputs. The Company recognizes changes to the fair value of its contingent consideration liabilities in selling, general and administrative expenses in the consolidated statements of comprehensive income.
The following tables present information about the above-referenced assets and liabilities measured at fair value on a recurring basis and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:
|
| | | | | | | | | | | | | | | |
| | Fair Value Measurements as of December 31, 2019 |
| Assets (Liabilities) | Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| Money market funds | $ | 2,508 |
| | $ | 2,508 |
| | $ | — |
| | $ | — |
|
| Deferred compensation | (81,064 | ) | | (81,064 | ) | | — |
| | — |
|
| Commercial paper | 59,243 |
| | — |
| | 59,243 |
| | — |
|
| Acquisition contingent consideration liabilities | (23,100 | ) | | — |
| | — |
| | (23,100 | ) |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | Fair Value Measurements as of December 31, 2022 | | Fair Value Measurements as of December 31, 2021 |
| Assets (Liabilities) |
Level 1 | |
Level 2 | | Level 3 | | Total | | Level 1 | | Level 2 | | Level 3 | | Total |
| Money market funds | $ | 36,895 | | | $ | — | | | $ | — | | | $ | 36,895 | | | $ | 91,454 | | | $ | — | | | $ | — | | | $ | 91,454 | |
| Deferred compensation | (128,465) | | | — | | | — | | | (128,465) | | | (119,617) | | | — | | | — | | | (119,617) | |
| Corporate bonds | — | | | 25,095 | | | — | | | 25,095 | | | — | | | 29,159 | | | — | | | 29,159 | |
| Commercial paper | — | | | 31,536 | | | — | | | 31,536 | | | — | | | 80,596 | | | — | | | 80,596 | |
| Acquisition contingent consideration liabilities | — | | | — | | | (5,070) | | | (5,070) | | | — | | | — | | | — | | | — | |
|
| | | | | | | | | | | | | | | |
| | Fair Value Measurements as of December 31, 2018 |
| Assets (Liabilities) | Total | | Quoted Prices in Active Markets for Identical Assets (Level 1) | | Significant Other Observable Inputs (Level 2) | | Significant Unobservable Inputs (Level 3) |
| Money market funds | $ | 2,461 |
| | $ | 2,461 |
| | $ | — |
| | $ | — |
|
| Deferred compensation | (55,720 | ) | | (55,720 | ) | | — |
| | — |
|
| Commercial paper | 63,243 |
| | — |
| | 63,243 |
| | — |
|
| Acquisition contingent consideration liabilities | (7,700 | ) | | — |
| | — |
| | (7,700 | ) |
52
The following table sets forth a reconciliation of changes in the fair value of contingent consideration liabilities classified as Level 3 in the fair value hierarchy: | | | | | | | | | | | |
| | 2022 | | 2021 |
| Balance as of January 1, | $ | — | | | $ | (8,000) | |
| Settlement of b4health contingent consideration liability for year ended December 31, 2020 | — | | | 8,000 | |
| Contingent consideration liability from Connetics acquisition on May 13, 2022 | (8,000) | | | — | |
| Change in fair value of contingent consideration liability from Connetics acquisition | 2,930 | | | — | |
| Balance as of December 31, | $ | (5,070) | | | $ | — | |
|
| | | | | | | |
| | 2019 | | 2018 |
| Balance as of January 1, | $ | (7,700 | ) | | $ | (2,070 | ) |
| Settlement of HealthSource Global contingent consideration liability for year ended December 31, 2016 | — |
| | 70 |
|
| Settlement of HealthSource Global contingent consideration liability for year ended December 31, 2017 | — |
| | 2,000 |
|
| Settlement of PDA and LFT contingent consideration liability for year ended December 31, 2018 | 7,000 |
| | — |
|
| Contingent consideration liability from PDA and LFT acquisition on April 6, 2018 | — |
| | (5,700 | ) |
| Contingent consideration liability from MedPartners acquisition on April 9, 2018 | — |
| | (4,400 | ) |
| Contingent consideration liability from Silversheet acquisition on January 30, 2019 | (1,500 | ) | | — |
|
| Contingent consideration liability from Advanced acquisition on June 14, 2019 | (10,622 | ) | | — |
|
| Contingent consideration liability from b4health acquisition on December 19, 2019 | (3,100 | ) | | — |
|
| Change in fair value of contingent consideration liability from PDA and LFT acquisition | — |
| | (1,300 | ) |
| Change in fair value of contingent consideration liability from MedPartners acquisition | 700 |
| | 3,700 |
|
| Change in fair value of contingent consideration liability from Silversheet acquisition | 1,500 |
| | — |
|
| Change in fair value of contingent consideration liability from Advanced acquisition | (9,378 | ) | | — |
|
| Balance as of December 31, | $ | (23,100 | ) | | $ | (7,700 | ) |
Assets Measured on a Non-Recurring Basis
The Company applies fair value techniques on a non-recurring basis associated with valuing potential impairment losses related to its goodwill, indefinite-lived intangible assets, long-lived assets, and equity method investment.investments.
The Company evaluates goodwill and indefinite-lived intangible assets annually for impairment and whenever events or changes in circumstances occur indicatingindicate that goodwill or indefinite-lived intangible assets might be impaired.it is more likely than not that an impairment exists. The Company determines the fair value of its reporting units based on a combination of inputs, including the market capitalization of the Company, as well as Level 3 inputs such as discounted cash flows, which are not observable from the market, directly or indirectly. The Company determines the fair value of its indefinite-lived intangible assets using the income approach (relief-from-royalty method) based on Level 3 inputs.
The Company’s equity investment represents an investment in a non-controlled corporation without a readily determinable market value. The Company has elected to measure the investment at cost minus impairment, if any, plus or minus changes resulting from observable price changes. The fair value is determined by using quoted prices for identical or similar investments of the same issuer, which are Level 2 inputs.inputs, and other information available to the Company such as the rights and obligations of the securities. The Company recognizes changes to the fair value of its equity investment in interest expense, net, and other in the consolidated statements of comprehensive income.
The balance of the equity investment classifiedwas $19,204 and $22,633 as Level 2 in the fair value hierarchy was $15,449 for years endedof December 31, 20192022 and 2018,2021, respectively. There were no changes to the fair value of the equity investment recognized during the year ended December 31, 2019 .
There were no triggering events identified, no indication of impairment of the Company’s goodwill, indefinite-lived intangible assets, or long-lived assets or equity investments, and 0no impairment charges recorded for the aforementioned assets during the three years ended December 31, 20192022 requiring such measurements.
Fair Value of Financial Instruments
The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even though these instruments are not recognized at fair value in the consolidated balance sheets. The fair value of the Company’s 5.125%2027 Notes (as defined in Note (8) below) and 4.000% senior notes due 20242029 (the “2024 Notes”) and 4.625% senior notes due 2027 (the “2027“2029 Notes”) was estimated using quoted market prices in active markets for identical liabilities, which are Level 1 inputs. The carrying amounts and estimated fair value of the 20242027 Notes and the 20272029 Notes, which are more fully described in Note (8), “Notes Payable and Credit Agreement,” are presented in the following table:
|
| | | | | | | | | | | | | |
| | As of December 31, 2019 | | As of December 31, 2018 |
| | Carrying Amount | Estimated Fair Value | | Carrying Amount | Estimated Fair Value |
| 2024 Notes | $ | 325,000 |
| $ | 337,188 |
| | $ | 325,000 |
| $ | 310,375 |
|
| 2027 Notes | 300,000 |
| 301,500 |
| | — |
| — |
|
| | | | | | | | | | | | | | | | | |
| As of December 31, 2022 | | As of December 31, 2021 |
| Carrying
Amount | Estimated
Fair Value | | Carrying
Amount | Estimated
Fair Value |
| 2027 Notes | $ | 500,000 | | $ | 460,000 | | | $ | 500,000 | | $ | 517,500 | |
| 2029 Notes | 350,000 | | 300,125 | | | 350,000 | | 353,500 | |
The fair value of the Company’s long-term self-insurance accruals cannot be estimated as the Company cannot reasonably determine the timing of future payments.
(4) Goodwill and Identifiable Intangible Assets
As of December 31, 20192022 and 2018,2021, the Company had the following acquired intangible assets:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2022 | | As of December 31, 2021 |
| | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount | | Gross
Carrying
Amount | | Accumulated
Amortization | | Net
Carrying
Amount |
| Intangible assets subject to amortization: | | | | | | | | | | | |
| Staffing databases | $ | 41,036 | | | $ | (24,784) | | | $ | 16,252 | | | $ | 36,836 | | | $ | (19,857) | | | $ | 16,979 | |
| Customer relationships | 478,122 | | | (179,795) | | | 298,327 | | | 445,169 | | | (150,255) | | | 294,914 | |
| Tradenames and trademarks | 260,140 | | | (121,576) | | | 138,564 | | | 256,889 | | | (81,522) | | | 175,367 | |
| Non-compete agreements | 7,555 | | | (6,035) | | | 1,520 | | | 6,495 | | | (4,621) | | | 1,874 | |
| Acquired technology | 51,306 | | | (29,137) | | | 22,169 | | | 47,320 | | | (21,994) | | | 25,326 | |
| $ | 838,159 | | | $ | (361,327) | | | $ | 476,832 | | | $ | 792,709 | | | $ | (278,249) | | | $ | 514,460 | |
| | | | | | | | | | | |
| | | | | | | | | | | |
| | | | | | | | | | | |
As a result of developments in its brand consolidation efforts, the Company reassessed the useful lives of its tradenames and trademarks intangible assets during the fourth quarter of 2021. This assessment included tradenames and trademarks related to the Company's locums tenens, interim leadership, local staffing, physician permanent placement, allied, and VMS businesses. As a result, the Company concluded (a) that the useful lives for $89,400 of tradenames and trademarks that were previously not subject to amortization were no longer considered to be indefinite and (b) to revise the estimated useful lives for $19,766 of tradenames and trademarks. Prior to assigning useful lives to the previously indefinite-lived intangible assets, the Company tested the assets for impairment, concluding that they were not impaired. Effective December 31, 2021, these tradenames and trademarks intangible assets were assigned a weighted average useful life of approximately six years. The Company is amortizing their carrying values on a straight-line basis over the remaining useful lives.
|
| | | | | | | | | | | | | | | | | | | | | | | |
| | As of December 31, 2019 | | As of December 31, 2018 |
| | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount | | Gross Carrying Amount | | Accumulated Amortization | | Net Carrying Amount |
| Intangible assets subject to amortization: | | | | | | | | | | | |
| Staffing databases | $ | 35,836 |
| | $ | (13,369 | ) | | $ | 22,467 |
| | $ | 25,536 |
| | $ | (10,174 | ) | | $ | 15,362 |
|
| Customer relationships | 273,839 |
| | (94,206 | ) | | 179,633 |
| | 201,759 |
| | (75,081 | ) | | 126,678 |
|
| Tradenames and trademarks | 126,269 |
| | (33,545 | ) | | 92,724 |
| | 112,769 |
| | (22,529 | ) | | 90,240 |
|
| Non-compete agreements | 4,117 |
| | (2,035 | ) | | 2,082 |
| | 2,877 |
| | (1,410 | ) | | 1,467 |
|
| Acquired technology | 20,430 |
| | (8,262 | ) | | 12,168 |
| | 8,730 |
| | (5,730 | ) | | 3,000 |
|
| | $ | 460,491 |
| | $ | (151,417 | ) | | $ | 309,074 |
| | $ | 351,671 |
| | $ | (114,924 | ) | | $ | 236,747 |
|
| Intangible assets not subject to amortization: | | | | | | | | | | | |
| Tradenames and trademarks | | | | | $ | 89,400 |
| | | | | | $ | 89,400 |
|
| | | | | | $ | 398,474 |
| | | | | | $ | 326,147 |
|
Aggregate amortization expense for intangible assets was $36,493$83,078 and $24,239$63,015 for the years ended December 31, 20192022 and 2018,2021, respectively. Based on the currentnet carrying amount of intangiblesintangible assets subject to amortization, the estimated future amortization expense as of December 31, 20192022 is as follows:
| | | | | |
| Amount |
| Year ending December 31, 2023 | $ | 86,525 | |
| Year ending December 31, 2024 | 76,029 | |
| Year ending December 31, 2025 | 60,131 | |
| Year ending December 31, 2026 | 51,538 | |
| Year ending December 31, 2027 | 49,022 | |
| Thereafter | 153,587 | |
| $ | 476,832 | |
|
| | | |
| | Amount |
| Year ending December 31, 2020 | $ | 44,017 |
|
| Year ending December 31, 2021 | 41,735 |
|
| Year ending December 31, 2022 | 40,754 |
|
| Year ending December 31, 2023 | 39,647 |
|
| Year ending December 31, 2024 | 33,400 |
|
| Thereafter | 109,521 |
|
| | $ | 309,074 |
|
The following table summarizes the activity related to the carrying value of goodwill by reportable segment:
| | | | | | | | | | | | | | | | | | | | | | | |
| Nurse and Allied
Solutions | | Physician and Leadership
Solutions | | Technology and Workforce Solutions | | Total |
| Balance, January 1, 2021 | $ | 339,015 | | | $ | 152,800 | | | $ | 372,670 | | | $ | 864,485 | |
| Goodwill adjustment for Stratus Video acquisition | — | | | — | | | 663 | | | 663 | |
| Goodwill from Synzi and SnapMD acquisition | — | | | — | | | 27,193 | | | 27,193 | |
| Balance, December 31, 2021 | 339,015 | | | 152,800 | | | 400,526 | | | 892,341 | |
| Goodwill adjustment for Synzi and SnapMD acquisition | — | | | — | | | 33 | | | 33 | |
| Goodwill from Connetics acquisition | 42,990 | | | — | | | — | | | 42,990 | |
| Balance, December 31, 2022 | $ | 382,005 | | | $ | 152,800 | | | $ | 400,559 | | | $ | 935,364 | |
| Accumulated impairment loss as of December 31, 2021 and 2022 | $ | 154,444 | | | $ | 60,495 | | | $ | — | | | $ | 214,939 | |
|
| | | | | | | | | | | | | | | |
| | Nurse and Allied Solutions | | Locum Tenens Solutions | | Other Workforce Solutions | | Total |
| Balance, January 1, 2018 | $ | 103,107 |
| | $ | 19,743 |
| | $ | 217,746 |
| | $ | 340,596 |
|
| Goodwill from MedPartners acquisition | — |
| | — |
| | 81,113 |
| | 81,113 |
|
| Goodwill from PDA and LFT acquisition | — |
| | — |
| | 16,797 |
| | 16,797 |
|
| Balance, December 31, 2018 | 103,107 |
| | 19,743 |
| | 315,656 |
| | 438,506 |
|
| Goodwill adjustment for MedPartners acquisition | — |
| | — |
| | 23 |
| | 23 |
|
| Goodwill adjustment for PDA and LFT acquisition | — |
| | — |
| | (14 | ) | | (14 | ) |
| Goodwill from Silversheet acquisition | — |
| | — |
| | 23,537 |
| | 23,537 |
|
| Goodwill from Advanced acquisition | 119,839 |
| | — |
| | — |
| | 119,839 |
|
| Goodwill from b4health acquisition | — |
| | — |
| | 13,660 |
| | 13,660 |
|
| Balance, December 31, 2019 | $ | 222,946 |
| | $ | 19,743 |
| | $ | 352,862 |
| | $ | 595,551 |
|
Accumulated impairment loss as of
December 31, 2018 and 2019 | $ | 154,444 |
| | $ | 53,940 |
| | $ | 6,555 |
| | $ | 214,939 |
|
(5) Leases
The Company leases certain office facilities, data centers, and equipment under various operating leases. The Company’s short-term leases (with initial lease terms of 12 months or less) are primarily related to housing arrangements for healthcare professionals on assignment. Most leases include one or more options to renew, with renewal terms that can extend the lease term up to 10 years. Certain leases also include options to terminate the leases within 32 years.
During 2021, the Company entered into an arrangement to terminate the lease agreement (as amended to date) for its office space in San Diego. The termination will occur in two phases: the first phase terminated the Company’s right to use certain floors effective February 28, 2022 and the second phase reduces the remaining lease term to December 31, 2024 from its original termination date of July 31, 2027. As a result of the arrangement, which was accounted for as a modification, the Company paid a termination fee of $17,000, remeasured the lease liability using its incremental borrowing rate as the discount rate, and recorded decreases to its operating lease liabilities and right-of-use assets of $27,340 during 2021. Prior to the modification, the total remaining lease payments for this office lease were $62,487. Under the modified lease terms, the total remaining lease payments (excluding the termination fee paid during the third quarter of 2021) were $9,564 as of the modification date.
In the first quarter of 2022, the Company entered into a lease agreement for an office building located in Dallas, Texas, with future undiscounted lease payments of approximately $29,514, excluding lease incentives. Because the Company does not control the underlying asset during the construction period, the Company is not considered the owner of the asset under construction for accounting purposes. The lease will commence upon completion of the construction of the office building which is expected be near the end of the first quarter of 2023. The initial term of the lease is approximately 11 years with options to renew the lease during the lease term. A right-of-use asset and lease liability will be recognized in the consolidated balance sheet in the period the lease commences.
The components of lease expense were as follows: | | | | | | | | | | | |
| Years Ended December 31, |
| 2022 | 2021 | 2020 |
| Operating lease cost | $ | 16,439 | | $ | 23,495 | | 20,176 | |
| Short-term lease cost | 5,787 | | 6,056 | | 8,702 | |
| Variable and other lease cost | 3,129 | | 2,485 | | 2,526 | |
| Net lease cost | $ | 25,355 | | $ | 32,036 | | $ | 31,404 | |
|
| | | | | |
| | | | Year Ended December 31, |
| | | | 2019 |
| Lease Cost | | | |
| Operating lease cost | | | $ | 18,725 |
|
| Short-term lease cost | | | 20,112 |
|
| Variable and other lease cost | | | 2,880 |
|
| Net lease cost | | | $ | 41,717 |
|
The maturities of lease liabilities as of December 31, 20192022 were as follows:
|
| | | |
| | Operating Leases |
| Years ending December 31, | |
| 2020 | $ | 18,651 |
|
| 2021 | 18,599 |
|
| 2022 | 18,227 |
|
| 2023 | 17,895 |
|
| 2024 | 16,711 |
|
| Thereafter | 33,666 |
|
| Total lease payments | $ | 123,749 |
|
| Less imputed interest | (18,597 | ) |
| Present value of lease liabilities | $ | 105,152 |
|
Supplemental cash flow information related to leases was as follows:
|
| | | |
| | Year Ended December 31, |
| | 2019 |
| Cash paid for amounts included in the measurement of operating lease liabilities (operating cash flows) | $ | 17,817 |
|
| Operating lease right-of-use assets obtained in exchange for lease obligations | $ | — |
|
|
| | | | |
Weighted average remaining lease term | 7 years |
|
Weighted average discount rateYear ending December 31, 2023 | 4.8$ | %8,501 | |
| Year ending December 31, 2024 | 6,695 | |
| Year ending December 31, 2025 | 2,741 | |
| Year ending December 31, 2026 | 112 | |
| Year ending December 31, 2027 | — | |
| Thereafter | — | |
| Total lease payments | 18,049 | |
| Less imputed interest | (599) | |
| Present value of lease liabilities | $ | 17,450 | |
Future minimum lease payments under noncancelable operating leases (with initial orThe weighted average remaining lease terms in excess of one year)term and discount rate as of December 31, 20182022 and 2021 were as follows: | | | | | | | | |
| December 31, |
| 2022 | 2021 |
| Weighted average remaining lease term | 2 years | 3 years |
| Weighted average discount rate | 3.1 | % | 2.6 | % |
|
| | | |
| | Operating Leases |
| Years ending December 31, | |
| 2019 | $ | 18,218 |
|
| 2020 | 18,149 |
|
| 2021 | 18,349 |
|
| 2022 | 18,144 |
|
| 2023 | 17,990 |
|
| Thereafter | 50,436 |
|
| Total minimum lease payments | $ | 141,286 |
|
Rent expense under operating leases (with initial lease terms in excess of one year) was $21,402 and $20,529 for the years ended December 31, 2018 and 2017, respectively.
(6) Balance Sheet Details
The consolidated balance sheets detail is as follows as of December 31, 2019 and 2018:follows:
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| Other current assets: | | | |
| Restricted cash and cash equivalents | $ | 37,225 | | | $ | 29,262 | |
| Income taxes receivable | 8,875 | | | — | |
| Other | 19,937 | | | 37,568 | |
| Other current assets | $ | 66,037 | | | $ | 66,830 | |
| | | |
| Prepaid expenses: | | | |
| Prepaid payroll deposits | $ | — | | | $ | 60,014 | |
| Other | 18,708 | | | 12,446 | |
| Prepaid expenses | $ | 18,708 | | | $ | 72,460 | |
| | | |
| Fixed assets: | | | |
| Furniture and equipment | $ | 51,408 | | | $ | 43,134 | |
| Software | 323,418 | | | 265,137 | |
| Leasehold improvements | 2,067 | | | 8,797 | |
| 376,893 | | | 317,068 | |
| Accumulated depreciation | (227,617) | | | (189,954) | |
| Fixed assets, net | $ | 149,276 | | | $ | 127,114 | |
| | | |
| Accounts payable and accrued expenses: | | | |
| Trade accounts payable | $ | 78,057 | | | $ | 77,325 | |
| Subcontractor payable | 295,259 | | | 261,689 | |
| Accrued expenses | 73,885 | | | 61,220 | |
| Loss contingencies | 14,638 | | | 10,400 | |
| Professional liability reserve | 7,756 | | | 7,127 | |
| Other | 6,857 | | | 7,496 | |
| Accounts payable and accrued expenses | $ | 476,452 | | | $ | 425,257 | |
| | | |
| Accrued compensation and benefits: | | | |
| Accrued payroll | $ | 63,857 | | | $ | 98,817 | |
| Accrued bonuses and commissions | 96,760 | | | 105,155 | |
| Accrued travel expense | 2,033 | | | 3,058 | |
| Health insurance reserve | 7,790 | | | 6,041 | |
| Workers compensation reserve | 12,113 | | | 12,384 | |
| Deferred compensation | 128,465 | | | 119,617 | |
| Other | 22,226 | | | 9,309 | |
| Accrued compensation and benefits | $ | 333,244 | | | $ | 354,381 | |
| | | |
| Other current liabilities: | | | |
| Income taxes payable | $ | — | | | $ | 21,162 | |
| Acquisition related liabilities | 5,070 | | | — | |
| Client deposits | 21,466 | | | 141,102 | |
| Other | 1,786 | | | 155 | |
| Other current liabilities | $ | 28,322 | | | $ | 162,419 | |
| | | |
|
| | | | | | | |
| | As of December 31, |
| | 2019 | | 2018 |
| Other current assets: | | | |
| Restricted cash and cash equivalents | $ | 18,393 |
| | $ | 26,329 |
|
| Income taxes receivable | 5,984 |
| | 799 |
|
| Other | 16,069 |
| | 12,759 |
|
| Other current assets | $ | 40,446 |
| | $ | 39,887 |
|
| | | | |
| Fixed assets: | | | |
| Furniture and equipment | $ | 37,315 |
| | $ | 34,211 |
|
| Technology and software | 191,050 |
| | 162,006 |
|
| Leasehold improvements | 9,367 |
| | 8,615 |
|
| | 237,732 |
| | 204,832 |
|
| Accumulated depreciation | (132,900 | ) | | (114,413 | ) |
| Fixed assets, net | $ | 104,832 |
| | $ | 90,419 |
|
| | | | |
| Accounts payable and accrued expenses: | | | |
| Trade accounts payable | $ | 26,985 |
| | $ | 31,537 |
|
| Subcontractor payable | 75,562 |
| | 50,892 |
|
| Accrued expenses | 36,344 |
| | 30,236 |
|
| Loss contingencies | 6,146 |
| | 24,549 |
|
| Professional liability reserve | 7,925 |
| | 8,633 |
|
| Other | 3,178 |
| | 3,756 |
|
| Accounts payable and accrued expenses | $ | 156,140 |
| | $ | 149,603 |
|
| | | | |
| Accrued compensation and benefits: | | | |
| Accrued payroll | $ | 47,381 |
| | $ | 42,571 |
|
| Accrued bonuses and commissions | 22,613 |
| | 18,021 |
|
| Accrued travel expense | 2,459 |
| | 3,417 |
|
| Health insurance reserve | 4,019 |
| | 3,559 |
|
| Workers compensation reserve | 8,782 |
| | 7,817 |
|
| Deferred compensation | 81,064 |
| | 55,720 |
|
| Other | 4,614 |
| | 3,954 |
|
| Accrued compensation and benefits | $ | 170,932 |
| | $ | 135,059 |
|
| | | | |
| Other current liabilities: | | | |
| Acquisition related liabilities | $ | 20,000 |
| | $ | 7,918 |
|
| Other | 5,302 |
| | 2,325 |
|
| Other current liabilities | $ | 25,302 |
| | $ | 10,243 |
|
| | | | |
| Other long-term liabilities: | | | |
| Workers compensation reserve | $ | 18,291 |
| | $ | 19,454 |
|
| Professional liability reserve | 34,606 |
| | 38,324 |
|
| Deferred rent | — |
| | 15,012 |
|
| Unrecognized tax benefits | 5,431 |
| | 4,862 |
|
| Other | 3,485 |
| | 876 |
|
| Other long-term liabilities | $ | 61,813 |
| | $ | 78,528 |
|
| | | | | | | | | | | |
| | December 31, |
| | 2022 | | 2021 |
| Other long-term liabilities: | | | |
| Workers compensation reserve | $ | 23,841 | | | $ | 24,130 | |
| Professional liability reserve | 36,214 | | | 34,544 | |
| | | |
| Unrecognized tax benefits | 8,372 | | | 4,633 | |
| Other | 42,779 | | | 33,682 | |
| Other long-term liabilities | $ | 111,206 | | | $ | 96,989 | |
(7) Income Taxes
The provision for income taxes from operations for the years ended December 31, 2019, 20182022, 2021 and 20172020 consists of the following:
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Current income taxes: | | | | | |
| Federal | $ | 25,255 |
| | $ | 33,564 |
| | $ | 45,899 |
|
| State | 8,332 |
| | 12,047 |
| | 8,699 |
|
| Total | 33,587 |
| | 45,611 |
| | 54,598 |
|
| Deferred income taxes: | | | | | |
| Federal | 625 |
| | (1,372 | ) | | 1,754 |
|
| State | 288 |
| | 705 |
| | 3,853 |
|
| Total | 913 |
| | (667 | ) | | 5,607 |
|
| Provision for income taxes from operations | $ | 34,500 |
| | $ | 44,944 |
| | $ | 60,205 |
|
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| Current income taxes: | | | | | |
| Federal | $ | 145,217 | | | $ | 98,795 | | | $ | 32,673 | |
| State | 42,051 | | | 34,025 | | | 9,813 | |
| Total | 187,268 | | | 132,820 | | | 42,486 | |
| Deferred income taxes: | | | | | |
| Federal | (20,173) | | | (12,992) | | | (15,092) | |
| State | (4,442) | | | (3,295) | | | (6,536) | |
| Total | (24,615) | | | (16,287) | | | (21,628) | |
| Provision for income taxes from operations | $ | 162,653 | | | $ | 116,533 | | | $ | 20,858 | |
The Company’s income tax expense differs from the amount that would have resulted from applying the federal statutory rate of 21% for both 20192022, 2021 and 2018 and 35% for 20172020 to pretax income from operations because of the effect of the following items during the years ended December 31, 2019, 20182022, 2021 and 2017:2020:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| Tax expense at federal statutory rate | $ | 127,390 | | | $ | 93,223 | | | $ | 19,220 | |
| State taxes, net of federal benefit | 29,711 | | | 23,990 | | | 4,161 | |
| Non-deductible expenses | — | | | — | | | 3,621 | |
| Share-based compensation | (2,383) | | | (1,460) | | | (2,311) | |
| | | | | |
| Unrecognized tax benefit | 3,245 | | | (680) | | | (78) | |
| Other, net | 4,690 | | | 1,460 | | | (3,755) | |
| Income tax expense from operations | $ | 162,653 | | | $ | 116,533 | | | $ | 20,858 | |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Tax expense at federal statutory rate | $ | 31,253 |
| | $ | 39,272 |
| | $ | 67,467 |
|
| State taxes, net of federal benefit | 6,810 |
| | 9,902 |
| | 7,880 |
|
| Non-deductible expenses | 3,840 |
| | 2,956 |
| | 3,849 |
|
| Share-based compensation | (4,770 | ) | | (4,343 | ) | | (4,889 | ) |
| Corporate tax rate change impact on deferred income taxes | — |
| | — |
| | (14,039 | ) |
| Unrecognized tax benefit | (207 | ) | | 413 |
| | (1,175 | ) |
| Other, net | (2,426 | ) | | (3,256 | ) | | 1,112 |
|
| Income tax expense from operations | $ | 34,500 |
| | $ | 44,944 |
| | $ | 60,205 |
|
58
The adoption of ASU 2016-09, “Stock Compensation - Improvements to Employee Share-Based Payment Accounting” in the first quarter of 2017, resulted in recording reductions in income tax expense of $5,915, $5,401, and $5,449 for the years ended December 31, 2019, 2018, and 2017. Prior to adoption, this amount would have been recorded as additional paid-in capital.
The tax effects of temporary differences that give rise to significant portions of deferred tax assets and liabilities are presented below as of the years ended December 31, 20192022 and 2021:
and 2018: | | | | | | | | | | | |
| | December 31, |
| 2022 | | 2021 |
| Deferred tax assets: | | | |
| Share-based compensation | $ | 7,556 | | | $ | 6,954 | |
| Deferred compensation | 32,962 | | | 30,513 | |
| Accrued bonus | 22,437 | | | 24,636 | |
| Accrued payroll taxes | — | | | 6,427 | |
| Accrued expenses | 30,178 | | | 19,899 | |
| | | |
| Operating lease liabilities | 4,532 | | | 6,472 | |
| Net operating losses | 5,803 | | | 8,815 | |
| Loss contingencies | 10,857 | | | 8,528 | |
| Workers compensation insurance | 6,661 | | | 6,476 | |
| Other | 3,749 | | | 2,731 | |
| Total deferred tax assets | $ | 124,735 | | | $ | 121,451 | |
| Deferred tax liabilities: | | | |
| Intangibles | $ | (114,967) | | | $ | (126,535) | |
| Fixed assets | (21,739) | | | (28,824) | |
| Operating lease right-of-use assets | (4,228) | | | (7,269) | |
| Other | (6,514) | | | (6,637) | |
| Total deferred tax liabilities | $ | (147,448) | | | $ | (169,265) | |
| | | |
| Net deferred tax liabilities | $ | (22,713) | | | $ | (47,814) | |
|
| | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 |
| Deferred tax assets: | | | |
| Stock compensation | $ | 5,848 |
| | $ | 6,606 |
|
| Deferred compensation | 20,564 |
| | 13,869 |
|
| Accrued expenses | 18,572 |
| | 21,643 |
|
| Deferred rent | — |
| | 4,000 |
|
| Operating lease liabilities | 27,206 |
| | — |
|
| Net operating losses | 3,448 |
| | 1,846 |
|
| Other | 570 |
| | 1,030 |
|
| Total deferred tax assets | $ | 76,208 |
| | $ | 48,994 |
|
| Deferred tax liabilities: | | | |
| Intangibles | $ | (71,646 | ) | | $ | (51,493 | ) |
| Fixed assets | (22,896 | ) | | (19,802 | ) |
| Operating lease right-of-use assets | (23,234 | ) | | — |
|
| Other | (5,050 | ) | | (5,025 | ) |
| Total deferred tax liabilities | $ | (122,826 | ) | | $ | (76,320 | ) |
| Valuation allowance | $ | — |
| | $ | — |
|
| Net deferred tax liabilities | $ | (46,618 | ) | | $ | (27,326 | ) |
In the current year, the Company recognized deferred tax assets and deferred tax liabilities associated with operating lease liabilities and right-of-use assets, respectively, in accordance with ASU 2016-02. The Company also derecognized existing deferred rent liabilities, but consistent with its adoption of ASU 2016-02 and the optional transition method, there has been no change to the prior year deferred tax assets related to deferred rent liabilities. The Company’s adoption of ASU 2016-02 is more fully described in Note (1), “Summary of Significant Accounting Policies.”
In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management believes it is more likely than not that the Company will realize the benefits of its deferred tax assets.
The amount of federal net operating losses (“NOL”) carryforward that is available for use in years subsequent to December 31, 20192022 is $16,418,$27,321, primarily related to the Stratus Video and Synzi acquisitions, which is setbegins to expire by 2029.2030. The amount of state NOL carryforward that is available for use in years subsequent to December 31, 20192022 is not material.$617, primarily related to the Stratus Video and Synzi acquisitions, which expires in 2039. The Stratus Video and Synzi acquisitions are more fully described in Note (2), “Acquisitions.”
A summary of the changes in the amount of unrecognized tax benefits (excluding interest and penalties) for 2019, 20182022, 2021 and 20172020 is as follows:
| | | | | | | | | | | | | | | | | |
| 2022 | | 2021 | | 2020 |
| Beginning balance of unrecognized tax benefits | $ | 4,067 | | | $ | 4,916 | | | $ | 4,937 | |
| Additions based on tax positions related to the current year | 1,464 | | | 504 | | | 667 | |
| Additions based on tax positions of prior years | 1,966 | | | — | | | 255 | |
| Reductions for tax positions of prior years | — | | | (301) | | | — | |
| Reductions due to lapse of applicable statute of limitation | (517) | | | (1,052) | | | (943) | |
| | | | | |
| Ending balance of unrecognized tax benefits | $ | 6,980 | | | $ | 4,067 | | | $ | 4,916 | |
|
| | | | | | | | | | | |
| | 2019 | | 2018 | | 2017 |
| Beginning balance of unrecognized tax benefits | $ | 4,393 |
| | $ | 4,663 |
| | $ | 6,842 |
|
| Additions based on tax positions related to the current year | 588 |
| | 475 |
| | 513 |
|
| Additions based on tax positions of prior years | 990 |
| | 753 |
| | 731 |
|
| Reductions due to lapse of applicable statute of limitation | (1,034 | ) | | (547 | ) | | (949 | ) |
| Settlements | — |
| | (951 | ) | | (2,474 | ) |
| Ending balance of unrecognized tax benefits | $ | 4,937 |
| | $ | 4,393 |
| | $ | 4,663 |
|
At December 31, 2019,2022, if recognized, approximately $4,695$7,181 net of $736$1,191 of temporary differences would affect the effective tax rate (including interest and penalties).
The Company recognizes interest related to unrecognized tax benefits in income tax expense. The Company had approximately $493, $467$1,390, $564 and $606$530 of accrued interest related to unrecognized tax benefits at December 31, 2019, 20182022, 2021 and 2017,2020, respectively. The amount of interest expense (benefit) recognized in 2019, 20182022, 2021 and 20172020 was $26, $(139)$826, $34 and $(1,016),$37, respectively.
The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. With few exceptions, as of December 31, 2019,2022, the Company is no longer subject to state, local or foreign examinations by tax authorities for tax years before 2010,2011, and the Company is no longer subject to U.S. federal income or payroll tax examinations for tax years before 2016. The IRS conducted, completed, and settled audits of the Company’s 2011-2012 and 2013 tax years related to income and employment tax issues for the Company’s treatment of certain non-taxable per diem allowances and travel benefits in November 2017 and May 2018, respectively. Prior to the Company’s acquisition of Advanced, on June 14, 2019, Advanced was under an IRS audit for the years 2011-2013 for various payroll tax matters related to the treatment of certain non-taxable per diem allowances and travel benefits. This audit was completed and an assessment was issued for $8,300 in July 2018. Advanced filed a protest in August 2018 and had their first IRS Appeals meeting in May 2019. The Company received a final determination from the IRS in November 2019. The Company is indemnified for the potential contingent liability by Advanced. The Advanced acquisition is more fully described in Note (2), “Acquisitions.”
The Company believes its reserveliability for unrecognized tax benefits and contingent tax issues is adequate with respect to all open years. Notwithstanding the foregoing, the Company could adjust its provision for income taxes and contingent tax liability based on future developments.
Tax Cuts and JobsCARES Act
On December 22, 2017,March 27, 2020, the U.S. government enacted comprehensive tax legislation commonly referred to as the Tax CutsCoronavirus Aid, Relief, and JobsEconomic Security Act (the “Tax“CARES Act”). The Tax Act makes broad was enacted and complex changessigned into law in response to the U.S.COVID-19 pandemic. Among other things, the CARES Act contains significant business tax code,provisions, including but not limited to, reducing the U.S. federal corporate tax rate from 35% to 21%.a deferral of payment of employer payroll taxes and an employer retention credit for employer payroll taxes.
The Tax Act changes that affected the Company in 2017 are primarily tax rate changes on certain deferred tax assets (“DTAs”) and deferred tax liabilities (“DTLs”). The Tax Act also establishes new tax laws that will affect 2018 and beyond, including, but not limited to, (1) reductionpayment of the U.S. federal corporate tax rate; (2)employer’s share of payroll taxes of $48,452. Approximately half of such taxes was paid during the repealfourth quarter of 2021 and the domestic production activity deduction; (3) limitations onremaining balance was paid during the deductibilityfourth quarter of certain executive compensation; and (4) limitations on various entertainment and meals deductions.
The SEC staff issued Staff Accounting Bulletin No. 118 (“SAB 118”), which provides guidance on accounting for the tax effects of the Tax Act. SAB 118 provides a measurement period that should not extend beyond one year from the Tax Act enactment date for companies to complete the accounting under ASC 740. To the extent that a company’s accounting for certain income tax effects of the Tax Act is incomplete but it is able to determine a reasonable estimate, it must record a provisional estimate in the financial statements.
The Company’s accounting for the following elements of the Tax Act was incomplete as of the year ended December 31, 2017.2022. The Company was able to make reasonable estimatesclaimed an employee retention employment tax credit of executive compensation$1,756 during 2020 and accounting methods and, therefore, recorded provisional adjustments for these items. Final adjustments were made in the quarter ended December 31, 2018 which were not material and the accounting for these elements is now considered complete.2021.
(8) Notes Payable and Credit Agreement
(a) The Company’s Credit Agreement and Related Credit Facilities
On February 9, 2018, the Company entered into the New Credit Agreement with several lenders to provide for the $400,000 Senior Credit Facility to replace its then-existing credit facilities. The Senior Credit Facility includes a $50,000 sublimit for the issuance of letters of credit and a $50,000 sublimit for swingline loans. On June 14, 2019, the Company entered into the first amendment to the New Credit Agreement (the “First Amendment”) to provide for, among other things, a $150,000 secured term loan credit facility (the “Term Loan”). The First Amendment (together with the New Credit Agreement, the “Amended Credit Agreement”) also extended the maturity date of the Senior Credit Facility to be coterminous with the Term
Loan. The obligations of the Company under the Amended Credit Agreement are secured by substantiallyfully repaid all of the assets of the Company. The Company used the proceeds fromamounts under the Term Loan together with a drawdown of a portion of the Senior Credit Facility, to complete its acquisition of Advanced, as more fully described in Note (2), “Acquisitions.”2019.
Borrowings under the Senior Credit Facility and the Term Loan (together, the “Credit Facilities”) bear interest at floating rates, at the Company’s option, based upon either LIBOR plus a spread of 1.00% to 2.00% or a base rate plus a spread of 0.00% to 1.00%. The applicable spread is determined quarterly based upon the Company’s consolidated net leverage ratio. The Term Loan is subject to amortization of principal of 2.50% per year for the first year of the term and 5.00% per year thereafter, payable in equal quarterly installments. The Senior Credit Facility is available for working capital, capital expenditures, permitted acquisitions and general corporate purposes. The maturity date of the Credit Facilities is June 14, 2024.
In connection with the First Amendment, the Company incurred $875 in fees paid to lenders and other third parties, which were capitalized and are amortized to interest expense over the term of the Credit Facilities. In addition, $1,702 of unamortized financing fees incurred in connection with obtaining the New Credit Agreement will continue to be amortized to interest expense over the term of the Credit Facilities.
On February 14, 2020, the Company entered into the second amendment to the New Credit Agreement (the “Second Amendment”) to provide for, among other things, a $250,000 secured term loan credit facility (the “Additional Term Loan”). The Second Amendment also extended the maturity date of the Senior Credit Facility to beFebruary 14, 2025, which was coterminous with the Additional Term Loan. The Company used the proceeds from the Additional Term Loan, together with a drawdown of a portion of the Senior Credit Facility, to complete its acquisition of Stratus Video, as more fully described in Note (14)(2), “Subsequent Events.“Acquisitions.” The Additional Term Loan iswas subject to amortization of principal of 2.50% per year for the first year of the term and 5.00% per year thereafter, payable in equal quarterly installments. The Company fully repaid all amounts under the Additional Term Loan in the first quarter of 2021.
In connection with the Second Amendment, the Company incurred $4,144 in fees paid to lenders and other third parties, which were capitalized and are being amortized to interest expense over the term of the Senior Credit Facility. In addition, $1,681 of unamortized financing fees incurred in connection with obtaining the New Credit Agreement and First Amendment will continue to be amortized to interest expense over the term of the Senior Credit Facility.
On February 10, 2023, the Company entered into the third amendment to the New Credit Agreement (the “Third Amendment”). The Third Amendment (together with the New Credit Agreement, the First Amendment and the Second Amendment, collectively, the “Amended Credit Agreement”) provides for, among other things, the following: (i) an extension of the maturity date of the Additional Term Loan isSenior Credit Facility to February 14, 2025.
At December 31, 2019, with $17,445 of outstanding letters of credit collateralized by10, 2028, (ii) an increase to the Senior Credit Facility to $750,000, and (iii) a transition from LIBOR to a SOFR-based interest rate. The obligations of the Company under the Amended Credit Agreement are secured by substantially all of the assets of the Company.
Borrowings under the Senior Credit Facility bear interest at floating rates, at the Company’s option, based upon either SOFR plus a spread of 1.00% to 1.75% or a base rate plus a spread of 0.00% to 0.75%. The applicable spread is determined quarterly based upon the Company’s consolidated net leverage ratio (as calculated per the Amended Credit Agreement). The Senior Credit Facility, which includes a $125,000 sublimit for the issuance of letters of credit and a $75,000 sublimit for swingline loans, is available for working capital, capital expenditures, permitted acquisitions and general corporate purposes. At February 10, 2023, $45,000 was drawn in the ordinary course of business and there was $382,555$683,592 of available credit under the Senior Credit Facility.
(b) The Company’s 4.625% Senior Notes Due 2027
On October 1, 2019,August 13, 2020, the Company completed the issuance and sale of an additional $200,000 aggregate principal amount of 4.625% senior notes due 2027 (the “New 2027 Notes”), which were issued at a price of 101.000% of the aggregate principal amount. The New 2027 Notes were issued pursuant to the existing indenture, dated as of October 1, 2019, under which the Company previously issued $300,000 aggregate principal amount of 4.625% senior notes due 2027 (the “Existing 2027 Notes” and together with the New 2027 Notes, which mature on October 1, 2027. Interest on the “2027 Notes”). The New 2027 Notes are being treated as a single series with the Existing 2027 Notes and have the same terms (other than issue price, issue date and the date from which interest accrues) as those of the Existing 2027 Notes. The 2027 Notes are unsecured obligations of the Company and the interest is fixed at 4.625% and payable semi-annually in arrears on April 1 and October 1 of each year, commencing October 1, 2020 with respect to the New 2027 Notes. The aggregate principal amount of the 2027 Notes matures on October 1, 2027.
With proceeds from the New 2027 Notes and cash on hand, the Company (1) repaid $200,000 of its indebtedness under the Additional Term Loan and (2) paid $2,620 of fees and expenses related to the issuance of the New 2027 Notes, which were recorded as a reduction of the notes payable balance and are being amortized to interest expense over the remaining term of the 2027 Notes.
(c) The Company’s 4.000% Senior Notes Due 2029
On October 20, 2020, the Company completed the issuance of $350,000 aggregate principal amount of the 2029 Notes, which mature on April 1, 2020.15, 2029. The 2029 Notes are unsecured obligations of the Company and the interest is fixed at 4.000% and payable semi-annually in arrears on April 15 and October 15 of each year, commencing April 15, 2021. With the proceeds from the 20272029 Notes and cash generated from operations, the Company (1) redeemed all of its outstanding $325,000 aggregate principal amount of the 5.125% senior notes due 2024 (the “2024 Notes”) on November 4, 2020, (2) paid $9,857 consisting of the associated redemption premium and accrued and unpaid interest on the 2024 Notes, (3) repaid $149,063 of existing Term Loan indebtedness, (2) repaid $146,000$40,000 under the Senior Credit Facility and (3) paid $4,348 of(4) incurred $4,744 in fees and expenses related to the issuance and sale of the 20272029 Notes, which were recorded as a reduction of the notes payable balance and are being amortized to interest expense over the term of the 20272029 Notes.
The indenture governing In addition, the 2027 Notes contains covenants that, among other things, restrictCompany wrote off $2,992 of unamortized financing fees incurred in connection with the abilityissuance of the Company to:2024 Notes, which was recognized in interest expense, net, and other in the consolidated statements of comprehensive income for the year ended December 31, 2020.
•sell assets,
•pay dividends or make other distributions on capital stock, make payments in respect of subordinated indebtedness or make other restricted payments,
•make certain investments,
•incur or guarantee additional indebtedness or issue preferred stock,
•create certain liens,
•enter into agreements that restrict dividends or other payments from restricted subsidiaries,
•consolidate, merge or transfer all or substantially all of its assets,
•engage in transactions with affiliates, and
•create unrestricted subsidiaries.
These covenants are subject to a number of important exceptions and qualifications. The indenture governing the 2027 Notes contains affirmative covenants and events of default that are customary for indentures governing high yield securities. The 2027 Notes and the related guarantees thereof are not subject to any registration rights agreements.
(c)(d) Debt Balances
Outstanding debt balances as of December 31, 20192022 and 20182021 consisted of the following: |
| | | | | | | |
| | As of December 31, |
| | 2019 | | 2018 |
| Senior Credit Facility | — |
| | 120,000 |
|
| 2024 Notes | 325,000 |
| | 325,000 |
|
| 2027 Notes | 300,000 |
| | — |
|
| Total debt outstanding | 625,000 |
| | 445,000 |
|
| Less unamortized fees | (7,841 | ) | | (4,393 | ) |
| Long-term portion of notes payable | $ | 617,159 |
| | $ | 440,607 |
|
| | | | | | | | | | | |
| As of December 31, |
| 2022 | | 2021 |
| | | |
| | | |
| | | |
| 2027 Notes | $ | 500,000 | | | $ | 500,000 | |
| 2029 Notes | 350,000 | | | 350,000 | |
| Total debt outstanding | 850,000 | | | 850,000 | |
| Less unamortized fees and premium | (6,495) | | | (7,678) | |
| | | |
| Long-term portion of notes payable | $ | 843,505 | | | $ | 842,322 | |
The 2024 Notes were issued in October 2016 and have a fixed rate of 5.125%. The aggregate principal amounts of the 2024 Notes and the 2027 Notes mature on October 1, 2024 and October 1, 2027, respectively.
(d)(e) Letters of Credit
At December 31, 2019,2022, the Company maintained outstanding standby letters of credit totaling $19,752$21,962 as collateral in relation to its workers compensation insurance agreements and a corporate office lease agreement. Of the $19,752$21,962 outstanding letters of credit, the Company has collateralized $2,307$554 in cash and cash equivalents and the remaining $17,445$21,408 is collateralized by the Senior Credit Facility. Outstanding standby letters of credit at December 31, 20182021 totaled $17,632.$23,562.
(9) Retirement Plans
The Company maintains the AMN Services 401(k) Retirement Savings Plan (the “AMN Plan”), which the Company believes complies with the IRC Section 401(k) provisions. The AMN Plan covers all employees that meet certain age and other eligibility requirements. An annualA discretionary matching contribution is determined by the Compensation and Stock Plan Committee of the Board of DirectorsCompany each year. Employer contribution expenses incurred under the AMN Plan were $5,516, $5,250$31,409, $13,157 and $4,486$4,256 for the years ended December 31, 2019, 20182022, 2021 and 2017,
2020, respectively. Employer contribution expenses for the year ended December 31, 2022 include one-time contributions and a temporary increase to the discretionary matching contribution for a portion of the year.
The Company has a deferred compensation plan for certain executives and key employees (the “Plan”). The Plan is not intended to be tax qualified and is an unfunded plan. The Plan is composed of deferred compensation and all related income and losses attributable thereto. Discretionary matching contributions to the Plan are made that vest incrementally so that the employee is fully vested in the match following five years of employment with the Company. Under the Plan, participants can defer up to 80% of their base salary, 90% of their bonusvariable compensation and 100% of their vested RSUs or vested PRSUs. An annualA discretionary matching contribution is determined by the Compensation and Stock Plan Committee of the Board of DirectorsCompany each year. Employer contributions under the Plan were $5,551, $4,708$18,023, $8,951 and $4,545$2,845 for the years ended December 31, 2019, 20182022, 2021 and 2017,2020, respectively. Employer contribution expenses for the year ended December 31, 2022 include one-time contributions and a temporary increase to the discretionary matching contribution for a portion of the year.. In connection with the administration of the Plan, the Company has purchased company-owned life insurance policies insuring the lives of certain officers and key employees. The cash surrender value of these policies was $79,515$117,139 and $55,028$115,095 at December 31, 20192022 and 2018,2021, respectively. The cash surrender value of these insurance policies is included in other assets in the consolidated balance sheets.
(10) Capital Stock
(a) Preferred Stock
The Company has 10,000 shares of preferred stock authorized for issuance in one or more series (including preferred stock designated as Series A Conditional Convertible Preferred Stock), at a par value of $0.01$0.01 per share. At December 31, 20192022 and 2021, no and 2018, 0 shares of preferred stock were outstanding.
(b) Treasury Stock
On November 1, 2016, the Company’s Boardboard of Directorsdirectors approved a share repurchase program under which the Company may repurchase up to $150,000 of its outstanding common stock. On November 10, 2021, February 17, 2022 and June 15, 2022 the Company announced increases to the share repurchase program totaling $700,000 for a total of $850,000 of repurchase authorization as of December 31, 2022. The amount and timing of the purchases will depend on a number of factors including the price of the Company’s shares, trading volume, Company performance, Company liquidity, general economic and market conditions and other factors that the Company’s management believes are relevant. The share repurchase program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time.
The Company intends to make all repurchases and to administer the plan in accordance with applicable laws and regulatory guidelines, including Rule 10b-18 of the Exchange Act, and in compliance with its debt instruments. Repurchases
may be made from cash on hand, free cash flow generated from the Company’s business or from the Company’s Senior Credit Facility. Repurchases may be made from time to time through open market purchases or privately negotiated transactions. Repurchases may also be made pursuant to one or more plans established pursuant to Rule 10b5-1 under the Exchange Act whichthat would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insiderthe Company’s securities trading restrictions.policy.
During 2019,the year ended December 31, 2022, the Company repurchased 3955,644 shares of its common stock at an average price of $47.30$102.16 per share excluding broker’s fees, resulting in an aggregate purchase price of $18,705.$576,767. During 2018,the year ended December 31, 2021, the Company repurchased 1,23625 shares of its common stock at an average price of $54.17$108.97 per share excluding broker’s fees, resulting in an aggregate purchase price of $67,013.$2,688. During the year ended December 31, 2020, the Company did not repurchase any shares of its common stock.
On February 7, 2023, the Company’s board of directors approved an increase to the share repurchase program of up to an additional $500,000 of repurchases of its outstanding common stock. Since December 31, 2022, and through February 22, 2023, the Company has repurchased 923 shares of its common stock at an average price of $108.40 per share excluding broker’s fees, resulting in an aggregate purchase price of $100,028.
(11) Share-Based Compensation
(a) Equity Award Plans
Equity Plan
The Company established the AMN Healthcare Equity Plan (as amended or amended and restated from time to time, the “Equity Plan”), which has been approved by the Company’s stockholders. At the time of the Equity Plan’s original adoption in 2006, equity awards, based on the Company’s common stock, could be issued for a maximum of 723 shares plus the number of shares of common stock underlying any grants under the Stock Option Plan (under which there are no longer any outstanding awards) that were forfeited, canceled or terminated (other than by exercise) from and after the effective date of the Equity Plan. Pursuant to the Equity Plan, stock options and stock
appreciation rights (“SARs”) granted havehad a maximum contractual life of ten years and have exercise prices that will be determined at the time of grant, which will be no less than fair market value of the underlying common stock on the date of grant.years. Any shares to be issued under the Equity Plan will be issued by the Company from authorized but unissued common stock or shares of common stock reacquired by the Company. On April 18, 2007, April 9, 2009, April 18, 2012 and April 19, 2017, the Company amended the Equity Plan, with stockholder approval, to increase the numberAs of shares authorized under the Equity Plan by 3,000, 1,850, 2,400 and 1,400, respectively. At December 31, 20192022 and 2018, 2,9302021, 2,414 and 3,0512,548 shares of common stock were reserved for future grants under the Equity Plan, respectively.
Other Plans
From time to time, the Company grants, and has granted, key employees inducement awards outside of the Equity Plan (collectively, “Other Plans”), which have recently consisted of SARs, options or RSUs. Although these awards are not made under the Equity Plan, the key terms and conditions of the grant are typically the same as equity awards made under the Equity Plan.
Additionally, in February 2014, the Company established the 2014 Employment Inducement Plan, which reserves for issuance 200 shares of common stock for prospective employees of the Company. As of December 31, 2019, 1752022, 181 shares of common stock remained available for future grants under the 2014 Employment Inducement Plan.
(b) Share-Based Compensation
Restricted Stock Units
RSUs and PRSUs (subject to a PRSUperformance conditions being earned)achieved) granted under the Equity Plan generally entitle the holder to receive, at the end of a vesting period, a specified number of shares of the Company’s common stock. The following table summarizes RSU and PRSU activity for non-vested awards for the years ended December 31, 2019, 20182022, 2021 and 2020:2017:
|
| | | | | | |
| | Number of Shares | | Weighted Average Grant Date Fair Value per Share |
| Unvested at January 1, 2016 | 1,075 |
| | $ | 22.14 |
|
| Granted—RSUs | 166 |
| | $ | 40.73 |
|
| Granted—PRSUs (1) | 317 |
| | $ | 27.51 |
|
| Vested | (637 | ) | | $ | 16.88 |
|
| Canceled/forfeited/expired | (66 | ) | | $ | 30.02 |
|
| Unvested at December 31, 2017 | 855 |
| | $ | 30.98 |
|
| Granted—RSUs | 279 |
| | $ | 53.73 |
|
| Granted—PRSUs (1) | 266 |
| | $ | 35.28 |
|
| Vested | (499 | ) | | $ | 23.04 |
|
| Canceled/forfeited/expired | (83 | ) | | $ | 42.32 |
|
| Unvested at December 31, 2018 | 818 |
| | $ | 43.84 |
|
| Granted—RSUs | 191 |
| | $ | 54.99 |
|
| Granted—PRSUs (1) | 201 |
| | $ | 48.32 |
|
| Vested | (400 | ) | | $ | 35.46 |
|
| Canceled/forfeited/expired | (52 | ) | | $ | 41.09 |
|
| Unvested at December 31, 2019 | 758 |
| | $ | 52.45 |
|
| | | | | | | | | | | |
| Number of Shares | | Weighted Average
Grant Date
Fair Value per
Share |
| Unvested at January 1, 2019 | 758 | | | $ | 52.45 | |
| Granted—RSUs | 271 | | | $ | 60.02 | |
Granted—PRSUs (1) | 155 | | | $ | 64.59 | |
| Vested | (283) | | | $ | 49.18 | |
| Canceled/forfeited | (184) | | | $ | 53.84 | |
| Unvested at December 31, 2020 | 717 | | | $ | 58.88 | |
| Granted—RSUs | 290 | | | $ | 85.30 | |
Granted—PRSUs (1) | 186 | | | $ | 97.46 | |
| Vested | (280) | | | $ | 56.05 | |
| Canceled/forfeited | (158) | | | $ | 65.69 | |
| Unvested at December 31, 2021 | 755 | | | $ | 78.13 | |
| Granted—RSUs | 200 | | | $ | 109.66 | |
Granted—PRSUs (1) | 190 | | | $ | 92.65 | |
| Vested | (405) | | | $ | 72.43 | |
| Canceled/forfeited | (75) | | | $ | 82.13 | |
| Unvested at December 31, 2022 | 665 | | | $ | 94.79 | |
(1) PRSUs granted included both the PRSUs granted during the year at the target amount and the additional shares of prior period granted PRSUs vested during the year in excess of the target shares.
As of December 31, 2019,2022, there was $14,762$28,293 unrecognized compensation cost related to non-vestedunvested RSUs and PRSUs. The Company expects to recognize such cost over a period of 1.61.8 years. As of December 31, 20192022 and 2018,2021, the aggregate intrinsic value of the RSUs and PRSUs outstanding was $47,242$68,348 and $46,336,$92,346, respectively.
Stock Options and SARs
Stock options entitle the holder to purchase, at the end of a vesting period, a specified number of shares of the Company’s common stock at a price per share set at the date of grant. SARsStock appreciation rights (“SARs”) entitle the holder to receive, at the end of a vesting period, shares of the Company’s common stock equal in value to the difference between the exercise price of the SAR, which is set at the date of grant, and the fair market value of the Company’s common stock on the date of exercise.
A summary of stock option and SAR activity under the Equity Plan and Other Plans areis as follows:
|
| | | | | | |
| | Number Outstanding | | Weighted- Average Exercise Price per Share |
| Outstanding at December 31, 2016 | 286 |
| | $ | 9.67 |
|
| Granted | — |
| | $ | — |
|
| Exercised | (24 | ) | | $ | 18.85 |
|
| Canceled/forfeited/expired | — |
| | $ | — |
|
| Outstanding at December 31, 2017 | 262 |
| | $ | 8.81 |
|
| Granted | — |
| | $ | — |
|
| Exercised | (35 | ) | | $ | 10.12 |
|
| Canceled/forfeited/expired | — |
| | $ | — |
|
| Outstanding at December 31, 2018 | 227 |
| | $ | 8.61 |
|
| Granted | — |
| | $ | — |
|
| Exercised | (215 | ) | | $ | 8.67 |
|
| Canceled/forfeited/expired | — |
| | $ | — |
|
| Outstanding at December 31, 2019 | 12 |
| | $ | 7.51 |
|
| Vested and expected to vest at December 31, 2019 | 12 |
| | $ | 7.51 |
|
| Exercisable at December 31, 2019 | 12 |
| | $ | 7.51 |
|
| | | | | | | | | | | | | | | |
| | | |
| | | | | | Number
Outstanding | | Weighted-
Average
Exercise Price
per Share |
| Outstanding at December 31, 2019 | | | | | 12 | | | $ | 7.51 | |
| Granted | | | | | — | | | $ | — | |
| Exercised | | | | | (12) | | | $ | 7.51 | |
| Canceled/forfeited/expired | | | | | — | | | $ | — | |
| Outstanding at December 31, 2020 | | | | | — | | | $ | — | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| | | | | | | |
| Vested and expected to vest at December 31, 2020 | | | | | — | | | $ | — | |
| Exercisable at December 31, 2020 | | | | | — | | | $ | — | |
As of December 31, 2019, all SARs were fully vested, and2020, there were 0no stock options or SARs outstanding. The total intrinsic value of stock options and SARs exercised was $9,177, $1,535 and $555$828 for 2019, 2018 and 2017, respectively. At December 31, 2019 and 2018, the total intrinsic value of stock options and SARs outstanding and exercisable was $645 and $10,841, respectively.2020.
Share-Based Compensation
Total share-based compensation expense for the years ended December 31, 2019, 20182022, 2021 and 20172020 was as follows:
| | | | | | | | | | | | | | | | | |
| | Years Ended December 31, |
| | 2022 | | 2021 | | 2020 |
| Share-based employee compensation, before tax | $ | 30,066 | | | $ | 25,217 | | | $ | 20,465 | |
| Related income tax benefits | (7,817) | | | (6,556) | | | (5,321) | |
| Share-based employee compensation, net of tax | $ | 22,249 | | | $ | 18,661 | | | $ | 15,144 | |
|
| | | | | | | | | | | |
| | Years Ended December 31, |
| | 2019 | | 2018 | | 2017 |
| Share-based employee compensation, before tax | $ | 16,241 |
| | $ | 10,815 |
| | $ | 10,237 |
|
| Related income tax benefits | (4,223 | ) | | (2,812 | ) | | (3,985 | ) |
| Share-based employee compensation, net of tax | $ | 12,018 |
| | $ | 8,003 |
| | $ | 6,252 |
|
(12) Commitments and Contingencies
From time to time, the Company is involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. These matters typically relate to professional liability, tax, compensation, contract, competitor disputes and employee-related matters and include individual and class action lawsuits, as well as inquiries and investigations by governmental agencies regarding the Company’s employment and compensation practices. Additionally, some of the Company’s clients may also become subject to claims, governmental inquiries and investigations, and legal actions relating to services provided by the Company’s healthcare professionals. Depending upon the particular facts and circumstances, the Company may also be subject to indemnification obligations under its contracts with such clients relating to these matters. The Company accrues for contingencies and records a liability when management believes an adverse outcome from a loss contingency is both probable and the amount, or a range, can be reasonably estimated. Significant judgment is required to determine both probability of loss and the estimated amount. The Company reviews its loss contingencies at least quarterly and adjusts its accruals and/or disclosures to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, or other new information, as deemed necessary. The most significant matters for which the Company has established loss contingencies are class actions related to wage and hour claims under California and Federal law. Specifically, among other claims in these lawsuits, it is alleged that employees were not afforded required breaks or compensated for all time worked, employees’ wage statements are not sufficiently clear, and certain expense reimbursements should be considered wages and included in the regular rate of pay for purposes of calculating overtime rates.
On May 26, 2016, former travel nurse Verna Maxwell Clarke filed a complaint against AMN Services, LLC, in California Superior Court in Los Angeles County. The Company believesremoved the case to the United States District Court for the Central District of California (Case No. 2:16-cv-04132-DSF-KS) (the “Clarke Matter”). The complaint asserts that, due to the Company’s per diem adjustment practices, traveling nurses’ per diem benefits should be included in their regular rate of pay for the purposes of calculating their overtime compensation. On June 26, 2018, the district court denied the plaintiffs’ Motion for Summary Judgment in its entirety, and granted the Company’s Motion for Summary Judgment with respect to the plaintiffs’ per diem and overtime claims. The plaintiffs filed an appeal of the judgment relating to the per diem claims with the Ninth Circuit Court of Appeals (the “Ninth Circuit”). On February 8, 2021, the Ninth Circuit issued an opinion that reversed the district court’s granting of the Company’s Motion for Summary Judgment and remanded the matter to the district court instructing the district to enter partial summary judgment in favor of the plaintiffs. On August 26, 2021, the Company filed a Petition for Writ of Certiorari in the United States Supreme Court seeking review of the Ninth Circuit’s decision, which was denied on December 13, 2021. This case is proceeding in the United States District Court.
On May 2, 2019, former travel nurse Sara Woehrle filed a complaint against AMN Services, LLC, and Providence Health System – Southern California in California Superior Court in Los Angeles County. The Company removed the case to the United States District Court for the Central District of California (Case No. 2:19-cv-05282 DSF-KS). The complaint asserts that, due to the Company’s per diem adjustment practices, traveling nurses’ per diem benefits should be included in their regular rate of pay for the purposes of calculating their overtime compensation. The complaint also alleges that the putative class members were denied required meal periods, denied proper overtime compensation, were not compensated for all time worked, including reporting time and training time, and received non-compliant wage statements. The Company has reached an agreement to settle this matter in its entirety and hour practices conformis awaiting court approval. Final approval of the settlement is expected in early 2023.
Because of the inherent uncertainty of litigation, the Company is not able to reasonably predict if any matter will be resolved in a manner that is materially adverse to the Company. The Company has recorded accruals in connection with law in all material respects, but litigationthe matters described above amounting to $46,225. The Company is always subjectcurrently unable to inherent uncertainty.
With regards toestimate the possible loss or range of loss beyond amounts already accrued. Loss contingencies accrued as of December 31, 2019, which are included in accounts payable and accrued expenses and other long-term liabilities in the consolidated balance sheet, the Company believes that such matters will not, either individually or in the aggregate, have a material adverse effect on its business, consolidated financial position, results of operations, or cash flows.sheets.
(13) Quarterly Financial Data (Unaudited)
|
| | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2019 |
| | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter | | Total Year |
| | (In thousands, except per share data) |
| Revenue | $ | 532,441 |
| | $ | 535,177 |
| | $ | 567,597 |
| | $ | 586,892 |
| | $ | 2,222,107 |
|
| Gross profit | $ | 176,759 |
| | $ | 179,542 |
| | $ | 190,031 |
| | $ | 197,133 |
| | $ | 743,465 |
|
| Net income | $ | 34,122 |
| | $ | 28,869 |
| | $ | 23,515 |
| | $ | 27,482 |
| | $ | 113,988 |
|
| Net income per share from: | | | | | | | | | |
| Basic | $ | 0.73 |
| | $ | 0.62 |
| | $ | 0.50 |
| | $ | 0.59 |
| | $ | 2.44 |
|
| Diluted | $ | 0.71 |
| | $ | 0.61 |
| | $ | 0.49 |
| | $ | 0.58 |
| | $ | 2.40 |
|
|
| | | | | | | | | | | | | | | | | | | |
| | Year Ended December 31, 2018 |
| | First Quarter | | Second Quarter | | Third Quarter | | Fourth Quarter | | Total Year |
| | (In thousands, except per share data) |
| Revenue | $ | 522,489 |
| | $ | 558,108 |
| | $ | 526,842 |
| | $ | 528,635 |
| | $ | 2,136,074 |
|
| Gross profit | $ | 167,824 |
| | $ | 180,956 |
| | $ | 175,147 |
| | $ | 172,456 |
| | $ | 696,383 |
|
| Net income | $ | 42,681 |
| | $ | 35,529 |
| | $ | 27,918 |
| | $ | 35,613 |
| | $ | 141,741 |
|
| Net income per share from: | | | | | | | | | |
| Basic | $ | 0.89 |
| | $ | 0.75 |
| | $ | 0.59 |
| | $ | 0.76 |
| | $ | 2.99 |
|
| Diluted | $ | 0.87 |
| | $ | 0.73 |
| | $ | 0.58 |
| | $ | 0.74 |
| | $ | 2.91 |
|
(14) Subsequent Events
On February 14, 2020, the Company completed its acquisition of Stratus Video, a remote video interpreting company, for $475,000 in cash. Stratus Video provides healthcare interpretation via remote video, over the phone, and onsite in-person, all supported by proprietary technology platforms. To help finance the acquisition, the Company (1) entered into the Second Amendment, which provided $250,000 of additional borrowings to the Company, and (2) borrowed $175,000 under the Senior Credit Facility. The Second Amendment and Senior Credit Facility are more fully described in Note (8), “Notes Payable and Credit Agreement.”
| |
Item 9. | Changes In and Disagreements With Accountants on Accounting and Financial Disclosure |
Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure
None.
| |
Item 9A. | Controls and Procedures |
Item 9A. Controls and Procedures
(1) Evaluation of Disclosure Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of December 31, 20192022 were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms.
(2) Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rule 13a-15(f) of the Exchange Act. Under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Based on the framework set forth in Internal Control—Integrated Framework (2013), management concluded that our internal control over financial reporting was effective as of December 31, 2019.2022.
A registrant may omit an assessment of an acquired business’s internal control over financial reporting from the registrant’s assessment of its internal control; however, such an exclusion may not extend beyond one year from the date of the acquisition, nor may such assessment be omitted from more than one annual management report on internal control over financial reporting. We acquired Advanced Medical Personnel Services, Inc. (the “acquired entity”) during 2019, and we excluded from the assessment of the effectiveness of our internal control over financial reporting as of December 31, 2019, the acquired entity’s internal control over financial reporting associated with total assets of $233.9 million (of which $206.5 million represents goodwill and intangible assets included within the scope of the assessment) and total revenues of $82.3 million included in our consolidated financial statements as of and for the year ended December 31, 2019.
The effectiveness of our internal control over financial reporting as of December 31, 20192022 has been audited by KPMG LLP, an independent registered public accounting firm, as stated in its report, which we include herein.
(3) Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 20192022 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
(4) Report of Independent Registered Public Accounting Firm
TheTo the Stockholders and Board of Directors
AMN Healthcare Services, Inc.:
Opinion on Internal Control Over Financial Reporting
We have audited AMN Healthcare Services, Inc. and subsidiaries’ (the “Company”)Company) internal control over financial reporting as of December 31, 2019,2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019,2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (“PCAOB”)(PCAOB), the consolidated balance sheets of the Company as of December 31, 20192022 and 2018, and2021, the related consolidated statements of comprehensive income, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2019,2022, and the related notes (collectively, the “consolidatedconsolidated financial statements”)statements), and our report dated February 24, 202022, 2023 expressed an unqualified opinion on those consolidated financial statements.
The Company acquired Advanced Medical Personnel Services, Inc., during 2019, and management excluded from its assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2019, Advanced Medical Personnel Services, Inc.’s internal control over financial reporting associated with total assets of $233.9 million (of which $206.5 million represents goodwill and intangible assets included within the scope of the assessment) and total revenues of $82.3 million included in the consolidated financial statements of the Company as of and for the year ended December 31, 2019. Our audit of internal control over financial reporting of the Company also excluded an evaluation of the internal control over financial reporting of Advanced Medical Personnel Services, Inc.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ KPMG LLP
San Diego, California
February 24, 202022, 2023
| |
Item 9B. | Other Information |
Item 9B. Other Information
None.
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
| |
Item 10. | Directors, Executive Officers and Corporate Governance |
Item 10. Directors, Executive Officers and Corporate Governance
Information required by this item, other than the information below concerning our Code of Ethics for Senior Financial Officers and stockholder recommended nominations, is incorporated by reference to the Proxy Statement to be distributed in connection with our Annual Meeting of Stockholders currently scheduled to be held on April 22, 2020May 17, 2023 (the “2020“2023 Annual Meeting Proxy Statement”) under the headings “Election“Corporate Governance—Election of Our Directors—Nominees for theAMN Healthcare Board of Directors,” “Executive Compensation Disclosure—Non-Director Executive Officers,Disclosure,” “Security Ownership and Other Matters—Section 16(a) Beneficial Ownership Reporting Compliance,” the table set forth in “Corporate Governance—Committees of the Board” identifying, among other things, members of our Board committees, and “Corporate Governance—Committees of the Board.”
We have adopted a Code of Ethics for Senior Financial Officers that applies to our principal executive officer, principal financial officer, and principal accounting officer or any person performing similar functions, which we post on our website in the “Corporate Governance”“Governance Documents” link located at www.amnhealthcare.com/investors.ir.amnhealthcare.com. We intend to publish any amendment to, or waiver from, the Code of Ethics for Senior Financial Officers on our website. We will provide any person, without charge, a copy of such Code of Ethics upon written request, which may be mailed to 12400 High Bluff Drive,8840 Cypress Waters Boulevard Suite 100, San Diego, California 92130,300, Dallas, Texas 75019, Attn: Corporate Secretary.
There have been no material changes to the procedures by which stockholders may recommend nominees to our Board since we last disclosed information related to such procedures.
| |
Item 11. | Executive Compensation |
Item 11. Executive Compensation
Information required by this item is incorporated by reference to the 20202023 Annual Meeting Proxy Statement under the headings “Compensation, Discussion and Analysis,” “Executive Compensation Disclosure,” “Director Compensation and Stock Ownership Guidelines,” “Corporate Governance—Board Role InEnterprise Risk Oversight,” “Corporate Governance—Committees of the Board—Compensation Committee—Compensation Committee Interlocks and Insider Participation,” and “Compensation Committee Report.Report on Executive Compensation.”
| |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Information required by this item, other than the information below concerning our equity compensation plans, is incorporated by reference to the 20202023 Annual Meeting Proxy Statement under the headings “Security Ownership and Other Matters—Security Ownership of Certain Beneficial Owners and Management” and “Equity Compensation Plan Information atManagement.”
The following table sets forth information as of December 31, 2019.2022 regarding compensation plans under which our equity securities are authorized for issuance.
| | | | | | | | | | | | | | | | | |
| (a) | | (b) | | (c) |
| Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights(1) | | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights ($) | | Numbers of Securities Remaining Available for Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected in Column(a))(2)
|
| Plan Category | | | | | |
| Equity compensation plans approved by security holders | 664,732 | | | $— | | 2,413,823 | |
Equity compensation plans not approved by security holders (3) | — | | | — | | 181,454 | |
| | | | | | |
| Total | 664,732 | | | $— | | 2,595,277 | |
(1) Includes RSUs and PRSUs. As of December 31, 2022, there were no stock options or SARs outstanding. The weighted-average exercise price set forth in this table excludes the effect of RSUs and PRSUs, which have no exercise price.
(2) Under the Equity Plan, each share (a) tendered or held back upon exercise of an option or settlement of an award to cover the exercise price or tax withholding with respect to an award, or (b) subject to SARs that are not issued in connection with the settlement of the SARs on exercise thereof, is made available to be re-awarded. For PRSUs, we consider the maximum number of shares that may be issued under the award to be outstanding upon grant. When the number of PRSUs that have been earned are determined, we true-up the actual number of shares that were awarded and return the unearned shares into shares available for issuance. This figure does not include shares underlying our Equity Plan that are forfeited, canceled or terminated after December 31, 2022. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (11), Share-Based Compensation.”
(3) On occasion, we have made employee award inducement equity grants to key employees outside of the Equity Plan. Although these awards were made outside of the Equity Plan, the key terms and conditions of each grant are the same in all material respects as equity awards made under the Equity Plan. Additionally, in 2014, the Board adopted the Company’s 2014 Employment Inducement Plan under which we may issue up to 200,000 shares of our common stock to prospective employees. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (11), Share-Based Compensation.”
| |
Item 13. | Certain Relationships and Related Transactions, and Director Independence |
Item 13. Certain Relationships and Related Transactions, and Director Independence
Information required by this item is incorporated by reference to the 20202023 Annual Meeting Proxy Statement under the headings “Corporate Governance—Board Policy onPolicies and Procedures Governing Conflicts of Interest and Related Party Transactions,” “Corporate Governance—Director Independence,” and “Corporate Governance—Committees of the Board.”
| |
Item 14. | Principal Accounting Fees and Services |
Item 14. Principal Accounting Fees and Services
Information required by this item is incorporated by reference to the 20202023 Annual Meeting Proxy Statement under the heading “Ratification of the Selection of Independent Registered Public Accounting Firm.”
PART IV
| |
Item 15. | Exhibits and Financial Statement Schedules |
Item 15. Exhibits and Financial Statement Schedules
(a) Documents filed as part of the report.
(1) Consolidated Financial Statements
Report of Independent Registered Public Accounting Firm
Consolidated Balance Sheets as of December 31, 20192022 and 20182021
Consolidated Statements of Comprehensive Income for the years ended December 31, 2019, 20182022, 2021 and 2020
and 2017
Consolidated Statements of Stockholders’ Equity for the years ended December 31, 2019, 20182022, 2021 and 20172020
Consolidated Statements of Cash Flows for the years ended December 31, 2019, 20182022, 2021 and 20172020
Notes to Consolidated Financial Statements
(2) Financial Statement Schedules
All schedules have been omitted because the required information is presented in the financial statements or notes thereto, the amounts involved are not significant or the schedules are not applicable.
(3) Exhibits
|
| | | | | | | |
Exhibit Number | | Description |
| | |
| 2.1 |
| | Agreement and Plan of Merger dated as of December 16, 2014 by and among Onward Healthcare, Inc., AMN Healthcare, Inc., Terrell Acquisition Corp., and OGH, LLC (Incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K dated January 7, 2015, filed with the SEC on January 9, 2015). |
| | |
2.2 |
| | |
| | |
2.3 |
| | Membership Interest Purchase Agreement, dated as of April 9, 2018, by and among AMN Healthcare, Inc., MedPartners HIM, LLC, the owners listed on Schedule A thereto, and the Owner Representative as defined therein (Incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K dated April 9, 2018, filed with the SEC on April 10, 2018). |
| | |
2.4 |
| | Stock Purchase Agreement, dated as of April 29, 2019, by and among AMN Healthcare, Inc., Advanced Medical Holdings, LLC, and Advanced Medical Personnel Services, Inc. (Incorporated by reference to Exhibit 2.1 of the Registrant’s Current Report on Form 8-K dated June 14, 2019, filed with the SEC on June 17, 2019).** |
| | |
2.5 |
| | |
| | |
| 3.1 |
| | |
| | |
| 3.2 |
| | NinthEleventh Amended and Restated BylawsBy-laws of AMN Healthcare Services, Inc., dated January 17, 2020December 14, 2022 (Incorporated by reference to Exhibit 3.1 of the Registrant’s Current Report on Form 8-K dated January 17, 2020,December 14, 2022, filed with the SEC on January 23, 2020)December 16, 2022). |
| | |
| 3.3 |
| | |
| | |
| 4.1 |
| | |
| | |
| 4.2 |
| | |
| | |
| 4.3 |
| | |
| | |
| 4.4 |
| | |
| | |
| 4.5 | | | |
| | |
| 10.1 |
| | Credit Agreement, dated as of February 9, 2018, by and among AMN Healthcare, Inc., as borrower, AMN Healthcare Services, Inc.the guarantors party thereto, AMN Services, LLC, O’Grady-Peyton International (USA), Inc., AMN Staffing Services, LLC, Merritt, Hawkins & Associates, LLC, AMN Healthcare Allied, Inc., Staff Care, Inc., AMN Allied Services, LLC, Nursefinders, LLC, Shiftwise, Inc., AMN Vision Services, LLC, Locum Leaders of Missouri, LLC, Onward Healthcare, LLC, Locum Leaders, LLC, Medefis, Inc., Avantas, LLC, The First String Healthcare, Inc., MillicanSolutions, LLC, B. E. Smith, LLC, B. E. Smith Interim Services, LLC, HealthSource Global Staffing, Inc., Peak Provider Solutions, Inc., Peak Health Solutions, LLC, and Peak Government Services, LLC, as guarantors, the lenders identified on the signature pages thereto, as lenders, and SunTrust Bank, as administrative agent (Incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2018, filed with the SEC on May 4, 2018). |
| | |
|
| | | |
Exhibit
Number
10.2 | | Description |
10.2 |
| | First Amendment to Credit Agreement, dated as of June 14, 2019, by and among AMN Healthcare, Inc., as borrower, AMN Healthcare Services, Inc.the guarantors party thereto, AMN Services, LLC, O’Grady-Peyton International (USA), Inc., AMN Staffing Services, LLC, Merritt, Hawkins & Associates, LLC, AMN Healthcare Allied, Inc., Staff Care, Inc., AMN Allied Services, LLC, Nursefinders, LLC, Shiftwise, Inc., AMN Vision Services, LLC, Onward Healthcare, LLC, Locum Leaders, LLC, Medefis, Inc., Avantas, LLC, The First String Healthcare, Inc., MillicanSolutions, LLC, B. E. Smith, LLC, B. E. Smith Interim Services, LLC, HealthSource Global Staffing, Inc., Peak Provider Solutions, Inc., Peak Health Solutions, LLC, and Peak Government Services, LLC, Silversheet Inc., MedPartners HIM, LLC, Phillips, DiPisa & Associates, Inc., Leaders For Today, LLC, as guarantors, the lenders identified on the signature pages thereto, as lenders, and SunTrust Bank, as administrative agent (Incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2019, filed with the SEC on August 7, 2019). |
| | |
| 10.3 |
| | Second Amendment to Credit Agreement, dated as of February 14, 2020, by and among AMN Healthcare, Inc., as borrower, the guarantors party thereto, the lenders identified on the signature pages thereto, as lenders, and SunTrust Bank, as administrative agent (Incorporated by reference to Exhibit 4.1 to the Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2020, filed with the SEC on May 11, 2020). |
| | |
| 10.4 | | | |
| | |
10.410.5 |
| | |
| | |
| 10.6 | | | |
| | |
| 10.7 | | | |
| | |
10.510.8 |
| | |
| | |
| | | | | | | | |
Exhibit Number | | Description |
| 10.9 | | | |
| | |
| 10.10 | | | |
| | |
10.610.11 |
| | |
| | |
10.710.12 |
| | |
| | |
10.810.13 |
| | |
| | |
10.910.14 |
| | |
| | |
10.110.15 |
| | |
| | |
10.1110.16 |
| | |
| | |
10.1210.17 |
| | |
| | |
10.1310.18 |
| | |
| | |
10.1410.19 |
| | |
| | |
10.1510.20 |
| | |
| | |
|
| | | |
Exhibit
Number
10.21 | | Description |
10.16 |
| | |
| | |
10.1710.22 |
| | |
| | |
10.1810.23 |
| | |
| | |
10.1910.24 |
| | |
| | |
| | | | | | | | |
10.20Exhibit Number |
| Description |
| 10.25 | | | |
| | |
10.2110.26 |
| | |
| | |
10.2210.27 |
| | |
| | |
10.2310.28 |
| | |
| | |
10.2410.29 |
| | |
| | |
10.2510.30 |
| | |
| | |
10.2610.31 |
| | |
| | |
10.2710.32 |
| | |
| | |
10.2810.33 |
| | |
| | |
10.2910.34 |
| | |
| | |
|
| | | |
Exhibit
Number
10.35 | | Description |
10.30 |
| | |
| | |
10.3110.36 |
| | |
| | |
10.3210.37 |
| | |
| | |
| 10.38 | | | |
| | |
10.3310.39 |
| | |
| | |
| | | | | | | | |
10.34Exhibit Number |
| Description |
| 10.40 | | | First Amendment to Employment Agreement, dated as of February 6, 2008, between AMN Healthcare Services, Inc. and Susan R. Nowakowski (aka Susan R. Salka) (Management Contract or Compensatory Plan or Arrangement) (Incorporated by reference to Exhibit 10.410.1 of the Registrant’s CurrentQuarterly Report on Form 8-K dated February 12, 2008,10-Q for the quarter ended June 30, 2022, filed with the SEC on February 12, 2008)August 5, 2022). |
| | |
10.3510.41 |
| | |
| | |
10.3610.42 |
| | |
| | |
10.37 |
| | |
| | |
10.38 |
| | |
| | |
10.3910.43 |
| | |
| | |
21.110.44 |
| | |
| | |
| 10.45 | | | |
| | |
| 10.46 | | | |
| | |
| 10.47 | | | |
| | |
| 10.48 | | | |
| | |
| 10.49 | | | |
| | |
| 10.50 | | | |
| | |
| 10.51 | | | |
| | |
| 10.52 | | | |
| | |
| 10.53 | | | |
| | |
| 10.54 | | | |
| | |
| 10.55 | | | |
| | |
| | | | | | | | |
Exhibit Number | | Description |
| 10.56 | | | |
| | |
| 10.57 | | |
| | |
| 21.1 | | | |
| | |
| 23.1 |
| | |
| | |
| 31.1 |
| | |
| | |
| 31.2 |
| | |
| | |
| 32.1 |
| | |
| | |
| 32.2 |
| | |
| | |
| 101.INS |
| | XBRL Instance Document.* |
| | |
| 101.SCH |
| | XBRL Taxonomy Extension Schema Document.* |
| | |
| 101.CAL |
| | XBRL Taxonomy Extension Calculation Linkbase Document.* |
| | |
| 101.DEF |
| | XBRL Taxonomy Extension Definition Linkbase Document.* |
| | |
| 101.LAB |
| | XBRL Taxonomy Extension Label Linkbase Document.* |
| | |
| 101.PRE |
| | XBRL Taxonomy Extension Presentation Linkbase Document.* |
| | | | | | | | |
| * | | Filed herewith. |
| | |
| | |
* | | Filed herewith. |
| | |
** | | Schedules and exhibits have been omitted pursuant to Item 601(b)(2) of Regulation S-K. A copy of any omitted schedule or exhibit will be furnished supplementally to the Securities and Exchange Commission upon request; provided, however, that AMN may request confidential treatment pursuant to Rule 24b-2 of the Securities Exchange Act of 1934, as amended, for any schedule or exhibit so furnished. |
| | |
| | |
Item 16. Form 10-K Summary
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
|
| | | | | | | |
| AMN HEALTHCARE SERVICES, INC. |
|
/S/ SCUSANAROLINE R. SS. GALKARACE |
Susan R. Salka
Caroline S. Grace
President and Chief Executive Officer |
Date: February 24, 202022, 2023
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated and on February 24, 2020.22, 2023.
| | |
/S/ CAROLINE S. GRACE |
Caroline S. Grace
Director, President and Chief Executive Officer
(Principal Executive Officer) |
|
/S/ SJUSANEFFREY R. SKALKANUDSON |
SusanJeffrey R. Salka
Director, President and Chief Executive Officer
(Principal Executive Officer)
|
|
/S/ BRIAN M. SCOTT
|
Brian M. Scott
Chief Accounting Officer,
Knudson
Chief Financial Officer
(Principal Financial and Treasurer (Principal Accounting and Financial Officer)
|
|
/S/ DOUGLAS D. WHEAT |
Douglas D. Wheat
Director and Chairman of the Board
|
|
/S/ JORGE A. CABALLERO |
Jorge A. Caballero
Director |
|
/S/ MARK G. FOLETTA |
Mark G. Foletta
Director
|
|
/S/ TERI G. FONTENOT |
Teri G. Fontenot
Director
|
|
/S/ R. JEFFREY HARRIS |
R. Jeffrey Harris
Director
|
|
/S/ MICHAEL M.E. JOHNS
|
Michael M.E. Johns
Director
|
|
/S/ DAPHNE E. JONES |
Daphne E. Jones
Director
|
|
/S/ MARTHA H. MARSH |
Martha H. Marsh
Director
|
|
/S/ SYLVIA TRENT-ANDREW M. STERNDAMS |
Andrew M. Stern
Sylvia Trent-Adams
Director |
