Ladies and gentlemen, thank you for standing by, and welcome to the AMN Healthcare Fourth Quarter 2020 Earnings Conference Call. At this time all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker for today, Mr. Randy Reece, Director of Investor Relations. Thank you, sir. Please go ahead.

Good afternoon, everyone. Welcome to AMN Healthcare's Fourth Quarter and Full Year 2020 Earnings Call. A replay of this webcast will be available at ir.amnhealthcare.com, following the conclusion of this call. Details for the audio replay of the conference call are in our earnings release issued this afternoon. Various remarks we make during this call about future expectations, projections, trends, 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 and cautionary statements including those identified in our most recently filed forms 10-K and 10-Q, our earnings release, and subsequent filings with the SEC. The Company does not intend to update 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 our financial reports page at ir.amnhealthcare.com. On the call today are Susan Salka, Chief Executive Officer; Brian Scott, Chief Financial Officer; Kelly Rakowski, Group President and COO of Strategic Talent Solutions; Landry Seedig, Group President and COO of Nursing and Allied Solutions; and Maureen Huber, President of Workforce Technology Solutions. I will now turn the call over to Susan.

Thank you so much, Randy, and welcome, everyone. We have all been affected by the events of 2020 but none more so than the people afflicted with COVID-19, their families, and caregivers. Health care providers went to astonishing lengths, putting themselves at risk to save lives. Millions of Americans fundamentally changed the way they live each day, sacrificing to contain the pandemic; we must never forget those losses. But it is also essential that our efforts are focused on the future and doing all we can to help bring an end to this crisis. While our nation was rocked by the pandemic, we also faced the turmoil of racial and social injustice and political unrest. I feel great pride in the way our AMN team responded to a year of dramatic swings in demand for health care labor while also making great progress on our commitment to social responsibility, diversity, and equity. No matter how intense the storm, we never lost sight of all of our stakeholders. We didn't just respond to the crisis; we transformed our company with agility and innovation when our clients and health care professionals needed us most. AMN began 2020 by taking bold steps, acquiring Stratus Video, the leader in virtual language services for health care, and launching mobile and other digital capabilities that enhanced how we support our health care professionals. These and other investments gave us the ability to deploy new solutions, speeding our pace of innovation and collaboration and creating lasting benefits. To provide you with more insights on how Stratus Video and other technology investments have enabled us to respond, we've invited Maureen Huber to join us on this call. In addition to her role as President of Stratus, Maureen has taken on broader responsibilities as the President of AMN's Workforce Technology Solutions. We are so fortunate to have her leading these teams and creating a vision for how AMN will create greater value through novel technology-based solutions. With that introduction, I will hand the call over to my colleague, Maureen.

Thank you, Susan. The Stratus team was thrilled to join the nation's leader in health care total talent solutions last February. And as we celebrated our one-year anniversary last week, we recognized the successful melding of our purpose-driven cultures, processes, and technologies. I am pleased to say that this union has exceeded our high expectations. The importance of AMN's telehealth platforms, including Stratus for language interpretation, became even more essential through the last year. Our language interpretation volumes grew about 30% year-over-year in 2020. That momentum continues with first-quarter volumes expected to be up at least 35% year-over-year. We help our clients deliver meaningful access to language services provided by more than 3,300 amazing medical interpreters in 208 languages. Additionally, we've integrated our language services into the AMN Televate schools platform to provide integrations for students and clinicians. We've added language services to several existing MSP clients, and we are differentiating AMN in the market to engage additional strategic clients seeking a more integrated full-service total talent solutions partner. Our technology-enabled talent solutions are a critical part of AMN's long-term strategy, and you have seen how the Company has been steadily investing in these capabilities. Over the last year, we have made advancements to respond to the urgent market needs. We quickly deployed enhanced capabilities and reinforced our AMN team with additional technology. This allowed us to do extraordinary things beyond clinical staffing, including the planning and ramp-up of field hospitals, deployment of an open talent marketplace, return to work, and contact tracing solutions, and now integrating many of our technologies and services to support mass vaccine administration. We proved our unique ability to offer a total payment solution to rapidly respond to these emerging needs at scale. We will further integrate and reimagine our technology and staffing capabilities to more efficiently and effectively deliver total talent solutions across acute, post-acute, and virtual settings. We believe these advancements will position AMN well for the changing market needs. I look forward to sharing more with you in our Q&A session. And now I'll turn the call back over to you, Susan.

Thank you so much, Maureen. Now, we'll share more about what occurred throughout the fourth quarter and the outlook as we begin 2021. Unfortunately, our country continued to experience higher and higher levels of COVID-19 infections during November and December. After peaking in January, we began to see some more positive trends. With vaccination efforts underway, we appear to be moving into the next phase of this pandemic, and there is a light at the end of the tunnel. The AMN team is working hard to continue to fill critical positions across all of our staffing businesses and adapting our services to partner with organizations to vaccinate our communities. Now let's turn to the financial results and outlook that we announced today. In the fourth quarter, AMN produced record high consolidated revenue of $631 million and adjusted EBITDA of $89 million. The revenue increase was unusually strong as our team leaned in like never before to serve the most extraordinary level of demand we've ever seen. Our Nurse and Allied Solutions segment came in with revenue of $448 million, 6% higher year-over-year. The segment returned to growth ahead of schedule, led by our largest business, Travel Nurse Staffing, which put up a 23% increase. I can't emphasize enough how impressive this team's performance was, sourcing, recruiting, credentialing, placing, and onboarding more health care professionals in one quarter than ever before. We would have normally said that this type of growth was unrepeatable. However, we've already seen the first quarter eclipse the historic high fourth-quarter delivery. We reached our highest ever number of assignment starts in January. And in February, we now have the most nurses on assignment in company history. Allied staffing revenue was 13% lower year-over-year in the fourth quarter, and all major Allied disciplines grew on a sequential basis. Our revenue cycle solutions business is still down year-over-year, though its fourth quarter grew 8% over the prior quarter with better trends heading into 2021. For the first quarter, we expect Nurse and Allied Solutions revenue to grow approximately 40% year-over-year. We project Travel Nurse Staffing revenue to grow approximately 40% sequentially and at least 50% over the prior year. Our forecast assumes Allied staffing revenue will grow sequentially by about 30% and return to year-over-year growth in the low double digits. Before discussing our Physician and Leadership Solutions segment, I'd like to extend a welcome to James Taylor, who recently joined us as the segment's first Group President and Chief Operating Officer. James is an outstanding leader with an excellent record of leading service providers to the health care industry. We are very fortunate to have James and his wonderful family join AMN, and we look forward to having them participate on the next earnings call. Physician and Leadership Solutions logged fourth-quarter revenue of $111 million, defying normal seasonality by being 2% higher than the third quarter. Within this segment, Locum Tenens performed better-than-expected and resulted in sequentially flat revenue. The year-over-year revenue gap narrowed and was down 12%, showing great improvement since the low point earlier in the year. The higher-than-expected revenue came from the COVID-related assignments and a rebound in the core business. Interim leadership also continued to improve, with revenue increasing 5% sequentially. Demand for interim leaders and placements picked up through the fourth quarter, and that momentum has increased in the first part of 2021. While physician and executive searches were hit hard during the pandemic, with revenues still down 30% year-over-year in the fourth quarter, we are starting to see stabilization. Clients are turning their attention back to hiring new leaders and physicians, and our team is rebuilding its pipeline of placement. With these improving trends, we expect first-quarter revenue for physician and leadership solutions to grow sequentially by 17% to 19% and narrow the year-over-year gap to be down about 5%. Our Technology and Workforce Solutions segment revenue of $72 million in the fourth quarter was up 192% year-over-year. The acquisitions of Stratus Video and b4health made another strong revenue contribution, and organic growth of our businesses in this segment was 32% above the prior year, far exceeding our expectations. Our VMS business grew revenue 31% year-over-year, with 19% organic growth, showing a swift rebound compared with previous quarters. This division benefited from the same trends that drove our strong Nursing and Allied performance. In the first quarter, we expect Technology and Workforce Solutions revenue to be up about 100% year-over-year with over 60% organic growth. COVID-related clinician needs should hit their peak in the first quarter. However, there will be many ongoing needs related to the pandemic, such as vaccine administration, recovery of elective procedures, and other care that may have been delayed. The well-deserved, higher than usual compensation packages for nurses and other clinicians supporting the COVID surges should begin to subside, and this will also bring down the corresponding bill rates. It is difficult to predict exactly what the timing and trajectory of this decline will look like amidst the continuing shortage of clinicians, so we believe we could experience premium rate declines starting in the second quarter. As rates in nursing and some Allied specialties decline, we would expect to see continued recovery of most of our businesses, which would provide a partial offset to this headwind. While we are only providing first quarter guidance at this time, we will share that we currently expect to see year-over-year revenue growth in all quarters of 2021. The workforce shortages that were already on a worsening path before the pandemic began have now been made worse by the burdens and pressures of the last year. The importance of having a strong total talent solutions partner has never been more essential and clear for the complex and sophisticated health care systems of today. The AMN team feels honored and fortunate to be in such a capable position to help patients, clinicians, and health care organizations at such a critical time in our country. In closing, let me emphasize that I have never been more energized and proud of the AMN team. They are working literally around the clock, and their commitment to service excellence and making a positive impact is an inspiration for all. I know I speak for all of our AMN leaders when I say we feel so fortunate to be a part of this team and wish to thank each and every one of our colleagues for their contributions. In a few minutes, Kelly, Landry, and Maureen will join us for the Q&A session. But for now, I will turn the call over to Brian, who will provide more insight into our financial results.

Thank you, Susan, and good afternoon, everyone. Fourth quarter revenue of $631 million was well above our guidance range as we previewed last month. Consolidated revenue grew 14% sequentially and 8% year-over-year. On an organic basis, revenue grew 1% year-over-year, even with a headwind from labor disruption staffing, which was $14 million lower this year. Gross margin for the quarter was just above the high end of our guidance range at 32.9%, 70 basis points lower than the prior year and down 60 basis points sequentially. Year-over-year, the margin was lower because of the higher compensation packages and nurse staffing, more than offsetting a benefit from higher average hours worked and the acquisitions of higher-margin Stratus Video and b4health. Sequentially, the higher pay packages were the biggest driver of the margin decline. Consolidated SG&A expenses were $155 million or 24.6% of revenue compared with $133 million or 22.7% of revenue in the year-ago quarter and $111 million or 20.2% of revenue in the previous quarter. As noted in our earnings press release, the quarter included a $20 million increase in legal reserves related to a wage and hour claim. Adjusted SG&A, excluding this legal expense, integration-related costs, and stock-based compensation expense, was $119 million this quarter, or 18.8% of revenue, compared with $121 million or 20.7% of revenue in the prior year quarter. The lower SG&A margin from the prior year reflects a reduction in total headcount and travel and convention costs, partly offset by $7 million of SG&A expenses added from the acquisitions of Stratus Video and b4health. On a sequential basis, adjusted SG&A was higher by $10 million due to hiring to support the strong revenue growth and other related adjustments to variable compensation and benefits for the better quarter and full-year results. In the fourth quarter, Nurse and Allied revenue was $448 million, 6% higher than prior year and up 17% sequentially. For our Travel Nurse division, revenue grew 23% over the prior year. Although our nurse travelers and assignments were down 6% year-over-year, the average nurse bill rate rose by more than 20%, and average billable hours worked also increased to historically high levels. Allied revenue was down 13% from the prior year and grew 23% sequentially on strong placements into record high demand. Revenue cycle solutions was down by about 40% for the prior year and posted 8% sequential growth. Nurse and Allied gross margin of 26.7% was 230 basis points lower than prior year and down 70 basis points sequentially. The year-to-year decline resulted in large part from the prior year, including $14 million more in labor disruption revenue at an unusually high gross margin. In addition, the margin is lower from increased clinician pay packages during this critical time. Segment EBITDA margin of 13% was 140 basis points lower than prior year on the lower gross margin. Physician and Leadership Solutions revenue in the fourth quarter was $111 million, 20% lower year-over-year and up 2% sequentially. Locum Tenens revenue was $68 million, 12% lower than prior year and flat sequentially. And our leadership revenue declined almost 30% from the prior year and was up sequentially by 5% from improved demand and volume. Search revenue was down just over 30% from the prior year and up 2% sequentially. Gross margin for the segment was 37.1%, 10 basis points lower than the prior year and up 40 basis points sequentially. Segment EBITDA margin was 15.2%, up 150 basis points from last year and 100 basis points sequentially. The year-over-year improvement was driven mainly by reduced SG&A. Technology and Workforce Solutions revenue was $72 million in the fourth quarter, growing 192% year-over-year and 21% sequentially. Organic revenue was up 32% year-over-year on growth in VMS and a boost from a contact tracing project. This also drove the sequential increase, along with 7% growth in our language interpretation business. Gross margin was 64.5%, down for the prior year margin of 92.3% as the acquisition of Stratus Video changed the revenue mix. Segment gross margin was down 160 basis points sequentially, also due to a revenue mix shift. Segment EBITDA margin of 42% was down 140 basis points year-over-year from the Stratus acquisition and was 100 basis points lower sequentially. Consolidated fourth quarter adjusted EBITDA of $89 million was 18% higher year-over-year, driven by the acquisitions and cost reductions during the year. Adjusted EBITDA margin of 14.1% was 120 basis points higher year-over-year and better by 20 basis points sequentially. We reported net income of $9 million and diluted earnings per share of $0.19 in the fourth quarter. Adjusted earnings per share was $1 compared with $0.85 in the year-ago quarter. Days sales outstanding was 55 days, four days better than last quarter. Operating cash flow for the quarter was $40 million, and capital expenditures were $10 million. Interest expense in the fourth quarter included $11.5 million of one-time expenses related to the bond financing transaction we discussed on the last earnings call. As of December 31, we had cash and equivalents of $29 million. During the fourth quarter, we reduced our long-term debt by $40 million, ended the year with $872 million of long-term debt and a leverage ratio of 2.6 times to 1. Recapping some financial highlights of the full year 2020, we reported revenue of $2.4 billion, a record level for AMN and an 8% increase from the prior year. Adjusted EBITDA for the year was $321 million, up 16% from the prior year with a margin of 13.4%, higher by 90 basis points. 2020 adjusted earnings per share was $3.43, higher than the prior year by 8%. Full-year cash flow from operations was $257 million, which included $48 million of deferred payroll taxes from the Cares Act. Now turning to first quarter guidance, we are projecting consolidated revenue to be in the range of $800 million to $820 million, up 33% to 36% over the prior year. First quarter gross margin is projected to be 31.5% to 32%, down year-over-year and sequentially, primarily from a segment mix change. Reported SG&A expenses are projected to be 18.3% to 18.6% of revenue. Operating margin is expected to be 10.3% to 10.7%, and adjusted EBITDA margin is expected to be 14.3% to 14.7%. Other first quarter estimates include the following: depreciation expense of $8 million, noncash amortization expense of $15 million, stock-based compensation expense of $6 million, interest expense of $10 million, integration, and other expenses of $4 million and an adjusted tax rate of 29%. And now we'd like to open the call for questions.

Operator, I believe we are ready for our first question.

Thank you. Your first question comes from the line of Kevin Fischbeck with Bank of America.

I appreciate the directional commentary for the year about revenue growth in every quarter. Is there any reason to think that that doesn't translate into earnings growth every quarter? Or is there something that we should be factoring in or thinking about either the gross profit or the G&A line that could be a headwind to reporting that?

Well, go ahead, Brian, it's your turn.

Thank you for the question, Kevin. The first quarter is going to be unique for us. While we don't provide full year guidance, I'll address your question and offer some insights into our expectations for the year. We anticipate revenue will decline from the high point in Q1 that we've projected. As Susan mentioned, there was a significant increase in demand due to COVID hospitalizations, leading to higher pay and bill rates, which contributed to our elevated guidance, alongside some additional volume. Specifically, the average nurse bill rate in our Q1 guidance is expected to be over 20% higher compared to Q4. This increase was primarily driven by the surge in COVID hospitalizations. Fortunately, the demand is now decreasing as hospitalizations have fallen, although it remains above normal levels. We expect bill rates to decrease as demand has declined from its peak levels. We anticipate this moderation in bill and pay rates to continue throughout the year, especially if COVID hospitalizations improve. For instance, if we assume a reduction of about half of the rate increase we experienced in Q1 for the second quarter, this could result in $50 million less revenue in Q2 if rates start to drop. Additionally, we expect to see declines in COVID-related volume across several business segments. However, as we normalize, we anticipate a rebound in our core business with the increase in healthcare utilization and improvement in elective procedures. Considering all these factors, we are currently predicting second quarter revenue in the low $700 million range, which would represent about a 10% decrease from the Q1 guidance but still reflect year-over-year growth of approximately 15% to 20%. Regarding margins, as I highlighted earlier, the Q1 margin guidance is lower than our recent trends due to a higher percentage of revenue from Nurse and Allied services and the elevated clinician pay rates. As we see a normalization and growth in our other segments, we expect the gross margin to return to around 33%. Consequently, while the Q1 margin guidance we provided will be significantly above our typical level, we believe it is likely to be the peak for what we can see at this time. Throughout the year, we still expect our EBITDA margins to remain above 13%, although they will decrease from the high levels indicated in our Q1 guidance. There are many moving parts and uncertainties at this stage, but I hope this provides a clearer picture of our expectations for the year.

That's perfect. I guess maybe just the last question. You guys sounded pretty optimistic about the supply-demand imbalance persisting or maybe even exacerbating as a result of growth. But I guess most of these publicly traded hospital companies are talking about a labor outlook improving, I guess, towards the end of the year. Would just love to kind of hear how you guys are thinking about it, maybe which segments you think post-COVID are kind of seeing the biggest shortages? And if there's anything specifically that you would point to as some segment of your business that pretty clearly, in your view, got worse as a result of COVID assessing more temporary staffing.

Sure, Kevin. I'll start with that. This is Susan. And then perhaps one of my colleagues would want to add something in. Certainly all of the different clinical disciplines, and I would say even beyond clinical disciplines like health care leaders, have been affected in its advanced retirements for many individuals who decided they didn't want to stay in the health care environment throughout the COVID pandemic, but also that's perhaps changed their course going forward. So there's been a larger than usual number of retirements, and while it's hard to find real-time data on that, we're certainly hearing that very clearly from our clients. And then even with the younger workforce, many of the clinicians might say nurses in particular, but also many of the female physicians have had to make a decision to leave the workforce in order to juggle children at home and school at home and again, maybe just not even wanting to take the risks of reentering direct patient care in this environment. So it's believed that we've lost some subset of the nursing workforce permanently, and that will accelerate the shortage path that we were already on. It was already getting quite bad before the pandemic, and it's really just accelerated it considerably. So nursing is probably the area where we believe the shortages will persist at relatively difficult levels, while the demand continues to be really quite strong. In other areas, you might see some of those individuals come back, but they may not come back full-time. Physician is one example where we've been really fortunate as a country to have so many more women go into medicine. But typically, the female physicians are working less hours because they're maybe juggling again, families at home. And then now some of them have made a more permanent decision that they'll take that less than full-time schedule and take it even down further on a permanent basis. So there's expected to be some long-term impacts there. And truly, it's really just across the board. So we think that those shortages that will persist will continue to drive a relatively strong demand environment. And then again, as you've got the elective surgeries and other delayed care procedures and whatnot, that will start to come back. And we're already seeing that a little bit in some of the businesses. But as we start to see COVID cases subside, we'd expect for them to come back more. Maybe I'll stop there. And I don't know, Landry, if you have anything else that you want to add in regarding the nursing shortage in particular?

Yes. Maybe I would add in specific to nursing. We have been doing and are in survey quarterly just to look at different trends that are impacting the occupation. And our last survey that we did, we actually did it in January, so it's very recent and found a couple of things in there that I'll mention. One is that 75% of nurses felt burned out of the respondents that responded to the survey. And of course, you might think, well, you would expect that with everything that's been going on. But the important thing there is the trend since we have been doing the survey quarterly, and to see that number increasing every quarter whenever we've asked it. Another thing that we learned of is that only 66% of nurses plan to continue working as they are today within the next year. That means that 34% of the workforce are planning some sort of change in the next year within the next 12 months, which is, again, a really high number from what we've seen and we've asked that question before. So with all that, we got to do our part to try to help the occupation out as much as possible to get through this. But what it does suggest is that we'll likely be in this high demand environment for quite some time.

Your next question comes from the line of A.J. Rice with Crédit Suisse.

Maybe a couple of questions. First of all, Brian, as you're giving those numbers about what happens from first quarter to second quarter and the $50 million potential impact of revenues from having a premium but less premium than you had in the first quarter. Where does that leave you relative to sort of a normal state? Is there still a substantial in that second quarter assumption? Is there still a substantial amount of premium revenue that you're getting? Or is that take you back to pretty much trend line?

Thank you for the question, A.J. We would still be above our previous levels. If we take the fourth quarter of 2019 or the first quarter of 2020 as a reference point, which was before the pandemic, we would remain above that. We wouldn't be surprised to see further reductions in the average rate as we move into the latter part of the year, particularly in the third quarter, assuming COVID hospitalizations decrease over time. We anticipate additional rate reductions. However, as Landry pointed out, the current shortages will require time for our clients to adapt and to give their teams a break as we navigate through this. We believe it will take a few quarters for adjustments to occur as we progress into the latter part of the year. Rates are still expected to be higher than they were a couple of years ago, reflecting normal inflationary trends along with some acceleration of shortages. We are still assessing where exactly this will settle, but we do expect it to be above pre-pandemic levels.

Okay. Another thing, obviously, we're talking about burnout at a high level and so forth. One metric, I guess, you can track is when people come off of assignment in your Nurse and Allied, are they re-upping for another assignment? Are you seeing a trend there where that percentage is going down as your own nurses or Allied professionals are sort of saying, I need a break now, and I need to come off of that? And the other thing we hear from hospitals is that there is some pressure from people seeing how much they can make as a temporary nurse and giving up their permanent job to do that for at least a time. Are you seeing new applicants pick up would be the flip side to what the hospitals are dealing with? You presumably see new applicants in that? Are you seeing much in the way of new applicants?

Yes, A.J., I'll have Landry pick up most of that. But I will say our recruitment team has done a phenomenal job and our rebook rates have actually improved since kind of the lower point in the middle of the year when, of course, demand dropped for a period. And so the increased demand, but also, I'd say the just the great work of our team in delivering so well during such a difficult environment has helped improve our rebook rates. So we feel really quite good and confident about those. If anything, I think what's really helped us to find ways to serve our clients and clinicians better and faster through digital capabilities and whatnot, certainly having more assignments at attractive compensation rates is helpful. But Landry, let me let you add to that and then also talk about applications, which I know is a great story.

Yes, A.J., regarding the clinicians who are rebooking extensions, we're not seeing any significant changes. There will always be a percentage of them on assignment that might extend where they currently are, while some transition to new assignments. Additionally, some of them take time off, which is one of the advantages of traveling—being able to take a couple of weeks off in between contracts. However, there's nothing noticeably different from what we've experienced over the years. Our supply funnel is functioning exceptionally well at the moment; we are seeing a robust influx of new applicants and record levels joining our business and database. The team has done an excellent job processing this supply and getting them assigned. Our achievements would not be possible without the digital investments we've made. We have been focusing on our mobile initiatives, integrating bots, enhancing automation, and increasing self-service options, thereby providing our clinicians with more control to navigate the process and secure assignments more quickly. Speed is crucial. These investments also benefit our internal teams, making us more efficient, which has contributed to the record number of assignments seen in the first quarter. Lastly, our mobile application, AMN Passport, continues to see remarkable adoption and an increase in users. The data indicates that our clinicians appreciate this investment. We track how much time they spend on the app, their return frequency, and the number of users engaging with it weekly. Overall, it empowers them by offering a single platform to manage job searches and their assignments until their last day. All of this is looking promising and has greatly supported our performance over the past few quarters. We will continue to invest in this mobile app and our digital initiatives moving forward.

Okay. Perhaps one final question. It's been interesting to discuss the sectors that have performed well over the past 12 to 15 months. However, some areas, such as certain placements and allied fields like rehab therapy, were negatively affected by the pandemic, including specialties in the local business and permanent placements. Have you begun to notice any recovery in demand in these areas? Is there anything you would want to highlight, or is it still too early in the transition from the pandemic to observe that?

Yes. A.J., it's Susan. I'll take the first couple and then have Landry comment on Allied. So regarding Locum, really, really nice recovery there, part of it's been the work they've done to assist in some of the COVID activities with whether it be state temporary facilities or just helping our clients overall but even the underlying core business has seen some nice recovery. It's not back to pre-pandemic levels. But there are some specialties like anesthesia and behavioral health that are back above pre-pandemic levels just in our core business and others that are lagging a little bit more. But we're continuing to see a steady trajectory upwards. Those should continue to grow faster as the COVID cases subside and you see more elective procedures and more normal care start to return. And it's definitely the dynamic that we're witnessing. So that's a pretty good story now. Search has been the hardest hit by far. I mentioned that still over 30% down in the fourth quarter. But in the fourth quarter, we started to see searches and some placements pick up and more dialogue with clients about those leadership and physician positions they want to start to fill now that just is settling a little bit in terms of how they're managing the COVID crisis, but then also expecting more patient flow back. So they're starting the first quarter off pretty strong and definitely going to close the year-over-year gap. But they will be the lagger, but at least we're starting to see things move forward. And then Allied has been a great story. So Landry, I'll let you take that.

Yes. A.J., Allied of course, went backwards quite a bit midyear last year, and their trajectory is probably one of the best trajectories that I've seen in our businesses. They had an outstanding fourth quarter and really across all their segments, kind of outperforming what we originally thought that they were going to do in the fourth quarter. Of course, respiratory and laboratory specialties have been performing well. Those specialties are closely tied to helping the pandemic. But we saw good performance across all the other parts of the business as well. So therapy performed better, imaging performed better, schools looks great for, in particular, speech language pathologists. So looking to the first quarter, they're experiencing the largest sequential growth that they've seen in the business. And it also includes their volume of travelers on assignment being back above prior year levels.

Your next question comes from the line of Jeff Silber with BMO Capital Markets.

I understand we're in a unique situation right now. However, considering the significant increases in bill rates that we're currently experiencing, and which you continue to see this quarter, in the past when such large premium rates or bill rate increases occurred after things settled down, we've often seen clients reduce their use of temporary nurses. Can we discuss this further? Will things be different this time? If so, what are the reasons?

Yes. That's not our expectation, Jeff. And I think the dynamics are different here. First of all, the shortage environment and some of the factors that Landry mentioned earlier around burnout and decisions by clinicians to do something different, whether it be retired, just should have changed their work environment. And our clients know that. There's a real concern amongst the health care systems that we talk with as well as nurse educators that this could put a real dent in the availability of clinicians for quite some time. And as you well know, we don't really have the capacity in nursing schools to increase new nurse graduates because we're pretty much at full capacity already. In fact, if anything, I'd say the dialogue we're having with clients around planning for their needs, not just now, but two, three, five years from now is increasing. And maybe it's a good time for Kelly to comment on some of the conversations we're having with the most strategic clients and how we are helping them plan, not just for the next quarter or two because we all know we'll get through that together, but rather how we're building our strategic accounts kind of for the future. So Kelly, you want to take that?

Yes, definitely. Hi, Jeff, you mentioned whether they will reconsider utilization. It's a broader perspective, as Susan noted. They are certainly evaluating their workforce overall, assessing the short-term and long-term impacts. It's not just about the current workforce; it's about changes in health care, shifts in care delivery models, and the future role of telehealth. We are able to engage with them and assist in their planning. In the short term, there's still an expectation to utilize this complementary workforce. They are also focusing on how to optimize their current resources while maintaining the flexibility and agility in their workforce that they initially lacked. Our Avantas workforce optimization solutions aid in this process. Additionally, on the permanent staffing side, many of our clients are experiencing high vacancy rates, often exceeding 10% in their full-time clinical staff. They are not adequately equipped to rapidly bring that workforce back. We are helping them find ways to be more agile and effective in filling some of those permanent positions. We’re supporting them comprehensively with all their strategies, and we anticipate that the reliance on travel, local, and flexible nurses will continue in the future.

Okay. That's fair enough. And based on that, I'm just curious what your own internal hiring plans are for this year? And in which areas do you think you might be adding?

We are hiring significant resources right now, as you can imagine. Some of it is temporary in nature to help support some of the projects we have going on. We've talked about the vaccine administration support work that we're doing in California. And we expect actually that there will be more opportunities and more projects going forward. But those are admittedly a little shorter-term, probably most of them will kind of occur this year. And then we've been adding across really almost all of our businesses because we are seeing growth in pretty much all of our businesses. And so we want to make sure that we're adding resources. We have, I think, 10% more recruiters or more. And then we're continuing to add on top of that. So it's a time when we're adding resources in anticipation of the underlying business continuing to grow. We know the first quarter is a bit of an anomaly with the surge in COVID cases and kind of all that ensued with that. But we also see the underlying business continuing to rebound and come back and there's no reason it shouldn't. And if anything, nurse travelers on assignment, as an example, volumes should continue to grow. So we need to be continuing to add resources. Now earlier, Landry mentioned the investments that we're making in digital. And I will say a lot of the automation that we added over the last year has been very beneficial to create efficiency for us. And not only has it created cost savings and speed and more reliability. It's also fueled our desire to accelerate our investments and do more, which is why our CapEx that you see is a bit higher than usual, and we're glad to spend that money because we're getting some really nice benefits out of it. If anything at our size and scale and in our leadership position, we need to be really advancing our digital and analytical capabilities for us but really for the benefit of our clients, our clinicians, and even the industry. And so we're doing a lot of that, which will also help ensure that when we're hiring, it's not just to move data around, it's really more to add value.

Your next question comes from the line of Tobey Sommer with Truist Securities.

This is Jasper Bibb on for Toby. I wanted to ask how you would assess your performance with MSP accounts this past year? And could you update us on account retention and what the pipeline looks like there? Thanks.

Thanks, Jasper. As we look back on the past year, our performance was very strong. We have shared with you over the last few quarters that demand rose significantly, prompting us to focus on our most strategic accounts while also supporting the wider industry with various solutions. Overall, we saw about a 20% increase from the prior year in both gross spend and direct revenue from our MSP clients. Our relationships have strengthened considerably this year, evidenced by a substantial number of large renewals in 2020. We successfully renewed 20 out of the 21 accounts that were up for renewal last year. Looking ahead to next year, we have significantly less revenue due for renewal, about 50% less in 2021. We are positioned to continue nurturing those relationships. Additionally, we are seeing a positive trend in renewals, with clients extending into different service lines and committing to longer-term contracts, reflecting our mutual commitment to strategic partnerships. We are encouraged and grateful for our clients’ relationships, as they made adjustments alongside us to ensure we could together meet their resource needs. Our pipeline is healthy, and despite having a strong sales year last year with nearly $500 million in gross spend under contract—largely from new business—this year we are seeing more engagement in AMN-led managed services programs. We have a robust funnel and are increasingly engaged with clients as they consider their future needs. Overall, we feel confident about our position with existing clients and optimistic about growth prospects in this environment.

And then on the M&A front, there were some deals in the news this month. As leverage comes down, would you consider adding scale in nursing or locums? Or is that not as attractive to these valuations?

Yes. Jasper, our priorities are to continue to add things that will help us be a better total talent solution partner for our clients. So at the top of that list are probably tech-enabled workforce solutions that help us to create efficiency and in some cases enable virtual care. Stratus was a fantastic example where the team had taken a traditional kind of on-premise or maybe over-the-phone workforce solution and created a video solution that really adds so much more value and a better experience for all. So those types of things will certainly be towards the top of our list. We could add on to existing tech-enabled solutions. The language interpretation industry is pretty fragmented still, even though we're the leader in virtual language interpretation. There's opportunities to do other tuck-in acquisitions. Maureen and the Stratus team had actually done that before they joined AMN and have a great track record there. So we'd be very confident in doing that. There are other tech capabilities that might enable us to extend what we're doing into Home Health, as an example, which we think is a really important market. It's important that we support the patient and clients where care is shifting, whether that be virtual and telehealth or home care or just helping our existing acute care clients to be more efficient in how they use the workforce, we want to do that. So again, tech-enabled at the top, I would say second would be adding on to existing areas where we believe there's a lot of growth opportunity, and maybe we don't have as much scale as we would like. Nice example of that would be our schools related business. Our schools team is doing a phenomenal job right now. And there, again, we have a wonderful virtual capability through our Televate platform. And yet, the schools part of the industry is still pretty fragmented. And so we could increase our footprint and continue to build that business by additional acquisitions. So that's just one example, but there are others throughout the Company. So hopefully, that's helpful.

Your next question comes from the line of Brian Tanquilut with Jefferies.

Congratulations, obviously strong year. I guess my first question, Susan, just to follow-up on that point you made in Stratus, obviously, really strong results out of those guys. Is there anything you can share with us in terms of what's driving that? I mean, are there new contract wins that you can point to? And maybe taking the opposite side of that, I mean, how much more market share do you think realistically is there for Stratus to take over with low-hanging fruit versus having to take from existing providers and competitors?

Thanks for the question, Brian, and it is all of our lucky day because we have Maureen Huber here, who is the expert in not only Stratus but language interpretation. So I'm going to let her take that question.

Thank you, Susan. And that's a very generous compliment, seeing as I struggle with the English language at times. And I'm always honored and humbled to represent the language services team and organization. The U.S. medical interpreting market is a $1.6 billion industry. And that comes in the form of on-site interpreting as well as over the phone and video interpretation. Video interpretation, only approximately half of the hospitals in the U.S. have made a video-based decision. Most rely heavily on their staff interpreters or over the phone. And over the phone, as we know, most communication, 93% of communication is nonverbal. So the preferred modality, especially around patient safety and improved outcomes, is being able to be present for the provider and the patient visually. So there's a lot of opportunity there for video, especially as the on-site interpretation for patient safety, as well as the safety of the interpreters and our providers really was reduced during the COVID period. And with our tech-enabled services, we actually doubled the number of call centers where we could enable the hospital systems' own staff to provide services. So we are working in partnership with our current clients to explore better opportunities for filling the gap and the needs that on-site interpreting either through video or other tech-enabled services with our in-person application. So to answer your question, what's the opportunity in the market share? The LEP population continues to grow in the United States, and it's outpacing other areas. It's pretty significant. Part of that will come from the conversion of only the phone to video, and others will come from the continued on-site interpreting and removing that from a patient safety perspective.

Maureen, I know another great thing, the team has really made advancement in is integrating our language interpretation services into other telehealth platforms in the ability to support acute care facilities but also into other telehealth providers, and we've really just scratched the surface in that. I think we've got 25 to 30 platforms that we've integrated in. And so there's a lot of opportunity as telehealth in general grows. If you have a telehealth encounter, you need an interpreter there. And most telehealth companies or technology providers aren't going to provide that network of 3,000-plus language interpreters. And so we are a wonderful plug-in to services that are already or going to be launched?

No, I appreciate that. Regarding the nursing side, many questions today have focused on demand. However, in the past, we've indicated that supply has been the larger constraint. You've invested significantly in recruitment and technology. As premium pay begins to decrease, how are you viewing the willingness of full-time nurses to take breaks and accept some of these temporary positions with your organization or other staffing agencies?

Yes, Brian, I'm sure there will be some element of the clinicians that have decided to join in the COVID fight that will go back into permanent roles. But many of them will now have their eyes opened to the travel industry. I actually just talked with a nurse like that a couple of weeks ago, who said, I never thought about traveling, but COVID pulled me into the industry. And now I see all the great benefits. And so I'm going to spend the next year traveling, and this is something that is typical. Once someone gets introduced, to the industry, they don't usually just take one assignment. And again, the rates might cause some to go back into other roles but some will say, no. This is a career choice that I want to make for some period of time. And so that's a really positive thing for our industry overall, it will keep more of these new candidates and kind of new starts that we talked about within the industry for some period of time. And Landry, I don't know if there's anything else you want to add to that?

I think you've covered everything. I don't have much to add from the clinician perspective. If I were to make one more point, it's that our clients appreciate the flexibility of being able to hire clinicians on a temporary basis. We're hearing from them that, compared to five years ago when they aimed to minimize the use of contractors or temporary staff, the current conversations focus on how to implement a flexible staffing model for the future.

Got you. And then last question for me really quickly. You obviously touched on vaccinations. In what role or what are the clients you are touching on the vaccination side? Will this be the retail pharmacies? Will we look at the drive-thru? And then what are kind of like the economics? Or how should we be thinking about that opportunity?

Sure. And certainly, for our clients, our health care clients, we're supporting them. In fact, we might have had staff on-premise that was previously assisting with COVID testing, and now they've shifted to vaccine administration. And that will probably ramp up over time as more vaccine becomes available. But even beyond that, probably obvious and traditional way of staffing with our existing clients. My team's done a phenomenal job of partnering with clients and other organizations to build a multidisciplinary sort of program so that we can help staff mass vaccination sites. I'm going to ask Kelly to give you a little more insight on that because her team's really led the charge on that, and we've had some great success just in the last couple of months. But really, we're just at the beginning, I think, of what the need is going to be. So Kelly, you want to take that?

Yes. Just to give a little bit more color on that. And I think Susan is right, I think we've had the opportunity to help several of our clients with more clinic-like vaccine capabilities. But we've also been able to really scale up to help in what we're calling some of these mass vaccination sites, and we're partnering currently with one client to operationalize these. And that multidisciplinary nature is really critical because the nature of these sites required both clinical and nonclinical staff, different levels of licensure to manage the different parts of the vaccine management and administration, and we were able to tap into all of our resources truly across AMN to staff these appropriately in just a matter of weeks. And we've also been able to underlie those solutions with our technology using our VMS technology, using our scheduling optimization technology to support that as well. So we do know that we are very capable of standing up these sites in a matter of weeks. We're kind of at the mercy, like our clients and other organizations right now, around the supply of vaccines. But we see, as that supply ramps up, we're in several conversations with other health systems as well as potentially some state or governmental programs that are going to do these across the nation. So it could be very significant in the next couple of quarters, or it could be a little bit more moderate type of volume remains to be seen, but we are absolutely ready and had great success being able to do it thus far.

Your next question comes from the line of Mark Marcon with Baird.

I was wondering if you could talk a little bit about the Tech and Workforce Solutions. You've, obviously, had very strong organic growth there. Wondering if you can segment that between the flow-through coming through MSP and VMS versus more of the monthly client adds? And then the second question is, how do we think about Tech and Workforce Solutions on a go-forward basis beyond the first quarter? Would you expect that to continue to increase sequentially throughout the year?

So I'll have Maureen pick that up, since a lot of the discussion is around Stratus and VMS and to some degree, Avantas, which all fall within her purview. And certainly, we've had some great growth across really all of those businesses, but in particular, Stratus and VMS. So Maureen, you want to take that and talk about where that growth is coming from both existing clients as well as some of the new clients that we've been able to add through our MSP contracts?

I'm going to address that, it's Kelly. Looking at the entire segment, regarding the first part of the question about how much is influenced by the MSP and COVID-related volume, the area most affected has been VMS. We anticipate similar trends in VMS regarding both volume and bill rates, akin to what we're observing in our Nurse and Allied division, and we expect this to moderate throughout the year. Of the new clients we acquired last year in VMS, about two-thirds were due to COVID, but we believe one-third will transition to a more typical business model. We also expect continued growth in our Stratus business throughout the year, as Maureen mentioned, due to our capacity to secure new business. We are consistently integrating Stratus with our AMN clients and experiencing organic growth driven by a strengthened sales support network. We anticipate a steady increase for Stratus. Additionally, our outsourced solutions and Avantas have remained stable; Avantas has shown consistent performance throughout the year, and we expect moderate growth as more clients engage our consulting and technology solutions. The outsourced business has seen some fluctuations, bolstered by contact tracing programs. Our core RPO business was slightly weaker, but it's showing signs of recovery with higher vacancy rates in hospitals necessitating extra support for their talent acquisition needs. We are actively collaborating with many of our strategic clients to assist them. The primary area related to volatility in contingent staffing appears to be VMS, while the other segments remain quite stable.

Yes, I will take that. As Kelly mentioned, VMS will face some of the same challenges as nursing, as rates decline, resulting in a decrease in their revenues. Therefore, while we anticipate a decline in VMS revenue, this will be balanced by growth in Stratus and Avantas throughout the year. We expect a downturn in the second quarter, followed by a more stable and positive growth path thereafter. However, we will encounter the impact of the VMS decline primarily in the second quarter, potentially extending into the third quarter. After the second quarter, the situation should either stabilize or see a slight increase.

Got it. And then with regards to just the bill rates for the first quarter, how much are the bill rates up in terms of the projection on Nurse and Allied relative to kind of a normal environment?

This is Brian. Well, we said, we're not in a normal environment, so it's a very different metric. As I mentioned, we kind of did the math. In the fourth quarter, we'd said our nurse bill rate up a little over 20% in the fourth quarter and then seeing about a 20% sequential increase into the first quarter. So, we're up 40% or so on a year-over-year basis in the Q1 guide. So that is far from normal. And as we mentioned, we think that will start to come down as we get into the second quarter and into the third quarter as well. And we, honestly, hope that, that happens because that means that we're continuing to see progress with vaccinations and hospitalizations move down and moving more towards a more normalized environment, and we think that will be healthy for our clients, of course, and for our industry overall as well. So, this is something we knew we'd see an increase. It's obviously a bit more than we anticipated, but also have been very consistent in articulating that we expect that to come down and we'd like to see that happen as well. And when that does, we'll still continue to expect to see the volume recovery that we've already had over the last couple of quarters as well. Allied has seen some pricing growth as well, far less than what we've had in nursing. And so, there's a little bit of a tick up in the fourth and first quarter. We do expect that to also come down a bit as you see some of the respiratory therapy and a couple of other specialties that have seen a little bit greater increase, but the order of magnitude is not nearly significant as on nursing.

Great. It seems you are not factoring in much for vaccine administration, but it could potentially be significant. Is that accurate?

Yes. Yes. Exactly, it's a little early at this point. We've got several different things in the pipeline but until we have kind of contract signed to really understand the scope of the services and the duration is very difficult for us to predict anything at this point.

Great. And Brian, can you just give us a feel for CapEx for the full year, what your expectation is in cash flow? And how we should think about that?

Yes, we are currently investing, which we consider essential. The capital expenditures for the fourth quarter were around $10 million, which we believe serves as a solid baseline for 2021, and we expect it to remain at that level throughout the year. The pandemic has accelerated discussions around digital solutions and telemedicine, and we have developed a strong strategy for our digital mobile initiatives and analytics. Over the past year, we have been focused on accelerating some of these investments to align with the direction our clients are moving. As industry leaders, we recognize the need to keep pace with these changes. There are many benefits for our clients and healthcare professionals from these efforts, and we are committed to them. We have an exceptional team, including Maureen and our IT department, driving these initiatives, which makes us optimistic. You can expect our capital expenditures for the year to fall in the range of approximately $40 million to $45 million.

And our final question comes from Sam Kusswurm with William Blair.

I just have a quick one relating to telehealth, actually, and some of the comments made on tech-enabled acquisitions. I guess I'm wondering, in the large space that virtual health is, where you see yourselves able to develop internal capabilities versus where you think you would need to look outside from these solutions? And how are you making that decision between the two different approaches?

Yes, great question. So I'll start with a couple of points and then have Maureen kind of add on. So, first, when you think about telehealth, there's more than just the tech-enabled offerings that we have to play in. So we are a staffing provider for telehealth. You think about our schools business, we have over about 300 therapists that are working on our Televate telehealth platform, about half of them are ours, half of them are therapists that are working for the schools. And we have a lot of opportunity to expand that both for therapists but also in adding in school psychologists and other capabilities. So we can't forget about the opportunity that we have to combine our staffing and recruitment capabilities with the telehealth platforms that we already have. And then Maureen, I'll have you talk about the expansion opportunities for Stratus and where we go with that as well as Televate and then maybe kind of other opportunities and some other categories that we might not necessarily extend Televate and Stratus into.

Thank you, Susan. And so as we think about the hospital at home and the initiatives around hostile without valves and supporting our acute care clients today. How we can leverage our existing technology and capabilities to provide tech-enabled services across that care continuum. So, as we continue to support those initiatives, that takes us from the acute care setting into the home. And as we heard Landry say earlier, many of nurses are looking for some type of change in the next 12 months. And so a lot of that will be driven towards these virtual care environments and also following that care continuum. So we'll continue to support those initiatives also with our language services. As we thought about the integrations and the points we integrate with more than two dozen existing telehealth platforms, but the number of clients that we've implemented with has increased tenfold in the last 12 months. So we're continuing to see that expansion, especially from the acute care providers and the adoption of virtual care. And I think we'll continue to see those initiatives grow as they're reevaluating their virtual care strategy.

Okay. Hopefully, that answers your question. And I do believe that was our last question. So, we want to thank you all for joining us today on this earnings call, and we look forward to updating you on our next call.

And that does conclude today's call. Thank you for your participation. You may now disconnect.