AMN Healthcare Services Inc (AMN) 2014 Q4 法說會逐字稿

Ladies and gentlemen, thank you for standing by. Welcome to the AMN fourth-quarter and full-year 2014 earnings conference call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session; instructions will be given at that time. (Operator Instructions). As a reminder, this conference is being recorded.

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

Good afternoon everyone. Welcome to AMN Healthcare's 2014 full-year and fourth-quarter earnings call. A replay of this webcast will be available until March 5, 2015 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, suggest, may and 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 31, 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 Company's current beliefs and are based upon information currently unavailable to us. Developments subsequent to this call may cause these statements to become outdated.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 unavailable 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. Ralph Henderson, our President of Healthcare Staffing, and Dan White, our President of Workforce Solutions, will be joining us during the Q&A session.

I will now turn the call over to Susan.

Thank you so much, Amy. Good afternoon everyone and welcome to AMN Healthcare's 2014 full-year and fourth-quarter earnings conference call. Over the last year, AMN continued to deliver revenue and profitability growth while further solidifying our leadership position as the innovator in healthcare workforce solutions.

The market environment accelerated mid-year as the stronger economy and millions of newly insured patients released pent-up demand for both healthcare services and the underlying clinical labor that provides their care. With the momentum of the higher demand and strong execution by our team, we delivered fourth-quarter consolidated revenue growth of 12% over prior year and an adjusted EBITDA margin of 9%.

This strong performance was led by our Nurse and Allied Staffing business with 17% revenue growth followed by Physician Permanent Placements which grew revenue by 14%. To bolster our recruitment capacity and candidate supply amidst the rising demand, in January of this year, we acquired two well-respected staffing companies, Onward Healthcare and Locum Leaders. To further evolve our portfolio of workforce solutions, in December we acquired Avantas, a leading provider of clinical workforce consulting, analytics and predictive modeling and scheduling technology.

More and more our clients want to use analytics to drive their population health and cost efficiency initiatives. With clinical labor being more than half of a hospital's budget, Avantas enables clients to achieve their efficiency goals through better workforce planning and scheduling.

In January of 2015, we also acquired Medefis, a leading vendor management system for healthcare organizations. Through Medefis and ShiftWise, AMN now provides two differentiated the VMS technologies to assist clients in managing their staffing vendors, float pools, and credentialing through one single platform. These VMS solutions are widely recognized as the top two technologies within the healthcare industry.

All four of these acquisitions bolster and complement AMN's current businesses and solidify the breadth of workforce solutions we offer. We are very pleased to have them join the AMN family and the integrations are proceeding very well. These are top-quality brands and even higher quality people. These additions will also enable AMN to deepen our client relationships and maximize our current and future market opportunities.

Another key part of our strategy is our focus on managed services programs. In 2014, AMN further strengthened our market leading position in MSP with new contract wins and expansions expected to contribute over $50 million in direct revenues at maturity. One-third of our consolidated 2014 revenues flowed through MSP relationships where we are the exclusive provider of supplemental staffing to our clients.

In MSP contracts, we typically deliver higher fill rates than in traditional contracts which enables efficiency and contributes to our operating margins. Through our VMS technologies and MSP contracts, AMN had annual gross staffing spend under management of over $1 billion. It is clear that these workforce solutions are having an impact in enabling clients to efficiently manage and deploy their contingent labor.

Now let's review the fourth- quarter results and outlook for each of our three business segments. As mentioned in our largest segment of Nurse and Allied Staffing, fourth-quarter revenue rose 17% year-over-year and 10% sequentially. This performance is being led by the travel nurse business which experienced a fourth-quarter revenue increase of 20% over prior year and 12% sequentially. We believe the significant order growth is due to a combination of hospital census, increased nurse turnover and the improving financial performance of hospitals.

For the first quarter, we expect travel nurse revenue to be up over 30% year-over-year and 10% sequentially. Excluding the impact of Onward Healthcare, we expect travel nurse revenue to be up approximately 25% year-over-year.

In our Allied Healthcare Staffing business, fourth-quarter revenue grew 14% year-over-year and 6% sequentially. Orders are up significantly year-over-year across therapy, imaging and lab specialty.

For the first quarter, we expect Allied staffing to be up approximately 40% year-over-year and 15% sequentially. Excluding the impact of Onward Healthcare, we expect Allied Staffing to be up nearly 20% year-over-year.

Our ShiftWise, Medefis, Avantas and RPO businesses, which are all included in this segment, are also experiencing very positive trends. As we begin the year, they are all expecting to deliver wrong year over year revenue growth. This performance enables us to continue investing in a technology to open up new market channels and ensure we are delivering greater value to our clients and our affiliate vendors.

Overall for the Nurse and Allied Healthcare Staffing segment, we expect first-quarter revenues to be up over 30% year-over-year and 15% sequentially. Excluding the impact of our recent acquisitions of Onward Healthcare, Avantas and Medefis, we are projecting year-over-year revenue growth of approximately 20% for this segment.

Now turning to Locum Tenens. Fourth-quarter revenue was up 3% year-over-year and down 3% sequentially due to seasonality. The year-over-year growth was attributable to the increases across most specialties and the improved demand of nearly 10%. For the first quarter, we expect revenues will be up approximately 25% year-over-year and 10% sequentially. Excluding the impact of the Locum Leaders acquisition, first-quarter year-over-year revenue is expected to be up approximately 15% and flat sequentially.

The strong year-over-year growth is across most specialties, hospitalists and internal medicine subspecialties make up the largest share of favorability. Locum's MSP programs continue to grow and are projected to comprise approximately 14% of first-quarter revenue. The Locum segment entered 2015 significantly stronger than in 2014 with higher demand and improved execution by the team. Q1 will represent the ninth straight quarter of year-over-year revenue growth for the Locum division.

In our Physician Perm Placement segment, fourth-quarter revenue was up 14% year-over-year and up 4% sequentially. The year-over-year growth was driven by increased search and placement volume along with higher project revenues. Going into the first quarter, placement activity is trending upward and revenue is expected to be up year-over-year approximately 10%. Sequentially, first-quarter revenue is expected to be down slightly due to the fourth quarter having more higher value executive search placements and project activity.

Merritt Hawkins was the first AMA business to implement our new front-office platform that will eventually be used across all of our businesses. The new system was launched in early Q1 and is already providing improved collaboration, data capture and efficiencies for the team.

Healthcare continues to undergo dramatic change. With stronger market trends unfolding, investments we continue to make have enabled AMN to differentiate itself in the market. The offerings we provide from workforce optimization and predictive analytics to VMS, MSP and RPO enable AMN to have a deeper and more value added relationship with our clients. We are pleased with our evolution into healthcare's innovator and workforce solutions and we will continue to look at acquisition opportunities in the areas of new workforce solutions and emerging healthcare roles.

Throughout 2015, we will continue on our investments in systems and infrastructure to ensure our efficiency, scalability and best-in-industry service delivery as we advance toward our long-term adjusted EBITDA goal of 10%.

In just a month, AMN will celebrate its 30th anniversary. Our value space on highly engaged culture has been a significant driver of our long-standing success and results. We are proud to have been recently recognized for the third consecutive year as one of Achiever's 50 Most Engaged Workplaces. I would like to thank our very talented leaders and team members for their passion and exceptional commitments every single day in serving our clients and healthcare professionals with excellence.

I will come back to you in our Q&A session along with Ralph. And joining us today is Dan White, who was recently promoted to President of Workforce Solutions. This will be Dan's first time participating in our earnings. Call so welcome, Dan.

For now I will turn the call over to Brian.

Thank you, Susan, and good afternoon, everyone.

The Company's fourth-quarter reported revenue of $279.6 million was up 12.5% from last year and 5.7% from last quarter. This result exceeded our guidance of $265 million to $269 million driven by stronger than expected performance at all three reportable segments.

Our gross margin for the quarter was 30.3%, up 50 basis points from last year but down 10 basis points from last quarter. The year-over-year increase was due to gross margin improvement in the Nurse and Allied and Physician Permanent Placement segments with the Nurse and Allied improvement driven mainly by having a full quarter of the higher-margin ShiftWise business. The sequential decrease was due primarily to a normal seasonal decline from fewer billable hours work during the holiday as well as some reduction in the bill-to-pay spread.

SG&A expenses in the quarter totaled $61.7 million or 22.1% of revenue compared to $54.5 million in the same quarter last year and $60.3 million in the prior quarter. The year-over-year increase in SG&A was due primarily to the higher expenses associated with our information technology initiatives, higher variable expenses to support our current volume growth and future growth initiatives as well as the addition of the ShiftWise business.

The sequential increase in SG&A expenses was due primarily to the same growth related drivers including recognizing a full quarter of expenses associated with the significant addition of sales resources hired in late Q3. This increase was partially offset by a $1.8 million favorable professional liability actuarial adjustment recorded in the Locum Tenen segment.

SG&A expenses in the quarter also included approximately $400,000 of costs related to our recent acquisitions. Excluding the actuarial benefit and acquisition related expenses, SG&A was in line with expectation at 22.5% of revenue.

Our fourth-quarter Nurse and Allied segment revenue increased 16.7% from the prior year and 9.9% sequentially to $191.6 million. Volume of 6,030 average clinicians on assignment was higher by 7.5% year-over-year. The average bill rate for the segment was higher by almost 4% from last year. Nurse and Allied gross margin of 28.6% was higher year-over-year by 90 basis points but lower sequentially by 10 basis points.

Most of the year-over-year improvement was due to the full quarter inclusion of the higher margin ShiftWise business while the lower sequential gross margin was due to seasonally lower hours worked and reduced bill-to-pay spread.

Fourth-quarter Nurse and Allied segment operating margin of 12.5% was higher by 60 basis points year-over-year and by 30 basis points from the prior quarter. The year-over-year improvement was gross margin driven whereas the sequential improvement resulted from operating leverage.

Fourth-quarter Locum Tenen segment revenue of $76.2 million was up 2.8% from prior year but down 3.4% sequentially. Compared to prior year, an average bill rate increase of 6.3% was partially offset by a 4.2% decrease in the number of days filled during the quarter.

Locum Tenen gross margin of 28.8% was lower year-over-year by 110 basis points and sequentially by 20 basis points due mainly to lower bill-to-pay spreads.

Fourth-quarter Locum Tenen segment operating margin of 10.7% was higher by 80 basis points year-over-year and by 40 basis points from the prior quarter driven by the previously noted $1.8 million favorable professional liability adjustment recorded this quarter.

Our fourth-quarter Physician Perm Placement segment revenue of $11.9 million was up 13.7% year-over-year and up 3.8% sequentially. Gross margin of 66.1% was higher by 310 basis points from the prior year and 120 basis points from the prior quarter driven in part by the previously noted higher-margin executive search and project activity.

Physician Permanent Placement fourth-quarter operating margin of 23% was higher by 200 basis points year-over-year and lower by 100 basis points from the prior quarter.

Interest expense in the fourth quarter was $1.3 million which compares to $1.8 million last year and $1.4 million last quarter. Our tax rate in the fourth quarter was 44%, in line with expectations.

We reported net income of $9.9 million in the fourth quarter. Diluted earnings per share was $0.20 for the fourth quarter. Excluding the one-time transaction cost associated with the acquisitions, adjusted diluted earnings per share was $0.21. This compares to $0.17 in the prior year quarter.

Cash provided by operations was $5 million for the quarter and $27.7 million for the year. Days sales outstanding were 61 days compared to 57 days in the last quarter and 55 days last year. The increase in DSO was attributable to several factors including slower payments by a few large customers, extended billing processes for some clients utilizing third-party VMS technologies, and some unique billing requirements for several staffing projects which delayed payments.

We have not noted any change in the credit quality of our overall client base and do we expect DSO to improve during 2015.

Capital expenditures for the fourth quarter were $4.8 million and for the full year were $19.1 million. These expenditures were primarily related to investments made in conjunction with our multi-year initiative to upgrade our front and back office systems onto more scalable and efficient platforms.

The current year also included certain infrastructure upgrades required for our future state systems and to improve productivity and collaboration. As of December 31, our cash and equivalents totaled $13.1 million and our total debt outstanding was $162.4 million. The year-end leverage ratio as calculated per our credit agreement was 1.9 times to 1 as compared to 2.0 times in the prior-year.

Now let's turn to our first-quarter 2015 guidance. The Company expects consolidated first-quarter revenue of $310 million to $314 million. Gross margin is expected to be approximately 30.5%. SG&A expenses as a percentage of revenue are expected to be approximately 22.5%. This excludes any transaction or integration expenses related to the acquisition which will be separately reported during 2015.

Adjusted EBITDA margin is expected to be 8.5% to 9%. This guidance includes the expected results for Avantas for the entire quarter and the Onward Healthcare and Locum Leaders and Medefis companies from the January 7 acquisition date.

First-quarter interest expense is projected to be $1.8 million. Depreciation expense for the first quarter is projected to be $2.5 million and amortization expense is projected to be $3 million. This amortization estimate is subject to change once the valuation analysis of the amortizable intangibles for the Onward, Locum Leaders and Medefis acquisitions is finalized.

The effective tax rate for the quarter and full year is expected to be 44%.

Capital expenditures are projected to be $17 million to $18 million for the full year including $2 million to $3 million related to certain integration activities of the recently acquired companies. Non-cash stock-based compensation expense is expected to be approximately $2.1 million per quarter during 2015.

Diluted share count is projected to be 48.6 million shares for the first quarter and 48.8 million for the full year.

Before we open up the call for questions, on behalf of AMN's Board, management team and team members, we would like to say congratulations to Susan Salka. Today happens to be her 25th anniversary with AMN Healthcare. It has been terrific working with you through the years and we thank you for your passion, commitment and inspirational leadership in driving the long-standing performance of our Company.

With that, we would like to open up the call for questions.

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

Maybe just a couple of questions if I could slip them in there. First of all, fairly directed question but your guidance in Q1 obviously those are some robust growth numbers on a same-store basis. Is weather or not having any meaningful impact on the business?

Not as much as last year and we are currently estimating that the impact will be something less than $1 million for the entire quarter. You might recall last year when all was said and done we felt it had more of a $3 million to $4 million, maybe even $5 million impact. And I think it has to do with where the weather impact is occurring, not coming quite as far south and not being as widespread. But it hasn't seemed to have made the same type of impact that we saw last year.

Okay. I think you referenced in the prepared remarks as one of the drivers, things you are seeing in the underlying market is a pickup in nurse turnover. I wondered if there was some way to elaborate that or is that just sort of a qualitative sense or do you actually -- is there any place you can go and get an actual sense of the numbers that are behind that potentially?

There are some reported numbers that are out there and they show -- I guess the latest reported number that we have from the BLS goes back to November where job openings were up 20% year-over-year and the number of quits were up 25%. And so that is definitely an acceleration. We also do our own survey and we saw that nurse attrition and vacancies were up in the high teens which is definitely different than single-digit numbers that we saw five years ago. So we feel there is definitely directionally a higher attrition.

Okay. And I think, Brian, in your comments you mentioned a couple of times a little bit of a tightening on the bill pay spread. Can you maybe elaborate a little bit more on where you are seeing, if you are seeing a little bit of pressure? And then is there with the tightening demand, are you seeing the rates the hospitals are paying you for nurses start to -- your increases accelerate?

Sure, this is Brian. I will get a little color and then I will hand it over to Ralph to add some as well.

As I mentioned, we saw a little bit of compression in the bill pay spreads in the Nurse and Allied and Locum segments and I think we talked about in the last call that we would expect to see a little bit of that as we are trying to pull more supply in to meet the very robust demand environment. As we look into the first quarter, you see the gross margin guidance is up a little bit and that is a reflection of that starting to normalize a little bit. In the first quarter, we see the Locum's margins improving on the spread and we expect Nurse and Allied to see some of that as well. Ralph?

On the pricing side, we are seeing some positive things. We talked about 4% increase in the Nurse and Allied segment, 6% in the Locum's business. I would describe it as accelerating and the team is executing well and keeping prices up to market levels of course most of that does go to the physicians and the clinicians on assignment. We get some leverage still out of housing costs which don't rise as quickly and actually lately one of things that has been helpful is (inaudible) work has been a positive trend for us. That is what keeps the margin as good as it is despite maybe a little bit of short-term pressure or compression.

Okay, all right. Great. Thanks a lot.

Tim McHugh, William Blair.

Thanks. Can you just maybe first talk about kind of where we sit relative to order volumes? I guess the story kind of second half of the year was at least as I saw it was orders were outpacing even what you could fill. And I know you invested in sales recruiting resources so where do we sit at this point? Is that what we are seeing in Q1? You are capturing more or you expect to capture more of it? What does that say about the need or the desire to further invest in recruiting staff from here?

Hi, Tim, this is Ralph. I will handle that one. Yes, we are seeing demand is up more than double in our Nurse and Allied business where it was at the same time last year and doesn't show any signs of slowing down from what we have been talking about the last couple of quarters.

In that segment we are executing better against that demand. We increased the number of resources we have and I think we said it takes a while for orders to catch up to volumes and that is pretty much what you are seeing in that segment now.

On the Locum side, demand is good there too. It is up about 10% over the same point in time last year. We use a measurement called days available which in a number of shifts a doctor could work and so that is a little bit stronger than we had anticipated as well. It has been running at kind of a 7%, 8% range. We have added a significant number of recruiters and account managers and we anticipate adding more although a more stable pace of adding those recruiters and account managers than we did in Q3 of last year.

We also, one other thing I think that is a huge positive is that acquisitions are going to add to our account management recruitment workforce considerably. We do think there are some efficiency gains in their production. It is less than our normalized production and so we expect to take advantage of that and I get a little bit of leverage out of theirs. That is created of course by our MSP programs where we get the first shot at filling most of those orders and by introducing those recruiters into those accounts, I think we will see some jumps with that as well.

Okay, great. There was a comment I think Susan made it earlier about -- I think it was new MSP contracts with a $50 million expected revenue contribution once they mature. I'm not sure if I heard that right though. Can you I guess -- ?

You did, yes, you did, Tim, and we were referring to our 2014 win. A few different ways that we measure it but the most important to us is how much direct revenue AMN will capture at maturity and keep in mind that that could take 12 to 24 months from now at a time those new accounts are implemented and fully at their maturity run rate. But the actual gross spend under management for those contracts was more in the range of $100 million. And so it gives us more opportunity if we can increase our fill rates obviously we can take that $50 million and move it upwards.

It might be a good time actually, Dan, for you to comments on what we saw in the fourth quarter and how we are coming into 2015 with our MSP pipeline.

So one of the things that I want to comment before I get too far into that answer, Susan, is I just want to thank our AB network out there today because they really are the backbone of that delta between the $50 million and the $100 million that you just referred to. They really do power our capabilities a great deal.

In terms of contracts that came through in the fourth quarter, there were six MSP deals that were closed. I would characterize them really as two medium and four small sized deals.

I guess what is the pipeline -- I guess following up on what Susan asked, just as we look forward to 2015, I guess RFP opportunities as you see them?

Q1 pipeline looks also equally strong. I would say again using my small, medium, large characterization, I would say most are small but there is a few large and medium under contract today. We anticipate that the quarter will be just as good or maybe even a little bit better than what we saw in Q4. And again, I am really pleased to see that the diversity of these particular contracts continues to be quite strong.

I would say the majority of those opportunities have a good percentage of Locum Tenens in them. I think to tag onto the comment about gross spend under management, Q1 would bring us to a spend year-over-year being up by 50%.

Great, that is helpful. Thank you.

Tobey Sommer, SunTrust.

Thank you. Susan gets the silver anniversary. So congratulations. I was curious, what is your long-term EBITDA margin target? I kind of know what you have been talking about over the last several years but I wonder if you may have a new one for us that you could share?

We have our sights set on hitting the 10% first. I do think there is opportunity beyond that but we are not quite ready to publicly put the next target out there. We want to make sure we get to that 10% to sustain that for a period.

But going into the low double digits is certainly the territory that we think we ought to be in and particularly as we continue to see such strong demand and we move into more of these workforce solution businesses, they typically come with higher margins. Most of these technology businesses exceeding 20% and EBITDA margin. And even RPO business which is doing extremely well while small today as it grows, it will be a bigger contributor to our overall EBITDA margin. So those are the types of things that I think can take us above the 10% over time.

Okay. You may have mentioned this, if you did I apologize. What was pricing like particularly bill rate growth in travel nurse?

It was about 4% year-over-year.

Do you think there is momentum?

There is momentum. We see that probably increasing on a year-over-year basis going into Q1. Some of it is due to rate increases that were put into place last year and even might just now be continuing through. We may get a little bit of an uplift from some of the bill rates from very critical to fill positions where they are having challenges and the client is wanting to put a premium on the bill rate for a short period of time to ensure that they capture that supply. But that is actually a fairly small percentage of our overall orders that have that premium rate attached to it but it does certainly help when they do.

Sure. How much have you increased recruiter headcount? To the extent you can talk about it numerically because maybe there is some competitive information you don't want to convey. But could you frame it for us so we understand the size of the increase and the timing? Because I know in the third quarter call you said September was a particularly (inaudible) month. Have you hired more in a significant fashion since that time?

This is Ralph. I will handle that. We are up on a year-over-year basis about 30% on recruiter count and a lot of those people are still in their training and not in [physical] production mode yet. And a large percentage, 15%, 20% of them who actually drop out before they complete training so we will exit at a little bit less than a 30% increase in full production.

We have been keeping up with kind of that level. We are looking for opportunities to expand it all the time so the acquisition was one way to help us get there a little quicker. But we'd anticipate we continue hiring into Q2 based on no order demands right now.

At this point, can you feather them in at a lower rate and therefore demonstrate -- is it your anticipation in your projection that demonstrate leverage in 2015?

We do expect to see improved leverage throughout the year. (technical difficulty) we will say we won't want to restrain ourselves from hiring sales and support staff that we need to deliver in this high-volume business in order to accelerate that leverage. I think we can do both to answer your question at an appropriate rate.

Okay. Just two numeric questions and I will get back in the queue. What was the professional liability adjustment expressed in EPS and was there any strike revenue of note either in the fourth quarter or in first-quarter guidance?

This is Brian. I will take the first question there. The $1.8 million that we mentioned in the fourth quarter, that equates to about a $0.02 impact on our results.

And on the labor disruption question, we have seen increased activity and so in the fourth quarter we had a little under $2 million in related revenues and we are actually seeing that repeat itself in the first quarter.

Okay, I guess I want to sneak one more in. How influential is the flu season in guidance and are you concerned that order flow may be temporarily boosted by the seasonal phenomenon? Thank you.

We have seen some orders relative to flu and as best as we can, we ask our clients what the purpose of the staffing need is and whether it will sustain. And surprisingly the flu has been a very small percentage of our overall orders and we don't think that it is really lifting up the volumes in a meaningful way in the first quarter. Certainly it is a factor but it is a very small factor.

Thank you very much.

Jeff Silber, BMO Capital Markets.

This is Henry Chien calling in for Jeff. Just a quick modeling question. I don't think you guys gave out your G&A guidance for 2015 or sorry if I missed that.

Yes, this is Brian. I just gave the first quarter. The amortization expense I gave of $3 million, that would be the same for the entire year and again once we do the next call, we will have the valuation report done on the acquisitions. But we don't expect it to move much from that, if at all. The depreciation expense in the first quarter $2.5 million, that will go up a little bit as it goes through the year in part just from some of the IT initiatives we have in place as well as some of the integration activities. So we will probably exit the year closer to $2.7 million.

And this might be a little bit early but in your guidance for the first quarter, does that incorporate any revenue or earnings synergies from the recent acquisitions or is it too early to tell?

This is Brian again. For the first quarter guidance, it does not really attribute any revenue synergies. As we look through the year, we talked about it when we announce the acquisition that we do see opportunities for synergies, both revenue and cost synergies over time. Particularly the revenue synergies, as we give them access to orders and move them on to our travel Nurse and Allied platforms that will really create the biggest opportunity for synergies. The majority of that would really be seen in the very back half of the year.

We do think there is some opportunity as we move into the late end of the first quarter into the second quarter but the bigger real revenue synergy opportunities will be late in the third and into the fourth quarter.

We will obviously have a much more meaningful impact in 2016. With Avantas as an example, we are actually already seeing some terrific collaboration and we are actually able to already close a new client based on introductions and working together. So I think that is an area of focus for us across all of the new businesses. I would say that all of our workforce solutions businesses are working much more collaboratively and it is because clients are wanting to hear about multiple and different kinds of services. As we are out talking with them about the full capabilities of AMN and maybe they are interested in initially an MSP, we can also be talking with them about RPO and what we can do to help them with their permanent hiring.

Going back to the commentary earlier on attrition and vacancies, one of the reasons their temporary staffing needs may be through the roof today is because they are seeing such high turnover. And so we can be a value-added partner in helping them to address that issue while we are also helping them with their short-term needs.

Okay, that is great. Thank you.

Randy Reece, Avondale Partners.

Good afternoon. I have a question about how the professional liability adjustments affect your management of expenses. Is that something that happens after the quarter is closed and it is just an accounting exercise? Do you have any idea intra-quarter how it is going to come out? Does it affect your spending plans whatsoever?

This is Brian. Yes, you paraphrased it pretty well. It is more of an accounting exercise. We have a third party doing an actuarial study for us twice a year so June and December, we have our reserves analyzed for Nurse and Allied and the Locum segment. And so we have some insights into trends in our claims but really it is difficult to use that to predict exactly what the adjustment is going to be.

So we don't typically factor that into our guidance for the quarter and we certainly don't layer it into our spending plans because our views are typically longer term. So we don't really know that number until the end of the quarter which we found out early January what the fourth quarter adjustment was going to be. And it was more than we anticipated but that is the positive we are seeing claims settle at lower amount sense we will always take that kind of a trend.

So under the covers here, you still have a very robust surge in spending presumably in advance of anticipated revenue growth. Is that correct?

No, I think our spend -- we talked about for the fourth quarter what our percentage of revenue and it came in right in line with that. So if you look at the third quarter to fourth quarter SG&A, it went up some which was really driven by the additional sales resources that we hired, additional commissions on higher revenue. There weren't really any other major changes from the third to the fourth quarter. And as we look into the first quarter, the guidance we gave for the SG&A as a percentage of revenue, it really implies not a big change in the SG&A from Q4 to Q1. The increase is really driven more from the acquired companies.

You talked about the flu effect. My observation, direct observation, in the hospital with regard to the flu effect on staffing, is it these facilities can't and don't and are unwilling to adjust nearly as quickly as their populations change? And everything I saw was running way understaffed which seems to have future implications for staff turnover. Am I interpreting that right? Is this sort of experience going to have a tail in terms of elevated turnover over the next few quarters?

Yes, Randy, I think you are interpreting that exactly right. Burn out and having too heavy of a patient load are some of the top reasons why nurses leave their jobs because it has become too much for them. And so it becomes somewhat of a vicious cycle for clients unfortunately when they are understaffed that it can drive more attrition which leads to greater need for both permanent and temporary staff. So I don't think we have seen the end of this anytime soon and in fact, I think it is one of the reasons we are seeing such strong demand for all of our services including, as I mentioned, RPO, which really gets to the core staffing needs that they have going forward.

I also agree with you that I don't think that they adjust their staffing too much for flu. If they do, it is through the per diem business and getting local staff to work on an as needed basis because they don't know how long the flu season is going to last. Just because census goes up for a week or two for flu, they are not going to hire a traveler for that.

In fact, the travelers are probably going to -- the travelers that they are procuring from us today, are not likely going to start for another month and then they will be there for three months. So the orders that we are seeing today would not likely be flu related because hospitals know that the flu season is going to be over by likely by the end of February. So I think you are seeing it exactly right, Randy.

Thank you very much.

Mark Marcon, Robert W Baird.

Good afternoon and let me throw in my congratulations as well as happy anniversary. So in terms of your actual headcount, I guess we will see it when the 10-K comes out but can you give us a sense for what your internal headcount is now?

At the end of the year, it was around 1800. Obviously it will be a little bit higher, it will be higher from the recent acquisitions as well. We will add another 200 and change from the Onward, Locum Leader and Medefis and Avantas companies as well so we are probably closer to 2100, 2200 at this point.

How are you thinking about growing that over the course of the year? Obviously it was accelerated in September. How should we think about that?

The primary growth will come in the sales resources and support service areas and that will be in conjunction with anticipated revenue growth. So I would consider those to be variable but we do have to hire in advance due to the training cycle and ramp time to get those people up to speed and be productive in their roles.

Then as Ralph mentioned earlier, we have now the benefit of the teams at Onward and Locum Leader who are doing a fabulous job but we think we can help them be even more productive and have higher traveler accounts per recruiter by getting them onto our systems and introduced to our MSP accounts. There is no reason they should not be at the same higher productivity levels as the other AMN recruiters.

And so I think we will have the benefit of not having to hire as many recruiters as we would otherwise because of the acquisitions. And what is fantastic is those are very experienced and talented recruiters. So I think that their ramp time to get on to our systems will be very fast.

In terms of the fill rate off of your MSP programs in terms of what your direct fill could go from and to, how should we think about that with those additions?

Yes, Mark, this is Ralph. I will answer that one. The fill rates when orders jump like this to this extent are trended down just a little bit so while they are still a lot higher than our traditional fill rates they are a little bit less than they were kind of at the same time period last year when orders were less than half of what we have.

So there is quite a bit of upside in fill rate there. And an average recruiter takes -- to get to average production rates as Susan said, in 12 to 18 months so probably 10 of that timeframe before these recruiters have the same kind of effect as their counterparts who have been with us for a long time. You are right in that there is upside, it just takes us a while to get there.

And with regards to just the behavior that you are seeing in terms of the travelers, can you comment a little bit in terms of the willingness to travel, the number of nurses that are registering with you?

Yes, we have seen positive trends on the number of people that are applying -- I will start there. But our travelers come from three different groups. They are people who are rebooking, people who are [labs] who use to travel and are coming back into the industry and then new supply which we have recruited and hasn't worked for us before. We are seeing increases in all three which is great news. So the people who are already traveling like it, people who used to travel are coming back, and people who have never traveled are beginning to with greater numbers.

That new category is the fastest growing category of the three so those are all positive signs.

It is still insufficient to keep up with the demand levels. I would love to say that we could double the business but there is still some caution and the wages were kind of flat for several years due to the recession. So I think as pricing has begun to move up in the last few quarters, that will attract more people back into the industry. You will see the type of improvement we had in the last couple of quarters continue.

That is terrific. You mentioned the DSOs earlier. Where do you think they could go to?

This is Brian. I think we can go down from where it is at 61. I am reticent to put an exact target there. We have already seen I kind of mentioned a couple of different factors, one being a couple of larger clients that were just a little slower in paying. A couple of those have already gone back to current again so that already would move the DSO down by a day or so.

I think we can move it down by a few days this year but I also recognize that we are in a growth mode and there are certain things that are not completely in our control that our clients are interfacing with VNS technology and they have to interact with it, approve certain things that we have to keep educating and training our clients on how to use the technology appropriately and that will take some time as well.

So I think we will continue to move it down a little bit over the year but the 55 that we had last year is going to be probably a stretch to get to in the near term.

Okay. And where do you anticipate total debt being at the close of the quarter?

We will be at about $240 million or so. We had $142 million on our existing facility and we borrowed a revolver for the acquisition. We may pay down a little bit of that by the end of the quarter but right around the $240 million range.

Great. Can you just give us some anecdotal color with regards to the reaction of clients to the acquisitions?

It has been very positive. As I mentioned just starting with the first acquisition that we closed, Avantas, we have already been able to share several contacts and leads and I myself have been in meetings with clients where we have talked about this capability and their eyes light up and they get very interested and very much want to include that as at least a potential solution that we bring to the table. And so I think a lot of great opportunity there between the organizations.

And then regarding Onward and Locum Leaders, a lot of positive response about us being able to just do that much more to serve the needs of our clients. It immediately bolsters our supply, gives us more power on the recruitment front, more capabilities there.

And then Medefis, Medefis has just done an outstanding job in building their business and they in fact as well as ShiftWise are having the best quarters the companies have ever seen and are coming into the first quarter very strong. And what is fantastic is they approach the market in a slightly different way. They are trying to solve the same problem but they have different features and ways that they deliver their technology and their solutions that are going to appeal to different clients.

And so we are able to as appropriate bring both solutions to the table or sometimes it may just be obvious which solution is better for the clients. And what is really, really rewarding is when you can go to a client and say we just want to serve your needs and help you achieve your goal and we have multiple solutions and ways that we can help them do that. Medefis is just one more offering that can help them solve their problems in a different way.

So it has been extremely positive and I will also say the collaboration between the team members at those companies and the AMN team members has also been exceptionally strong. As you know, we have been through several of these integrations before and so it is helpful that we have got a playbook and we have a good history of walking through these things. But the willingness and the sheer talent of the teams is the most critical part in the success.

And I have been in a few of the integration meetings as the teams have come together and it is a very, very impressive group of people on all sides of the table and that is to me the most important ingredient for us to really get the benefit and synergies out of these businesses.

That is great to hear. Congratulations.

Tobey Sommer, SunTrust.

I was just hoping you could repeat the itemized guidance details that aren't in the press release because my penmanship wasn't quite quick enough to get all of that down.

Sure. This is Brian. Give me one second.

Tobey, are you asking about the individual segments?

No, the small items down the P&L, depreciation, amortization.

Sure, this is Brian. The interest expense I said $1.8 million for the quarter; depreciation $2.5 million; amortization $3 million; tax rate 44%; non-cash stock-based compensation expense $2.1 million; and share count $48.6 million for the first quarter, $48.8 million for the full year.

Okay. Thank you very much.

At this time there are no further questions.

Terrific. Thank you everyone for joining us today and for your continued support of AMN. We look forward to updating you on our progress next quarter.

Ladies and gentlemen, that does conclude your conference for today. Thank you for your participation and for using AT&T Executive Teleconference. You may now disconnect.