AMN Healthcare Services(AMN) - 2021 Q4 - Annual Report

Part I Business AMN Healthcare provides comprehensive talent solutions for the U.S. healthcare industry through three core segments - AMN Healthcare provides a comprehensive suite of talent solutions including staffing, MSP, VMS, language services, and technology to optimize healthcare workforces[15][16][18] - The company operates through three reportable segments: Nurse and Allied Solutions, Physician and Leadership Solutions, and Technology and Workforce Solutions[33] - As of December 31, 2021, the company had approximately 3,800 corporate team members and an average of 14,827 nurses and allied professionals on assignment in Q4 2021[25] - Kaiser Foundation Hospitals accounted for approximately 17% of consolidated revenue and 20% of nurse and allied solutions segment revenue in fiscal year 2021[49] - The U.S. healthcare staffing market was estimated at $24.7 billion in 2021, with AMN recognized as the largest temporary healthcare staffing firm[50][52] Risk Factors The company faces demand, operational, legal, regulatory, and financial risks, including client concentration and debt - Demand for services fluctuates with public health crises, with a post-pandemic decrease in demand and bill rates expected[61][62] - Client consolidation poses a risk to pricing and client retention, with Kaiser Foundation Hospitals accounting for approximately 17% of consolidated revenue in 2021[71][72] - The company is subject to legal proceedings, including class action lawsuits related to wage and hour violations, and is at risk for anti-competitive conduct claims[78][81] - Challenges to the classification of locum tenens professionals as independent contractors could increase costs and negatively impact profitability[87][88][89] - The company's total indebtedness was $842.3 million as of December 31, 2021, imposing operational restrictions and exposing it to interest rate risk[120][126] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[129] Properties The company leases all its properties, primarily office facilities in San Diego and Dallas, which are deemed adequate - The company leases all its properties, with its principal offices located in San Diego, CA and Dallas, TX[130] Legal Proceedings The company faces legal proceedings, primarily class action lawsuits for wage and hour claims, with $37.2 million accrued - The company is involved in class action lawsuits (e.g., Clarke Matter, Woehrle Matter) alleging that per diem benefits for traveling nurses should be included in their regular rate of pay for overtime calculations[349][350][351] - As of December 31, 2021, the company has accrued $37.2 million for loss contingencies related to these legal matters[352] Mine Safety Disclosures This item is not applicable to the company - Not applicable[132] Part II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities AMN common stock trades on NYSE, with a share repurchase program, no dividends, and strong five-year stock performance - The company's common stock is traded on the New York Stock Exchange under the symbol 'AMN'[133] - On November 10, 2021, the Board authorized an additional $150.0 million for the company's common stock repurchase program[135] Share Repurchases in 2021 | Period | Total Number of Shares Purchased | Average Price Paid per Share | Maximum Dollar Value that May Yet Be Purchased Under the Program (in millions) | | :--- | :--- | :--- | :--- | | Nov 1 - 30, 2021 | 10,242 | $108.10 | $179.7 | | Dec 1 - 31, 2021 | 14,424 | $109.58 | $178.2 | | Total | 24,666 | $108.97 | $178.2 | - The company has not paid dividends on its common stock and does not expect to pay cash dividends in the future, retaining earnings for business operations and expansion[137] Comparison of 5-Year Cumulative Total Return | | 12/31/16 | 12/31/17 | 12/31/18 | 12/31/19 | 12/31/20 | 12/31/21 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | AMN Healthcare Services, Inc. | $100.00 | $128.09 | $147.36 | $162.05 | $177.50 | $318.15 | | NYSE Composite | $100.00 | $118.73 | $108.10 | $135.68 | $145.16 | $175.18 | | BTEA Index | $100.00 | $133.11 | $99.31 | $125.42 | $132.71 | $181.58 | Management's Discussion and Analysis of Financial Condition and Results of Operations In 2021, AMN Healthcare's revenue grew 66% to $3.98 billion and net income surged, driven by high demand across all segments Results of Operations In 2021, revenue increased 66% to $3.98 billion, driven by strong growth across all segments, with net income significantly increasing Consolidated Financial Highlights (2021 vs. 2020) | Metric | 2021 (in millions) | 2020 (in millions) | Change (in millions) | % Change | | :--- | :--- | :--- | :--- | :--- | | Revenue | $3,984.2 | $2,393.7 | +$1,590.5 | +66% | | Gross Profit | $1,309.6 | $791.8 | +$517.8 | +65% | | Income from Operations | $478.0 | $149.3 | +$328.7 | +220% | | Net Income | $327.4 | $70.7 | +$256.7 | +363% | | Diluted EPS | $6.81 | $1.48 | +$5.33 | +360% | Segment Revenue Growth (2021 vs. 2020) | Segment | 2021 Revenue (in millions) | 2020 Revenue (in millions) | % Change | | :--- | :--- | :--- | :--- | | Nurse and Allied Solutions | $2,990.1 | $1,699.3 | +76% | | Physician and Leadership Solutions | $594.2 | $466.6 | +27% | | Technology and Workforce Solutions | $399.9 | $227.8 | +76% | - The Nurse and Allied Solutions segment's 76% revenue increase was driven by a 31% increase in average bill rate and a 28% increase in the average number of travelers on assignment[157] - Gross margin decreased slightly from 33.1% in 2020 to 32.9% in 2021, primarily due to a change in sales mix with higher revenue from the lower-margin nurse and allied solutions segment[161] Liquidity and Capital Resources The company maintained strong liquidity in 2021 with $305.4 million cash from operations and total debt of $850.0 million Cash Flow Summary (in thousands) | Cash Flow Activity | 2021 | 2020 | 2019 | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $305,356 | $256,826 | $224,862 | | Net cash used in investing activities | $(107,402) | $(538,172) | $(291,824) | | Net cash provided by (used in) financing activities | $(34,895) | $211,486 | $136,599 | - The increase in cash from operations in 2021 was driven by higher net income and significant increases in accounts payable and accrued compensation, partially offset by a large increase in accounts receivable due to revenue growth[169] - As of December 31, 2021, the company had total debt outstanding of $850.0 million and available credit of $378.6 million under its Senior Credit Facility[167][329] - In Q1 2021, the company fully paid off the remaining balance of its Additional Term Loan[174] Critical Accounting Policies and Estimates Critical accounting policies involve significant judgment for goodwill impairment, professional liability reserves, and contingent legal liabilities - Goodwill and Indefinite-lived Intangible Assets: The company performs annual impairment tests, using discounted cash flow and market approaches, which require significant judgment on future cash flows, growth rates, and discount rates[188][189] - Professional Liability Reserve: The adequacy of the accrual is determined using historical data, third-party administrator reserves, and semi-annual independent actuarial studies to estimate known claims and IBNR[192] - Contingent Liabilities: The company records a liability for legal matters when a loss is probable and reasonably estimable[193][194] Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk is interest rate exposure on variable debt, with foreign currency risk deemed immaterial - The primary market risk is interest rate risk associated with variable interest debt[197] - Foreign currency risk is considered immaterial as the company generates substantially all of its revenue in the United States[197] Financial Statements and Supplementary Data This section presents audited consolidated financial statements, showing $3.13 billion in assets and $1.97 billion in liabilities, with an unqualified auditor's opinion - The independent registered public accounting firm, KPMG LLP, issued an unqualified opinion on the consolidated financial statements[201] - KPMG identified the Professional Liability Reserve as a Critical Audit Matter due to the high degree of complex and subjective judgment required in evaluating the actuarial estimates for incurred but not reported claims[205][206] Consolidated Balance Sheet Highlights (as of Dec 31, 2021) | Account | Amount (in thousands) | | :--- | :--- | | Total Current Assets | $1,349,068 | | Goodwill | $892,341 | | Intangible Assets, net | $514,460 | | Total Assets | $3,131,906 | | Total Current Liabilities | $969,390 | | Notes Payable, net | $842,322 | | Total Liabilities | $1,969,879 | | Total Stockholders' Equity | $1,162,027 | Note 2: Acquisitions The company completed several acquisitions between 2019 and 2021, including virtual care platforms, language interpretation services, and staffing companies - On April 7, 2021, the Company acquired Synzi and SnapMD, virtual care technology platforms, for an initial purchase price of $42.2 million in cash[269] - On February 14, 2020, the Company acquired Stratus Video, a remote video interpreting company, for a purchase price of $485.7 million[271][272] - On June 14, 2019, the Company acquired Advanced Medical Personnel Services, Inc., a national healthcare staffing company, for a purchase price of $211.8 million[279][280] Note 4: Goodwill and Identifiable Intangible Assets As of December 31, 2021, the company reported $892.3 million in goodwill and $514.5 million in net intangible assets, with some tradenames reclassified to finite lives Goodwill by Segment (as of Dec 31, 2021) | Segment | Goodwill (in thousands) | | :--- | :--- | | Nurse and Allied Solutions | $339,015 | | Physician and Leadership Solutions | $152,800 | | Technology and Workforce Solutions | $400,526 | | Total | $892,341 | - In Q4 2021, the company determined that $89.4 million of tradenames and trademarks previously classified as indefinite-lived now have finite useful lives (average of six years) and will be amortized[299] - Estimated future amortization expense for existing intangible assets is $79.0 million for 2022[300][301] Note 8: Notes Payable and Credit Agreement As of December 31, 2021, total debt was $850.0 million, primarily senior notes, with $378.6 million available under its credit facility Debt Balances (as of Dec 31, 2021) | Debt Instrument | Principal Amount (in thousands) | | :--- | :--- | | 4.625% Senior Notes due 2027 | $500,000 | | 4.000% Senior Notes due 2029 | $350,000 | | Total Debt Outstanding | $850,000 | - The company fully repaid all amounts under the Additional Term Loan in the first quarter of 2021[322] - At December 31, 2021, the company had $378.6 million of available credit under its Senior Credit Facility[325] Controls and Procedures Management and KPMG LLP concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2021 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2021[354] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2021, based on the COSO framework[355] - KPMG LLP, the independent registered public accounting firm, issued an unqualified opinion on the effectiveness of the company's internal control over financial reporting as of December 31, 2021[356][359] Other Information The company reported no other information for this item - None[367] Part III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the 2022 Proxy Statement - Most information required by this item is incorporated by reference from the 2022 Annual Meeting Proxy Statement[368] Executive Compensation Executive compensation information is incorporated by reference from the 2022 Annual Meeting Proxy Statement - Information required by this item is incorporated by reference from the 2022 Annual Meeting Proxy Statement[370] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Security ownership information is incorporated by reference from the 2022 Proxy Statement, with 2,729,205 securities available for future issuance Equity Compensation Plan Information as of December 31, 2021 | Plan Category | Number of Securities to be Issued upon Exercise of Outstanding Options, Warrants and Rights | Weighted-Average Exercise Price of Outstanding Options, Warrants, and Rights | Number of Securities Remaining Available for Future Issuance Under Equity Compensation Plans | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 736,346 | $— | 2,547,751 | | Equity compensation plans not approved by security holders | 18,546 | $— | 181,454 | | Total | 754,892 | $— | 2,729,205 | Certain Relationships and Related Transactions, and Director Independence Information on related party transactions and director independence is incorporated by reference from the 2022 Proxy Statement - Information required by this item is incorporated by reference from the 2022 Annual Meeting Proxy Statement[377] Principal Accounting Fees and Services Information on principal accounting fees and services is incorporated by reference from the 2022 Proxy Statement - Information required by this item is incorporated by reference from the 2022 Annual Meeting Proxy Statement[378] Part IV Exhibits and Financial Statement Schedules This section lists all exhibits filed with the Form 10-K, including consolidated financial statements, with schedules omitted as information is elsewhere - This section contains the consolidated financial statements and a list of all exhibits filed with the Form 10-K[380][381] - All financial statement schedules have been omitted because the required information is presented in the financial statements or notes thereto, is not significant, or is not applicable[380] Form 10-K Summary No Form 10-K summary was provided - None[387]