AMN Healthcare Services Inc (AMN) 2015 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by. And welcome to the AMN Healthcare first-quarter 2015 earnings conference. 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) Also, as a reminder, today's teleconference is being recorded.

At this time, I will turn the conference over to your host, Vice President of Investor Relations, Ms. Amy Chang. Please go ahead.

Thank you, Tony. Good afternoon, everyone. Welcome to AMN Healthcare's first-quarter 2015 earnings call. A replay of this webcast will be available until May 21, 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, planned, 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 31, 2014, 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 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 Developments subsequent to this call may cause these statements to become outdated.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. 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 first-quarter 2015 earnings conference call. I am extremely pleased with the performance of the AMN team, particularly during a time when our clients are struggling to predict and keep up with patient volume and are seeking more strategic solutions to address their workforce challenges.

Driven by the strong market dynamic and execution of our team, AMN delivered higher than expected revenue and profitability during the first quarter. Consolidated revenue grew 36%, and adjusted EBITDA grew 58% year over year. Excluding the impact of our recent acquisitions, first-quarter revenue grew 22% and adjusted EBITDA grew 39% year over year. Consolidated adjusted EBITDA margin was 10.2%, an increase of 140 basis points over prior year.

The EBITDA improvement was driven by both the operating leverage achieved through the rapid revenue growth and an improved overall gross margin. The greater than expected revenue performance was due to a robust market across all businesses and stronger performance across all staffing divisions, including our newly acquired company. In addition, our RPO and EMS businesses delivered higher than expected growth. In contrast to last year, when top-line growth slowed during the first quarter, this year we saw an acceleration of revenue.

We are near historically high demand levels across all businesses, and the macro drivers appear unlikely to change in the near term. The US economy continues to show stability, particularly from an employment standpoint. Hospital and ambulatory care providers are experiencing increased volumes due to the aging population and millions of newly insured patients. The clinician shortages are becoming more severe, particularly as more of them reach retirement age.

With the return to a supply-constrained marketplace, AMN is very focused on increasing our recruitment capabilities. The addition of Onward Healthcare and Locum Leaders has bolstered our recruitment capacity and candidate supply amidst a rising demand. We have already seen successful internal order sharing and placements across the Company. We are also seeing the benefits from the expansion of our recruitment team as well as the investments we have been making in our digital marketing capabilities.

During this trend, where demand for healthcare professionals is outpacing supply, AMN's workforce solutions are well positioned to help clients cost-effectively address their temporary and permanent recruitment challenges. For example, in NSP contracts, clients can exclusively outsource their supplemental staffing to AMN in order to gain efficiency, accountability, and higher fill rates.

For clients who want a do-it-yourself approach, AMN offers two vendor-neutral VMS technologies: ShiftWise, and Medefis. Through these online VMS platforms, clients can access a wide network of staffing suppliers to manage and fill their supplemental staffing needs. In total, AMN has annual growth spend under management of over $1 billion running through VMS and MSP contracts. It is clear that these workforce solutions are increasingly enabling clients to effectively manage and deploy their contingent labor.

In addition to demand for contingent workforce solutions, we are experiencing significantly greater interest in our RPO offering, where clients outsource the recruitment of their permanent placement needs. We anticipate this trend to continue driven by the dynamics of increased demand for healthcare services, higher clinician turnover, and the improved economy. As healthcare providers continuing to consolidate and form integrated networks, it has become more important for them to optimize their entire workforce, particularly since clinical labor makes up at least half of a hospital's budget.

Through Avantas, AMN provides workforce consulting solutions to optimize our client clients' labor planning through analytics, predictive modeling, and scheduling technology to achieve their patient care and cost reduction goals.

Now, let's review the first-quarter result and outlook for each of our three business segments. In our largest segment of nurse and allied staffing, first-quarter revenue rose 40% year over year and 20% sequentially. On an organic basis, year-over-year revenue growth was 24% for this segment. A significant contributor of this performance was the travel nurse business, which experienced a first-quarter revenue increase year over year of 38%, driven largely by organic growth of 28%. The remainder came from the recent acquisition of Onward Healthcare, which is also performing exceptionally well. Order levels continue to be more than double compared to prior year. For the second quarter, we expect travel nurse revenue to be up over 35% year over year and 25% on an organic basis.

In our allied staffing business, first-quarter revenue grew 56% year over year, with organic growth of 25%. The remainder came from the acquisition of Onward, which is also performing extremely well in allied. Demand is up significantly year over year across the therapy, imaging, and lab specialties, with therapy order levels more than double compared to prior year. We continue to make great progress with MSP penetration in this business, with MSPs now representing approximately 30% of our allied revenue.

For the second quarter, we expect allied staffing to be up over 50% year over year and 20% excluding the impact of the Onward acquisition. Our ShiftWise, Medefis, Avantas, and RPO businesses, which are also included in this segment, are experiencing very strong year-over-year revenue and profitability growth. This performance enables us to continue investing in these business to ensure we are delivering greater value to our clients and our staffing suppliers.

Overall, for the nurse and allied staffing segment, we expect second-quarter revenues to be up approximately 40% year over year and 20% on an organic basis.

Now turning to Locum Tenens, first-quarter revenue was up 30% year over year, driven by 19% organic growth. The remainder came from the acquisition of Locum Leaders, which is also performing well. The year-over-year growth was broad-based across most specialties, with the hospitalists, internal medicine, primary care, and advanced practice specialties making up the largest portion. Locum's MSP continues to gain momentum, comprising about 15% of Locum's revenue, with several additional opportunities in the pipeline. For the second quarter, we anticipate Locum revenues will be up approximately 25% year over year and 15% on an organic basis.

In our physician permanent placement segment, first-quarter revenue was up 11% year over year and down 1% sequentially. The strong year-over-year growth was driven mainly by increased search and placement volumes. The slight sequential decrease was due to the fourth quarter having more high-value executive search placements and project activity. Performance remains strong going into the second quarter, and revenue is expected to be up approximately 10% year over year.

As healthcare continues to undergo dramatic transformation, the appetite to adopt strategic outsourced services is growing. Our portfolio of innovative workforce solutions is a cornerstone of AMS strategy. Each of these solutions -- MSP, VMS, RPO, and workforce consulting -- address significant current and future pain points for healthcare organizations. More than ever, our clients are using multiple workforce solutions and staffing services, increasing the strategic value we contribute.

While we are pleased with where we are positioned today, we will continue our evolution and will be a opportunistically looking at acquisitions in the areas of new workforce solutions and emerging healthcare roles.

The strong performance we are reporting today is only made possible through the talent and passion of our team members and leaders. I would think like to thank all of my AMN colleagues for their outstanding execution and exceptional commitment in serving our clients and healthcare professionals every single day.

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

Thank you, Susan. Good afternoon, everyone. The Company's first-quarter reported revenue of $327.5 million was up 36% from last year and 17.1% from last quarter. This result exceeded our guidance by approximately 5%.

Our gross margin for the quarter was 31%, up 30 basis points from last year and 70 basis points from last quarter. The improvement was due in large part to an increase in the mix of our higher-margin workforce solution, particularly RPO and the recently acquired Medefis, VMS, and Advantis businesses.

SG&A expenses in the quarter totaled $71.6 million, or 21.8% of revenue, compared to $54.7 million in the same quarter last year and $61.7 million in the prior quarter. The year-over-year increase in SG&A was due primarily to the addition of $7 million of SG&A from the recent acquisition and higher variable expenses to support our growth. The sequential increase in SG&A was due primarily to the acquisitions as well as the prior quarter including a $1.8 million favorable professional liability adjustment recorded in the Locum Tenens segment. SG&A expenses in the quarter also included approximately $1.1 million of acquisition and integration costs, which compares to about $400,000 last quarter. SG&A in the second quarter is expected to rise, due to the impact of hiring additional sales and service team members to support the revenue growth.

Our first-quarter nurse and allied segment revenue increased 40% from the prior year and 19.6% sequentially to $229 million. Volume up 7,223 average clinicians in assignment was higher by 28.2% year over year. Of this volume increase, about 12% was organic growth, with the remainder coming from the Onward acquisition. The average bill rate for the segment was higher by approximately 7% over last year.

Nurse and allied gross margin of 29.8% was higher year over year by 80 basis points and sequentially by 120 basis points. Most of this improvement was due to the previously noted increase in the mix of our higher-margin workforce solutions as well as the current quarter's $600,000 favorable workers' compensation actuarial adjustment.

For our traditional travel nurse and allied staffing businesses in this segment, gross margins were relatively stable. First-quarter nurse and allied segment operating margin of 13.9% was 170 basis points higher year over year and 140 basis points higher than prior quarter. The improvements resulted from a combination of both gross margin expansion and improved operating leverage.

First-quarter Locum Tenens segment revenue of $86.7 million was up 29.6% from prior year and 13.8% sequentially. The year-over-year growth was driven by an approximately 7% increase in the average bill rate and a 21.3% increase in the number of days filled during the quarter. The days-filled volume growth came from 12% organic growth, with a balance on the acquisition of Locum Leaders. Locum Tenens gross margin of 29.4% was lower year over year by 50 basis points but higher sequentially by 60 basis points, with the sequential increase driven by improved bill-to-pay spread.

First-quarter Locum Tenens segment operating margin of 10.5% was higher by 20 basis points year over year but lower by 20 basis points from the prior quarter. The year-over-year improvement was a result of operating leverage. The sequential decline was a result of the prior quarter, including a $1.8 million favorable professional liability adjustment, which more than offset the gross margin and operating leverage improvement.

Our first-quarter physician permanent placement segment revenue of $11.8 million was up 11.5% year over year and down 1.2% sequentially. Gross margin of 65.7% was higher by 270 basis points from the prior year and lower by 40 basis points in the prior quarter. The increased gross margin compared to prior year was primarily a result of higher recruiter productivity.

Physician permanent placement first-quarter operating margin of 27.8% was higher by 760 basis points year over year and by 480 basis points from the prior quarter.

Interest expense in the first quarter was $1.8 million, which compares to $1.8 million last year and $1.3 million last quarter. The sequential increase resulted from the higher debt balance as a result of the recent acquisition. In early April, we executed a three-year interest rate swap to reduce our exposure to interest rate fluctuations. This swap fixes the variable rate on $100 million of our debt at just under 1%.

Our tax rate in the first quarter was 46.9%, which was higher than our projected rate of 44% due to an adjustment to our tax reserves in the quarter. Our projected tax rate for the second quarter is 44%.

We reported net income of $12.2 million and diluted earnings per share of $0.25 for the first quarter. Excluding acquisition and integration expenses, as well as intangible asset amortization expenses of $2.9 million, adjusted earnings per share was $0.30. This compares to an adjusted earnings per share of $0.18 in the prior-year quarter.

This is the first quarter that we have excluded intangible asset amortization expense in calculating adjusted earnings per share, and we will continue with this reporting measure going forward.

Cash provided by operations was $8.7 million for the quarter. Day sales outstanding were 61 days, compared to 61 days last quarter and 56 days last year. Excluding the impact of the acquisitions, DSO would have been 60 days in the quarter.

Capital expenditures for the first quarter were $6.4 million, which includes approximately $500,000 related to migrating the acquired companies onto our infrastructure and systems. As of March 31, our cash equivalents totaled $11.6 million, and our total debt outstanding was $238 million. The quarter-end leverage ratio as calculated per our credit agreement was 2.2 times to one, as compared to 2.0 times in the prior year.

Now let's turn to second-quarter 2015 guidance. The Company expects consolidated revenue of $335 million to $340 million. Gross margin is expected to be 30.5% to 31%. SG&A expenses as a percentage of revenue are expected to be 22% to 22.5%. Included in SG&A is approximately $1 million of acquisition and integration expenses. Adjusted EBITDA margins is expected to be approximately 9.5%. Other estimates include intangible asset amortization of $2.9 million, depreciation expense of $2.5 million, interest expense of $2.0 million, and stock compensation expense of $2.1 million. Diluted share count is projected to be 48.9 million shares for the second quarter.

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

(Operator Instructions) AJ Rice, UBS.

This is Brandon (inaudible) here for AJ. I was wondering if you could just give an update on what you are seeing at the hospital level in terms of vacancy rates and nurse turnover. And just the progression of that over the course of last couple of quarters would be helpful.

Sure, Brandon. Thanks for the question. The most recent public data that is out there is provided by the BLS; it is the (inaudible) state, and I think it is February is the last report they show. Job openings up 25% year over year within healthcare, and the number of quits up about 19%. And I wouldn't be surprised if it has gone up since then, based on what we are anecdotally hearing from our clients.

And what is driving demand for not only the temporary staffing services, but also the demand for our recruitment process outsourcing services. We have seen a tremendous increase in the appetite for assistance in permanent placement. So I would have to say that that has got to be a big driver as those clients think about how they are going to address those permanent recruitment challenges, not just in the short-term, but on a longer-term basis.

And just one follow-up. On the MSP side, can you remind us where you are at on the nurse side in terms of penetration? I know you gave (inaudible) in a couple of other your segments. And then just what you are seeing from a contract activity there in terms of any sizable contracts may be coming online and going forward here.

Sure, Brandon. So our penetration within the travel nurse business is around 45%, 46%. It can fluctuate a little bit. And it has actually come down just a tad, but that is not because the MSP business has declined. It has been more because of the incredible growth we have seen in the traditional market, the non-MSP business where we have customers who maybe haven't used travelers for many years that are coming back into the market.

I think we mentioned last call back that our orders from traditional clients has gone up dramatically, the number of hospitals that have orders is double over prior years. The number of units that have orders are double over prior years. So that is really driving, I think, a broader, more diversified demand.

And I will let Dan update you on our MSP win activity as well as what is in the pipeline.

Thanks, Susan. And Brandon, thanks for the question. This is Dan. But before I answer your specific question about new deals, I just want to make sure everybody hears our number one priority with our MSP, and other workforce solutions for that matter, are existing accounts. Trying to help them get through this tough circumstance, helping them with even cross-selling, bringing in RPO when they might need it. So that is our first and highest priority. So we are getting new add-on deals, but I am not counting in the figures I am going to give you now.

We have solid performance from our MSP sales team, winning five new MSP deals. One happened to be a synergy win with Avantas, so we are really excited about that. As I said, it is a solid mix of disciplines, Locums, allied nursing, all included. Q2 fields, also just as good or maybe even better than Q1 on what we have in contracting now. I can see in the near term to large, one medium, three small, somewhere in that neighborhood. Again, the majority of all of those in the pipeline are multi-disciplined as well. So, again, solid performance; feeling really good about our MSP sales group.

Tobey Sommer, SunTrust.

Susan, you have done some acquisitions recently, and the business appears to be really clicking along with the market. Are there things that you can do strategically to leapfrog or kind of put even more space between yourselves and the competition? And how do you think about that?

As Dan mentioned, we are very focused on finding ways to help our current and soon-to-be clients in multiple ways. We have more and more clients that are using multiple workforce solutions and multiple staffing service lines from us. And I think that is a differentiator for AMN. No other organization has quite the breadth and depth of capabilities to help these healthcare organizations across both their contingent and permanent staffing needs across multiple disciplines. So we need to make sure we look at that as our first and best opportunity to continue to find ways to help them.

And secondly is to continue to look at additional new workforce solutions or staffing services where we may have gaps today or may just have an opportunity to assist our clients in a more holistic way. And I don't necessarily want to get into naming those for competitive reasons. But we do believe that there are those kind of opportunities out there, and we will continue to pursue them.

Okay. In the Locums business, how has the adoption rate improved versus a year or a couple of years ago? I think I heard you say 15% of sales. And is there continued room for bill rate and bill pay spread expansion there?

Yes. I will start with that, and ask Ralph to jump in. But absolutely, we have seen continued adoption and existing MSP clients that are very pleased with the services and have certainly seen the value and continue to expand our services into other areas. As Dan mentioned, one of our largest wins in the first quarter for MSP was with a Locums client. And as we look at our pipeline going forward, we expect to continue winning more Locums-related MSPs.

So I would say the momentum has increased that penetration rate. We would expect to absolutely go up as we continue through the year. And, as you saw in our numbers, it is not affecting our bill rate in the Locums segment. In fact, we see increases in the areas even where we have greater penetration within MSP. So, Ralph, do you want to comment more on that?

Yes, and I definitely wanted to add a little bit of flavor on MSP. The Locums business has accomplished quite a bit of a turnaround. And seeing the type of growth they are seeing this quarter, I think, is the most substantial that they have had since we acquired the company, gosh, almost eight or nine years ago now. So that is a direct result of us getting more involved in the Locums space in MSP. As Susan mentioned, at 15%, it is probably just the tip of the iceberg of what it could be. It takes a little bit longer to develop in this business because the credentialing, onboarding, and privileging processes can run 90 days to even double that in some facilities.

So we are steadily heading there and think very pleased with the progress. As Dan mentioned, one of our big wins this quarter was in Locums. So we are adding to the customers. And then even existing customers continue to expand their programs to regions and markets that we weren't previously. And so no telling where the end of it is. I guess we are at 45%, 46% in nursing and expect that Locums can get there as well.

On the pricing side, I think it is a great question. I've said a couple of times on the call before that we have done a great job. We continue to move pricing up this quarter. We moved pricing up in Locums by about 7 percentage points, and we improved our spreads just a little bit. And I think there is further opportunity there to get this business into the 32%, maybe even 33% gross margin from where it's at today in the 30s -- at 30%.

Okay. My last question is, how do you think about sales generating headcount and adding to it in this kind of market? And what sort of growth do you have year over year at this point?

On the last call, we only talked about recruiters. I think I will broaden it and talk about recruiters and account managers as well. It takes people to service the client, as Dan was talking about. So currently we are up about 30% year over year, and our total producer horsepower, I guess, would be a good way to describe it. We have over 1,000 people have who are in those types of roles.

And we are, as Brian mentioned, on the expense side we're going to make some additional investments in Q2 to increase our headcount probably by about another 10% there. We are finding the talent, and we are getting them onboarded and up to speed at a faster pace than I think even we anticipated. So it helps to have a good, strong demand market. They have a tailwind. They work for a great brand name. We have a great recruitment and sourcing organization to provide them with just the right candidates at the right time. So that helps them get off the ground a lot faster. So we are confident that that has been working well, so we're going to continue to make those investments.

Thank you very much.

Jeff Silber, BMO.

It is Henry Chien calling in for Jeff. I was hoping you could comment on maybe what drove the upside versus your prior guidance in the quarter, whether that was just orders above expectations or prices. And then how much of that is incorporated in your second-quarter guidance?

Henry, I think it wasn't any one thing. The good news is we saw greater than expected performance across all of our businesses -- nursing, allied, physician, and permanent placement. And I think it is a combination of the market itself being extremely robust and accelerating through the quarter, which was a bit of a surprise to us, especially considering last year. Remember, it actually decelerated a bit.

And on top of that, really, the caliber and quality of our winning team. We have incredible leaders and team members. And even though we have added more to that recently, we also have the benefit of a lot of experienced and tenured individuals who know what it takes to perform well in this kind of market. And so I think they were able to convert that market opportunity very quickly.

We also were able to be the beneficiary of a lot of cross-selling opportunities. As we have been able to build strong relationships, particularly within our MSP clients, we have definitely gotten more traction on our ability to cross-sell multiple service lines and multiple workforce solutions. So a couple of the upside pieces came from additions of these services or, say, RPO that came a little bit later in the quarter and came a bit faster than we expected. And, again, great news: they are continuing as we move forward. It wasn't a one -- necessarily a one-time project. I am thinking of one of the RPO deals we did, which is a multi-year, multi-million-dollar project.

Got it. Thanks for the color. And you talked about sales count. What are your thoughts on recruiter headcount for the rest of the year?

We are going to continue to watch orders very carefully. I think we probably, in Q2 -- I already talked about adding about 10% there. We have to integrate and get our new Onward company onto our technology platform, which will be a huge benefit to us and will make those recruiters more productive. So we may slow down a little bit there for a while. And so we will assess Q3 at a later date. But I would suspect that we saw that the same demand trends, fill opportunities that we have in all of our business, that we probably make a similar investment in Q2.

Tim McHugh, William Blair.

It is Stephen Sheldon in for Tim. First, you had a really strong margin lift here in the first quarter, but it looks like you are assuming only a very moderate year-over-year increase in the second quarter. And you mentioned that you were planning on ramping hiring. But is there anything else to point out for why we shouldn't expect kind of a bigger margin lift in the second quarter?

This is Brian. We talked about this. If you look at the guidance for the second quarter, we have the gross margin range just slightly down from the first quarter. But we do have the SG&A going up a little bit as well. And we talked about the investments we made. Quite honestly, in the first quarter, we saw that acceleration of revenue, and we are still kind of catching up internally to catch all that additional volume. And so we are not only investing in growth forward, as Ralph mentioned, but also making sure we have the right support resources to really deliver great service to our clients.

So there is a little bit of that in the second quarter as you see the SG&A going back up a little bit in Q2. We think it is really critical to make sure we are delivering really high service as well.

If you look year-over-year, the second quarter of last year did have an actuarial benefit on professional liability. So our EBITDA margins actually are expanding more than it would indicate. We were more in the mid-8's last year if you exclude that actuarial adjustment. We don't have any estimate of an adjustment in the second quarter. So we are seeing really nice leverage year over year. It may not show up so much just versus the reporting results.

Okay. That's helpful. And then on the Locum Tenens MSP side, you talked about the strong growth and the strong pipeline, but I'm just curious if there has been any change in the way your competitors or partners have been responding to MSP adoption. Have you been seeing less pushback from them, or just any color there?

Hi, Stephen. This is Dan. I wouldn't say we are seeing any changes in particular. So we have, obviously, a few participants in the marketplace who don't believe in MSP, and there are a decent number like us that do believe in it. And so for those that believe in it and for those customers, in particular, that believe in it, we are seeing a great deal of success. So I wouldn't really necessarily talk about it as being different than last quarter, and I don't expect it to change much in the next quarter. But we are certainly taking advantage of those people who want to be adopters now.

Randy Reese, Avondale Partners.

You have assembled quite a portfolio of solutions now and have the vision of helping clients achieve more labor force flexibility. I am wondering how long it is going to take for you to take what you have assembled and forge something of an integrated solution.

That is a terrific question, Randy. And I don't know that we have a concrete answer to give you of when we would have a completely end-to-end solution for those clients that want that because there are technology interfaces that would be required to connect all of those dots. But what we can do, and are doing today, is bring that portfolio of solutions forward to our clients, both when we are talking with them about our complete capabilities, but also --. And it does matter to them because while they might not need all of those services today, they are looking forward as well. And they want to work with a partner that can help them not just today, but that can help them in more sophisticated ways two, three, five years from now. Because they know their workforce challenges are only going to be more difficult.

And because we do at least have these different solutions under one umbrella or roof, if you will, we can coordinate them. So they may not be quite as seamless as we would like them eventually to be, but they are well coordinated internally. So from the client's standpoint, they can see us as one organization delivering these services.

Dan, since you have got experience out there with the clients every day, what are you hearing?

I think a -- excuse me. This is Dan, Randy. I think a great example of the coordination discussion that Susan just had with you is the synergy win I talked about earlier. So with Avantas being inside the customer, understanding what their needs are, predicting what those needs should be, it was easy for them to say, you need some help with contingent labor and we have got a great program here with MSP that could really help fulfill that. So this notion of coordinating is probably a lot more powerful than you might think about it. It doesn't have to be integrated technology for us to make a huge impact on a customer.

Have you seen any clients trying to make, let's say, a harder choice between investing more internally in their own recruiting capability and outsourcing more in the various ways you can do that, including RPO?

Randy, this is Dan again. I see that every day with every customer I talk to. They have a debate about, do I add resources to my core staff or do I go with a proven partner who has that capability to flex up and flex down. This wonderful market environment where I am right now is not going to last forever.

And so we know that -- and they know, more importantly -- they know that is ability to flex up and down, particularly in RPO, is something that they need to take advantage of. So they are always going to keep a small, core staff, but they are very likely to leverage a firm like ours to go through these big spikes.

Mitra (inaudible).

Just a few questions. First, I was wondering -- coming back to the Onward acquisition, I know you have only had one quarter. But how would you characterize it in terms of your expectations? And as it relates to the synergies, is it more 2016 benefit for you, or would it be even earlier this year?

That is an easy answer, Mitra. Thank you for asking it. One word: fantastic. The Onward, Locum Leaders, Medefis, and Avantas teams have really done a fantastic job of embracing the AMN organization and performing exceptionally well beyond, I think, their expectations and beyond our expectations.

Now, I have to say, they were already performing very well. When we look at their results from last year, they were as good, if not, in a couple cases, a little bit better than AMN's results. So they were already entering as a high-performance team. But when they embraced the AMN opportunity, it helped them to grow even more.

I will actually asked Ralph to add any other color since most of those organizations report up through him.

Yes. I think from both a top-line and a bottom-line perspective, it is better than we anticipated, probably even better than the model that the bankers gave us, which is pretty unusual. So they've really done a great job. We really like their leadership team. They participated and have been very hands-on, I guess, in our integration activities.

I think if you're looking for some success stories, we had anticipated to start to see some revenue synergies in the second half or late, even possibly in the fourth quarter. But we are already about double the number of travelers that we were cross-sold into our MSP program. And then what we anticipate at being at year end. So we are way ahead of schedule on that part of it.

And, like I said, we just -- we find out more and more about the talent on that team every day, and very, very pleased with how that is going. Locums Leaders has also exceeded our expectations, both the top line and bottom line. And we are starting to see the benefits of having another Locums brand as well in fulfilling our MSP requirements.

Medefis had an outstanding first quarter; certainly a record high, as you would expect. They are growing so fast and really outperformed anyone's expectations, both in top line but also in bottom-line. And so we were very proud of them. Avantas, which is part of the workforce solutions team, as Dan mentioned, is performing very well. But as importantly, they are helping us make high-level connections across the business, and that is extremely valuable to us.

I really appreciate the color. And it sounds like a great fit. And I'm just wondering, in terms of more types of these opportunities that are out there, is this pretty much one of those that you were pretty lucky to get? Or are there several more that you can probably capitalize on?

I do think we were fortunate. But as we look forward and we think about additional components to add on to the AMN organization, I think I mentioned earlier, there are most likely to be focused in the areas of workforce solutions and areas that we don't already have capabilities. And then, secondly, in new staffing capabilities within healthcare, where we may not currently be providing services.

And particularly within our MSP clients, there are often areas of staffing that they are asking us to provide that we just don't have the capability to do internally. And so we end up outsourcing those or subcontracting them to affiliate vendors. Would obviously be better for us and our shareholders if we could keep that internally as direct revenue. So we will be looking at areas where we can kind of fill in some of those gaps.

Okay. Thanks. And is it fair to say the strength you are seeing in the business is pretty much across the board as related to the specialties, but also to geographies? Or are there pockets that you are trying to focus on?

On the specialty side in the nursing business, it is the usual suspects -- telemetry, ICU. But we have seen an increase in MedSurg orders. They are up with more than double year over year. On the physician side, it is in line with a lot of our MSP wins -- hospitals, ER, surgery, a lot of the internal medicine specialties as well. So we are seeing that.

Geographically, (inaudible) similar to our business was California, Texas, New York, Washington, all being some of the biggest pockets of growth. So it matches well to our database. As Susan mentioned, we are seeing some orders from clients that are in states where we hadn't done business before. And interestingly, we have been able to fill those jobs is that the strength of our recruitment database that we just kind of Those people active during the slower times. So had a lot of success in new states as well.

Thanks. And, finally, I know, Susan, in the past you have talked about as a result of the healthcare reform, new positions being created. And I was just wondering if you are increasingly seeing that become evident for you.

Yes, we are. We continue to see increased demand in some of the what we would call future roles, even though they actually exist today. There are things that are going to be more important going forward. So, areas like case management; nurse navigators; telehealth capabilities or skills by our professionals within our Locums business, we certainly have seen an increase in the demand for telehealth physicians. Even though it is small today relative to five years ago, when it was nonexistent, it is absolutely growing.

So we would expect to continue to see those kinds of trends, which is why we are also focused on the kinds of clinicians we are recruiting and making sure that they have the right skill set for the future. We also, as you know, launched the center, which is focused on working with our clients to develop unique training programs to help them create that future workforce, whether it be for the temporary workforce or for permanent positions.

Mark Marcon, RW Baird.

With regards to the integration of the new acquisitions, when do you think that would probably be completed?

We will be largely complete by the end of the second quarter, early third quarter. As Ralph mentioned, we will be going through an integration of their teams onto our front office platform. There is a little bit of that going on now in sharing of orders, which is why we are getting some early revenue synergies. But the more comprehensive integration into our systems will occur midyear.

We have done this many times, so we take it seriously every time, but we have a lot of experience in bringing those teams onto our technologies. And we actually have a whole integration team that goes out there and works with them and trains them through the process to minimize any sort of disruption. So really, by the end of the third quarter we would consider ourselves pretty fully integrated with the organization.

Great. Can you give us an update with regards to the technology initiatives that you have that are cross the organization, when you would anticipate those would be completed?

This is Brian, Mark. As mentioned on the last call, we had implemented our salesforce platform for Merritt Hawkins, our physician firm business, and it has gone really well. No (inaudible) disruptions there. And we have access to a lot of great capabilities now that they haven't had in the past.

As we have mentioned before, it is kind of a multi-year investment strategy. And so we will continue through this year with the development for our next business line, and then we will really -- the majority of the work will happen also in 2016 as well. So we expect to have all of our business lines on a common front-office platform and back-office platform by later in 2016.

Overall, things are going well. They are progressing as we expect. We are very diligent in how we do this. They are great opportunities to deliver greater value and service to our clients. We think they can really create differentiation for us. But we also -- there are also changes in the business where we operate, so we are also very thoughtful about how we purchase as well.

Great. And then, with regards to physician perm -- I mean, the last few quarters, margin has been really good. How should we think about the margins in that particular business from a longer-term perspective?

I would think about them being relatively steady in the current core business that we have. They have improved a bit, and that has been partially driven by our increased penetration into executive search and other market channels where we haven't been as deep before. And so as we increase the mix of that portion of the business, you might see a little bit of improvement in the margins going forward. But it would be more of a steady progression as we continue to build our teams and our exposure in those areas.

And we were a little closer to 27 in the first quarter. And that is, again -- they are also hiring right now, too. There is a lot of demand, so they want to make sure they are appropriately staffed. So our historic margins have been in the low 20s. It feels like we have got the step change. We are probably more in the mid-20s on a go-forward basis, and I think it is a combination of the, as Susan mentioned, market opportunities in some of the new markets they are going after. I think also it is it is easy to look at the operations as well and even the new capabilities from Salesforce, we think there is an ability to have a higher level of productivity for the team members as well, which had improved profitability.

Great. And then, with regards to the clinician side, just in terms of recruiting, what are you seeing in terms of the number of clinicians that are willing to work as travelers now that the environment has gotten this tight?

Mark, this is Ralph. I will try to give you a little color on that. We have had a lot of success, obviously, with the growth numbers we have had. So our recruitment is definitely keeping up with the demand level. And it comes to us three different ways. We have people who are on assignments today and our re-book of those individuals is very high. There's (inaudible) recruiters, which are probably interested. And (inaudible) people who used to be in the industry and have come back, and they have grown considerably.

But the third bucket, which is people who are brand new to travel, is a group that is growing the most. And generally runs about a little less than a third of our placements are new to the industry. So, beyond their first assignment with us ever. Right in the last month or so, you are talking over half of them are new to the industry.

So it is probably a good sign that people have figured out it is safe to get back in the water. And we certainly are changing our marketing tactics to take advantage of all three of those buckets, but that bucket is particularly important to us.

What are the characteristics of those brand-new ones? Are they younger, older? Experienced, less experienced?

They are probably what you would expect. People who are relatively new to nursing that finally got one or two years experience and want to see what else is out there in the world is probably the primary persona. But you also are getting people who are in their twilight years, kids are out of college, and coming back into travel who may have traveled 30 years ago in their career. And so those are kind of the retirees. We are seeing more of those as well.

But even the people in the middle are -- because of the opportunities that are available right now, they are every specialty, every shift, every state at slightly higher pay rates there. It is bringing people back to the market there as well.

Tobey Sommer, SunTrust.

I had to juggle a couple of calls, so I might have missed something. I hope I don't repeat a question. Your long-term adjusted EBITDA margin goal seems like it is not only within striking distance, but we are kind of here. Are you taking a look at maybe coming out with a new one? Or how should we think about the long-term profitability at this point?

Well, as we discussed in our guidance, we do expect to come back to what is probably at this moment a more normalized EBITDA margin of 9.5% as we catch up with our hiring. But as we go through the year and go forward, absolutely, we expect to continue to get leverage off the revenue growth, but also from the increased mix of workforce solutions -- things like VMS and RPO and Avantas, which have a higher EBITDA margin. And that absolutely contributes to our bottom line.

I would say we would want to be at that 10% EBITDA margin for a few quarters before we reset a new target. But we will get there, and we look forward to the day when we can give you a new target. It is not as though we feel that is a ceiling. It is just the next milestone for us to hit. And what we do get there, we will be providing you with a new target.

Okay. That's fair. In the volume of nurse and allied travelers, I am trying to think of maybe saying it on a core basis before the recent acquisitions, how much below the old high of volume are we at this point? If you have that on a rough percentage terms.

I would say we are -- just travel nursing because that is the best comparison. When we were at approximately 8,300 travelers working in the early 2000s, probably predominantly nursing. And on an organic travel nurse basis, we are probably at something around 60% of that. So we have, in our mind, a lot of upside.

Now, we just added to that with the Onward acquisition. And, of course, we have our allied business, which is significantly bigger than it was then. And then of course local staffing. So if you actually look at our FTE equivalent, it is getting close to that 8,000 range. But if you are really only going to compare apples to apples in the travel nurse business, we have quite a bit of room to grow.

Okay. And, Brian, I just wanted to ask you a numbers question because I think you mentioned a couple of adjustments to gross margins. And I was wondering if you could net those out and tell me what the impact might have been for things that are not so easy to predict in the quarter.

Sure. This is Brian. So the first-quarter gross margin -- the only adjustment that I called out in the nurse and allied segment was the workers' comp adjustment, which was about $600,000. So that had about a 30-basis-point impact to that segment; about 20 basis points to the consolidated results.

Outside of that, there really wasn't anything material. I think we had seen (inaudible). Year over year, we have seen sequentially a step up, and that was -- we talked about the fact that with the growth in the workforce solutions, the addition of Medefis and Avantas, which have higher margins as well, that has moved us up into this range of more or less 31%, a little bit lower than that in the second-quarter guidance. But we kind of jumped up again into this new territory in gross margin. But that is really the only thing notable in the first quarter.

And does that -- when tax effective and down at the bottom line, is that a penny, half a penny?

Yes. Closer to a half a penny.

Okay. Perfect. Thank you for taking my follow-up call -- question.

Thank you. At this time, there is no additional questions in queue. Please continue.

Well, again, I would like to thank our team members for their great efforts and performance. Because of our clients -- because of our team members, really, our clients are winning, our clinicians are winning, and our shareholders are being rewarded.

We appreciate you joining us today and for your continued support of AMN, and we look forward to updating you on our progress next quarter.

Thank you very much. And ladies and gentlemen, that does conclude your conference call for today. We do thank you for your participation and for using AT&T Executive TeleConference. You may now disconnect.