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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT PURSUANT TO
SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934

Date of Report (Date of earliest event reported): October 31, 2018
AMN HEALTHCARE SERVICES, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware
(State or Other Jurisdiction of Incorporation)

001-16753
(Commission File Number)
06-1500476
(I.R.S. Employer
Identification No.)

 
12400 High Bluff Drive, Suite 100
San Diego, California 92130 
(Address of Principal Executive Offices)
 

Registrant’s telephone number, including area code: (866) 871-8519
NOT APPLICABLE
(Former Name or Former Address, if Changed Since Last Report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
 
 
¨
Written communication pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
 
 
¨
Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
 
 
¨
Pre-commencement communication pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
 
 
 
¨
Pre-commencement communication pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (17 CFR §230.405) or Rule 12b-2 of the Securities Exchange Act of 1934 (17 CFR §240.12b-2).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐




Section 2—Financial Information
 
Item 2.02.
Results of Operations and Financial Condition.
On October 31, 2018, AMN Healthcare Services, Inc. (the “Company”) reported its third quarter 2018 results. The Company’s third quarter 2018 results are discussed in detail in the press release (the “Press Release”), which is furnished as Exhibit 99.1 to this Current Report on Form 8-K and incorporated herein by reference.
The information in this Item 2.02 and Exhibit 99.1 attached hereto shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent as shall be expressly set forth by specific reference in such filing.
 
 

Item 9.01.
 
Financial Statements and Exhibits.

(d) Exhibits.

99.1




SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

 
AMN Healthcare Services, Inc.

Date: October 31, 2018
By:
/s/ Susan R. Salka
 
 
Susan R. Salka
 
 
President & Chief Executive Officer



Exhibit
        


Contact:
Randle Reece
Director, Investor Relations
866.861.3229
______________________________________________________________________________


AMN HEALTHCARE ANNOUNCES THIRD QUARTER 2018 RESULTS
Quarterly revenue of $527 million, up 7% over prior year;
GAAP EPS of $0.58 and adjusted EPS of $0.84

SAN DIEGO – (October 31, 2018) – AMN Healthcare Services, Inc. (NYSE: AMN), the leader and innovator in healthcare workforce solutions and staffing services, today announced its third quarter 2018 financial results. Financial highlights are as follows:

Dollars in millions, except per share amounts.
 
Q3 2018
% Change Q3 2017
YTD Sept. 30, 2018
% Change
YTD September 30, 2017
Revenue
$526.8
7%
$1,607.4
9%
Gross profit
$175.1
10%
$523.9
9%
Net income
$27.9
(1)%
$106.1
16%
Diluted EPS
$0.58
2%
$2.17
17%
Adj. diluted EPS*
$0.84
33%
$2.47
28%
Adjusted EBITDA*
$67.4
9%
$204.0
6%

* See “Non-GAAP Measures” below for a discussion of our use of non-GAAP items and the table entitled “Supplemental Financial and Operating Data” for a reconciliation of non-GAAP items.

Highlights
•
Third quarter consolidated revenue of $527 million increased 7% year over year.
•
Nurse and Allied segment revenue of $306 million up 1% over the prior year, led by Allied with 8% growth.
•
Growth in strategic partnerships continues, with 32 service lines added at new and existing MSP clients year to date.
•
Travel nurse demand has risen recently to the highest level in almost two years.
•
Adjusted EBITDA of $67 million, up 9% year over year and 12.8% of revenue.
•
Operating cash flow $45 million in the quarter, $171 million year to date, up 67% year over year.

1


•
Repurchased 580,000 shares for $32 million.

“The industry-leading AMN team continues to serve our clients and healthcare professionals well, drive innovation within our businesses and deliver solid overall performance,” said Susan R. Salka, Chief Executive Officer of AMN Healthcare. “Our strategy of evolving AMN’s offerings to help healthcare organizations more effectively manage their workforce is resulting in stronger partnerships and the addition of new clients across the country. At the same time, we are also increasing our ability to provide a wide variety of opportunities to healthcare professionals throughout their careers.
“We are very pleased to see demand in our travel nursing business recently increasing. This provides us optimism for better volume growth. At the same time, there are challenges in a few other businesses, and our teams are working diligently and making progress on improving performance,” Ms. Salka said.

Third Quarter 2018 Results
Consolidated revenue for the quarter was $527 million, a 7% increase over prior year and a 6% decrease compared with prior quarter. Revenue for the Nurse and Allied Solutions segment was $306 million, higher by 1% year over year and down 8% sequentially. The Travel Nurse division performed better than expected with revenue flat year over year, with higher volume offset by a lower average bill rate. Allied division revenue increased 8% year over year on higher volume.

The Locum Tenens Solutions segment reported revenue of $101 million, down by 9% year over year, with lower volumes offset in part by positive pricing. Other Workforce Solutions segment revenue was $119 million reflecting an increase of 49% year over year, driven primarily by the acquisitions made in April 2018. Organic growth of 2% year over year was led by the permanent placement and mid-revenue cycle businesses.

Gross margin was 33.2%, higher by 90 basis points year over year and higher by 80 basis points sequentially. The year-over-year variance was driven by higher-than-average gross margins from the recently acquired companies and a change in classification of certain recruiter expenses from cost of sales to SG&A in our physician permanent placement business.

2



SG&A expenses were $121 million, or 23.0% of revenue, compared with $101 million, or 20.3% of revenue, in the same quarter last year. SG&A was $116 million, or 20.7% of revenue, in the previous quarter. The year-over-year increase in expense margin stemmed mainly from the physician permanent placement cost change and a $12.1 million increase in legal reserves.

Income from operations was $42.6 million, or 8.1% of revenue, compared with $50.8 million, or 10.3% of revenue, in the same quarter last year. Adjusted EBITDA was $67 million, a year-over-year increase of 9%. Adjusted EBITDA margin was 12.8%, representing an increase of 30 basis points year over year and an increase of 20 basis points sequentially.

Net income was $28 million, or $0.58 per diluted share, compared with $28 million, or $0.57 per diluted share, in the same quarter last year. Adjusted diluted EPS was $0.84.

At September 30, 2018, cash and cash equivalents totaled $19 million. Cash flow from operations was $45 million for the quarter, and capital expenditures were $10 million. AMN repurchased 580,000 shares of stock for $32 million during the quarter. The Company ended the quarter with total debt outstanding of $475 million, with a leverage ratio as calculated in accordance with the Company’s credit agreement of 1.7 to 1.



3


Fourth Quarter 2018 Outlook

Metric
Guidance*
Consolidated revenue
$534 - $542 million
Gross margin
32.5% - 33.0%
SG&A as percentage of revenue
21.0% - 21.5%
Operating margin
9.1% - 9.6%
Adjusted EBITDA margin
12.0% - 12.5%
*Note: Guidance percentage metrics are approximate. For a reconciliation of adjusted EBITDA margin, see the table entitled “Reconciliation of Guidance Adjusted EBITDA Margin to Guidance Operating Margin” below.
    
Projected year-over-year revenue growth in the fourth quarter of 2018 is 5-6%. On an organic basis, revenue is projected to be down 1-2% due primarily to lower revenue in the Locum Tenens business. Nurse and Allied segment revenue is expected to be up by about 1-2% over prior year. No significant labor disruption revenue is included in fourth quarter guidance.

Conference Call on October 31, 2018
AMN Healthcare Services, Inc. (NYSE: AMN), healthcare’s leader and innovator in workforce solutions and staffing services, will host a conference call to discuss its third quarter 2018 financial results on Wednesday, October 31, 2018, 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 (800) 230-1059 in the U.S. or (612) 234-9959 internationally. 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 October 31, 2018, and can be accessed until 11:59 p.m. Eastern Time on November 14, 2018, by calling (800) 475-6701 in the U.S. or (320) 365-3844 internationally, with access code 455277.

About AMN Healthcare

4


AMN Healthcare is the leader and innovator in healthcare workforce solutions and staffing services to healthcare facilities across the nation. The Company provides unparalleled 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 delivers managed services programs, healthcare executive search solutions, vendor management systems, recruitment process outsourcing, predictive modeling, mid-revenue cycle solutions, and other services. Clients include acute-care hospitals, community health centers and clinics, physician practice groups, retail and urgent care centers, home health facilities 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 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 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

5


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 “Supplemental Financial and Operating Data” 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 our guidance for fourth quarter 2018 revenue, gross margin, SG&A expenses as a percentage of revenue and adjusted EBITDA margin. 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,” “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. Factors that could cause actual results to differ from those implied by the forward-looking statements contained in this press release are set forth in our fillings with the Securities and Exchange Commission (SEC), including our most recent Annual Report on Form 10-K for the year ended December 31, 2017, 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

6


Director, Investor Relations
866.861.3229


7


AMN Healthcare Services, Inc.
Condensed Consolidated Statements of Comprehensive Income
(in thousands, except per share amounts)
(unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2018
 
2017
 
2018
 
2018
 
2017
Revenue
$
526,842

 
$
494,406

 
$
558,108

 
$
1,607,439

 
$
1,479,378

Cost of revenue
351,695

 
334,867

 
377,152

 
1,083,512

 
997,051

Gross profit
175,147

 
159,539

 
180,956

 
523,927

 
482,327

Gross margin
33.2%
 
32.3%
 
32.4%
 
32.6%
 
32.6%
Operating expenses:
 
 
 
 
 
 
 
 
 
Selling, general and administrative (SG&A)
121,216

 
100,579

 
115,535

 
341,488

 
299,325

SG&A as a % of revenue
23.0%
 
20.3%
 
20.7%
 
21.2%
 
20.2%
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
11,296

 
8,132

 
10,606

 
29,788

 
23,759

Total operating expenses
132,512

 
108,711

 
126,141

 
371,276

 
323,084

Income from operations
42,635

 
50,828

 
54,815

 
152,651

 
159,243

Operating margin (1)
8.1%
 
10.3%
 
9.8%
 
9.5%
 
10.8%
 
 
 
 
 
 
 
 
 
 
Interest expense, net, and other
4,649

 
4,837

 
6,376

 
16,360

 
14,895

 
 
 
 
 
 
 
 
 
 
Income before income taxes
37,986

 
45,991

 
48,439

 
136,291

 
144,348

 
 
 
 
 
 
 
 
 
 
Income tax expense
10,068

 
17,863

 
12,910

 
30,163

 
52,957

Net income
$
27,918

 
$
28,128

 
$
35,529

 
$
106,128

 
$
91,391

Net income as a % of revenue
5.3%
 
5.7%
 
6.4%
 
6.6%
 
6.2%
 
 
 
 
 
 
 
 
 
 
Other comprehensive income (loss):
 
 
 
 
 
 
 
 
 
Foreign currency translation and other
133

 
(73
)
 
91

 
205

 
(111
)
Cash flow hedge, net of income taxes
—

 
—

 
—

 
—

 
(15
)
Other comprehensive income (loss)
133

 
(73
)
 
91

 
205

 
(126
)
 
 
 
 
 
 
 
 
 
 
Comprehensive income
$
28,051

 
$
28,055

 
$
35,620

 
$
106,333

 
$
91,265

 
 
 
 
 
 
 
 
 
 
Net income per common share:
 
 
 
 
 
 
 
 
 
Basic
$
0.59

 
$
0.59

 
$
0.75

 
$
2.23

 
$
1.91

Diluted
$
0.58

 
$
0.57

 
$
0.73

 
$
2.17

 
$
1.85

Weighted average common shares outstanding:
 
 
 
 
 
 
 
 
 
Basic
47,286

 
47,912

 
47,653

 
47,556

 
47,870

Diluted
48,529

 
49,445

 
48,936

 
48,859

 
49,480

 
 
 
 
 
 
 
 
 
 


AMN Healthcare Services, Inc.
Supplemental Financial and Operating Data
(dollars in thousands, except per share data and operating data)
(unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2018
 
2017
 
2018
 
2018
 
2017
Revenue
 
 
 
 
 
 
 
 
 
Nurse and allied solutions
$
306,292

 
$
302,933

 
$
332,728

 
$
977,199

 
$
917,183

Locum tenens solutions
101,102

 
111,415

 
107,297

 
311,516

 
322,473

Other workforce solutions
119,448

 
80,058

 
118,083

 
318,724

 
239,722

 
$
526,842

 
$
494,406

 
$
558,108

 
$
1,607,439

 
$
1,479,378

 
 
 
 
 
 
 
 
 
 
Reconciliation of Non-GAAP Items:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Segment operating income (2)
 
 
 
 
 
 
 
 
 
Nurse and allied solutions
$
42,165

 
$
40,807

 
$
43,936

 
$
137,906

 
$
134,638

Locum tenens solutions
10,992

 
14,438

 
13,371

 
34,321

 
39,028

Other workforce solutions
29,010

 
19,890

 
28,576

 
77,437

 
61,788

 
82,167

 
75,135

 
85,883

 
249,664

 
235,454

Unallocated corporate overhead
14,739

 
13,438

 
15,823

 
45,657

 
43,409

Adjusted EBITDA (3)
67,428

 
61,697

 
70,060

 
204,007

 
192,045

Adjusted EBITDA margin (4)
12.8%
 
12.5%
 
12.6%
 
12.7%
 
13.0%
 
 
 
 
 
 
 
 
 
 
Depreciation and amortization
11,296

 
8,132

 
10,606

 
29,788

 
23,759

Share-based compensation (5)
1,809

 
2,477

 
3,281

 
7,954

 
7,720

Acquisition and integration costs (6)
(452
)
 
260

 
1,358

 
1,474

 
1,323

Legal settlement accrual increases (7)
12,140

 
—

 
—

 
12,140

 
—

Income from operations
42,635

 
50,828

 
54,815

 
152,651

 
159,243

Interest expense, net, and other
4,649

 
4,837

 
6,376

 
16,360

 
14,895

Income before income taxes
37,986

 
45,991

 
48,439

 
136,291

 
144,348

Income tax expense
10,068

 
17,863

 
12,910

 
30,163

 
52,957

Net Income
$
27,918

 
$
28,128

 
$
35,529

 
$
106,128

 
$
91,391

 
 
 
 
 
 
 
 
 
 
GAAP diluted net income per share (EPS)
$
0.58

 
$
0.57

 
$
0.73

 
$
2.17

 
$
1.85

Adjustments:
 
 
 
 
 
 
 
 
 
Amortization of intangible assets
0.14

 
0.09

 
0.13

 
0.36

 
0.28

Acquisition and integration costs (6)
(0.01
)
 
0.01

 
0.02

 
0.03

 
0.03

Legal settlement accrual increases (7)
0.25

 
—

 
—

 
0.25

 
—

Equity investment fair value changes (8)
(0.03
)
 
—

 
—

 
(0.03
)
 
—

Debit financing related costs
—

 
—

 
—

 
0.01

 
—

Tax effect on above adjustments
(0.09
)
 
(0.04
)
 
(0.04
)
 
(0.16
)
 
(0.12
)
Tax correction related to prior periods (9)
—

 
—

 
—

 
(0.05
)
 
—

Excess tax benefits (10)
—

 
—

 
(0.01
)
 
(0.11
)
 
(0.11
)
Adjusted diluted EPS (11)
$
0.84

 
$
0.63

 
$
0.83

 
$
2.47

 
$
1.93

 
 
 
 
 
 
 
 
 
 


 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2018
 
2017
 
2018
 
2018
 
2017
Gross Margin
 
 
 
 
 
 
 
 
 
Nurse and allied solutions
27.4
%
 
27.3
%
 
26.3
%
 
27.2
%
 
27.6
%
Locum tenens solutions
28.4
%
 
30.1
%
 
29.8
%
 
29.0
%
 
30.2
%
Other workforce solutions
52.4
%
 
54.1
%
 
52.2
%
 
52.6
%
 
54.9
%
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating Data:
 
 
 
 
 
 
 
 
 
Nurse and allied solutions
 
 
 
 
 
 
 
 
 
Average healthcare
professionals on assignment (12)
8,979

 
8,817

 
9,095

 
9,214

 
8,881

 
 
 
 
 
 
 
 
 
 
Locum tenens solutions
 
 
 
 
 
 
 
 
 
Days filled (13)
50,069

 
58,881

 
55,225

 
158,089

 
172,784

Revenue per day filled (14)
$
2,019

 
$
1,892

 
$
1,943

 
$
1,971

 
$
1,866

 
 
 
 
 
 
 
 
 
 
 
As of September 30,
 
As of June 30,
 
2018
 
2017
 
2018
Leverage ratio (15)
1.7
 
1.3
 
1.7
 
 
 
 
 
 


AMN Healthcare Services, Inc.
Condensed Consolidated Balance Sheets
(dollars in thousands)
(unaudited)
 
September 30, 2018
 
December 31, 2017
 
September 30, 2017
Assets
 
 
 
 
 
Current assets:
 
 
 
 
 
Cash and cash equivalents
$
18,614

 
$
15,147

 
$
19,625

Accounts receivable, net
366,436

 
350,496

 
343,596

Accounts receivable, subcontractor
44,891

 
41,012

 
37,200

Prepaid and other current assets
49,898

 
67,498

 
42,052

Total current assets
479,839

 
474,153

 
442,473

Restricted cash, cash equivalents and investments
59,453

 
64,315

 
34,380

Fixed assets, net
86,817

 
73,431

 
68,188

Other assets
93,206

 
74,366

 
73,962

Goodwill
438,299

 
340,596

 
340,596

Intangible assets, net
332,788

 
227,096

 
231,791

Total assets
$
1,490,402

 
$
1,253,957

 
$
1,191,390

 
 
 
 
 
 
Liabilities and stockholders' equity
 
 
 
 
 
Current liabilities:
 
 
 
 
 
Accounts payable and accrued expenses
$
142,543

 
$
130,319

 
$
117,934

Accrued compensation and benefits
135,632

 
121,423

 
111,984

Deferred revenue
13,107

 
8,384

 
9,609

Other current liabilities
11,806

 
5,146

 
5,440

Total current liabilities
303,088

 
265,272

 
244,967

 
 
 
 
 
 
Revolving credit facility
150,000

 
—

 
—

Notes payable, less unamortized fees
320,416

 
319,843

 
319,652

Deferred income taxes, net
24,651

 
27,036

 
11,899

Other long-term liabilities
77,527

 
79,279

 
82,673

Total liabilities
875,682

 
691,430

 
659,191

 
 
 
 
 
 
Commitments and contingencies
 
 
 
 
 
 
 
 
 
 
 
Stockholders’ equity:
614,720

 
562,527

 
532,199

 
 
 
 
 
 
Total liabilities and stockholders’ equity
$
1,490,402

 
$
1,253,957

 
$
1,191,390



AMN Healthcare Services, Inc.
Summary Condensed Consolidated Statements of Cash Flows
(dollars in thousands)
(unaudited)
 
Three Months Ended
 
Nine Months Ended
 
September 30,
 
June 30,
 
September 30,
 
2018
 
2017(16)
 
2018
 
2018
 
2017(16)
 
 
 
 
 
 
 
 
Net cash provided by operating activities
$
44,811

 
$
32,053

 
$
66,203

 
$
170,749

 
$
102,096

Net cash used in investing activities
(35,401
)
 
(4,429
)
 
(229,337
)
 
(274,351
)
 
(24,045
)
Net cash provided by (used in) financing activities
(36,883
)
 
(24,951
)
 
133,627

 
81,774

 
(63,824
)
Effect of exchange rates on cash
133

 
(73
)
 
91

 
205

 
(111
)
Net increase (decrease) in cash, cash equivalents and restricted cash
(27,340
)
 
2,600

 
(29,416
)
 
(21,623
)
 
14,116

Cash, cash equivalents and restricted cash at beginning of period
104,611

 
62,544

 
134,027

 
98,894

 
51,028

Cash, cash equivalents and restricted cash at end of period
$
77,271

 
$
65,144

 
$
104,611

 
$
77,271

 
$
65,144




AMN Healthcare Services, Inc.
Additional Supplemental Non-GAAP Disclosures
Reconciliation of Guidance Adjusted EBITDA Margin to
Guidance Operating Margin
(unaudited)
 
Three Months Ended
 
December 31, 2018
 
Low(17)
 
High(17)
 
 
 
 
Adjusted EBITDA margin
12.0%
 
12.5%
Deduct:
 
 
 
Share-based compensation
 
0.6%
 
Acquisition and integration costs
 
0.2%
 
EBITDA margin
11.2%
 
11.7%
Depreciation and amortization
 
2.1%
 
Operating margin
9.1%
 
9.6%



(1)
Operating margin represents income from operations divided by revenue.
(2)
Segment operating income represents net income plus interest expense (net of interest income) and other, income tax expense, depreciation and amortization, unallocated corporate overhead, acquisition and integration costs, legal settlement accrual increases and share-based compensation.
(3)
Adjusted EBITDA represents net income plus interest expense (net of interest income) and other, income tax expense, depreciation and amortization, acquisition and integration costs, legal settlement accrual increases 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 indenture governing our 5.125% Senior Notes due 2024. Adjusted EBITDA is not intended to represent cash flows for the period, nor has it been presented as an alternative to income from operations or net income as an indicator of operating performance. Although management believes that some of the items excluded from adjusted EBITDA are not indicative of the Company’s operating performance, these items do impact the statement of comprehensive income, and management therefore utilizes adjusted EBITDA as an operating performance measure in conjunction with GAAP measures such as net income.
(4)
Adjusted EBITDA margin represents adjusted EBITDA divided by revenue.
(5)
Share-based compensation for the three months ended September 30, 2018 was partially offset by a $1,610,000 reduction related to performance equity awards.
(6)
Acquisition and integration costs of $874,000 for the three months ended September 30, 2018 were partially offset by a decrease in contingent consideration liabilities for recently acquired companies of $1,326,000.
(7)
During the third quarter of 2018, the Company recorded increases to its legal accruals established in connection with settlement agreements entered into during September and October 2018 in two class actions related to wage and hour claims, both of which are considered probable. For the three months ended September 30, 2018, the increases amounted to $12,140,000. Since the settlements are largely unrelated to the Company’s operating performance, we excluded the impact on adjusted EBITDA and adjusted diluted EPS for the three months ended September 30, 2018. Amounts recorded in prior quarters in these two class actions and legal accruals related to other matters are immaterial and their impact was not excluded from adjusted EBITDA or adjusted diluted EPS.
(8)
As a result of the adoption of a new accounting pronouncement on January 1, 2018, the Company now measures equity investments, except those accounted for using the equity method of accounting, at fair value with changes in fair value recognized through net income. For the three and nine months ended September 30, 2018, changes in fair value of equity investments recognized in interest expense, net, and other were $1,359,000. Since this favorable change in fair value is unrelated to the Company’s operating performance, we excluded the impact on adjusted diluted EPS for the three and nine months ended September 30, 2018.
(9)
During the first quarter of 2018, the Company recorded a net tax benefit of $2,501,000 to adjust for an immaterial out-of-period error identified this quarter related to the income tax treatment of fair value changes in the cash surrender value of its Company Owned Life Insurance for years ended December 31, 2015 through December 31, 2017. These fair value changes had not previously been included as a benefit in the tax provision of the related years.
(10)
The consolidated effective tax rate for the three and nine months ended September 30, 2018 was favorably affected by the recording of excess tax benefits relating to equity awards vested and exercised during the period. As a result of the adoption of a new accounting pronouncement on January 1, 2017, we no longer record excess tax benefits as an increase to additional paid-in capital, but record such excess tax benefits on a prospective basis as a reduction of income tax expense, which amounted to $5,000 and $56,000 for the three months ended September 30, 2018 and 2017, respectively. For the nine months ended September 30, 2018 and 2017, excess tax benefits recorded as a reduction of income tax expense were $5,099,000 and $5,381,000, respectively. The magnitude of the impact of excess tax benefits 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 favorable tax benefits are largely unrelated to our current year’s income before taxes and is unrepresentative of our normal effective tax rate, we excluded their impact on adjusted diluted EPS for the three and nine months ended September 30, 2018 and 2017.
(11)
Adjusted diluted EPS represents GAAP diluted EPS excluding the impact of the (A) amortization of intangible assets, (B) acquisition and integration costs, (C) legal settlement accrual increases, (D) changes in fair value of equity investments since January 1, 2018, (E) deferred financing costs, (F) tax effect, if any, of the foregoing adjustments, (G) excess tax benefits relating to equity awards vested and exercised since January 1, 2017, and (H) correction of prior periods error. Management included this non-GAAP measure to provide investors and prospective investors with an alternative method for assessing the Company’s operating results in a manner that


is focused on its operating performance and to provide a more consistent basis for comparison between periods. However, investors and prospective investors should note that this non-GAAP measure involves judgment by management (in particular, judgment as to what is classified as a special item to be excluded from adjusted diluted EPS). Although management believes the items excluded from adjusted diluted EPS are not indicative of the Company’s operating performance, these items do impact the statement of comprehensive income, and management therefore utilizes adjusted diluted EPS as an operating performance measure in conjunction with GAAP measures such as GAAP diluted EPS.
(12)
Average healthcare professionals on assignment represents the average number of nurse and allied healthcare professionals on assignment during the period presented.
(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 solutions segment 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.
(16)
As a result of the adoption of ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash” on January 1, 2018, we are required to present in the statement of cash flows the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. We adjusted certain restricted cash amounts for the three and nine months ended September 30, 2017 in the cash flow table presented above. These adjustments had no effect on previously reported results of operations or retained earnings.
(17)
Guidance percentage metrics are approximate.