Press Release Details

Female executive
Investor Relations Investors news releases news release details AMN Healthcare Announces First Quarter 2020 Results

AMN Healthcare Announces First Quarter 2020 Results

May 11, 2020
Quarterly revenue of $602 million; GAAP EPS of $0.27 and adjusted EPS of $0.79

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 (6)

12.3

%

 

12.4

%

 

12.9

%

           

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 solutions

28.5

%

 

28.5

%

 

29.0

%

Physician and leadership solutions

36.7

%

 

36.6

%

 

37.2

%

Technology and workforce solutions

75.7

%

 

92.6

%

 

92.3

%

           
           

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.

 

 

SOURCE AMN Healthcare Services, Inc.