AMN Healthcare Services, Inc. Q2 FY2025 earnings call

Second quarter revenue of $658 million was at the upper end of the guidance range. Adjusted EBITDA was $58 million and gross margin of 29.8% exceeded the high end of guidance. At the end of the second quarter, the revolving line of credit balance was down to $70 million after repaying $80 million during the quarter. Uncertainty about government policy impact placed the healthcare sector in a more cautious stance, affecting staffing orders, rebook retention rate, etc. July saw improvement in key metrics across most businesses. Nurse and Allied traveler extension rates rebounded sharply in July. Allied orders in July were up 3% from March. International nurse staffing is positioned to resume sequential growth in volume and revenue in the fourth quarter. Language Services revenue was up 1% year-over-year with utilization up 6% but affected by competitive pricing pressure. Locum tenens revenue was flat year-over-year but expected to deliver consistent year-over-year growth starting in the third quarter. Completed the sale of Smart Square scheduling software. Passport app surpassed 300,000 registered users, with over 20% of Nurse and Allied placements assisted by Passport automation. AI capabilities rollout is a key area of focus.

Second quarter consolidated revenue was $658 million. The Nurse and Allied segment had revenue of $382 million, down 14% from the prior year, accounting for approximately 58.1% of consolidated revenue. The Physician and Leadership Solutions segment had revenue of $175 million, down 6% year-over-year, representing about 26.6% of consolidated revenue. The Technology and Workforce Solutions segment had revenue of $102 million, down 9% year-over-year, making up around 15.5% of consolidated revenue. The Language Services segment had revenue of $76 million, up 1% both year-over-year and sequentially, accounting for about 11.5% of consolidated revenue.

Third quarter projected consolidated revenue is in the range of $610 million to $625 million. This revenue guidance includes $5 million related to labor disruption support. Gross margin is projected to be between 28.7% and 29.2%. Operating margin is expected to be 6% to 6.5% and adjusted EBITDA margin is expected to be 7.7% to 8.2%.

Uncertainty about government policy impact on the healthcare sector. The healthcare sector being in a more cautious stance directly impacting the industry. Hiring freezes hampering the physician search business and likely affecting demand in locum tenens. Academic medical centers taking strong measures to reduce spending in response to cuts in federal funding for research. International nurse staffing business being affected by visa retrogression dates.

Q: Please provide more color on how clients are thinking about their contingent labor needs.

A: Cary Grace mentioned that at the start of the year there was healthy demand, but second quarter saw delays in decision-making due to policy uncertainty. Clients are normalizing contingent labor utilization, focusing on broader workforce solutions including predictive analytics, program management as they aim to manage and sustain a quality, cost-effective workforce.

Q: Talk about the drivers of gross margins in the Nurse and Allied segment.

A: Brian Scott said underlying spreads in Nurse and Allied have been more stable. There were favorable mix, payroll tax benefit, and additional international perm placement revenue contributing to the margin pickup from the prior quarter.

Q: When do you think the numbers will bottom?

A: Cary Grace said academic medical centers' volumes are up from the past 4 quarters. Brian Scott mentioned orders have been stable for over 2 months, and expecting winter orders in the next 60 - 80 days, with the back half of the year expected to see improvement.

Q: On the MSP side, what are you seeing?

A: Cary Grace said coming out of COVID, clients were open to new models, and now there's a slight bias back to supplier-led MSPs with a strong pipeline of MSP opportunities.