| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2023
| ☐ | ||||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | ||||||
For the transition period from to
Commission File No.: 001-16753
AMN HEALTHCARE SERVICES, INC.
(Exact Name of Registrant as Specified in Its Charter)
| Delaware | 06-1500476 | ||||||||
(State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | ||||||||
| Suite | |||||||||
| Dallas | Texas | 75019 | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | ||||||||
Registrant’s Telephone Number, Including Area Code: (866) 871-8519
____________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of each exchange on which registered | ||||||
| Common Stock, $0.01 par value | AMN | New York Stock Exchange | ||||||
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 o
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 o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging“emerging growth company"company” in Rule 12b-2 of the Exchange Act. (Check one):
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 is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes o☐ No x
As of November 1, 2017,May 3, 2023, there were 47,772,33339,645,292 shares of common stock, $0.01 par value, outstanding.
Auditor Name: KPMG LLP Auditor Location: San Diego, California Auditor Firm ID: 185
TABLE OF CONTENTS
| Item | Page | |||||||
| PART I - FINANCIAL INFORMATION | ||||||||
| 1. | ||||||||
| 2. | ||||||||
| 3. | ||||||||
| 4. | ||||||||
| PART II - OTHER INFORMATION | ||||||||
| 1. | ||||||||
| 1A. | ||||||||
| 2. | ||||||||
| 3. | ||||||||
| 4. | ||||||||
| 5. | ||||||||
| 6. | ||||||||
| Item | Page | |
| PART I - FINANCIAL INFORMATION | ||
| 1. | ||
| 2. | ||
| 3. | ||
| 4. | ||
| PART II - OTHER INFORMATION | ||
| 1. | ||
| 1A. | ||
| 2. | ||
| 3. | ||
| 4. | ||
| 5. | ||
| 6. | ||
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except par value)
| March 31, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 28,516 | $ | 64,524 | |||||||
| Accounts receivable, net of allowances of $37,736 and $31,910 at March 31, 2023 and December 31, 2022, respectively | 687,645 | 675,650 | |||||||||
| Accounts receivable, subcontractor | 276,655 | 268,726 | |||||||||
| Prepaid expenses | 26,696 | 18,708 | |||||||||
| Other current assets | 51,552 | 66,037 | |||||||||
| Total current assets | 1,071,064 | 1,093,645 | |||||||||
| Restricted cash, cash equivalents and investments | 67,594 | 61,218 | |||||||||
| Fixed assets, net of accumulated depreciation of $233,942 and $227,617 at March 31, 2023 and December 31, 2022, respectively | 155,276 | 149,276 | |||||||||
| Other assets | 197,325 | 172,016 | |||||||||
| Goodwill | 935,319 | 935,364 | |||||||||
| Intangible assets, net of accumulated amortization of $379,172 and $361,327 at March 31, 2023 and December 31, 2022, respectively | 454,485 | 476,832 | |||||||||
| Total assets | $ | 2,881,063 | $ | 2,888,351 | |||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued expenses | $ | 473,764 | $ | 476,452 | |||||||
| Accrued compensation and benefits | 269,237 | 333,244 | |||||||||
| Other current liabilities | 60,600 | 48,237 | |||||||||
| Total current liabilities | 803,601 | 857,933 | |||||||||
| Revolving credit facility | 140,000 | — | |||||||||
| Notes payable, net of unamortized fees and premium | 843,801 | 843,505 | |||||||||
| Deferred income taxes, net | 16,113 | 22,713 | |||||||||
| Other long-term liabilities | 121,774 | 120,566 | |||||||||
| Total liabilities | 1,925,289 | 1,844,717 | |||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
| Preferred stock, $0.01 par value; 10,000 shares authorized; none issued and outstanding at March 31, 2023 and December 31, 2022 | — | — | |||||||||
| Common stock, $0.01 par value; 200,000 shares authorized; 50,236 issued and 40,238 outstanding at March 31, 2023 and 50,109 issued and 41,879 outstanding at December 31, 2022 | 502 | 501 | |||||||||
| Additional paid-in capital | 505,857 | 501,674 | |||||||||
| Treasury stock, at cost; 9,998 and 8,230 shares at March 31, 2023 and December 31, 2022, respectively | (874,898) | (698,598) | |||||||||
| Retained earnings | 1,325,106 | 1,240,996 | |||||||||
| Accumulated other comprehensive loss | (793) | (939) | |||||||||
| Total stockholders’ equity | 955,774 | 1,043,634 | |||||||||
| Total liabilities and stockholders’ equity | $ | 2,881,063 | $ | 2,888,351 | |||||||
| September 30, 2017 | December 31, 2016 | ||||||
| ASSETS | |||||||
| Current assets: | |||||||
| Cash and cash equivalents | $ | 19,625 | $ | 10,622 | |||
| Accounts receivable, net of allowances of $11,381 and $11,376 at September 30, 2017 and December 31, 2016, respectively | 343,596 | 341,977 | |||||
| Accounts receivable, subcontractor | 37,200 | 49,233 | |||||
| Prepaid expenses | 15,832 | 14,189 | |||||
| Other current assets | 26,220 | 34,607 | |||||
| Total current assets | 442,473 | 450,628 | |||||
| Restricted cash, cash equivalents and investments | 34,380 | 31,287 | |||||
| Fixed assets, net of accumulated depreciation of $94,531 and $84,865 at September 30, 2017 and December 31, 2016, respectively | 68,188 | 59,954 | |||||
| Other assets | 73,962 | 57,534 | |||||
| Goodwill | 340,596 | 341,754 | |||||
| Intangible assets, net of accumulated amortization of $85,990 and $72,057 at September 30, 2017 and December 31, 2016, respectively | 231,791 | 245,724 | |||||
| Total assets | $ | 1,191,390 | $ | 1,186,881 | |||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||
| Current liabilities: | |||||||
| Accounts payable and accrued expenses | $ | 117,934 | $ | 137,512 | |||
| Accrued compensation and benefits | 111,984 | 107,993 | |||||
| Current portion of notes payable, less unamortized fees | — | 3,750 | |||||
| Deferred revenue | 9,609 | 8,924 | |||||
| Other current liabilities | 5,440 | 16,611 | |||||
| Total current liabilities | 244,967 | 274,790 | |||||
| Notes payable, less unamortized fees | 319,652 | 359,192 | |||||
| Deferred income taxes, net | 11,899 | 21,420 | |||||
| Other long-term liabilities | 82,673 | 82,096 | |||||
| Total liabilities | 659,191 | 737,498 | |||||
| Commitments and contingencies | |||||||
| Stockholders’ equity: | |||||||
| Preferred stock, $0.01 par value; 10,000 shares authorized; none issued and outstanding at September 30, 2017 and December 31, 2016 | — | — | |||||
| Common stock, $0.01 par value; 200,000 shares authorized; 48,402 issued and 47,772 outstanding, respectively, at September 30, 2017 and 48,055 issued and 47,612 outstanding, respectively, at December 31, 2016 | 484 | 481 | |||||
| Additional paid-in capital | 451,136 | 452,491 | |||||
| Treasury stock, at cost (630 and 443 shares at September 30, 2017 and December 31, 2016, respectively) | (20,358 | ) | (13,261 | ) | |||
| Retained earnings | 101,062 | 9,671 | |||||
| Accumulated other comprehensive income (loss) | (125 | ) | 1 | ||||
| Total stockholders’ equity | 532,199 | 449,383 | |||||
| Total liabilities and stockholders’ equity | $ | 1,191,390 | $ | 1,186,881 | |||
See accompanying notes to unaudited condensed consolidated financial statements.
1
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited and in thousands, except per share amounts)
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2023 | 2022 | |||||||||||||||||||||||||||||||||
| Revenue | $ | 494,406 | $ | 472,636 | $ | 1,479,378 | $ | 1,414,367 | Revenue | $ | 1,126,223 | $ | 1,552,538 | |||||||||||||||||||||||||
| Cost of revenue | 334,867 | 318,169 | 997,051 | 953,249 | Cost of revenue | 757,377 | 1,056,370 | |||||||||||||||||||||||||||||||
| Gross profit | 159,539 | 154,467 | 482,327 | 461,118 | Gross profit | 368,846 | 496,168 | |||||||||||||||||||||||||||||||
| Operating expenses: | Operating expenses: | |||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | 100,579 | 99,995 | 299,325 | 297,359 | Selling, general and administrative | 205,599 | 257,579 | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 8,132 | 7,789 | 23,759 | 21,888 | ||||||||||||||||||||||||||||||||||
| Depreciation and amortization (exclusive of depreciation included in cost of revenue) | Depreciation and amortization (exclusive of depreciation included in cost of revenue) | 37,577 | 30,656 | |||||||||||||||||||||||||||||||||||
| Total operating expenses | 108,711 | 107,784 | 323,084 | 319,247 | Total operating expenses | 243,176 | 288,235 | |||||||||||||||||||||||||||||||
| Income from operations | 50,828 | 46,683 | 159,243 | 141,871 | Income from operations | 125,670 | 207,933 | |||||||||||||||||||||||||||||||
| Interest expense, net, and other | 4,837 | 3,016 | 14,895 | 9,065 | Interest expense, net, and other | 10,259 | 9,589 | |||||||||||||||||||||||||||||||
| Income before income taxes | 45,991 | 43,667 | 144,348 | 132,806 | Income before income taxes | 115,411 | 198,344 | |||||||||||||||||||||||||||||||
| Income tax expense | 17,863 | 16,371 | 52,957 | 53,319 | Income tax expense | 31,301 | 52,336 | |||||||||||||||||||||||||||||||
| Net income | $ | 28,128 | $ | 27,296 | $ | 91,391 | $ | 79,487 | Net income | $ | 84,110 | $ | 146,008 | |||||||||||||||||||||||||
| Other comprehensive income (loss): | Other comprehensive income (loss): | |||||||||||||||||||||||||||||||||||||
| Foreign currency translation and other | (73 | ) | 40 | (111 | ) | 165 | ||||||||||||||||||||||||||||||||
| Cash flow hedge, net of income taxes | — | 231 | (15 | ) | (343 | ) | ||||||||||||||||||||||||||||||||
| Unrealized gains (losses) on available-for-sale securities, net, and other | Unrealized gains (losses) on available-for-sale securities, net, and other | 146 | (907) | |||||||||||||||||||||||||||||||||||
| Other comprehensive income (loss) | (73 | ) | 271 | (126 | ) | (178 | ) | Other comprehensive income (loss) | 146 | (907) | ||||||||||||||||||||||||||||
| Comprehensive income | $ | 28,055 | $ | 27,567 | $ | 91,265 | $ | 79,309 | Comprehensive income | $ | 84,256 | $ | 145,101 | |||||||||||||||||||||||||
| Net income per common share: | Net income per common share: | |||||||||||||||||||||||||||||||||||||
| Basic | $ | 0.59 | $ | 0.57 | $ | 1.91 | $ | 1.66 | Basic | $ | 2.03 | $ | 3.11 | |||||||||||||||||||||||||
| Diluted | $ | 0.57 | $ | 0.55 | $ | 1.85 | $ | 1.61 | Diluted | $ | 2.02 | $ | 3.09 | |||||||||||||||||||||||||
| Weighted average common shares outstanding: | Weighted average common shares outstanding: | |||||||||||||||||||||||||||||||||||||
| Basic | 47,912 | 48,049 | 47,870 | 47,993 | Basic | 41,378 | 46,913 | |||||||||||||||||||||||||||||||
| Diluted | 49,445 | 49,410 | 49,480 | 49,287 | Diluted | 41,570 | 47,208 | |||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
2
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited and in thousands)
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| 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 | — | — | — | (2,298) | (228,024) | — | — | (228,024) | |||||||||||||||||||||||||||||||||||||||
| Equity awards vested, net of shares withheld for taxes | 164 | 2 | (9,433) | — | — | — | — | (9,431) | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 11,259 | — | — | — | — | 11,259 | |||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | — | — | — | — | — | 146,008 | (907) | 145,101 | |||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | 50,013 | $ | 500 | $ | 488,535 | (4,884) | $ | (349,855) | $ | 942,954 | $ | (1,202) | $ | 1,080,932 | |||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | 50,109 | $ | 501 | $ | 501,674 | (8,230) | $ | (698,598) | $ | 1,240,996 | $ | (939) | $ | 1,043,634 | |||||||||||||||||||||||||||||||||
| Repurchase of common stock into treasury | — | — | — | (1,768) | (176,300) | — | — | (176,300) | |||||||||||||||||||||||||||||||||||||||
| Equity awards vested, net of shares withheld for taxes | 127 | 1 | (6,135) | — | — | — | — | (6,134) | |||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | 10,318 | — | — | — | — | 10,318 | |||||||||||||||||||||||||||||||||||||||
| Comprehensive income | — | — | — | — | — | 84,110 | 146 | 84,256 | |||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | 50,236 | $ | 502 | $ | 505,857 | (9,998) | $ | (874,898) | $ | 1,325,106 | $ | (793) | $ | 955,774 | |||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from operating activities: | |||||||||||
| Net income | $ | 84,110 | $ | 146,008 | |||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization (inclusive of depreciation included in cost of revenue) | 38,834 | 31,510 | |||||||||
| Non-cash interest expense and other | 505 | 479 | |||||||||
| Change in fair value of contingent consideration liabilities | 80 | — | |||||||||
| Increase in allowance for credit losses and sales credits | 25,447 | 3,432 | |||||||||
| Provision for deferred income taxes | (6,639) | 18,526 | |||||||||
| Share-based compensation | 10,318 | 11,259 | |||||||||
| Loss on disposal or impairment of long-lived assets | 1,849 | 241 | |||||||||
| Net loss on investments in available-for-sale securities | 81 | 174 | |||||||||
| Net loss (gain) on deferred compensation balances | 41 | (570) | |||||||||
| Non-cash lease expense | (228) | 2,880 | |||||||||
| Changes in assets and liabilities, net of effects from acquisitions: | |||||||||||
| Accounts receivable | (37,376) | (194,044) | |||||||||
| Accounts receivable, subcontractor | (7,929) | (50,592) | |||||||||
| Income taxes receivable | 8,875 | — | |||||||||
| Prepaid expenses | (7,988) | 33,373 | |||||||||
| Other current assets | (115) | 12,180 | |||||||||
| Other assets | 221 | (342) | |||||||||
| Accounts payable and accrued expenses | (9,557) | 70,988 | |||||||||
| Accrued compensation and benefits | (71,038) | 96,486 | |||||||||
| Other liabilities | 11,903 | 18,353 | |||||||||
| Deferred revenue | 2,040 | (126) | |||||||||
| Net cash provided by operating activities | 43,434 | 200,215 | |||||||||
| Cash flows from investing activities: | |||||||||||
| Purchase and development of fixed assets | (17,487) | (13,590) | |||||||||
| Purchase of investments | — | (4,018) | |||||||||
| Proceeds from sale and maturity of investments | 2,007 | 6,885 | |||||||||
| Proceeds from sale of equity investment | — | 68 | |||||||||
| Payments to fund deferred compensation plan | (16,951) | (12,584) | |||||||||
| Net cash used in investing activities | (32,431) | (23,239) | |||||||||
4
| Nine Months Ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Cash flows from operating activities: | |||||||
| Net income | $ | 91,391 | $ | 79,487 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
| Depreciation and amortization | 23,759 | 21,888 | |||||
| Non-cash interest expense and other | 1,718 | 1,180 | |||||
| Change in fair value of contingent consideration | 66 | (88 | ) | ||||
| Increase in allowances for doubtful accounts and sales credits | 9,012 | 6,746 | |||||
| Provision for deferred income taxes | (9,512 | ) | (3,209 | ) | |||
| Share-based compensation | 7,720 | 8,795 | |||||
| Excess tax benefits from share-based compensation | — | (2,764 | ) | ||||
| Loss on disposal or sale of fixed assets | 130 | 45 | |||||
| Amortization of discount on investments | (112 | ) | — | ||||
| Changes in assets and liabilities, net of effects from acquisitions: | |||||||
| Accounts receivable | (10,631 | ) | (42,594 | ) | |||
| Accounts receivable, subcontractor | 12,033 | 8,681 | |||||
| Income taxes receivable | (1,854 | ) | 6,160 | ||||
| Prepaid expenses | (1,643 | ) | (195 | ) | |||
| Other current assets | 10,155 | (10,109 | ) | ||||
| Other assets | (5,204 | ) | (4,295 | ) | |||
| Accounts payable and accrued expenses | (20,442 | ) | (791 | ) | |||
| Accrued compensation and benefits | 3,991 | 10,761 | |||||
| Other liabilities | (5,112 | ) | 5,736 | ||||
| Deferred revenue | 678 | 256 | |||||
| Restricted cash, cash equivalents and investments balance | (9,761 | ) | (870 | ) | |||
| Net cash provided by operating activities | 96,382 | 84,820 | |||||
| Cash flows from investing activities: | |||||||
| Purchase and development of fixed assets | (17,168 | ) | (17,705 | ) | |||
| Purchase of investments | (11,021 | ) | — | ||||
| Proceeds from maturity of investments | 17,200 | — | |||||
| Change in restricted cash, cash equivalents and investments balance | 601 | — | |||||
| Payments to fund deferred compensation plan | (10,056 | ) | (5,665 | ) | |||
| Equity investment | (2,000 | ) | — | ||||
| Cash paid for acquisitions, net of cash received | — | (216,553 | ) | ||||
| Cash paid for working capital adjustments and holdback liability for prior year acquisitions | (1,000 | ) | (1,348 | ) | |||
| Net cash used in investing activities | (23,444 | ) | (241,271 | ) | |||
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Cash flows from financing activities: | |||||||||||
| Payments on revolving credit facility | (70,000) | — | |||||||||
| Proceeds from revolving credit facility | 210,000 | — | |||||||||
Repurchase of common stock (1) | (174,744) | (228,024) | |||||||||
| Payment of financing costs | (3,579) | — | |||||||||
| Cash paid for shares withheld for taxes | (6,134) | (9,431) | |||||||||
| Net cash used in financing activities | (44,457) | (237,455) | |||||||||
| Effect of exchange rate changes on cash | — | (183) | |||||||||
| Net decrease in cash, cash equivalents and restricted cash | (33,454) | (60,662) | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | 137,872 | 246,714 | |||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | 104,418 | $ | 186,052 | |||||||
| Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | 2,610 | $ | 4,230 | |||||||
| Cash paid for interest (net of $288 and $121 capitalized for the three months ended March 31, 2023 and 2022, respectively) | $ | 1,053 | $ | 196 | |||||||
| Cash paid for income taxes | $ | 5,404 | $ | 9,824 | |||||||
| Supplemental disclosures of non-cash investing and financing activities: | |||||||||||
| Purchase of fixed assets recorded in accounts payable and accrued expenses | $ | 6,849 | $ | 4,771 | |||||||
| Excise tax payable on share repurchases | $ | 1,556 | $ | — | |||||||
(1) The difference between the amount reported for the three months ended March 31, 2023 and the corresponding amount presented in the condensed consolidated statements of stockholders’ equity is due to accrued excise tax payable on share repurchases recorded within treasury stock.
| Nine Months Ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Cash flows from financing activities: | |||||||
| Capital lease repayments | — | (6 | ) | ||||
| Payments on term loans | (44,063 | ) | (8,438 | ) | |||
| Proceeds from term loans | — | 75,000 | |||||
| Payments on revolving credit facility | — | (24,000 | ) | ||||
| Proceeds from revolving credit facility | — | 124,000 | |||||
| Repurchase of common stock | (7,097 | ) | — | ||||
| Payment of financing costs | — | (448 | ) | ||||
| Earn-out payments for prior acquisitions | (3,677 | ) | (900 | ) | |||
| Proceeds from termination of derivative contract | 85 | — | |||||
| Cash paid for shares withheld for taxes | (9,072 | ) | (5,554 | ) | |||
| Excess tax benefits from equity awards vested and exercised | — | 2,764 | |||||
| Net cash provided by (used in) financing activities | (63,824 | ) | 162,418 | ||||
| Effect of exchange rate changes on cash | (111 | ) | 165 | ||||
| Net increase in cash and cash equivalents | 9,003 | 6,132 | |||||
| Cash and cash equivalents at beginning of period | 10,622 | 9,576 | |||||
| Cash and cash equivalents at end of period | $ | 19,625 | $ | 15,708 | |||
| Supplemental disclosures of cash flow information: | |||||||
| Cash paid for interest (net of $113 and $158 capitalized for the nine months ended September 30, 2017 and 2016, respectively) | $ | 9,395 | $ | 7,106 | |||
| Cash paid for income taxes | $ | 65,998 | $ | 52,684 | |||
| Acquisitions: | |||||||
| Fair value of tangible assets acquired in acquisitions, net of cash received | $ | — | $ | 18,789 | |||
| Goodwill | — | 136,521 | |||||
| Intangible assets | — | 89,064 | |||||
| Liabilities assumed | — | (21,921 | ) | ||||
| Holdback provision | — | (1,830 | ) | ||||
| Earn-out liabilities | — | (4,070 | ) | ||||
| Net cash paid for acquisitions | $ | — | $ | 216,553 | |||
| Supplemental disclosures of non-cash investing and financing activities: | |||||||
| Purchase of fixed assets recorded in accounts payable and accrued expenses | $ | 3,156 | $ | 1,370 | |||
See accompanying notes to unaudited condensed consolidated financial statements.
5
AMN HEALTHCARE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheets and related condensed consolidated statements of comprehensive income, stockholders’ equity and cash flows contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”), which are unaudited, include the accounts of AMN Healthcare Services, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all entries necessary for a fair presentation of such unaudited condensed consolidated financial statements have been included. These entries consisted of all normal recurring items. The results of operations for the interim period are not necessarily indicative of the results to be expected for any other interim period or for the entire fiscal year or for any future period.
The unaudited condensed consolidated financial statements do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States.States (“U.S. GAAP”). Please refer to the Company’s audited consolidated financial statements and the related notes for the fiscal year ended December 31, 2016,2022, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2022, filed with the Securities and Exchange Commission on February 17, 2017 (“201622, 2023 (the “2022 Annual Report”).
The preparation of financial statements in conformity with accounting principles generally accepted in the United StatesU.S. GAAP 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 intangible assets purchased in a business combination, asset impairments, accruals for self-insurance, compensation and related benefits, accounts receivable, contingencies and litigation, earn-outcontingent consideration liabilities associated with acquisitions, and income taxes. Actual results could differ from those estimates under different assumptions or conditions.
Recently Adopted Accounting Pronouncements
In March 2016,October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, “Stock Compensation - Improvements to Employee Share-Based Payment Accounting.2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The new guidance attemptsrequires companies to simplifyapply the accounting for share-based payment transactionsdefinition 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 are acquired in several areas,a business combination. Under prior guidance, an acquirer generally recognized 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 following: income tax consequences, classification of awards as either equity oracquirer recognizing acquired contract assets and liabilities forfeitures, expected term, and statement of cash flows classification.on the same basis that would have been recorded by the acquiree prior to the acquisition under ASC Topic 606. The Company adopted this pronouncement prospectively beginningstandard effective January 1, 2017. Accordingly, the prior period has not been adjusted2023 on a prospective basis, and the primary effects ofadoption did not have a material effect on the adoption for the current period are as follows:Company’s consolidated financial statements.
Cash, Cash Equivalents and Restricted Cash
The Company recorded $56considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and $5,381cash equivalents include currency on hand, deposits with financial institutions, money market funds, commercial paper and other highly liquid investments. Restricted cash and cash equivalents primarily includes cash, corporate bonds and commercial paper that serve as collateral for the Company’s captive insurance subsidiary claim payments. See Note (7), “Fair Value Measurement” for additional information.
The following table provides a reconciliation of tax benefitscash, cash equivalents and restricted cash reported within income tax expensethe accompanying condensed consolidated balance sheets and related notes to the amounts presented in the accompanying condensed consolidated statements of cash flows.
6
| March 31, 2023 | December 31, 2022 | ||||||||||
| Cash and cash equivalents | $ | 28,516 | $ | 64,524 | |||||||
| Restricted cash and cash equivalents (included in other current assets) | 31,500 | 37,225 | |||||||||
| Restricted cash, cash equivalents and investments | 67,594 | 61,218 | |||||||||
| Total cash, cash equivalents and restricted cash and investments | 127,610 | 162,967 | |||||||||
| Less restricted investments | (23,192) | (25,095) | |||||||||
| Total cash, cash equivalents and restricted cash | $ | 104,418 | $ | 137,872 | |||||||
The Company maintains its cash and restricted cash in bank deposit accounts primarily at large, national financial institutions, which typically exceed federally insured limits. The Company has not experienced any losses in such accounts.
Accounts Receivable
The Company records accounts receivable at the invoiced amount. Accounts receivable are non-interest bearing. The Company maintains an allowance for expected credit losses based on the Company’s historical write-off experience, 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 following table provides a reconciliation of activity in the allowance for credit losses for accounts receivable:
| 2023 | 2022 | ||||||||||
| Balance as of January 1, | $ | 31,910 | $ | 6,838 | |||||||
| Provision for expected credit losses | 6,938 | 1,166 | |||||||||
| Amounts written off charged against the allowance | (1,112) | (534) | |||||||||
| Balance as of March 31, | $ | 37,736 | $ | 7,470 | |||||||
The increase in the provision for expected credit losses for the three and nine months ended September 30, 2017, respectively, relatedMarch 31, 2023 was primarily the result of concern with a specific customer’s ability to meet its financial obligations, and uncertainty regarding the collectability of cash flows from customers due primarily to the excess tax benefit on share-based compensation. Priorcurrent macroeconomic outlook.
Reclassifications
To conform to adoption, this amount wouldthe current year presentation, certain reclassifications have been recorded as additional paid-in capital;
7
2. BUSINESS COMBINATIONSACQUISITIONS
On June 3, 2016,May 13, 2022, the Company completed its acquisition of Peak Provider SolutionsConnetics Communications, LLC (“Peak”Connetics”), which provides remote medical codingspecializes in the direct hire recruitment and consulting solutions to hospitalspermanent placement of international nurse and physician medical groups nationwide. The addition of Peak has expandedallied health professionals with healthcare facilities in the Company’s workforce solutions and enables the Company to offer services in coding diagnosis and procedure codes, which is critical to clinical quality reporting and the financial health of healthcare organizations.United States. The initial purchase price of $52,125$78,764 included (1) $51,645$70,764 cash consideration paid upon acquisition, funded through cash-on-hand, net of cash received, and borrowings under the Company’s revolving credit facility,on hand, and (2) a contingent earn-out paymentconsideration (earn-out payment) of up to $3,000$12,500 with an estimated fair value of $480 as of the acquisition date. The contingent earn-out payment was based on the operating results of Peak for the year ending December 31, 2016, which resulted in no earn-out payment. As the acquisition was not considered significant, pro forma information has not been provided. The results of Peak have been included in the Company’s other workforce solutions segment since the date of acquisition. During the third quarter of 2016, an additional $275 of cash consideration was paid to the selling shareholders for the final working capital settlement.
The preliminary allocation of the $8,219$78,533 purchase price, which was reduced by the final working capital settlement during the fourth quarter of 2022, consisted of (1) $1,025$3,632 of fair value of tangible assets acquired, which included $963 cash received, (2) $3,698$8,244 of liabilities assumed, (3) $3,944$40,200 of identified intangible assets, and (4) $6,948$42,945 of goodwill, none of which is deductible for tax purposes. The intangible assets include the fair value of trademarks, customer relationships, staffing databases, and covenants not to compete with a weighted average useful life of approximately eight years.
| 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 | ||||||||||||||||
8
| Fair Value | Useful Life | ||||||
| (in years) | |||||||
| Identifiable intangible assets | |||||||
| Tradenames and Trademarks | $ | 26,300 | 20 | ||||
| Customer Relationships | 25,700 | 12 | |||||
| Staffing Database | 13,000 | 10 | |||||
| Non-Compete Agreements | 900 | 5 | |||||
| $ | 65,900 | ||||||
3. 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 SaaS-based technology,technology-enabled services, including itslanguage interpretation and vendor management systems, and talent planning and acquisition services, including recruitment process outsourcing. The Company recognizes revenue when control of its scheduling software.services is transferred to its 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 theclinical and non-clinical healthcare professional or executive.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 poolnetwork 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. Payables to subcontractors of $38,167 and $51,973 were included in accounts payable and accrued expenses in the unaudited condensed consolidated balance sheet as of September 30, 2017 and the consolidated balance sheet as of December 31, 2016, respectively. Revenue from recruitment and permanent placement and recruitment process outsourcing services is recognized as the services are provided and upon successful placements. Therendered. Depending 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. Fees
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.
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 that 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 that 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.
See Note (5), “Segment Information,” for additional information regarding the Company’s revenue disaggregated by service type.
9
4. NET INCOME PER COMMON SHARE
Basic net income per common share is calculated by dividing net income by the weighted average number of common shares outstanding during the reporting period. The following table sets forth the computation of basic and diluted net income per common share for the three months and nine months ended September 30, 2017 and 2016, respectively:share:
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2023 | 2022 | |||||||||||||||||||||||||||||||||
| Net income | $ | 28,128 | $ | 27,296 | $ | 91,391 | $ | 79,487 | Net income | $ | 84,110 | $ | 146,008 | |||||||||||||||||||||||||
| Net income per common share - basic | $ | 0.59 | $ | 0.57 | $ | 1.91 | $ | 1.66 | Net income per common share - basic | $ | 2.03 | $ | 3.11 | |||||||||||||||||||||||||
| Net income per common share - diluted | $ | 0.57 | $ | 0.55 | $ | 1.85 | $ | 1.61 | Net income per common share - diluted | $ | 2.02 | $ | 3.09 | |||||||||||||||||||||||||
| Weighted average common shares outstanding - basic | 47,912 | 48,049 | 47,870 | 47,993 | Weighted average common shares outstanding - basic | 41,378 | 46,913 | |||||||||||||||||||||||||||||||
| Plus dilutive effect of potential common shares | 1,533 | 1,361 | 1,610 | 1,294 | Plus dilutive effect of potential common shares | 192 | 295 | |||||||||||||||||||||||||||||||
| Weighted average common shares outstanding - diluted | 49,445 | 49,410 | 49,480 | 49,287 | Weighted average common shares outstanding - diluted | 41,570 | 47,208 | |||||||||||||||||||||||||||||||
Share-based awards to purchase 10243 and 14160 shares of common stock were not included in the above calculation of diluted net income per common share for the three and nine months ended September 30, 2017,March 31, 2023 and 2022, respectively, because the effect of these instruments was anti-dilutive. Share-based awards to purchase 11
Since March 31, 2023, and 18through May 5, 2023, the Company repurchased 594 shares of its common stock were not includedat an average price of $84.18 per share excluding broker’s fee, resulting in the above calculationan aggregate purchase price of diluted net income per common share for the three and nine months ended September 30, 2016 because$50,000 excluding the effect of these instruments was anti-dilutive.1% of excise taxes on the repurchased amount.
5. 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 three reportable segments: (1) nurse and allied solutions, (2) physician and leadership solutions, and (3) technology and workforce solutions. The nurse and allied solutions segment includes the Company’s travel nurse staffing (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 physician and leadership solutions segment includes the Company’s locum tenens staffing, healthcare interim leadership staffing, executive search, and physician permanent placement businesses. The technology and workforce solutions segment includes the Company’s language services, vendor management systems, workforce optimization, virtual care, and other workforce solutions.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:
10
| Three Months Ended September 30, | Nine Months Ended September 30, | Three Months Ended March 31, | ||||||||||||||||||||||||||||||||||||
| 2017 | 2016 | 2017 | 2016 | 2023 | 2022 | |||||||||||||||||||||||||||||||||
| Revenue | Revenue | |||||||||||||||||||||||||||||||||||||
| Nurse and allied solutions | $ | 302,933 | $ | 286,810 | $ | 917,183 | $ | 877,197 | Nurse and allied solutions | $ | 824,480 | $ | 1,228,039 | |||||||||||||||||||||||||
| Locum tenens solutions | 111,415 | 108,553 | 322,473 | 320,420 | ||||||||||||||||||||||||||||||||||
| Other workforce solutions | 80,058 | 77,273 | 239,722 | 216,750 | ||||||||||||||||||||||||||||||||||
| Physician and leadership solutions | Physician and leadership solutions | 165,757 | 179,506 | |||||||||||||||||||||||||||||||||||
| Technology and workforce solutions | Technology and workforce solutions | 135,986 | 144,993 | |||||||||||||||||||||||||||||||||||
| $ | 494,406 | $ | 472,636 | $ | 1,479,378 | $ | 1,414,367 | $ | 1,126,223 | $ | 1,552,538 | |||||||||||||||||||||||||||
| Segment operating income | Segment operating income | |||||||||||||||||||||||||||||||||||||
| Nurse and allied solutions | $ | 40,807 | $ | 37,396 | $ | 134,638 | $ | 118,517 | Nurse and allied solutions | $ | 113,445 | $ | 195,089 | |||||||||||||||||||||||||
| Locum tenens solutions | 14,438 | 14,026 | 39,028 | 43,634 | ||||||||||||||||||||||||||||||||||
| Other workforce solutions | 19,890 | 20,867 | 61,788 | 56,311 | ||||||||||||||||||||||||||||||||||
| Physician and leadership solutions | Physician and leadership solutions | 25,100 | 20,381 | |||||||||||||||||||||||||||||||||||
| Technology and workforce solutions | Technology and workforce solutions | 67,010 | 78,880 | |||||||||||||||||||||||||||||||||||
| 75,135 | 72,289 | 235,454 | 218,462 | 205,555 | 294,350 | |||||||||||||||||||||||||||||||||
| Unallocated corporate overhead | 13,698 | 15,113 | 44,732 | 45,908 | Unallocated corporate overhead | 30,733 | 43,648 | |||||||||||||||||||||||||||||||
| Depreciation and amortization | 8,132 | 7,789 | 23,759 | 21,888 | Depreciation and amortization | 37,577 | 30,656 | |||||||||||||||||||||||||||||||
| Depreciation (included in cost of revenue) | Depreciation (included in cost of revenue) | 1,257 | 854 | |||||||||||||||||||||||||||||||||||
| Share-based compensation | 2,477 | 2,704 | 7,720 | 8,795 | Share-based compensation | 10,318 | 11,259 | |||||||||||||||||||||||||||||||
| Interest expense, net, and other | 4,837 | 3,016 | 14,895 | 9,065 | Interest expense, net, and other | 10,259 | 9,589 | |||||||||||||||||||||||||||||||
| Income before income taxes | $ | 45,991 | $ | 43,667 | $ | 144,348 | $ | 132,806 | Income before income taxes | $ | 115,411 | $ | 198,344 | |||||||||||||||||||||||||
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, 2023 | $ | 382,005 | $ | 152,800 | $ | 400,559 | $ | 935,364 | |||||||||||||||
| Goodwill adjustment for Connetics acquisition | (45) | — | — | (45) | |||||||||||||||||||
| Balance, March 31, 2023 | $ | 381,960 | $ | 152,800 | $ | 400,559 | $ | 935,319 | |||||||||||||||
| Accumulated impairment loss as of December 31, 2022 and March 31, 2023 | $ | 154,444 | $ | 60,495 | $ | — | $ | 214,939 | |||||||||||||||
11
Disaggregation of Revenue
The following tables present the Company’s revenue disaggregated by service type:
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| Nurse and Allied Solutions | Physician and Leadership Solutions | Technology and Workforce Solutions | Total | ||||||||||||||||||||
| Travel nurse staffing | $ | 592,677 | $ | — | $ | — | $ | 592,677 | |||||||||||||||
| Labor disruption services | 5,702 | — | — | 5,702 | |||||||||||||||||||
| Local staffing | 25,272 | — | — | 25,272 | |||||||||||||||||||
| Allied staffing | 196,125 | — | — | 196,125 | |||||||||||||||||||
| Locum tenens staffing | — | 106,703 | — | 106,703 | |||||||||||||||||||
| Interim leadership staffing | — | 40,242 | — | 40,242 | |||||||||||||||||||
| Temporary staffing | 819,776 | 146,945 | — | 966,721 | |||||||||||||||||||
| Permanent placement | 4,704 | 18,812 | — | 23,516 | |||||||||||||||||||
| Language services | — | — | 61,676 | 61,676 | |||||||||||||||||||
| Vendor management systems | — | — | 54,173 | 54,173 | |||||||||||||||||||
| Other technologies | — | — | 7,347 | 7,347 | |||||||||||||||||||
| Technology-enabled services | — | — | 123,196 | 123,196 | |||||||||||||||||||
| Talent planning and acquisition | — | — | 12,790 | 12,790 | |||||||||||||||||||
| Total revenue | $ | 824,480 | $ | 165,757 | $ | 135,986 | $ | 1,126,223 | |||||||||||||||
| Three Months Ended March 31, 2022 | |||||||||||||||||||||||
| Nurse and Allied Solutions | Physician and Leadership Solutions | Technology and Workforce Solutions | Total | ||||||||||||||||||||
| Travel nurse staffing | $ | 970,109 | $ | — | $ | — | $ | 970,109 | |||||||||||||||
| Local staffing | 44,057 | — | — | 44,057 | |||||||||||||||||||
| Allied staffing | 213,873 | — | — | 213,873 | |||||||||||||||||||
| Locum tenens staffing | — | 112,672 | — | 112,672 | |||||||||||||||||||
| Interim leadership staffing | — | 44,354 | — | 44,354 | |||||||||||||||||||
| Temporary staffing | 1,228,039 | 157,026 | — | 1,385,065 | |||||||||||||||||||
| Permanent placement | — | 22,480 | — | 22,480 | |||||||||||||||||||
| Language services | — | — | 49,238 | 49,238 | |||||||||||||||||||
| Vendor management systems | — | — | 75,022 | 75,022 | |||||||||||||||||||
| Other technologies | — | — | 7,658 | 7,658 | |||||||||||||||||||
| Technology-enabled services | — | — | 131,918 | 131,918 | |||||||||||||||||||
| Talent planning and acquisition | — | — | 13,075 | 13,075 | |||||||||||||||||||
| Total revenue | $ | 1,228,039 | $ | 179,506 | $ | 144,993 | $ | 1,552,538 | |||||||||||||||
The Company did not generate material revenue from labor disruption services during the three months ended March 31, 2022.
12
6. NOTES PAYABLE AND CREDIT AGREEMENT
| Nurse and Allied Solutions | Locum Tenens Solutions | Other Workforce Solutions | Total | ||||||||||||
| Balance, January 1, 2017 | $ | 104,306 | $ | 19,743 | $ | 217,705 | $ | 341,754 | |||||||
| Goodwill adjustment for HSG acquisition | (1,199 | ) | — | — | (1,199 | ) | |||||||||
| Goodwill adjustment for Peak acquisition | — | — | 41 | 41 | |||||||||||
| Balance, September 30, 2017 | $ | 103,107 | $ | 19,743 | $ | 217,746 | $ | 340,596 | |||||||
| Accumulated impairment loss as of December 31, 2016 and September 30, 2017 | $ | 154,444 | $ | 53,940 | $ | 6,555 | $ | 214,939 | |||||||
7. FAIR VALUE MEASUREMENT
The Company’s valuation techniques and inputs used to measure fair value and the definition of the three levels (Level 1, Level 2, and Level 3) of the fair value hierarchy are disclosed in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note 4—(3), Fair Value Measurement” of the 20162022 Annual Report. The Company has not changed the valuation techniques or inputs it uses for its fair value measurement during the ninethree months ended September 30, 2017.March 31, 2023.
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
The Company has a deferred compensation plan for certain executives and employees, which is composed of deferred compensation and all related income and losses attributable thereto. 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 Company’s restricted cash equivalents and investments that serve as collateral for the Company’s captive insurance company primarily 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. The Company’s cash equivalents also include commercial paper classified as Level 2 in the fair value hierarchy. Of the $28,538$37,600 commercial paper issued and outstanding as of September 30, 2017, $5,076March 31, 2023, none had original maturities greater than three months. Of the $31,536 commercial paper issued and outstanding as of December 31, 2022, 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 March 31, 2023, the Company had $23,192 corporate bonds issued and outstanding, all of which had original maturities greater than three months whichand were considered available-for-sale securities. As of December 31, 2016,2022, the Company had $25,610 commercial paper$25,095 corporate bonds issued and outstanding, all of which $11,152 had original maturities greater than three months and were considered available-for-sale securities.
The Company’s interest rate swap wascontingent consideration liabilities associated with acquisitions are measured at fair value using a discounted cash flow analysis that includes the contractual terms, including the period to maturity, and Level 2 observable market-based inputs, including interest rate curves. The fair value of the swap was determined by netting the discounted future fixed cash receipts payments and the discounted expected variable cash receipts. The variable cash receipts were based on an expectation of future interest rates (forward curves) derived from observable market interest rate yield curves. The valuation also considered credit risk adjustments that were necessary to reflect the probability of default by the counterparty or the Company, which were considered Level 3 inputs. On May 3, 2017, the Company terminated the remaining interest rate swap.
The following tables present information about the above-referenced assets and liabilities and indicate the fair value hierarchy of the valuation techniques utilized to determine such fair value:
13
| Fair Value Measurements as of March 31, 2023 | Fair Value Measurements as of December 31, 2022 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements as of September 30, 2017 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Total | Quoted Prices in Active Markets for Identical Assets (Level 1) | Significant Other Observable Inputs (Level 2) | Significant Unobservable Inputs (Level 3) | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Assets (Liabilities) | Assets (Liabilities) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Money market funds | $ | 4,026 | $ | 4,026 | $ | — | $ | — | Money market funds | $ | 641 | $ | — | $ | — | $ | 641 | $ | 36,895 | $ | — | $ | — | $ | 36,895 | |||||||||||||||||||||||||||||||||||||
| Deferred compensation | Deferred compensation | (144,349) | — | — | (144,349) | (128,465) | — | — | (128,465) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Corporate bonds | Corporate bonds | — | 23,192 | — | 23,192 | — | 25,095 | — | 25,095 | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Commercial paper | 28,538 | — | 28,538 | — | Commercial paper | — | 37,600 | — | 37,600 | — | 31,536 | — | 31,536 | |||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition contingent consideration earn-out liabilities | (1,952 | ) | — | — | (1,952 | ) | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition contingent consideration liabilities | Acquisition contingent consideration liabilities | — | — | (5,150) | (5,150) | — | — | (5,070) | (5,070) | |||||||||||||||||||||||||||||||||||||||||||||||||||||
| Fair Value Measurements as of December 31, 2016 | |||||||||||||||
| 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 | $ | 4,627 | $ | 4,627 | $ | — | $ | — | |||||||
| Commercial paper | 25,610 | — | 25,610 | — | |||||||||||
| Interest rate swap asset | 24 | — | 24 | — | |||||||||||
| Acquisition contingent consideration earn-out liabilities | (6,816 | ) | — | — | (6,816 | ) | |||||||||
| Three Months Ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Balance as of July 1, | $ | (1,932 | ) | $ | (7,054 | ) | |
| Change in fair value of contingent consideration earn-out liability from Peak acquisition | — | 480 | |||||
| Change in fair value of contingent consideration earn-out liability from TFS acquisition | — | (94 | ) | ||||
| Change in fair value of contingent consideration earn-out liability from HSG acquisition | (20 | ) | (84 | ) | |||
| Balance as of September 30, | $ | (1,952 | ) | $ | (6,752 | ) | |
| Nine Months Ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Balance as of January 1, | $ | (6,816 | ) | $ | (3,770 | ) | |
| Settlement of TFS earn-out for year ended December 31, 2015 | — | 1,000 | |||||
| Contingent consideration earn-out liability from HSG acquisition on January 11, 2016 | — | (3,590 | ) | ||||
| Contingent consideration earn-out liability from Peak acquisition on June 3, 2016 | — | (480 | ) | ||||
| Change in fair value of contingent consideration earn-out liability from Avantas acquisition | — | 660 | |||||
| Change in fair value of contingent consideration earn-out liability from TFS acquisition | — | (859 | ) | ||||
| Change in fair value of contingent consideration earn-out liability from HSG acquisition | (66 | ) | (193 | ) | |||
| Change in fair value of contingent consideration earn-out liability from Peak acquisition | — | 480 | |||||
| Settlement of TFS earn-out for year ended December 31, 2016 | 3,000 | — | |||||
| Settlement of HSG earn-out for year ended December 31, 2016 | 1,930 | — | |||||
| Balance as of September 30, | $ | (1,952 | ) | $ | (6,752 | ) | |
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 investments.
The Company evaluates goodwill and indefinite-lived intangible assets annually for impairment and whenever events or changes in circumstances occur indicatingindicate that goodwill 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, 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 condensed consolidated statements of comprehensive income. The balance of the equity investment was $19,204 as of both March 31, 2023 and December 31, 2022.
There were no triggering events identified and no indication ofmaterial impairment of the Company’s goodwill, indefinite-lived intangible assets, long-lived assets, or equity investmentscharges recorded during the ninethree months ended September 30, 2017March 31, 2023 and 2016.2022.
Fair Value of Financial Instruments
The carrying amountCompany 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 4.625% senior notes approximate their fair values. Thedue 2027 (the “2027 Notes”) and 4.000% senior notes were issueddue 2029 (the “2029 Notes”) was estimated using quoted market prices in October 2016active markets for identical liabilities, which are Level 1 inputs. The carrying amounts and have a fixed rateestimated fair value of 5.125%. There have been no changesthe 2027 Notes and the 2029 Notes are presented in available rates for similar debt since the date of issuance.following table. See additional information regarding the 2027 Notes and the 2029 Notes in “Item 8. FinancialPart II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of our 2016the 2022 Annual Report.
| As of March 31, 2023 | As of December 31, 2022 | ||||||||||||||||
| Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||
| 2027 Notes | $ | 500,000 | $ | 463,125 | $ | 500,000 | $ | 460,000 | |||||||||
| 2029 Notes | 350,000 | 308,875 | 350,000 | 300,125 | |||||||||||||
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.
The Company is subject to taxation in the U.S. and various states and foreign jurisdictions. With few exceptions, as of September 30, 2017,March 31, 2023, the Company is no longer subject to state, local or foreign examinations by tax authorities for tax years before 2006,2011, and the Company is no longer subject to U.S. federal income or payroll tax examinations for tax years before 2011. The Company’s tax years 2007, 2008, 2009 and 2010 had been under audit by the Internal Revenue Service (“IRS”) for several years and in 2014, the IRS issued the Company its Revenue Agent Report (“RAR”) and an Employment Tax Examination Report (“ETER”). The RAR proposed adjustments to the Company’s taxable income for 2007-2010 and net operating loss carryforwards for 2005 and 2006, resulting from the proposed disallowance2019.
14
Legal Proceedings
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, payroll,compensation, contract, competitor disputes and employee-related matters and include individual and collectiveclass 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 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 removed 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. Management currently believesThe plaintiffs filed an appeal of the probable loss relatedjudgment relating to thesethe 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 reached an agreement to settle this matter in its entirety and hour claimsreceived court approval of the settlement. Payment is expected to be made in the second quarter of 2023.
Because of the inherent uncertainty of litigation, the Company is not material andable to reasonably predict if any matter will be resolved in a manner that is materially adverse to the amountCompany. The Company has recorded accruals in connection with the two matters described above amounting to $46,225. The Company is currently unable to estimate the possible loss or range of loss beyond amounts already accrued. Loss contingencies accrued by the Company for such claims is not material as of September 30, 2017. However, losses ultimately incurred for such claims could materially differ from amounts already accrued by the Company.
Operating Leases
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 in the second quarter of 2023. The initial term of the lease is approximately eleven 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 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, resultsperiod the lease commences.
15
The consolidated balance sheets detail is as follows asfollows:
| March 31, 2023 | December 31, 2022 | |||||||||||||
| Other current assets: | ||||||||||||||
| Restricted cash and cash equivalents | $ | 31,500 | $ | 37,225 | ||||||||||
| Income taxes receivable | — | 8,875 | ||||||||||||
| Other | 20,052 | 19,937 | ||||||||||||
| Other current assets | $ | 51,552 | $ | 66,037 | ||||||||||
| Fixed assets: | ||||||||||||||
| Furniture and equipment | $ | 54,978 | $ | 51,408 | ||||||||||
| Software | 333,302 | 323,418 | ||||||||||||
| Leasehold improvements | 938 | 2,067 | ||||||||||||
| 389,218 | 376,893 | |||||||||||||
| Accumulated depreciation | (233,942) | (227,617) | ||||||||||||
| Fixed assets, net | $ | 155,276 | $ | 149,276 | ||||||||||
| Other assets: | ||||||||||||||
| Life insurance cash surrender value | $ | 140,731 | $ | 117,139 | ||||||||||
| Operating lease right-of-use assets | $ | 14,484 | 16,266 | |||||||||||
| Other | 42,110 | 38,611 | ||||||||||||
| Other assets | $ | 197,325 | $ | 172,016 | ||||||||||
| Accounts payable and accrued expenses: | ||||||||||||||
| Trade accounts payable | $ | 81,447 | $ | 78,057 | ||||||||||
| Subcontractor payable | 278,432 | 295,259 | ||||||||||||
| Accrued expenses | 82,337 | 73,885 | ||||||||||||
| Loss contingencies | 15,874 | 14,638 | ||||||||||||
| Professional liability reserve | 8,091 | 7,756 | ||||||||||||
| Other | 7,583 | 6,857 | ||||||||||||
| Accounts payable and accrued expenses | $ | 473,764 | $ | 476,452 | ||||||||||
| Accrued compensation and benefits: | ||||||||||||||
| Accrued payroll | $ | 72,113 | $ | 63,857 | ||||||||||
| Accrued bonuses and commissions | 28,032 | 96,760 | ||||||||||||
| Workers compensation reserve | 12,394 | 12,113 | ||||||||||||
| Deferred compensation | 144,349 | 128,465 | ||||||||||||
| Other | 12,349 | 32,049 | ||||||||||||
| Accrued compensation and benefits | $ | 269,237 | $ | 333,244 | ||||||||||
| Other current liabilities: | ||||||||||||||
| Acquisition related liabilities | $ | 5,150 | $ | 5,070 | ||||||||||
| Income taxes payable | 23,395 | — | ||||||||||||
| Client deposits | 7,463 | 21,466 | ||||||||||||
| Operating lease liabilities | 7,789 | 8,090 | ||||||||||||
| Deferred revenue | 13,876 | 11,825 | ||||||||||||
| Other | 2,927 | 1,786 | ||||||||||||
| Other current liabilities | $ | 60,600 | $ | 48,237 | ||||||||||
| Other long-term liabilities: | ||||||||||||||
| Workers compensation reserve | $ | 22,756 | $ | 23,841 | ||||||||||
| Professional liability reserve | 38,153 | 36,214 | ||||||||||||
| Operating lease liabilities | 7,652 | 9,360 | ||||||||||||
| Other | 53,213 | 51,151 | ||||||||||||
| Other long-term liabilities | $ | 121,774 | $ | 120,566 | ||||||||||
16
Contents
| September 30, 2017 | December 31, 2016 | |||||||
| Other current assets: | ||||||||
| Restricted cash and cash equivalents | $ | 16,215 | $ | 20,271 | ||||
| Other | 10,005 | 14,336 | ||||||
| Other current assets | $ | 26,220 | $ | 34,607 | ||||
| Fixed assets: | ||||||||
| Furniture and equipment | $ | 28,202 | $ | 25,582 | ||||
| Software | 126,492 | 112,405 | ||||||
| Leasehold improvements | 8,025 | 6,832 | ||||||
| 162,719 | 144,819 | |||||||
| Accumulated depreciation | (94,531 | ) | (84,865 | ) | ||||
| Fixed assets, net | $ | 68,188 | $ | 59,954 | ||||
| Other assets: | ||||||||
| Life insurance cash surrender value | $ | 45,835 | $ | 32,190 | ||||
| Other | 28,127 | 25,344 | ||||||
| Other assets | $ | 73,962 | $ | 57,534 | ||||
| Accounts payable and accrued expenses: | ||||||||
| Trade accounts payable | $ | 24,166 | $ | 33,392 | ||||
| Subcontractor payable | 38,167 | 51,973 | ||||||
| Accrued expenses | 45,690 | 37,251 | ||||||
| Professional liability reserve | 7,048 | 10,254 | ||||||
| Other | 2,863 | 4,642 | ||||||
| Accounts payable and accrued expenses | $ | 117,934 | $ | 137,512 | ||||
| Accrued compensation and benefits: | ||||||||
| Accrued payroll | $ | 31,840 | $ | 30,917 | ||||
| Accrued bonuses | 16,755 | 26,992 | ||||||
| Accrued travel expense | 3,488 | 2,972 | ||||||
| Accrued health insurance reserve | 3,708 | 3,189 | ||||||
| Accrued workers compensation reserve | 8,301 | 8,406 | ||||||
| Deferred compensation | 45,771 | 32,690 | ||||||
| Other | 2,121 | 2,827 | ||||||
| Accrued compensation and benefits | $ | 111,984 | $ | 107,993 | ||||
| Other current liabilities: | ||||||||
| Acquisition related liabilities | $ | 2,981 | $ | 6,921 | ||||
| Other | 2,459 | 9,690 | ||||||
| Other current liabilities | $ | 5,440 | $ | 16,611 | ||||
| Other long-term liabilities: | ||||||||
| Workers’ compensation reserve | $ | 18,475 | $ | 18,708 | ||||
| Professional liability reserve | 40,033 | 37,338 | ||||||
| Deferred rent | 14,602 | 13,274 | ||||||
| Unrecognized tax benefits | 7,240 | 8,464 | ||||||
| Other | 2,323 | 4,312 | ||||||
| Other long-term liabilities | $ | 82,673 | $ | 82,096 | ||||
Item 2. Management’s Discussion and Analysis of Financial Condition and Results
of Operations
The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto and other financial information included elsewhere herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2016,2022, filed with the Securities and Exchange Commission (“SEC”) on February 17, 201722, 2023 (“20162022 Annual Report”). Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are “forward-looking statements.” See “Special Note Regarding Forward-Looking Statements.” We undertake no obligation to update the forward-looking statements in this Quarterly Report. References in this Quarterly Report to “AMN Healthcare,” the “Company,” “we,” “us” and “our” refer to AMN Healthcare Services, Inc. and its wholly owned subsidiaries.
Overview of Our Business
We provide healthcare workforce solutions and staffing services to healthcare facilitiesorganizations across the nation. As an innovative workforcetotal talent solutions partner, our managed services programs, or “MSP,” vendor management systems, or “VMS,” recruitment process outsourcing, or “RPO,” workforce optimizationconsulting services, medical coding and consultingpredictive modeling, staff scheduling, revenue cycle solutions, language services, and the placement of physicians, nurses, allied healthcare professionals and healthcare executivesleaders 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. Our clients include acute and sub-acute care hospitals, community health centers and clinics, physician practice groups, retail and urgent care centers, home health facilities, and many other healthcare settings. Our clients utilize our workforce solutions and healthcare staffing services to strategically plan for and meet their workforce needs in an economically beneficial manner. Our managed services program and vendor management systems enable healthcare organizations to increase their efficiency by managing all of their supplemental workforce needs through one company or technology.
We conduct business through three reportable segments: (1) nurse and allied solutions, (2) locum tenensphysician and leadership solutions, and (3) othertechnology and workforce solutions. For the three months ended September 30, 2017,March 31, 2023, we recorded revenue of $494.4$1,126.2 million, as compared to $472.6 million for the same period last year. For the three months ended September 30, 2017, we recorded net income of $28.1 million, as compared to $27.3 million for the same period last year. For the nine months ended September 30, 2017, we recorded revenue of $1,479.4 million, as compared to $1,414.4 million for the same period last year. For the nine months ended September 30, 2017, we recorded net income of $91.4 million, as compared to $79.5$1,552.5 million for the same period last year.
Nurse and allied solutions segment revenue comprised 62%73% and 79% of total consolidated revenue for both the ninethree months ended September 30, 2017March 31, 2023 and 2016.2022, respectively. Through our nurse and allied solutions segment, we provide hospitals and other healthcare facilities with a comprehensive managed services solution in which we manage and staff all of the temporary and permanent nursing and allied staffing needs of a clientclient. We also provide revenue cycle solutions, which include skilled labor solutions for remote medical coding, clinical documentation improvement, case management, and clinical data registry, and provide auditing and advisory services. A majority of our placements in this segment are under our managed services solution, however, we also provide traditional clinicaldirect nurse and allied healthcare staffing solutions of variable assignment lengths.
Operating Metrics
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 education programindicator of labor market trends and costs within our nurse and allied solutions segment;
•Billable hours represent hours worked by our healthcare professionals that provides custom healthcare education, research, professional practice tools,we are able to bill on client engagements, which are used by management as a measure of volume in our nurse and professional development services, (6) medical codingallied solutions segment;
17
•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 related consulting services,leadership solutions segment; and (7) workforce optimization services that include consulting, data analytics, predictive modeling,
•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 SaaS-based scheduling technology.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. The U.S. Bureautrends, and from early 2020 through 2022, the COVID-19 pandemic and the “Great Resignation” impacted demand. From late 2020 through most of Labor Statistics’ survey data reflect near record2022, these conditions resulted in historically high demand for our nurses and allied healthcare professionals. In 2023, with the pandemic-related needs subsiding, demand in our travel nurse business has declined significantly from historic highs and is currently slightly below pre-pandemic levels. Demand in our allied business continues to be above pre-pandemic levels of healthcare job openings and quits, which we viewcertain specialties such as positive trends forallied therapy are up significantly year over year. Our clients are still dealing with significant labor shortages as their progress on permanent hiring and retention has not addressed the healthcare staffing industry.vacancies. At the same time, despite the entire healthcare industry continues to face uncertainty related to the potential dismantling, or significant change to certain aspectsrelatively high level of the Affordable Care Act, which could impact the reimbursements upon whichhospital job openings, our clients depend. The uncertainty has impacted thehave focused on reducing what had been historically high utilization of healthcare servicescontingent labor.
Wages for nurses and demand forthe corresponding bill rates we charge our services.
solutions segment decreased year-over-year in the first quarter of 2023. We expect bill rates and clinician compensation to stabilize above pre-pandemic levels in 2023.
In our physician and leadership solutions segment, demand for our locum tenens solutions segment, we have seen a decline in demand in certain specialties such as hospitalists that has negatively impacted our volumes and, as a result,business is well above pre-pandemic levels. Demand for certified registered nurse anesthetists (CRNAs), which represents the largest percentage of revenue in this segment. In addition, we made organizationalbusiness, continues to be strong. We expect continued strong demand for locums tenens staffing in the second quarter of 2023. Demand remained softer for our interim leadership and search businesses in the first quarter of 2023 as some healthcare organizations streamlined or deferred leadership changes in this business and are making operational changesroles to improve performance. We are beginning to see the positive impact of these changes and improving demand in most specialties.
reduce costs.
In our othertechnology and workforce solutions segment, our interim leadershiplanguage services business continued to experience increased utilization reflecting a continued shift to more virtual interpretation that began during the pandemic. As anticipated, bill rates and vendor management systems businesses are growing.volumes in our VMS business followed similar trends as our nurse and allied solutions segment, declining from historic highs but remaining above pre-pandemic levels. We anticipate our VMS business to continue to trend along the same lines as our nurse and allied solutions segment with bill rates stabilizing in 2023 above pre-pandemic levels.
Our clients have accelerated initiatives designed to contain costs of their spend on contingent labor, and we are experiencing declines in our permanent placement businessesa number of clients that we believe are primarily related to operational executionreevaluating their approach and are making organizational changes designed to improve our performance.seeking sustainable workforce solutions.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) 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, including those related to intangible assets purchased in a business combination, asset impairments, accruals for self-insurance, compensation and related benefits, accounts receivable, contingencies and litigation, earn-outcontingent consideration (“earn-out”) liabilities associated with acquisitions, and income taxes. We base these estimates 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. If these estimates differ significantly from actual results, our consolidated financial statements and future results of operations may be materially impacted. There have been no material changes in our critical accounting policies and estimates, other than the adoption of the Accounting StandardsStandard Update (“ASU”) 2016-09 described in Item 1. Condensed Consolidated Financial Statements—the accompanying Note 1,(1), “Basis of Presentation,” as compared to the critical accounting policies and estimates described in our 20162022 Annual Report.
Results of Operations
The following table sets forth, for the periods indicated, selected unaudited condensed consolidated 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 PeakConnetics acquisition impacts the comparability of the results between the three and nine months ended September 30, 2017March 31, 2023 and 2016.2022. See additional information in the accompanying Note (2), “Acquisitions.” Our historical results are not necessarily indicative of our future results of operations.
| Three Months Ended March 31, | |||||||||||||||||||||||
| 2023 | 2022 | ||||||||||||||||||||||
| Unaudited Condensed Consolidated Statements of Operations: | |||||||||||||||||||||||
| Revenue | 100.0 | % | 100.0 | % | |||||||||||||||||||
| Cost of revenue | 67.2 | 68.0 | |||||||||||||||||||||
| Gross profit | 32.8 | 32.0 | |||||||||||||||||||||
| Selling, general and administrative | 18.3 | 16.6 | |||||||||||||||||||||
| Depreciation and amortization | 3.3 | 2.0 | |||||||||||||||||||||
| Income from operations | 11.2 | 13.4 | |||||||||||||||||||||
| Interest expense, net, and other | 1.0 | 0.6 | |||||||||||||||||||||
| Income before income taxes | 10.2 | 12.8 | |||||||||||||||||||||
| Income tax expense | 2.7 | 3.4 | |||||||||||||||||||||
| Net income | 7.5 | % | 9.4 | % | |||||||||||||||||||
| Three Months Ended September 30, | Nine Months Ended September 30, | ||||||||||
| 2017 | 2016 | 2017 | 2016 | ||||||||
| Unaudited Condensed Consolidated Statements of Operations: | |||||||||||
| Revenue | 100.0 | % | 100.0 | % | 100.0 | % | 100.0 | % | |||
| Cost of revenue | 67.7 | 67.3 | 67.4 | 67.4 | |||||||
| Gross profit | 32.3 | 32.7 | 32.6 | 32.6 | |||||||
| Selling, general and administrative | 20.3 | 21.2 | 20.2 | 21.0 | |||||||
| Depreciation and amortization | 1.7 | 1.6 | 1.6 | 1.6 | |||||||
| Income from operations | 10.3 | 9.9 | 10.8 | 10.0 | |||||||
| Interest expense, net, and other | 1.0 | 0.6 | 1.0 | 0.6 | |||||||
| Income before income taxes | 9.3 | 9.3 | 9.8 | 9.4 | |||||||
| Income tax expense | 3.6 | 3.5 | 3.6 | 3.8 | |||||||
| Net income | 5.7 | % | 5.8 | % | 6.2 | % | 5.6 | % | |||
Comparison of Results for the Three Months Ended September 30, 2017March 31, 2023 to the Three Months Ended September 30, 2016March 31, 2022
Revenue. Revenue increased 5%decreased 27% to $494.4$1,126.2 million for the three months ended September 30, 2017March 31, 2023 from $472.6$1,552.5 million for the same period in 2016, all of which was organic growth.2022, attributable to a decline in revenue across our segments with the greatest decline in our nurse and allied solutions segment.
Nurse and allied solutions segment revenue increased 6%decreased 33% to $302.9$824.5 million for the three months ended September 30, 2017March 31, 2023 from $286.8$1,228.0 million for the same period in 2016.2022. The $16.1$403.5 million increasedecrease was primarily attributable to a 4% increasean approximately 22% decrease in the average bill rate, an 11% decrease in the average number of healthcare professionalstravelers on assignment, and a 2% increase3% decrease in the average bill ratebillable hours during the three months ended September 30, 2017.March 31, 2023. The overall decrease was partially offset by an approximately $6.0 million increase in labor disruption revenue and additional revenue of $4.7 million in connection with the Connetics acquisition.
For the three months ended March 31, 2023 and 2022, revenue under our MSP arrangements comprised approximately 57% and 66% of our consolidated revenue, 74% and 81% of our nurse and allied solutions segment revenue, 21% and 14% of our physician and leadership solutions segment revenue, and 2% and 2% of our technology and workforce solutions segment revenue, respectively.
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Gross Profit. Gross profit decreased 26% to $368.8 million for the three months ended March 31, 2023 from $496.2 million for the same period in 2022, representing gross margins of 32.3%32.8% and 32.7%32.0%, respectively. The decreaseincrease in consolidated gross margin for the three months ended March 31, 2023, as compared to the same period in 2022, was primarily due to an unfavorablea change in sales mix higher insurance costsresulting from lower revenue in our othernurse and allied solutions segment. The overall increase was partially offset by (1) a lower margin in our technology and workforce solutions segment primarily due to a change in sales mix resulting from lower revenue in our VMS business and lower bill-pay spreads inits higher margins as compared to our other businesses within the locum tenens solutions segment partially offset byand (2) a higher grosslower margin in theour nurse and allied solutions segment driven primarily by lower direct costs during the three months ended September 30, 2017.a decrease in billable hours. Gross margin by reportable segment for the three months ended September 30, 2017March 31, 2023 and 20162022 was 27.3%25.9% and 26.7%26.2% for nurse and allied solutions, 30.1%35.2% and 31.2%35.0% for locum tenensphysician and leadership solutions, and 54.1%71.4% and 56.7%76.7% for othertechnology and workforce solutions, respectively.
Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses were $100.6$205.6 million, representing 20.3%18.3% of revenue, for the three months ended September 30, 2017,March 31, 2023, as compared to $100.0$257.6 million, representing 21.2%16.6% of revenue, for the same period in 2016.2022. The increasedecrease in SG&A expenses was primarily due to higher bad debt expense$56.9 million of lower employee compensation and benefits (inclusive of share-based compensation), partially offset by operating leverage ona $5.8 million increase in the higher revenue and lower acquisition and integration costs as compared to the same period last year. The decrease in unallocated corporate overhead was primarily attributable to lower
| (In Thousands) | ||||||||||||||||||
| (In Thousands) Three Months Ended September 30, | Three Months Ended March 31, | |||||||||||||||||
| 2017 | 2016 | 2023 | 2022 | |||||||||||||||
| Nurse and allied solutions | $ | 41,884 | $ | 39,312 | Nurse and allied solutions | $ | 99,997 | $ | 126,996 | |||||||||
| Locum tenens solutions | 19,075 | 19,881 | ||||||||||||||||
| Other workforce solutions | 23,445 | 22,985 | ||||||||||||||||
| Physician and leadership solutions | Physician and leadership solutions | 33,208 | 42,489 | |||||||||||||||
| Technology and workforce solutions | Technology and workforce solutions | 31,343 | 33,187 | |||||||||||||||
| Unallocated corporate overhead | 13,698 | 15,113 | Unallocated corporate overhead | 30,733 | 43,648 | |||||||||||||
| Share-based compensation | 2,477 | 2,704 | Share-based compensation | 10,318 | 11,259 | |||||||||||||
| $ | 100,579 | $ | 99,995 | $ | 205,599 | $ | 257,579 | |||||||||||
Depreciation and Amortization Expenses. Amortization expense decreased slightlyincreased 10% to $4.7$21.7 million for the three months ended September 30, 2017March 31, 2023 from $4.8$19.6 million for the same period in 2016.2022, primarily attributable to additional amortization expense related to the intangible assets acquired in the Connetics acquisition. Depreciation expense (exclusive of depreciation included in cost of revenue) increased 13%45% to $3.4$15.9 million for the three months ended September 30, 2017March 31, 2023 from $3.0$11.0 million for the same period in 2016,2022, 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, $1.3 million and $0.9 million of depreciation expense for our language services business is included in cost of revenue for the three months ended March 31, 2023 and 2022, respectively.
Interest Expense, Net, and Other. Interest expense, net, and other was $4.8$10.3 million during the three months ended September 30, 2017March 31, 2023 as compared to $3.0$9.6 million for the same period in 2016.2022. The increase iswas primarily due to a higher interest bearing Notes (as defined below)average debt outstanding balance during the three months ended March 31, 2023.
Income Tax Expense. Income tax expense was $31.3 million for the three months ended September 30, 2017,March 31, 2023 as compared to the term loans and revolver in the same period last year.
| (In Thousands) Nine Months Ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Nurse and allied solutions | $ | 118,464 | $ | 115,755 | |||
| Locum tenens solutions | 58,507 | 56,247 | |||||
| Other workforce solutions | 69,902 | 70,654 | |||||
| Unallocated corporate overhead | 44,732 | 45,908 | |||||
| Share-based compensation | 7,720 | 8,795 | |||||
| $ | 299,325 | $ | 297,359 | ||||
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Liquidity and Capital Resources
In summary, our cash flows were:
| (In Thousands) | |||||||||||
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net cash provided by operating activities | $ | 43,434 | $ | 200,215 | |||||||
| Net cash used in investing activities | (32,431) | (23,239) | |||||||||
| Net cash used in financing activities | (44,457) | (237,455) | |||||||||
| (In Thousands) Nine Months Ended September 30, | |||||||
| 2017 | 2016 | ||||||
| Net cash provided by operating activities | $ | 96,382 | $ | 84,820 | |||
| Net cash used in investing activities | (23,444 | ) | (241,271 | ) | |||
| Net cash provided by (used in) financing activities | (63,824 | ) | 162,418 | ||||
Historically, our primary liquidity requirements have been for acquisitions, working capital requirements, and debt service under our credit facilities and the Notes.senior notes. We have funded these requirements through internally generated cash flow and funds borrowed under our credit facilities. During the third quarter of 2017, we paid off the remaining balance of our term debt.
As of September 30, 2017, zeroMarch 31, 2023, (1) $140.0 million was drawn from $258.8with $589.2 million of available credit under theour $750.0 million secured revolving credit facility (the “Revolver”“Senior Credit Facility”) and, (2) the aggregate principal amount of our 5.125% Senior Notes4.625% senior notes due 20242027 (the “Notes”“2027 Notes”) outstanding equaled $325.0was $500.0 million, and (3) the aggregate principal amount of our 4.000% senior notes due 2029 (the “2029 Notes”) outstanding was $350.0 million. We describe in further detail our amended credit agreement,Amended Credit Agreement (as defined below), under which our term loan and Revolver arethe Senior Credit Facility is governed, the 2027 Notes, and the 2029 Notes in “Item 8. FinancialPart II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of our 20162022 Annual ReportReport.
As of March 31, 2023, the total of our contractual obligations under operating leases with initial terms in excess of one year was $16.0 million. We describe in further detail our operating lease arrangements in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (5), Leases” of our 2022 Annual Report. We also have various obligations and working capital requirements, such as certain tax and legal matters, contingent consideration and other liabilities, that are recorded on Form 10-K.our consolidated balance sheets. See additional information in the accompanying Note (7), “Fair Value Measurement,” Note (8), “Income Taxes,” Note (9), “Commitments and Contingencies,” and Note (10), “Balance Sheet Details.”
In April 2015,addition to our cash requirements, we enteredhave 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 the accompanying Part II, Item 2, “Unregistered Sales of Equity Securities and Use of Proceeds.” Under the repurchase program, we intend to enter into an interest rate swapaccelerated share repurchase (“ASR”) agreement with a counterparty to minimize our exposure to interest rate fluctuations on $100repurchase approximately $200.0 million of our outstanding variable rate debt under one of our term loans for which we pay a fixed rate of 0.983% per annum and receive a variable rate equal to floating one-month LIBOR. This agreement expires on March 30, 2018, and no initial investment was made to enter into this agreement. On October 3, 2016, we reduced the interest rate swap notional amount to $40 million. On May 3, 2017, we terminated the remaining interest rate swap.common stock.
We believe that cash generated from operations and available borrowings under the RevolverSenior Credit Facility will be sufficient to fund our operations and liquidity requirements, including expected capital expenditures, for at least the next year.12 months and beyond. We intend to finance potential future acquisitions either with cash provided from operations, borrowings under the Revolver,Senior Credit Facility or other borrowings 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 the ninethree months ended September 30, 2017March 31, 2023 was $96.4$43.4 million, compared to $84.8$200.2 million for the same period in 2016.2022. The increasedecrease in net cash provided by operating activities was primarily attributable to (1) improveda decrease in net income excluding non-cash expenses of $59.5 million primarily due to a decline in operating results in our nurse and allied solutions segment, (2) a decrease in accounts receivableaccrued compensation and subcontractor receivablebenefits between periods of $167.5 million primarily due to timingprior year increases in pay rates and the average number of collections,travelers on assignment in our nurse and (3) excess taxallied solutions segment and increased employee compensation and benefits onin 2022, including accrued bonuses and commissions that were paid during the vestingfirst quarter of employee equity awards resulting from the adoption of a new accounting pronouncement discussed in Item 1. Condensed Consolidated Financial Statements—Note (1), “Basis of Presentation.” The overall increase was partially offset by (1)2023, (3) a decrease in accounts payable and accrued expenses between periods of $80.5 million primarily due to timingincreased associate vendor usage in 2022, and (4) increases in prepaid expenses and other current assets between periods of payments, (2) additional$41.4 million and $12.3 million, respectively, primarily due to prepayments and deposits that were made in 2021 and refunded by third-party vendors in 2022 related to labor disruption services. The overall decrease in net cash paid for income taxes duringprovided by operating activities was partially offset by a decrease in accounts receivable and subcontractor receivables between periods of $199.3 million primarily due to a smaller increase in the nine months ended September 30, 2017receivables balance in the current year as compared to the same period lastprior year, which was due to increases in revenue and (3) an increaseassociate vendor usage in the cash, cash equivalents and investments attributable to cash payments made to our captive insurance entity, which are restricted for use byprior year along with timing of collections during the captive for future claim payments and, to a lesser extent, its working capital needs.three months ended March 31, 2023. Our Days Sales Outstanding (“DSO”) was 6455 days at each of September 30, 2017,March 31, 2023, 55 days at December 31, 2016,2022, and September 30, 2016.57 days at March 31, 2022.
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Investing Activities
Net cash used in investing activities for the ninethree months ended September 30, 2017March 31, 2023 was $23.4$32.4 million, compared to $241.3net cash used in investing activities of $23.2 million for the same period in 2016.2022. The decreaseincrease was primarily due to (1) no cash paid for acquisitions during the nine months ended September 30, 2017 as compared to $216.6 million used for acquisitions during the nine months ended September 30, 2016 and (2) net $6.2 million restricted investment proceeds related to our captive insurance entity during the nine months ended September 30, 2017. The overall decrease was partially offset by (1) a $2.0 million equity investment and (2) $10.1$17.0 million of payments to fund the deferred compensation plan during the ninethree months ended September 30, 2017March 31, 2023 as compared to $5.7$12.6 million of payments during the ninethree months ended September 30, 2016. CapitalMarch 31, 2022. In addition, capital expenditures were $17.2$17.5 million and $17.7$13.6 million for the ninethree months ended September 30, 2017March 31, 2023 and 2016,2022, respectively.
Financing Activities
Net cash used in financing activities during the ninethree months ended September 30, 2017March 31, 2023 was $63.8$44.5 million, primarily due to (1) the repayment of $44.1 million under our term loans, (2) $3.7 million for acquisition contingent consideration earn-out payments, (3) $7.1$174.7 million paid in connection with the repurchase of our common stock, and (4) $9.1(2) repayments of $70.0 million under the Senior Credit Facility, (3) $6.1 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards.awards, and (4) $3.6 million payment of financing costs in connection with the Third Amendment (as defined below), all of which was partially offset by borrowings of $210.0 million under the Senior Credit Facility. Net cash provided byused in financing activities during the ninethree months ended September 30, 2016March 31, 2022 was $162.4$237.5 million, primarily due to borrowings$228.0 million paid in connection with the repurchase of $124.0our common stock and $9.4 million under the Revolver and $75.0 million of borrowings under a new term loan under our amended credit agreement to fund our BES and HSG acquisitions, partially offset by (1) the repayment of $8.4 million under our term loans and $24.0 million under the Revolver, and (2) $5.6 millionin cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards.
Amended Credit Agreement
On February 10, 2023, we entered into the third amendment to our credit agreement (the “Third Amendment”). The Third Amendment (together with the credit agreement as amended to date, collectively, the “Amended Credit Agreement”) provides for, among other things, an increase to the revolving commitments under the Senior Credit Facility to $750.0 million and an extension of the maturity date of the Amended Credit Agreement to February 10, 2028. Our obligations under the Amended Credit Agreement are secured by substantially all of our assets. We describe in further detail the terms of the Amended Credit Agreement, including maturity dates and interest terms, in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of our 2022 Annual Report.
Letters of Credit
At September 30, 2017,March 31, 2023, we maintained outstanding standby letters of credit totaling $20.2$21.3 million as collateral in relation to our professional liability insurance agreements, workers’ compensation insurance agreements and a corporate office lease agreement. Of the $20.2$21.3 million of outstanding letters of credit, we have collateralized $4.0$0.5 million in cash and cash equivalents and the remaining amounts are$20.8 million is collateralized by the Revolver.Senior Credit Facility. Outstanding standby letters of credit at December 31, 20162022 totaled $15.4$22.0 million.
There have been no material changes to the table entitled “Contractual Obligations” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our 2016 Annual Report that occurred during the nine months ended September 30, 2017.
Special Note Regarding Forward-Looking Statements
This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We base these forward-looking statements on our expectations, estimates, forecasts, and projections about future events and about 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,” variations of such words, and other similar expressions. In addition, any statements that refer to projections of demand or supply trends, financial items, anticipated growth, future growth and revenues, future economic conditions and performance, plans, objectives and strategies for future operations, expectations, or other characterizations of future events or circumstances are forward-looking statements. All forward-looking statements involve risks and uncertainties. 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 materially from those implied by the forward-looking statements in this Quarterly Report are set forth in our 20162022 Annual Report and include but are not limited to:
•the effects of the COVID-19 pandemic on our business, financial condition and results of operations;
•the duration and extent to which hospitals and other healthcare entities adjust their utilization of temporary nurses and allied healthcare professionals, physicians, healthcare leaders and other healthcare professionals and workforce technology applications as a result of the labor market, economic conditions or COVID-19 pandemic;
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•the extent to which a spike in the COVID-19 pandemic may disrupt our operations due to the unavailability of our employees or healthcare professionals because of illness, risk of illness, quarantines, travel restrictions, mandatory vaccination requirements, desire to travel and work on temporary assignments or other factors that limit our existing or potential workforce and pool of candidates;
•the severity and duration of the impact the COVID-19 pandemic, the Great Resignation, economic downturns, inflation, recession or slow recoveries have on the financial condition and cash flow of many hospitals and healthcare systems such that it impairs their ability to make payments to us, timely or otherwise, for services rendered;
•the effects of economic downturns, inflation, recession or slow recoveries, which could result in less demand for our services, increased client initiatives designed to contain costs, including reevaluating their approach as it pertains to contingent labor and pricing pressures;managed services programs;
•any inability on our part to anticipate and quickly respond to changing marketplace conditions, such as alternative modes of healthcare delivery, reimbursement, or client needs;needs and requirements, including mandatory vaccination requirements;
•the negative effects that intermediary organizations may have on our ability to secure new and profitable contracts;
•the level of consolidation and concentration of buyers of healthcare workforce, staffing and technology solutions, which could affect the pricing of our services and our ability to mitigate concentration risk;
•the ability of our clients to retain and increase the productivity of their permanent staff, or their ability to increase the efficiency and effectiveness of their internalstaffing management and recruiting efforts, through predictive analytics, online recruiting, telemedicine or otherwise, which may negatively affect our revenue, results of operations, and cash flows;
•any inability on our part to grow and operate our business profitably in compliance with federal and state healthcare industry regulation, including privacy laws, conduct of operations, costs and payment for services and payment for referrals as well as laws regarding employment and compensation practices and government contracting;
•any challenge to the classification of certain of our healthcare professionals as independent contractors, which could adversely affect our profitability;
•the effect of investigations, claims, and legal proceedings alleging medical malpractice, violationanti-competitive conduct, violations of employment, privacy and wage regulations and other legal theories of liability asserted against us, which could subject us to substantial liabilities;
•any failure to further develop and evolve our current workforce solutions technology offerings and capabilities, which may harm our business and/or impact our ability to compete with new technologies and competitors;
•disruption to or failures of our SaaS-based technology within certain of our service offeringsor technology-enabled services, or our inability to adequately protect our intellectual property rights with respect to such technology, whichtechnologies or sufficiently protect the privacy of personal information, could reduce client satisfaction, harm our reputation and negatively affect our business;
•security breaches and cybersecurity incidents, including ransomware, that could compromise our information and systems, which could adversely affect our business operations and reputation and could subject us to substantial liabilities;
•any inability on our part to quickly and properly credential and match quality healthcare professionals with suitable placements, which may adversely affect demand for our services;
•any inability on our part to continue to attract, develop and retain our sales and operations team members, which may deteriorate our operations;
•our increasing dependence on third parties, including offshore vendors, for the execution of certain critical functions;
•the loss of our key officers and management personnel, which could adversely affect our business and operating results;
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•any inability to consummate and effectively incorporate acquisitions into our business operations, which may adversely affect our long-term growth and our results of operations;
•businesses we acquire may have liabilities or adverse operating issues, which could harm our operating results;
•any increase to our business and operating risks as we develop new services and clients, enter new lines of business, and focus more of our business on providing a full range of client solutions;
•any inability on our part to maintain our positive brand awareness and identity;identity, which may adversely affect our results of operation;
•any recognition by us of an impairment to the substantial amount of goodwill or indefinite-lived intangibles;intangibles on our balance sheet;
•our indebtedness, which could adversely affect our ability to raise additional capital to fund operations, limit our ability to react to changes in the effect of significant adverse adjustments byeconomy or our industry, and expose us to our insurance-related accruals, which could decrease our earnings or increase our losses, asinterest rate risk to the case may be;extent of any variable rate debt;
•the terms of our debt instruments that impose restrictions on us that may affect our ability to successfully operate our business.business; and
•the effect of significant adverse adjustments to our insurance-related accruals on our balance sheet, which could decrease our earnings or increase our losses and negatively impact our cash flows.
Item 3. 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 the three and nine months ended September 30, 2017,March 31, 2023, our primary exposure to market risk was interest rate risk associated with our variable interest debt instruments. In April 2015, we entered into an interest rate swap agreement to minimizeinstruments and our exposure to interest rate fluctuations on $100 million of our outstanding variable rate debt under one of our term loans for which we pay a fixed rate of 0.983% per annum and receive a variable rate equal to floating one-month LIBOR. In connection with the issuance and sale of the Notes and repayment of a portion of the Term Loans, we reduced the interest rate swap notional amount to $40 million in the fourth quarter of 2016. On May 3, 2017, we terminated the remaining interest rate swap after further repayment of the Term Loans. During the third quarter of 2017, we paid off the remaining balance of the Term Loans.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 unaudited condensed consolidated financial statements for the three and nine months ended September 30, 2017. March 31, 2023. A 100 basis point change in interest rates as of March 31, 2023 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 the three and nine months ended September 30, 2017,March 31, 2023, we generated substantially all of our revenue in the United States. Accordingly, we believe that our foreign currency risk is immaterial.
Item 4. Controls and Procedures
We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of September 30, 2017March 31, 2023 were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.
There were no changes in our internal control over financial reporting that occurred during the quarter ended September 30, 2017March 31, 2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II - OTHER INFORMATION
Item 1. Legal Proceedings
Item 1A. Risk Factors
We do not believe that there have been any material changes to the risk factors disclosed in Part I, Item 1A of our 20162022 Annual Report. The risk factors described in our 2022 Annual Report 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.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
During the three months ended March 31, 2023, we repurchased 1.8 million shares of common stock at an average price of $98.81 per share excluding broker’s fees, resulting in an aggregate purchase price of $174.7 million excluding the effect of excise taxes, funded through cash on hand and borrowings under our secured revolving credit facility. We describe in further detail our repurchase program and the shares repurchased thereunder in Part II, 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” set forth in our 2022 Annual Report.
The following table presents repurchases of our common stock, which excludes the effect of excise taxes, during the three months ended March 31, 2023:
| 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, 2023 | 922,516 | $108.40 | 922,516 | $ | 51,374,511 | ||||||||||||||||||
| February 1 - 28, 2023 | 187,031 | $93.83 | 187,031 | $ | 533,820,512 | ||||||||||||||||||
| March 1 - 31, 2023 | 658,402 | $86.79 | 658,402 | $ | 476,658,438 | ||||||||||||||||||
| Total | 1,767,949 | $98.81 | 1,767,949 | $ | 476,658,438 | ||||||||||||||||||
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.
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Item 6. Exhibits
Exhibit Number | Description | |||||||
| 4.1 | ||||||||
| 31.1 | ||||||||
| 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. | |||||||
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SIGNATURES
Pursuant to the requirements 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.
Date: November 3, 2017May 5, 2023
| AMN HEALTHCARE SERVICES, INC. | ||||||||
/S/ CAROLINE S. GRACE | ||||||||
| Caroline S. Grace President and Chief Executive Officer (Principal Executive Officer) | ||||||||
Date: May 5, 2023
/S/ | ||
Chief Financial Officer (Principal Financial and | ||
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