AMN Healthcare Services, Inc. announced operating results for the third quarter of 2008. Highlights include:
-- Revenue of $315 million, up 5% over last year and 1% over last quarter
but slightly below Company guidance.
-- Revenue growth primarily driven by year-over-year volume increases in
the Company's two largest segments, Nurse & Allied and Locum Tenens.
-- EPS of $0.28, up 12% over last quarter, down 20% from last year,
primarily due to certain non-recurring expenses and a tax adjustment
during this quarter. These results were $0.03 below guidance.
-- Free cash flow of $19 million as days sales outstanding improved by 2
days from last quarter to 56 days in the third quarter. Cash flow from
operations was $21 million.
"While the healthcare staffing industry is not insulated from the impact of our nation's economic uncertainties, we do believe our industry leadership position and our diversified strategy is enabling AMN to deliver solid results that will translate into an even stronger market position in the future. While we are disappointed to be reporting operating performance slightly below our previous higher growth expectations, we do believe these results are more than respectable given the worsening financial and employment environment and the lower patient admissions and procedures reported by the healthcare industry," said Susan R. Nowakowski, President and Chief Executive Officer of AMN Healthcare. "We were especially pleased with our largest business line of travel nurse staffing, where we experienced year-over-year and sequential revenue growth and likely the most significant market share gains we have seen in several quarters. The lower than expected overall results came primarily from our allied business and certain specialties within our locum tenens division."
For the third quarter of 2008, revenue for the Nurse and Allied staffing segment was $217.1 million, an increase of 6.4% from the same quarter last year. The Locum Tenens staffing segment generated revenue of $85.3 million, an increase of 2.8% from the same quarter last year, and the Physician Permanent Placement segment provided revenue of $12.6 million, decreasing from $13.2 million reported the same quarter last year.
Gross profit for the third quarter of 2008 was $81.1 million, an increase of 1.7% from the same quarter last year. Gross margin this quarter decreased to 25.7% from 26.6% in the same quarter last year mainly reflecting lower gross profit contribution from higher margin business lines such as international nursing and physician permanent placement and a shift in the mix of specialties within our locum tenens staffing segment.
Selling, general and administrative ("SG&A") expenses increased to 19.1% of revenue in the third quarter of 2008 from 18.6% in the same quarter last year due primarily to restructuring and legal expenses associated with the Company's pharmacy staffing business which included a change in management, certain headcount reductions, and other non-recurring expenses. Excluding these costs, SG&A expenses would have been 18.6% of revenue, consistent with the same quarter last year.
Income tax expense was 34.4% of taxable income in the third quarter of 2008 as compared to 32.9% in the same quarter last year. During this quarter, the Company identified a tax matter that impacts the travel healthcare staffing industry. Since nearly the inception of the industry over two decades ago, it has been common industry practice for companies to offer lodging per diem payments; however, we recently became aware that a portion of these per diem payments may not be fully deductible for income tax purposes. The accompanying condensed consolidated financial statements reflect this uncertain tax position under U.S. generally accepted accounting principles.
Earnings per share was $0.28 in the third quarter which included $0.03 for the restructuring charge and legal expenses, $0.01 for a sales allowance adjustment lowering revenue in the permanent placement segment, offset with $0.04 for the income tax benefit. These results came in $0.03 lower than the low end of guidance due mainly to lower than expected volumes in both nurse and allied and locum tenens segments, along with higher income taxes before recognizing the tax benefit mentioned above.
Revenue and Earnings Guidance for Fourth Quarter and Full Year 2008
In light of the current uncertain economic conditions and the potential effect on the healthcare staffing industry on both demand and supply for flexible healthcare staffing, the Company revised its projected full-year 2008 revenue to $1.22 billion and its fourth quarter 2008 revenue to a range from $295 million to $300 million. Fourth quarter and full-year EPS are estimated to be negatively impacted by $0.03 and $0.04, respectively, as a result of the income tax matter. Fourth quarter EPS is expected to range from $0.20 to $0.23, including an estimated $0.02 negative income tax adjustment, and full year EPS is now expected to range from $0.99 to $1.02. Pro forma EPS for the full year excluding an estimated $0.03 negative effect of the income tax adjustment, $0.03 impact of the restructuring and legal expense and the $0.01 impact of the sales allowance would range from $1.06 to $1.09.
Nowakowski added, "Despite the recent short-term challenges, the long-term fundamentals of our business opportunity have not changed. The demand for clinicians will continue to rise as the population ages and the shortages of physicians, nurses and allied professionals become more severe. We do expect to continue to see an impact from the current uncertain economic and political environment, which limits our short-term growth opportunities. During these times we have rededicated ourselves to focus on three key aspects of our strategy: Continuing to (1) capture more market share, (2) capture efficiency and productivity gains which should drive reductions in our cost structure, and (3) expand and diversify our business to respond to changing modes of healthcare delivery. Two good examples of such expansion are the recent launch of AMN's Recruitment Process Outsourcing and surgical center staffing service offerings. We will utilize this downturn to implement changes that can drive greater profitability through operating leverage when stability returns to the economy and the healthcare sector."
Stock Repurchase Program Update
The Company is authorized to purchase up to $38 million of its outstanding common stock in the open market through March 31, 2009. Since June 2008, the Company has repurchased 1,554,600 shares of its common stock for approximately $28.4 million. Diluted shares outstanding at September 30, 2008 were approximately 33.9 million.
Company Summary
AMN Healthcare Services, Inc. is the largest healthcare staffing company in the United States and the largest nationwide provider in all three of its business segments: travel nurse and allied staffing, locum tenens staffing (temporary physician staffing), and physician permanent placement services. AMN Healthcare recruits healthcare professionals both nationally and internationally and places them on variable lengths of assignments and in permanent positions at acute-care hospitals, physician practice groups and other healthcare settings throughout the United States. For more information, visit http://www.amnhealthcare.com.
Conference Call on October 30, 2008
AMN Healthcare Services, Inc.'s third quarter 2008 conference call will be held on Thursday, October 30, 2008, at 5:00 p.m., Eastern Time. A live webcast of the call can be accessed through AMN Healthcare's website at http://www.amnhealthcare.com/investors. 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 (888) 428-4479 in the U.S. or (651) 291-5254 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 at 7:30 p.m. Eastern Time on October 30, 2008, and can be accessed until November 13, 2008 at midnight Eastern Time, by calling (800) 475-6701 in the U.S. or (320) 365-3844 internationally, with access code 962588.
This earnings release contains certain non-GAAP financial information. These measures are not in accordance with, or an alternative to, generally accepted accounting principles in the United States ("GAAP"), and may be different from non-GAAP measures reported by other companies. From time to time, additional information regarding non-GAAP financial measures may be made available on the Company's website at http://www.amnhealthcare.com/investors.
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