AMN Healthcare Announces First Quarter 2020 Results

DALLAS and SAN DIEGO, May 11, 2020 /PRNewswire/ -- AMN Healthcare Services, Inc. (NYSE: AMN), the leader and innovator in total talent solutions for healthcare organizations across the United States, today announced its first quarter 2020 financial results. Financial highlights are as follows:

Dollars in millions, except per share amounts.


                              Q1 2020 % Change Q1 2019




       Revenue                $602.5               13%

    ---


       Gross profit           $202.1               14%

    ---


       Net income              $13.0             (62)%

    ---


       Diluted EPS             $0.27             (62)%

    ---

        Adjusted diluted EPS*   $0.79                5%

    ---


       Adjusted EBITDA*        $74.0               12%

    ---



               *  See "Non-GAAP Measures" below
                for a discussion of our use of
                non-GAAP items and the table
                entitled "Non-GAAP Reconciliation
                Tables" for a reconciliation of
                non-GAAP items.

Business Highlights

    --  First quarter financial results in line with guidance, with favorable
        trends and strong momentum across most business lines in the first two
        months of the year.
    --  Revenue of $602 million was 13% above prior year, with organic revenue
        higher by 3%, and adjusted EBITDA was $74 million.
    --  With the nationwide reduction in elective procedures and overall
        healthcare utilization starting in the second half of March due to
        COVID-19, all divisions except Travel Nurse and VMS were negatively
        impacted in the quarter.
    --  Stratus Video, the remote video interpretation business acquired in
        mid-February, contributed $14 million of revenue in the first quarter,
        just below expectations due to COVID-19.
    --  We have realigned our three reportable segments to better correlate with
        our business operations and organizational structure.

"I am immensely proud of the incredible AMN team, our clients, our industry and most importantly, our front-line healthcare professionals for the way they have risen to the challenge of this global pandemic," said Susan R. Salka, Chief Executive Officer of AMN Healthcare. "In March and April, we mobilized thousands of healthcare professionals to respond to the needs of our clients and the patients and communities they serve. To handle this dramatic COVID-19 demand surge, our teams rallied with hundreds of team members shifting into new roles to support our clients and healthcare professionals.

"Under pressure from the pandemic and the urgent patient care needs across the country, we were quickly able to deploy several new, innovative solutions," Ms. Salka added. "In April we expanded our scalable VMS solution, Open Talent Marketplace, allowing a multitude of healthcare facilities to quickly staff and manage their entire range of contingent talent. We saw a significant increase in utilization of our emerging Televate teletherapy platform by the school districts we serve. We added new functionality to our Stratus platform that enabled clients to utilize it for broader telehealth care. AMN launched a new telehealth platform, AMN Cares, for care teams to interact with patients or employees at home. We also accelerated the release of AMN Passport, the most comprehensive mobile app for healthcare professionals in the industry."

"As needs related to COVID-19 support decelerated in late April and healthcare utilization remained low across the country, demand for most of our service lines also declined. As a result, we have made adjustments to our cost structure to reflect this market environment. At the same time, we remain focused on our total talent strategy to ensure we emerge as an even stronger and more agile organization," Ms. Salka said.

First Quarter 2020 Results

Consolidated revenue for the quarter was $602 million, a 13% increase over prior year and 3% higher than prior quarter. On an organic basis, consolidated revenue was up 3% over prior year. Beginning this quarter, we are reporting with three realigned business segments. The Nurse and Allied Solutions segment now includes our revenue cycle solutions business. Physician and Leadership Solutions is a new segment that encompasses contingent and permanent leadership solutions, locum tenens, and physician permanent placement. Technology and Workforce Solutions, the third segment, includes remote video interpreting, vendor management solutions, predictive analytics, RPO and credentialing services.

Revenue for the Nurse and Allied Solutions segment was $424 million up 14% year over year (3% organic) and flat sequentially. Travel Nurse division revenue grew 12% year over year with 6% organic growth. Allied division revenue increased 41% year over year, 5% organic.

The Physician and Leadership Solutions segment reported revenue of $138 million, up 1% year over year and down 1% sequentially. Technology and Workforce Solutions segment revenue was $40 million for an increase of 84% year over year (13% organic), driven in large part by our recent acquisitions of b4health and Stratus Video.

Gross margin was 33.5%, higher by 30 basis points year over year and lower by 10 basis points sequentially. The year-over-year variance was driven primarily by a favorable segment mix shift.

SG&A expenses were $146 million, or 24.3% of revenue, compared with $120 million, or 22.5% of revenue, in the same quarter last year. SG&A was $133 million, or 22.7% of revenue, in the previous quarter. The year-over-year increase in SG&A costs included a $7 million increase in one-time costs related to recent acquisitions, as well as $9 million of SG&A from the acquired companies. The remainder of the SG&A increase from prior year was due mainly to higher employee-related expenses and an increase in bad debt reserves due largely to the COVID-19 crisis.

Income from operations was $36 million, or 5.9% of revenue, compared with $45 million, or 8.5% of revenue, in the same quarter last year. Adjusted EBITDA was $74 million, a year-over-year increase of 12%. Adjusted EBITDA margin was 12.3%, representing a decrease of 10 basis points year over year.

Net income was $13 million, or $0.27 per diluted share, compared with $34 million, or $0.71 per diluted share, in the same quarter last year. Adjusted diluted EPS was $0.79.

At March 31, 2020, cash and cash equivalents totaled $98 million. Cash flow from operations was $51 million for the quarter, and capital expenditures were $14 million. The Company ended the quarter with total debt outstanding of $1,100 million with a leverage ratio of 3.1 to 1. Subsequent to quarter end, the Company reduced total debt outstanding to $1,050 million and currently has more than $200 million available to draw under the revolving credit facility.

Second Quarter 2020 Outlook

The stay-at-home orders and suspension of elective procedures have caused a material decrease in healthcare utilization and delayed buying decisions from our clients. Travel nurse demand was remarkably strong in the second half of March and much of April. However, recent demand has fallen significantly, reflecting the decline in crisis assignments and healthcare utilization. Overall, for the second quarter, we expect Nurse and Allied Solutions segment revenue to be above prior year by 7-10%, with higher travel nurse revenue partly offset by lower revenue cycle solutions and labor disruption revenue. For this segment, the trajectory of volume and revenue is declining through the quarter, and we expect volumes for nurse, allied and revenue cycle to be below prior year in June.

For our Physician and Leadership Solutions and Technology and Workforce Solutions segments, April revenue for most service lines was below prior-year levels by about 10-30%. Revenue has stabilized, and we expect demand to grow from current levels for these businesses as elective procedures resume and overall healthcare utilization increases.

Based on the above trends, we are projecting second quarter revenue to be in a range of $550 million to $570 million. This wide range reflects the uncertainty and volatility of business activity. In response to the lower level of revenue, we have taken several steps to reduce spending across the enterprise. These actions, plus the variable nature of certain expenses, have decreased our SG&A by approximately 15% on an annualized basis from our pre-COVID-19 run rate. Second quarter operating margin is expected to be above 6%, and adjusted EBITDA margin is expected to be above 12%.

Second quarter estimates for certain financial items include depreciation of $7.5 million, non-cash amortization expense of $15.6 million, interest expense of $10.7 million, integration expenses of $4-5 million, and an adjusted tax rate of 32%.

Conference Call on May 11, 2020

AMN Healthcare Services, Inc. (NYSE: AMN), the leader and innovator in total talent solutions for healthcare, will host a conference call to discuss its first quarter 2020 financial results and outlook on Monday, May 11, 2020, at 5:00 p.m. Eastern Time. A live webcast of the call can be accessed through AMN Healthcare's website at http://amnhealthcare.investorroom.com/eventcalendar. Please log in at least 10 minutes prior to the conference call in order to download the applicable audio software. Interested parties may participate live via telephone by dialing (844) 721-7241 in the U.S. or (409) 207-6955 internationally and using participant code 4038932. Following the conclusion of the call, a replay of the webcast will be available at the Company's website. Alternatively, a telephonic replay of the call will be available starting at 7:30 p.m. Eastern Time on May 11, 2020, and can be accessed until 11:59 p.m. Eastern Time on May 25, 2020, by calling (800) 207-1041 in the U.S. or (402) 970-0847 internationally, with access code 1880818.

About AMN Healthcare

AMN Healthcare is the leader and innovator in total talent solutions for healthcare organizations across the nation. The Company provides access to the most comprehensive network of quality healthcare professionals through its innovative recruitment strategies and breadth of career opportunities. With insights and expertise, AMN Healthcare helps providers optimize their workforce to successfully reduce complexity, increase efficiency and improve patient outcomes. AMN total talent solutions include managed services programs, clinical and interim healthcare leaders, temporary staffing, executive search solutions, vendor management systems, recruitment process outsourcing, predictive modeling, language interpretation services, revenue cycle solutions, credentialing, and other services. Clients include acute-care hospitals, community health centers and clinics, physician practice groups, retail and urgent care centers, home health facilities, schools and many other healthcare settings. AMN Healthcare is committed to fostering and maintaining a diverse team that reflects the communities we serve. Our commitment to the inclusion of many different backgrounds, experiences and perspectives enables our innovation and leadership in the healthcare services industry.

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

Non-GAAP Measures

This earnings release contains certain non-GAAP financial information, which the Company provides as additional information, and not as an alternative, to the Company's condensed consolidated financial statements presented in accordance with GAAP. These non-GAAP financial measures include (1) adjusted EBITDA, (2) adjusted EBITDA margin and (3) adjusted net income, and (4) adjusted diluted EPS. The Company provides such non-GAAP financial measures because management believes that they are useful both to management and investors as a supplement, and not as a substitute, when evaluating the Company's operating performance. Additionally, management believes that adjusted EBITDA, adjusted EBITDA margin, adjusted net income, and adjusted diluted EPS serve as industry-wide financial measures. The Company uses adjusted EBITDA for making financial decisions and allocating resources. The non-GAAP measures in this release are not in accordance with, or an alternative to, GAAP measures and may be different from non-GAAP measures, or may be calculated differently than other similarly titled non-GAAP measures, reported by other companies. They should not be used in isolation to evaluate the Company's performance. A reconciliation of non-GAAP measures identified in this release, along with further detail about the use and limitations of certain of these non-GAAP measures, may be found below in the table entitled "Non-GAAP Reconciliation Tables" under the caption entitled "Reconciliation of Non-GAAP Items" and the footnotes thereto or on the Company's website at http://amnhealthcare.investorroom.com/financialreports. Additionally, from time to time, additional information regarding non-GAAP financial measures, including pro forma measures, may be made available on the Company's website.

Forward-Looking Statements

This press release contains "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, among others, statements concerning future demand projections, projected healthcare utilization rates, projections regarding the trajectory of travel nurse volume and revenue, revenue projections for our Physician and Leadership Solutions and Technology and Workforce Solutions segments, the Company's projected annualized SG&A performance and our guidance for second quarter 2020 Nurse and Allied Solutions segment revenue, allied and revenue cycle solutions revenue, consolidated revenue, travel nurse revenue, operating margin, adjusted EBITDA margin, depreciation expense, non-cash amortization expense, interest expense, integration expenses, and adjusted tax rate. The Company bases these forward-looking statements on its current expectations, estimates and projections about future events and the industry in which it operates using information currently available to it. Actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Forward-looking statements are identified by words such as "believe," "project," "anticipate," "expect," "intend," "plan," "will," "may," "estimates," variations of such words and other similar expressions. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements.

The Company's ability to meet the targets and expectations noted in our second quarter 2020 outlook depends upon, among other factors, (i) the magnitude and duration of the effects of the COVID-19 pandemic on our business, financial condition and results of operations, (ii) the duration of the period that hospitals and other healthcare entities decrease their utilization of temporary employees, physicians, leaders and other workforce technology applications as a result of the suspension or restrictions placed on non-essential and elective healthcare as a result of the COVID-19 pandemic, (iii) the duration of the period that individuals may continue to forgo non-essential and elective healthcare once "safer at home" restrictions and recommendations are lifted, (iv) the extent and duration of the period that a significant spike in unemployment that has resulted from the COVID-19 pandemic will cause an increase in under- and uninsured patients and a corresponding reduction in overall healthcare utilization and demand for our services, (v) the extent to which the COVID-19 pandemic may disrupt our operations due to the unavailability of our employees or healthcare professionals due to illness, risk of illness, quarantines, travel restrictions or other factors that limit our existing or potential workforce and pool of candidates, (vi) the severity and duration of the impact the COVID-19 pandemic has on the financial condition and cash flow of many hospitals and healthcare systems such that it impairs their ability to make payments to us, timely or otherwise, for services rendered, (vii) our ability to anticipate and quickly respond to changing marketplace conditions, such as alternative modes of healthcare delivery, reimbursement, or client needs, (viii) our ability to manage the pricing impact that the COVID-19 pandemic and consolidation of healthcare delivery organizations may have on our business, (ix) our ability to develop and evolve our current technology offerings and capabilities and implement new infrastructure and technology systems to optimize our operating results and manage our business effectively, (x) our ability to comply with extensive and complex federal and state laws and regulations related to the conduct of our operations, costs and payment for services and payment for referrals as well as laws regarding employment practices, (xi) our ability to recruit and retain sufficient quality healthcare professionals at reasonable costs, and (xii) our ability to consummate and effectively incorporate acquisitions into our business.

For a discussion of additional risk factors and a more complete discussion of some of the cautionary statements noted above that could cause actual results to differ from those implied by the forward-looking statements contained in this press release, please refer to our most recent Annual Report on Form 10-K for the year ended December 31, 2019, our subsequent Quarterly Reports on Form 10-Q and our Current Reports on Form 8-K. Be advised that developments subsequent to this press release are likely to cause these statements to become outdated and the Company is under no obligation (and expressly disclaims any such obligation) to update or revise any forward-looking statements whether as a result of new information, future events, or otherwise.

Contact:
Randle Reece
Director, Investor Relations
866.861.3229


                                                                    
          
                AMN Healthcare Services, Inc.


                                                          
          
            Condensed Consolidated Statements of Comprehensive Income


                                                               
           
               (in thousands, except per share amounts)


                                                                         
              
                (unaudited)




                                                                     
          
                Three Months Ended


                                           
            
            March 31,                                              December 31,



                                               2020                      2019                                                     2019




     Revenue                                       $
          602,461                                                                    $
        532,441              $
        586,892


      Cost of revenue                       400,395                                    355,682                                                            389,759




     Gross profit                          202,066                                    176,759                                                            197,133




     Gross margin                   33.5
            %                            33.2
            %                                                              33.6
                                                                                                                                                              %


                   Operating expenses:


      Selling, general and
       administrative (SG&A)                146,234                                    119,997                                                            133,158


      SG&A as a % of revenue         24.3
            %                            22.5
            %                                                              22.7
                                                                                                                                                              %




      Depreciation and
       amortization                          20,089                                     11,710                                                             17,007



      Total operating
       expenses                             166,323                                    131,707                                                            150,165



      Income from operations                 35,743                                     45,052                                                             46,968


      Operating margin (1)            5.9
            %                             8.5
            %                                                        8.0
         %




      Interest expense, net,
       and other (2)                         11,054                                      5,673                                                              8,859





      Income before income
       taxes                                 24,689                                     39,379                                                             38,109




      Income tax expense                     11,724                                      5,257                                                             10,627




     Net income                                     $
          12,965                                                                     $
        34,122               $
        27,482



      Net income as a % of
       revenue                        2.2
            %                             6.4
            %                                                        4.7
         %




      Other comprehensive income (loss):


      Foreign currency
       translation and other                   (47)                                     (101)                                                                59


      Other comprehensive
       income (loss)                           (47)                                     (101)                                                                59




      Comprehensive income                           $
          12,918                                                                     $
        34,021               $
        27,541





                   Net income per common share:



     Basic                                            $
          0.27                                                                       $
        0.73                 $
        0.59




     Diluted                                          $
          0.27                                                                       $
        0.71                 $
        0.58



                   Weighted average common shares
                    outstanding:



     Basic                                  47,359                                     46,784                                                             46,713




     Diluted                                47,641                                     47,772                                                             47,573


                                                             
             
                AMN Healthcare Services, Inc.


                                                             
             
                Non-GAAP Reconciliation Tables


                                                      
             
               (dollars in thousands, except per share data)


                                                                     
              
                (unaudited)




                                                                
             
                Three Months Ended


                                        
              
           March 31,                                         December 31,



                                          2020                         2019                                                2019

                                                                                                                          ---

                   Reconciliation of Non-GAAP Items:





     Net income                                 $
         12,965                                                                  $
       34,122           $
       27,482


      Income tax expense                11,724                                    5,257                                                        10,627


      Income before income
       taxes                            24,689                                   39,379                                                        38,109


      Interest expense, net,
       and other (2)                    11,054                                    5,673                                                         8,859


      Income from operations            35,743                                   45,052                                                        46,968


      Depreciation and
       amortization                     20,089                                   11,710                                                        17,007


      Depreciation (included
       in cost of revenue)
       (3)                                145


      Share-based
       compensation                      4,927                                    5,186                                                         4,528


      Acquisition,
       integration, and
       other costs (4)                  13,077                                    4,029                                                         6,936


      Adjusted EBITDA (5)                        $
         73,981                                                                  $
       65,977           $
       75,439





      Adjusted EBITDA margin              12.3                                     12.4                                                          12.9
       (6)                                  %                                       %                                                            %





     Net income                                 $
         12,965                                                                  $
       34,122           $
       27,482



     Adjustments:


      Amortization of
       intangible assets                13,431                                    6,651                                                        11,074


      Acquisition,
       integration, and
       other costs (4)                  13,077                                    4,029                                                         6,936


      Equity instrument fair
       value changes (2)                 1,298


      Debt financing related
       costs                                 -                                                                                                  594


      Tax effect on above
       adjustments                     (7,230)                                 (2,777)                                                      (4,838)


      Tax effect of COLI
       fair value changes
       (7)                              5,255                                  (1,527)                                                      (1,002)


      Excess tax
       deficiencies
       (benefits) related to
       equity awards (8)               (1,221)                                 (4,569)                                                          203


      Adjusted net income
       (9)                             37,575                                   35,929                                                        40,449





      GAAP diluted net
       income per share
       (EPS)                                       $
         0.27                                                                    $
       0.71             $
       0.58



     Adjustments                         0.52                                     0.04                                                          0.27



      Adjusted diluted EPS
       (10)                                       $
         0.79                                                                    $
       0.75             $
       0.85


                                                         
              
                AMN Healthcare Services, Inc.


                                                   
          
                Supplemental Segment Financial and Operating Data


                                                     
          
                (dollars in thousands, except operating data)


                                                                  
              
                (unaudited)




                                                            
              
                Three Months Ended


                                               
           
             March 31,                                              December 31,



                                            2020                          2019                   2019

                                                                                                ---


       Revenue


        Nurse and allied
         solutions                               $
          424,346                                                        $
              373,472         $
      422,705


        Physician and
         leadership solutions            137,842                                 137,077                                                    139,394


        Technology and
         workforce solutions              40,273                                  21,892                                                     24,793



                                                 $
          602,461                                                        $
              532,441         $
      586,892






       Segment operating income (11)


        Nurse and allied
         solutions                                $
          59,608                                                         $
              53,556          $
      61,021


        Physician and
         leadership solutions             14,569                                  15,872                                                     19,098


        Technology and
         workforce solutions              15,295                                  10,383                                                     10,754



                                          89,472                                  79,811                                                     90,873


        Unallocated corporate
         overhead                         15,491                                  13,834                                                     15,434


        Adjusted EBITDA (5)                       $
          73,981                                                         $
              65,977          $
      75,439





       Gross Margin


        Nurse and allied                    28.5                                    28.5                                                       29.0
         solutions                             %                                      %                                                         %


        Physician and                       36.7                                    36.6                                                       37.2
         leadership solutions                  %                                      %                                                         %


        Technology and                      75.7                                    92.6                                                       92.3
         workforce solutions                   %                                      %                                                         %







       
                Operating Data:

    ---


       Nurse and allied solutions


        Average healthcare
         professionals on
         assignment (12)                  11,411                                  10,447                                                     11,246




        Physician and leadership solutions


        Days filled (13)                  40,284                                  40,496                                                     40,149


        Revenue per day filled
         (14)                                     $
          1,968                                                          $
              1,988           $
      1,941


                                                        
             
             AMN Healthcare Services, Inc.


                                                    
             
             Condensed Consolidated Balance Sheets


                                                
             
             (dollars in thousands, except leverage ratio)


                                                                
           
                (unaudited)




                                           March 31, 2020                                               December 31, 2019                     March 31, 2019

                                                                                                                                   ---


     Assets



     Current assets:


      Cash and cash equivalents                               $
           97,509                                                $
        82,985                               $
        19,116


      Accounts receivable, net                    376,528                                    352,685                                       365,231


      Accounts receivable,
       subcontractor                               75,938                                     72,714                                        55,607


      Prepaid and other current
       assets                                      50,619                                     52,115                                        48,933


      Total current assets                        600,594                                    560,499                                       488,887


      Restricted cash, cash
       equivalents and investments                 60,873                                     62,170                                        61,279



     Fixed assets, net                           116,718                                    104,832                                        93,625


      Operating lease right-of-
       use assets                                  87,217                                     89,866                                        97,055



     Other assets                                104,829                                    120,254                                       105,590



     Goodwill                                    851,459                                    595,551                                       464,923


      Intangible assets, net                      638,443                                    398,474                                       326,466




     Total assets                                         $
           2,460,133                                             $
        1,931,646                            $
        1,637,825





      Liabilities and stockholders' equity



     Current liabilities:


      Accounts payable and accrued
       expenses                                              $
           175,188                                               $
        156,140                    153,566


      Accrued compensation and
       benefits                                   153,018                                    170,932                                       135,792


      Current portion of notes
       payable                                      6,250


      Current portion of operating
       lease liabilities                           14,634                                     13,943                                        12,341



     Deferred revenue                             12,587                                     11,788                                        11,459


      Other current liabilities                    11,383                                     25,302                                        20,112



      Total current liabilities                   373,060                                    378,105                                       333,270


      Revolving credit facility                   225,000                                                                                 150,000


      Notes payable, less
       unamortized fees                           858,906                                    617,159                                       320,798


      Deferred income taxes, net                  104,262                                     46,618                                        20,079


      Operating lease liabilities                  88,090                                     91,209                                        99,946


      Other long-term liabilities                  61,735                                     61,813                                        63,746




     Total liabilities                         1,711,053                                  1,194,904                                       987,839






     Commitments and contingencies




      Stockholders' equity:                       749,080                                    736,742                                       649,986




      Total liabilities and
       stockholders' equity                                $
           2,460,133                                             $
        1,931,646                            $
        1,637,825





      Leverage ratio (15)                             3.1                                        2.0                                           1.9


                                              
            
                AMN Healthcare Services, Inc.


                                   
            
              Summary Condensed Consolidated Statements of Cash Flows


                                                 
            
                (dollars in thousands)


                                                     
              
                (unaudited)




                                             
            
                Three Months Ended


                        
            
          March 31,                                        December 31,



                          2020                     2019                                                2019

                                                                                                      ---



     Net cash
      provided by
      operating
      activities                $
        51,365                                                                 $
     36,214             $
      78,657


     Net cash used
      in investing
      activities     (492,137)                            (36,248)                                                     (38,218)


     Net cash
      provided by
      financing
      activities       456,126                                1,790                                                           159


     Effect of
      exchange rates
      on cash             (47)                               (101)                                                           59



     Net increase in
      cash, cash
      equivalents
      and restricted
      cash              15,307                                1,655                                                        40,657


     Cash, cash
      equivalents
      and restricted
      cash at
      beginning of
      period           153,962                               84,324                                                       113,305



     Cash, cash
      equivalents
      and restricted
      cash at end of
      period                   $
        169,269                                                                 $
     85,979            $
      153,962

AMN Healthcare Services, Inc.
Additional Supplemental Non-GAAP Disclosure
Reconciling Operating Margin Guidance to
Adjusted EBITDA Margin Guidance

Adjusted EBITDA margin represents operating margin excluding the impact of (A) depreciation and amortization expense, (B) share-based compensation and (C) acquisition, integration, and other costs. Due to the impact that the COVID-19 pandemic has had on the healthcare industry and the resulting uncertainty the pandemic is having on our future financial performance, we are unable to provide a quantitative reconciliation of our projected second quarter 2020 adjusted EBITDA margin to our projected operating margin without undertaking unreasonable efforts.



              (1)               Operating margin represents income from
                                   operations divided by revenue.



              (2)               Interest expense, net, and other for the
                                   three months ended March 31, 2020
                                   includes $1,298,000 related to changes
                                   in the fair value of equity
                                   instruments. Since the changes in fair
                                   value is unrelated to the Company's
                                   operating performance, we excluded the
                                   impact from the calculation of adjusted
                                   net income and adjusted diluted EPS for
                                   the three months ended March 31, 2020.



              (3)               A portion of depreciation expense for
                                   Stratus Video, which was acquired in
                                   February 2020, is included in cost of
                                   revenue for the three months ended
                                   March 31, 2020. Beginning in 2020, we
                                   exclude the impact of depreciation
                                   included in cost of revenue from the
                                   calculation of adjusted EBITDA.



              (4)               Acquisition, integration, and other
                                   costs for the three months ended March
                                   31, 2020 include advisory fees
                                   contingent upon closing of the Stratus
                                   Video acquisition of $5,000,000.
                                   Acquisition, integration, and other
                                   costs of $4,029,000 for the three
                                   months ended March 31, 2019 included
                                   $2,100,000 of extraordinary legal
                                   expenses and a decrease in contingent
                                   consideration liabilities for recently
                                   acquired companies of $700,000. We
                                   exclude the impact of extraordinary
                                   legal expenses from the calculation of
                                   adjusted EBITDA because we believe that
                                   these expenses are not indicative of
                                   the Company's operating performance.



              (5)               Adjusted EBITDA represents net income
                                   plus interest expense (net of interest
                                   income) and other, income tax expense,
                                   depreciation and amortization,
                                   depreciation (included in cost of
                                   revenue), acquisition, integration, and
                                   other costs, extraordinary legal
                                   expenses, 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
                                   agreement and the indentures governing
                                   our 5.125% Senior Notes due 2024 and
                                   our 4.625% Senior Notes due 2027.
                                   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.



              (6)               Adjusted EBITDA margin represents
                                   adjusted EBITDA divided by revenue.



              (7)               The Company records net tax expense
                                   (benefit) related to the income tax
                                   treatment of the fair value changes in
                                   the cash surrender value of its company
                                   owned life insurance. Since this change
                                   in fair value is unrelated to the
                                   Company's operating performance, we
                                   excluded the impact on adjusted net
                                   income and adjusted diluted EPS.



              (8)               The consolidated effective tax rate is
                                   affected by the recording of excess tax
                                   benefits and tax deficiencies 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, the
                                   Company no longer records excess tax
                                   benefits and tax deficiencies to
                                   additional paid-in capital, but such
                                   excess tax benefits and tax
                                   deficiencies are now recognized in
                                   income tax expense. The magnitude of
                                   the impact of excess tax benefits and
                                   tax deficiencies generated in the
                                   future, which may be favorable or
                                   unfavorable, is 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 excess tax benefits and tax
                                   deficiencies are largely unrelated to
                                   our income before taxes and are
                                   unrepresentative of our normal
                                   effective tax rate, we excluded their
                                   impact in the calculation of adjusted
                                   net income and adjusted diluted EPS.



              (9)               Adjusted net income represents GAAP net
                                   income excluding the impact of the (A)
                                   amortization of intangible assets, (B)
                                   acquisition, integration, and other
                                   costs, (C) extraordinary legal
                                   expenses, (D) changes in fair value of
                                   equity instruments, (E) write offs of
                                   deferred financing costs, (F) tax
                                   effect, if any, of the foregoing
                                   adjustments, (G) excess tax benefits
                                   and tax deficiencies relating to equity
                                   awards vested and exercised since
                                   January 1, 2017, and (H) net tax
                                   expense related to the income tax
                                   treatment of fair value changes in the
                                   cash surrender value of its company
                                   owned life insurance. 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 in the calculation of adjusted
                                   net income). Although management
                                   believes the items in the calculation
                                   of adjusted net income are not
                                   indicative of the Company's operating
                                   performance, these items do impact the
                                   statement of comprehensive income, and
                                   management therefore utilizes adjusted
                                   net income as an operating performance
                                   measure in conjunction with GAAP
                                   measures such as GAAP net income.



              (10)              Adjusted diluted EPS represents adjusted
                                   net income divided by diluted weighted
                                   average common shares outstanding.
                                   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 in the
                                   calculation of adjusted net income).
                                   Although management believes the items
                                   in the calculation of adjusted net
                                   income 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.



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



              (12)              Average healthcare professionals on
                                   assignment represents the average
                                   number of nurse and allied healthcare
                                   professionals on assignment during the
                                   period presented. Excluding Advanced
                                   Medical, which was acquired during the
                                   second quarter of 2019, the average
                                   healthcare professionals on assignment
                                   was 10,087 and 9,900 for the three
                                   months ended March 31, 2020 and
                                   December 31, 2019, respectively.



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



              (14)              Revenue per day filled represents
                                   revenue of the Company's locum tenens
                                   business divided by days filled for the
                                   period presented.



              (15)              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.

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SOURCE AMN Healthcare Services, Inc.