UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________
FORM 10-Q
____________________
| QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the quarterly period ended March 31, 2023
| OR | |||||
| TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the transition period from to
Commission File No.: 001-16753
(Exact Name of Registrant as Specified in Its Charter)
| (State or Other Jurisdiction of Incorporation or Organization) | (I.R.S. Employer Identification No.) | |||||||
| (Address of Principal Executive Offices) | (Zip Code) | |||||||
Registrant’s Telephone Number, Including Area Code: (866 ) 871-8519
____________________
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each Class | Trading Symbol | Name of each exchange on which registered | ||||||
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| ☒ | Accelerated filer | ☐ | Non-accelerated filer | ☐ | ||||||||||||||||||||||
| Smaller reporting company | 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. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act). Yes ☐ No x
As of May 3, 2023, there were 39,645,292 shares of common stock, $0.01 par value, outstanding.
Auditor Name: KPMG LLP Auditor Location: San Diego, California Auditor Firm ID: 185
TABLE OF CONTENTS
| Item | Page | |||||||
| PART I - FINANCIAL INFORMATION | ||||||||
| 1. | ||||||||
| 2. | ||||||||
| 3. | ||||||||
| 4. | ||||||||
| PART II - OTHER INFORMATION | ||||||||
| 1. | ||||||||
| 1A. | ||||||||
| 2. | ||||||||
| 3. | ||||||||
| 4. | ||||||||
| 5. | ||||||||
| 6. | ||||||||
PART I - FINANCIAL INFORMATION
Item 1. Condensed Consolidated Financial Statements
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited and in thousands, except par value)
| March 31, 2023 | December 31, 2022 | ||||||||||
| ASSETS | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
Accounts receivable, net of allowances of $ | |||||||||||
| Accounts receivable, subcontractor | |||||||||||
| Prepaid expenses | |||||||||||
| Other current assets | |||||||||||
| Total current assets | |||||||||||
| Restricted cash, cash equivalents and investments | |||||||||||
Fixed assets, net of accumulated depreciation of $ | |||||||||||
| Other assets | |||||||||||
| Goodwill | |||||||||||
Intangible assets, net of accumulated amortization of $ | |||||||||||
| Total assets | $ | $ | |||||||||
| LIABILITIES AND STOCKHOLDERS’ EQUITY | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable and accrued expenses | $ | $ | |||||||||
| Accrued compensation and benefits | |||||||||||
| Other current liabilities | |||||||||||
| Total current liabilities | |||||||||||
| Revolving credit facility | |||||||||||
| Notes payable, net of unamortized fees and premium | |||||||||||
| Deferred income taxes, net | |||||||||||
| Other long-term liabilities | |||||||||||
| Total liabilities | |||||||||||
| Commitments and contingencies | |||||||||||
| Stockholders’ equity: | |||||||||||
Preferred stock, $ | |||||||||||
Common stock, $ | |||||||||||
| Additional paid-in capital | |||||||||||
Treasury stock, at cost; | ( | ( | |||||||||
| Retained earnings | |||||||||||
| Accumulated other comprehensive loss | ( | ( | |||||||||
| Total stockholders’ equity | |||||||||||
| Total liabilities and stockholders’ equity | $ | $ | |||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
1
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited and in thousands, except per share amounts)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Revenue | $ | $ | |||||||||
| Cost of revenue | |||||||||||
| Gross profit | |||||||||||
| Operating expenses: | |||||||||||
| Selling, general and administrative | |||||||||||
| Depreciation and amortization (exclusive of depreciation included in cost of revenue) | |||||||||||
| Total operating expenses | |||||||||||
| Income from operations | |||||||||||
| Interest expense, net, and other | |||||||||||
| Income before income taxes | |||||||||||
| Income tax expense | |||||||||||
| Net income | $ | $ | |||||||||
| Other comprehensive income (loss): | |||||||||||
| Unrealized gains (losses) on available-for-sale securities, net, and other | ( | ||||||||||
| Other comprehensive income (loss) | ( | ||||||||||
| Comprehensive income | $ | $ | |||||||||
| Net income per common share: | |||||||||||
| Basic | $ | $ | |||||||||
| Diluted | $ | $ | |||||||||
| Weighted average common shares outstanding: | |||||||||||
| Basic | |||||||||||
| Diluted | |||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
2
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited and in thousands)
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2021 | $ | $ | ( | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock into treasury | — | — | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Equity awards vested, net of shares withheld for taxes | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Comprehensive income (loss) | — | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2022 | $ | $ | ( | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Common Stock | Additional Paid-in Capital | Treasury Stock | Retained Earnings | Accumulated Other Comprehensive Loss | Total | ||||||||||||||||||||||||||||||||||||||||||
| Shares | Amount | Shares | Amount | ||||||||||||||||||||||||||||||||||||||||||||
| Balance, December 31, 2022 | $ | $ | ( | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
| Repurchase of common stock into treasury | — | — | — | ( | ( | — | — | ( | |||||||||||||||||||||||||||||||||||||||
| Equity awards vested, net of shares withheld for taxes | ( | — | — | — | — | ( | |||||||||||||||||||||||||||||||||||||||||
| Share-based compensation | — | — | — | — | — | — | |||||||||||||||||||||||||||||||||||||||||
| Comprehensive income | — | — | — | — | — | ||||||||||||||||||||||||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | ( | $ | ( | $ | $ | ( | $ | ||||||||||||||||||||||||||||||||||||||
See accompanying notes to unaudited condensed consolidated financial statements.
3
AMN HEALTHCARE SERVICES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited and in thousands)
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
Cash flows from operating activities: | |||||||||||
| Net income | $ | $ | |||||||||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
| Depreciation and amortization (inclusive of depreciation included in cost of revenue) | |||||||||||
| Non-cash interest expense and other | |||||||||||
| Change in fair value of contingent consideration liabilities | |||||||||||
| Increase in allowance for credit losses and sales credits | |||||||||||
| Provision for deferred income taxes | ( | ||||||||||
| Share-based compensation | |||||||||||
| Loss on disposal or impairment of long-lived assets | |||||||||||
| Net loss on investments in available-for-sale securities | |||||||||||
| Net loss (gain) on deferred compensation balances | ( | ||||||||||
| Non-cash lease expense | ( | ||||||||||
| Changes in assets and liabilities, net of effects from acquisitions: | |||||||||||
| Accounts receivable | ( | ( | |||||||||
| Accounts receivable, subcontractor | ( | ( | |||||||||
| Income taxes receivable | |||||||||||
| Prepaid expenses | ( | ||||||||||
| Other current assets | ( | ||||||||||
| Other assets | ( | ||||||||||
| Accounts payable and accrued expenses | ( | ||||||||||
| Accrued compensation and benefits | ( | ||||||||||
| Other liabilities | |||||||||||
| Deferred revenue | ( | ||||||||||
| Net cash provided by operating activities | |||||||||||
Cash flows from investing activities: | |||||||||||
| Purchase and development of fixed assets | ( | ( | |||||||||
| Purchase of investments | ( | ||||||||||
| Proceeds from sale and maturity of investments | |||||||||||
| Proceeds from sale of equity investment | |||||||||||
| Payments to fund deferred compensation plan | ( | ( | |||||||||
| Net cash used in investing activities | ( | ( | |||||||||
4
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
Cash flows from financing activities: | |||||||||||
| Payments on revolving credit facility | ( | ||||||||||
| Proceeds from revolving credit facility | |||||||||||
Repurchase of common stock (1) | ( | ( | |||||||||
| Payment of financing costs | ( | ||||||||||
| Cash paid for shares withheld for taxes | ( | ( | |||||||||
| Net cash used in financing activities | ( | ( | |||||||||
| Effect of exchange rate changes on cash | ( | ||||||||||
| Net decrease in cash, cash equivalents and restricted cash | ( | ( | |||||||||
| Cash, cash equivalents and restricted cash at beginning of period | |||||||||||
| Cash, cash equivalents and restricted cash at end of period | $ | $ | |||||||||
Supplemental disclosures of cash flow information: | |||||||||||
| Cash paid for amounts included in the measurement of operating lease liabilities | $ | $ | |||||||||
Cash paid for interest (net of $ | $ | $ | |||||||||
| Cash paid for income taxes | $ | $ | |||||||||
| Supplemental disclosures of non-cash investing and financing activities: | |||||||||||
| Purchase of fixed assets recorded in accounts payable and accrued expenses | $ | $ | |||||||||
| Excise tax payable on share repurchases | $ | $ | |||||||||
(1) The difference between the amount reported for the three months ended March 31, 2023 and the corresponding amount presented in the condensed consolidated statements of stockholders’ equity is due to accrued excise tax payable on share repurchases recorded within treasury stock.
See accompanying notes to unaudited condensed consolidated financial statements.
5
AMN HEALTHCARE SERVICES, INC.
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(in thousands, except per share amounts)
1. BASIS OF PRESENTATION
The condensed consolidated balance sheets and related condensed consolidated statements of comprehensive income, stockholders’ equity and cash flows contained in this Quarterly Report on Form 10-Q (this “Quarterly Report”), which are unaudited, include the accounts of AMN Healthcare Services, Inc. and its wholly-owned subsidiaries (collectively, the “Company”). All significant intercompany balances and transactions have been eliminated in consolidation. In the opinion of management, all entries necessary for a fair presentation of such unaudited condensed consolidated financial statements have been included. These entries consisted of all normal recurring items. The results of operations for the interim period are not necessarily indicative of the results to be expected for any other interim period or for the entire fiscal year or for any future period.
The unaudited condensed consolidated financial statements do not include all information and notes necessary for a complete presentation of financial position, results of operations and cash flows in conformity with accounting principles generally accepted in the United States (“U.S. GAAP”). Please refer to the Company’s audited consolidated financial statements and the related notes for the fiscal year ended December 31, 2022, contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the Securities and Exchange Commission on February 22, 2023 (the “2022 Annual Report”).
Recently Adopted Accounting Pronouncements
In October 2021, the Financial Accounting Standards Board issued Accounting Standards Update (“ASU”) 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The new guidance requires companies to apply the definition of a performance obligation under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities, such as deferred revenue, relating to contracts with customers that are acquired in a business combination. Under prior guidance, an acquirer generally recognized assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at their acquisition-date fair values in accordance with ASC Subtopic 820-10, Fair Value Measurements—Overall. Generally, this new guidance will result in the acquirer recognizing acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree prior to the acquisition under ASC Topic 606. The Company adopted this standard effective January 1, 2023 on a prospective basis, and the adoption did not have a material effect on the Company’s consolidated financial statements.
Cash, Cash Equivalents and Restricted Cash
The Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents. Cash and cash equivalents include currency on hand, deposits with financial institutions, money market funds, commercial paper and other highly liquid investments. Restricted cash and cash equivalents primarily includes cash, corporate bonds and commercial paper that serve as collateral for the Company’s captive insurance subsidiary claim payments. See Note (7), “Fair Value Measurement” for additional information.
6
| March 31, 2023 | December 31, 2022 | ||||||||||
| Cash and cash equivalents | $ | $ | |||||||||
| Restricted cash and cash equivalents (included in other current assets) | |||||||||||
| Restricted cash, cash equivalents and investments | |||||||||||
| Total cash, cash equivalents and restricted cash and investments | |||||||||||
| Less restricted investments | ( | ( | |||||||||
| Total cash, cash equivalents and restricted cash | $ | $ | |||||||||
Accounts Receivable
The Company records accounts receivable at the invoiced amount. Accounts receivable are non-interest bearing. The Company maintains an allowance for expected credit losses based on the Company’s historical write-off experience, an assessment of its customers’ financial conditions and available information that is relevant to assessing the collectability of cash flows, which includes current conditions and forecasts about future economic conditions.
The following table provides a reconciliation of activity in the allowance for credit losses for accounts receivable:
| 2023 | 2022 | ||||||||||
| Balance as of January 1, | $ | $ | |||||||||
| Provision for expected credit losses | |||||||||||
| Amounts written off charged against the allowance | ( | ( | |||||||||
| Balance as of March 31, | $ | $ | |||||||||
Reclassifications
To conform to the current year presentation, certain reclassifications have been made to prior year balances in the condensed consolidated balance sheets and accompanying Note (10), “Balance Sheet Details.”
7
2. ACQUISITIONS
The Company accounted for the acquisition set forth below using the acquisition method of accounting. Accordingly, the Company recorded the tangible and intangible assets acquired and liabilities assumed at their estimated fair values as of the date of acquisition. Since the date of acquisition, the Company has revised the allocation of the purchase price to the tangible and intangible assets acquired and liabilities assumed based on analysis of information that has been made available through March 31, 2023. The allocation will continue to be updated through the measurement period, if necessary. The goodwill recognized for the acquisition is attributable to expected growth as the Company leverages its brand and diversifies its services offered to clients, including potential revenue growth and margin expansion. The Company did not incur any material acquisition-related costs.
Connetics Acquisition
On May 13, 2022, the Company completed its acquisition of Connetics Communications, LLC (“Connetics”), which specializes in the direct hire recruitment and permanent placement of international nurse and allied health professionals with healthcare facilities in the United States. The initial purchase price of $78,764 included (1) $70,764 cash consideration paid upon acquisition, funded through cash on hand, and (2) contingent consideration (earn-out payment) of up to $12,500 with an estimated fair value of $8,000 as of the acquisition date. The contingent earn-out payment is based on the operating results of Connetics for the twelve months ending May 31, 2023. The results of Connetics have been included in the Company’s nurse and allied solutions segment since the date of acquisition. During the fourth quarter of 2022, $231 was returned to the Company in respect of the final working capital settlement.
The preliminary allocation of the $78,533 purchase price, which was reduced by the final working capital settlement during the fourth quarter of 2022, consisted of (1) $3,632 of fair value of tangible assets acquired, which included $963 cash received, (2) $8,244 of liabilities assumed, (3) $40,200 of identified intangible assets, and (4) $42,945 of goodwill, of which $34,944 is deductible for tax purposes. The intangible assets acquired have a weighted average useful life of approximately thirteen years . The following table summarizes the fair value and useful life of each intangible asset acquired as of the acquisition date:
| Fair Value | Useful Life | ||||||||||||||||
| (in years) | |||||||||||||||||
| Identifiable intangible assets | |||||||||||||||||
| Customer relationships | $ | ||||||||||||||||
| Staffing database | |||||||||||||||||
| Tradenames and trademarks | |||||||||||||||||
| $ | |||||||||||||||||
8
3. REVENUE RECOGNITION
Revenue primarily consists of fees earned from the temporary staffing and permanent placement of healthcare professionals, executives, and leaders (clinical and operational). The Company also generates revenue from technology-enabled services, including language interpretation and vendor management systems, and talent planning and acquisition services, including recruitment process outsourcing. The Company recognizes revenue when control of its services is transferred to its customers, in an amount that reflects the consideration the Company expects to be entitled to receive in exchange for those services. Revenue from temporary staffing services is recognized as the services are rendered by clinical and non-clinical healthcare professionals. Under the Company’s managed services program (“MSP”) arrangements, the Company manages all or a part of a customer’s supplemental workforce needs utilizing its own network of healthcare professionals along with those of third-party subcontractors. Revenue and the related direct costs under MSP arrangements are recorded in accordance with the accounting guidance on reporting revenue gross as a principal versus net as an agent. When the Company uses subcontractors and acts as an agent, revenue is recorded net of the related subcontractor’s expense. Revenue from permanent placement and recruitment process outsourcing services is recognized as the services are rendered. Depending on the arrangement, the Company’s technology-enabled service revenue is recognized either as the services are rendered or ratably over the applicable arrangement’s service period.
The Company’s customers are primarily billed as services are rendered. Any fees billed in advance of being earned are recorded as deferred revenue. While payment terms vary by the type of customer and the services rendered, the term between invoicing and when payment is due is not significant.
The Company has elected to apply the following practical expedients and optional exemptions related to contract costs and revenue recognition:
•Recognize incremental costs of obtaining a contract with amortization periods of one year or less as expense when incurred. These costs are recorded within selling, general and administrative expenses.
•Recognize revenue in the amount of consideration that the Company has a right to invoice the customer if that amount corresponds directly with the value to the customer of the Company’s services completed to date.
•Exemptions from disclosing the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less, (ii) contracts for which revenue is recognized in the amount of consideration that the Company has a right to invoice for services performed and (iii) contracts for which variable consideration is allocated entirely to a wholly unsatisfied performance obligation or to a wholly unsatisfied promise to transfer a distinct service that forms part of a single performance obligation.
See Note (5), “Segment Information,” for additional information regarding the Company’s revenue disaggregated by service type.
9
4. NET INCOME PER COMMON SHARE
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Net income | $ | $ | |||||||||
| Net income per common share - basic | $ | $ | |||||||||
| Net income per common share - diluted | $ | $ | |||||||||
| Weighted average common shares outstanding - basic | |||||||||||
| Plus dilutive effect of potential common shares | |||||||||||
| Weighted average common shares outstanding - diluted | |||||||||||
Share-based awards to purchase 243 and 160 shares of common stock were not included in the above calculation of diluted net income per common share for the three months ended March 31, 2023 and 2022, respectively, because the effect of these instruments was anti-dilutive.
Since March 31, 2023, and through May 5, 2023, the Company repurchased 594 shares of its common stock at an average price of $84.18 per share excluding broker’s fee, resulting in an aggregate purchase price of $50,000 excluding the effect of 1 % of excise taxes on the repurchased amount.
5. SEGMENT INFORMATION
The Company’s operating segments are identified in the same manner as they are reported internally and used by the Company’s chief operating decision maker for the purpose of evaluating performance and allocating resources. The Company has three reportable segments: (1) nurse and allied solutions, (2) physician and leadership solutions, and (3) technology and workforce solutions. The nurse and allied solutions segment includes the Company’s travel nurse staffing (including international nurse staffing and rapid response nurse staffing), labor disruption staffing, local staffing, international nurse and allied permanent placement, allied staffing and revenue cycle solutions businesses. The physician and leadership solutions segment includes the Company’s locum tenens staffing, healthcare interim leadership staffing, executive search, and physician permanent placement businesses. The technology and workforce solutions segment includes the Company’s language services, vendor management systems, workforce optimization, virtual care, and outsourced solutions businesses.
10
| Three Months Ended March 31, | |||||||||||
| 2023 | 2022 | ||||||||||
| Revenue | |||||||||||
| Nurse and allied solutions | $ | $ | |||||||||
| Physician and leadership solutions | |||||||||||
| Technology and workforce solutions | |||||||||||
| $ | $ | ||||||||||
| Segment operating income | |||||||||||
| Nurse and allied solutions | $ | $ | |||||||||
| Physician and leadership solutions | |||||||||||
| Technology and workforce solutions | |||||||||||
| Unallocated corporate overhead | |||||||||||
| Depreciation and amortization | |||||||||||
| Depreciation (included in cost of revenue) | |||||||||||
| Share-based compensation | |||||||||||
| Interest expense, net, and other | |||||||||||
| Income before income taxes | $ | $ | |||||||||
The following table summarizes the activity related to the carrying value of goodwill by reportable segment:
| Nurse and Allied Solutions | Physician and Leadership Solutions | Technology and Workforce Solutions | Total | ||||||||||||||||||||
| Balance, January 1, 2023 | $ | $ | $ | $ | |||||||||||||||||||
| Goodwill adjustment for Connetics acquisition | ( | ( | |||||||||||||||||||||
| Balance, March 31, 2023 | $ | $ | $ | $ | |||||||||||||||||||
| Accumulated impairment loss as of December 31, 2022 and March 31, 2023 | $ | $ | $ | $ | |||||||||||||||||||
11
Disaggregation of Revenue
The following tables present the Company’s revenue disaggregated by service type:
| Three Months Ended March 31, 2023 | |||||||||||||||||||||||
| Nurse and Allied Solutions | Physician and Leadership Solutions | Technology and Workforce Solutions | Total | ||||||||||||||||||||
| Travel nurse staffing | $ | $ | $ | $ | |||||||||||||||||||
| Labor disruption services | |||||||||||||||||||||||
| Local staffing | |||||||||||||||||||||||
| Allied staffing | |||||||||||||||||||||||
| Locum tenens staffing | |||||||||||||||||||||||
| Interim leadership staffing | |||||||||||||||||||||||
| Temporary staffing | |||||||||||||||||||||||
| Permanent placement | |||||||||||||||||||||||
| Language services | |||||||||||||||||||||||
| Vendor management systems | |||||||||||||||||||||||
| Other technologies | |||||||||||||||||||||||
| Technology-enabled services | |||||||||||||||||||||||
| Talent planning and acquisition | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
| Three Months Ended March 31, 2022 | |||||||||||||||||||||||
| Nurse and Allied Solutions | Physician and Leadership Solutions | Technology and Workforce Solutions | Total | ||||||||||||||||||||
| Travel nurse staffing | $ | $ | $ | $ | |||||||||||||||||||
| Local staffing | |||||||||||||||||||||||
| Allied staffing | |||||||||||||||||||||||
| Locum tenens staffing | |||||||||||||||||||||||
| Interim leadership staffing | |||||||||||||||||||||||
| Temporary staffing | |||||||||||||||||||||||
| Permanent placement | |||||||||||||||||||||||
| Language services | |||||||||||||||||||||||
| Vendor management systems | |||||||||||||||||||||||
| Other technologies | |||||||||||||||||||||||
| Technology-enabled services | |||||||||||||||||||||||
| Talent planning and acquisition | |||||||||||||||||||||||
| Total revenue | $ | $ | $ | $ | |||||||||||||||||||
The Company did not generate material revenue from labor disruption services during the three months ended March 31, 2022.
12
6. NOTES PAYABLE AND CREDIT AGREEMENT
7. FAIR VALUE MEASUREMENT
The Company’s valuation techniques and inputs used to measure fair value and the definition of the three levels (Level 1, Level 2, and Level 3) of the fair value hierarchy are disclosed in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (3), Fair Value Measurement” of the 2022 Annual Report. The Company has not changed the valuation techniques or inputs it uses for its fair value measurement during the three months ended March 31, 2023.
Assets and Liabilities Measured on a Recurring Basis
The Company invests a portion of its cash and cash equivalents in non-federally insured money market funds that are measured at fair value based on quoted prices, which are Level 1 inputs.
The Company has a deferred compensation plan for certain executives and employees, which is composed of deferred compensation and all related income and losses attributable thereto. The Company’s obligation under its deferred compensation plan is measured at fair value based on quoted market prices of the participants’ elected investments, which are Level 1 inputs.
The Company’s restricted cash equivalents and investments that serve as collateral for the Company’s captive insurance company include commercial paper that is measured at observable market prices for identical securities that are traded in less active markets, which are Level 2 inputs. The Company’s cash equivalents also include commercial paper classified as Level 2 in the fair value hierarchy. Of the $37,600 commercial paper issued and outstanding as of March 31, 2023, none had original maturities greater than three months. Of the $31,536 commercial paper issued and outstanding as of December 31, 2022, none had original maturities greater than three months.
The Company’s restricted cash equivalents and investments that serve as collateral for the Company’s captive insurance company also include corporate bonds that are measured using readily available pricing sources that utilize observable market data, including the current interest rate for comparable instruments, which are Level 2 inputs. As of March 31, 2023, the Company had $23,192 25,095
The Company’s contingent consideration liabilities associated with acquisitions are measured at fair value using a probability-weighted discounted cash flow analysis or a simulation-based methodology for the acquired companies, which are Level 3 inputs. The Company recognizes changes to the fair value of its contingent consideration liabilities in selling, general and administrative expenses in the condensed consolidated statements of comprehensive income.
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| Fair Value Measurements as of March 31, 2023 | Fair Value Measurements as of December 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||
| Assets (Liabilities) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | |||||||||||||||||||||||||||||||||||||||
| Money market funds | $ | $ | $ | $ | $ | $ | $ | $ | |||||||||||||||||||||||||||||||||||||||
| Deferred compensation | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
| Corporate bonds | |||||||||||||||||||||||||||||||||||||||||||||||
| Commercial paper | |||||||||||||||||||||||||||||||||||||||||||||||
| Acquisition contingent consideration liabilities | ( | ( | ( | ( | |||||||||||||||||||||||||||||||||||||||||||
Assets Measured on a Non-Recurring Basis
The Company applies fair value techniques on a non-recurring basis associated with valuing potential impairment losses related to its goodwill, long-lived assets, and equity investments.
The Company evaluates goodwill and indefinite-lived intangible assets annually for impairment and whenever events or changes in circumstances indicate that it is more likely than not that an impairment exists. The Company determines the fair value of its reporting units based on a combination of inputs, including the market capitalization of the Company, as well as Level 3 inputs such as discounted cash flows, which are not observable from the market, directly or indirectly. The Company determines the fair value of its indefinite-lived intangible assets using the income approach (relief-from-royalty method) based on Level 3 inputs.
There were no
Fair Value of Financial Instruments
The Company is required to disclose the fair value of financial instruments for which it is practicable to estimate the value, even though these instruments are not recognized at fair value in the consolidated balance sheets. The fair value of the Company’s 4.625 % senior notes due 2027 (the “2027 Notes”) and 4.000 % senior notes due 2029 (the “2029 Notes”) was estimated using quoted market prices in active markets for identical liabilities, which are Level 1 inputs. The carrying amounts and estimated fair value of the 2027 Notes and the 2029 Notes are presented in the following table. See additional information regarding the 2027 Notes and the 2029 Notes in Part II, Item 8, “Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of the 2022 Annual Report.
| As of March 31, 2023 | As of December 31, 2022 | ||||||||||||||||
| Carrying Amount | Estimated Fair Value | Carrying Amount | Estimated Fair Value | ||||||||||||||
| 2027 Notes | $ | $ | $ | $ | |||||||||||||
| 2029 Notes | |||||||||||||||||
8. INCOME TAXES
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9. COMMITMENTS AND CONTINGENCIES
Legal Proceedings
From time to time, the Company is involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. These matters typically relate to professional liability, tax, compensation, contract, competitor disputes and employee-related matters and include individual and class action lawsuits, as well as inquiries and investigations by governmental agencies regarding the Company’s employment and compensation practices. Additionally, some of the Company’s clients may also become subject to claims, governmental inquiries and investigations, and legal actions relating to services provided by the Company’s healthcare professionals. Depending upon the particular facts and circumstances, the Company may also be subject to indemnification obligations under its contracts with such clients relating to these matters. The Company accrues for contingencies and records a liability when management believes an adverse outcome from a loss contingency is both probable and the amount, or a range, can be reasonably estimated. Significant judgment is required to determine both probability of loss and the estimated amount. The Company reviews its loss contingencies at least quarterly and adjusts its accruals and/or disclosures to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, or other new information, as deemed necessary. The most significant matters for which the Company has established loss contingencies are class actions related to wage and hour claims under California and Federal law. Specifically, among other claims in these lawsuits, it is alleged that certain expense reimbursements should be considered wages and included in the regular rate of pay for purposes of calculating overtime rates.
On May 26, 2016, former travel nurse Verna Maxwell Clarke filed a complaint against AMN Services, LLC, in California Superior Court in Los Angeles County. The Company removed the case to the United States District Court for the Central District of California (Case No. 2:16-cv-04132-DSF-KS) (the “Clarke Matter”). The complaint asserts that, due to the Company’s per diem adjustment practices, traveling nurses’ per diem benefits should be included in their regular rate of pay for the purposes of calculating their overtime compensation. On June 26, 2018, the district court denied the plaintiffs’ Motion for Summary Judgment in its entirety, and granted the Company’s Motion for Summary Judgment with respect to the plaintiffs’ per diem and overtime claims. The plaintiffs filed an appeal of the judgment relating to the per diem claims with the Ninth Circuit Court of Appeals (the “Ninth Circuit”). On February 8, 2021, the Ninth Circuit issued an opinion that reversed the district court’s granting of the Company’s Motion for Summary Judgment and remanded the matter to the district court instructing the district to enter partial summary judgment in favor of the plaintiffs. On August 26, 2021, the Company filed a Petition for Writ of Certiorari in the United States Supreme Court seeking review of the Ninth Circuit’s decision, which was denied on December 13, 2021. This case is proceeding in the United States District Court.
On May 2, 2019, former travel nurse Sara Woehrle filed a complaint against AMN Services, LLC, and Providence Health System – Southern California in California Superior Court in Los Angeles County. The Company removed the case to the United States District Court for the Central District of California (Case No. 2:19-cv-05282 DSF-KS). The complaint asserts that, due to the Company’s per diem adjustment practices, traveling nurses’ per diem benefits should be included in their regular rate of pay for the purposes of calculating their overtime compensation. The complaint also alleges that the putative class members were denied required meal periods, denied proper overtime compensation, were not compensated for all time worked, including reporting time and training time, and received non-compliant wage statements. The Company reached an agreement to settle this matter in its entirety and received court approval of the settlement. Payment is expected to be made in the second quarter of 2023.
Because of the inherent uncertainty of litigation, the Company is not able to reasonably predict if any matter will be resolved in a manner that is materially adverse to the Company. The Company has recorded accruals in connection with the two matters described above amounting to $46,225 . The Company is currently unable to estimate the possible loss or range of loss beyond amounts already accrued. Loss contingencies accrued as of both March 31, 2023 and December 31, 2022 are included in accounts payable and accrued expenses and other long-term liabilities in the consolidated balance sheets.
Operating Leases
In the first quarter of 2022, the Company entered into a lease agreement for an office building located in Dallas, Texas, with future undiscounted lease payments of approximately $29,514 , excluding lease incentives. Because the Company does not control the underlying asset during the construction period, the Company is not considered the owner of the asset under construction for accounting purposes. The lease will commence upon completion of the construction of the office building which is expected be in the second quarter of 2023. The initial term of the lease is approximately eleven years with options to renew the lease during the lease term. A right-of-use asset and lease liability will be recognized in the consolidated balance sheet in the period the lease commences.
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10. BALANCE SHEET DETAILS
The consolidated balance sheets detail is as follows:
| March 31, 2023 | December 31, 2022 | |||||||||||||
| Other current assets: | ||||||||||||||
| Restricted cash and cash equivalents | $ | $ | ||||||||||||
| Income taxes receivable | ||||||||||||||
| Other | ||||||||||||||
| Other current assets | $ | $ | ||||||||||||
| Fixed assets: | ||||||||||||||
| Furniture and equipment | $ | $ | ||||||||||||
| Software | ||||||||||||||
| Leasehold improvements | ||||||||||||||
| Accumulated depreciation | ( | ( | ||||||||||||
| Fixed assets, net | $ | $ | ||||||||||||
| Other assets: | ||||||||||||||
| Life insurance cash surrender value | $ | $ | ||||||||||||
| Operating lease right-of-use assets | $ | |||||||||||||
| Other | ||||||||||||||
| Other assets | $ | $ | ||||||||||||
| Accounts payable and accrued expenses: | ||||||||||||||
| Trade accounts payable | $ | $ | ||||||||||||
| Subcontractor payable | ||||||||||||||
| Accrued expenses | ||||||||||||||
| Loss contingencies | ||||||||||||||
| Professional liability reserve | ||||||||||||||
| Other | ||||||||||||||
| Accounts payable and accrued expenses | $ | $ | ||||||||||||
| Accrued compensation and benefits: | ||||||||||||||
| Accrued payroll | $ | $ | ||||||||||||
| Accrued bonuses and commissions | ||||||||||||||
| Workers compensation reserve | ||||||||||||||
| Deferred compensation | ||||||||||||||
| Other | ||||||||||||||
| Accrued compensation and benefits | $ | $ | ||||||||||||
| Other current liabilities: | ||||||||||||||
| Acquisition related liabilities | $ | $ | ||||||||||||
| Income taxes payable | ||||||||||||||
| Client deposits | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Deferred revenue | ||||||||||||||
| Other | ||||||||||||||
| Other current liabilities | $ | $ | ||||||||||||
| Other long-term liabilities: | ||||||||||||||
| Workers compensation reserve | $ | $ | ||||||||||||
| Professional liability reserve | ||||||||||||||
| Operating lease liabilities | ||||||||||||||
| Other | ||||||||||||||