AMN Healthcare Announces First Quarter 2017 Results

Dollars in millions, except per share amounts.

Revenue

$495.2

6%

Gross profit

$161.8

7%

Net income

$32.0

24%

Diluted EPS

$0.65

23%

Adj. diluted EPS*

$0.63

5%

Adjusted EBITDA*

$63.2

8%

*  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.

Consolidated revenue

$486 - $492 MM

Gross margin

32.5%

SG&A as percentage of revenue

20.5%

Adjusted EBITDA margin

12.5%

*Note: Guidance percentage metrics are approximate. No significant labor disruption revenues are projected for this quarter.  For a reconciliation of adjusted EBITDA margin, see the table entitled "Reconciliation of Guidance Adjusted EBITDA Margin to Guidance Operating Margin" below.

AMN Healthcare Services, Inc.

Condensed Consolidated Statements of Comprehensive Income

(in thousands, except per share amounts)

(unaudited)

Three Months Ended

March 31,

December 31,

2016

2016

Revenue

$  495,169

$  468,002

$  487,858

Cost of revenue

333,393

316,104

329,252

Gross profit

161,776

151,898

158,606

Gross margin

32.7%

32.5%

32.5%

Operating expenses:

Selling, general and administrative (SG&A)

102,073

97,823

101,113

SG&A as a % of revenue

20.6%

20.9%

20.7%

Depreciation and amortization

7,668

6,765

7,732

Total operating expenses

109,741

104,588

108,845

Income from operations

52,035

47,310

49,761

      Operating margin ⁽¹⁾

10.5%

10.1%

10.2%

Interest expense, net, and other

5,130

3,249

6,400

Income before income taxes

46,905

44,061

43,361

Income tax expense

14,897

18,192

17,010

Net income

$    32,008

$    25,869

$    26,351

Net income as a % of revenue

6.5%

5.5%

5.4%

Other comprehensive income (loss):

Foreign currency translation and other

3

39

102

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

43

(463)

260

Other comprehensive income (loss)

46

(424)

362

Comprehensive income

$     32,054

$    25,445

$     26,713

Net income per common share:

Basic

$         0.67

$         0.54

$         0.55

Diluted

$         0.65

$         0.53

$         0.54

Weighted average common shares outstanding:

Basic

47,782

47,894

47,806

Diluted

49,520

49,103

49,208

AMN Healthcare Services, Inc.

Supplemental Financial and Operating Data

(dollars in thousands, except per share data and operating data)

(unaudited)

Three Months Ended

March 31,

December 31,

2017

2016

2016

Revenue

  Nurse and allied solutions

$

313,523

$

297,724

$

307,898

  Locum tenens solutions

102,843

102,738

103,822

  Other workforce solutions

78,803

67,540

76,138

$

495,169

$

468,002

$

487,858

Reconciliation of Non-GAAP Items:

Segment operating income ⁽²⁾

  Nurse and allied solutions

$

45,980

$

41,618

$

43,262

  Locum tenens solutions

12,219

13,291

15,123

  Other workforce solutions

19,857

17,586

21,139

78,056

72,495

79,524

   Unallocated corporate overhead

14,891

13,805

18,649

Adjusted EBITDA ⁽³⁾

63,165

58,690

60,875

Adjusted EBITDA margin ⁽⁴⁾

12.8%

12.5%

12.5%

Depreciation and amortization

7,668

6,765

7,732

Share-based compensation

2,681

3,381

2,604

Acquisition and integration costs

781

1,234

778

Income from operations

52,035

47,310

49,761

Interest expense, net, and other

5,130

3,249

6,400

Income before income taxes

46,905

44,061

43,361

Income tax expense  

14,897

18,192

17,010

Net income

$

32,008

$

25,869

$

26,351

GAAP diluted net income per share (EPS)

$

0.65

$

0.53

$

0.54

   Adjustments:

   Amortization of intangible assets

0.09

0.09

0.10

   Acquisition and integration costs

0.02

0.03

0.01

   Debt financing related costs

0.00

0.00

0.02

   Tax effect on above adjustments

(0.04)

(0.05)

(0.05)

   Excess tax benefits ⁽⁵⁾

(0.09)

0.00

0.00

Adjusted diluted EPS ⁽⁶⁾

$

0.63

$

0.60

$

0.62

Three Months Ended

March 31,

December 31,

2017

2016

2016

Gross Margin

   Nurse and allied solutions

27.7%

26.6%

27.3%

   Locum tenens solutions

30.7%

31.0%

30.8%

   Other workforce solutions

55.0%

60.3%

55.7%

Operating Data:

Nurse and allied solutions

9,051

8,474

8,764

Locum tenens solutions

    Days filled ⁽⁸⁾

55,243

58,166

57,008

    Revenue per day filled ⁽⁹⁾

$1,862

$1,766

$1,821

As of March 31,

As of December 31,

2017

2016

2016

Leverage ratio ⁽¹⁰⁾

1.6

1.9

1.6

AMN Healthcare Services, Inc.

Condensed Consolidated Balance Sheets

(dollars in thousands)

(unaudited)

March 31,

December 31,

2017

2016

Assets

Current assets:

Cash and cash equivalents

$    37,711

$    10,622

Accounts receivable, net

334,782

341,977

Accounts receivable, subcontractor

48,838

49,233

Prepaid and other current assets

50,893

48,796

Total current assets

472,224

450,628

Restricted cash, cash equivalents

and investments

29,141

31,287

Fixed assets, net

62,620

59,954

Other assets

65,368

57,534

Goodwill

340,564

341,754

Intangible assets, net

241,130

245,724

Total assets

$ 1,211,047

$ 1,186,881

Liabilities and stockholders' equity

Current liabilities:

Accounts payable and accrued expenses

$ 136,028

$ 137,512

Accrued compensation and benefits

99,642

107,993

Current portion of notes payable

3,750

3,750

Deferred revenue

8,840

8,924

Other current liabilities

29,428

16,611

Total current liabilities

277,688

274,790

Notes payable, less unamortized fees

358,512

359,192

Deferred income taxes, net

16,548

21,420

Other long-term liabilities

81,494

82,096

Total liabilities

734,242

737,498

Commitments and contingencies

Stockholders' equity

476,805

449,383

Total liabilities and stockholders' equity

$ 1,211,047

$ 1,186,881

AMN Healthcare Services, Inc.

Summary Condensed Consolidated Statements of Cash Flows

(dollars in thousands)

(unaudited)

Three Months Ended

March 31,

December 31

2016

2016

Net cash provided by operating activities

$  52,314

$  35,227

$  47,031

Net cash  used in investing activities

(13,301)

(174,703)

(16,091)

Net cash provided by (used in) financing activities

(11,928)

152,967

(36,128)

Effect of exchange rates on cash

4

39

102

Net increase (decrease) in cash and cash equivalents

27,089

13,530

(5,086)

Cash and cash equivalents at beginning of period

10,622

9,576

15,708

Cash and cash equivalents at end of period

$  37,711

$  23,106

$  10,622

AMN Healthcare Services, Inc.

Additional Supplemental Non-GAAP Disclosures

Reconciliation of Guidance Adjusted EBITDA Margin to

Guidance Operating Margin

(unaudited)

Three Months Ending

June 30, 2017

Adjusted EBITDA margin

Deduct:

Share-based compensation

0.6%

EBITDA margin

11.9%

Depreciation and amortization

1.6%

Operating margin

(1)

Operating margin represents income from operations divided by revenue.

(2)

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.

(3)

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 the Company's 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.

(4)

Adjusted EBITDA margin represents adjusted EBITDA divided by revenue.

(5)

The consolidated effective tax rate for the three months ended March 31, 2017 was favorably affected by the recording of excess tax benefits relating to equity awards vested and exercised during the period. As a result of the adoption of a new accounting pronouncement on January 1, 2017, we no longer record excess tax benefits as an increase to additional paid-in capital, but record such excess tax benefits on a prospective basis as a reduction of income tax expense, which amounted to $4,297,000 for the three months ended March 31, 2017. Since a majority of our equity awards vest during the first quarter, we do not anticipate the recording of additional excess tax benefits of this magnitude for the reminder of the year. The magnitude of the impact of excess tax benefits generated in the future, which may be favorable or unfavorable, are dependent upon the Company's future grants of share-based compensation, the Company's future stock price on the date awards vest or exercise in relation to the fair value of the awards on the grant date or the exercise behavior of the Company's stock appreciation rights holders. Since these favorable tax benefits are largely unrelated to our current year's income before taxes and are unrepresentative of our normal effective tax rate, we excluded its impact on adjusted diluted EPS for the three months ended March 31, 2017.

(6)

Adjusted diluted EPS represents GAAP diluted EPS excluding the impact of (A) amortization of intangible assets, (B) acquisition and integration costs, (C) debt financing related costs, (D) tax effect, if any, of the foregoing adjustments, and (E) excess tax benefits relating to equity awards vested and exercised since January 1, 2017. 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.

(11)

Guidance percentage metrics are approximate. No significant labor disruption revenues are projected for this quarter.