AMN Healthcare Services(AMN) - 2023 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1. Condensed Consolidated Financial Statements The unaudited statements show significant decreases in revenue and net income, with declining assets and equity due to share repurchases Condensed Consolidated Balance Sheets Total assets decreased to $2.64 billion, while stockholders' equity fell significantly due to substantial treasury stock purchases Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2023 | December 31, 2022 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $2,644,143 | $2,888,351 | ($244,208) | | Cash and cash equivalents | $7,013 | $64,524 | ($57,511) | | Accounts receivable, net | $579,926 | $675,650 | ($95,724) | | Total Liabilities | $1,877,846 | $1,844,717 | $33,129 | | Revolving credit facility | $190,000 | $0 | $190,000 | | Total Stockholders' Equity | $766,297 | $1,043,634 | ($277,337) | | Treasury stock, at cost | ($1,086,862) | ($698,598) | ($388,264) | Condensed Consolidated Statements of Comprehensive Income Revenue and net income declined sharply in Q2 and the first half of 2023 compared to the prior year's pandemic-driven highs Financial Performance Summary (in thousands, except per share data) | Metric | Q2 2023 | Q2 2022 | YoY Change | Six Months 2023 | Six Months 2022 | YoY Change | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Revenue | $991,299 | $1,426,607 | -30.5% | $2,117,522 | $2,979,145 | -28.9% | | Gross Profit | $330,281 | $460,237 | -28.2% | $699,127 | $956,405 | -26.9% | | Income from Operations | $91,663 | $183,533 | -50.1% | $217,333 | $391,466 | -44.5% | | Net Income | $60,906 | $123,800 | -50.8% | $145,016 | $269,808 | -46.3% | | Diluted EPS | $1.55 | $2.77 | -44.0% | $3.58 | $5.87 | -39.0% | Condensed Consolidated Statements of Cash Flows Operating cash flow decreased due to lower net income, while financing activities were driven by significant stock repurchases Cash Flow Summary for the Six Months Ended June 30 (in thousands) | Activity | 2023 | 2022 | Change | | :--- | :--- | :--- | :--- | | Net cash provided by operating activities | $241,101 | $424,677 | ($183,576) | | Net cash used in investing activities | ($54,859) | ($115,762) | $60,903 | | Net cash used in financing activities | ($247,744) | ($411,688) | $163,944 | | Net decrease in cash | ($61,502) | ($102,773) | $41,271 | - Significant cash outflow for financing activities in the first six months of 2023 was due to $424.7 million used for the repurchase of common stock[20] Notes to Unaudited Condensed Consolidated Financial Statements Segment data highlights revenue declines, a $200 million share repurchase, and a $62 million legal settlement accrual Revenue by Segment (in thousands) | Segment | Q2 2023 Revenue | Q2 2022 Revenue | YoY Change | | :--- | :--- | :--- | :--- | | Nurse and allied solutions | $689,015 | $1,101,478 | -37.4% | | Physician and leadership solutions | $176,229 | $175,697 | +0.3% | | Technology and workforce solutions | $126,055 | $149,432 | -15.6% | - On May 8, 2023, the company entered into a $200 million Accelerated Share Repurchase (ASR) agreement, receiving an initial delivery of 1.76 million shares[47] - The company has reached an agreement to settle the Clarke Matter, a class action lawsuit related to per diem and overtime claims, and has recorded an accrual of $62 million for this matter[76] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses the revenue decline driven by post-pandemic demand normalization and details segment performance and capital allocation Recent Trends Travel nurse demand has fallen below pre-pandemic levels, while locum tenens demand remains strong amid client cost containment - Demand in the travel nurse business has declined significantly from historic highs in 2023, with Q2 demand remaining below pre-pandemic levels as healthcare organizations focus on hiring permanent staff[92] - Bill rates in the nurse and allied solutions segment decreased year-over-year and quarter-over-quarter in Q2 2023, reflecting less urgent needs from clients post-pandemic[93] - Demand for the locum tenens business is well above pre-pandemic levels, driven by growth in CRNAs and anesthesiologists, while demand was lower for interim leadership and search businesses[94] Results of Operations Q2 revenue fell 31% to $991.3 million, driven by a 37% decline in the Nurse and Allied segment, though gross margin improved - Q2 2023 revenue decreased 31% year-over-year, primarily due to a 37% decline in the Nurse and Allied solutions segment, caused by a 19% decrease in average bill rate and a 17% decrease in travelers on assignment[99] - The Physician and Leadership solutions segment revenue was flat in Q2 2023, as a 15% growth in the locum tenens business was offset by declines in interim leadership and search businesses[100] - Consolidated gross margin for Q2 2023 increased to 33.3% from 32.3% in Q2 2022, mainly due to a favorable sales mix from lower revenue in the lower-margin Nurse and Allied segment[102][103] Liquidity and Capital Resources The company maintains solid liquidity with $539.2 million available credit and actively returned capital via share repurchases - As of June 30, 2023, the company had $190.0 million drawn and $539.2 million available under its $750.0 million secured revolving credit facility[118] - In May 2023, the company entered into a $200.0 million Accelerated Share Repurchase (ASR) agreement, funded by borrowings under the Senior Credit Facility[119] - Net cash from operating activities decreased to $241.1 million for the first six months of 2023 from $424.7 million in 2022, primarily due to a decline in operating results[120] Item 3. Quantitative and Qualitative Disclosures about Market Risk The company's primary market risk from variable-rate debt is considered immaterial, as is foreign currency risk - The company's main market risk is interest rate risk from variable rate debt, but a 100 basis point increase would not have a material effect on financial statements for the period[128] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of the end of the quarter[130] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[131] PART II - OTHER INFORMATION Item 1. Legal Proceedings The company settled the notable Clarke Matter wage and hour lawsuit, recording a $62 million accrual - The company has reached an agreement to settle the Clarke Matter, a class action lawsuit concerning per diem benefits and overtime calculations, and has accrued $62 million for the settlement[76][133] Item 1A. Risk Factors No material changes to the risk factors disclosed in the 2022 Annual Report on Form 10-K have been identified - There have been no material changes to the risk factors disclosed in the company's 2022 Annual Report[134] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased $424.7 million in shares during H1 2023, with $226.7 million remaining under its authorization - On May 8, 2023, the company entered into a $200 million Accelerated Share Repurchase (ASR) agreement, receiving an initial delivery of 1.8 million shares[136] Share Repurchases for the Six Months Ended June 30, 2023 | Period | Total Shares Purchased | Average Price Paid | Total Value (excl. ASR prepayment) | | :--- | :--- | :--- | :--- | | Jan - Mar 2023 | 1,767,949 | $96.56 | ~$170.7M | | Apr - Jun 2023 | 2,354,108 (incl. ASR) | $90.08 | ~$212.0M | - As of June 30, 2023, the maximum dollar value of shares that may yet be purchased under the program is $226.7 million[139][140] Other Items (3, 4, 5, 6) This section confirms no senior security defaults and no new Rule 10b5-1 trading plans by insiders during the quarter - Item 3: No defaults upon senior securities were reported[141] - Item 5: No directors or officers adopted, modified, or terminated a Rule 10b5-1 trading arrangement during the second quarter of 2023[142]