AMN Healthcare Providers, Inc. (AMN) This autumn 2022 Earnings Name Transcript

AMN Healthcare Providers, Inc. (NYSE:AMN) This autumn 2022 Earnings Convention Name February 16, 2023 5:00 PM ET

Firm Contributors

Randle Reece – Senior Director, Investor Relations

Cary Grace – Chief Government Officer

Jeff Knudson – Chief Monetary Officer

Kelly Rakowski – Group President and COO of Strategic Expertise Options

Landry Seedig – Group President and COO of Nursing and Allied Options

James Taylor – President and Chief Working Officer of Doctor and Management Options

Convention Name Contributors

Kevin Fischbeck – Financial institution of America

A.J. Rice – Credit score Suisse

Tobey Sommer – Truist

Tim Mulrooney – William Blair

Mark Marcon – Robert W. Baird

Brian Taji Phillips – Jefferies

Operator

Good day, and welcome to AMN Healthcare Fourth Quarter 2022 Earnings Name. At this all members are in a listen-only mode. After the speaker presentation there will probably be a query and reply session. [Operator Instructions]. Please be recommendation that at present’s convention is being recording.

I’d now like handy the decision over to your speaker Mr. Randle Reece, Senior Director of Investor Relations. Please go forward sir.

Randle Reece

Good afternoon, everybody. Welcome to AMN Healthcare’s fourth quarter and full 12 months 2022 earnings name. A replay of this webcast will probably be obtainable at ir.amnhealthcare.com following the conclusion of this name.

Numerous remarks we make throughout this name about future expectations, projections, traits, plans, occasions or circumstances represent forward-looking statements. These statements replicate the corporate’s present beliefs primarily based upon info at the moment obtainable to it.

Our precise outcomes could differ materially from these indicated by these forward-looking statements, due to varied components and cautionary statements, together with these recognized in our most just lately filed types 10-Ok and 10-Q, our earnings launch and subsequent filings with the SEC. The corporate doesn’t intend to replace steerage or any forward-looking statements supplied at present previous to its subsequent earnings launch.

This name comprises sure non-GAAP monetary info. Data concerning and reconciliations of those non-GAAP measures to probably the most straight comparable GAAP measures are included in our earnings launch and on our monetary experiences web page at ir.amnhealthcare.com.

On the decision at present are Cary Grace. Chief Government Officer, Jeff Knudson, Chief Monetary Officer; Kelly Rakowski, Group President and COO of Strategic Expertise Options; and Landry Seedig, Group President and COO of Nursing and Allied Options. James Taylor, President and Chief Working Officer of Doctor and Management Options, in unavailable at present.

I’ll now flip the decision over to Cary.

Cary Grace

Thanks, Randle, and welcome everybody. I wish to start by expressing my gratitude for the nice and cozy welcome I’ve acquired by the AMN crew, our board of administrators, buyers and analysts and our purchasers since my time as CEO started in late November. The previous few months have greater than confirmed all of the the explanation why I joined AMN.

AMN stands on the nexus of healthcare and expertise, the place we make an more and more worthwhile distinction within the high quality and timeliness of care. My expertise operating giant shopper centered service supply companies that mix natural development and acquisitions positions me effectively to assist information AMN by its subsequent section of development.

And although all people says they’ve an ideal firm tradition, AMN really has one thing particular. Our whole management crew is dedicated to stay within the AMN distinction every single day, and ensuring we create nice long-term alternatives for everybody in our group.

I am particularly grateful to report excellent news in my first AMN convention name with excellent fourth quarter outcomes, and a powerful first quarter outlook. Thanks to our healthcare professionals and crew members for making a worthwhile influence for our purchasers in 2022, with greater than 250,000 placements as our nation managed by the pandemic.

I’m happy with how we’re partnering with purchasers to optimize their labor prices, decreasing invoice charges because the urgency of demand moderated and investing in tech-enabled options to assist our purchasers remodel care supply fashions and handle their workforces over the long-term. We stay the popular associate for healthcare purchasers with our MSP and BMS applications managing greater than $12 billion of labor spent in 2022.

AMN is a most popular employer for healthcare professionals and company crew members, as demonstrated by a number of latest accolades we acquired, together with the Variety Fairness and Inclusion award from the Nationwide Affiliation of Company Administrators and being named to the Bloomberg Gender Equality Index for our dedication to gender equality and fairness for a sixth 12 months in a row.

Over the previous 12 months, as we managed by extraordinarily excessive demand, we have been wanting forward, anticipating a moderation with the wind down of the pandemic, our companies exceeded the expectations we laid out a 12 months in the past.

Our excessive stage of efficiency is obvious in our newest monetary outcomes and outlook for the present quarter. Fourth quarter income was $1.13 billion with adjusted EBITDA of $175 million. Each enterprise phase exceeded steerage and what continues to be a quick altering market.

Nurse and Allied phase income was forward of expectation because the fourth quarter, practically flat with the third quarter regardless of decrease labor disruption income. The moderation of invoice charges was considerably lower than we had anticipated, with a phase common invoice price coming in 23% decrease than the primary quarter peak.

As anticipated quantity in journey nurse was increased than the third quarter offset by the decrease common invoice price. Demand for journey nursing stays above 2019 ranges, even after the healthcare sector maintained a powerful tempo of everlasting hiring over the previous eight months.

Our Allied enterprise has 6% year-over-year income development with a 3% sequential enhance. The crew did an exceptional job pivoting focus from pandemic associated specialties, to remedy and different areas.

For the primary quarter of 2023, we anticipate income in Nurse and Allied Options to be steady sequentially, and down 32% to 34% year-over-year towards our most troublesome comparability of the 12 months.

In our Doctor and Management Resolution phase, fourth quarter income was barely higher than our steerage. Locum tenens is working at a persistently excessive stage with 4 consecutive quarters over $100 million of income. Interim Management and Search achieved report excessive income for the 12 months.

As we anticipated, demand for Interim Management and Search was decrease within the fourth quarter at some purchasers concentrate on brief time period price financial savings. Within the first quarter, we projected income and Doctor and Management Options to be down 10% to 12% year-over-year, excluding pandemic associated enterprise income can be flat to prior 12 months.

Demand is effectively above pre-pandemic ranges for locum tenens and doctor everlasting placement. In Expertise and Workforce Options income grew 14% year-over-year, higher than our steerage of about 10% development. Our Language Providers enterprise was the first driver of the outperformance

Since AMN acquired the corporate in 2020, Language Providers has doubled its income, an ideal instance of how we are able to add worth with acquisition. It’s additional proof of our dedication to innovation, supporting high quality affected person care, and making a optimistic influence to the communities we serve.

In 2022 alone, we improve the well being care expertise outcomes for sufferers in over 15 million interactions. Additionally on this phase, VMS income continued its moderation consistent with our expectations. For the primary quarter, we anticipate income and Expertise and Workforce Options to be down 10% to 12% year-over-year on account of decrease VMS income.

Now, I am going to flip over the decision to Jeff for extra particulars about our outcomes and outlook, after which I’ll return to supply a glimpse at our focus areas for 2023 and past.

Jeff Knudson

Thanks, Cary, and good afternoon everybody. Fourth quarter income of $1.126 billion was 4% above the excessive finish of our steerage vary with all three segments contributing to the outperformance. Consolidated income was down 17% year-over-year and 1% sequentially, excluding labor disruption income, consolidated income was consistent with the prior quarter.

Gross margin for the quarter was 33.3%, 140 foundation factors increased than prior 12 months and down 50 foundation factors sequentially. Yr-over-year, the margin was employed on account of a income combine shift towards increased margin companies. Sequentially, the margin was decrease because of the typical seasonal income combine shift in direction of staffing.

Consolidated SG&A bills have been $219 million or 19.5% of income, in contrast with $239 million or 17.5% of income within the 12 months in the past quarter, and $215 million or 18.9% of income within the earlier quarter.

SG&A bills have been decrease year-over-year primarily on account of decrease worker associated bills, given much less income and extra regular working situations. Greater allowances for credit score losses and authorized reserve bills drove the rise in SG&A in contrast with the prior quarter.

Adjusted SG&A. excluding sure non-recurring bills and stock-based compensation expense was $202 million this quarter, or 17.9% of income in contrast with $212 million or 15.6% of income within the 12 months in the past quarter. The rise in adjusted SG&A margin got here from much less working leverage on decrease income.

Within the fourth quarter, Nurse and Allied income was $825 million, 24% decrease than prior 12 months and barely down sequentially. Common invoice price was decrease by 2% quarter-over-quarter and common hours down 1%, offsetting 3% increased quantity.

Our journey nurse income was down 24% versus prior 12 months and flat sequentially. Allied income was $195 million rising 6% from the prior 12 months and three% above prior quarter. Nurse and Allied gross margin of 26.6% was 40 foundation factors decrease than prior 12 months and prior quarter.

The year-over-year change was brought on by much less labor disruption income, decrease common hours and better insurance coverage bills partially offset by enchancment within the invoice pay unfold.

Sequentially, the margin decreased stem primarily from the favorable staff compensation changes that occurred in Q3, phase working margin of 12.7% was 370 foundation factors decrease than prior 12 months and 120 foundation factors decrease than prior quarter, reflecting the upper allowances for credit score losses.

Doctor and Management Options income within the fourth quarter was $168 million, 2% increased year-over-year and down 4% sequentially. Locum tenens income was $103 million, 4% increased than prior 12 months or rising by 13%, excluding pandemic associated income.

Interim management income elevated 4% from prior 12 months and was down 5% from prior quarter. Search income declined 10% from prior 12 months and was down 13% sequentially. Gross margin for this phase was 35%, 100 foundation factors increased than prior quarter and down 10 foundation factors 12 months over 12 months.

The sequential margin enhance was primarily on account of increased gross margin for locum tenens partially offset by combine. Phase working margin was 16.7%, up 510 foundation factors from final 12 months and up 310 foundation factors sequentially. The upper revenue margin got here primarily from a decrease allowance for credit score losses and a positive actuarial adjustment.

Expertise and Workforce Options income was $133 million within the fourth quarter, rising 14% year-over-year and down 1% sequentially. Language Providers stood out with income of $58 million, which grew 23% year-over-year, and 5% quarter-over-quarter, BMS income of $55 million grew 5% year-over-year and was down 9% from prior quarter as we had anticipated.

Phase gross margin was 73.3%, up 130 foundation factors over prior 12 months and down 230 foundation factors sequentially. The year-over-year and sequential modifications monitor income comparisons for the upper margin BMS enterprise.

Phase working margin of fifty.2% was up 280 foundation factors year-over-year and down 250 foundation factors sequentially. Consolidated fourth quarter adjusted EBITDA of $175 million was decrease by 22% year-over-year and down 4% from the prior quarter. Adjusted EBITDA margin of 15.5% was 80 foundation factors decrease year-over-year and down 50 foundation factors sequentially.

We reported internet earnings of $82 million and diluted earnings per share of $1.88 within the quarter. Adjusted earnings per share was $2.48 in contrast with $2.95 within the 12 months in the past quarter. Day gross sales excellent got here in higher than anticipated at 55 days, 4 days lower than the prior quarter and two days increased than prior 12 months.

Working money stream for the quarter was $115 million and capital expenditures have been $25 million. As of December thirty first, we had money equivalents of $65 million, long-term debt of $850 million and a internet leverage ratio of 1 time to 1

Recapping monetary highlights for the total 12 months 2022, we reported income of $5.2 4 billion, a 32% year-over-year enhance and internet earnings of $444 million, which grew by 36% in contrast with 2021. Adjusted EBITDA was $847 million, up 33% from prior 12 months. Full 12 months adjusted EBITDA margin of 16.1% was 20 foundation factors increased year-over-year.

GAAP EPS was $9.90, up 45% year-over-year, adjusted EPS was $11.90 increased than prior 12 months by 48%. EPS benefited from our repurchases of $577 million in inventory in the course of the 12 months.

Full 12 months money stream from operations was $654 million, which included a $24 million fee of deferred payroll taxes from the Cares Act, adjusting for the Cares Act compensation. practically 80% of our adjusted EBITDA was transformed into money stream from operations. Capital expenditures totaled 76 million.

Because the finish of 2022, two occasions have bolstered our capital technique, we obtained an growth of our revolving line of credit score including $350 million of borrowing capability to complete $750 million with its tenor prolonged to 2028. The rate of interest for the expanded facility is consistent with earlier phrases.

As well as, the Board of Administrators expanded our share repurchase authorization by $500 million. Since our final earnings name, we purchased again 2.4 million shares of inventory for $275 million. The most recent authorization offers us a complete of $551 million in potential buybacks.

Now first quarter 2023 steerage. We undertaking consolidated income to be in a variety of $1.1 billion to $1.13 billion, down 27% to 29% over prior 12 months. Gross margin is projected to be 32.6% to 33.1%.

Reported SG&A bills are projected to be 18.3% to 18.8% of income. Working margin is predicted to be 11% to 11.7%, and adjusted EBITDA margin is predicted to be 15.4% to fifteen.9%. Common diluted shares excellent are projected to be $42 million, reflecting our latest share repurchase exercise. Different first quarter steerage particulars will be present in at present’s earnings launch.

Final quarter, we talked about 2023 returning to a standard seasonal sample. Our fourth quarter outcomes and first quarter outlook got here in stronger than we had anticipated, with increased invoice charges being a key driver. After the Q1 power present enterprise traits counsel a decline in Nurse and Allied income for Q2 that’s higher than regular seasonality.

Whereas demand continues to be above pre pandemic ranges, we’ve got seen some purchasers pursue close to time period price financial savings and cut back utilization of contingent workers. Labor market situations stay very tight with excessive vacancies and attrition. And we imagine staffing demand will return up over the summer season consistent with regular seasonality.

And now, I would like handy the decision again to Cary.

Cary Grace

Thanks, Jeff. Whereas the healthcare sector employed greater than 9 million individuals in 2022, that hiring spree resulted in a internet employment enhance of lower than 800,000. Competitors for expertise stays intense, and wage inflation is elevated. Voluntary turnover stays on the highest stage in additional than 20 years, and situations are most troublesome for our purchasers in acute care.

Recognizing these enduring points, we’re centered on 4 key areas that we imagine will drive long-term worth for all our stakeholders. First, we’ll proceed to be the popular associate for well being care organizations, as they optimize their workforce technique to fulfill continued long-term will increase in utilization.

Our options that’s complete and differentiated and will probably be extra so with our inner investments and acquisition technique. We see nice alternative each in higher serving present purchasers and profitable new purchasers. On that path, we’ll strengthen our means to go-to-market as one AMN constructing model fairness and making it simpler for purchasers and healthcare professionals to work with us.

We’re already gaining traction on initiatives to enhance our velocity to ship whereas sustaining our trade main high quality. As demand has receded from its excessive highs, our MSP technique higher positions us to achieve share.

Second, we’re standing our efforts to make sure AMN is the popular employer for healthcare professionals and crew members. These applications embrace new initiatives on office flexibility, guaranteeing aggressive pay and advantages in any respect ranges, profession pathing and mentoring and trade management in range, equality, fairness and inclusion.

Our well being care professionals profit from having the biggest number of job alternatives within the trade, simply accessed by cellular expertise. Third, we wish to preserve constructing our diversified portfolio that’s increasing and bettering complete expertise options for healthcare.

Our methods to aggressively enhance expertise enablement in each side of AMN. Our plan will allocate roughly 2% of income to capital expenditures with a heavy concentrate on digital innovation.

These investments will enhance outcomes for our current options, and add new expertise led options to maintain up with the problem of delivering care amidst a sustained mismatch of provide and demand.

We’re persevering with to spend money on Digital First initiatives resembling AMN Passport, are all the time on reference to greater than 170,000 nurses and rising. And at last, we’re dedicated to being good stewards of capital.

Our capital expenditures greater than doubled over the previous three years, enabling us to steer our trade and expertise enhancements. We have now constructed an organization with top quality of earnings and powerful free money flows that give us strategic choices.

With a powerful stability sheet and expanded borrowing capability, we’ve got the framework and adaptability to make enticing acquisitions, whereas additionally repurchasing inventory, which we imagine is a superb funding alternative.

Now, let’s please open the decision for questions.

Query-and-Reply Session

Operator

Thanks. [Operator Instructions] And our first query will come from the road of Kevin Fischbeck with Financial institution of America. Please go forward.

Kevin Fischbeck

Nice. Thanks. I assume, you are mainly flat earnings sequentially, and Q1 communicate to some stability there. However there’s all the time seasonality in that from This autumn to Q1. And I believe the large debate proper now, it is simply type of, the place the brand new regular is in your view round healthcare staffing demand? I used to be actually useful to listen to your feedback concerning the seasonal drop into Q2, however as your view on Q2 change? Is it extra about Q1 being increased than it’s about Q2 being decrease? And I assume, we must be right here type of once more, Q2 change from the place you have been once you have been giving steerage final time?

Cary Grace

Hello, Kevin, thanks for the questions. Possibly what we’ll do is, I am going to flip it over to Jeff, who’ll discuss a little bit bit concerning the patterning of Q1, Q2, after which Landry and I can discuss a little bit bit extra broadly about demand.

Jeff Knudson

Sure, Kevin. So, the primary quarter steerage is increased than what we might have initially thought actually primarily pushed from increased invoice charges, and that is partially pushed by a mixture with some increased price orders that we’ll be rolling off on the finish of Q1. So, consequently, we predict the next than regular sequential decline in Nurse and Allied income from Q1 to Q2. And if we simply step again and take into consideration Q2 going into the 12 months, we might have anticipated the second quarter to be the bottom income and EBITDA margin quarter of the 12 months, and that’s nonetheless the case.

On the Nurse and Allied aspect, we might usually anticipate a 6% sequential decline within the second quarter, historic patterns and that is normalized for labor disruption pushed by the winner orders winding down and that 6% can be pushed by equal declines in each quantity and invoice charges. So, because the invoice charges have been increased in each the fourth and the primary quarter, we do now anticipate a excessive single digit invoice price decline within the second quarter, once more, primarily pushed by that blend affect from Q1 and the traditional seasonality. After which, we might anticipate the second quarter sequential quantity decline to be increased than our historic seasonality, however lower than the invoice price declines.

Cary Grace

Hey, Kevin, if we type of step again and take the demand query, let me type of provide you with a perspective on what we see is the form of demand and a number of the components round provide that we’re seeing. After which, I am going to have Landry remark a little bit bit extra on what we have been seeing extra just lately. So, if I am going again into the onset of the pandemic, it actually accelerated an current provide/demand imbalance throughout the healthcare workforce. And as we have moderated down from the emergency demand ranges, we noticed in the course of the pandemic, we nonetheless have an everlasting structural change within the provide of and demand for these well being care professionals. So the issues that we’re seeing and persevering with to trace is you are seeing continued utilization demand rising, so I believe individuals are pegging it someplace type of 5 plus p.c yearly.

The brand new provide, particularly of nurses is just not maintaining with these will increase, and the already constrained provide of the healthcare professionals is being impacted by retirement. So, the identical demographics which are driving a number of the will increase in demand, are additionally driving the accelerated retirement of a few of our well being care professionals. And we additionally proceed to see bedside clinicians leaving and taking much less aggravating jobs in well being care and elsewhere. Past these provide/demand enduring imbalances, we’re seeing compensation expectations which have elevated throughout all financial sectors, as excessive inflation has put upward strain on wages. And so that actually was occurring all through the pandemic.

So, the conversations we have been speaking to our purchasers about is, how can we assist them entice and retain the workforce they should serve their sufferers in a value efficient means. So, enduring structural provide demand imbalance, continued upward, type of leaving level from the pandemic of strain on wages. And I am going to flip it over to Landry to speak a little bit bit about what we’re seeing extra just lately.

Landry Seedig

Sure. Hello, Kevin. So, we do as of at present, we proceed to see journey nurse and allied demand that’s above pre-pandemic ranges. It’s down from a number of the highs that we noticed within the trade throughout a few of these main COVID spikes. However you actually have to consider on the peak, plenty of that demand as what we might type of characterize as irrelevant, and it by no means did get crammed by the general trade. So that you had demand spiking due to the acute wants that exist there and the insufficient labor provide that exists. We have been predicting all alongside that we would not have as excessive of demand at any time when issues cool down. But, that demand nonetheless can be increased than pre pandemic ranges, simply to a few of these — on account of a few of these common points on the labor inside healthcare.

We have now seen a few experiences on the market on demand within the market that replicate what others could be seeing within the trade. And whereas our demand is down, as I simply talked about, our decline has not been as steep as what a few of these experiences counsel. I believe there’s a few causes for that. I believe one cause is that we keep true to our MSP prospects over the previous few years. And in addition the AMN crew actually didn’t chase any of the type of what we might think about short-term enterprise over the previous couple of years. Lot of our conversations proper now with purchasers are about decreasing price. However the actuality is that their services stay extremely understaffed even at present.

Invoice charges, they’ve moderated for probably the most half, so purchasers are in search of decreases of their order quantity actually to attempt to accomplish plenty of their contingent labor expense targets. After which, in case you have a look at a number of the underlying drivers of provide and demand, we anticipate that the pullback goes to be fairly short-term, and it is actually simply general not sustainable within the market. So, we do anticipate to see a wholesome demand setting as we progress all year long. There’s fairly a little bit of levers that we’re pulling proper now, issues like rising our MSP fill charges, after which additionally returning our inner seize to some historic ranges. We noticed that dip a little bit bit all through the pandemic at any time when demand was actually excessive and we have been extremely reliant on our provider companions. After which the final assume that that I would talked about is that we even have alternatives to focus in additional on our non-MSPs, which we had beforehand been over the previous couple of years.

Kevin Fischbeck

Okay. That is implausible. And I simply do yet another. I assume, Cary, at any time when there is a new CEO, all the time seeking to see type of what they’re focusing extra on now. And I assume in your ready feedback, this go as one AMN factor type of caught out to me. Any approach to dimension type of what you see the chance as and the way we should always take into consideration what that would imply? Thanks.

Cary Grace

Sure. Let me — thanks, Kevin. Let me provide you with a little bit little bit of perspective at a macro stage. And as we proceed on these calls all year long, I am going to proceed to place colour on it. So one AMN, I do know there’s going to be a really bodily illustration of that, the place you’ll begin to see our manufacturers come collectively. So we’ll actually look extra cohesive and built-in as one firm. However actually, plenty of the issues that we’re working extremely arduous on and can proceed to all year long is how can we truly make all of the elements throughout AMN work extra seamlessly collectively.

So there’s plenty of implications for work that we’re doing to streamline our processes throughout our 20 resolution set to streamline our platform. And so plenty of what we wish AMN to really feel like is to really feel simpler to do enterprise with, each for all of our purchasers, for our clinicians, and really importantly for our personal crew members.

If I gave you an instance of what I’d anticipate it to begin altering when it comes to the form of our financials, as a proxy proper now, in case you have a look at our 30 largest purchasers, of our 20 resolution, we’ve got a mean of eight. And so clearly, in case you went a lot, a lot additional throughout our shopper base after which type of did the mathematics round our 20 options, there’s large alternative for us to additional penetrate these shopper relationships. And we’ll have extra success in doing that and we have created an actual and significant worth proposition that is compelling to them.

Kevin Fischbeck

Thanks.

Operator

Thanks. One second for our subsequent query, that can come from the road of A.J. Rice with Credit score Suisse. Your line is open.

A.J. Rice

Hello, all people. And congratulations, Cary in your first quarter right here. Let me simply possibly drill down a little bit bit additional on a number of the stuff that Landry was saying. So in case you have a look at your MSP accounts, I do know within the peak, you have been having to — you could not fill all of the orders, the complete trade could not fill all of the orders, however you have been subcontracting out a significant share.

In the event you have a look at say, Q3 to This autumn, are you stepping up the share that you just’re filling of these open orders meaningfully? Or is it nonetheless a good quantity which are being subcontracted and probably even going amongst your MSP accounts?

Cary Grace

A.J., I used to be going to say, thanks for that. You bought our technique what we have been doing all through the pandemic, and likewise round what we’ve got been doing subsequently. I am going to let Landry type of kick off after which Kelly can discuss a little bit bit about our broader MSP technique.

Landry Seedig

Sure. So I will flip that to Kelly, however I used to be simply going to say, A.J., each Q3 and This autumn are sturdy. So we have been residing in actually excessive demand within the fourth quarter. And so these — you must have a look at that as being fairly flat. After which proper now our focus is on rising that as we progress by Q1 after which going into Q2. And we’re seeing will increase on that, however I am going to let Kelly present a little bit bit extra element.

Kelly Rakowski

Sure. A.J., simply to construct on that, actually favorable development for us as these demand — that demand decrease from This autumn to Q1. We’re seeing each elevated achievement in addition to some will increase — incremental will increase in our inner seize. We are going to stay — our mannequin will stay a mixture of AMN’s means to satisfy on behalf of our purchasers, but additionally the power of our provider community, which is crucial for us to realize that achievement in addition to increase our capabilities in regional or specialised areas and we have been very lucky to have the power of our suppliers all through COVID as have been our purchasers.

In order that technique will not change, though, we do have alternatives to develop that. And it additionally creates extra capability for us, as we’re seeing fairly sturdy demand from a brand new enterprise and pipeline perspective, A.J. So we have been very lively out there. We added a number of new MSPs within the final couple of quarters and a wholesome pipeline for us right here beginning the 12 months. So we’ll proceed to develop our shopper base. And once more, the power of our community will probably be a key a part of that development.

A.J. Rice

Okay. After which only a follow-up. Is one other remark you guys have been making. So when you consider what occurred within the pandemic, you had some new rivals are available and seize some marginal share. And there was all the time — such as you stated, you needed to emphasize your MSP accounts and a number of the different ones in all probability received much less focus. As you are fascinated about having the chance to return after a few of that enterprise, how sticky is it with the brand new rivals? Are individuals — are you discovering that individuals are keen to return again to you fairly simply. And I puzzled additionally whether or not it would create some alternatives on the M&A aspect. I do know historically, plenty of your M&A has been adjoining companies, however I puzzled if there have been alternatives rising within the core Journey Nursing, Allied and Locums enterprise you may have a look at.

Landry Seedig

So A.J., that is Landry. I can begin with it. So we cowl the non-MSP enterprise, we by no means left it. We simply deprioritized it and we nonetheless — nothing modified in {our relationships}. We have been very clear with whether or not these are direct contracts or the place we’re a third-party to a few of these possibly different MSP or VMS holders out within the market.

So there was nothing that was being hidden. We have been looking for different options to attempt to assist even a few of these various kinds of purchasers out, whether or not that was by our VMS system or our native enterprise or another companies. So, all these contracts nonetheless exist. We nonetheless get these orders. We are able to simply prioritize them increased inside our order score numbers.

Among the short-term enterprise that I used to be referring to that was simply extra of that type of state contracts or a number of the services that we’re establishing for vaccine facilities, or get up hospitals, or FEMA, a few of these different applications that we thought would go away sooner or later they usually, in actual fact, have. So I believe our technique is staying extremely centered on our MSP prospects has been new retention price of our MSP prospects in the long term has had and can proceed to play out effectively for us.

Cary Grace

And — okay…

Kelly Rakowski

A.J., simply to your final remark round as I replicate on a number of the new enterprise and new strategic relationships we’re bringing in, we’re seeing some early traction as we go-to-market with a extra complete resolution set and actually emphasizing that and purchasers in search of extra options as they confronted a difficult market. So we’ve got seen as one early indicator, the variety of service strains per contract goes up with our new enterprise versus previously, the place we began with contracts and noticed development over time. So we’ll anticipate to see that development proceed as effectively.

Cary Grace

Hey, A.J., on the M&A aspect, we anticipate M&A to proceed to be an vital a part of our development technique. And so you must anticipate us to have a proactive concentrate on M&A, particularly as ways in which we expect it might probably assist us serve our purchasers extra successfully. We are going to have a look at strategic match, we’ll have a look at monetary match, we have a look at cultural match, high quality of administration. We are going to have a look at extra conventional staffing belongings. We additionally will have a look at and have a concentrate on tech-enabled options.

What I’d say from type of what we’ve got seen standpoint, final 12 months, we in all probability on bias noticed extra conventional staffing belongings. I do know it is comparatively early within the 12 months, however we’re seeing comparatively extra tech-enabled options come up. And so know that we are going to look broadly, we’ll look and we’re very involved in M&A as a development technique.

A.J. Rice

Okay. Nice. Thanks quite a bit.

Operator

Thanks. One second for our subsequent query, that can come from the road of Tobey Sommer with Truist. Your line is open.

Tobey Sommer

Thanks. I needed to see in case you might spend a while giving us some extra colour on VMS and MSP traits. Specifically, in case you might contact on the — what looks like fast adoption of vendor-neutral MSPs and VMS options and possibly additionally communicate to any timing of recompetes in your bigger MSPs? Thanks.

Cary Grace

Hey, Tobey. I will flip it over to Kelly in a second, however as a body up for this dialog, we’ve got very deliberately constructed a broad set of capabilities. We all know that purchasers have totally different wants; they usually have totally different methods for the way they wish to handle their workforce recruiting, retention staffing methods. And so consider this as Kelly talks about a few of these traits that we actually do have a look at it and we begin with the shopper want after which we work round from that and the way we will be useful to them and the way they wish to execute that technique. So, Kelly, I am going to flip it over to you to speak about a few of these traits.

Kelly Rakowski

Sure. Hello, Tobey, I’d say, I am unsure we’re seeing a few of these traits. I’ll say, it is fairly typical and we usually see on any given 12 months from our personal mixture of enterprise. Now it modified a little bit bit throughout COVID. However have a look at our pipeline during the last two years, in 2021, we noticed heavier mixture of technology-only resolution. Now we begin to see that come again. So I’d say our pipeline at present is extra closely weighted in direction of full MSP applications.

And in addition, we see in our — as a result of we’ve got a number of VMS options and such a big shopper base, practically 500, usually, in any given 12 months, we’ll see some transition from purchasers who wish to take their enterprise in-house, and conversely those that wish to transition from an in-house resolution into our MSP program. So we have had each of these play out in our shopper base. And once more, I’d say that’s fairly typical to what we have seen previously.

So we’re seeing, in fact, purchasers wish to add to their means to have extra versatile kind options inside their workforce, I’d say, it is extra of an to make use of of Journey Nurse. So issues like inner stream pool. You probably did see some inner company exercise the place they’re utilizing VMS options to assist accommodate that. And positively, we’re partnering with them in extremely custom-made methods to fulfill their native wants.

On the second a part of your query, Tobey, round our outlook for our renewals and contracts. Once more, we had a really sturdy retention price final 12 months. We have now a really typical renewal interval, as we have a look at our contracts coming to phrases. We have now a really sturdy outlook this 12 months for renewals. In reality, we have a number of already in verbal. It is not contracted this 12 months. So, nothing is accelerating that or actually altering that and plenty of the catch-up that it occurred for laser and COVID have performed out contracting over the previous 12 months.

Tobey Sommer

Thanks. For my follow-up, I needed to see if I might get you to speak about why you assume demand rebounds in the summertime and for Journey Nurse. And if that is practically a mirrored image of reliance on historical past, a product of conversations and what prospects are telling you, kind of how do you get that as a conclusion?

Cary Grace

No, I believe, it actually goes again to a mixture of a number of the feedback that Jeff and Landry are making. So in case you have a look at it from a macro standpoint and simply have a look at the structural imbalance in provide and demand towards the backdrop of — and there is a — we simply revealed some analysis on this simply on timing and continued delays in entry.

We all know that the demand continues to get pent up. And as a lot as purchasers proper now are extraordinarily centered on price containment, additionally they are very centered on how are they going to workers to fulfill their demand. So, it is a mixture of what we’re seeing structurally.

And second, that we’ve got seen seasonal patterns usually the place you begin to get winter orders as you undergo the summer season. So, it is actually a mixture of each of these issues.

Landry Seedig

Sure, Tobey, I’d simply add. It is simply — it’s really not sustainable. All the decrease demand is solely a CFO determination proper now. We’re not seeing it from CMOs, we’re not seeing it from unit managers. It is purely a monetary determination. They’re nonetheless understaffed. Nothing has modified there. And the truth is that, our Q1 volumes are good, it is simply the demand has been pulled again. That is the answer that they are considering for price financial savings, they have not felt the ache, proper. So our clinicians are nonetheless there proper now.

And so at any time when these clinicians begin coming off, it’s going to get noisy, their inner workers will probably be getting noisy, that we’ll expertise even increased turnover. And it is not — we noticed it all through the pandemic, however we have additionally seen this during the last 15 years. It is simply not sustainable at any time when there’s a scarcity inside a facility, it is a poor determination to not have the labor.

Cary Grace

And Tobey, the final half that I’d add that I do know we have talked about, significantly over the previous 12 months to 18 months is once you have a look at actually type of the delicate state of the workforce, so we do a biannual survey of nurses. And we’ll publish it in Could. I simply received a number of the information over the previous 24 hours.

And in case you have a look at the macro stage satisfaction ranges, for nursing profession present nursing job, we noticed it drop right down to 71%, that quantity has been between 80% and 85% for a decade. And so once you have a look at nonetheless very excessive turnover price satisfaction ranges happening, there’s this stability of — for lots of our purchasers how do they discover the stability between the price containment. But additionally ensuring that from a tempo standpoint that they’ve an setting that’s going to have the ability to retain and preserve their valuable workers.

Tobey Sommer

Thanks.

Operator

One second for our subsequent query and that can come from the road of Tim Mulrooney with William Blair. Your line is open.

Tim Mulrooney

Cary, Jeff, Kelly Landry, good afternoon.

Cary Grace

Good afternoon.

Tim Mulrooney

So there’s plenty of transferring elements right here with first quarter anticipated to be stronger, second quarter is predicted to be decrease than regular. So I simply wish to ask it otherwise. Final quarter, you laid out a framework for 2023 of greater than $4 billion in annualized income and 15% EBITDA margins. Is that also your expectation at present?

Jeff Knudson

Sure, Tim. So that you’re proper. The primary quarter steerage is increased than what we had thought. And once more, that is primarily pushed from increased invoice charges, and that is what’s additionally driving our expectation for a decrease Q2 and that increased than regular sequential decline, we talked about earlier. However given every part that, Landry simply talked about with demand rising within the second half, and we additionally imagine that invoice charges off of that Q2 stage will comply with a standard seasonal sample into Q2, that if that ordinary seasonality performs out within the second half, we might see a path to that full 12 months expectation that we specified by the final name.

Tim Mulrooney

Okay. Thanks. The previous few years, you are – simply constructing on that. You have supplied an expectation the place you assume invoice charges finally settle as you exit the 12 months. What’s your expectation for invoice charges as you needed to exit in ‘2023?

Jeff Knudson

They actually have not. As a result of they have been increased within the fourth quarter and the primary quarter once we thought after which with that top single-digit decline into the second quarter, they’re nonetheless exiting the 12 months with the place we initially thought they’d be. It is simply they weren’t there within the fourth quarter and the primary quarter.

Tim Mulrooney

Okay. Thanks.

Operator

Thanks. One second for our subsequent query, and that can come from the road of Mark Marcon with Robert W. Baird. Your line is open.

Mark Marcon

Hey, good afternoon, everybody. Almost about simply the fourth quarter, simply the rearview mirror. You talked about some credit score changes as regards to Nurse and Allied within the working margin for the fourth quarter. Jeff, what was that precisely, what occurred?

Jeff Knudson

Sure. So there was only a reserve for credit score losses or dangerous debt, Mark. There was one particular MSP accounts that we’ve got involved out. After which additionally simply given the macro setting, we additionally took a barely larger-than-normal common reserve for anticipated credit score losses, and that impacted Nurse and Allied, primarily is what drove these {dollars}.

Mark Marcon

And that MSP account is a – one giant one? Or is it comparatively effectively contained?

Jeff Knudson

It is comparatively effectively contained. It is not one among our bigger accounts.

Mark Marcon

Okay. Nice. After which actually admire the ahead look into Q2. That is extraordinarily useful. Cary, Jeff, kudos to you for each disclosing what you are seeing now because it pertains to that. I imply, it does sound like plenty of that’s mainly the change when it comes to the invoice charges, and it seems like mainly in This autumn and Q1, the invoice charges are increased on account of sure specialties which are being utilized to a higher extent. What specialties are you seeing that, that our excessive invoice price specialties that have been a little bit bit increased than anticipated when it comes to utilization in This autumn and Q1? And why would that drop off greater than standard going into Q2?

Jeff Knudson

Sure. So Mark, going into the fourth quarter, our expectation for invoice charges is that they’d decline within the mid-single digits. They ended up coming down 2% over Q3 ranges. After which actually, the upper invoice price specialties is a driver of why they enhance sequentially into the primary quarter and that is actually nearly quite a lot of pressing wants orders that we acquired that carried the next invoice price that from a mixture standpoint, drove invoice charges up within the first quarter after which these will predominantly roll off by the tip of the primary quarter as we exit into Q2.

Mark Marcon

Nice. After which if I might simply cheat and simply ask yet another. How a lot variance are you seeing when it comes to the habits amongst your 30 largest purchasers when it comes to how they’re treating the necessity for price self-discipline versus managing the workload on the flooring?

Kelly Rakowski

Mark, it is Kelly. I am chuckling a little bit bit, as a result of we had plenty of variation simply within the make-up of these 30 throughout the nation, totally different sizes, totally different settings, totally different communities that they serve. So on the one hand, it is troublesome to kind of peg consistency. However I’ll say from a – generally, Landry talked about it. We’re coming off a peak, so very excessive quantity. There’s nonetheless the sensitivity across the financials, whereas I believe the trade, significantly the hospital trade began to see enchancment of their backside line popping out of December, there’s nonetheless appreciable monetary pressure on the techniques, they usually’re seeking to their largest line merchandise of bills to have the ability to handle that going ahead.

So, I’d say there’s nonetheless that sensitivity to price administration, largely doing that by invoice charges, by a number of the pressing wants that Jeff simply referred to. We’re seeing them flip to us to assist them with predictive planning, using our everlasting sources to assist them backfill in order that they will carry again down these emptiness charges to extra regular ranges. So, excessive sensitivity the price.

On the similar time, nonetheless a necessity round achievement. Landry talked about there’s – they nonetheless want the nurses and their allied professionals on the ground, there’s challenges round retention. We hear most CHRO’s discuss, I haven’t got a recruitment problem, I’ve a retention problem, I must preserve the individuals I’ve. And we all know the largest issue to retention is making a protected optimistic work setting.

So they are not – they do not wish to relinquish using contingent workers. So our groups simply proceed to work with them on all fronts, serving to them from a short-term perspective, handle these prices, but additionally bringing to bear different capabilities and elements of our resolution to assist them with the long run. So I believe that is in all probability a really broad-brush common type of lay of the land mark.

Mark Marcon

Respect that, Kelly. Thanks.

Operator

Thanks. One second for our subsequent query, and that can come from the road of Jeff Silber with BMO Capital Markets. Your line is open.

Unidentified Analyst

Hey. That is Ryan on for Jeff. I simply needed to ask a fast query on the tech and workforce. I am simply curious, what the drivers are for the phase for the 12 months as you lap some difficult comps and a few headwinds in VMS? And do you assume the language service enterprise can proceed its sturdy trajectory and actually drive the phase going ahead? Thanks.

Jeff Knudson

Sure. Thanks, Ryan. I’d say once you have a look at the year-over-year comparisons for the remainder of the 12 months that we might nonetheless anticipate language companies to be rising in that high-teens price as we transfer by the remainder of the 12 months. As you famous, VMS may have some very powerful compares, significantly within the Q2 – past Q1 and the Q2 and Q3 timeframe. And so they’ll even be challenged sequentially within the second quarter as a few of these invoice price dynamics that we talked about on Nurse and Allied play out within the entrance half of the 12 months.

Kelly Rakowski

And I am going to simply add, Ryan, on Language Providers, I imply, you heard Cary talked about, we celebrated the three-year anniversary with AMN this week. That crew simply continues to ship very high-quality companies, very sturdy retention of purchasers in addition to type of in account development. So we nonetheless see natural development patterns for that enterprise inside their current account base as they elevated adoption of the mannequin, in some instances, the place we’ve got accounts, the place we could be working with well being techniques on a number of different hospitals. They see our outcomes they usually proceed to develop. And we’ve got a powerful pipeline and new acquisition there and nonetheless a chance to develop inside our MSP base. So, only a shout out to that crew for his or her large worth that they create to their prospects, and we’re simply thrilled to have them as a part of AMN.

Unidentified Analyst

Positive. Thanks. And simply as my follow-up, given a number of the clinicians rolling off within the second quarter and CFO grumblings about price. Simply questioning if there’s any room to maneuver charges decrease, provide any concessions to type of ease the monetary burden on suppliers for later within the 12 months. After which are you anticipating regular seasonality to return within the second half?

Jeff Knudson

The invoice price is a tough one, as a result of we noticed invoice charges go down on our orders, not essentially on our placements all through. Properly, the invoice charges within the placements did go down, however the orders went right down to a stage final 12 months that it was negatively impacting invoice charges due to a low tempo. In order that’s why we have some confidence in the place we expect that the invoice charges are going to normalize.

In order that’s a little bit bit tough one. I believe the higher factor is to go and provide extra options to assist with the general labor drawback. So whether or not that is providing some RPO options or extra native kind of options that – it is not new, not one thing model new, however purchasers wish to attempt all types of recent issues proper now. After which I believe your different a part of your query needed to do with the second half of the 12 months seasonality.

Landry Seedig

On the seasonality, we predict the second half of the 12 months to play out, which might imply Q3 would usually be up modestly over Q2 after which a little bit little bit of stronger development within the fourth quarter over Q3 ranges.

Unidentified Analyst

Obtained it. Thanks.

Operator

Thanks. One second for our subsequent query, and that can come from the road of Brian Taji Phillips with Jefferies. Your line is open.

Brian Tanquilut

Hey, good afternoon, guys. It is Brian Tanquilut. I assume my query for the crew. There’s plenty of chatter across the aggressive dynamics within the house, the place a few of your rivals are speaking about expectations for a very good little bit of incremental decline in invoice charges going ahead or their predictions. So simply curious what you are seeing out there when it comes to the competitors and what you are listening to when it comes to — is there a possible for worth aggressiveness from a number of the gamers out there at this level?

Landry Seedig

So that is Landry, Brian. Jeff talked about that we’re anticipating that sequential decline in invoice price from Q1 to Q2. From what we’re seeing from the competitors, there’s some pockets of small rivals on the market that may make margin transfer or a invoice price transfer. It is not one thing that we have seen as of proper now from any of our giant rivals.

Brian Tanquilut

Obtained it. Okay. Superior. Thanks. That is all I’ve.

Operator

Thanks. And audio system, I am exhibiting no additional questions within the queue presently. I’d now like to show the decision again over to administration for any closing remarks.

Cary Grace

Thanks. Earlier than we are saying, our remaining goodbye, I do know we have talked fairly a bit about a few our companies. We did not discuss as a lot about PLS. So I simply wish to give them an enormous recognition for — as you go and have a look at all through 2022. They’d only a terrific 12 months, together with within the locums enterprise, 4 consecutive quarters of hitting over $100 million of income. And so deserves a particular shout out.

Thanks all for being with us. We admire all of the questions and all of the curiosity. I will finish with how I began, which is I couldn’t be extra thrilled to be a part of this glorious AMN crew, and I’m wanting ahead to spending time with all of you within the coming weeks and months.

Operator

Thanks all for taking part. This concludes at present’s program. You might now disconnect.