AMN Healthcare Services Inc (AMN) 2017 Q3 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the AMN Healthcare Third Quarter 2017 Earnings Call. (Operator Instructions) And as a reminder, this conference is being recorded. I'll now turn the conference over to Randy Reece, Director, Investor Relations.

Good afternoon, everyone. Welcome to AMN Healthcare's Third Quarter 2017 Earnings Call. A replay of this webcast will be available until November 16 at amnhealthcare.investorroom.com following the conclusion of this call. Details for the audio replay of the conference call are in our earnings press release issued this afternoon. Various remarks we make during this call about future expectations, projections, plans, events or circumstances constitute forward-looking statements. These statements reflect the company's current beliefs based upon information currently available to it. Our actual results may differ materially from those indicated by these forward-looking statements as a result of various factors, including those identified in our most recent Form 10-K and subsequent filings with the SEC. The company does not intend to update the guidance or any forward-looking statements provided today prior to its next earnings release.

This call contains certain non-GAAP financial information. Information regarding and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and on the Financial Reports page of the company's website, which can be accessed at amnhealthcare.investorroom.com. On the call today are Susan Salka, President and Chief Executive Officer; Brian Scott, Chief Financial Officer; Ralph Henderson, President of Professional Services and Staffing; and Dan White, President of Strategic Workforce Solutions. I will now turn the call over to Susan.

Thank you so much, Randy. We are thrilled to have you join the AMN family and to help us continue to evolve our strategy and our dialogue with investors and the analyst community. As we near the end of what has certainly been an eventful year, AMN Healthcare recorded a solid performance in the third quarter and most importantly delivered significant value to our clients. Our revenue of $494 million was 5% higher year-over-year, led by strength in Travel Nurse, Allied, and our MSP and VMS offerings. The quarter also included a return to year-over-year revenue growth for our Locum Tenens segment. Our adjusted EBITDA was $62 million and represented a margin of 12.5%. The overall environment for our business remains positive, and the macro trends enable growth across all of our segments. We continued to revolve our business model to improve the company's sustainable growth rate and our profit margins. Even while improving our operating leverage, we are investing back into the business to fuel future growth. These factors are keeping us on track to achieve our goal of a 14% adjusted EBITDA margin by 2020.

Looking forward, our fourth quarter guidance reflects typical seasonal performance across all 3 segments. This should enable AMN to deliver year-over-year revenue growth that is similar to or somewhat better than what we achieved in the third quarter, excluding our labor disruption business. As mentioned earlier, the overall operating environment remains positive. During the quarter, we won new MSP clients with an estimated $75 million in gross spend under management, which brings our year-to-date wins to over $210 million. Our VMS technology businesses launched new capabilities and continued to expand and add new clients.

Now let's review third quarter performance and trends for our business. Our Nurse and Allied segment posted revenue of $303 million, higher by 6% year-over-year. Third quarter revenue for our largest business, Travel Nurse Staffing, increased 5% year-over-year. This growth was driven by volume and price increases, and reflects another quarter of exceptional delivery by our sales, service and clinical teams.

We remain focused on serving the needs of all of our clients with priority on our MSP partnerships. As a result, over 65% of our Travel Nurse revenue was from MSP-related placements. The demand environment for Travel Nurse Staffing continues to recover from the slow start we reported earlier in the year. New orders began growing year-over-year again in the second quarter, and that growth has continued through the year. Although overall demand is still below prior year levels, the positive new order trends and new MSP clients set us up for continued growth as we look to 2018.

In the third quarter, the Allied staffing division achieved revenue growth of 6% year-over-year, driven primarily by volume increases. MSP clients represented over 40% of this division's revenue. Looking ahead to the fourth quarter, the Nurse and Allied segment is expected to be up 6% year-over-year, excluding our labor disruption business. On an as-reported basis, the increase is projected to be about 3%. In the Locum Tenens segment, third quarter revenue of $111 million grew 3% year-over-year. Overall demand for Locum is positive with many of our specialties experiencing year-over-year growth. However, a couple of our larger specialties, such as hospitalists and primary care remained below prior year demand levels.

The leadership team is making people and process changes to further strengthen the business' growth potentials. We are seeing early signs of a positive impact from these changes, but most of the anticipated benefits will come in 2018. For the fourth quarter, Locum Tenens revenue is expected to grow 3% year-over-year with a normal seasonal decline in the mid-single digits sequentially. Third quarter revenue in the Other Workforce Solutions segment was $80 million, which was 4% higher year-over-year.

Growth was led by our interim leadership and VMS businesses, which together grew over 15% year-over-year. Our permanent placement-related businesses in this segment remained challenged and declined year-over-year. Avantas, our workforce optimization offering, added several new clients and settings, and the sales pipeline remains very strong and solid. Physician permanent placement third quarter revenue was down year-over-year. A decline in searches and placements reflected the tail effect of operational issues that emerged in the first half of the year.

Recent organizational changes are now in place and trends are modestly improving. The negative year-over-year revenue gap is expected to narrow in the fourth quarter with a return to growth in 2018. Overall, fourth quarter revenue for the Other Workforce Solutions segment is expected to be up approximately 3% to 4% year-over-year. Over the past decade, AMN has transformed from a staffing provider to a strategic workforce partner for our healthcare clients. This evolution has made us more collaborative with our clients, creating greater trust and fostering more opportunities for innovation.

Investments in our systems and infrastructure are helping us to create a more agile, scalable platform that will improve our services and efficiency. We recently held a Strategy Summit with AMN board members, management and thought leaders from around the country. This event gathered hospital executives, healthcare technology firms, payers and policymakers. The candid insights they shared validated our strategy and provided ideas for ways to further expand our existing businesses and launch or acquire new capabilities. The overarching theme we heard was opportunity for AMN to continue to evolve and become a more critical partner. This will further inform our strategic decisions and investments as we move forward. Finally, I'd like to take a moment to thank our amazing team at AMN, whose talent, hard work and passion for making an impact turned our strategy into reality. The commitment to our values and the culture at AMN is incredibly strong and everything we achieve starts and ends with our people. Now I will turn the call over to Brian for a financial update, after which Ralph and Dan will join us for the Q&A section of the call.

Thank you so much, Susan. Good afternoon, everyone. The company's third quarter reported revenue of $494.4 million was just above the midpoint of our guidance range. There was no meaningful labor disruption revenue in this quarter. We estimate less than $2 million of revenue was lost in the quarter due to the disruptions associated with the hurricanes. Gross margin for the quarter was 32.3%, down 40 basis points from last year and 60 basis points from last quarter. Year-over-year gross margin decline was due mainly to lower bill pay spreads in Locum Tenens and a lower gross margin in the Other Workforce Solutions segment. The sequential gross margin decline was driven primarily by lower margins in the Other Workforce Solutions and the Nurse and Allied segments. SG&A expenses in the quarter totaled $100.6 million or 20.3% of revenue, as compared to 21.2% last year and 19.7% last quarter. The improved SG&A margin from the prior year was primarily the result of operating leverage. Sequentially, the prior quarter included a $4 million favorable professional liability actuarial adjustment, the majority of which impacted the Nurse and Allied segment. Excluding this adjustment, SG&A was relatively consistent on a sequential basis. Third quarter Nurse and Allied segment revenue was $302.9 million, an increase of 6% from the prior year and 1% sequentially. Volume was higher by 4% year-over-year, while the average bill rate increased 2%. Nurse and Allied gross margin of 27.3% was 60 basis points higher compared to the prior year and down 50 basis points sequentially. Third quarter Locum Tenens segment revenue of $111.4 million was 3% higher than both the prior year and on a sequential basis. On a year-over-year basis, the average bill rate increased by 6% and the number of days filled was lower by 1%.

Locum Tenens gross margin of 30.1% was down 110 basis points from prior year, driven mainly by lower bill-to-pay spread. We have several initiatives in place to improve the gross margin as we look to 2018. Third quarter Other Workforce Solutions segment revenue of $80.1 million was up 4% year-over-year and down 1% sequentially. Gross margin of 54.1% was lower by 260 basis points year-over-year and 160 basis points sequentially. The year-over-year variance was driven in part from lower permanent placement fees and higher insurance costs. On a consolidated basis, third quarter adjusted EBITDA of $61.7 million was up 6% year-over-year and down 8% sequentially. The adjusted EBITDA margin of 12.5% represented an improvement of 20 basis points over the prior year and a decline of 120 basis points over the prior quarter.

Excluding the professional liability benefit in the prior quarter, this quarter's EBITDA margin was lower by 40 basis points due to the lower gross margin. We reported net income of $28.1 million and diluted earnings per share of $0.57 for the third quarter. Adjusted earnings per share was $0.63 compared to $0.62 in the prior year quarter. Our income tax rate in the quarter was 39%, and we expect a similar tax rate in the next quarter due to some discrete benefits in both periods. Looking to 2018, we expect our tax rate to be approximately 40%.

Cash provided by operations was $26 million for the quarter and $96 million year-to-date, which compares to $85 million in the same 9 months of last year. Day sales outstanding at quarter end was 64 days compared to 62 last quarter, and 64 days in the comparable prior year quarter. As of September 30, cash and equivalents totaled $20 million. Capital expenditures for the third quarter were $5 million. At quarter end, our total debt outstanding was $325 million, and our leverage ratio was [1.3x to 1x]. During the quarter, we repurchased just over 177,000 shares. And since the November 2016 inception of our $150 million share repurchase plan, about 630,000 shares have been repurchased for a total of about $20 million. Now let's turn to fourth quarter 2017 guidance.

The company expects consolidated revenue of $498 million to $504 million. As a reminder, the prior year quarter included $12 million of labor disruption revenue. Excluding this, the fourth quarter is expected to grow approximately 5% year-over-year. The hurricanes are expected to have a negative revenue impact of $1 million to $2 million. Gross margin is projected to be approximately 32%. This sequentially lower expected gross margin reflects the seasonal decline in the Nurse and Allied segment and an unfavorable revenue mix shift. SG&A expenses as a percentage of revenue are expected to be approximately 20%. Adjusted EBITDA margin is expected to be 12% to 12.5%. Other fourth quarter estimates include interest expense of $4.7 million, depreciation and amortization of $8.2 million, and diluted share count of 49.4 million shares. That concludes our prepared remarks, and now we'd like to open up the call for questions.

(Operator Instructions) And our first question will come from Mark Marcon with Robert W. Baird.

In the prepared remarks, you mentioned a little bit about the orders. You also talked about Nurse and Allied in terms of the guidance being up 3%, up 6% ex labor disruption. Can you just give a little bit more color in terms of what you're seeing from a demand perspective? Where you expect to see the growth come from? And are there any sorts of trends that you are denoting with regards to overall demand trends?

Mark, this is Ralph. I'll handle that. I'll start out with just the Travel Nurse demand. We have seen it improve. I think on the last call we talked about the start of second quarter is very soft and began to improve, right? As we got to the call. Trends have actually gotten better since then. And the mix of the business is pretty favorable. We're seeing growth across kind of both MSP and non-MSP business, a little bit stronger from our MSP clients in Q3. So we feel like it's a good market from a demand standpoint.

Just a couple of other metrics and nuggets that we look at are -- in addition to the number of new orders we're getting in, which is a really good reflection of the current and future demand, which have been increasing in very -- much stronger even on a year-over-year basis. We look at things like the number of facilities that have orders, which has gone up. And so that's been a positive trend as well and that's even been, quite honestly, more recent over the last couple of months. And the teams have had some really great trends in placements over the last sort of 4 to 8 weeks, I would say. And so a lot of good signs that not only the demand is strong, but our ability to obviously fill that demand is also strong.

I mean, given those comments, do you feel like trend should accelerate in the next quarter, as the quarter unfolds and as we go into next year or how should we think about longer-term growth rate ex strike revenue? And then speaking of the labor disruption, anything going on in Marquette, Michigan? How should we think about that situation?

Yes, we don't [know or really] call out any of our clients. But we do have a little bit of strike revenue next quarter that we're expecting. But it's not incremental sequentially and it's baked into our...

It's a typical amount and is very small. So I don't want to overblow it. For example, as we look at the third quarter, we had a little under 3 million of strike and EMR revenue, and it would be similar in the fourth quarter based on what we know today. So don't want you to expect something that's going to, like, tick up.

Yes. I guess, and just a little comment on your longer-term. Our first quarter is typically very strong for us. We do fulfill a lot of winter needs for our clients. And our fill rates in that area are up. So we feel pretty good about first quarter as well, but I don't know if I want to go any further than that at this time.

I just meant in terms of like year-over-year as the month unfold for -- obviously orders are a pretty good leading indicator. So I was just wondering if we should -- if the orders are picking up now then maybe the revenue gross, as the quarter progresses on a year-over-year basis?

Mark, this is Brian. I mean, that -- I think that's a little bit reflected in the guidance and the commentary we gave that we -- as the orders have improved in the third quarter, our thoughts for the nursing, particularly in the fourth quarter, are a little bit better year-over-year than in the third quarter. So I think it's a little early to call out anything for 2018, but it's a good early sign.

In addition to the underlying trends in our current clients, which I would say we're more bullish on that today than we were even 6 to 8 weeks ago, it's been progressively getting better. But on top of that, remember we have several new MSPs that either recently went online or will be coming online over the next 3 months. And some of those are somewhat sizeable. And so we have a lot of new incremental demands that will help us drive growth rates even more. Now what that number will be? I think it's a little premature and early to call that out. But knowing what we have coming online, it certainly makes us more bullish about the future.

Our next question is from Jeff Silber with BMO.

It's Henry Chien calling for Jeff. Just wanted to follow up on the demand trends. The sequential improvement was -- or the improvement from the first half to this quarter from a demand perspective, is that just that the environment for hospitals improving or just sort of like a natural pickup in order rates or any kind of -- just trying to understand what's driving the pick up recently.

Yes, Henry. This is Ralph. I'll start on that. What we've seen is an improvement up where we were at, you're right, in the last quarter. It is a little bit better than we had anticipated when we were probably in second quarter and so we feel good about that. There always is a pickup in demand with those winter needs. But this was I guess a little bit stronger than anticipated this time around and then combine that I think with our higher fill rates this year and then in prior years. That's probably why you hear us sounding a little bit more favorable about both demand as well as our execution on it. Additionally, we are -- MSP and the new wins are offsetting those clients that are declining, not every client is increasing. It's not that kind of an environment yet. So the new wins help us -- get us into some new markets. They are very well distributed across the country, and they are implementing at a pretty rapid rate right now.

So that help -- that makes us feel pretty good as well and [gives us a little confidence]. But there are a handful of clients that -- where volumes are coming down as well, just luckily not too many of our large ones.

Henry, I think the other thing that you might be getting to is if the macro environment for hospitals is kind of a mixed bag right now. You have some that are talking about declines in the sense that some that are flat and [weak]. Of course, those are the public hospitals and we have the majority of hospitals that of course aren't included in those numbers. And we know that those are also a mixed bag. Although, I will say that many of the nonprofit and the academic facilities are telling us that they are growing and kind of bursting at the scenes. But what they are all dealing with across the board is the challenge of the shortages. And the fact that you've got still very high openings. I mean, if you continue to go back to the BLS data in August, the number of job openings in healthcare was up 14% year-over-year, the ratio between openings and hires is still at about [1.9]. So we -- there's been no relief in this area of vacancy. And on top of that, you've got retirement continuing to effect. It's been a pretty steady pressure on the workforce. Again, kind of going back to the BLS, they tracked something called other separations, which are primarily retirements, and that's -- it's up 56% over prior year. But if you kind of normalize it, it is more like a steady state 10% year-over-year growing. And that's not likely to let off. We have a survey coming out in the next couple of weeks, an RN Survey, that ask a variety of questions around the anticipated retirements of nurses. And right now, 73 -- in this survey, which I don't want to I guess give away all of the headlines, but relevant to this conversation, 73% of baby boomers say they plan to retire in the next 3 years or less. And that is up pretty significantly from the last time we did this survey 2 years ago. So I do think and what we heard from our clients at our Strategy Summit is they are feeling the pressure of retirements and vacancies.

Got it. Okay. That will be interesting to see. And just shifting over to gross margins. Some of the pressure that you are seeing from wage rates, is that also on the nursing side as well and should we expect some of these pressures to continue or to pass into early 2018? Or...

Henry, this is Brian. And maybe there's a couple of different segments we can talk about. So within Nursing and Allied, I wouldn't say we're feeling significant wage rate pressure. I think we're in a good place. The margin is down a little bit from the second to the third quarter. But we anticipated that, actually mentioned that on the last call with relatively low health insurance claims in the second quarter that came back a little bit in the third quarter. So this 27.3% gross margin is actually kind of where we expected it to be. The Locum Tenens segment, you have seen the margin come down year-over-year by about 100 basis points, and we are feeling a little bit more of that. I'll see if Ralph wants to add some color but we're -- the team's working on that, but they have been aggressively trying to grow volumes, and I think we've seen a little bit of that margin compression. But I think there's some things that we're doing as well to address that as we look into next year.

Yes. On the Locum side, demand was down there for a while and I do think that puts a little bit of pressure on us to grow volumes. And so the team will negotiate a little bit more to get a job filled as quickly and get some revenue as fast as they can. We are very diligent and our teams are very good about managing margin at the transaction level, though. So it's a slight drop there. It's not anything that makes me nervous, I do still feel like the long-term margin that business is -- [32] is possible. And this is probably just a little bit of cyclical change for us.

And we will go next to Tobey Sommer with SunTrust.

Susan, I wanted to ask a question about capital deployment. You bought back a little bit of stock in the quarter, but the leverage is below the historical average and the margins are strong, so the cash flow is strong. Do you have any changes to what you might do kind of in the absence of acquisitions to maybe direct more of your free cash towards share repurchase?

Well, we still have about $130 million left on our existing share repurchase program. And so that gives us a lot of capacity to still opportunistically deploy that capital and you would expect that we are evaluating that, particularly when our stock and the market has been generally volatile and it creates opportunities for us. So we've got quite a bit of room there. And yet we are still looking at acquisition opportunities pretty aggressively. There is actually a fair amount of activity out in the market. We're being very disciplined about what we go after and making sure that it is not only the right valuation, but even more importantly, strategically the right places that we want to grow our business to not only be a better partner, but also to achieve our profitability goals. So we're trying to make sure we have the capacity that we need there, but with $130 million sitting there authorized, we're not shy to use it either.

Okay. Can you describe the time to fill orders and I don't know how to express it differently, maybe urgency on the part of customers in the Travel Nurse business? Any change in the time it takes you to submit somebody and then get them on assignment?

This is Ralph. I'll take that, Tobey. The time to start -- I'll start there, which is kind of interesting, has shortened. So we're getting people started about 3 days faster. And some of that is some technology changes we've made, we've got customers who are now using the kind of a voice energy system, which was a lot quicker and gets them out on assignment faster, that means we get our revenue a little bit quicker. But back to the original question, which is our submittals and then their turnaround time on our submittals. When they have those types of tools in place, they don't drag their feet. So we're not seeing as much kind of foot dragging there. It's probably a little bit slower than it was 1.5 years ago with the peak of the market. But in most cases, customer feedback in 48 hours or less. Best customers are in kind of 24 hours or same day, sometimes even a couple of hours. So we're seeing better movement there. A little bit different in the -- I'll just jump, you didn't ask, but in our interim executive business where they have moved a little bit slower there, particularly in the retained search business. I think that's also in the physician's search business. So it's just taking a little more time there, but the Nurse business is actually operating pretty well.

You said 3 days faster time to start. Is that year-over-year or is that a multi-year period?

That's a year-over-year increment.

Okay. In the Locum's business, you talked about narrower bill pay spreads maybe causing some gross margins pressure. Was that broad or in select specialties that somehow had an effect on the whole segment?

It's actually a little bit of both, I hate to say that. But there are some specialties where our spread is improving, about 4 or 5 of them. And then we get about 5 where we've had a little bit of compression. So like I said, it's -- has -- there's a lot of different reasons why it happens, right? The types of specialties and little mix shift and things like that. It's not a big concern of ours.

Yes, this is Brian. But it's not just 1 or 2 specialties. And it's -- we're assuming it's -- if you get to pick 1 of the 2 it'd be probably more broad than anything specific. But again, not something that we don't think we can address and in turn as well. The demand is strong. So that gives us the opportunity to make sure that we are making the placements into the right clients with good margins as well.

Great. Brian, since I heard your voice, asking a numbers question, if I could. Are there any factors to consider for 1Q, as we look to model either days in the quarter, seasonality, something you'd like us to keep in mind as we evaluate our models for next year?

Yes. Well, if you think about seasonality, we talked in the prepared remarks around the margin being -- gross margin being down a little bit sequentially. We normally would see that recover. There is -- in Nursing and Allied, fewer hours work, you feel a bit of margin compression and then the Locum Tenens and Other Workforce Solutions segments typically decline in revenue. So that mix works against us. You can kind see the opposite in the first quarter, where you still see some growth in Nursing and Allied, but usually see better growth in the other 2 segments. So that helps us as well, and then the margin will pick back up again in Nurse and Allied. So I think you expect to see better recovery in the first quarter to something closer to what we had in the third quarter on the gross margin and a lot of that will flow through as well.

Our average bill rate for Nursing also tends to go up in the first quarter because we have more of these winter placements, which tend to be at higher rates and for the placements where we've made thus far we're seeing that trend repeat itself.

If I could ask 1 last question. Regarding your fill rates at MSPs, where do they fall now versus historic ranges of wherever the high fill rate has been for you versus the low?

Yes, we talked in the past. We're filling about 2/3 of MSP orders internally. So internal captured thinking our great affiliates and their network is filling the rest of them. And it's up slightly from where it was last quarter. It's actually up quite a bit from last year, but it's not near any historical highs. There's still lots of upside left.

(Operator Instructions) We will go next to Tim McHugh with William Blair.

It's actually Stephen Sheldon on for Tim. I guess just first, I appreciate the comments about orders and this planned environment, but I was just wondering if you've seen any change in the hospital systems' ability to recruit full-time candidates? Some of the publicly traded systems have talked positively about hiring more full-time health care professionals and cutting the use of temps. So I guess are you seeing any impact from that across any of your business lines?

Stephen, I think part of what we saw earlier this year was an impact from some hospitals hiring new grads, which is something they resisted doing for several years, because it's really quite challenging for them to take experienced nurses off the floor to be a preceptor and get these new grads up to speed, it can take months if not a year to get a new grad to where they need to be. And so while they're always hiring new grads to make it a major part of their staffing up, creates its own challenges. But we were hearing earlier this year that they decided that's something that they just had to do. And I do think that, that affected our order levels. What played out there is that they realized that doesn't fill all of their gaps. And in the meantime, the turnovers remained very high and so to have the appropriate experience level that they need on the floor to deliver the quality patient care and quite honestly, keep their risk level down, they need to have a certain number of nurses that actually have that experience under their belt. So I think that's something that is not new. It's actually something that I would say happened maybe towards the end of '16, early '17, and now we're sort of feeling the effects of that playing out and maybe not accomplishing everything that they needed it to. But I'm going to actually pass it to Dan and ask him, since he's out in front of clients everyday practically, if he's hearing other things.

I'm hearing the same things that Susan just referred to. But we are hearing from clients, especially when we speak to them about RPO, that their recruiting staff is way overburdened with requisitions, typically 2x to 3x what a normal recruiter would be able to handle, which means they just can't keep up with the demand. That actually causes our clients to use more contingent labor. And so it's one of the things that candidly makes our clients buy our MSPs programs from us is that we have a lot more wisdom and insights into what the real problems are that they are trying to solve. And as a result of that, have a number of different solutions that we can combine together to meet both the cost objectives, the quality objectives and the timeliness objectives that they are all trying to manage. I often refer to that as this human capital equation, there is a lot of puts and takes to it. And it can be fairly complicated if you're going to try and partner that stuff away. With AMN, you don't have to do that.

Okay, that's very helpful. I guess, Dan, just in the Locum Tenens business, the slight improvement you saw there. I guess, is that reflective, would you attribute that more to the demand environment or is a slight acceleration kind of the early byproduct of some of the changes you've made in the business?

Yes, the demand environment there did improve, but just a little bit. So it's more of execution. And even more recently, the team's really last 5 or 6 weeks, our bookings trends have improved quite a bit. So we have a lot going on there. We're getting ready to install some new technology. We had a leadership change, where making some organizational changes that go along with that technology change. And even through all of that, the team was able to deliver better than we expected results for the quarter.

We will go next to Brooks O'Neil with Lake Street Capital Markets.

I was hoping one of you could give us a little color on your MSP pipeline?

That sounds like a great question for Dan to answer for us, Brooks. Thank you for asking.

Brooks, I've been dying for somebody to ask that question. What I want to do is just make sure that you understand first that to pick back up on a comment I made a second ago. They're buying from us because we're solving a bigger set of problems. And what that does for us is it helps our wins be larger than they have been in the past. So, for example, last year our average was around $10 million per signing and now it's up to about $14 million. So of the $75 million that we referenced in the opening remarks, 1 of the deals is Locum's, the rest are Nurse and Allied. Of those deals, they are all in acute care settings with a very nice geographic diversity. So we feel really good about that. That would bring us to a total of over 210 million of new wins for the year versus $185 million for the full year last year, which is also a really good sign for setting us up for a great 2018. Of that $210 million, 86% of it is Nurse and Allied, 4% is Locum's and 10% is nonclinical. The pipeline that I'll talk about in a minute is really much more focused and better improvement on Locum. So I'll talk about that in a minute. If you think about the full year set of wins, about 55% of them are customers new to MSP, and 45% of them are competitive wins. About half of the competitive wins come from vendor-neutral programs, which is a really nice new trend for us. And as I said before, these wins for us are important, but on top of that, it leaves room for additional services to be added. So I also thought I would throw in a fact that we had 7 new add-on services as well highlighting some of the great cross-selling that our team has been doing.

In terms of the pipeline, again, very robust. We have over $300 million in our pipeline at 50% or higher. Really strong number of contracts being worked on today. As I said, 3 are Locum's, the rest are Nurse and Allied. Two of the deals that are in contracting now are worth $10 million each. So again, feel super about the pipeline.

It's great, if there happens to be any other questions, you are keyed up for me to ask. Go ahead and answer that.

Thanks, Brooks.

You can tell he was right.

Right. So the second question I had was, my sense in listening to you talk about the business over the last couple of quarters is that there is always this trade-off between robust demand and your ability to fill internally the requirements on some of the MSP programs. And I was hoping you might -- maybe Ralph might talk about how you see the current environment or the outlook for, say, Q1 in terms of that dynamic, that trade-off that I was just alluding to.

Yes, the -- I'll talk about our supply trends just a little bit. Our supply is up slightly year-over-year, but I think the bigger story right now on improving our fill rates has been about lapsed supply. People who used to work for us and are coming back has become a much larger percentage of the total. And so that's been a very positive thing. Of the new supply, our conversion rates are increasing across all 3 of our businesses, which is a plus. So we're hitting it out of the park a little bit on our fill rates prominently because the -- of those -- our ability to manage supply, have it understand our database better than other people. We have a really good portfolio of customers where candidates want to go to work and so that whole combination works in our favor. I know I feel pretty good about Q1, I think I probably already said that maybe more than I should have. But we've done a good job on those winter needs and I want to make sure we call out our team for doing that.

Perfect. So then the last question. And I know I heard Susan talk about the 14% adjusted EBITDA goal over the next couple of years. It looked to me like just a little softness in the margin outlook for Q4. I just want to make sure you guys still feel pretty good about your longer-term opportunity to expand the margins of the business.

Yes, we absolutely do, Brooks.

And our next question will come from Mitra Ramgopal with Sidoti.

Just a couple of questions. First, regarding the positive volume trends you are seeing. I was wondering if you are noticing a difference between the MSP hospitals versus the non-MSP?

Yes, the demand improvement through the quarter was stronger in MSP than it was in the traditional clients in the non-MSPs. And a lot of those systems, of course, we do business with larger systems, and they are more strategic users of flex labor. So the smaller hospitals use it probably because they didn't recruit or they forgot to recruit, and they are in a panic. But the larger systems are looking to have a more flexible workforce. And so they tend to use more. They seem to be also the ones who are -- whose demand is up the most.

Okay. And then just coming back to the MSP pipeline. Given some of the uncertainty out there around ACA, are you seeing potential clients sort of taking a more cautious approach before committing to MSPs or pretty much business as usual for you?

Mitra, I would actually say absolutely the opposite. If they are focused on cost savings, MSP is a fantastic way for them to do that. And when you combine that with the number of solutions that we have as a market leader to add on and address those same cost concerns, it makes us an even better choice for the MSP provider as well. So if anything, the pipeline that I was sharing with you before continues to grow rather than contract.

And we have no one else in queue. Please go ahead with any closing remarks.

Wonderful. Well, we very much appreciate everybody joining us today on the call, and we look forward to updating you on our progress next quarter.

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