AMN Healthcare Services Q2 2025 Earnings Call Transcript

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Provided by Quartr
August 7, 2025

Key Takeaways

  • Positive Sentiment: Revenue of $658 million and adjusted EBITDA of $58 million topped guidance, with a 29.8% gross margin exceeding expectations.
  • Negative Sentiment: Travel nurse orders dropped 15% from March to June, and academic medical centers curtailed spending, weighing on physician search and locum tenens demand.
  • Positive Sentiment: July metrics improved as traveler extension rates rebounded sharply and allied orders rose 3% from March, pointing to stabilizing client demand.
  • Positive Sentiment: International nurse staffing is projected to resume sequential revenue growth in Q4 and deliver double-digit growth into 2026 as visa retrogression eases.
  • Negative Sentiment: Non-cash goodwill and intangible asset impairments totaling $128 million drove a Q2 net loss of $116 million, versus prior-year net income.
AI Generated. May Contain Errors.
Earnings Conference Call
AMN Healthcare Services Q2 2025
00:00 / 00:00

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Operator

Good afternoon and thank you for standing by. Welcome to AMN Healthcare's Second Quarter twenty twenty five Earnings Call. At this time, all participants are in listen only mode. After the presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone.

Operator

You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Randy Rees, Vice President, Investor Relations. Please go ahead.

Randy Reece
Randy Reece
VP, IR & Strategy at AMN Healthcare Services

Good afternoon, everyone. Welcome to AMN Healthcare's second quarter twenty twenty five earnings call. A replay of this webcast will be available at ir.amnhealthcare.com at the conclusion of this call. Remarks we make during this call about future expectations, projections, trends, plans, events, or circumstances constitute forward looking statements. These statements reflect the company's current beliefs based upon information currently available to it.

Randy Reece
Randy Reece
VP, IR & Strategy at AMN Healthcare Services

Our actual results may differ materially from those indicated by these forward looking statements because of various factors and cautionary statements, including those identified in our most recently filed Forms 10 ks and 10 Q, our earnings release and subsequent filings with the SEC. The company does not intend to update guidance or any forward looking statements provided today prior to its next earnings release. This call contains certain non GAAP financial information. Information regarding and reconciliations of these non GAAP measures to the most directly comparable GAAP measures are included in our earnings release and on our financial reports page at ir.amnhealthcare.com. On the call with me today are Carrie Grace, President and Chief Executive Officer and Brian Scott, Chief Financial and Operating Officer. I will now turn the call over to Carrie.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Thank you, Randy, and welcome to our second quarter conference call. Second quarter revenue of $658,000,000 was at the upper end of our guidance range. Adjusted EBITDA of $58,000,000 and gross margin of 29.8% exceeded the high end of guidance. At the end of the second quarter, the balance on our revolving line of credit was down to $70,000,000 after we repaid $80,000,000 during the quarter, and we expect further debt reduction this quarter. Through the quarter, uncertainty about government policy impacts placed the healthcare sector in a more cautious stance compared with the first quarter, directly impacting our industry.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

The strongest indications we had of clients' uncertainty were declines in staffing orders and extensions. Travel nurse orders in June were 15% lower than March and our rebook retention rate for travelers fell through the quarter. Our language services business also billed fewer minutes in June compared with May. Hiring freezes hampered our physician search business and likely affected demand and volume in locum tenants. Our academic medical center clients have taken the strongest measures to reduce spending in response to cuts in federal funding for research.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Academic medical centers made up about 20% of our consolidated revenue year to date. Other hospitals have seen some slowing in patient utilization, though still growing year over year. With the new tax bill now finalized, our clients have some clarity on future changes to reimbursement and their insured population mix, much of which will happen gradually over several years. July saw improvement in key metrics across most of our businesses. In Nurse and Allied, traveler extension rates rebounded sharply in July, which underscores that our clients still have the need for flexible staffing.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Travel Nurse is largely an acute care business and while orders have been stable since the June, they are running below prior year levels and we need to see higher order levels to regain volume growth. Allied draws from a more diverse client base with about half of its business coming from non acute care. While travel nurse orders fell more than 10% from March to July, Allied orders in July were up 3% from March, benefiting from our strength in outpatient therapy, rehabilitation, and imaging. We also anticipate a strong year for our Allied Schools business, built on robust bookings in the first half selling season and the benefit of innovative solutions like our Televate Virtual Care platform. Q3 is the seasonally lowest quarter of the year for school staffing and our improved bookings will be more visible in Q4, where we expect double digit volume growth from the prior year.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Our international nurse staffing business is positioned to resume sequential growth in volume and revenue in the fourth quarter, with growth trends continuing into 2026. We expect this business to have outsized growth opportunities over the next two to three years as visa retrogression dates move forward. Language services revenue was up 1% year over year in the second quarter with utilization up 6% from a year ago, mostly offset by competitive pricing pressure. Utilization declined from May to June and grew again in July, and our sales pipeline continued to increase and progress over the past three months. Revenue for our Locum Tenens business was flat year over year in the second quarter and we see good opportunity to deliver consistent year over year growth starting in the third quarter.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Locum tenens demand so far this quarter is 5% higher than Q2. We recently completed the last stages of the MSCR integration and are seeing traction in adding more locums programs into our existing MSP clients as clients seek consistency and cost efficiency in their locum spend. We expect MSP revenue to reach a historic high this year with higher same client sales and new opportunities for additional growth in locum. Our labor disruption business has had a successful start to the year and we could have more activity from now into 2026, supporting a number of clients in large upcoming collective bargaining agreements. Our recently completed AI enabled event management technology has had positive client reaction and combined with our deep expertise enables us to scale to support more clients.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

The staffing industry analysts recently released 2024 market share rankings show that AMN retained market share in an intense competitive environment in Travel Nurse and Allied while gaining share due to acquisition in LocumTenens. In May, AMN was named the largest healthcare leadership in search form by Modern Healthcare. This year to date, our growth strategy to serve all market channels has progressed, supported by our Workwise technology infrastructure. Our operational speed and automation initiatives have resulted in steadily improving fill rates in both our AMN led MSPs and vendor neutral programs. These efforts have been greeted by a healthy pipeline of vendor led and vendor neutral MSP opportunities and we are also building up our client list for direct staffing relationships.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

We continue to make good progress on diversifying our revenues and building on our technology enabled services. AMN Passport is one of our best success stories. Passport, our industry leading app for healthcare professionals, now covers travel and per diem nurse, allied and locum tenant specialties. We also have extended Passport's capabilities to manage float pool workers and labor disruption events. These additions have given a boost to Passport, which recently surpassed 300,000 registered users.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

More significant is the impact Passport is making on our efficiency and user engagement. More than 20% of our Nurse and Ally placements are now assisted by Passport automation. We have seen other early successes from our rollout of AI capabilities across all facets of our operations and this will continue to be a key area of focus for us. In early July, we completed the sale of our SmartSquare scheduling software to a new commercial business partner, Simpler. This transaction enables us to expand the potential Workwise network of technology partners to deliver workforce planning, staffing, and talent deployment to the benefit of our current and future clients.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

In two and a half years, we have rebuilt our ability to address all channels of the healthcare staffing market. We have stabilized and in some areas modestly grown our staffing market share and we are well positioned to win as demand recovers. For the near term, we continue to manage our cost structure and drive for operational efficiency. Our financial strength and level of innovation stand out in the industry at a time when many competitors are struggling. Now I will hand over the call to Brian for a review of second quarter results and third quarter guidance.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Thank you, Carrie, and good afternoon, everyone. Second quarter consolidated revenue was $658,000,000 at the high end of guidance, driven primarily from better than expected performance in our Nurse and Allied segment. Revenue was down 11% from the prior year and down 5% sequentially. Consolidated gross margin for the second quarter was 29.8%, 80 basis points above the high end of our guidance range. Year over year, margin decreased 120 basis points, while sequentially gross margin increased by 110 basis points.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Consolidated SG and A expenses were $155,000,000 compared with $149,000,000 in the prior year and $148,000,000 in the previous quarter. Adjusted SG and A, which excludes certain expenses, was $140,000,000 in the second quarter, compared with $137,000,000 in the prior year and $136,000,000 in the previous quarter. The sequential SG and A increase was primarily due to a $5,000,000 unfavorable professional liability reserve adjustment and $2,000,000 in higher bad debt expense, more than offsetting lower employee costs and other expense management efforts. The majority of the professional liability reserve adjustment was recorded in the Nurse and Allied segment, while the bad debt charge was in the Physician and Leadership Solutions segment. Second quarter Nurse and Allied revenue was $382,000,000 down 14% from the prior year, driven mainly by lower volume, partially offset by labor disruption revenue.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Sequentially, segment revenue was down 8%, primarily due to lower labor disruption revenue and seasonally lower volume. Labor disruption revenue in the quarter was $16,000,000 compared with $39,000,000 in the first quarter and zero in the prior year quarter. Year over year segment volume decreased 16%, average rate was down 2%, and average hours worked down 1%. Sequentially, volume was down 3%, while the average rate and hours worked were both flat. Travel nurse revenue in the second quarter was $2.00 $8,000,000 a decrease of 25% from the prior year period and 4% from the prior quarter.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Allied revenue in the quarter was $146,000,000 down 4% year over year and 1% sequentially. Nurse and Allied gross margin in the second quarter was 23.9%, an increase of 10 basis points year over year. Sequentially, gross margin was up 120 basis points due to lower payroll taxes and a favorable business mix. Moving to Physician and Leadership Solutions segment. Second quarter revenue of $175,000,000 was down 6% year over year, driven by lower volume across the search and interim leadership businesses.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Sequentially, revenue was flat. Welcome Tenants revenue in the quarter was a 143,000,000, flat year over year and up 1% sequentially. Interim leadership revenue of 23,000,000 decreased 25% from the prior year period and 5% sequentially. Search revenue of $9,000,000 was down 29% year over year and 2% sequentially. Gross margin for the Physician and Leadership Solutions segment was 28.2%, down two thirty basis points year over year on a lower bill pay spread and an adverse revenue mix shift.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Sequentially, gross margin increased 90 basis points, mainly due to a favorable sales allowance adjustment in the Locums business. Technology and Workforce Solutions revenue for the second quarter was $102,000,000 down 9% year over year, primarily driven by declines in our VMS and outsourced solutions businesses. Sequentially, revenue was flat. Language services revenue for the quarter was $76,000,000 up 1% both year over year and sequentially. VMS revenue for the quarter was 19,000,000 a decrease of 31% year over year and 2% sequentially.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Segment gross margin was 55.1%, down five ten basis points from the prior year period, primarily due to lower revenue from DMS and outsourced solutions. Sequentially, gross margin declined 40 basis points. At the July, we completed the sale of SmartSWARE for $75,000,000 with $65,000,000 paid at closing and 10,000,000 in an eighteen month note. This business was included in our Technology and Workforce Solutions segment. Starting in the third quarter, this transaction will reduce annualized revenue by approximately $17,000,000 and adjusted EBITDA by about 6,000,000 Second quarter consolidated adjusted EBITDA was $58,000,000 down 38% year over year and 9% sequentially.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Adjusted EBITDA margin for the quarter was 8.9%, down three eighty basis points from the prior year period and 40 basis points sequentially. During the second quarter, we recorded a noncash goodwill impairment charge of $110,000,000 related to our Physician and Leadership Solutions segment. We also recorded a non cash intangible asset impairment charge of $18,000,000 related to our Nurse and Allied segment. Second quarter net loss was $116,000,000 driven by the goodwill and intangible asset impairment charges. This compared with net income of $16,000,000 in the prior year period and a net loss of $1,000,000 in the prior quarter.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Second quarter GAAP diluted loss per share was $3.2 Adjusted earnings per share for the quarter was $0.30 compared to $0.98 in the prior year period and $0.45 in the prior quarter. Days sales outstanding for the quarter was fifty four days, which was nine days lower than a year ago, and one day lower sequentially. Operating cash flow in the second quarter was $79,000,000 and capital expenditures were $10,000,000 The quarter and year to date cash flow has been favorably impacted by an approximately $50,000,000 increase in client deposits related to labor disruption events. These deposits will be repaid during the third quarter, somewhat offsetting the proceeds received from the SmartSquare sale. As of June 30, had cash and equivalents of $42,000,000 and total debt of $920,000,000 including $70,000,000 drawn on our revolver.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

We ended the quarter with a net leverage ratio of 3.3 times to one. Moving to third quarter guidance, we project consolidated revenue to be in a range of $610,000,000 to $625,000,000 This revenue guidance includes $5,000,000 related to labor disruption support. Gross margin is projected to be between 28.729.2%. Reported SG and A expenses are projected to be approximately 23% of revenue. Operating margin is expected to be 6% to 6.5%, and adjusted EBITDA margin is expected to be 7.7 to 8.2%.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Additional third quarter guidance details can be found in today's earnings release. And now let's go back to Carrie for some closing remarks.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Thank you, Brian. Before I open the call for questions, I want to acknowledge the recent passing of AMN's former chairman, Doug Wheat, last month. Doug will always be a pivotal figure in both the growth story of AMN and as a friend and mentor to so many of us. Doug had served on our Board of Directors for twenty six years and was the Board's Chairman for seventeen years. Doug's legacy lives on in the values he championed, the people he impacted, and the continued impact of AMN on the lives of healthcare professionals and patients across the country.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

We are grateful for his extraordinary contributions and extend our deepest sympathies to his wife Laura and his entire family. I know I speak for many in saying how deeply he will be missed. Among the many great things about AMN, our people and our culture are the foundation of what makes AMN so special, and we are grateful for the many years Doug was a part of the wonderful AMN team. Operator, you can open the call for questions now.

Operator

Thank you.

Operator

At this time, we will conduct a question and answer And our first question comes from Trevor Romeo with William Blair. Your line is now open.

Trevor Romeo
Research Analyst at William Blair

Hi, good afternoon, everybody. Thanks for taking the questions. First one I had was, you would just love, I guess, any more color on how your clients are kind of thinking about their contingent labor needs at this point. I think, Carrie, you noted the slower decision making in Q2 followed by some improvement in July. I think there were a few comments you already had on kind of the demand levels, but would love maybe just more color on how you saw the trends move throughout the quarter and maybe more importantly, what your clients are telling you as far as where their contingent labor needs could go forward with the various uncertainties out there?

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Yeah. So let me take demand first, and then I'll maybe more broadly talk about what we're seeing in terms of their needs around workforce solutions. So I mentioned this in the call, but what we really saw as we kicked off the year is a very healthy start to the year. We saw year over year increases in demand. As we got into the second quarter, we really started to see the uncertainty of some pending policy changes, whether it was around tariffs, around healthcare funding as part of the spending bill, and for academic medical centers, potential cuts in research budget.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

And so we saw that uncertainty result in delays in decision making throughout second quarter. What we've seen really starting in July, and we're only kind of a week into August, but we have seen demand stabilize in nurse. We are seeing demand up in allied and in locums. And we saw extension rates in July rebound sharply back. And so we've seen some of the delayed decision making really start to break free a little bit as we've entered the third quarter.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Now, what we experienced in the second quarter plays through to what we see in the third quarter. And so, of the stabilization or increase in demand, we would expect to start to come through more in the fourth quarter or towards the end of the year. If I step back and think a little bit about what clients are thinking about contingent labor, We really are at a period where for many clients they have normalized both their utilization of labor and when we look at where premium contingent cost over fully loaded permanent cost is, we're down to high single digits. This past quarter we were more at 9%, which is at a really low end of what you would see historically. And so we've seen that contingent spend normalize as systems were focused on permanent hiring and they were focused on building flexibility, whether that was in flex pools or other ways.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

We are very focused on helping them across all of their total talent solutions. Throughout this, we help them in permanent hiring, we help them with building up their internal float pools, whether we're running that or they're running that, whether they want to do programs or they want to do per diem. We are seeing the start of broader conversations about how you're really going to manage and sustain a quality cost effective workforce in the future. Things like predictive analytics, more data. We're seeing interest in program management, particularly in historically decentralized areas like Locum.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

And so we would expect, Trevor, those trends to continue, particularly as organizations are dealing with still increasing patient utilization and a limited supply of clinicians.

Trevor Romeo
Research Analyst at William Blair

Interesting. Yeah, thank you very much, Kerry. That's really helpful color. And then I guess I also just wanted to ask on your gross margins, particularly in the Nurse and Allied segment. I think they picked up nicely from last quarter.

Trevor Romeo
Research Analyst at William Blair

So I was just wondering if you could give us a little bit more color on the drivers there. I think Brian talked about a favorable mix, but did you actually see kind of underlying spreads improve a bit there or the competitive activity stabilize? And then what's your outlook for spreads in kind of the core Nurse and Allied moving forward?

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Yes. Thanks, Trevor. Yes, the underlying spreads in Nurse and Allied have been more stable. So we did have a little bit of better gross margin performance from what we guided in both the Nurse and Allied and Physician and Leadership segments. But most of that was more either a couple of one time items like sales allowance, had a payroll tax benefit in the second quarter as well.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

And then we picked up a little bit of additional international firm placement revenue at a very high margin. So there were a couple of good guys in the quarter, which helped out. Same on physician leadership, we had a sales allowance reduction. And same thing in locums, we didn't see an improvement in margin. And so as we think about our focus right now is actually on just trying to drive as much volume as possible.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

And there's been pretty stable bill rates, and so that has led to pretty stable margins. And we would expect to see that as we go into the third and fourth quarter as well.

Trevor Romeo
Research Analyst at William Blair

Got it. Yeah, nice to see some stabilization there. All right, thank you both. I really appreciate it.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Thank you.

Operator

Our next question comes from Kevin Fischbeck with Bank of America.

Kevin Fischbeck
Kevin Fischbeck
VP, Director & Senior Equity Research Analyst at Bank of America

Great. Thanks. I was just wondering if you could provide a little more color, I guess, in when you kind of think that these numbers will have kind of actually bottomed? I guess when you talk about some of the firming and demand that you're seeing, are those comments like seasonally adjusted? I know that oftentimes timing through the year can change when orders start to rebound or would be expected to rebound.

Kevin Fischbeck
Kevin Fischbeck
VP, Director & Senior Equity Research Analyst at Bank of America

So just wanted get more color on kind of when you thought we might start to see year over year growth again.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Yes. Number one, welcome back. It's nice to hear your voice.

Kevin Fischbeck
Kevin Fischbeck
VP, Director & Senior Equity Research Analyst at Bank of America

Thanks.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

A couple of things in demand. If I look at second quarter year over year and what we're seeing in clients, if you look at the decrease in utilization, the vast majority of that year over year decrease came from a concentrated number of clients. And the majority of that concentrated group of clients was academic medical centers. And so we saw the biggest change in utilization from a relatively small group of clients. In the remainder of the utilization declines year over year, it was concentrated in clients that were at the tail end of rolling off that we had lost in 2023 or 2024.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

So think of that as really that tail end has played through. If we look at what we're seeing in the early days of Q3, we are seeing academic medical centers in aggregate, their volumes up from what we saw over the past four quarters. So Kevin, what I would say is, in terms of where we have seen some of the declines, we're seeing even into this quarter some stabilization of those clients. And you're always going to have puts and takes in any given month or quarter for some client. But I think some of the challenges that we had seen over the past year, we've seen that play out over the past couple of quarters.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Yeah, I just add. As Care mentioned at the beginning of the call, we saw the extension rates decline during the second quarter, that had some nominal impact on Q2, but we're going to feel it more in the third quarter, which is reflected in the guidance and the sequential decline in travel nurse. And again, the decline in orders that also we started to see a little bit in April, but more so in May and June. That also compounded the impact we're seeing on volume in the third quarter. Orders have been stable now for the last two plus months, still at a lower level than they were earlier in the year.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

But with extension rates picking back up again and stability in order levels, it feels like we're kind of at this current normal level right now. We've had some better booking trends. And so our expectation as we go through the back half of the year, just conservatively, is that we'll start to see more winter orders come in the next sixty days. And we're already having some conversations with clients about that. And so that as you think about the shape of our volume, you'll see some declines from July through the end of the quarter, which is already really just a function of what happened in the second quarter.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

But as we continue to look at our booking trends and moving into the fourth quarter, that will start to turn back positive on a month to month basis heading through the fourth quarter and as we move into 2026 as well. So overall, it feels like the backdrop is stable. And now it's a question of just if that extension rate is kind of the first sign of clients getting back to a little bit more normal buying behavior, the next thing we'd want to see is orders start to improve again as well. And in the meantime, of course, we're not just waiting for that to happen. We're making very proactive steps around improving our fill rates with the orders that we have, building our pipeline of MSP opportunities to access more orders.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

And we talked about improving our internal capture on third party as well. All those things are gaining traction. And so that would be incremental as we move into the back half of the year.

Kevin Fischbeck
Kevin Fischbeck
VP, Director & Senior Equity Research Analyst at Bank of America

Okay. And then, I guess, appreciate the commentary around legislative uncertainty, I guess, particularly among teaching hospitals. But I guess we did also see during the quarter sequential declines in growth rates of volumes. I guess to what extent have hospitals been talking to you about that and how it might relate to their need for temp staffing?

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

What we're seeing is when you get into kind of July and into August, we start to see demand either stabilize in nurse and or pick up in allied and in locum. We would typically see Kevin and clients have told us to expect similar timing this year. We would start to see winter order needs come in the end of this month and early September. So we kind of look at demand both in terms of what we've been seeing in the base business and then we would expect in the next six weeks, eight weeks to start seeing some future orders come in around some of their winter needs. But I don't

Kevin Fischbeck
Kevin Fischbeck
VP, Director & Senior Equity Research Analyst at Bank of America

know, although the

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

rate of growth in patient volumes has slowed down, it's still up. It was up last year. It's still up on a year over year basis. I don't think that's really the major driver of any change in clients buying behavior. I think it's been some of these other factors that we've talked about that have been more impactful, but really haven't had client feedback around with the volume slowing down, so that's a big driver of any change in their buying.

Kevin Fischbeck
Kevin Fischbeck
VP, Director & Senior Equity Research Analyst at Bank of America

All right, great. That's helpful. Thank you.

Operator

Our next question comes from A. J. Rice with UBS.

A.J. Rice
A.J. Rice
Managing Director at UBS Group

Thanks. Hi, everybody. Maybe the flip side of these academic medical centers and hospitals generally putting hiring freezes on and being a little tougher on the permanent hires might be a step up in people being willing to consider travel nurse assignments or allied assignments. Have you have you seen what what what's happening with respect to people, you know, new applicants and so forth?

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

So we have seen we still have healthy supply. Take aside, you know, certain specialties or locations, this really is about demand, not about supply. And so if you have an order that is priced right, we don't have a challenge filling it. And in fact, even when people will pull up and look at demand week to week, if you have orders that come in that are priced appropriately, that will get filled immediately. It won't even have more than a couple days of time.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

And so it's not a supply challenge right now and an interest challenge. It's a is the package attractive enough for them to sign on? That is true overall. I'd say that's particularly true in locum where you still see healthy demand in locums and have seen that throughout the year. It really is you have to have attractive pay packages to be able to get them to sign on because they have a number of options.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

AJ, it's a good point. I think that we've seen that slowdown in some slowdown in healthcare hiring. They're still hiring, but usually, there's a lag effect of that. So if they go through if they continue to slow down on their permanent hiring and you have, you know, kinda normal attrition, it it takes a few months. But then we've seen that before where then you start to start to feel more of a pinch on their staffing levels, and that's where you could see demand pick up.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

But we haven't seen that yet, but it's certainly we've seen that trend historically.

A.J. Rice
A.J. Rice
Managing Director at UBS Group

Okay. I know you called out some wins in MSP. I wondered if you could step back. There was some debate a while back, but it seemed like it was normalizing. People either moving away from MSP or people churning contracts generally.

A.J. Rice
A.J. Rice
Managing Director at UBS Group

What what are you seeing now? Are you seeing more activity? And that's part of what you're picking up. I know the market is somewhat disruptive with deals out there and so forth. Is that creating opportunities?

A.J. Rice
A.J. Rice
Managing Director at UBS Group

What's happening on the MSP side and your ability to potentially grab incremental share?

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Yeah, what we have seen so far is coming out of COVID, we saw two things around programs. Number one is almost no matter what model a client was in, they weren't happy with what outcomes were during COVID. So they were open to new models. We still see clients that may look at different models, but we've seen, I'd say, a little bit of normalization of that sentiment that we saw coming out of COVID. The other thing we saw is we saw a bias towards vendor neutral really in 2023 and 'twenty four.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

In 2025, if you look at our pipeline, we have a slight bias back to supplier led MSPs. And so you are seeing some of that normalize. We've had a couple of examples in our pipeline where we had a client who may have gone to a tech only solution. They're having challenges filling, and so they're open now to going back in more of a risk aligned, risk sharing type of program, like a supplier led MSP. So our strategy has been to serve clients in the model that they choose, whether that's a supplier led or vendor neutral MSP, whether that's direct.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

We have had success in all of those over the past eighteen months, which is really why you saw an SIA with the recent market share rankings us holding our market share. And so we want to serve that growing group of clients that want MSPs. We also simultaneously want to serve clients who want vendor neutral and direct relationships and build from there.

A.J. Rice
A.J. Rice
Managing Director at UBS Group

Okay, thanks a lot.

Operator

Our next question comes from Tobey Sommer with Truist.

Tobey Sommer
Tobey Sommer
Managing Director at Truist Securities

Thanks. I want to start out with just a question on the guidance. How do we square the revenue below in gross margin down, but SG and A better? What are the moving pieces? Bonus accruals came to mind, perhaps there are other moving pieces you could illustrate for us?

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Hey, Toby. Well, I'll maybe just start on the SG and A. As you mentioned in the prepared remarks, our second quarter SG and A, we've done really good work. The team's done great work in trying to manage our costs effectively, made process and automation changes to be able to bring down some of our costs. And so that was really playing through in the second quarter, but then we had the actuarial adjustment and let higher bad debt that collectively was $7,000,000 and change.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

So if you remove that and look at the underlying SG and A, you're looking at something in the low 130s. And then with the sale of SmartSquare, the third quarter is the first quarter reflecting about a $2,000,000 reduction in SG and A from that as well. So we're in the low 130,000,000 range of SG and A, which is what's that's adjusted SG and A. So excluding stock based comp and a small amount of the write backs, that's where you end up with the guidance that we gave for the third quarter and reflecting through the EBITDA margin. The gross margin side, I kind of mentioned that Q2 had a couple of unique items that were favorable.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

The SmartSquare divestiture, it's about a 30 basis point impact to gross margin on a consolidated basis, about 100 basis to the segment. But if you think about the second quarter actual to the third quarter guide kind of at midpoint, again, 30 basis points related to that sale. And then the balance of it is a few things that happened in the second quarter that aren't going occur in the third. Underneath that, you've got pretty stable margin profile across the businesses.

Tobey Sommer
Tobey Sommer
Managing Director at Truist Securities

I appreciate that. Thank you. With respect to strike opportunities going forward, are you still managing that aspect of your business only for kind of your your best core clients where you can manage the whole experience, or are you pursuing business sort of more broadly in different fashion?

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

We are using our strike support to support our clients. So both our MSP clients as well as our VMS clients. And there is strong interest in both of those groups. The technology that we have built enables us to be able to scale more effectively in supporting strikes without disrupting our core business. The challenge we had historically, Toby, is when we were supporting a strike for a strategic client, it really took so many resources away from our core business that it was hard to do both simultaneously.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

We've made a lot of operational efficiencies. Brian just talked about a number of them. And the technology that we built that we can do both, and we were able to do both in the fourth and first quarter in the strikes that we supported. We have a healthy pipeline that we were intentional about building for the back half of the year that we are supporting a number of clients in some large CBAs that they are negotiating. You never know if a strike is going to go or not.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

But we feel like this is both an important capability that matters greatly to clients that we want to support, and we have a differentiated ability to support it now than we did in the past.

Tobey Sommer
Tobey Sommer
Managing Director at Truist Securities

Thanks. If I could ask, speak one in and I'll get back in the queue. One more about language services. What's the growth algorithm and expectation from here after I think what you described as a slowdown in 2Q? Thank you.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Yeah, let me tell you a little bit about what we're seeing in language services. So, first, we love this business. It is an important service that we provide both in acute and non acute settings. When we look at quarter over quarter, we had mid single digit growth in utilization but that was offset. We've seen significant competitive pressure on price per minute.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

And so that resulted in, from a net basis, very, very modest growth. We would expect those trends to continue. From a top line standpoint, the softness in utilization that we saw really kind of in the second quarter going into third quarter, When we talk to others in the industry, they are seeing something similar. So our focus is not just on continuing to strongly manage this business, but we have built over the past couple of quarters a strong pipeline that we would expect to progress as we go through the next couple of quarters that would help us get back to stronger top line growth ending this year going into next year.

Tobey Sommer
Tobey Sommer
Managing Director at Truist Securities

Thank you.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Thanks, Kevin.

Operator

Our next question comes from Brian Tanquilut with Jefferies.

Brian Tanquilut
Senior Analyst - Healthcare Services & HCIT/Digital Health Equity Research at Jefferies & Company Inc

Hey, good afternoon. You've got Jax Levin on. Just wanted to maybe turn a little more broadly just to the competitive environment, and appreciate your comments on sort of being able to hold share with some of the latest SI data that's out there. But maybe thinking about opportunities to potentially win share, I guess the chatter we get is that plenty of the private comps of yours are under significant pressure. And I'm just wondering if you could maybe just dive into a little bit of what you're seeing in terms of actions, whether it's on price or other things from the competitors in the landscape.

Brian Tanquilut
Senior Analyst - Healthcare Services & HCIT/Digital Health Equity Research at Jefferies & Company Inc

And then maybe just how you think about what does that look like on a multiyear basis if you are to sort of win out in the market? Is it more of just the same and then waiting for others to capitulate? Or is there more action that needs to be taken? Thanks.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Yeah, so a couple of things. One, I'll talk about just the winning share dynamics. Then I know we've also started to see what we think are the beginnings of consolidation that will continue. The industry is still relatively fragmented. So in terms of what we're seeing from a competitive dynamic, our goal is to gain share.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Stabilizing and in some cases growing our share, which happened in 2024, is a step to gaining market share. We are very focused on how we do that in a couple of ways. One is how do we continue to build on net new clients, on strategic net new clients, so net new wins, expansions, net of losses, year to date we are up modestly. We continue to build our pipeline and progress our pipeline to be able to get new clients to be able to sell more of our solutions to. Second is how do we continue to expand, which we have had success in.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

I'd say particularly in Locum, Strike and to a lesser degree in Language Services to some of our MSP clients. And then how do we fill more? So Brian talked about this a little bit earlier in some of our operational initiatives. We have higher fill rates both on our internal capture of our MSPs but also on our own BMS platforms. You will see us continue to focus on those areas.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

That is the trifecta of how we continue to work on gaining market share. From a competitive standpoint, we think that the challenging position that some of our competitors are in is going to give us an ability to continue to have differentiated solutions to be able to win more clients with. Strike is a great example of a very important solution for clients that have unionized populations that we now can uniquely support in ways that other competitors can't. What we're doing with Passport and being able to support float pools is another great example. So we think that we will extend our differentiation during this period with competitors having challenges.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

We've also seen the beginnings of some consolidation over the past two quarters. We think that will continue into 2026 and we think there's always opportunity over the coming years that that consolidation will benefit us.

Brian Tanquilut
Senior Analyst - Healthcare Services & HCIT/Digital Health Equity Research at Jefferies & Company Inc

Okay, got it. Really, really helpful color. I'll just jump with one quick follow-up here and just say on the international piece, appreciate some of the updated commentary there. I'm wondering if you can just dig in a little bit deeper in terms of exactly we see the turn probably later this year, but then what the path to sort of grow that over time, I guess what the checks we would want to see are to know that that is on track and the extent of the recovery in revenues that you can get on a multiyear basis. Thanks.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

So let me give you a little bit of the shape of what that will look like. And then between Brian and I, we can talk through different scenarios of what that could look like. So we expect in international that we will go back to growth. It will be very modest in the fourth quarter. The bigger thing for us in the fourth quarter is that this has been a significant headwind for us for the past two years as retrogression has taken place.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

So us getting back to being neutral with a very slight positive in the fourth quarter is important to us. As we get into 2026, we would expect even under conservative assumptions for us to grow both revenue and EBITDA in the double digits. Depending on different scenarios of how much forward movement of retrogression you would get, that could range more highly in terms of how you get the recovery. It'll be a multi year recovery. But we know enough now and even under conservative assumptions that you will get into double digit growth, both top and EBITDA for international next year.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Yeah, I'll say that all the talk of immigration, it hasn't we haven't really seen it directly impact the business as much, maybe a little bit of a slowdown in some of the State Department processing, but those visas that are allocated still exist. So we still see good demand from clients. We have a large and growing pipeline. And so to Carey's point, as we talked about before, we still feel like it's not a matter of if, just a matter of when. It's just very difficult to predict how the dates will continue to move forward.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

We know they will. We've got a new budget year coming up soon. We've typically seen the heels of that movement on the dates. And so we're just being a little bit cautious on our forecast of what that will look like. If you went back into history, we've had retrogression.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

There's been periods where there's been pretty significant movement forward, but it's just really hard to predict at this point what's going to happen. But to Terry's point, even in very conservative scenarios, we absolutely expect to resume growth, particularly as we move into 'twenty six. It's just that the magnitude is still the part that we can't quite predict.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

And the last piece that I'll mention is whether it's the hospital association or other lobbying groups, there's really broad support for bringing in clinicians. It is incredibly important source of clinical supply really for all hospitals, but I'd say really acutely for rural hospitals. And so we would expect there to continue to be a strong level of support into 2026.

Brian Tanquilut
Senior Analyst - Healthcare Services & HCIT/Digital Health Equity Research at Jefferies & Company Inc

Got it, super helpful. Appreciate all the questions.

Operator

Our next question comes from Mark Marcon with Baird.

Mark Marcon
Senior Research Analyst at Robert W. Baird & Co

Good afternoon. Most of my questions have been asked, I wanted to dig in a little bit deeper on some of them. So starting with visa retrogression, can you remind us like what was the peak level of revenue on the international nursing side? Where is it currently so that we have a base level that we're gonna build double digits from?

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Brian's getting you that number.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Yeah. Mean, it just as a reminder, we've we've come down by about a 100,000,000 from from the peak in in 2023. So it's we were we were at about 225,000,000 of revenue in 2023. We're running it now more like a 125. So that's when we've talked previously about just getting back to that level, that $100,000,000 and the flow through from that.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

And we have pipeline that could take us beyond that, but that gives you an org magnitude and our EBITDA margin is north of 30% in that business.

Mark Marcon
Senior Research Analyst at Robert W. Baird & Co

Great. And then on the labor disruption side, it sounds like we're building it. We did $16,000,000 last quarter. We're building in $5,000,000 for this quarter, but it sounds like there are a lot of CBAs. So is that $5,000,000 a really conservative number?

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

We have line of sight to the $5,000,000 in the third quarter. We always put Mark $5,000,000 in because we can't really, with any degree of precision, both timing and magnitude, be able to predict more than that. There is upside in the third quarter from that number If some of those CBAs, if the unions strike, there is also upside potential in the fourth quarter as well, based on the CBAs that we know we are supporting. So there is both third quarter

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

and fourth quarter upside. Yeah, but the bigger, the more likely larger revenue opportunity would be There the fourth and first quarter next are a couple of smaller things that could happen in the third quarter. But again, it's just we have good like I said, we contracted work that supports the guidance we gave. There's a couple others that may or may not happen that are smaller. I don't feel conservative, maybe, but I think it's appropriate based on what we know right now.

Mark Marcon
Senior Research Analyst at Robert W. Baird & Co

Okay. And then on the competitive environment, you you we we all know there's a number of players out there that are that are struggling, and then we also have consolidation. In terms of the players that are struggling, are there any sort of negative impacts that you're currently seeing from a pricing perspective just as they struggle to maintain viability? Or is pricing staying from a competitive perspective staying fairly stable? And then, how should we think about pricing as we do get that stabilization or rationalization in terms of industry capacity?

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

I think what we've seen more in terms of the pricing is just the competitive environment. We've really been in that for several years. So I don't know that anything has incrementally changed. I think Mark, when you look at, we've had relative stability in bill rates in nursing. Revenue per day in locums has continued to increase, but you've seen relative stability in our Nurse and Ally business.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

So what you'd really want to see as you get into 2026 is you still have underlying increases in wages that are going on and you'd really want to see that reflected in bill rates. Because the premium spread from contingent to permanent is high single digits. And so I don't know that there's a lot of room to go from there. So that's what you want to see more competitively. And I think that regardless of financial position, there's going to be an interest in all players being able to maintain some level of margin.

Mark Marcon
Senior Research Analyst at Robert W. Baird & Co

Great. And then you have the SmartSquare divestiture. You're not anticipating any other divestitures, are you?

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

No, from a background standpoint, and I know we talked about this in the press release, what we were seeing in SmartSquare, which really led to the strategic decision of a divestiture, is it's a great platform, it's a great team. That buy and the implementation was increasingly becoming part of broader ERP buy and decision and it was tied in a lot of cases to time and attendance. And so for us, we looked at it as a win win, which is we found a great partner in home in Simpler. It was a great outcome for the clients of that platform. And for us, it allows us to focus our CapEx spend on areas that are growing more strongly.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

And it really created for us an ability to more robustly partner with all these different providers that also have some scheduling systems. Had kind of a competitive friction with them in the past. So we view that whole opportunity as a very strategic decision.

Mark Marcon
Senior Research Analyst at Robert W. Baird & Co

Great. And then just from a financial perspective, you've got that $50,000,000 that you're going be paying back, but then you ended up getting the cash. How are you thinking about and then you also mentioned that you plan to pay some more of the revolver. Where do we think cash flow is gonna be for the third quarter?

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

We'll we'll on an operating cash flow, we'll have a use of cash be because of the debt deposit refund. But to your point, we'll have also the proceeds from that sale. So maybe I'll answer a little bit differently. We are and we're getting, like other companies, some cash tax benefit from the the tax bill. We would expect revolver balance to be somewhere around $30,000,000 at the end of the third quarter.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

That's probably what you're trying to get to there. We're obviously continuing to make really good progress on reducing that revolver balance and have more and more line of sight to getting that fully paid off here, if not at the end of the year, shortly thereafter.

Mark Marcon
Senior Research Analyst at Robert W. Baird & Co

Fantastic. Thank you.

Operator

Our next question comes from Jeff Silber with BMO Capital Markets.

Ryan Griffin
Ryan Griffin
Senior Equity Research Associate at BMO Capital Markets

Hey, good afternoon. This is Ryan on for Jeff. I was just hoping to dig into the underlying bill rate and volume assumptions for the third quarter Nurse and Ally guide. I think you mentioned pretty stable bill rates and perhaps some softness on the volume front. I was just hoping to get some more color there. Thank you.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

Yeah, mean, you've kind of characterized it pretty well. Bill rates have been pretty stable and so we really, as Pierre mentioned, that would unlock more volume if clients are still testing low rates in certain markets and certain clients. And so that we can fill, but it takes longer or in some cases they they can't be filled by us or anybody else. When we get an appropriate price to order, we're able to fill them very quickly. So as you look at the guide we gave for the third quarter, for the travel nurse business, it's that that decline is really all volume driven.

Brian Scott
Brian Scott
CFO & COO at AMN Healthcare Services

We haven't really seen any change in hours worked as well. So that's the bulk of the sequential change. Allied is also down a little bit, partly just again with the school year. This is kind of the low point in the season. And that's probably the main drivers for the Nurse and Allied segment.

Ryan Griffin
Ryan Griffin
Senior Equity Research Associate at BMO Capital Markets

Got it. And then just for the follow-up, I was wondering what your exposure is to rural hospitals?

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

We pulled that up a couple of months ago. We don't have, I'd say, kind of disproportionate exposure to rural versus urban. So I'd say it's not kind of oversized or undersized.

Ryan Griffin
Ryan Griffin
Senior Equity Research Associate at BMO Capital Markets

Thank you.

Operator

This concludes the question and answer session. I would now like to turn it back to Keri Grace for closing remarks.

Cary Grace
Cary Grace
President & CEO at AMN Healthcare Services

Thank you for joining our second quarter earnings call. Our entire team appreciates your interest in AMN Healthcare.

Operator

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Executives
    • Randy Reece
      Randy Reece
      VP, IR & Strategy
    • Cary Grace
      Cary Grace
      President & CEO
    • Brian Scott
      Brian Scott
      CFO & COO
Analysts
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