AMN Healthcare Announces Third-Quarter 2016 Results and Share Repurchase Program
Revenue up 23% over prior year to $473 million; reports GAAP EPS of $0.55 and adjusted EPS of $0.62; $150 million share repurchase program authorized

SAN DIEGO, Nov. 3, 2016 /PRNewswire/ -- AMN Healthcare Services, Inc. (NYSE: AMN), healthcare's leader and innovator in workforce solutions and staffing services, today announced its third-quarter 2016 financial results. Financial highlights are as follows:

Dollars in millions, except per share amounts.


Q3 2016

% Change

Q3 2015

YTD Sept.
30, 2016

% Change
YTD Sept.
30, 2015

Revenue

$472.6

23%

$1,414.4

33%

Gross profit

$154.5

23%

$461.1

37%

Net income

$27.3

(19)%

$79.5

29%

Diluted EPS

$0.55

(20)%

$1.61

27%

Adj. diluted EPS*

$0.62

29%

$1.82

56%

Adjusted EBITDA*

$58.1

27%

$176.0

49%


*  See "Non-GAAP Measures" below for a discussion of our use of non-GAAP items and the table entitled "Supplemental Financial and Operating Data" for a reconciliation of non-GAAP items.

Highlights

  • Strong demand for healthcare workforce solutions and staffing continues, driving third-quarter 2016 revenue growth of 23% year-over-year, with 12% organic growth.
  • Nurse and Allied Solutions segment revenue up 16% year-over-year driven primarily by volume growth.
  • Adjusted EBITDA grew 27% year-over-year with a 40 basis point margin increase.
  • Generated $30 million of operating cash flow in the quarter and $85 million year-to-date, a 52% increase compared to the first nine months in 2015.
  • Successfully completed a debt offering in October, adding long-term liquidity at favorable terms to position the Company for further investment in growth opportunities.
  • Board of Directors authorized a $150 million share repurchase program.

"The demand for healthcare professionals and workforce solutions is strong today and is expected to continue to grow as turnover and vacancies persist at historical high levels," said Susan R. Salka, President and Chief Executive Officer of AMN Healthcare. "Our results this quarter reflect a positive market environment but are also a testament to the team's outstanding execution as we partner with our clients to help them manage their significant labor challenges and enable them to stay focused on delivering quality patient care. We are well positioned to offer strategic solutions to address these issues through our broad suite of services. The current demand levels, indicators of our clients' future needs and our leading market position provide us with optimism heading into 2017."

Ms. Salka added, "I am also pleased to announce that our Board approved a $150 million share repurchase program to leverage our strong financial position and free cash flow as another prudent capital allocation option. Although we will continue to prioritize investing in our current businesses and compelling acquisition opportunities, we are also committed to maximizing shareholder returns, and we believe a share repurchase program provides an additional mechanism to accomplish this."

Third-Quarter 2016 Results

Consolidated revenue was $473 million, an increase of 23% from the same quarter last year, driven by 12% organic growth mainly stemming from the Nurse and Allied Solutions segment.

Revenue for the Nurse and Allied Solutions segment was $287 million, which is 16% higher compared to the same quarter last year and down 2% sequentially. The sequential decline in this segment resulted from minimal labor disruption-related revenue in the third quarter, compared to the prior quarter that had approximately $19 million of revenue from these services. The Travel Nurse division continued with strong performance, with revenue up 21% year-over-year and 4% sequentially. Allied revenue was up 10% year-over-year and 6% sequentially.

Locum Tenens Solutions segment revenue was $109 million, an increase of 7% from the same quarter last year and down 1% sequentially. The Other Workforce Solutions segment revenue was $77 million, an increase of 125% from the same quarter last year and 7% sequentially, with the growth in both periods driven mostly from recent acquisitions.

Gross margin was 32.7%, which is 20 basis points lower than the same quarter last year and flat sequentially. The year-over-year gross margin decline was due to a lower Nurse and Allied Solutions segment gross margin, partially offset by an increase in gross margin in the Locum Tenens segment and greater contribution from the higher-margin Other Workforce Solutions segment.

SG&A expenses were $100 million, or 21.2% of revenue, compared to $83 million, or 21.7% of revenue, in the same quarter last year and $100 million, or 21.0% of revenue, in the previous quarter. The year-over-year 50 basis point decline in percentage of revenue was driven by improved operating leverage. The 20 basis point increase in percentage of revenue from the previous quarter was mainly driven by a $2 million professional liability actuarial credit recorded in the second quarter.

Net income was $27 million, or $0.55 per diluted share, compared to $34 million, or $0.69 per diluted share, in the same quarter last year. The prior-year quarter included a $12 million benefit related to a reversal of tax reserves. Excluding amortization of intangible assets and acquisition and integration costs, net of tax, adjusted net income per diluted share was $0.62. Adjusted EBITDA was $58 million, a year-over-year increase of 27%. Adjusted EBITDA margin was 12.3%, representing a 40 basis point increase year-over-year and a 20 basis point decrease sequentially. The sequential decline was mainly the result of the previously noted actuarial benefit recorded last quarter.

At September 30, 2016, cash and cash equivalents totaled $16 million. Cash flow from operations was $30 million and capital expenditures were $5 million. The Company ended the quarter with total debt outstanding of $386 million, with a leverage ratio as calculated in accordance with the Company's credit agreement of 1.7 to 1.

On October 3, 2016, the Company completed the offering and sale of $325 million principal amount of its 5.125% Senior Notes due 2024, the proceeds of which were used to repay existing indebtedness under its credit facilities and to pay expenses related to the transaction.

Share Repurchase Program

On November 1, 2016, the Board of Directors approved a share repurchase program under which the Company may repurchase up to $150 million of its common stock.

The amount and timing of the purchases will depend on a number of factors including the price of the Company's shares, trading volume, Company performance, Company liquidity, general economic and market conditions and other factors that the Company's management believes are relevant. The share repurchase program does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time.

The Company intends to make all repurchases and to administer the plan in accordance with applicable laws and regulatory guidelines, including Rule 10b-18 of the Exchange Act, and in compliance with its debt instruments. Repurchases may be made from cash on hand, free cash flow generated from the Company's business or from the Company's credit facilities. Repurchases may be made from time to time through open market purchases or privately negotiated transactions. Repurchases may also be made pursuant to one or more plans established pursuant to Rule 10b5-1 under the Exchange Act, which would permit shares to be repurchased when the Company might otherwise be precluded from doing so under insider trading restrictions.

Fourth-Quarter 2016 Outlook

Metric

Guidance*

Consolidated revenue

$473 - $479 MM

Gross margin

32.5%

SG&A as percentage of revenue

21.0% - 21.5%

Adjusted EBITDA margin

11.5% - 12.0%

*Note: Guidance percentage metrics are approximate. For a reconciliation of Adjusted EBITDA margin, see the table entitled "Reconciliation of Guidance Adjusted EBITDA Margin to Guidance Operating Margin" below.

 

The Company's revenue guidance is based on the expectation of a continued strong demand environment, representing year-over-year growth of 18-19%, of which approximately 10% is organic with the remainder from acquisitions.

Conference Call on November 3, 2016

AMN Healthcare Services, Inc. (NYSE: AMN), healthcare's leader and innovator in workforce solutions and staffing services, will host a conference call to discuss its third-quarter 2016 financial results on Thursday, November 3, 2016 at 5:00 p.m. Eastern Time. A live webcast of the call can be accessed through AMN Healthcare's website at http://amnhealthcare.investorroom.com/presentations. Please log in at least 10 minutes prior to the conference call in order to download the applicable audio software. Interested parties may participate live via telephone by dialing (800) 230-1092 in the U.S. or (612) 288-0337 internationally. Following the conclusion of the call, a replay of the webcast will be available at the Company's website. Alternatively, a telephonic replay of the call will be available starting at 7:30 p.m. Eastern Time on November 3, 2016, and can be accessed until 11:59 p.m. Eastern Time on November 17, 2016 by calling (800) 475-6701 in the U.S. or (320) 365-3844 internationally, with access code 403342.

About AMN Healthcare

AMN Healthcare is the leader and innovator in healthcare workforce solutions and staffing services to healthcare facilities across the nation. The Company provides unparalleled access to the most comprehensive network of quality healthcare professionals through its innovative recruitment strategies and breadth of career opportunities. With insights and expertise, AMN Healthcare helps providers optimize their workforce to successfully reduce complexity, increase efficiency and improve patient outcomes. AMN delivers managed services programs, healthcare executive search solutions, vendor management systems, recruitment process outsourcing, predictive modeling, medical coding and consulting, and other services. Clients include acute-care hospitals, community health centers and clinics, physician practice groups, retail and urgent care centers, home health facilities and many other healthcare settings.

The Company's common stock is listed on the New York Stock Exchange under the symbol "AMN." For more information about AMN Healthcare, visit www.amnhealthcare.com, where the Company posts news releases, investor presentations, webcasts, SEC filings and other material information. The Company also utilizes email alerts and Really Simple Syndication ("RSS") as routine channels to supplement distribution of this information. To register for email alerts and RSS, visit http://amnhealthcare.investorroom.com/emailalerts.

Non-GAAP Measures

This earnings release contains certain non-GAAP financial information, which the Company provides as additional information, and not as an alternative, to the Company's condensed consolidated financial statements presented in accordance with GAAP. These non-GAAP financial measures include (1) adjusted EBITDA, (2) adjusted EBITDA margin and (3) adjusted diluted EPS.  The Company provides such non-GAAP financial measures because management believes that they are useful both to management and investors as a supplement, and not as a substitute, when evaluating the Company's operating performance. Additionally, management believes that adjusted EBITDA, adjusted EBITDA margin and adjusted diluted EPS serve as industry-wide financial measures. The Company uses adjusted EBITDA for making financial decisions and allocating resources. The non-GAAP measures in this release are not in accordance with, or an alternative to, GAAP measures and may be different from non-GAAP measures, or may be calculated differently than other similarly titled non-GAAP measures, reported by other companies. They should not be used in isolation to evaluate the Company's performance.  A reconciliation of non-GAAP measures identified in this release, along with further detail about the use and limitations of certain of these non-GAAP measures, may be found below in the table entitled "Supplemental Financial and Operating Data" under the caption entitled "Reconciliation of Non-GAAP Items" and the footnotes thereto or on the Company's website at http://amnhealthcare.investorroom.com/financialreports. Additionally, from time to time, additional information regarding non-GAAP financial measures, including pro forma measures, may be made available on the Company's website.

Forward-Looking Statements

This press release 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. Such statements include expectations regarding the outlook for labor shortages, the favorable demand environment, fourth-quarter 2016 revenue, gross margin, SG&A expenses and adjusted EBITDA margin. The Company bases these forward-looking statements on its current expectations, estimates and projections about future events and the industry in which it operates using information currently available to it. Actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Forward-looking statements are identified by words such as "believe," "anticipate," "expect," "intend," "plan," "will," "may," "estimates," variations of such words and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. Factors that could cause actual results to differ from those implied by the forward-looking statements contained in this press release are set forth in the Company's Annual Report on Form 10-K for the year ended December 31, 2015 and its other periodic reports as well as the Company's current and other reports filed from time to time with the Securities and Exchange Commission. Be advised that developments subsequent to this press release are likely to cause these statements to become outdated.

Contact:
David Erdman
Director, Investor Relations
866.861.3229

 

AMN Healthcare Services, Inc.

Condensed Consolidated Statements of Comprehensive Income

(in thousands, except per share amounts)

(unaudited)










Three Months Ended




Nine Months Ended


September 30,


June 30,


September 30,


2016

2015


2016


2016

2015

Revenue

$  472,636

$  382,859


$  473,729


$ 1,414,367

$ 1,060,513

Cost of revenue

318,169

256,850


318,976


953,249

722,954

Gross profit

154,467

126,009


154,753


461,118

337,559

Gross margin

32.7%

32.9%


32.7%


32.6%

31.8%

Operating expenses:








Selling, general and administrative (SG&A)

99,995

83,098


99,541


297,359

229,377

SG&A as a % of revenue

21.2%

21.7%


21.0%


21.0%

21.6%









Depreciation and amortization

7,789

5,304


7,334


21,888

15,631

Total operating expenses

107,784

88,402


106,875


319,247

245,008

Income from operations

46,683

37,607


47,878


141,871

92,551

      Operating margin (1)

9.9%

9.8%


10.2%


10.0%

8.7%









Interest expense, net, and other

3,016

2,013


2,800


9,065

5,797









Income before income taxes

43,667

35,594


45,078


132,806

86,754









Income tax expense

16,371

1,947


18,756


53,319

25,028

Net income

$    27,296

$    33,647


$    26,322


$    79,487

$    61,726

Net income as a % of revenue

5.8%

8.8%


5.6%


5.6%

5.8%









Other comprehensive income (loss):








Foreign currency translation and other

40

54


86


165

42

Unrealized gain (loss) on cash flow hedge, net of income taxes

231

(367)


(111)


(343)

(331)

Other comprehensive income (loss)

271

(313)


(25)


(178)

(289)









Comprehensive income

$     27,567

$     33,334


$     26,297


$     79,309

$     61,437









Net income per common share:
















Basic

$         0.57

$         0.71


$         0.55


$         1.66

$         1.30

Diluted

$         0.55

$         0.69


$         0.53


$         1.61

$         1.27









Weighted average common shares outstanding:








Basic

48,049

47,674


48,034


47,993

47,466

Diluted

49,410

48,978


49,348


49,287

48,737

 


AMN Healthcare Services, Inc.

Supplemental Financial and Operating Data

(dollars in thousands, except per share data and revenue per day)

(unaudited)















Three Months Ended

Nine Months Ended


September  30,


June 30,


September 30,



2016


2015 (2)



2016



2016


2015 (2)

Revenue













  Nurse and allied solutions

$

286,810

$

246,748


$

292,663


$

877,197

$

690,234

  Locum tenens solutions


108,553


101,755



109,129



320,420


285,835

  Other workforce solutions


77,273


34,356



71,937



216,750


84,444


$

472,636

$

382,859


$

473,729


$

1,414,367

$

1,060,513














Reconciliation of Non-GAAP Items:


























Segment operating income (3)













  Nurse and allied solutions

$

37,396

$

32,354


$

39,503


$

118,517

$

90,875

  Locum tenens solutions


14,026


13,321



16,317



43,634


34,142

  Other workforce solutions


20,867


13,074



17,858



56,311


28,397



72,289


58,749



73,678



218,462


153,414

   Unallocated corporate overhead


14,235


13,127



14,420



42,460


35,093

Adjusted EBITDA (4)


58,054


45,622



59,258



176,002


118,321

Adjusted EBITDA margin (5)


12.3%


11.9%



12.5%



12.4%


11.2%














Depreciation and amortization


7,789


5,304



7,334



21,888


15,631

Share-based compensation


2,704


2,021



2,710



8,795


6,551

Acquisition and integration costs


878


690



1,336



3,448


3,588

Income from operations


46,683


37,607



47,878



141,871


92,551

Interest expense, net, and other


3,016


2,013



2,800



9,065


5,797

Income before income taxes


43,667


35,594



45,078



132,806


86,754

Income tax expense  


16,371


1,947



18,756



53,319


25,028

Net income

$

27,296

$

33,647


$

26,322


$

79,487

$

61,726



























GAAP diluted net income per share (EPS)

$

0.55

$

0.69


$

0.53


$

1.61

$

1.27

   Adjustments:













   Amortization of intangible assets


0.09


0.06



0.09



0.28


0.18

   Acquisition and integration costs


0.02


0.01



0.03



0.07


0.07

   IRS adjustment


0.00


(0.25)



0.00



0.00


(0.25)

   Tax effect of adjustments


(0.04)


(0.03)



(0.04)



(0.14)


(0.10)

Adjusted diluted EPS (6)

$

0.62

$

0.48


$

0.61


$

1.82

$

1.17

 


Three Months Ended



Nine Months Ended



September 30,



June 30,



September 30,



2016


2015(2)



2016



2016


2015(2)

Gross Margin













   Nurse and allied solutions


26.7%


27.5%



26.7%



26.7%


27.1%

   Locum tenens solutions


31.2%


30.7%



31.3%



31.2%


29.8%

   Other workforce solutions


56.7%


78.2%



58.9%



58.6%


77.1%














Operating Data:













Nurse and allied solutions







































Average healthcare professionals on assignment – consolidated (7)


8,458


7,564



8,337



8,423


7,338



























Locum tenens solutions













    Days filled (8)


59,612


59,267



61,068



178,846


173,371

    Revenue per day filled (9)


$1,821


$1,717



$1,787



$1,792


$1,649
























As of September 30,


As of June 30,








2016


2015




2016






Leverage ratio (10)


1.7


1.5




1.9






 

 

AMN Healthcare Services, Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands)

(unaudited)








September 30,


June 30,


December 31,


2016


2016


2015

Assets






Current assets:






Cash and cash equivalents

$    15,708


$    21,062


$      9,576

Accounts receivable, net

331,220


330,853


277,996

Accounts receivable, subcontractor

42,094


46,326


50,807

Prepaid and other current assets

44,635


44,332


37,249

Total current assets

433,657


442,573


375,628













Restricted cash, cash equivalents

and investments

28,222


28,490


27,352

Fixed assets, net

57,965


56,575


50,134

Other assets

57,296


54,759


47,569

Goodwill

342,174


342,827


204,779

Intangible assets, net

250,455


255,214


174,970







Total assets

$ 1,169,769


$ 1,180,438


$ 880,432







Liabilities and stockholders' equity






Current liabilities:






Accounts payable and accrued expenses

$ 118,289


$ 131,965


$ 118,822

Accrued compensation and benefits

99,629


102,516


83,701

Current portion of revolving credit facility

            ‒‒  


40,000


30,000

Current portion of notes payable

3,750


11,250


7,500

Deferred revenue

8,446


6,145


5,620

Other current liabilities

9,962


9,728


5,374

Total current liabilities

240,076


301,604


251,017













Revolving credit facility

182,500


166,500


52,500

Notes payable, less unamortized fees

198,793


194,019


128,490

Deferred income taxes, net

28,278


30,921


22,431

Other long-term liabilities

86,949


84,495


78,134

Total liabilities

736,596


777,539


532,572







Commitments and contingencies












Stockholders' equity

433,173


402,899


347,860







Total liabilities and stockholders' equity

$ 1,169,769


$ 1,180,438


$ 880,432

 

AMN Healthcare Services, Inc.

Summary Condensed Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)



Three Months Ended


Nine Months Ended


September 30,


June 30


September 30,


2016

2015


2016


2016

2015









Net cash provided by operating activities

$  29,540

$  21,950


$  20,053


$  84,820

$  55,637









Net cash  used in investing activities

(8,117)

(10,768)


(58,451)


(241,271)

(105,634)









Net cash provided by (used in) financing activities

(26,817)

(11,302)


36,268


162,418

51,290









Effect of exchange rates on cash

40

54


86


165

42









Net increase (decrease) in cash and cash equivalents

(5,354)

(66)


(2,044)


6,132

1,335









Cash and cash equivalents at beginning of period

21,062

14,474


23,106


9,576

13,073

















Cash and cash equivalents at end of period

$  15,708

$  14,408


$  21,062


$  15,708

$  14,408

 

AMN Healthcare Services, Inc.

Additional Supplemental Non-GAAP Disclosures

Reconciliation of Guidance Adjusted EBITDA Margin to

Guidance Operating Margin

(unaudited)






Three Months Ending


December 31, 2016


Low


High

Adjusted EBITDA margin

11.5%


12.0%

Deduct:




Share-based compensation


0.6%


Acquisition and integration costs


0.2%


EBITDA margin

10.7%


11.2%

Depreciation and amortization


1.6%


Operating margin

9.1%


9.6%



(1)

Operating margin represents income from operations divided by revenue.

(2)

Effective as of January 1, 2016, we modified our reportable segments. We previously utilized three reportable segments, which we identified as follows: (a) nurse and allied healthcare staffing, (b) locum tenens staffing and (c) physician permanent placement services. In light of our acquisitions over the past several years as well as our transition to a healthcare workforce solutions company, our management renamed our three reportable segments and also placed several of our business lines that were in our nurse and allied healthcare staffing segment into a different segment to better reflect how the business is evaluated by our chief operating decision maker. As of January 1, 2016, we began to disclose the following three reportable segments: (a) nurse and allied solutions, (b) locum tenens solutions, and (c) other workforce solutions. The nurse and allied solutions segment consists of our travel nurse, allied and local staffing businesses. The locum tenens solutions segment consists of our locum tenens staffing business. The other workforce solutions segment consists of our healthcare interim leadership staffing and executive search services business, physician permanent placement services business, recruitment process outsourcing business, vendor management systems business, workforce optimization services business, medical coding and related consulting business, and our education business. Prior period data has been reclassified to conform to the new segment reporting structure.

(3)

Segment operating income represents net income plus interest expense (net of interest income) and other, income tax expense, depreciation and amortization, unallocated corporate overhead, acquisition and integration costs and share-based compensation.

(4)

Adjusted EBITDA represents net income plus interest expense (net of interest income) and other, income tax expense, depreciation and amortization, acquisition and integration costs and share-based compensation. Management believes that adjusted EBITDA provides an effective measure of the Company's results, as it excludes certain items that management believes are not indicative of the Company's operating performance and is a measure used in credit facilities and the indenture governing our 5.125% Senior Notes due 2024. Adjusted EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to income from operations or net income as an indicator of operating performance. Although management believes that some of the items excluded from adjusted EBITDA are not indicative of the Company's operating performance, these items do impact the statement of comprehensive income, and management therefore utilizes adjusted EBITDA as an operating performance measure in conjunction with GAAP measures such as net income.

(5)

Adjusted EBITDA margin represents adjusted EBITDA divided by revenue.

(6)

Adjusted diluted EPS represents GAAP diluted EPS excluding the impact of (A) amortization of intangible assets, (B) acquisition and integration costs, (C) IRS adjustment, and (D) tax effect, if any, of the foregoing adjustments. Management included this non-GAAP measure to provide investors and prospective investors with an alternative method for assessing the Company's operating results in a manner that is focused on its operating performance and to provide a more consistent basis for comparison between periods. However, investors and prospective investors should note that this non-GAAP measure involves judgment by management (in particular, judgment as to what is classified as a special item to be excluded from adjusted diluted EPS). Although management believes the items excluded from adjusted diluted EPS are not indicative of the Company's operating performance, these items do impact the statement of comprehensive income, and management therefore utilizes adjusted diluted EPS as an operating performance measure in conjunction with GAAP measures such as GAAP diluted EPS.

(7)

Average healthcare professionals on assignment represents the average number of nurse and allied healthcare professionals on assignment during the period presented.

(8)

Days filled is calculated by dividing the locum tenens hours filled during the period by eight hours.

(9)

Revenue per day filled represents revenue of the Company's locum tenens solutions segment divided by days filled for the period presented.

(10)

Leverage ratio represents the ratio of the consolidated funded indebtedness (as calculated per the Company's credit agreement) at the end of the subject period to the consolidated adjusted EBITDA (as calculated per the Company's credit agreement) for the twelve month period ended at the end of the subject period.

 

SOURCE AMN Healthcare Services, Inc.


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