AMN Healthcare Services Inc (AMN) 2009 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the AMN Healthcare first quarter 2009 earnings call. At this time all phone lines are in a listen-only mode. Later there will be an opportunity for your questions and instructions will be given to you at that time. (Operator Instructions). As a reminder, today's conference is being recorded and made available for replay.

With that, I would now like to introduce your opening speaker for today, Chris Powell. Please go ahead.

Good afternoon. I would like to welcome everyone to the AMN Healthcare Services conference call to discuss the Company's earnings results for the first quarter of 2009. For the call this afternoon we have Susan Nowakowski, AMN's President and Chief Executive Officer, and David Dreyer, AMN's Chief Financial Officer.

A replay of this webcast is available at AMNHealthcare.com/investors, and will be available until May 21, 2009. 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, plan, will, may, and other similar expressions.

Any statements that refer 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 31, 2008, and our current reports on Form 8-K which have been filed with, and are publicly available from, the SEC.

The results reported in this call may not be indicative of 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 Developments subsequent to this call may cause these statements to become outdated.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 Susan Nowakowski, AMN Healthcare's President and Chief Executive Officer.

Thank you, Chris. Good afternoon everyone, and thank you for joining us today for our first-quarter earnings call.

The relative strength of our diversified client base and our consistent focus on quality is becoming even more evident in this tight market environment. We've been able to grow our market share over the prior year and, at the same time, continue to proactively maintain investments in our future to support our new service lines.

Our ability to remain agile and execute well in the short term, while maintaining a focus on our long-term strategy will enable us to emerge from this economic cycle better positioned to further expand our leadership position in the industry.

Short-term demand trends do remain challenging as the economic environment has temporarily reduced nurse attrition and expanded the available supply of hours from previously retired or part-time clinicians.

Similar to the trends we saw in the previous economic downturn, nurses who had left the workforce are now returning, and nurses who were working part-time are now willing to work full time. This is consistent with the Bureau of Labor statistics, reporting that healthcare job openings and quits are down over prior year by about 25%.

Many healthcare facilities are reporting admissions below prior year's levels, and even where admissions are relatively stable, the available dollars to adequately staff facilities is limited. According to a recent AHA survey of hospital CEOs, over half of hospitals have been experiencing lower levels of inpatient admissions, and elective procedures. This is consistent with an April Kaiser Family Foundation survey, which cited that nearly 60% of Americans say that they or a family member have taken steps to delay healthcare for cost reasons over the past year.

Despite this short-term squeeze, however, the long-term fundamentals that drive our industry have not changed. In fact, future demand for nurses and physicians could grow at a faster rate than previously expected if healthcare reform achieves one of its primary goals of increasing access for more of the population. The timing and impact of healthcare reform are uncertain, but in nearly any scenario, they are likely to increase the demand for quality clinicians.

In the short term, however, demand for temporary clinical staff continues to be down or at very modest growth rates for most disciplines. As a result, during the first quarter, we experienced a decline in consolidated revenues of 15% over last year. The biggest contributor was volume declines in the Nurse and Allied segment, which experienced a 20% year-over-year revenue drop. While we are certainly not happy with these numbers, we do believe that the strength of our model and the superior execution of our team have allowed us to capture market share over the prior year.

At the current low demand levels, we may see companies gain or lose a little market share from quarter to quarter. We think it's prudent to look at market share position over a longer period of time, and it is clear that over the last year, the last five years, and ten years, AMN has gained market share and increased our leading position in the industry.

One of our greatest strengths is how we perform in a market rebound. If you look at the last two market contractions, where you might have seen quarterly fluctuations in market share, most companies ended up with comparable overall volume contractions by the end of the cycle. A big difference, however, is how AMN performed as the markets improved. We have historically lagged our competitors in experiencing the decline, and as the market stabilizes and returns, we have picked up volume and share more quickly, resulting in greater, longer-term market gains.

We are finding that as our clients reduce the number of staffing companies they use, they are more and more interested in retaining AMN as their lead provider. This is a time when our size and our 25-year history of consistent focus on quality and service are rewarded by our clients. As a result, we have seen a significant increase in our preferred client relationships where we receive a lead time on our orders.

The pricing environment remains relatively stable in nursing, with average revenue per traveler per day 2% higher than prior year. Despite lower demand levels and some pricing pressure with certain clients, we continued to achieve pricing increases, resulting in a consistent overall average bill rate.

We have also been successful in maintaining and growing our position as a preferred provider with clinicians. When demand is low, our ability to offer the largest selection of assignments to nurse candidates continues to be a differentiator in the market. Our estimates indicate that we now have over twice the number of assignments to offer than our closest competitor, and nearly ten times more jobs than some of the second tier companies.

While nursing rebook rates fell at the beginning of the year, in line with the lower demand, we have seen more stability over the past few months, and although the overall new supply of candidates is down, we have seen a noticeable increase in the percentage of applicants that are coming from competitors, which is probably an indication of the lack of assignment selection amongst the smaller firms.

Over the past two months, we have seen some stabilization in nursing order levels, but it is still too early to tell whether we are near an inflection point. One of the potential catalysts for an inflection point in demand would be the healthcare reform portion of the economic stimulus package and Federal budget.

There have already been some positive impacts to hospitals reported, as the stimulus has provided stabilization to state Medicaid programs, and increased access to healthcare through COBRA subsidies. However, the economy and general unemployment continue to be the most significant factors that would spur hospital admissions and create different work patterns amongst permanent staff.

Within our Allied division, we are seeing noticeable improvement in the demand for rehab therapy specialties, and we expect to see this portion of the business grow throughout the year. Unfortunately, demand within the imaging specialties continues to be weak, slowing down the overall performance of the group. As therapy continues to grow, imaging is becoming a smaller part of the Allied business, and its impact should lessen over time. Overall, we expect stabilization in Allied revenues during the second quarter, which is a very good sign.

We continue to lead the locum tenens industry, with first quarter revenues up $75 million, which is a 2% decrease when compared with prior year and prior quarter. Our results were a combination of strong double-digit growth in behavioral health and dentistry, as well as in our larger specialty of primary care. This growth was offset by declines in radiology, surgery, and anesthesia. We believe the surgery and anesthesia declines are more short term in nature, whereas the radiology environment will likely remain at lower demand levels until reimbursement rates are adjusted.

Although pricing was up in most specialties, revenue per day filled was down 1.5% year over year, primarily due to mix shift away from our highest bill rate group of radiology. Overall, our days- filled volume was relatively flat for the quarter.

While the physician market has not been nearly as impacted by the economy as the nursing market, it has not been immune to it either. Our overall days available, which is a leading indicator of demand, trended downward in the first quarter. However, we are seeing signs of demand stabilization and growth in some areas going into the second quarter. All of our Locum specialties experienced improved fill rates, and we believe there is an opportunity to continue improving our execution and increasing our fill rates to grow revenues across all of our specialties.

In addition to focusing on daily execution, we are also dedicating resources to areas that will fuel our future growth. To expand our position market opportunity, we have made the decision to re-enter the emergency medicine staffing market for locum tenens. About five years ago, staff care exited the emergency medicine market due to concerns around malpractice exposure.

We recently re-examined the claims evidence in this market, and found our exposure risk to be less than previously thought, and an acceptable economic model for our clients and our shareholders. We believe the emergency medical locums market is roughly $350 million, and could represent a $30 million to $50 million revenue opportunity for AMN.

In addition, re-entering the emergency medicine market will enable us to quickly leverage the relationships we already have across the nation, and build market share quickly in this growing area.

In Physician Permanent Placement, first quarter revenues were $11 million, which is 17% below prior year. The decline was driven primarily by lower new retain search activity. However, placement volume also decreased by 5% year over year.

While hospitals and practice groups still remain very focused on hiring physicians, we believe it has become temporarily easier for them to facilitate their own direct recruitment efforts, or turn to less expensive and less predictable contingency search firms.

In response to the market environment, we have redirected our internal resources from supply recruiting activities towards demand-generating sales functions. In some cases, we have also adjusted our pricing structure to remain competitive in the marketplace.

Across all business lines, we continue to deal with the short-term economic pressures, and are proactively adjusting our infrastructure. While some of the cost reductions we have made are directly related to the short-term volume trends, many of the changes are permanent and strategic in nature, and will have a positive long-term impact on our business model and leverage. We discussed several of these cost savings and brand consolidation initiatives in our previous earnings call, and have made significant progress in implementing them.

Through a combination of natural attrition and employee reductions, our corporate staff levels decreased approximately 15% during the first quarter. Most of these reductions have been within our Nurse and Allied Staffing divisions, and within our corporate support functions. Also, by reducing work schedules, we have been able to preserve our employee talent pool so that we can quickly flux back upward once the market reaches an inflection point.

In balancing the short term with the future, we have been deliberate in continuing to support initiatives that further diversify our product lines and broaden our client base in order to position ourselves for long-term growth and expansion. In addition to launching our emergency medicine division, we continued to nurture the new service offerings launched last year, such as recruitment process outsourcing and staffing services in the home health market and ambulatory surgery centers. We have already seen some internal synergies from these services as we've been able to rebook some of our travel nurses into jobs with our RPO business.

At this point, I would like to turn the call over to David Dreyer, our CFO, who will give more detail on our first quarter results. David?

Well thank you Susan, and good afternoon.

Total revenue for the quarter was $250 million, a decline of 15% from the first quarter of 2008, and in line with what we guided last quarter, given the current challenging economic environment. This decline was driven primarily by lower volume in our Nurse and Allied Healthcare Staffing segment.

Gross margin in the first quarter came in at 25.6% versus 26.4% in the prior year, and 25.7% last quarter. The decline from last year was due primarily to a mix shift of lower gross profit contribution from our higher margin international nursing business, and narrower margins in the travel nursing business. We have made adjustments to improve pay bill spreads, and we expect to hold down payroll costs, as well as housing and other travel-related expenses. Gross margins have generally held compared to the prior quarter levels, and are expected to remain consistent.

We have not experienced significant pricing pressure, and direct costs are generally trending favorably. SG&A expenses of $50 million were 9% lower than prior year. The decrease included reductions in third-party vendor, and employee and other related costs, and will provide further benefits throughout 2009 and beyond. On a sequential basis, SG&A expenses were down 9%, driven primarily by lower employee expense. These reductions in SG&A expenses demonstrate management's ability to quickly and effectively implement cost reduction measures in response to expected lower revenue and volumes, while increasing efficiency and creating a more streamlined organization.

Included in the first quarter SG&A expenses were approximately $900,000 in non-recurring legal expenses to resolve a shareholder dispute. Excluding these non-recurring expenses, first quarter SG&A was $6 million, or 11% lower than prior quarter. For the second quarter, we expect SG&A to decline at a similar rate, in the low to mid-teens.

As a result of the cost reduction actions, we recorded a restructuring charge of $2.9 million in the first quarter, of which approximately $2.5 million was related to severance. The balance of the costs relates to leases. These actions will not affect our ability to continue supporting key initiatives that diversify our product lines and broaden our client base in order to expand for future long-term growth. The Company expects to record restructuring costs of approximately $2.8 million in the second quarter related to additional headcount reductions and lease expenses.

During the first quarter, the Company also recorded non-cash impairment charges of $176 million. Approximately $141 million was related to goodwill impairment in the Nurse and Allied Healthcare Staffing segment, while $32 million was related to goodwill impairment in the Locum Tenens segment. We also recorded an impairment charge of $3 million in the Nurse and Allied segment related to trade names and trademarks. These impairment charges resulted from a combination of continued decrease in the Company's market value, and lower projected growth rates, which reflected the decline in Nurse and Allied orders that began late in 2008, and then rapidly deteriorated during the first quarter of 2009.

The Company's effective tax rate for the quarter was 28.5% as compared to 46.1% last year. Excluding the tax impact of the impairment charges, the full-year tax rate is estimated to be in the mid-50% range. This rate differs from the statutory rate due to the Company having permanent differences which are not deductible for tax purposes.

The Company recorded a net loss of $122 million, or a negative $3.74 per diluted share. On an adjusted basis, excluding the impairment, restructuring charges and non-recurring legal expenses, the Company's net income was $3.5 million, or $0.11 per diluted share.

The Company continues to generate strong operating cash flow, a hallmark of our differentiated business model. During the first quarter, we generated $38 million of operating cash flow, which was used primarily to pay down the revolving credit facility. DSO improved by three days to 54 days, and the Company continues to focus on its collection efforts to drive strong cash flow.

We ended the quarter with $120 million of debt outstanding and a leverage ratio of 1.3 times, an improvement compared to 1.5 times a year ago. We are well within compliance with our debt covenant, the leverage, and the fixed charge coverage ratios. In order to provide more operating flexibility, especially given the current economic uncertainty, we have finalized an agreement with our lending group to amend key covenants and extend the term of our existing revolving credit. The amendment increases the leverage ratio from 2 times up to 3 times for the first quarter of 2010, and then ratably goes back down to 2 times by the end of the agreement in November 2011.

The amendment also extends the term of our revolver by 12 months, making it co-terminus with the term loan, and modifies the interest rate on the revolver by 200 basis points, up to LIBOR plus 350. We are pleased that the interest rate on the term debt remains unchanged at LIBOR plus 175 basis points.

Now turning to our business segments, revenue in the Nurse and Allied segment was $164 million for the quarter, reflecting a 20% decrease from the prior year, and a 21% decrease sequentially. Travelers on assignment averaged 5,489 this quarter, also down 20% versus the same quarter last year, and sequentially.

Gross margin at 23% was down 100 basis points from last year, and down 60 basis points from last quarter, as we experienced higher than normal health insurance costs in the first quarter, which we expect to return back to historical levels in the second quarter and going forward.

The adjusted EBITDA margin for this segment was 6.5% for the quarter, down 110 basis points from last year due primarily to lower margins. Compared to last quarter, adjusted EBITDA margin was up down 40 basis points.

Revenue in the Locum Tenens segment this quarter was $75 million, a 2% decrease from last year and last quarter. The decline was due mainly to lower average revenue per day filled from a mix shift away from specialties like radiology and surgery, which typically have the highest daily bill rates.

Gross margin for the quarter was 26.2%, down 50 basis points compared to last year, but up 20 basis points versus prior quarter. First quarter adjusted EBITDA margin of 5.6% was down 180 basis points from last year, due mainly to the lower margin. Compared to last quarter, EBITDA margin was down 230 basis points, due mostly to a combination of higher insurance and bad debt costs.

Revenue for the Physician Permanent Placement segment was $11 million, down 17% from last year, and down 10% from last quarter. These decreases were driven mostly by declines in new search levels, and lower average billing rates. Adjusted EBITDA margin for the quarter was 27.9%, up 270 basis points compared to the prior year, and up 420 basis points from last quarter, driven by increased recognition of deferred revenue from prior period placements and lower SG&A spending.

I will now return the call back to Susan.

Thank you David. As I hope you have heard from our comments today, we remain very focused on building our revenue opportunities and expanding our market share for the long term, while also being disciplined in adjusting the Company's infrastructure in line with the short-term market conditions.

Going into the second quarter, nursing order levels have begun to stabilize. However, because of the lag time between receiving an order and starting an assignment, we anticipate that travel nurse volumes will be down double digits sequentially in the second quarter. Allied orders have begun experiencing an upward trend for the past two months, and we anticipate Allied volume to be flat or slightly up on a sequential basis.

In Locum Tenens, we anticipate second quarter aggregate volumes will be up slightly on a sequential basis.

Pricing continues to be stable across most of our business lines, helping to maintain or improve gross margins. On a consolidated basis, we are anticipating second quarter revenue to decline by approximately 20% on a sequential basis, driven primarily by volume declines in nursing.

We remain very focused on three key aspects of our strategy; first, continuing to deliver our superior levels of quality and service, and building on our client base and breadth of offerings. Second, proactively adjusting our cost structure and capturing additional productivity gains in a way that will allow us to flex upward when the market returns. And finally, pursuing further penetration in emerging market opportunities in client segments.

And with that, we would now like to open up the call for questions.

(Operator Instructions).

Our first question comes from the line of Jim Janesky with Stifel Nicolaus. Please go ahead.

Yes, thank you. David, if I can ask a question, would you imply with a net income of about $3.5 million as an effective tax rate of about 57% in the quarter, do you think it's going to, for the rest of the year, going to go into the mid-40% range on an effective rate, or could it be higher than that?

We're actually probably targeting the mid-to-upper-40% range, and again, that's a preliminary estimate that we're making at this point of the year.

Okay, and then with respect to SG&A, we could -- we can, rather, expect further declines in the June period, and stability throughout the rest of the year? Would that be accurate?

Yes, absolutely. We are making further reductions, as I said, another $2.8 million of reductions in Q2, but you'll see that steady our expenses for the rest of the year.

Okay, and now shifting to Susan, you talked about -- if we could go into your comment about stability, because if I -- I know you didn't really give revenues by segment, but if I just kind of follow your outlook by segment and have Locum and Physician down a bit, but we're looking at a sequential decline then in Nurse and Allied in the mid to possibly upper-20s. Where, has the stability in orders been very recent, and do you expect that to continue throughout the year, or what's your outlook?

It has been stable for about two months now, in Nursing in particular. I mentioned in Allied, we've actually seen some nice growth even going back a little earlier than that, and the decline that we're seeing going into the second quarter is almost all Nursing. As I mentioned, Allied, which we don't -- and we don't really separate out for reporting purposes -- but just to give you kind of the inside color, Allied is actually expected to be flat to slightly up sequentially. So really, the decline -- as is Locum's -- so the decline we're looking at is pretty much travel nursing and a little bit in perm placement as well.

But how, just kind of getting back to stability, what do you think is driving that because it would be a big change from what's happened over the last couple of quarters?

Well, it's the big drop off in demand that we saw earlier in the year. Demand dropped off pretty precipitously in January and February, and then as I said, started to stabilize in March. It takes one to two quarters to really see the effect of that demand flow through to your bookings and your traveler accounts. And so the volume decline we're seeing in the second quarter is really more of a result of the demand drop we saw in the early part of the first quarter.

And so if we, I mean if you sort of extrapolate that out, if we've seen stabilization in orders now for the last one to two months, you would expect that you wouldn't see the bottom in the second quarter, that it would take a little bit longer than that to actually flow through to your traveler account.

Okay, okay thanks for the color.

Thank you; our next question is from A.J. Rice with Soleil Securities. Please go ahead.

Thanks, hello everybody. A couple of questions if I could ask, maybe just following up on the previous line of questioning. So I think you're down, consolidated revenues, about 50.5% versus fourth quarter to first, and you're guiding for another 20% decline in the second. So your comments about stabilization, does that mean then on a sequential basis, everything you see now suggests that the third quarter would be similar to second quarter, so we're stabilizing at these lower levels? Is that what we're calling stabilization, or are we talking about somehow rebound where year-over-year trends are all of a sudden more comparable and so forth, I guess if that makes sense, what I'm asking.

It does A.J. I think it's too difficult to call exactly which month the stabilization in traveler accounts will occur. It gets back to that lag effect between orders translating into bookings, and you have extensions mixed in there, and a few other things. So it's, I think -- and you've got to remember in the second quarter, we saw a decline in traveler account from April, we'd expect to see from the decline in orders in the first quarter, you'd expect to see the second quarter kind of fall off through the quarter as opposed to be a straight line.

And so where exactly that stabilizes -- obviously, if it stabilizes perfectly from June to July, then yes, you would expect third quarter to be stable from June. But if you're seeing a decline throughout the quarter in the second quarter, then your third quarter would inherently be a little lower. Does that make sense?

Right. Yes, so stabilization, though, is not further sequential quarter only -- you're saying there is not further sequential month-to-month declines. It's just that you're bottoming out at a low level of orders. Is that right I guess?

I think that's a fair characterization.

Okay. You got, obviously, some good cash flow out of your working capital, and I know Cross Country reported yesterday, and they had obviously seen a similar thing. So you're getting the benefit of the sales coming down, so you're working down your receivables just naturally from that, plus you got three extra days off the DSOs. I guess maybe just some color on that. How much more -- David, you mentioned you think you can (inaudible) capital management. How much more do you think you can take the DSOs down in the current environment versus where we're at ending the first quarter?

Well, 54 days is very -- we're very pleased with that result. We've been trending more in the upper-50s, so I would say reasonably, it's going to be in the middle to upper-50s in terms of the DSO. You're right, A.J., there was a bit of a peeling off of the AR balance, if you will, from the business somewhat contracting. But I think there was also very good collections and, again, we are not experiencing any credit issues, unusual bad debt issues. We're going after it aggressively.

Okay, and then just highlights finally on the push into the emergency locum tenens business. I mean, there are a couple of huge players in that space that provide emergency medical management, obviously EMS and Team Health, and then obviously a lot of hospitals do it themselves. Is -- can you give us a little flavor for, do you try to align with one of the big players that's already subcontracting it out, or do you go directly to the hospitals that are still trying to manage it themselves? Maybe a little more on the strategy there.

Sure, I think our first, and quite honestly easiest line is to our existing clients, which would mean going directly to the hospitals that are clients. They're already asking us for emergency medicine physicians. And so that's our first client channel.

However, contract management has been a nice additional client channel for us in our other specialties, such as anesthesiology. And so, yes, we would expect that, as we have in other disciplines, like anesthesiology in hospitals, we would align with a contract management firm in emergency medicine as well.

So do most of the hospitals that you would have a relationship with today are not outsourcing their contracting, their emergency medical staff, or -- as a general rule today?

It's still a minority of hospitals that are outsourcing those functions, at least from the, again, from the hospitals and anesthesiology groups that we're working with. So yes, we think that there's probably the most opportunity to contract with them directly.

Okay, all right, well that's good. Thanks.

Thanks A.J.

We next have a question from Tobey Sommer with SunTrust Robinson Humphrey. Please go ahead.

Good afternoon; this is Frank in for Tobey. Staying on the emergency medicine line, could you talk about has anything changed in terms of the malpractice exposure there, or your view on that malpractice?

As I mentioned in my remarks, we did go back and very thoroughly review the claims from both our own physicians when we did place emergency medicine docs over five years ago, and followed those claims through, and saw that there actually was less exposure than they had originally anticipated. There have also been a fair amount of tort reform changes out there, which have made the environment a little less onerous. And so we believe that the risk while, yes, while higher than other specialties is an acceptable level, and you just have to price it accordingly. And probably most importantly, manage it at the front end with your referencing and your quality, kind of quality control in deciding which physicians you choose to work with.

Okay great, and could you talk a little bit about trends in housing or travel costs?

Sure. First, regarding housing, we are seeing benefits from the housing market easing. Our average daily rent costs have actually come down in the first quarter, both on a sequential and a year-over-year basis. However, at the same time, we have had an increase in the vacancy rate, meaning the number of days we might have an apartment sitting open, and that's because of the lower volume. It's easier for us to keep our apartments completely full every day when we have more volume that we can slide in when a nurse finishes or leaves an assignment. So we have seen a slight increase in our vacancy, which unfortunately has a bit offset the benefit of the lower rents.

Okay, that's fair. And finally if I could ask if any update on the international nurse regulatory front, anything you're seeing there.

Unfortunately not. We continue to work with legislators in introducing different language that would likely be an amendment on another bill that's getting put through but we just haven't really gotten the movement on that yet, so we're just kind of sitting tight for now.

Thanks so much.

Thanks Frank.

We next have a question from Paul Condro with BMO Capital Markets. Please go ahead.

Great, thank you. Just to return again to the emergency medical staffing market, I wondered if you could just talk a little bit about what kind of investment you think you need to make to go in there, and how that's going to impact SG&A, if you already have that in your kind of forward-looking guidance? And then the $30 million to $50 million, is that like on an annual basis, or when could we see some of that come through? Thanks.

Sure Paul. First regarding the SG&A, we are starting that with existing staff within our primary care division, and as I mentioned, we, before we acquired staff care, they were in emergency medicine. So we still have many very talented sales leaders who were actually in that division when they were in that business. So we feel we can get a pretty quick ramp up.

We have actually also redeployed other team members from other areas within Locum, such as radiology. Again, very successful talented folks, but with the business lower in radiology, we felt it more prudent to redirect those resources to where we have more opportunity. And so we are starting this with existing staff, which again, we think will give us a greater ramp up and kind of entry into the market. We have built it into our estimates for the second quarter, and won't be carving it out separately for you because it is part of the Locum segment, but try to give you a little color along the way in how we're doing.

The $30 million to $50 million is our bogey of where we think we can be on an annualized basis. I won't quite put a timeframe around that. Obviously, the team thinks they can do it rather soon. But where we get that is by looking at other competitors who are in this market, and what percentage of their business is in emergency medicine. We are the leader in every other significant specialty within locum. As I say, we haven't been in emergency medicine, but our competitors who are have anywhere from 10% to 20% of their business in emergency medicine. And so we think it's very reasonable for us to assume that we could achieve those same types of numbers.

Okay great, thank you. That's very helpful. And then I have just two quick numbers questions. I think you mentioned an SG&A decline in the second quarter in the mid to low-teens. Were you talking on a sequential basis or year over year?

Sequential.

Yes.

Okay, and then the other question, could you --maybe this is in the release, I missed it, but what was the CapEx for the first quarter?

Our CapEx -- give me a second here -- second quarter it was about $1.2 million.

And could you maybe just talk about what you expect there for the rest of the year?

We're going to keep it fairly low. We typically run under 1%; in fact, last year, it was 0.7%. We're trending at that level or probably slightly lower.

Okay great, thank you.

Sure.

Operator instructions). Ali Motamed, Boston Partners. Please go ahead.

Hi, it's Ali Motamed, but I was wondering, I may have missed it, but is it really sequential decline that you expect in the revenues, or is that a year-over-year decline of 20%?

That is a sequential decline.

Okay, thank you.

Thank you.

And Ms. Nowakowski, at this time, we have no further questions in our queue. Please continue.

Thank you so much, Doug, and thank you everyone for joining us today, and certainly for your continued support of AMN Healthcare. We look forward to updating you on our progress next quarter.

And ladies and gentlemen, that does conclude our conference call for this afternoon. Thank you for your participation, and for using AT&T Executive Teleconference. You may now disconnect.