Hello, and welcome to AMN Healthcare's Fourth Quarter 2024 Earnings Call. At this moment, all participants are in listen-only mode. Following the presentation by the speakers, there will be a question-and-answer session. I would now like to turn the conference over to Randy. Please go ahead.

Good afternoon, everyone. Welcome to AMN Healthcare's fourth quarter and full-year 2024 earnings call. A replay of this webcast will be available at ir.amnhealthcare.com at the conclusion of this call. 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 because 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 with me today are Cary Grace, President and Chief Executive Officer; and Brian Scott, Chief Financial and Operating Officer. I will now turn the call over to Cary.

Thank you, Randy, and welcome to our quarterly conference call. We are pleased to report that AMN Healthcare ended 2024 with solid financial results. And that trend has continued as we've started 2025. Fourth quarter revenue of $735 million was $30 million above the high end of our guidance range. And adjusted EBITDA of $75 million also exceeded expectations. Our Nurse and Allied Solutions revenue was 6% above the high end of guidance, and this segment still beat by 1%, excluding upside in labor disruption revenue. Physician and Leadership Solutions revenue was on target, aided by outperformance from physician permanent placement. Technology and Workforce Solutions revenue was 4% better than guidance as language services saw improved volume. During the quarter, we repaid $75 million in revolver debt, enabled by another quarter of strong cash flow. Our industry continues to see signs of stabilization. Consistent with last quarter, travel nurse orders remain above the April 2024 level, though still 20% below pre-pandemic. These orders typically trend down after November, and the drop this year is much less than in the past two years and in line with pre-pandemic seasonality. Allied orders grew 7% year-over-year in the fourth quarter with new orders up 20% year-over-year. Locum tenens demand was better than normal seasonality, rising 6% from Q3 to Q4. Staffing gross margins declined through 2024, and we recently saw stabilization of margins across our staffing businesses. Unfilled orders and vendor-neutral programs increased again in the fourth quarter as candidates continue to pass over jobs with low pay rates, and more staffing firms resist the pressure to accept unprofitable margins. As 2025 unfolds, macro indicators tell us that after more than two years of stepped-up hiring, the healthcare sector has erased the permanent staffing deficit that grew from 2020 to 2022. Wage inflation has remained high, especially for highly qualified professionals. Factors that caused our industry trajectory to detach from labor market fundamentals have eased as travel nurse utilization and bill rates have returned to normal levels. The next step would be to see client behavior continue moving towards a renewed focus on long-term objectives for cost-effective flexibility. Hospitals experienced strong growth in patient volume last year, and recent analyst surveys called for a 3% to 4% increase in admissions this year. To accommodate that volume growth, hospitals grew employment 4% in 2024 and at year-end was 12% higher than the end of 2021 when workforce difficulties were most acute. Despite tactics to offset labor costs, hospital wage inflation moved back up to 5% in the fourth quarter of 2024. Healthcare organizations managed wage pressures last year by reducing average hours worked across their workforce to their lowest levels since 2013. Consistent with that, average hours for travelers are also at a 12-year low, which is negatively impacting the staffing industry's gross margin. In many instances of client needs, we can now demonstrate that travel nurses are an attractive alternative to using overtime, leaving vacant positions open, and even to aggressive permanent hiring. As travel nurse staffing was 30% of our 2024 revenue, any demand recovery in this specialty would boost our efforts to return to growth. Since our last report, we have continued to see stable bill rates for Nurse and Allied staffing, and bill rates have continued to rise in locum tenens. For the Nurse and Allied segment, our first-quarter outlook assumes volume down in the low-single digits compared with the fourth quarter average, driven by expected lower international nurse assignments due to visa retrogression and lower utilization by a few of our large clients, mostly offset by growth in other MSP clients and direct and third-party channels. For Physician and Leadership Solutions, we expect first-quarter revenue to be down slightly from the prior quarter. Our Technology and Workforce Solutions outlook for the first quarter assumes a low-single-digit dip compared with Q4 due to lower VMS volume, with language services and outsourced solutions modestly up. Language services achieved our highest minutes delivered in Q4 and we expect to continue that trend in Q1. As the healthcare industry seeks long-term solutions for its workforce needs, the AMN team is united behind our mission of innovation and service to healthcare professionals and the diverse organizations that provide care for millions of Americans. Clinicians and clients made their voices clear. They want more choices, more visibility, and more control. We are uniquely positioned to provide information-rich technology tools that give clients and healthcare professionals what they need now. In 2024, we launched and scaled best-in-class technology solutions that provide unprecedented visibility, cost control, mobility, and efficiency in staffing management. By the end of the year, we had successfully rolled out our next-generation VMS, ShiftWise Flex, to almost all our ShiftWise users. With its ease of use, automation of key functions, support for clinical and non-clinical roles, data-packed market pricing surveillance, internal resource pool management, and more, ShiftWise Flex is poised to attract new clients in 2025 and beyond. Our market-leading app for healthcare professionals, Passport, now enables clinicians to store their preferences and, enabled by AI, automatically apply for matching opportunities, a powerful advantage in competing for the most attractive positions. Passport also supports locum tenens for the first time. We rolled out our next-generation in-person interpreter scheduling system in our language services business, enabling convenient scheduling by location and language, broadening the capabilities of our interpretation platform. And we have raised the bar higher with WorkWise, which integrates our demand forecasting, staffing, and sourcing, predictive scheduling, and workforce management solutions into a powerful platform. Clients are increasingly looking for integrated technology solutions, and we are very pleased with the reception WorkWise has received from current and prospective clients. The recently launched event management capabilities of WorkWise have made AMN a more effective partner supporting clients during labor disruption events where our scale and financial strength are also advantages. Technology innovations and operational scale drive our strategy to embrace all parts of our $41 billion addressable market, enabling us to expand service offerings and capture share, not just in our MSPs, but also in the direct and third-party channels. Our Allied business has improved its direct market fill rates in recent months. Our locum's MSP volume is on an uptrend, which is being reinforced by the addition of locum's support to ShiftWise Flex. In summary, AMN has evolved in many ways to identify and focus on the changing needs of clients and healthcare professionals. Though we provide 18 different solutions to thousands of clients, we work as one AMN, one highly flexible organization capable of delivering AMN service and value in a form that is customized to each client's unique situation. We have changed the way we operate, making it easier for clients to access our full range of solutions and easier for clinicians to access a broader set of opportunities. The more we enable client success in workforce management, the more AMN will be differentiated in the marketplace. We expect our client-centric strategy to get stronger over time, building long-term value for all our stakeholders. Now I'm thrilled to reintroduce Brian Scott, who will add his perspective on our results and outlook.

Thank you, Cary, and good afternoon, everyone. Let me start by saying how honored I am to be back at AMN. Although I'm still getting caught up on the changes in the organization and industry, it didn't take long for me to see that this team still has the same passion and values and is energized about our future. AMN has clearly made meaningful progress aligning under a unified go-to-market strategy using technology as a differentiated enabler and improving our operational efficiency with speed to placement that is 33% faster than in 2019. However, we know there is still more opportunity to consistently use automation and process changes to drive speed and efficiency across our services, and we have the talent and strategy to make this happen. These efforts will underpin our ability to drive sustained growth and profitability to deliver value to our customers and shareholders. Cary and I look forward to providing future updates on our progress. Turning now to our results. Fourth quarter consolidated revenue was $735 million, above the high end of guidance and consensus driven primarily by higher-than-expected labor disruption revenue in the Nurse and Allied segment. Revenue was down 10% from the prior year and up 7% sequentially. Consolidated gross margin for the fourth quarter was 29.8% at the high end of our guidance range. Year-over-year, gross margin decreased 210 basis points, driven by lower margins across all three segments, partly offset by a favorable segment mix shift. Sequentially, gross margin was down 120 basis points due to lower margin in the Nurse and Allied segment as well as an unfavorable segment mix shift. Consolidated SG&A expenses were $159 million, or 21.6% of revenue compared with $185 million or 22.7% of revenue in the prior year and $150 million or 21.8% of revenue in the previous quarter. Adjusted SG&A, which excludes certain expenses, was $145 million in the fourth quarter or 19.8% of revenue compared with $159 million or 19.4% of revenue in the prior year period, and $141 million or 20.5% of revenue in the previous quarter. The year-over-year decline in SG&A expenses reflected our efforts to reduce expenses along with lower revenue. The quarter-over-quarter increase was driven primarily by unfavorable accruals from a state sales tax audit and professional liability, along with labor disruption support costs, partially offset by cost reduction efforts. Fourth quarter Nurse and Allied revenue was $455 million, down 15% from the prior year, primarily from lower volume and rates, partially offset by an increase in labor disruption revenue. Sequentially, segment revenue was up 14% as fourth quarter labor disruption revenue more than offset lower volume in travel nurse. The Nurse and Allied average bill rate was down 6% year-over-year and was flat sequentially. Year-over-year segment volume decreased 22% and average hours worked was down 1%. Sequentially, volume was flat while average hours worked was down 2%. Travel nurse revenue in the fourth quarter was $230 million, a decrease of 35% from the prior year period and 6% from the prior quarter. Allied revenue in the quarter was $149 million, down 9% year-over-year and up 6% sequentially. Nurse and Allied gross margin in the fourth quarter was 23.8%, a decrease of 170 basis points year-over-year and 120 basis points sequentially primarily due to the decline in international nurse revenue. Segment operating margin of 8.6% decreased 310 basis points year-over-year and 20 basis points sequentially. The year-over-year decline was mainly due to lower gross margin, increased bad debt expense, and negative operating leverage. Moving to the Physician and Leadership Solutions segment. Fourth quarter revenue of $173 million increased 3% year-over-year with the growth coming from the MSDR acquisition. Sequentially, revenue was down 4%, driven primarily by lower volume within the locums and interim businesses. Locum tenens revenue in the quarter was $137 million, up 10% year-over-year, driven by the MSDR acquisition. Sequentially, revenue is down 4%, in line with normal seasonality. Interim leadership revenue of $26 million decreased 11% from the prior year period and 9% sequentially due to lower volume and rate. Search revenue of $10 million was down 32% year-over-year and up 2% sequentially. Gross margin for the Physician and Leadership Solutions segment was 28.5%, down 480 basis points year-over-year, primarily attributable to a lower bill pay spread in locum tenens and an unfavorable revenue mix shift. Sequentially, gross margin increased 20 basis points. Segment operating margin was 9.8%, which decreased 320 basis points year-over-year, primarily due to the lower gross margin and the negative professional liability actuarial adjustment, partially offset by lower employee expenses and lower bad debt. Sequentially, operating margin decreased 20 basis points. Technology and Workforce Solutions revenue for the fourth quarter was $107 million, down 5% year-over-year as growth in language services was more than offset by decreases in VMS and outsourced solutions. Sequentially, revenue was down 1%. Language services revenue for the quarter was $76 million, an increase of 12% year-over-year and 2% sequentially. VMS revenue for the quarter was $23 million, a decrease of 26% year-over-year and 10% sequentially. Segment gross margin was 57.3%, down 320 basis points from the prior year period, primarily due to the lower mix of VMS and outsourced solutions revenue, partially offset by margin improvements within language services. Sequentially, gross margin declined 60 basis points, mainly due to a revenue mix shift. Segment operating margin in the fourth quarter was 37.7%, an increase of 90 basis points from the prior year period, driven primarily by expense management, partially offset by the lower gross margin. Fourth quarter consolidated adjusted EBITDA was $75 million, down 28% year-over-year and up 2% sequentially. Adjusted EBITDA margin for the quarter of 10.2% was down 250 basis points from the prior year, primarily driven by lower gross margin and negative operating leverage. Sequentially, adjusted EBITDA margin was down 50 basis points due to the lower gross margin, partially offset by expense management. During the fourth quarter, we performed a quantitative impairment test of our goodwill. This assessment resulted in a non-cash impairment charge of $222 million, impacting the Nurse and Allied and Physician and Leadership Solutions segment. Net interest expense and other in the quarter was $23 million and included a $10 million non-cash charge related to the revaluation of minority equity investments. Fourth quarter net loss was $188 million, driven in large part by the non-cash goodwill impairment charge. This compared with net income of $12.5 million in the prior year and $7 million in the prior quarter. Fourth quarter GAAP diluted loss per share was $4.90. Adjusted earnings per share for the quarter was $0.75 compared with $1.32 in the prior year and $0.61 in the prior quarter. Days sales outstanding for the quarter was 55 days, which was 15 days lower than a year ago. Sequentially, DSO improved by five days, in large part due to the upfront payment on labor disruption revenue recognized during the quarter. Operating cash flow in the fourth quarter was $73 million, and capital expenditures were $16 million. As of December 31, we had cash and equivalents of $11 million and long-term debt of $1.06 billion, including $210 million drawn on revolving line of credit. We ended the year with a net leverage ratio of 3.0x to 1. With a focus in 2024 on debt reduction, we paid down the revolver by $75 million in the quarter and $250 million for the full year. Recapping financial highlights for the full-year 2024, we reported revenue of $3 billion, a year-over-year decrease of 21%. Gross margin for the year was 30.8%, a decrease of 220 basis points from the prior year. Adjusted EBITDA was $341 million, a decrease of 41% from the prior year. Full-year adjusted EBITDA margin of 11.4% was 390 basis points lower year-over-year. For 2024, we reported a GAAP loss per share of $3.85 and adjusted EPS was $3.31 compared with the prior year GAAP EPS of $5.36 and adjusted EPS of $8.21. Full-year cash flow from operations was $320 million and capital expenditures totaled $81 million. Moving now to first-quarter guidance. We project consolidated revenue to be in the range of $660 million to $680 million, down 17% to 20% from the prior year period. This guidance includes an assumption of $24 million of labor disruption revenue. Gross margin is projected to be between 28.1% and 28.6%. Reported SG&A expenses are projected to be 22.2% to 22.7% of revenue. Operating margin is expected to be minus 0.3% to a positive 0.4%, and adjusted EBITDA margin is expected to be 7.7% to 8.2%. Additional first quarter guidance details can be found in today's earnings release. For modeling purposes, we anticipate full-year capital expenditures of $40 million to $50 million, stock-based compensation expense of $35 million and a non-GAAP tax rate of 26% to 28%. Before we open up the call for questions, I will hand the call back to Cary.

Thank you, Brian, and welcome back. Before I open the call to Q&A, I want to thank Doug Wheat, our long-time Chairman of our Board of Directors, who announced his retirement earlier this month and has become AMN Healthcare's Board Chair Emeritus. Doug provided invaluable leadership and guidance to the company and management over the past 25 years, including helping take the company public 23 years ago. We thank Doug for his service to our organization and welcome Mark Foletta as the new Board Chairman. Mark has deep public company leadership and governance experience, both as a Board member and as a CFO. Now operator, please open the call for questions.

Thank you. Our first question comes from Tobey Sommer with Truist. Your line is open.

Hey. Good afternoon, everyone. It's Jasper Bibb on for Tobey. I wanted to ask about gross margins in Nurse and Allied. How are you thinking about the segment gross margins there in the first quarter, and could you maybe extrapolate for us like how the labor structural revenue might influence that margin versus what otherwise might be comparable to a year ago? Thank you.

Hey, Jasper. There's nothing like a welcome back to Brian than a gross margin question in the first piece. So we'll talk a little bit about – I think you got the big points that we're seeing. We obviously have a part of it that's mix and particularly coming from headwinds that we have in international that we saw really throughout 2024 that will continue into 2025. So Brian, if you want to maybe give...

Yes. Thanks, Cary. Jasper, thanks for the question. Yes, there's a few moving parts on the gross margin, as you probably know. Within Nurse and Allied specifically, the margin in the fourth quarter at 23.8% in part reflected some sales reserve reversals that we took in the fourth quarter that we had talked about on the last quarter. And so that – if you take that in the context of our Q1 guidance, we would have been closer to, call it, 22.5%. And so our expectation for Q1 is relatively similar to the fourth quarter, and that's the team doing a really good job of looking at pay packages and negotiating. And the trends we're seeing with bill rates stabilizing in the last couple of quarters and expected to be up modestly in the first quarter, we're seeing pretty stable gross margin trends in the Nurse and Allied segment.

Thanks. And then you mentioned, obviously, the normalization of domain conditions. In the prepared remarks, bill rates up a little bit in the first quarter. What do you think you need to see in the market to start growing the Nurse and Allied volume sequentially this year?

Yes. I think what we've seen and what we talked about this quarter and last quarter are a number of signs around normalization. And I think they really all speak to different parts of healthcare systems really getting back into much more of a normal mix between permanent a layer of contingent staff and a layer of flexible staff. And so we've seen a lot of – when you look at some of the things that would typically drive buying behavior, normalization of premium. So our estimate today of premium spread over fully loaded labor cost is about 10%, the lower end of what you would have seen historically. And so what we want to see now, Jasper, is if recent analyst reports are predicting patient demand increasing 3% to 4%, and you still see probably above-average wage inflation in healthcare, you'd want to start seeing some of that play through in terms of orders then getting picked up as we go through the year to reflect some of those tailwinds.

Got it. Thank you.

Thank you. Our next question comes from A.J. Rice with UBS. Your line is open.

Hi, everybody. Just wondering if – we've got the strike revenue. We've got other things going on in the fourth and first quarter, and then there's seasonality. I'm trying to understand how do you – do you feel like you're seeing a normal pattern here that was similar to what you would have seen pre-pandemic? Do you feel like there's still some softness? And any early thoughts about how the trajectory of the rest of the year for 2025 might play out? What are you looking for in terms of revenue trends as we progress through the rest of the year?

Let me talk about what we've seen. And then I can tag team with Brian on what we expect. We've seen a more return to normal. If you look at normal being what we would have seen pre-COVID. And so as an example, and I talked about this in some of the opening remarks, we've seen order increases in nursing since last April. We would normally see from November until now, a drop off of those orders. We saw that. It was actually not as much as we had seen pre-COVID. So you're really starting to see for us more of that return to normal. Locums, you typically see a little bit of seasonal weakness at the end of the year. And so we don't have as much visibility as we would ideally like. But what we do have visibility in, we are seeing more normalcy as we enter 2025 than we have seen in the past couple of years.

A.J., it's Brian. Yes, I mean, the fourth quarter, I think, played out overall as expected. We see the labor disruption event went longer than we anticipated, and that added some additional revenue in the fourth quarter and is flowing through into our first quarter guidance. If you try to strip that out of both quarters and also take out the kind of $5 million-ish sales reserve reversal that we've talked about, we are looking at a little bit of a decline probably in the – particularly midpoint of our guidance in Q1, call it, $15 million to $20 million or so. And there's a few pieces there. I think to Cary's point, I think we're seeing much more normalization. There's still some residual flow-through of some of the changes with client behavior, some runoff from early client exits during 2024. But for the most part, as we think about as we're moving into Q1, seeing really good trends in locums. I think overall, we'd expect that business to be flat to slightly up in the first quarter, which is pretty normal for it to be up. We're still working through the MSDR integration, but the booking trends especially over the last few weeks have been really positive, which gives us confidence in the first quarter, but also that we'd expect to see growth in the second quarter and beyond. Language services continue to grow sequentially – it grew in Q4, we expect it to grow in Q1 and through the year. International is still a bit of a headwind, right. As we talked about, as we have retrogression continuing, we have about a $4 million to $5 million reduction expected sequentially in Q1. And then with the Nurse and Allied business, a little bit of a decline on the nursing side as you see some of the winter orders start to roll off. But underneath that, there's still, I think, a more normal kind of buying behavior due to some of the seasonal impacts that are on there. And then with VMS also down a little bit in the first quarter as well, again, more reflective of the market environment and some client losses from 2024 that just are kind of working their way through the system. So Q1, I think, sets a really good foundation for 2025, and it's a good marker ex that strike. And as we think about the rest of the year, we see good opportunities for the businesses to grow and a lot of really good momentum in most of our service lines.

Okay. That's great. Maybe a follow-up, I'll ask. In the prepared remarks, you mentioned and you mentioned a couple of times in answering the international headwind. Do you have a sense of what the international revenue or impact would be EBITDA impact of 2024 versus 2025 overall? I'm sure it varies a little bit depending on how demand looks, but I'm just curious if you got a figure there. And then the other comment was made in the prepared remarks was about large clients seemingly stepping back a little bit. Was that because they're doing it themselves, they've changed vendor? Are they having volume issues? What – maybe flush that out a little more?

Yes. Let me answer the first one. So what we would expect and very similar to what we talked about last quarter is, if you look at our international business, so take full-year 2023 before retrogression started. Total revenue in that business was at $225 million. We expect about $100 million revenue headwind between 2024 and 2025. About 60% of that, A.J., would be in 2024. And so we have the remainder of the headwind in 2025, and mostly in the first two quarters of 2025. And so we would expect after that, that you would start to see that flatten out in the back half of the year. And then in 2026, you would start to get growth in that business again. On your question from a client standpoint, we always like to give color about what we're seeing in some of our top clients. And so while we have seen the majority of our largest MSP clients be relatively flat to growing, we still have a couple of large clients that are reducing their TOA. And it really is just a reflection of them getting back into a target mix of permanent and flexible and contingent staff. And isn't necessarily a commentary on changing models. It's just kind of where they are in that process.

Okay. Thanks a lot.

Thank you. Our next question comes from Jeff Silber with BMO Capital Markets. Your line is open.

Thanks so much and welcome back, Brian. And actually, let me start with a question for you. I know it's been a few years since you left the company, and I know things have changed a lot in the industry. But from your perspective, what do you think you can do to help the company get back on track?

Well, thanks. It's good to be back. Well, I think I'd start with this, this team has already done a tremendous amount of work to get this company on track. So I'm here to do what I can to help that, but there's already been a tremendous amount of work laying that foundation. As I mentioned in my opening remarks, we've got, I think, a really fantastic team here. A great blend of folks that I've known for years that are still here, but also some really strong new talent that's been infused in the organization, which I think has been good because, as you said, the industry has changed a fair amount. But I'm already seeing a lot of really good work, much more of a unified approach towards – our clients have done it with both branding, but also just the way we operate internally, engage with our clients. And I think that's going to set us up well – from just a technology point of view, there's been tremendous work that was needed. It was, I think, an acceleration of use of technology and digitization of our industry over the last several years. And so maybe a little bit of catch up here, but the team has done a lot to close that gap, both the things you see externally with Passport and ShiftWise Flex, really, I think, best-in-class solutions there internally with our – upgrading our applicant tracking system, our AMI web solution. And then on the back office side, standardizing more of our businesses on a common ERP. All of that is going to help us become more efficient, have better speed to market and then also deliver services that really resonate with clients and allow us to listen more. I think, obviously, when I left, we had a larger mix of our business tied to managed service programs. I think that's still a critically important part of the industry and for clients that want that service. I think we delivered really well. But I think we're better positioned now to be able to meet clients that want more of a vendor-neutral or hybrid solution. And we can kind of walk that walk as well now, and I see that across the organization. So I think we're – we laid a lot of the right foundation this year; it's a year of execution. And we're feeling good that we're going to – we'll see the kind of the benefits of those investments and our efforts as we move through the year.

All right. That's great to hear. Maybe I could just step back and ask a broader question in terms of the overall marketplace. Are you still seeing hospitals trying to reduce their contract labor? I know Census is up, and I know they're focused on full-time employment. But I'm just wondering if you're still seeing pressure on that side of the house?

Yes. What I would say is we're still seeing a focus on contract labor. It's not the cost savings lever that it was even a year ago, right, especially as you've seen the premium spread normalize as you've seen broadly utilization come down. Now, there are some systems that still are probably above where they want to be or where they were pre-COVID that still need to come down. But I'd say what we're increasingly seeing is the end of they're still focused on that line item, but they're stepping back and looking at their overall workforce and really wanting to have a partner who's going to help them with how they build high-quality, cost-effective workforces to meet what they see as kind of increasing patient demand. So yes, we're focused on it. They're increasingly focused on what is the next round of broader workforce solutions to help me sustainably build a workforce in the coming years.

All right. Really appreciate the color. Thanks so much.

Thank you. Our next question comes from Joanna Gajuk with Bank of America. Your line is open.

Hi. Thank you for taking my question. Regarding your last comment, I recall on the third-quarter call you mentioned that some hospitals were starting to offer higher rates to attract staff. Have you noticed an increase, decrease, or has it remained the same? How is that situation evolving?

We will see, particularly as the need for some of those clinicians get higher, you will see systems go back and adjust bill rates to be able to fill those orders. I don't know if at this point we've seen a significant uptick from what we were seeing at the end of the year. But given some of my earlier commentary about the increase in unfilled orders, you would look for more systems increasing their bill rates to get some of those orders crossed is one sign of just continuing stabilizing demand over the next quarter or two.

Okay. Thanks for that. Another follow-up on the comment about the Q1 versus Q2, like the moving pieces, and I appreciate the strike revenue and such. But then when we think about – and there's obviously seasonality, that's what I'm headed with this EBITDA margin for Q1 guidance. Because I guess, last quarter, you were kind of talking about maybe like 8.5% EBITDA margin in Q1 and grow from there. So now I guess you're guiding to a lower margin despite the fact that there is some strike revenue in there, in EBITDA. So is that sort of 8% a better starting point and how we should think about kind of as the year goes on how this EBITDA margin should be moving, assuming there's just normal seasonality?

Sure. Yes. Thanks. I think that well said as far as Q1, I think that is a good starting point in that 8%. And as we move through the year, the seasonality that we would expect to see in the second quarter, typically, nursing is down. Nurse and Allied are both down low single digits as we roll off winter assignments. And some of the schools impact on Allied as we get into the summer months. But we're also expecting growth in other businesses that are higher margin, like locums and our interim and search business, continued growth in language. So those – I think those will somewhat expect them to offset each other to some degree in the second quarter, but that mix of revenue should be favorable on the gross margin as we continue to manage our G&A right now, I think that 8% is a good – probably a good way to think about the first half of the year. And then as we move into the back half of the year as we get growth kind of across all businesses, we should see continued improvement on our gross margin and then more operating leverage, and that's where we'd start to see that EBITDA margin lift in the back half of the year.

So that's another question, if I may, on the international business because I appreciate your comments around your expectations in first half and then second half. But is there any risk to this? I mean, is it sort of like things going to change come June 30 and then you can kind of be back to growing international business?

So we've assumed some marginal improvement of the date moving forward. I think the date now is at December 2022. It's pretty modest. So if there were no movement, there might be some kind of marginal risk towards the back end of the year, but smaller relative to what we've seen either in 2024 or what we expect in the first half. So we're giving you our outlook of what we have seen historically when you've gone through a retrogression period.

Yes. So there's unlikely to be upside in 2025. But again, we've got this pipeline that continues to build. So it's really just a function of timing. If we don't – the dates move forward a little bit, that it won't have a meaningful impact on this year, but it will just accelerate the recovery in that business as we get into 2026 and beyond.

Great. Thank you. Thanks for taking the question.

Thank you. Our next question comes from Mark Marcon with Robert W. Baird. Your line is open.

Hey, good afternoon. Thanks for taking my question. And welcome back, Brian. Great to have you on the call. Wondering if you can talk a little bit on Technology and Workforce Solutions, what are you assuming in terms of VMS revenue for the first quarter? So it sounds like language is doing well. So I'm just trying to figure that part out.

Yes. It's going to be likely a little bit under $20 million in the first quarter. So and that's a little under $20 million in the first quarter. So we've – as we talked about, just with some of the client transitions, the timing of the way they end up rolling off is sometimes a little bit difficult to predict. So it actually took a little bit longer in the fourth quarter. It was actually a little bit of an upside for us in Q4. But as that settles out, that's where you're seeing one more step down in the first quarter as well as some volume declines as utilization has come down some. At this point, what we're seeing is that, that should be kind of the low watermark. We've had some more recent client wins with ShiftWise Flex as those are getting implemented. And we stabilized with our current client base and then start to see some of these wins roll into 2025, within Q1 should be the low point, and the team is doing everything they can to execute to start to see that grow as we move through the year.

Okay. And just in general, aside from the ShiftWise transition, just in terms of just what you're seeing in terms of overall volumes across the MSP as well as VMS, the elements that you're not filling, how is that trending?

So if we look at kind of overall demand – and I would say this is true both in MSP, for us, the shape of that looks a little bit different post-COVID because we had focused all of our supply into that market during COVID. So when you look at our MSP volumes, they were naturally going to go down because our starting point was so high there. Everything that we've been doing, Mark, that Brian talked about earlier to position ourselves in the non-MSP space has really been an opportunity for us. And so right now, as we look in our nurse business, and look at the mix of where we're seeing demand. Overall, about 20% of our demand is coming from MSP, and about 80% would be coming from non-MSP. And so it was incredibly important for us over the past two years to really reposition ourselves against that broader market because we see a lot of incremental demand opportunities for us that we have been taking advantage of. So we're seeing similar trends around overall demand increasing in the nurse space since last April. We've seen very healthy demand in Allied particularly as we started 2025 and similar for locum.

Great. And then kind of a broader industry question. There's been some obvious signs of consolidation in terms of ECRN and AIA. There's also been reports of some other companies in the space that might be looking for partners and seems like it would be natural to see a little bit of a shakeout and a little bit of consolidation, just given what's happened to the overall demand level since 2020. And I was wondering if you could provide any commentary on what – in terms of what you're seeing from a competitive dynamic perspective, both in terms of demand from hospitals and your competitive position and how that translates to pricing. But also in terms of are the clinicians appreciating your relative strength? And what are you seeing from that perspective?

Yes. What I would say broadly about the competitive environment, and we draw different competitors depending on what solution you're talking about. But I would say there is consistently very strong competition across the space. If we look at, Mark, to the first part of your question about what we've seen in terms of recent consolidation, what we saw most acutely in the nursing space coming out of COVID is you really had excess competitive capacity that had been built when that TAM became so significant during COVID. And you started to see both between the recent acquisition announcement, but also even some players exiting the space or getting out of it. I think you've really started to see some of that excess capacity start to shake out a little bit from a nursing standpoint. What we're seeing from a client perspective is particularly as clients are stepping back and saying, I really want a partner who's going to help me think about how to build a sustainable workforce for the future. The breadth and depth of our capabilities positions us very well for those conversations and to be that partner for them. So it's not just that we have the solutions that we have. It's that we have increasingly done a tremendous amount of work to make those solutions more integrated and more relevant to those clients. So we are seeing clients want how we are approaching the market from a total workforce standpoint. From a clinician standpoint, I'd say there's two pieces that we are seeing. One, throughout all this, and we do think there's going to continue to be consolidation in this market, not the least of which is because you really need to be able to scale your technology investments. But clinicians and clients want choice and competition. And so from a clinician standpoint, it is also very beneficial for them to work with a player like us because we can support them in any type of role they want throughout their career. And so we are an appealing partner for them if they want to go on a contract assignment and then want to go permanent. We know them and can help support them.

Great. Cary, just to follow-on on that. I mean, given the consolidation, it sounds like the competition is still tough. Or are you saying that there has been a little bit of a reduction in capacity and that your competitive position is appreciably better because of that – because of some of the exits that have occurred?

Yes. I think it's too early for some of the exits. I think a lot of that news is much more recent. So I don't know that we've seen an impact yet of that. I'll kind of take the competition in kind of two phases. One is we still see very significant competition around getting new clients. And so coming out of COVID, this really has been, for most parts of our business, a demand environment and getting access to that demand locums is a little bit different. But we really do see very strong competition there. On the supply side, we have seen, especially with bill rates stabilizing, we have seen competitors be very rational, and they're not going to go and fill orders that are not priced appropriately or priced where it's going to be unprofitable for them, which is why we suspect we're seeing an increase in unfilled orders. So it's still a very competitive environment, but you have an underpinning of rational decisions that competitors are making, particularly on the supply side.

That's very helpful. Thank you so much.

Thank you. Our next question comes from Jack Slevin with Jefferies. Your line is open.

Hey, thanks for the question. A lot of mine have been asked already, so maybe a pretty quick one. You gave some color around the margin impacts from the labor disruption revenue when you guided 4Q. Apologies if I missed it, but could you just help me see if we can frame that out in terms of gross margin and adjusted EBITDA in the 1Q guide?

As it relates to the labor disruption?

That's right.

I mean, there's not – it doesn't – I mean there's not a material difference in the margin on the labor disruption revenue. So it's really – we're getting the flow through, obviously, through the EBITDA, but particularly as it relates to gross margin, it's not really a notable impact on Q4 or Q1. The bigger influences are around either mix changes within the segments or between the segments on a consolidated basis, some headwind from the international decline that does have a higher margin. And then on Q4, we mentioned the sales reserve adjustment. Those are the bigger influences. Strike itself, the labor disruption events have been – they're pretty similar in the margin. And it's just adding revenue and a flow-through of EBITDA. The outperformance in the fourth quarter EBITDA was – that was the largest part of it. It was also though we had better performance in a couple of other businesses, including our VMS business and our interim business, some areas that flow through with nice high margin, but labor disruption itself that had a big influence on the gross margin.

Okay. Got it. Really appreciate it. That's helpful. One quick follow-up. I guess just taking the business at face value where you sit in the first quarter. I was hoping you could give a little color maybe on how you're thinking about free cash flow conversion for free cash generation. I guess I'm just trying to square, you had some of the benefit in Q4 that probably reverses, but on a normalized basis, sort of how we should think about converting cash going forward? Thanks.

Yes. I mean I think we've typically talked that the free cash flow conversion in the kind of 60s range. I would still use that as a good marker. We have adjusted our CapEx this year to reflect the current environment and revenue and expected EBITDA. So that, I think, is still a good market to use for any modeling. Does that help?

That's great. Yes. Thanks very much. Appreciate it guys.

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Cary for closing remarks.

Great. Thank you. We appreciate your continued interest in AMN Healthcare, and I want to have a special thank you to all of our corporate and clinical employees who work hard every day to enable patient care. Thank you.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.