AMN Healthcare Services Inc (AMN) 2010 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the AMN Healthcare first quarter 2010 earnings conference call. (Operator Instructions). And as a reminder, this conference is being recorded. I would now like to turn the conference over to our host, Ms. Amy Chang, Vice President of Investor Relations. Please go ahead.

Good afternoon, everyone. Welcome to AMN Healthcare's first quarter 2010 earnings conference call. A replay of this webcast is available at www.amnhealthcare.com/investors and will be available until May 20, 2010. Details for the audio replay of the conference call can be found in our earnings press release.

I would also like to mention to 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 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 31, 2009 and other periodic reports 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 Developments subsequent to this call may cause these statements to become outdated.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, Amy. Good afternoon everyone and welcome to AMN Healthcare's 2010 first quarter earnings conference call. I'll kick off the call first with a discussion on our business trends, and some of the first quarter sales and operational highlights. And then Bary Bailey, our CFO, will join in to share some financial details. Before we go to Q&A, we will also provide an outlook for the second quarter.

Overall, our first quarter results were representative of the stabilization being experienced across the healthcare staffing industry, as well as the improved operational and sales execution of our team. The significant efforts we undertook to restructure and streamline our operations and build stronger client relationships in 2009 are paying off and are evident in our profitability and margins.

Earnings per share for the first quarter were $0.02, which was above our expectations. First quarter consolidated revenue was $143 million, which was relatively flat on a sequential basis. This quarterly stability marks an important inflexion point for us in the economic cycle. The performance was driven by an increase in our nurse staffing business and offset by sequential decreases in our other business lines.

The market is still very tight and continues to be constricted by high general unemployment and stagnant patient admission levels. It remains unclear when these factors will change enough to move us off these artificially low demand levels. There is no doubt in my mind that as the economy returns to more normal levels of general unemployment, we will begin to see the gap between demand and supply of clinical labor widen significantly.

Layering on the accelerating aging population and the potential effect of healthcare reform, we should experience a dynamic that would be very favorable to our industry. But predicting the timing of such a confluence of events is difficult. In the meantime, we will remain lean to deliver solid operating profits at these lower volume levels and ensure that we are taking necessary steps to be prepared for the opportunities for the future.

So let's talk about the current environment. In the first quarter the Nurse and Allied business generated $75 million in revenues, which was up 2% sequentially. Our Nurse business saw a sequential volume increase of 8%. The improvement was a result of higher order levels during the first part of the fourth quarter and continued improvements in our fill rates and retention rates. These improvements are most evident and have the greatest impact with our preferred and VMS clients.

While demand for nurse travelers continues to be higher on a year-over-year basis, the orders are still at very low historic levels. Despite the constricted environment, our nurses on assignment are working more hours per day. We also saw a notable pickup in our quick start, shorter assignment business called Nurse Choice. These are typically positive early indicators. Pricing remained relatively steady with average nursing bill rates flat on a sequential basis and down about 1% from last year.

In the first quarter, our Allied business experienced a sequential volume decline, which came from both internal and external issues. The imaging portion of the Allied market remains soft and at historically low levels. Demand for rehab therapists remains strong, but the availability of the supply of clinicians is limited. The internal issues I mentioned arose from significant restructuring we did in 2009, creating a temporary disruption in the business and the productivity of our teams. The vast majority of these changes were completed in the fourth quarter, and we believe we will soon begin to see the benefits.

Our Locum Tenens segment delivered first quarter revenues of $60 million, which is 3% lower than last quarter. On a sequential basis we saw volume stabilization in the first quarter, with overall days filled being relatively flat. There was a continued decline in radiology, but this was offset by increases in the other specialties.

With volumes flat, the 3% lower sequential revenue was due primarily to a mix shift to lower bill rate subspecialties in radiology and surgery. A positive indicator was days sold, which were higher on both a year-over-year and sequential basis. Going into the second quarter, we anticipate continued stabilization and improvements in the Locum Tenens trends.

In Physician Permanent Placement, first quarter revenues were $8 million which is 7% below prior quarter. Although we experienced slightly higher sequential placements, the drop in revenues over prior quarter was due primarily to a decrease in the billable hours and direct marketing. While aggregate new searches have gone up in the last six months, the growth in active searches has lagged because we have been experiencing a greater number of multisearch arrangements. These larger search opportunities provide excellent long-term revenue opportunity; however, they take longer to fully convert as these clients often prefer to stage the recruitment and hiring process.

To maximize fill rates with our active searches, we are continuing to increase our recruiter headcount. As I mentioned in our last call, it will take a couple of quarters before we see a meaningful impact on placements from these new recruitment hires.

From an operational perspective, we are poised to leverage our infrastructure and productivity capacity as the market rebounds. Our systems and teams are more agile and we believe we can absorb additional volumes without adding commensurate SG&A.

Over the past year our team has worked proactively to manage to the severity of the market dynamics. We are working more cohesively than ever before, and with our recent rebranding efforts we are presenting ourselves externally and connecting internally as a more unified organization. I know that might sound trite, but it is very real and meaningful to our teams because they are seeing the results every day.

Despite the distractions of the past year, the team took a very balanced approach of managing the business to the short-term dynamics while still remaining focused on our long-term strategic plan. We believe this approach will begin to pay off this year and into the future. We have been focused around four key strategic areas.

First, our efforts to remain close to the customer to streamline and evolve our brands and win new preferred provider and managed services contracts. These initiatives are already evident in our results and will give us even more upside opportunity as we emerge into a more robust recovery mode. Second, the ongoing investments in new service lines we have made over the last two years have set us up for stronger growth and more diversified revenue streams in the long-term.

Third, our efforts to streamline and consolidate our operational and cost infrastructure not only improve our operating leverage but have created a more agile organization to support product development and other growth initiatives. And fourth, our efforts to preserve the financial health of our balance sheet through close management of our profitability and debt restructuring position us very well to actively evaluate and pursue synergistic investments. These may include initiatives to expand on our current core capabilities or diversify into strategic market adjacencies that further differentiate the company.

At this time I would like to turn the call over to Bary Bailey, our CFO, who will give you more detail on our first quarter results and our financial position. Bary?

Thank you, Susan, and good afternoon, everyone. Susan has provided you with an overview of the topline performance for the first quarter, which was pretty much in line with revenue guidance we provided in the last quarter's earnings call. Overall, gross margin in the quarter continued to hold up well, and came in a little above our expectations that we communicated last quarter. Compared to the first quarter of 2009, we saw a 230 basis point improvement to 27.9% for the first quarter of 2010.

The margin increase from last year was due to continued gross margin improvement in our Nurse and Allied segment and by our higher margin Physician Permanent Placement segment representing a greater portion of our business mix. As we look to the second quarter and beyond, we see margins holding steady with potential for some improvement due to continued reductions in the cost of health benefits and from changes in how we reimburse travelers for meals and incidentals.

As we are all aware, throughout last year the company took significant steps to rightsize the organization and improve the overall operating structure of the company in order to achieve sustained efficiencies. First quarter SG&A expenses of $32 million reflect the dollar impact of those changes and were 37% lower than prior year and slightly lower than prior quarter. Looking forward, we anticipate overall SG&A to gradually increase on an actual dollar basis quarter to quarter as we see modest growth in revenues.

Our Nurse and Allied segment operating income for the first quarter was $8.7 million, representing a 41% decline as compared to the same period in the prior year. The decline in operating income in this segment is slightly lower than the revenue decline we saw due in large part to the cost of revenue decreasing at a faster pace than revenue, mainly from lower labor costs. Nurse and Allied gross margin in the first quarter was 26.3%, 330 basis points higher than the same period in 2009 and, as anticipated, 70 basis points lower than last quarter.

Compared to last quarter, traveler volume increased 5% to 2,505, which represents the first sequential quarterly increase since the second quarter of 2008. Nurse and Allied segment SG&A was lower reflecting the efforts taken to reduce ongoing operational costs. As the business rebounds, we expect expenses will increase at a faster pace than revenues in the short-term. However, on the long-term we expect such expenses to decrease as a percentage of revenue. Overall, Nurse and Allied segment operating income margins increased to 11.6% from 9% in the first quarter of 2009.

While revenue declined 3% in our Locum Tenens segment, days filled and gross margin held steady sequentially at about 43,000 and 26.2% respectively. The operating margin for the first quarter was 9.1%, which is up 290 basis points compared to last year, although down 120 basis points compared to the previous quarter. The increases compared to prior year was due to lower overall SG&A costs. The decreased operating margin as compared to prior quarter was primarily due to the favorable professional liability reserve adjustment we reported last quarter.

Physician Permanent Placement operating income for the first quarter was $2 million, which declined 40% as compared to the same quarter last year and was flat sequentially. Gross margin in the first quarter was 57.9%, which was down 370 basis points compared to last year and 210 basis points compared to the previous quarter. The sequential decrease in gross margin reflects the impact of the decline in realized deferred revenue.

Unallocated overhead in the first quarter was $5.7 million as compared to $6.1 million in the prior year and $5.4 million in the prior quarter. The increase as compared to prior quarter is due to our reflecting the cost of unused space in our leased facilities in unallocated overhead.

Our income tax rate came in at about 64%. We had indicated the rate would be around 59%, which was our rate last year after adjusting for the impairment charges and restructuring costs. As discussed on the last call, our rate is impacted by permanent tax differences and by the cost of our uncertain tax positions associated with assumed per diem disallowances and the relative relationship to pre-tax income.

As our pre-tax income increases over time the impact of such items will have less of an impact to our rate. Our actual cash tax rate has been trending in the low 40s in line with our statutory rate.

For the first quarter, the company is reporting a net income of $800,000 or $0.02 per share. For the first quarter we generated $11.7 million of operating cash flow, of which about $1.4 million went to reduce debt.

Day sales outstanding were 56 days, as compared to 57 last quarter. We continue to closely manage capital expenditures without limiting important investments. Capital expenditures for the first quarter were $700,000. We expect capital expenditures in the future quarters of 2010 to be slightly above this level. As of March 31, our cash and equivalents totaled $36.6 million and our total term debt outstanding was $105 million with no borrowings under the revolver.

I will now return the call to Susan.

Thank you very much, Bary.

Our results would suggest that we did indeed see the trough of volume declines in our Nursing and Physician businesses during the latter part of 2009. On our last earnings call we predicted that 2010 would be a period of stability and modest growth, albeit at a still uncertain trajectory. This continues to be our outlook today.

Going into the second quarter, we anticipate Nurse travel volumes to be roughly flat with the first quarter and Allied staffing volumes to be down. We are also anticipating Locum Tenens to show improved sequential volumes based on growth in days sold in the first quarter. Our Physician Perm Placement business is also expecting modest sequential improvement based on growth in active searches and placements.

Despite the improving trends across the business segments, overall demand is still at relatively low levels and constrained by high national unemployment and stagnant admission levels. As I have indicated in the past, historically as we have entered into a downturn, we seem to hold onto our business longer and gain market share. Then as market drops to low levels, we lose our opportunity to outperform and there is a leveling effect. As the market stabilizes and improves, we begin to rebuild volume earlier and stronger than our competitors.

This dynamic seems to be repeating itself today. Based on these factors, second quarter consolidated revenue is expected to be up 1% to 3% compared with the prior quarter.

While the short-term trajectory of the recovery remains unclear, the long-term drivers of this industry remain strong. In the next five years the aging population will continue to continue to grow and require more healthcare services. At the same time our clinical labor supply is aging and will begin to retire. Currently 40% of nurses and over 50% of physicians are over the age of 50. This growing shortage will be further compounded by the limited capacity of our physician residency programs and nursing schools to produce new clinicians at the same pace.

Given these short-term and long-term dynamics, we remain focused on the key components of our long-term strategic plan.

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

(Operator Instructions) Our first question is from the line of Tobey Sommer with SunTrust. Please go ahead.

This is Frank in for Tobey. First question is, can you give some color on trend in bill/pay spreads and what you're seeing in that?

Sure, Frank. We'll start with the bill rate first. As I mentioned during the script, we saw pretty stable pricing in the Nurse and Allied business. Nurse in particular showed a sequential increase quarter over quarter in our revenue per traveler per day. No, I'm sorry. It showed a slight decrease; I think it was 0.4%. And on a year-over-year basis it was about 1%.

So we're pretty happy with that pricing considering the demand pressures within the market. A little bit more pressure on the Allied side both on a sequential and year-over-year basis.

We've seen a lot of stability in pricing within the physician businesses with the exception of radiology where we continue to see pressure on the demand which has resulted in pressure in pricing as well as in anesthesiology. And I think you've heard us all talk about the pressures in anesthesia over the last few months. That's resulted into some pricing pressure from clients as well.

In terms of the bill/pay spreads we've certainly seen improvement in our Nurse and Allied business and that's contributed to our improving margins on a year-over-year basis.

Okay, great. And in terms of any differences or trends you're seeing across different geographic areas? Any color there would be helpful.

Nothing significant. Orders I mentioned were up in Nurse and Allied on a year-over-year basis, but we'll qualify that and say they're still relatively low in terms of what we need to drive more significant growth.

Some of the areas that we've seen the most growth would be on the West Coast, in California, Texas has seen quite a bit of growth, Florida, albeit off of very low levels. We've certainly seen some growth there and then a little bit in the Northeast. So it's kind of scattered around the country. I wouldn't say it's all driven in one particular region.

Okay, great. And finally if I could ask, just how would you characterize the collections environment?

Frank, it's been pretty consistent with what we've seen in the past. We've actually not seen much variation at all. You did have some vendor managers last year who were a bit challenged, but I think the whole industry has become a lot more aware of that and how to handle it. So outside of that I'm not seeing much in the way of collection issues and as evident by our days outstanding, our days sales are pretty constant, consistent.

Great. Thank you very much.

And our next question is from the line of Paul Condra with BMO Capital Markets. Please go ahead.

Great. Thank you. Your gross margins took a small step down sequentially. And I just wondered was there anything seasonally that might have been impacting that?

No, I don't think there's anything specifically around seasonality there. As we indicated on the last quarter call we actually expected gross margins overall to decline down to about the 27.5% range. We actually came in a little more favorable. So from that standpoint we were impacted a little bit due to the number of days that you can bill, but having kind of a fixed cost relative to housing on a per traveler basis. But outside of that, not much else.

The other thing, Paul, about the first quarter is you do have an unusually high number of first-time starts in January. And often with those starts come a little bit of extra upfront costs with orientations maybe being built in at a lower bill rate and things like that. So you do get a little bit of that new start effect.

Oh, great. Thank you. And on your -- I just wanted to ask about the travelers on assignment. You had a pretty good sequential increase. And then you talked about guidance of maybe a slight decline. I just wondered, were there some factors contributing to the increase in the first quarter that maybe you're not seeing anymore? Or if you could just talk about that?

Sure. Part of that increase was driven by the stronger order volumes we had at the beginning of the fourth quarter. I think you heard us talk on our third quarter call and even again on our last call that we saw a sort of a hike in orders around October and November and those orders were for placements in the December, January, February time frame. And then we saw orders fall off in December and January.

We've been very stable since our last earnings call, so things haven't changed much in the last couple of months. But some of that increase in the first quarter came from that spike that occurred a couple of months before.

The other thing that's contributed is our improved execution. I mentioned our higher fill rates and the higher retention rates. And that can really be attributed to two things. One, the number of preferred accounts and vendor management accounts that we have where we do have a preference or lead time on the orders, and that certainly helps us increase our fill rates.

But secondly, it's the execution of our teams. As you can expect, when demand is low, we work harder to find ways that we can improve our processes and efficiency and getting our candidates in front of clients first and really present their skills in the best light. So I think we're seeing the payoff from a lot of those efforts during 2009.

Okay. Thanks. And I just wanted to ask on the restructuring -- it sounds like then the restructuring just took maybe a little longer to kind of work its way through than you were expecting. Am I understanding that correctly?

Just in the Allied division. I would say the Nursing division we unfortunately had to do a lot of that heavy lifting towards the beginning of the year or mid 2009. And I think we were able to work our way through that and saw any effect kind of ending in the end of the third quarter. But in Allied, we did continue to make some changes in our processes, in our branding, moving our teams around. And that continued a bit into the fourth quarter which has affected their volumes.

Could you give a -- what's the breakdown between Nurse and Allied staffing or travel and allied staffing now?

You know, I don't think we provide that externally.

Can you give a rough sort of idea?

We haven't provided it. So it's well over half, well over half is nursing.

Okay. Great. Thank you very much.

And our next question is from the line of Jim Janesky with Stifel Nicolaus, please go ahead.

Yes. Good afternoon. Susan, in the Nurse and Allied area, the sequential increase from the December quarter, how much of that was attributed to that new large VMS customer that you have and how much was just the more -- the regular travel business?

Well, first of all it was both. So we certainly appreciate having that client and that business helps us. As I mentioned, our fill rates are better with those preferred and VM clients across the board. So that certainly contributed to our better fill rates.

But it wasn't just from that account. We don't break out our business on a per client basis, and so I don't think we'd want to start doing that now. Because generally our business isn't driven by any one client. So hopefully that gives you a little bit of a flavor that it wasn't just that driver.

Okay. And then in the second quarter, what I'm reading into your comments is that Nurse and Allied will be down. So if you're going to increase revenues sequentially, it sounds like you're going to have pretty good quarters in both Locum and Physician Perm. Is that accurate?

They will be sequentially up as I mentioned. And yes, they will obviously be enough to overcome a very slight dip in Nurse and Allied.

Okay. All right.

We're probably not expecting as much of a decline in the second quarter as I believe some of our peers are for Nurse and Allied.

Okay. And is that due to again more VMS business? I know it's something that you've been -- you've had a focus on. How do you think the outlook is for that business for the remainder of the year?

I think there's a couple of contributors. It's the same things that drove our superior performance in the first quarter, having more of those preferred and VM clients, again better fill rates, better retention rates. But also if you look at our total orders not only are orders up on a year-over-year basis, but the number of facilities that have orders is up pretty considerably, almost double on a year-over-year basis.

And that could also be contributing to our strength and I think it's one of the things that possibly has caused us to perform historically better coming out of these troughs is that we do have more assignments available at more locations. That's always been a key part of our strategy is to offer that choice in location to the candidates. And that possibly helps us to stay -- to come out of the troughs earlier and stronger.

Okay. And Bary, EBITDA margins were flat sequentially. What are your expectations going into the June quarter? The revenues, you expect them to be up. Could we see some upward movement there? Or what is going on in the cost line?

No, up from an EBITDA standpoint as I indicated, I'm expecting -- while we see revenues going up, I am expecting expenses to move up a little bit faster as we look to the following quarters even. And it's a little -- you have to look at that and then try to anticipate as best we can. So I'm expecting the margins to come down just slightly.

Okay. Thank you.

Thanks, Jim.

And there's a question from the line of AJ Rice with Susquehanna Financial Group. Please go ahead.

Yes. Thanks a lot. A couple of questions if I could ask. In the Locums business if you are seeing sequential growth, is there any particular category of physician that is picking up? Or is that across the board?

In the second quarter it is across the board. If we look across all our specialties, we anticipate growth in all areas. If you go back to the first quarter, pretty much all areas saw growth with the exception of radiology, which really offset most of that growth in terms of volume.

And just in terms of the mix of business, we've definitely seen a pickup in our government business versus private. And we anticipated that because as you recall we had a disruption in the third quarter of last year where subcontractors turned over and we temporarily lost volume from that disruption. And now we're starting to see a regain in the traction of that business.

Is that shift toward a little bit of a shift toward government? Does that account for the comments on the EBITDA margin?

No, not really. I think it's just again we're saying that as we're trying to look forward it's not that significant. And it isn't driven by the government business.

Yes. The government business hasn't changed that much as a percentage of our overall staff care business. So I wouldn't see that just slight increase as driving anything significant.

Okay. I guess it doesn't sound like it's a lot, but what expenses would grow faster than revenues as the business stabilizes or starts to turn? I guess I'm just sort of trying to understand that comment, too.

Well, as we start to see the business coming back looking at primarily in the labor side, recruiting --

Okay.

-- so as we start seeing it rebound we have some room in our existing recruiters certainly. But we don't want to get caught running into a supply limitation as the demand starts to increase. So we're trying to anticipate that.

Now, certainly we're going to continue to, as Susan mentioned in her script, run lean. But we also don't want to get ourselves, at least at this point the way we see the market going and starting to come back, to get caught unprepared. So you have a little bit of a pickup but then it should, as I indicated, we should see those spreads come back again and revenue -- see that start to correct itself in subsequent quarters.

Okay. I don't think it would have had any impact but I'll ask just in case it did. Obviously a lot of the hospital companies and other facility-based companies are saying that the weather had an impact on them in February, the severe weather conditions. Did that impact your business at all either in terms of orders or in terms of actually the people out in the field for the first quarter?

Anecdotally we haven't heard our clients use that as a reason for their census. More so it's just been general softness. If you listen to the -- I'm sure you do -- the public hospitals reporting, there's just been a general softness across the board. And most are expecting that to continue into the next couple of quarters. But that's just more of a general admission issue as opposed to a one-time issue related to weather.

I mean, if a hospital was running on limited services that happened to have some of your people employed there or on assignment there, would that affect the amount that you get paid or not really?

It could, but it didn't in the first quarter.

Okay. So you didn't -- it didn't come back to you guys that there was any impact there?

No.

Just, Bary, on the covenants associated with your debt, can you just update us on what some of the key covenants and where you stand relative to those?

Certainly. I mean, from a leverage ratio standpoint in the first quarter our requirement is a 3.25 and we're sitting at about 2.1. And then the other is free cash flow and fixed charge ratio here. I'm looking at my other schedule. Fixed charge coverage is 1.75. And we're at 3.25. So well, well, well within our covenants.

And just to make sure I understand those, those are on gross debt for the leverage or they are net debt of cash?

Gross debt.

And is it a trailing EBITDA calculation?

Trailing, yes, trailing 12 months.

Right. Okay. All right. That's great. Thanks a lot.

Thanks, AJ.

Our next question is from the line of Mark Marcon with RW Baird. Please go ahead.

Good afternoon. I was wondering if you could talk a little bit more about the expenses that you're increasing. Are the increase in recruiters just limited to Physician Perm, or are you anticipating increasing your recruiting efforts across Locum and Nurse and Allied as well?

No, we are talking about increasing recruiters obviously in our perm because that drives the business directly. The more I'm talking about on the Nurse and Allied side and Locum side; and also as we start to see more effort towards vendor management solutions and us providing those, we're building up that capability.

We're anticipating it, like I say. So as we're looking at it in the second quarter, building up to make sure we can deliver on what we see coming down the road.

So how should we think about the excess capacity or the incremental margins going forward if things do improve as this year and the next year unfolds?

I think first it depends on the trajectory of that improvement.

If it's slow and steady.

If it's slow then we won't be adding that many resources because we can absorb a slow, steady growth rate. If we start to see it ramping up at a faster pace and/or we continue to win more preferred and VM clients, there is an upfront cost in hiring to be prepared to staff and operate those types of arrangements.

So you might see a little improvement there. But it would only be because we saw the real revenue opportunity that would likely follow within the next quarter or two.

Great. Can you talk a little bit more about your big California VM just in terms of how that's gone and what the learnings are and how you're thinking about that model and what the potential is?

Sure. First of all, our team has done a terrific job of implementing and serving that client during actually a very busy time for them in California in particular. Many of the facilities actually are quite busy depending upon the nature of the facility. And so their volume has actually been higher than anticipated. And so we were not only in the middle of an important implementation but saw volume levels pick up fairly significantly. And I think our team responded very well to that.

We were also implementing new technology that the client wanted and preferred but hadn't necessarily used before. And that's always a learning situation for both the client and for us. And so again, I think the teams worked through those well.

As always, you learn through these implementations and there's always things you're going to do better next time. And I think that while the client gives us good marks in how we are executing and delivering for them today, we will do even better the next time we have the opportunity to implement a large contract like this.

Great. And can you talk a little bit about the -- I didn't quite get the -- what you thought about the gross margins sequentially by division and how you think that unfolds as the year goes on.

I think we talked about gross margin overall being pretty flat.

Right.

We haven't talked about gross margin per se by division.

Right. Can you give us a little bit of color there?

Like I said, we haven't gone through it. I don't see that much changing from the standpoint of each of the business units. There's nothing dramatic happening on those so I don't see that much changing by segment.

Okay. Great. Thank you.

Thanks, Mark.

(Operator Instructions). And we go next to the line of Josh Vogel with Sidoti & Company. Please go ahead.

Hi. Thanks for taking my questions. I've been seeing travel costs seem to be increasing. But boarding seems relatively stable. I was just curious, are you starting to see the higher travel cost lean on margins at all in a meaningful way?

No, we have not. Most of our clinicians drive to their assignments and are provided a per mile reimbursement with a cap. And that's been pretty standard in the industry for many years. And over time that per mile and per cap may go up and down a little bit. But we haven't really seen it change that much.

Now again in the first quarter, because you have a large number of new starts, you will see the travel costs a bit higher. And that can affect the margin. That's another kind of factor. It's not a lot but just a few basis points can affect your gross margin in the first quarter because you have a lot of your beginning starts that are getting their go-to assignment travel.

Okay. And are you seeing any notable or encouraging signs of increased attrition with non-contract doctors or nurses at healthcare facilities?

You know, it's been bouncing around. We were more encouraged a couple of months ago as we saw the JOLTS data come out and indicate that job openings were starting to increase and the number of quits were starting to go up. But actually, the February preliminary data came out and showed that the number of quits actually went down. In fact it was at the lowest level in the last decade, I think.

So I think there's still a lot of hesitancy in clinicians that might want to leave their permanent employment and do something different, even if it's just to move from one permanent job to another, but they're still not comfortable enough to make that change. Still enough uncertainty in the economic environment and the housing market for them to be comfortable picking from up their home and moving to a new area.

Okay.

With that said, Josh, it is interesting. Our nurse applications were up in the first quarter. So even with minimal marketing expense -- at these demand levels as you can expect, there's not a lot being spent on kind of the supply recruitment. But even then we saw an increase in our unique new applications. And that's a good sign.

Okay. Great. And just lastly, just a bit of a follow-up on one of the covenant questions earlier. Are there any covenants that prohibit you from buying back stock?

There -- I mean, to buy back stock we would have to get approval.

Okay. So there's no buy-back program in place?

No.

Okay. Thank you very much.

Thanks, Josh.

And now I'll turn it back to our presenters for any closing remarks.

Hey. Well, thank you so much for joining us today. And we appreciate your continued support of AMN. We look forward to updating you on our progress next quarter.

Thank you. And ladies and gentlemen, that will conclude our conference call for today. We do thank you for your participation and for using AT&T's Executive Teleconference Service. You may now disconnect.