AMN Healthcare Services Inc (AMN) 2014 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the AMN Healthcare first quarter 2014 earnings conference call. At this time, all participants are in a listen-only mode. And then later, we'll conduct a Q&A session. Instructions will be given at that time. (Operator Instructions). As a reminder, this conference is being recorded.

And I would now like to turn the conference over to our host, Vice President of Investor Relations, Ms. Amy Chang. Please go ahead.

Thanks, Laurie. Good afternoon, everyone. Welcome to AMN Healthcare's first quarter 2014 earnings call. A replay of this Webcast will be available until May 15th, 2014, at amnhealthcare.investorroom.com. Details for the audio replay of the conference call can be found in our earnings press release.

Regarding our policy on forward-looking statements, various remarks and characterizations we make during this call about future expectations, projections, plans, prospects, events, or circumstances constitute forward-looking statements.

Forward-looking statements are identified by words such as believe, anticipate, expect, intend, plan, will, should, would, project, may, variations of such words, and other similar expressions. 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, 2013, and our other filings with the SEC, which are publicly available.

The results reported in this call may not be indicative of results for future quarters. These statements reflect the current -- 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Developments subsequent to this call may cause these statements to become outdated.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.

This call may also contain certain non-GAAP financial information. We make available additional information regarding non-GAAP financial measures in the earnings release and on the Company's Website.

On the call today are Susan Salka, our President and Chief Executive Officer, as well as Brian Scott, our Chief Financial Officer. Joining us during the Q&A session will be Ralph Henderson, our President of Healthcare Staffing, and Bob Livonius, our President of Strategic Workforce Solutions. I will now turn the call over to Susan.

Thank you, Amy. Good afternoon, everyone, and welcome to AMN Healthcare's first quarter 2014 earnings conference call.

AMN is making progress on our long-term strategy as the innovator in healthcare workforce solutions as well as improving our operating margins. With that said, the first quarter proved to be more challenging than expected.

Some of the factors impacting the first quarter were lower census volumes, a lighter flu season, and adverse weather. Although the mid- to longer-term effects of the Affordable Care Act are still expected to drive greater demand for clinicians, the shorter-term impacts are resulting in lower utilization of healthcare services and difficulty in predicting workforce needs.

These trends resulted in first quarter consolidated revenue lower than we expected and lower than prior year by 4%. In spite of the slightly softer volumes, our strategy to increase our mix of workforce solutions business and improve our gross margins enabled AMN to deliver solid profitability and expand adjusted EBITDA margin to 8.8%.

This margin improvement was achieved while making continued investments in our infrastructure and to further differentiate AMN in the marketplace.

Now, let's review the first quarter results of our three business segments in more detail. I'll start first with our largest segment of nursing allied staffing, which has been the most affected by the continued soft hospital census and reimbursement changes over the last year.

First quarter revenue for this segment was down 8% year over year and flat sequentially. Gross margin grew 150 basis points over prior year and 130 basis points over prior quarter.

Our travel nurse first quarter revenue was down 8% year over year and flat sequentially. The lower-than-expected revenue for travel nursing was driven by three factors. First, weather impacts were greater than we anticipated when we gave our guidance in February.

Second, the lower hospital census caused our clients to ask their nursing staff, which included our travelers, to work fewer hours. This resulted in a drop in the average hours worked in the first quarter.

The third factor was lower-than-expected March volumes. Since mid-February, travel nurse orders have been above prior-year levels. But, hospitals have been slower to make offers on candidates, resulting in lower placements for March and the second quarter.

Based on these trends, we expect travel nurse second quarter revenue to be down year over year and sequentially in the low to mid-single digits.

The same market factors also affected local staffing, where first quarter revenue was down both year over year and sequentially. We are seeing some improvement in placement trends and are currently expecting second quarter revenues for local staffing to be up 2% to 3% sequentially but still down on a year-over-year basis.

Now, turning to allied staffing, first quarter allied revenue was down 16% year over year and 5% sequentially. The year-over-year decline was driven by the lower therapy volume, partially offset by increases in the imaging and lab specialties.

Allied orders have been trending upward since the beginning of the year. And currently, orders are up on a year-over-year basis. While part of the upward movement is due to seasonality, we believe there has also been some market improvement.

Second quarter allied staffing revenue is expected to be down in the low teens year over year and up slightly on a sequential basis. This would be the first sequential improvement in seven quarters.

Overall, for the nurse and allied staffing segment, we expect second quarter revenues to be down in the mid-single digits year over year and down slightly sequentially. Despite the mixed demand trends and cautious client mindset, more of our clients are expanding their relationships with us to include more services. We're also having more strategic conversations about how AMN can support their future workforce needs in some very innovative ways.

In the first quarter, we also continued to build on our leadership position in MSP as we won two additional nurse and allied MSP contracts and expanded our largest allied MSP client into 16 additional states.

In the Locum Tenens segment, first quarter revenue was up 2% year over year and down 10% sequentially. The year-over-year revenue improvement was driven mainly by growth in the hospitalist and emerging medicine specialties, partially offset by declines in internal medicine and anesthesia.

The sequential decline was due mainly to a pullback in the days available across most specialties and more cautious client hiring behavior. During the quarter, the Locums division maintained a strong gross margin of 29.9%, which represented a 200 basis point year-over-year improvement.

In the first quarter, new days sold grew 6% sequentially. And we anticipate second quarter Locums revenue to grow 2% to 3% year over year and to grow sequentially by 10%.

Our early leadership position in providing MSP services to Locums clients continues to pay off with two more new Locums MSP wins in the first quarter. Our Locums MSP revenue mix reached 8% in the first quarter compared to just 3% a year ago. We expect this penetration to grow as we continue to build our business at our current MSP clients and also win new MSP contracts from our robust sales pipeline.

Now, let's turn to physician permanent placement, our highest margin segment, where first quarter revenue was up 7% year over year and 1% sequentially. The year-over-year growth was driven by higher placement volume.

Both our Merritt Hawkins retained search team and the Kendall and Davis contingency business had strong results for the first quarter. In addition to strengthening our leadership position in the traditional physician search industry, the team is making progress in expanding into new market channels and revitalizing opportunities in historically less active clients.

Based on sequential growth in new searches, we expect second quarter physician perm revenue to be up slightly year over year and also up sequentially in the mid-single digits.

Overall, our sales teams across the Company are doing a very good job in delivering qualified candidates and obtaining interviews. However, due to the uncertainty about future census volumes, some clients have been slower to pull the trigger and make candidate offers.

Healthcare providers continue to operate with a very lean workforce and a cautious mindset in hiring decisions. As the general economy continues to improve and the newly insured begin to utilize healthcare services, we expect temporary staffing volumes to pick up again. In the meantime, we remain focused on the key elements of our strategy.

First, we continue to expand our leadership position as healthcare's innovator in workforce solutions. In particular, MSP contracts enable us to achieve higher direct fill rates will providing some protection during periods of softer demand.

In addition to our four new MSP accounts, we have several more currently in the contracting phase. Revenues generated through our MSP contracts made up 34% of AMN's consolidated revenue in the first quarter as compared to 30% a year ago.

Our acquisition in November of ShiftWise, healthcare's leading VMS solution, is another example of our continuing innovation. In the first quarter, ShiftWise also closed four new VMS contracts.

A further example of our continuing innovation is our recent investment in PipelineRx, a leading telepharmacy services and technology company that provides hospitals with cost-efficient pharmacy coverage 24 hours a day.

This investment is a further platform through which AMN can be at the forefront of enabling hospitals to improve patient outcomes by providing the right care through the right clinician at the right time wherever it is needed.

Our second strategic focus is the continued streamlining of our systems and infrastructure to create greater efficiency, scalability, and agility. These investments are essential to delivering revenue growth and operating leverage as we progress towards our long-term goal of a 10% adjusted EBITDA margin.

Our third focus is continuing to develop and engage our team members to deliver industry-leading service to our clients and clinicians. It is particularly important that we maintain solid execution through temporary market challenges and to be ready to capture market share and future growth opportunities as they unfold.

It is our team member commitment and values-based culture that led to AMN's recognition by Forbes in its top 100 list of America's most trustworthy companies out of 8,000 publicly traded companies.

Recently, Novation, which is the country's largest healthcare group purchasing organization, also selected AMN as the top company in the category of compliance and integrity. We won this award over 800 of the nation's preeminent healthcare suppliers.

We are very proud of our talented team members and the everyday impact that they make for our clients, our clinicians, our shareholders, and the greater healthcare community.

I will come back to you in our Q&A section along with Ralph and Bob to help answer your questions. But, for now, I will turn the call over to Brian.

Thank you, Susan. Good afternoon, everyone.

The Company's first quarter revenue of $240.9 million was down 4.5% from last year and 3.1% from last quarter. Our gross margin for the quarter was 30.7%, up 170 basis points from last year and 90 basis points from last quarter.

The year-over-year increase was due mainly to margin improvement in all business segments, with the sequential increase due mainly to margin improvement in the nurse and allied segment. Both comparisons benefited from having a full quarter inclusion of the higher-margin ShiftWise business.

SG&A in the quarter totaled $54.7 million or 22.7% of revenue compared to $53.6 million in the same quarter last year and $54.5 million last quarter. The year-over-year increase in SG&A was due primarily to the inclusion of the ShiftWise expenses in the current quarter, partially offset by lower professional liability expenses.

Our first quarter nurse and allied segment revenue decreased 7.5% from the prior year and 0.4% sequentially to $163.5 million. Volume of 5,633 average clinicians on assignment was lower by 9.4% year over year and up 0.4% sequentially. Our average bill rate was up slightly over last year.

Nurse and allied gross margin of 29% was higher year-over-year by 150 basis points and sequentially by 130 basis points. The year-over-year improvement was due to the inclusion of the higher-margin ShiftWise business along with improved bill pay spreads. The sequential improvement was due to a full quarter inclusion of the ShiftWise business along with favorable insurance expenses.

First quarter nurse and allied segment operating margin of 12.2% was lower by 50 basis points year over year and higher by 30 basis points from the prior quarter, with the year-over-year reduction resulting from negative operating leverage on lower revenue.

First quarter Locum Tenens segment revenue of $66.9 million was up 2.2% from prior year and down 9.7% sequentially. Compared to prior year, and average bill rate increase of 3.5% was partially offset by a 1.3% decrease in the number of days filled during the quarter.

Gross margin of 29.9% was 200 basis points higher than the prior year due primarily to improved bill pay spreads.

First quarter Locum Tenens segment operating margin of 10.3% was higher by 280 basis points year over year and by 40 basis points from the prior quarter. The year-over-year increase was due mainly to the gross margin improvement and lower professional liability cost. The sequential increase was due to lower employee expenses and favorable bad debt trends.

Our first quarter physician permanent placement segment revenue of $10.6 million was up year over year by 6.7% and by 0.9% sequentially. Gross margin of 63% was higher by 40 basis points from the prior year and flat from the prior quarter.

Physician perm placement first quarter operating margin of 20.2% was lower by 240 basis points year over year and 80 basis points from the prior quarter, with the year-over-year decrease due to an increase in sales headcount and commissions.

Interest expense in the quarter was $1.8 million, which compares to $2.9 million last year and $1.8 million last quarter. Our tax rate in the first quarter was 44%, which is consistent with the tax rate expected throughout 2014.

We reported net income of $7.6 million in the first quarter. Diluted earnings per share was $0.16 for the first quarter, which was consistent with the prior-year quarter.

Cash provided by operations for the quarter was $1 million. Days sales outstanding were 56 days compared to 55 days in the last quarter and 56 days last year. Capital expenditures for the first quarter were $5.8 million.

As of March 31st, our cash and equivalents totaled $9.3 million, and our total debt outstanding was $158.7 million. Our year-end leverage ratio -- I'm sorry -- as calculated per our credit agreement was 2.0 times to 1, as compared to 2.3 prior year.

On April 18th, we refinanced our existing credit facilities with a new $150 million term loan and $225 million revolving line of credit, both of which mature in April 2019. The interest rate on the new facilities adjust quarter based on the Company's leverage ratio and are currently at LIBOR plus 175 basis points.

This agreement significantly reduces our average cost of debt with the current rate approximately 175 basis points lower than under our prior agreement. In addition to generating approximately $2 million in annual interest savings on the current loan balance, this new agreement also provides added flexibility to pursue opportunistic strategic investments.

In conjunction with this transaction, $3.5 million of transaction costs were capitalized and will be amortized over the term of the new agreement. We also expensed $3.1 million of noncash deferred financing costs associated with the previous credit facilities.

Now, let's turn to second quarter 2014 guidance. The Company expects consolidated second quarter revenue of $244 million to $248 million. Gross margin is expected to be approximately 30.5%. SG&A expenses as a percentage of revenue are expected to be between 22.5% to 23%. Adjusted EBITDA margin is expected to be approximately 8.5%.

Second quarter interest expense, excluding the previously noted write-off of deferred financing cost, will be $1.5 million. Depreciation expense for the second quarter will be $2.1 million, and amortization expense will be $1.9 million.

And, with that, we'd like to open up the call for questions.

(Operator Instructions). A.J. Rice, UBS.

Thanks. Hi, everybody.

A.J.

Couple of questions if I might. First of all, on the comments about the expanding the agreement with your largest MSP customer to 16 new states, is that reflected in the quarter, or is that somehow staged over time?

It is staged over time. And it was our largest allied MSP client. We actually have other larger nursing clients on the MSP side. And they're, as you would guess, a large national player. And we started in certain -- their largest region. But, over time, they want to expand it to every state that they do business in and so think we should take it as a great sign they were very pleased with the work we were able to do with them in the first set of states and so now rolling it out to this next set.

Started March 31st. So, we'll be rolling. It'll probably take a few months to get that fully rolled out to all of those additional states. But, it's a great example of how we can work with a client initially in one area. And sometimes, that's a particular specialty, like nursing or allied or Locums, and then expand our business in helping them in other ways. And sometimes, that's a regional expansion. And sometimes, it is an expansion into other service lines.

And were they an MSP client of someone else, or were -- was this the first time they've really gone the MSP route for this -- for allied -- .

-- Bob. Yes, this was an MSP win for us about a year -- little more than a year ago. And it's not different than about three or four others we have in the pipe -- that we actually have sold last year, where we started out with one portion of the country, like Susan talked about. And we're rolling out other parts of the country.

And so far, all of the ones we've sold that way, which is not uncommon if you have a very large national player, it's pretty common that you start in one part of the country. So far, all of them have continued to want to expand.

Okay. Appreciate the comments you guys made about reform. And obviously, that'll take time to really ramp up across the country. But, one thing we have heard from a couple of the hospital chains is that they have seen some -- California's sort of the leader on the public exchanges as well as doing the Medicaid expansion. It seems like there's some optimism that California providers are seeing some of the early effects of health reform.

I know you guys are big out there. Can you tell us specifically in that market what -- have you seen anything that gives you any early indication of how reform might play out?

I think what we're hearing from our clients is that their volumes in the first quarter in particular were still not where they had hoped that they would be. But, the mix of their volumes was better. So, they had less uninsured care provided and more insured, whether it be through MediCal or Medicare, etc.

And so, they have better margins and feel better about their profitability profile going forward. But, their overall census hadn't necessarily gone up.

Okay. And maybe just a last question for Brian. On -- you talked about greater flexibility on the new bank agreement maybe to pursue strategic or tactical opportunities. Can you elaborate a little more on what does this one -- this agreement allow you to do, or how is the flexibility improved over what you had before?

Sure. Well, I think the main thing, obviously, with the line of credit getting large from $50 million under our previous agreement to $225 million.

Right.

We have kind of ready access to additional capital at a very low cost. In addition to that, the agreement does allow -- has an accordion feature as well, where we have the ability to increase either the term loan or the revolver, an additional $125 million if we decided that was necessary. But, kind of out of the gate that ability to access that larger revolving credit facility is the main flexibility that we added.

Okay. All right. That makes sense. Thanks a lot -- .

-- A.J.

Jeff Silber, BMO Capital Markets.

Thanks so much. Susan, I believe, in your prepared remarks, you talked about a number of factors that impacted the business, specifically -- excuse me -- in the nurse allied area, lower census, flu season, the weather etc. Is it possible to rank order those?

It's difficult because it's hard to always attribute exact volume changes. But, we can give you maybe an order of magnitude. If you recall on the weather, we had said in our prior call that we thought it would be about a $2 million to $3 million impact. And we think it was more than that, probably by $1 million or $2 million.

It's hard, again, to give an exact number. But, as we dug into office closures, interviews that didn't happen, etc., it seemed like it probably was a greater impact from that.

The other one was the average hours worked, which is really a byproduct of the census being lower than expected and the lighter flu season. And that probably impacted the quarter just a little under $2 million in revenue. That's one that has continued, though, as well.

And I think it's a reflection of the uncertainty that our clients are feeling around their census. And so, they -- it goes back to our commentary that they're giving us the orders. They know they're -- they believe they're going to need people. But, they don't know exactly what that utilization is going to be.

And so, once they get them on assignment, they're calling them off. And it's not just our nurses. They're calling their own staff off as well and providing them with less hours. It's a small fraction of -- on a percentage basis. But, when you add it up across a large number of people, obviously, it adds up to real dollars. And in our case, as I said, it was just probably around about a $2 million mark. And so, those are probably the two biggest impacts. Ralph, anything else that you want to add?

And just on the flu stat, a little color there, it was -- the acuity was just kind of average on that. The duration was very short. So, generally speaking, if acuity is high and the duration is long, we'll see higher volumes.

In this case, it was so short, it may have even spiked orders at times that then got closed out before they were even filled when they realized that it -- that they didn't have the needs that they thought they were going to have, also that, if they did fill those orders, that's probably part of the cause behind the shortened hours.

They had -- if they were in an overstaffed situation, they obviously asked their temporary labor to leave early, to work one less shift a week, and things like that. So, I think those were things that we probably didn't anticipate happening whenever we put our guidance out for Q1.

Okay. That's great. Brian, I believe, when you were talking about the Locum Tenens area, you cited lower professional liability. Can we get a little bit more color in terms of what's going on there?

Sure. We just -- we've had more favorable experience in the last several quarters. And so, that will translate into favorable reserve adjustments as well. So, we had a natural study done in the fourth quarter and had about a $400,000 reduction in reserve. First quarter, we had a kind of a similar amount that the reserve came down.

On comparative basis to Q1 of last year, we were seeing a little bit negative trending. And so, we actually increased the reserve in the first quarter, brought it down a little bit in the first quarter of this year. And that's what drove the favorable comp on a year-over-year basis.

Can you just remind me how often all those studies done?

Yes, so, we have a formal study done twice a year for professional liability at the third -- at the second quarter and the fourth quarter. We do analyze the reserves in the interim periods just for any material changes. And so, we will make smaller adjustments in those periods, but we actually have the formal study done at June and December.

Okay. Great. And as long as I have you, Brian, just a few numbers questions. The guidance that you gave for interest expense for the second quarter, is that a good run rate for the remainder of the year?

Yes, it would like to come down a little bit from there just as we'd -- assuming we'd use our free cash flow to pay down debt. But, the -- but, on a -- otherwise, on a run rate, $1.5 million is a good number.

Okay. And then how about depreciation and amortization?

Pretty consistent with the second quarter. That's a good number to -- .

-- And what about capital spending for the year?

Yes, it'll -- this Q1 was kind of the high point on the CapEx. Just part of it was a carryover of some investments we had planned for the fourth quarter that pulled into the first quarter. So, I would expect it to be more in the $3 million to $4 million a quarter for the remainder of the year.

All right. Fantastic. I'll jump back in the queue. Thanks so much.

Thanks, Jeff.

Josh Vogel, Sidoti & Company.

Thanks. Good afternoon, everyone.

Hi, Josh -- .

-- Josh.

I wanted to focus a little bit on SG&A. I understand with ShiftWise, cots are a little bit elevated there. And, Susan, you talked about investments in streamlining the operations. And I understand, to a degree, that'll be ongoing. But, when you get out beyond Q2, will you see some leverage on the SG&A line, or should we expect this mid-20% range to be the run rate going forward?

This is Brian. Hey, Josh. I think that, for 2014, we gave guidance for the second quarter of between 22.5% and 23%. I think, for 2014, that's a good range to be thinking about. As we start to see more of the benefits from these investments we're making during this year, obviously would anticipate that along with getting some revenue leverage over time that you'd see that number come down.

Okay. So, is there more upfront investments though in the streamlining of the operations, or can you quantify for us what hits up each quarter?

Sure. The thing is we've been making different investments over the last year plus. Now, we talked a lot last year about the investments we're making in our digital transformation. And so, the bulk of that work really ended in the first quarter of this year. So, those costs were already built into 2013.

As those expenses have ramped down, we've now kind of reallocated those dollars toward some of these other projects we're working on. So, not a real material change in the next several quarters in the amount that we're deploying into these projects.

And it's probably an order of magnitude of maybe $0.5 million to $1 million per quarter. So, they're not huge amounts. But, again, they're investments we're making that we think will generate efficiency in the longer term as well.

Okay. Shifting gears a little bit, I understand can't control the weather and any weather-related impact to your volumes. And same with regards to a decline in hours worked. But, I thought -- could you basically remind us of the visibility you have across your nurse and physician markets with regards to the orders you see today and how reliable they are over the next two to three months?

The orders that we have today, say, for nursing, are generally for starts that would occur anywhere between May and even going into July. Occasionally, we'll get orders further out during seasonal times. But, right now, we're probably looking within that timeframe.

And so, in a normal situation, you would expect that you can follow your typical booking trends of when you get the order, the number of days on average that it's taking to fill that order, both in terms of the commitment from the client and then ultimately when does the person start.

But, what we've seen is that it's taken a little bit longer, not to get the candidates or the interviews, but to get the client to commit to actually booking an assignment and then also getting the person to start. So, the urgency has just flipped a little bit.

And so, I'd say it's similar visibility in terms of the orders we're getting are for the kind of typical time that we would see, the next month to three months, but the client's behavior shifted a little bit in the first quarter. Ralph, anything else you'd like to add?

Yes, on the -- in the travel nurse business, the orders are up double digits right now. And normally, we'd give a pretty -- a more robust forecast for the quarter, given those order volumes, and actually likewise for allied and for Locums than we're even giving.

We have a couple things going on there, one which Susan has called out, which is the clients are just moving very slowly on making offers. So, they're interviewing candidates at a higher frequency over prior year. They're accepting applications, things like that. But, they just are not offering the assignments. So, that's caused us to be more cautious on the forecast.

And then additionally, there is a slight seasonal pullback in Q2 that's caused by our West Coast customers who use significantly more travel nurses in Q1 than they do in Q2 by a magnitude of usually 200 to 300 travel nurses. There's assignments in, and then they come back again in Q4 of the year.

So, there's a kind of a combination of factors going on there. I would say that the fact that the clients are putting in the orders is a sign that they feel like their volumes are going to increase any day. The sign that they aren't making offers is probably that they just don't have any more visibility into that than we do right now.

Okay. That's helpful. Now, just looking at the commentary in the press release, you say that you think material improvement in nurse and allied are still likely a few months out. I don't want to get too technical. But, what is your definition of a material improvement? And how confident are you that it is likely only a few months out?

Well, in terms of how you quantify material, I don't know that there's a perfect number, but more than 1% or 2% -- .

-- Okay -- .

-- Something that starts to moves the needle and create some momentum. And in terms of our confidence, it goes back to what Ralph just said on the orders being up. And normally, we would be much more optimistic about even the second quarter because of just the sheer number of new orders that we're getting and the fact that it's up double digits over prior year.

So, the sense is that the need is there and the demand is there and that we ought to see some year-over-year improvements soon. But, because our clients surprised us a little bit with their more cautious behavior, we are probably hedging a little bit and because we're not seeing it all translate through.

The other thing that gives us really good confidence is the pipeline of MSP contracts that we have. I mentioned that we've got several contracts actually in contracting now. So, this is where the client has said I want an MSP. I've chosen AMN. We just need to get this thing inked. And maybe, Bob, it would be helpful for you to give a little color on that.

Yes, we -- in this April timeframe, we've had more contracts in the clients' hands than we can ever seen and by a magnitude of about two times the number of contracts than we've had in prior quarters waiting to be in the final contracting process. So, we're -- most of them are actually in the clients' hands as opposed to in our hands.

So, we do anticipate that the pipeline is strong enough to help us through the balance of this year. And of course, most of our big sales in MSPs don't necessarily help us right away. They'll help us over time.

Some of our clients in the MSP process do help get us kick started by ordering some of the -- some of their needs early on. And they'll start buying from us early in the process before they actually contract with us. However, it doesn't mean that we're getting all of that business. So, it means that we do have an opportunity to pick up more business as these contracts get completely closed.

Okay. Yes, it's good to see the traction in the -- on the MSP front, which goes into my last question. You signed four new MSPs last quarter. You're talking about a strong pipeline, several in contract today. I just want to get a sense of the overall market dynamics.

Are these accounts -- are you taking them from competitors, or are these MSPs that have been doing this work in house and now just starting to outsource?

It's about two-thirds new and about one-third from competitors. And I'd also just highlight that some clients go from an already existing VMS model, like even a ShiftWise. And one of -- couple cases in our pipeline are clients who are already ShiftWise clients that are going to move to an MSP model.

You do see that happen, by the way, go the other way from time to time, where an MSP will go to a VMS model. We were glad that we made this strategic decision to buy ShiftWise because it enables us to really maintain the continuity with clients as they shift even their strategies around how they want to use these tools.

But, I also -- so, I think we commented that we sold four VMS clients in the first quarter. And their pipeline is also strong.

So, answer your question, I think we're largely selling new. And two-thirds, roughly, are new contracts, where they're still -- they're just now learning that this is the right thing to do. They're beginning to understand that other people are doing it.

We get a lot of leverage from our Novation contract, as we just resigned our Novation contract again where they're -- we think they're a big, big help to us in terms of helping us get -- do business. They're actually out in the marketplace showing their members why they should be doing something like this and why they should convince themselves to do it the old -- or stop doing it the old way and start buying new services from the way in which you do business going forward should be into this new model with an MSP or at least with a VMS if not an MSP.

Okay. That's all I have right now. Thanks a lot.

Thanks, Josh.

Tim McHugh, William Blair.

Yes, thanks. One, I guess, just to clarify, did you say the order volume is up double digits right now?

In nursing I was talking about, but it is also up in allied, and our days available are up in Locum. So, pretty much across the board, we're up.

Okay. And I guess, have you looked at the possibility, just to play the devil's advocate -- I know you said, basically, your sense is that -- weak sense is volumes and cost pressure, which is why the clients aren't pulling the trigger, even with the orders.

Have you looked at -- is there any difference in -- are clients shopping them more? Are they sending it out to more people I guess and maybe just more competition to get those orders filled, or I guess, is there any -- have you crossed off the list any issue that this is competition or I guess execution or something like that?

Yes, so, I understand and appreciate the question, Tim. It's something we've looked at very carefully. We've even gone so far as to take a look at the candidates submitted, how well they matched up to the criteria, whether they were currently on assignment with us or at that facility previously and things like that.

We don't see any issue there with quality. So, that's why we believe it is more of a hedge against volumes than anything else. And we also have the proxy of having visibility into ShiftWise results. And ShiftWise is -- of course, it's a vendor-neutral technology. And all of our competitors fill those orders and get access to those orders the same as we do and actually see the exact same if not slightly worse trends in the ShiftWise volume numbers than we see in our own.

Okay. That's helpful. And then just the -- you mentioned the number of opportunities for the MSP is up. What's the competition for those contracts like? Have you seen the competitors improve there to the best you can tell I guess, their pitches for that, or a lot of -- is it still an area where a lot of people aren't really focusing on yet in this market?

Well, the competition's definitely always improving. And that's why we need to continue to improve as well. And we have the benefit of having a very strong track record in MSP, far more years and far more reference clients and successes than any other company in the industry. And so, that gives us, I think, a good differentiator. But, we have to look for more ways that we can further differentiate ourselves with those clients. Bob, any other commentary you have on the competition?

I think -- we respect all the competition that's out there. I think there are a few players who actually have dropped out of the market or have really deemphasized the sale of the MSP program because I think they've come to the conclusion that, unless you really make a tremendous amount of investment in the sales resources and the technologies we've done with ShiftWise, you really can't compete with the more sophisticated and complex sales the clients are buying today.

So, I think, if I were to say the companies have gotten better but there are fewer of them, really fewer good quality providers, so we're usually up against the same two or three providers in every situation. And in our VMS model, ShiftWise is up against two or three other good competitors that are providing vendor-neutral model.

Sometimes, clients want to decide between a VMS or an MSP. And they'll know that upfront. And that gives us the ability to go in and have them buy one or the other, or there are other times when the client is deciding, I don't know whether I want a VMS or an MSP. And then we get a chance to be at the table twice.

Okay. All right. That's helpful. Thank you.

Tobey Sommer, SunTrust.

Hi, this is actually Frank in for Tobey. Most of my questions have been answered. Just wanted to ask a little bit on the supply side of nursing, in particular, what are you seeing there, any changes? And kind of looking out over the -- maybe the remainder of the year, so, do you anticipate any changes that may affect the pay rate story?

Yes, on the -- this is Ralph, Frank. What we're seeing on the supply side is, from an application standpoint, very solid numbers. Our year-over-year increases are -- because of our digital transformation initiative, our social media programs, and other things, we are very, very strong and sufficient to drive much higher growth rates than we're talking about today.

And we're also seeing rebook behavior among our existing nurses at very high rates, as high as historical highs. So, we're -- they seem to be pretty confident about the marketplace as well. So, nothing negative in the supply numbers. It's really just kind of this issue of not executing against the demand they think they're going to have is really kind of the only area of concern.

Okay. Great. And one quick cost question. On housing and travel, any changes in expenses there?

This is Brian. Not a lot changed from the last quarter. Again, housing costs are still a headwind for us. It's -- the external data still suggesting things are moderating to some degree. Last year was more of a 5% increase. We're hearing more now is like 3% to 4% kind of nationally, although, in some of the major metro markets where we have accounts, it's more like 5% to 6%. And that's been more what our experience has been over the last couple quarters as well.

We've also been focusing on -- strategically on having shorter-term leases, which in a cautious environment, we want to -- we don't want to end up with vacancy as well. So, we've been able to lower our vacancy. But, it's a tradeoff of slightly higher rents for that as well. But, we think that's appropriate in the environment we're in now.

Keep in mind as well, not all of our travelers are in housing as well. Some of them -- about half of them are also getting a kind of a monthly stipend. And so, it doesn't affect all of our housing costs when we see our rents go up as well.

But, we expect it to be a headwind going forward, although there are indications that, with more and more units coming online this year and next year that that will start to moderate in -- later in this year and especially into 2015.

All right. Great. Thanks very much.

Mark Marcon, Robert W. Baird.

With regards to ShiftWise, what was the revenue contribution from them this quarter?

It was -- this is Brian. Right around $3 million.

And that would've all fallen into nurse and allied?

Correct.

And with regards to the monthly trends, I know that orders were going up. But, in terms of the nurses on assignment, how did that trend as the quarter progressed and going into April?

Yes, the -- March was about 200 higher than January was. It was progressing very nicely, and then it did flatten out in April.

And can you talk a little bit about the number of MSP contracts that you currently have in place relative to a year ago and give us an order of magnitude?

I don't know if we give the exact number (inaudible) have to ask you, but we -- .

Typically over 130.

Okay. So, the answer is -- so, it's -- grows by the number of contracts and actually growing at a slower pace than the number of facilities because what happens is, when we -- sometimes, we'll do one that'll have 20 or 30 facilities on it. So, we're actually growing the number of facilities by a lot as a percentage. The number of contracts has grown from last year this year probably close to 15%, 20%.

Yes, that's about right.

That'd be about right.

So, the number of facilities is up 15% to 20%?

Facilities is actually up higher. We'd be -- we've gone from -- I think from 500 to 650 or 700 facilities I think, something like that.

Okay. And then have there been any contracts or, within contracts, facilities that have been terminated or just didn't go as expected?

We -- most of our losses, if you will, are generally -- we win more than we lose. But, there are times when we get into a situation where a client has decided that they -- or they -- usually, the losses have come from acquisition, where they made a strategic decision at a corporate level to acquire a company, to acquire a hospital facility of ours under a contract with an MSP. And they may already be with a competitor. They might be already with a VMS model or another MSP provider. And they just sweep in our facility. And those are the most common scenario that we have for when we lose an account.

Did that occur at all over the last -- ?

-- We did have one in the first quarter. And fortunately, they -- when the two organizations came together, we had an MSP at one of the organizations. And the other organization had the ShiftWise VMS in place. They ultimately decided to go with the vendor-neutral VMS solution. So, the business will migrate over to be all ShiftWise. So, we still have the client. We'll still be filling their jobs. But, it won't be under an MSP. It'll be under a VMS through our ShiftWise technology.

That's another I think important point to make is that I can't think of an instance where we lost an account where we didn't still have the account. So, even if we lost the MSP somewhere else, we then became part of the vendor network. And oftentimes, because we already had a preferred position with a number of nurses we had there, we didn't see necessarily a big change in our volume.

If we did lose an account because of price, and this -- somebody comes in and says we're going to lower our prices, we -- because of supply, it's natural to just take those same nurses and put them someplace else at a higher rate. So, we might slow down the work we do at one facility to actually put those nurses somewhere else at a higher rate if we felt that that was the better choice for our -- for us as a company.

Great. And then just to come back to Josh's question, as you look at the -- how you think the second half may end up shaping up -- and I know it's difficult to say. But, how would you talk about just the seasonal patterns and the comps that you're going up against?

Well, most of the reports and speculation by the hospital community and analysts who cover them suggest that volumes should improve in the second half of the year. And we hear that anecdotally from our own larger clients as well. So, we're a believer that things will get better in the second half of the year. But, we don't have anything more than what you read. And I guess we do have what our clients tell us to really support that.

So, we need to be ready to deliver on that. And we think that we are. Our comps will get easier in the latter half of the year because we started to see the slowdown in nursing occur in the second half of 2013. So, I think, just naturally, the year-over-year comps will become easier for us, if you will. And we ought to see some better results. But, a lot of it depends upon the underlying market demand as well.

Great. Thank you.

Thanks, Mark.

Thank you. And I'll turn it back to Susan Salka for closing remarks.

Great. Thanks so much. We really appreciate your questions and your joining us today and certainly your continued support of AMN. And we look forward to updating you on our progress next quarter.

Thank you. And, ladies and gentlemen, this concludes our conference call for today. Thank you for your participation and for using AT&T Executive Teleconference. And you may now disconnect.