AMN Healthcare Services Inc (AMN) 2004 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the AMN Healthcare third quarter 2004 earnings conference call. At this time, all lines are in a listen-only mode. Later there will be a question-and-answer session and instructions will be given at that time. If do you need assistance during the call today, please press the star, followed by the zero. As a reminder, today's call is being recorded. At this time, I'd like to turn the conference over to Renee Grable Mullen. Please go ahead.

Good morning. I would like to welcome everyone to the AMN Healthcare Services conference call to discuss the Company's earning results for the third quarter of 2004. A replay of this webcast is available at amnhealthcare.com/investors, and will be replayed until November 18th, 2004. Details for the audio replay of the conference call can be found in our earnings press release.

I would also like to mention our policy regarding forward-looking statements. As we conduct this call, various remarks that we make about future expectations, plans, and prospects constitute forward-looking statements. Forward-looking statements are identified by words such as believe, anticipate, expect, intend, play, plan, will, may, and other similar expressions. Any statement that refers to expectations, projections, or other characterizations of future events or circumstances are forward-looking statements. It is possible that our actual results may differ materially from those indicated by these forward-looking statements as a result of various important factors, including those identified in our annual report on Form 10-K for the year ended December 31st, 2003, and the form on 10-Q for the quarter ended June 30, 2004, which has been filed with, and is publicly available from, the SEC. The results reported in this call may not be indicative of the results for future quarters. These statements reflect the Company's current beliefs and are based upon information currently available to it. Developments subsequent to this call may cause the statements to become outdated. The Company does not intend, however, to update the guidance provided today prior to its next earnings release.

I will now turn the call over to Steven Francis, AMN Healthcare's Chief Executive Officer, who will review the Company's third quarter 2004 results and current market conditions.

Good morning, and thank you, Renee. We are pleased to report solid third quarter results. Today I will provide a brief overview of our financial results. I will also give an overview of the current market environment and conditions that we expect to see through the end of the year. Susan Nowakowski will then provide a summary, some our recent accomplishments, as well as operational initiatives that we believe will continue to provide AMN with a competitive advantage. Following Susan's presentation, David Dreyer will present key financial statistics for the 3 months ended September 30th, 2004, and fourth quarter guidance. David joined us in September, and we are pleased to have him on the team. He has a solid history of financial success. David complements our management team and brings financial management expertise that will help to execute the Company's growth strategy. So welcome, David.

For the third quarter of 2004, AMN generated revenue of $156 million resulting in diluted earnings per share of 13 cents. Traveler count of 6,123 was consistent with the second quarter. We are especially pleased with our top line performance. We believe our continued focused strategy on our core business of travel healthcare staffing delivered these industry leading results. We also believe the investments that we have made to our infrastructure to strengthen our processes and systems during the last 18 months will benefit us in the upcoming quarters. I am pleased to report that we continue to see more positive market indicators in our industry. Demand continues to be strong, and grew during the third quarter. This marks a full year of solid increases in demand for our services. During the second quarter, we talked about the fact that orders were significantly above last year's level. That remains true for the third quarter, and in fact, orders continue to grow into the fourth quarter. Adding to our confidence during the third quarter, we experienced modest signs of increased interest in nurses desiring to travel. Year-over-year and sequentially since first quarter 2004, we have received more unique traveler applications. As demand continues to increase and the word of mouth referrals of travel nursing opportunities spread, we expect that traveler supply will grow at even a faster pace.

On July 30th of this past year, an industry publication by the staffing industry analysts reported that in 2005, healthcare staffing revenue is estimated to increase to $11.1 billion, which is a growth rate of 10 percent from 2004. This report projects a positive turn in healthcare staffing, and we believe that what we experienced in the third quarter and currently in the fourth quarter, are supportive indicators of this growth projection. Our supporting indicators of this forecasted growth are the improving economy and the lower nationwide unemployment rate. In the past, analysts have pointed out that there is an inverse correlation between general unemployment and nurse attrition. As general unemployment drops, nurses are more likely to change jobs, or move to part-time, or just stop working. This increased attrition contributes to both increased demand for temporary nurses, but it also contributes to supply force, as nurses leave permanent positions to pursue a career in travel nursing. In addition, nursing school enrollments across the country have increased over the last year. However, there is a shortage of nurse programs available, and a lack of qualified nurse educators. With a constrained supply of new candidates entering the nursing profession and the anticipated rise in hospital admissions and patient acuity, the shortage of nurses is expected to significantly get worse over the next decade, and we believe that this will drive increasing use of travel nurse staffing by hospital and healthcare facilities. That concludes the industry overview, and now I will turn the call over to Susan.

Thanks, Steve. We are certainly pleased to see the continued stability in our business. But we are also encouraged by our continued growth in demand and the more recent increase in new travelers joining our brand. While the market dynamics do seem to be turning in our favor, our expected fourth quarter growth in traveler count is also attributable to the process changes and the infrastructure investments that we've concentrated on during the last 18 months. We are a different Company today. Our people, our processes, and infrastructure are simply stronger, and even more focused. We are focused on holding our number one position in the travel industry, and expanding our market share. So, how do we do this? I will talk today about 3 important factors that drive our ability to execute our strategy. First, demand for our services, and the value that we deliver to our hospitals. Second, our ability to retain our travelers and attract new candidates. And third, our ability to drive profitability and efficiency throughout the organization.

So, let's start with demand. This is most important since increased demand gives us the best opportunity for growth. For AMN, demand is largely measured as open orders or requests for travelers. Our number of open orders has grown from the beginning of the year to the end of the third quarter. During the third quarter, we saw the biggest part of the demand increase at the end of September, and we've seen continued growth in October. We think this is a positive business and industry indicator. But, this also reflects the continued results in efforts of our hospital client sales and services team. We also believe that AMN is possibly experiencing stronger demand growth than some of our competitors due to our brand strength and industry leading position. To gain knowledge about this strength of our brand awareness, we hired a third party research firm to help us conduct a national survey in the third quarter. According to this survey, AMN Healthcare and our family of brands, have the highest recognition in the travel nurse industry. Survey results found that AMN and its brands were most often at the top of the list when a hospital thinks of a travel nurse provider. Not only were the AMN brands number one, but we were listed more than twice as often as the next company. AMN was more highly rated in customer service, and had an overall excellence rating compared to our competitors. When we asked hospitals how likely they are to use various companies for travel nurse staffing in the next year, AMN was once again rated higher than any other company.

I bring up this research for 2 reasons. First, it provides some insight into the activities we are undertaking to continue to expand our leading position with hospital clients. But the second reason is that our strong brand presence is possibly a contributing factor to our current growth, relative to others in the travel nurse industry. Using this type of valuable survey information, we can align our service and sales teams to better target and deliver our services. We continue to build stronger, preferred client partners, but we are also remaining very focused on the heart of the market; on what we refer to as competitive accounts. We believe by far, the largest opportunity in our industry is with hospital clients who choose to work with 3 to 5 providers to fill their staffing needs. As the leading provider in the country, our client relationships are more expansive today. Not only are our overall orders up, but we also have more orders with more hospitals and in more individual hospital units. And this translates into a broader customer base, less customer concentration, and more assignment diversity to offer our travelers. And this helps with retention and the attraction of new supply. So now let's talk about driving supply. Our 6 national recruitment brands are American Mobile Healthcare, Medical Express, NursesRx, Preferred Healthcare Staffing, Thera Tech Staffing, and O'Grady-Peyton International. Each brand has distinct market segment strength and appeal, and we believe that this has provided a competitive advantage in our ability to attract and place travelers. To maximize our ability to recruit the broadest pool of travelers to place at our hospital clients, we conduct extensive research on the important motivators of nurses who decide to take a travel assignment, and what keeps them loyal to AMN. Taking action on this information, we are able to further differentiate and segment our marketing and benefits, and to deliver the highest value to each segment of the nursing population. Where necessary, we can even customize our offerings to meet the unique needs of each individual person.

Another initiative we are working on, is to heighten our focus on profitability. We engaged consultants to assist us in developing a more comprehensive profitability management system. We expect to begin implementing this broader system in 2005, and expect that it will have a positive effect on our revenue per traveler per day, and on overall profitability. I talked earlier about our reputation of consistently delivering the highest level of services to our clients. One of the key ingredients to our success, is our ability to recruit, retain, and develop the best sales and service team. Recently, AMN was recognized as a progressive leading employer in Southern California. We were awarded the Workplace Excellence Award, due to our strong employee development and performance program. Our team has worked hard over the years to align our performance management system, our career pathing, and employee development programs to build a team that can continue to grow and improve every day. And on the topic of building a strong team, I would like to introduce you to one of our newest team members, who I'm very excited to have here, David Dreyer.

Well, thank you, Susan. I am very pleased to be here at AMN Healthcare. When I first began my recent job search, I set a few goals in terms of the types of companies to target. My targets included companies that are regarded as healthy businesses, that have good potential to grow, and that have seasoned and well regarded executive teams. I was excited to have the opportunity to join AMN, as it met all of my search goals. The Company has a passionate culture, is well organized operationally, and is led by a strong management team that complements one another. Having been through a turnaround strategy situation at my last company, I have experienced what it's like to roll up your sleeves and get into the company's operations, with a focus on profitability. I also know how important it is to have a solid infrastructure, to be prepared for future growth and success, and to nurture relationships with investors and Wall Street in order to share the Company's success. While AMN is not a turnaround, I feel that my past experiences will be helpful in insuring AMN is focused on maximizing both top line and bottom line growth opportunity.

In our earnings press release issued yesterday, we reported diluted earnings per share of 13 cents for the third quarter, which was at the higher end of our guidance range. The third quarter's 13 cents diluted earnings per share results compares to 22 cents for the third quarter of last year, and 14 cents for the second quarter of this year. Revenue of $156.1 million for the third quarter represents a decrease of 9 percent from the third quarter of last year, and an increase of 2 percent from the second quarter of 2004. Revenue, earnings, and traveler count, were all at the higher end of our third quarter guidance range. Gross profit for the third quarter was $36.7 million, representing a gross profit margin of 23.5 percent. Gross margin was slightly above our expectations, due to a decrease in the Workers' Compensation reserve related to our favorable claims experience. Excluding the adjustment to the reserve, gross profit would have been $36.3 million for the quarter, representing a gross profit margin of 23.3 percent, which is a 50 basis point increase over prior year and prior quarter. In addition to the Workers' Compensation reserve adjustment, this improvement in gross margin resulted from a decline in our housing and health insurance expenses as a percentage of revenue.

Selling, general, and administrative expenses totaled $26.4 million, representing 16.9 percent of revenue for the third quarter, an increased 19 percent or $4.2 million over the prior year. SG&A in the third quarter was negatively impacted by a $1.2 million increase to the Company's professional liability insurance reserve. This increase related to a revised estimate of the claims incurred, but not reported. The additional increases in SG&A over the prior year were related to increases in Sarbanes-Oxley 404, and other accounting and management consulting projects, along with the overall increase in professional liability insurance cost. Without the increase to the insurance reserve, SG&A would have totaled $25.2 million, or 16.1 percent of revenue. This was higher than the second quarter SG&A of $24 million or 15.7 percent of revenue. Income from operations totaled $8.7 million for the third quarter, decreasing slightly from the $9.2 million in the second quarter 2004, and declined as a percent of revenue to approximately 5.5 percent compared to 6 percent of revenue in the second quarter of 2004. Compared to the prior year, operating income declined from the $15.4 million reported, or 9 percent of revenue. The decline was primarily due to the increased SG&A expenses, and a 9 percent decline in the volume of travelers working.

Let's turn now to some of the key drivers of revenue for the third quarter. The $15.4 million, or 9 percent decrease in revenue from the third quarter of 2003, was driven primarily by the 9 percent decrease in the average number of travelers working. The third quarter's average revenue per traveler per day was flat with the prior year at approximately $277, an increase sequentially of approximately 1 percent from the second quarter of 2004. The 6.2 percent mix of flat rate contracts remain similar to the second quarter. Net interest expense for the third quarter was $2.4 million compared to $92,000 for the third quarter of last year, which was prior to the Company's self tender offer which completed in October, 2003. The third quarter's interest expense reflects a decrease in interest paid, due to a $23 million reduction in the term loan balance this quarter, offset by $.5 million of additional amortization of deferred financing charges that were accelerated due to the loan balance reduction. The third quarter's effective tax rate was 37.2 percent, resulting in a year-to-date income tax rate of 38.3 percent. This quarter's lower effective tax rate was due to a reduction in the state tax provision, primarily related to its state tax credits. Turning to our financial position at September 30th, we had $9.2 million in cash and equivalents. Total debt outstanding was $105.2 million, which was $23.3 million less debt than our balance at June 30th. We expect to continue to use our excess cash flow to aggressively reduce our debt. Days sales outstanding and accounts receivable were 64 days, a decrease of 2 days from June 30th. During the third quarter, AMN generated $19.9 million in cash flow from operations, and has generated $40.8 million in cash flow from operations year-to-date.

I will now turn our attention to revenue and earnings guidance for the fourth quarter and full year 2004. Our guidance for the fourth quarter reflects the increases in both the demand and supply environment that we have seen during the last 3 quarters. For the fourth quarter of 2004, we expect the Company will generate revenue ranging from 155 to $160 million, slightly greater than the third quarter results. Full year results would translate to revenue ranging from 626 to $631 million. The average number of travelers is expected to range between 6,200 and 6,350 in the fourth quarter, which would result in a sequential increase. Net income for the fourth quarter is expected to range between $4 million and $4.7 million, and is expected to generate net earnings per diluted share ranging from 13 cents to 15 cents. Full year net income is expected to range from 16.8 to $17.5 million, and is expected to generate net earnings per diluted share ranging from 54 cents to 56 cents. Average diluted shares outstanding are expected to be approximately 31.4 million shares. Although we are cautiously optimistic with respect to future growth, we are encouraged by the recent trends in our business. That concludes our formal presentation. We would now like to open the call up for questions.

(OPERATOR INSTRUCTIONS) Jim Janesky, Ryan Beck and Company.

A couple of questions. You said that the traveler count for the third quarter came in above your expectations, and it was roughly flat to last quarter. Could you remind us what you thought it was going to be originally?

5900 to 6100, and hi, Jim.

Okay. And you talked a little bit about the environment and the competitive environment. Some other folks out there are expecting that their traveler count, or FTEs, or demand is going to slightly decline in the fourth quarter. What do you attribute yours -- the reason why -- the reason behind, rather why yours is expected to go up?

Well, I can't really speak to why theirs might be going down, as much as we can speak to why we think ours is going up. We've talked about the continued increase in demand, that we've been seeing for the last 4 quarters, and we continue to see that into the third quarter, and into October as well. And along with that we've seen continued, modest, but consistent increases in the supply of new travelers coming into our business. And we think that's attributable to the increase in demand finally being enough to pull more people into the industry. Also, I think we take credit for some of our specific marketing efforts to pull more people into our specific brands. In fact, our new supply of applications has been going up now for a couple of quarters. And for the first time this year, was actually above last year's levels for sort of the end of the third quarter and into the fourth quarter. So we think those are positive signs and are contributing to our sequential growth.

Although this would be a nice problem to have, as we look longer term, how do you expect or anticipate the situation will play out. And how do you expect you will address it? Obviously the shortage of nurses, longer term is going to affect the traveler industry as well. I mean, there's not an infinite number of individuals to go around. How do you expect to be able to maintain growth?

Jim, you know, in 2000, 2001, when our orders were at an all time high, our applicants as well were at an all time high. And we've often said and believe that demand drives supply. And the more interest there is, or the more opportunities there are for nurses in travel, more nurses will apply. That's the way we see it. We also know that, in an improved or a robust economy, more nurses are willing to be -- or more nurses are more confident in their financial situation, and because of that they are more willing to travel. That's been our experiences over the many years we've been in business.

Jim, the other contributing factor, when demand is rising and especially when you get a, even a greater gap between the demand for travelers and the supply, it creates more urgency with the hospitals to be responding quickly, to interview travelers, to get them signed up. And so there are a lot of dynamics that become more positive within our industry as demand grows. Also you tend to get more upward pressure on bill rates and pay rates and bonuses within the industry, as hospitals begin to compete for travel nurses across the country. Typically, as Steve just said, rising demand is actually a very positive thing to pull supply into the industry.

Toby Sommer, Suntrust Robinson Humphrey.

A couple of questions. Maybe I will start out with the balance sheet. You repaid quite a bit of debt, and cash flow from operations obviously very strong. Wanted to get a sense for what your uses of cash may be going forward, and what debt level you think you would like to ideally have in terms of capital structure? Thanks.

Sure. Thank you. Clearly, we've been paying down our debt, and that's going to be a continued goal of ours. Basically, we are always looking for various merger opportunities. But barring that, we are going to continue to pay down our cash. Other than the reduction in debt, I think that's probably the most significant change in the balance sheet to expect going forward.

Thanks. In terms of demand in orders, I think that things were up in the first quarter slightly, and then pretty strong in the second. Could you quantify how high demand was, in terms of year-over-year comparison in the third quarter, or in October?

You know Toby, we generally try not to give out specific year-over-year numbers. I know in the second quarter call, we talked about demands being 50 percent above last year's levels. And what I will say, it's even stronger than that today. We are now back to demand levels that are comparable to what we saw in 2002. We actually saw one of the highest growth in number of orders during August to October of this year. So it's not slowing down. If anything, it's picked up.

Could you refresh my memory in terms of what orders looked like in the year ago second and third quarter? Was there a decline from the second to the third? In other words, does the third quarter have an easier order comparison?

You would typically see order growth in the third quarter, as hospitals ramp up for some of their winter needs. That's in a normal market. We weren't in a normal market last year, or even this year for that matter. So you would typically look for that. When you're asking second to third quarter, you are talking this year versus last?

I'm wondering if the orders decline from the second to the third quarter last year, so that this year's comparison would have been comping against an easier -- ?

No. They were relatively flat last year from second to third quarter.

Okay. And then given the fact that orders are improving, I was wondering if you have a sense for how the snow bird, kind of the January season may be shaping up?

In the feedback we are getting from our clients, there seems to be hesitancy in the Florida market. Certainly, relatively speaking, our stronger markets are in California and the West. And that includes Arizona, where you get a strong snow bird contingent, and they seem to be pretty bullish on their winter season. But at the same time, the northeast states are showing growth. So, and that's somewhat of your normal respiratory flu season that we see. And as I said, Florida, while we've seen growth in orders there, it's not as high as you might expect. And we are hearing that that's due to some hesitancy on the hospitals part, being unsure how they might be affected by the hurricanes.

Then 2 last questions, and I'll get back in the queue. From a geographic standpoint, could you share with us what percentage of revenue are sort of your top states now? And then I was interested if you could give a little bit more color about the preferred partnerships that you are pursuing, and progress there? Thank you very much.

Sure. In terms of the larger regions we try not to give, for competitive reasons, specific states. Obviously, California, we've talked a lot about, and it's our home state, is our largest market. And we've seen -- continue to see a lot of strength there. The West in general, I mentioned Arizona, is also a very strong state for us. So the West in general is probably our strongest region by far. The Northeast I mentioned is also strong. Although you sort of go from state to state, some are stronger than others, but overall that's a strong region. And then in terms of our preferred client partnership, we continue to strengthen those relationships, and pursue those opportunities where hospitals want that type of either preferred partner relationship or single source provider. In some cases, vendor management. And we have, if you look at the national providers that are out there, ourselves included, we have about the same number of travelers working in those types of preferred provider relationships. But if you look at it as a percentage of our business, it's probably a little bit smaller percentage, because we have a much larger base of travelers out there working. So we feel we are very competitive in that part of the market. And we are there when a hospital wants that type of service. But in terms of the percentage of our business, it's probably a little bit less than some of the smaller players.

And then I guess I will ask one other question. Could you give us an update on your international nurses, the nurses you source from abroad, and in growth, and in your expectations, perhaps in '05 for continued growth there?

Sure, Toby. Our international business we've talked about this year, has grown over the last year and that continued into the third quarter. And it continues today. Although, we point out that it is still a small part of our business, less than 10 percent of our revenue. You asked about 2005 projections, and certainly we are not providing guidance on any of our business lines for 2005 or beyond. But I will mention that we've recently become aware that due to increased visa processing times, the INS might be close to meeting some of the visa cap for certain visa categories for few countries. Specifically, nurses who were born in the Philippines, India, and China might be delayed in their green card processing. And our international recruitment operations are primarily based in the U.K. and Australia, but there are some nurses from some of these other countries, so could it cause a delay in the processing of some of their visas. You know, the reality with this international business, and probably one of the reasons we've been so successful at it, is that there are a lot of moving parts, including the licensing of nurses, the countries that you're targeting, and visa processing times. And sometimes these external factors change in our favor, and sometimes they cause challenges, and cause us to change our processes or recruiting methods. And this is just another example of that.

Nicklaus Aberle, Caris and Company.

Just wanted to quickly touch on pricing. It looked like the trend was positive coming into Q3 on a sequential basis. And then, looking at your guidance, looking like it might rollover a little bit going into Q4. I was just wondering if that's a fair statement. And if there's any seasonality at play there, or what are the other drivers of the pricing?

There's absolutely seasonality involved here. Our Q3 average revenue per traveler per day was $277, fourth quarter, $272. It's really affected by the holidays, the number of hours involved with holiday season coming in. So it's not a decrease per se, certainly not pricing at all. It's really just related to the holiday season and it's a typical seasonal factor.

Okay. And just a couple income statement items. SG&A, obviously Sarbanes-Oxley impacted profitability somewhat in this quarter. Heading into the end of your fiscal year, do you expect those expenses to trend a little higher?

Our experience with Sarbanes-Oxley expenses, I think we've already said this in the past. It's probably going to impact this year in total by about $1 million, our total internal and external cost. And we are probably 80 percent of the way through there. So, it will not have much impact on fourth quarter, and certainly we've reflected that in our fourth quarter guidance as well.

And then the tax rate, will that go back to the normalized 39 percent range?

The tax rate, as we mentioned, for this quarter was affected by the state credits. Basically for the full year rate, we are estimating effective tax rate of 38.6 percent. We are basically going forward, like for example, 2005, pretty much looking at that 39 to 39.5 percent effective rate.

Okay. And then lastly, with respect to top line guidance going into Q4. The sentiment of this call overall, to me it feels like you guys are feeling a little bit better. Obviously, you've seen stability over the last couple of quarters, but maybe the environment is showing some signs of a small up-trend here. The guidance still is rather muted. Isn't Q4 typically supposed to be a seasonally strong quarter for you guys? And isn't this growth projection going into Q4 a little lighter than that typical seasonal growth?

Actually, it is very comparable to what we would expect to see if we were in a normal sort of growth market environment. Fourth quarter is your highest traveler count quarter, because you are typically ramping up traveler count in September, October, November you hit a peak. And then you have the holiday effect through December, where people are taking time off for the holidays. And that kind of drags down your overall traveler count for the fourth quarter. And so net/net in a sort of normalized market you would expect to see the fourth quarter only slightly sequentially up, actually fairly comparable to what we are looking at here. But I will say that, you know, that trend of rising traveler count in September, October and November is what we are seeing today.

Jeff Silber, Harris Nesbitt.

I apologize, I got cut off a little while ago, and so if you discussed this, again I do apologize. I know on prior calls we've talked about the potential impact of Jayco accreditation on your business. I know it's still relatively early, but I'm wondering if any of your customers are looking at that, and asking that as a requirement to get new business?

Jeff, we do have a few clients who are starting to put that in their contracts, and ask for certifications as a requirement to do business with them. I would say it's only a few. I think partially because it's such a new thing and for that matter, Jayco is just starting the certification process. We've been very vocal in our support of this initiative by Jayco. In fact, we were strong participants in the process and advising them on the impact within our industry. And we think that it will be positive, both for the industry and for the hospitals.

I will say, also, just to add to that, that I do think it is going to be tougher for the smaller companies to comply. There's -- you have to have, what's helpful to have, you know, size and infrastructure and systems in order to meet their requirements. So I think it, it does give the larger players an advantage, and that's fortunate for us and unfortunate for the smaller companies.

Sure. That makes a lot of sense. On a second topic, some of the per diem providers that we've been talking to are claiming that they think that they're taking some business away from some of the travel companies, where hospitals are more willing to maybe give out a little bit lengthier per diem contract, but not get into the 13 week, typical travel contract. I was wondering if you can comment on that?

You know, Jeff, since we are not in per diem, we really can't comment as to how much that business has shifted, other than what we are hearing and seeing from our clients. And I would have to say, we are not hearing that from our clients and we don't feel it's impacting our business. If you look at the results, our business in the third quarter and our projected growth in the fourth quarter, and compare that to some of the national per diem companies, I don't think the numbers would reflect that they are increasing at any faster rate. In fact, some might be at a slower rate.

Yes. No, that makes sense. Okay. Appreciate the comment.

Jim Janesky, Ryan Beck and Company.

What was bad debt expense, allowance for doubtful accounts in the quarter?

I don't think we normally disclose that. So it's not a number that we normally give. But just a basic, round number, it's about 300,000 is what our third quarter expense was.

Okay. And there was a time where bad debt expense at some companies, was creeping up because of, you know hospitals were having problems with their own cash flow. So the bad debt expense kind of crept up. I guess it was about 6 months or 9 months ago. What are the current trends?

I don't think we are seeing that effect. Basically, we have a specific ID methodology, and so we are look at it account by account. It's really been fairly consistent. If you go back, and I am not going to quote these numbers, but if you go back and look at it as a percentage of revenue, or percentage of what our AR gross balances are, it's actually been fairly consistent. So it's certainly not seeing an upward trend. It's been consistent, or in some cases even gone down.

Toby Sommer, Suntrust Robinson Humphrey.

Any question about your lower housing and health insurance expenses in the quarter? If you see more room for continued kind of optimization there. And maybe what other moves you may have to be able to improve either GP or restrain SG&A expense growth going forward?

Well, our SG&A expense going forward, I think I would assume fourth quarter is fairly consistent with what our third quarter experience has been. Basically a lot of these expenses are variable type of expenses, and so as a percentage of revenue, I would assume a very consistent with third quarter. So I wouldn't expect a lot of variation there, certainly not for the fourth quarter. Did you want to go more specific, go into any, like housing or something?

I was just curious what you were able to do on the housing or health insurance side, to lower those expenses.

Actually, let me ask Susan to help with that.

You know, we talked earlier in the year about our housing initiatives, and we've been very pleased with the progress that we've made in restructuring some of our national contracts, and our approach through housing. And we've been able to reduce some of our overall housing costs, while maintaining the quality of the housing that we are providing to the travelers. We expect to continue to get a little bit more benefit from that into the future. And likewise on health insurance. That's a tougher one, but we are always looking to manage our claims process, to try to lower that overall expense. And we've been successful at that. Overall, we are going to be looking to leverage our SG&A. We've maintained a very solid core infrastructure to make sure that we are positioned to be able to handle growth as it resumes. And I think that's what we've been able to -- I think that's translated into our ability to turn the opportunities that we saw in the third quarter, into sequential growth into the fourth quarter. We are hopeful we will be able to continue to lever SG&A, and do that into the future.

Thank you. In turning to your sales force and recruiters. Could you speak to us about capacity that you feel you may have given some of the higher demand and the improving supply. And maybe the number of recruiters you have now, and if you expect to add some over the course of the next couple of quarters.

That's a great question, capacity. And that's really what I was just speaking to, in terms of maintaining our core infrastructure and SG&A. We've been very pleased with our recruiter productivity. In particular in the third quarter, we saw year-over-year and sequential increases in our recruiter productivity. Maintaining a good level of recruiters is always a focus for us. You always want to have enough recruiters. But, you know, it's not just a matter of having more recruiters, it's really finding the right balance between recruiter productivity and the right number of recruiters. If we can increase productivity of existing recruiters by 1 placement per week, we can increase our total traveler count significantly, without having to add more recruiters. With that said, we are always looking for talent and to add to our recruitment team. We have the normal attrition that takes place, and so we are always in a hiring mode with our recruiters.

So is that to say you expect kind of to increase the net number of recruiters over time?

I would expect us to increase the net number of recruiters over time.

Thanks. And at this time then, I am showing no further questions in queue.

Well, thank you very much. And we just want to thank everyone who participated in the call today, and your interest in AMN Healthcare. Have a great weekend, and we will talk to you again on next quarter's call. Thanks, again.

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