Amn Healthcare Services Inc Q4 FY2025 Earnings Call

Good day and thank you for standing by. Welcome to the AMN Healthcare Fourth Quarter 2025 Earnings Call. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Randy Reece. Please go ahead. Good afternoon, everyone. Welcome to AMN Healthcare's Fourth Quarter and Full Year 2025 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. Welcome, everyone, to our quarterly recap and year-end update. We are pleased to review our 2025 accomplishments and highlight what we expect looking ahead. Several themes prevailed last quarter and so far in the first quarter as we saw healthy seasonality in Nurse and Allied staffing, a return to sequential growth in international nurse staffing, increasing demand in our leadership and search businesses, along with extraordinary need for labor disruption support. We had outsized labor disruption revenue in the fourth quarter, and with two large events in the first quarter, we anticipate significantly more labor disruption revenue this quarter. For the full year 2025, we finished with revenue of $2.73 billion and adjusted EBITDA of $234 million. We reduced debt by $285 million in 2025. Fourth quarter revenue of $748 million was 2% higher than the year-ago quarter and $18 million above the high end of guidance. Gross margin came in slightly above the high end of the guidance range, and adjusted EBITDA margin was at the high end of guidance. Labor disruption revenue in the fourth quarter was $124 million, nearly doubled over the year-ago quarter. Excluding labor disruption, revenue for the quarter was $624 million, slightly above the midpoint of our guidance range. By segment, excluding labor disruption revenue, Nurse and Allied Solutions and Physician and Leadership Solutions came in at the high end of guidance. Technology and Workforce Solutions revenue was $2 million below the midpoint of the guidance range. Nurse and Allied revenue of $491 million grew 8% year-over-year. Excluding labor disruption, segment revenue was down 7% year-over-year, improved from down 13% in the third quarter. Travelers on assignment, which do not include labor disruption, grew 6% sequentially in the quarter. In the first quarter of 2026, we expect Nurse and Allied revenue to be up more than 135% year-over-year, or excluding labor disruption, up 2% to 4% year-over-year and up 4% to 6% from the fourth quarter. We are seeing positive year-over-year demand in Allied, including our Schools business and the seasonal demand decline in Travel Nurse in line with last year. Physician and Leadership Solutions revenue in the fourth quarter was $170 million, down 2% from the year-ago period. Every business in the segment exceeded the assumptions embedded in guidance, with interim leadership and search showing the most upside. For the first quarter of 2026, we expect Physician and Leadership revenue to be down 5% to 8% year-over-year. Within this outlook, we project interim to be down in the mid-single digits year-over-year, with search flat to up from the prior year. We expect locums to be down mid-single digits year-over-year, as we have seen some disruption in early-year demand with certain clients who are experiencing strike events, along with seasonal demand declines. However, our outlook remains positive for sequential growth in the segment for the middle quarters of the year. In the fourth quarter, Technology and Workforce Solutions revenue was $88 million, down 18% year-over-year or down 14%, excluding the divested Smart Square business. Within language services, our tiered service strategy to address price competition is already in trial with several clients, and we expect to see gross margin benefits from this strategy in the second half of the year. As we have now developed and deployed this new strategy, we are able to support a broader range of client choices. Our language services delivery models use our leading technology platform to provide medically qualified human interpreters on demand for clinical interactions as required by federal regulations. To support the entire patient journey, we are expanding our capabilities by investing in AI technology enablement to support the administrative and other nonclinical interactions with patients where human interaction is not required. We have momentum from new client wins in Q1 and a growing sales pipeline, giving us the opportunity to return to year-over-year revenue growth in Language Services later this year. VMS revenue in the fourth quarter was $16 million, lower by 4% quarter-over-quarter and 28% year-over-year. After rolling out ShiftWise Flex to our client base in early 2025, our emphasis was on deploying enhanced capabilities in our industry-leading VMS. These include advanced analytics and reporting, generative and Agentic AI, and expanded support for managing internal float pools and internal agency. These investments broaden our ability to win new business and expand our solution set with current clients. In the first quarter, we expect Technology and Workforce Solutions revenue to be down in the mid- to upper teens year-over-year, or low teens excluding Smart Square. We expect Language Services revenue to be modestly lower sequentially. The downward sequential trend for VMS is moderating, with the driver of decline in the first quarter being two fewer days. As we look forward, our consolidated first quarter outlook includes an assumption of $600 million in labor disruption revenue from multiple strike events. Although the labor disruption revenue reduces our consolidated gross margin, it does drive operating leverage. Our team has risen to the challenge of serving the day-to-day needs of our 2,000 clients while also managing two large indefinite duration strike events on both coasts. I am profoundly impressed by the energy, commitment, and teamwork we have sustained in driving quality outcomes for our clients during these events. We're also very pleased with the performance of the event management system we built over the past two years as the backbone of our differentiated labor disruption solution. Strategic clients expect us to support them through disruptive events, and we are committed to supporting them as part of building long-term partnerships while ensuring continuity of quality patient care. We have discussed over the past three years how our team has automated, reorganized, tech-enabled, and rebuilt our business processes to ensure that AMN would be ready when staffing demand rebounded. While we have reported on the improvements in our speed to fill and ability to compete across broader market segments, the labor disruption events in recent months have proven that our enhanced platform and solutions can successfully handle significantly higher levels of demand. Also strengthening our response is how we develop the ability to seamlessly onboard suppliers into our technology and programs during a demand spike. This strengthens our position as a preferred partner for other staffing vendors. Beyond the needs for labor disruption support, we view 2026 as a year of transition as we work to return all our businesses to growth. At the start of this year, conditions in the health care labor market show signs of returning to normal as measured by the rates of hiring and attrition. Clients are increasingly using a blended labor model to support revenue growth, and more clients are seeking support for centralizing their control over contingent labor spending, including heightened interest in locum. We see rising recognition of the value of having a long-term strategic partner for workforce management, and AMN is well-positioned to be that partner. We expect to see Allied International and Search return to year-over-year growth in Q1, with the other businesses returning to growth in the coming quarters. After 2026 and excluding labor disruption, we see a path to delivering sustainable organic revenue growth of 4% to 6% per year while growing operating expenses at half the rate of revenue growth, resulting in 10% to 15% growth of adjusted EBITDA. Cyclical drivers should help our industry return to growth, but we also have positioned AMN to fuel growth from market share gains and an improving revenue mix. In our robust sales pipeline, we see the potential to regain momentum in MSP, where we have demonstrated the value of having AMN as a long-term business partner. We are gaining share in the large direct and vendor-neutral segments of the market. The investments we made, including AI enablement across recruiting, applicant tracking, credentialing, and support, are transforming the way we operate. We are demonstrating that we are a much faster and more agile company with a stronger technology base than we were just a few years ago, giving us greater optimism about improving earnings power over the long term. Words cannot express the gratitude I have for our corporate team, our clinicians, and our suppliers for their tireless dedication to ensuring our ability to support our clients and providing continuous care for their patients. Now let me turn the call over to Brian for additional details about our fourth quarter results and full year results, along with our first quarter outlook.

Thank you, Cary, and good afternoon, everyone. Fourth quarter consolidated revenue was $748 million, above the high end of our guidance range, driven by labor disruption revenue that was $24 million above guidance. Revenue was up 2% from the prior year and 18% sequentially. Consolidated gross margin for the fourth quarter was 26.1%, slightly above the high end of our guidance range. Gross margin declined 370 basis points year-over-year and 300 basis points sequentially. Labor disruption revenue reduced fourth quarter consolidated gross margin by 130 basis points. Consolidated SG&A expenses were $152 million compared with $159 million in the prior year and $139 million in the previous quarter. Adjusted SG&A, which excludes certain expenses, was $143 million in the fourth quarter compared with $145 million in the prior year and $129 million in the previous quarter. The sequential increase in adjusted SG&A is primarily attributable to a $5 million unfavorable professional liability actuarial adjustment, a $4 million net increase in bad debt expense, and approximately $5 million of additional costs to support the large labor disruption event. Fourth quarter Nurse and Allied revenue was $491 million, up 8% from the prior year, exceeding the high end of our guidance range, driven by higher-than-anticipated labor disruption revenue. Sequentially, segment revenue was up 36%. Excluding labor disruption, segment sequential growth was 5%. Year-over-year Nurse and Allied segment volume decreased 5%, average rate was flat, and average hours worked were down 1%. Sequentially, volume was up 6%, average rate was up 1%, and hours worked were down 2%. Travel Nurse revenue in the fourth quarter was $209 million, a decrease of 9% from the prior year period, though up 6% from the prior quarter. Allied revenue in the quarter was $147 million, down 1% year-over-year and up 3% sequentially. Within Allied, our Schools business grew revenue 10% year-over-year. Nurse and Allied gross margin in the fourth quarter was 21.6%, a decrease of 220 basis points year-over-year. Sequentially, gross margin was down 250 basis points, driven by the lower labor disruption margin in the quarter. Moving to the Physician Leadership Solutions segment. Fourth quarter revenue of $170 million was down 2% year-over-year. Sequentially, revenue was down 5%, driven by seasonality in locum tenens. Locum tenens revenue in the quarter was $136 million, flat year-over-year and down 7% sequentially. Interim leadership revenue of $24 million decreased 8% from the prior year but was up 4% sequentially. Search revenue of $9 million was down 8% year-over-year and up 1% sequentially. Gross margin for the Physician and Leadership Solutions segment was 27.5%, down 100 basis points year-over-year. Sequentially, gross margin increased by 30 basis points. Technology and Workforce Solutions revenue for the fourth quarter was $88 million, down 18% year-over-year and 7% sequentially. Language Services revenue for the quarter was $70 million, down 9% year-over-year and 7% sequentially. VMS revenue for the quarter was $16 million, a decrease of 28% year-over-year and 4% sequentially. Segment gross margin was 48.1%, down 920 basis points from the prior year period due to an adverse revenue mix shift, lower margin in Language Services, and the sale of Smart Square. Sequentially, gross margin declined 340 basis points. Fourth quarter consolidated adjusted EBITDA was $54 million, down 27% year-over-year and 5% sequentially. Adjusted EBITDA margin for the quarter was 7.3%, down 290 basis points from the prior year period and 180 basis points sequentially. Fourth quarter net loss was $8 million. This compared with net loss of $188 million in the prior year period, which included a non-cash goodwill impairment charge, and net income of $29 million in the prior quarter. Fourth quarter GAAP loss per share was $0.20. Adjusted earnings per share for the quarter was $0.22 compared with $0.75 in the prior year period and $0.39 in the prior quarter. Days sales outstanding for the quarter was 47 days, which was 8 days lower than a year ago and 10 days lower sequentially. Excluding impacts from the large labor disruption events, year-end DSO was 56 days. Operating cash flow for the fourth quarter was $76 million, and capital expenditures were $8 million. As of December 31, we had cash and equivalents of $34 million and total debt of $775 million. We ended the year with a net leverage ratio of 3.3x to 1. Recapping financial highlights for the full year 2025, we reported revenue of $2.7 billion, a year-over-year decrease of 8%. Gross margin for the year was 28.3%, a decrease of 250 basis points from the prior year. Adjusted EBITDA was $234 million, a decrease of 31% from the prior year. Full year adjusted EBITDA margin of 8.6% was 280 basis points lower year-over-year. For full year 2025, we reported a GAAP loss per share of $2.48 and adjusted earnings per share was $1.36 compared with the prior year GAAP loss per share of $3.85 and adjusted earnings per share of $3.31. Full year cash flow from operations was $269 million and capital expenditures totaled $36 million. Moving to first quarter guidance. We project consolidated revenue to be in the range of $1.225 billion to $1.24 billion. This revenue guidance includes approximately $600 million related to labor disruption support, with the final amount subject to completion of the events. Gross margin is projected to be between 23.5% and 24%. The impact of labor disruption revenue this quarter reduces our gross margin by about 300 basis points. Reported SG&A expenses are projected to be approximately 14.5% to 15% of revenue, including about $40 million of additional costs in the quarter to support labor disruption activity. Operating margin is expected to be 5.9% to 6.5%, and adjusted EBITDA margin is expected to be 9.7% to 10.2%. Additional first quarter guidance details can be found in today's earnings release.

The first question of the day will be coming from Jeff Silber of BMO.

Since the labor disruption business is such a big part of 4Q and expected to continue in this quarter, I just wanted to drill down a little bit on there. Do you have like either separate operating procedures or a separate sales force for this? How do you make sure that it doesn't disrupt the rest of your business?

Yes. A couple of things. One is we have developed over and invested in over the past two years technology and operating model to be able to support strike events. That system is being used not just in the strike events that we're doing now. We also used it in the strike that we supported in the fourth quarter. We have a dedicated strike team. It includes sales down into leadership roles and operations roles for very large events like what we have now. You have resources coming from across the company and from external sources as well. So we have a playbook for how we bring those resources on seamlessly. They're trained. We have operating procedures against it. So we really have built a system so that we will have as little disruption to our core business as possible when we're supporting these types of events. Given the magnitude of what we've supported in the first quarter, we have moved many, many corporate resources onto support this. It has had some marginal impact on some of our core business. But really, relative to the size of events, the playbooks and everything that we've put in place over the past two years is working incredibly well.

Okay. That's helpful. Shifting gears a bit. I know the stock market is a bit jittery about AI disrupting a bunch of different businesses. And specifically with your company, I think some of the recent stock pressure might have been because of some fears on your language translation business. Can you talk a little bit about that in terms of what you think the risks might be and how you're countering them?

Yes. And just as a reminder, for our language service business, it is focused on clinical health care settings. And that, by government regulation, is required to have a human interface and a human providing that service. Our capabilities are tech-enabled, but we have humans who are delivering that, which allows our clients to be able to comply with federal laws. So we really have been focused much more on the clinical side of it. We look long term, this is an important service to be providing to patients and for health care systems. The clinical setting is also higher risk. So beyond it being regulated, it's not an area that we have had any clients coming to us and saying, 'I want to look at AI as one of the areas that I would want to focus on in the clinical setting.' We have had conversations around how do we use better AI enablement, both within our technology that is connecting the patient to all these medically trained interpreters. And we've also had clients who are looking at the overall patient journey and really wanting to ensure that they have some continuity in that patient journey outside of the clinical setting. So going from admitting into the clinical setting into discharge. So in my prepared remarks, I talked a little bit about what we're doing in terms of investing in AI enablement for us to be able to play in a broader part of that journey where you don't have that mandate and regulation to be able to have the human providing the interpretation.

And our next question is coming from the line of A.J. Rice of UBS.

Maybe just a couple of quick questions here. First, just following up on the labor disruption situation. The nurses that you get to fill an uptick that involves $600 million of incremental revenues in the first quarter, are those people that are generally known to you and have taken travel assignments before? Are you getting them from a new source? And do those then become people that you can use to have in your pipeline for future assignments? How should we think about the implications of that kind of revenue increase going forward in the business?

Yes. In terms of supply, we are experiencing two simultaneous indefinite events. We have crisis workers who are familiar to us coming in, as well as some who are new. We also engage suppliers during these events, which means we might have travelers and per diem clinicians who specialize in labor disruption support. This results in a mix of clinicians. We’ve achieved very high fill rates in both events, providing us with excellent supply to support our clients. Utilizing our event management system developed over the past two years, along with our recruitment enhancements from the last three years, including our AI recruiter, we have not only filled positions at a higher rate but have also done so much faster. After these events, our relationships with clinicians are strong, and we see this as an opportunity for them to continue working with us for future labor disruptions or as travelers and per diem staff.

Okay. Interesting. We've gotten some questions about the Kaiser contract overall, which obviously is a big factor here, that relationship and partnership. I know that doesn't really mature until later in the year. I don't think maybe the end of the year. Is there any update because of all of this that maybe that gets reworked early and it gets put to bed early?

So our contract with Kaiser goes through the end of this year. We expect them, as part of their normal governance process, to go through an RFP this year. We have been very busy with them in the beginning of the year, and we have a very strong, deep, long-standing partnership with them.

Okay. And then my last question quickly is a different area. It looks like the March Visa Bulletin was published today and is advancing the retrogression date by four months, and then you get two months of improvement in the Philippines. That's sort of meaningful, it seems like to me. Is that enough to change the way you look at the international staffing business for '26?

Yes. For those who haven't been following today, the latest visa bulletin has been released, showing that the rest of the world advanced by four months to October 1, 2023, and the Philippines advanced by two months to August 1, 2023. This progression was more than we had anticipated in this bulletin. We expect, as we mentioned in January, to see mid-teens growth in 2026 from international, which is a higher-margin business for us. A.J., this will particularly benefit us as we approach the end of this year and move into 2027.

A.J., this is Brian. I believe that with some of the restrictions implemented late in the fourth quarter and at the beginning of this year, this is definitely a positive development. It serves as a counterbalance to several countries we recruit from, which are currently in a pause. The methods we plan to use for bringing in candidates from different countries, along with the rescheduling of those dates, mean we have ample supply from both the Philippines and other markets. Therefore, any movement of those dates forward will be beneficial in the short and long term.

Our next question is coming from the line of Kevin Fischbeck of Bank of America.

I wanted to follow back up on that point about the labor pool and the strike disruption. Does it in any way crowd out your ability to staff other projects? Is there like a headwind in the core business as a result of this that we should be thinking about when this business goes away? Is there an uplift? Or is that completely separate and not an issue?

No, if you look at some of our guidance for the nurse business in the first quarter, you actually continue to see strong support for the core business. And so the way that we have built our ability to support strike also enables us to continue to support our core clients. And we can also, in a unique way because we have transparency, ensure that those clinicians do not get pulled off from our core clients as well, Kevin. So we've been able to do both simultaneously, and you see that in our guidance for the first quarter. When we look forward to the second quarter, what we would expect to see in the second quarter in our nurse business is the normal seasonal patterning that you have after winter orders. We had healthy winter orders this year. So anything that you would potentially see in the second quarter like that we have line of sight to right now would really be more reflective of that. Given that these are both indefinite strikes that have been going on for some period of time, it's really hard to predict what would happen in the second quarter in terms of as they get back to kind of business as usual, what that looks like. But we're not seeing really any meaningful impact in how it's enabled us to be able to support and staff our core clients.

Yes. I would just add that we have mentioned in recent calls that it remains an attractive market, and clinicians are keen to travel. When the right opportunities are available at the right price, we can quickly bring in talent and fill positions. These types of events are appealing to nurses looking for work, but that does not mean there are not many other attractive opportunities available. Geographically, these are largely concentrated in two regions. Specifically in California, where a California license is necessary to take advantage of these opportunities. As a result, there is a significant pool of talent that may not have that license and is engaged in other assignments. Therefore, this represents a large market for us, and it can be part of a broader strategy moving forward.

Kevin, I would add that there is less certainty when handling a crisis like this compared to doing a 13-week travel assignment. It really comes down to individual preference about whether to take a potentially higher-paying opportunity that carries the risk of not getting guaranteed days or hours, versus choosing something with more defined contract length.

I wanted to follow up on that. You’ve characterized the recent softness in the business as high hospital demand but with price mismatches. It seems that strike revenue is at a higher price point. I’m trying to understand how we should view the higher fill rates in relation to that situation. Are fill rates increasing simply because we’re reaching that price point, or do they reflect more positive trends for the second, third, and fourth quarters moving forward?

Yes. This has been a consistent theme for some time. If you have an order that is priced correctly, it gets filled. Given the urgency of building a workforce in a crisis, there is a very clear market for what that entails. Generally, when an order is priced appropriately, you can fill and establish your workforce. In our non-strike business, orders that are priced right get fulfilled. The same principle applies. Outside of strike situations, some systems may have the ability to wait a week or two to see if an order is filled and then can adjust the price. However, when staffing a crisis, that flexibility isn't typically available.

Yes. Some clients have a strong and urgent demand, and as they adjust prices, we can quickly fulfill those orders. We have real-time data on this and continue to educate our clients. In line with our earlier remarks, as hospitals return to pre-COVID levels of hiring and attrition, they tend to feel more urgency to fill positions, which can lead to greater pricing flexibility. When that occurs, we are able to fill those jobs. We have been stable for several quarters now, and historically, the next step would be for clients to reconsider their approaches to permanent and contingent labor, along with the associated cost flexibility. This encourages more productive discussions about the rates necessary to fill the appropriate mix of jobs for them.

Okay. And then just last question. On the AI disruption potential, I wasn't sure I was 100% following because it sounds like you guys feel like the business has some in-place moat to it that you really can't be disrupted because of the regulatory aspect of face-to-face, but it also sounds like you're responding and changing your pricing and you're seeing pressure on that business at the same time. So just are those separate dynamics that are causing it and it's not AI, it's something else? Or how should we be thinking about that?

It's a separate dynamic. It is not AI. And so the space that we're in, in language services is protected by government regulations requiring human interpreters. What we are seeing in terms of the pricing pressure is really an aggressive competitor consolidator that we talked a bit about in 2025 coming in that put pressure on. We were very agile in responding. We have developed and we now have in pilot a new service model that can compete against that. We have it in pilot with a couple of clients. And so that really is in response to a competitive environment. And the secondary thing we had in 2025 is you had the impact of tougher immigration policies on the industry. So those really were the two factors that we saw in 2025, but they are separate and not related to anything from an AI standpoint. We do believe not just for this business, but for all of our businesses, as you heard in our comments and some of the answers to our questions, we think AI can be accretive to us. We're using it in our client-facing technology in how we automate our own processes and how we support our recruiters. And so we think that AI can be very helpful to us in terms of helping productivity and speed and things that are really important in our business.

The next question is coming from the line of Trevor Romeo of William Blair.

I wanted to ask about your guidance and specifically the margin piece. I know it is probably very difficult to fully strip out the strike business. But just any help you can give us on kind of what underlying margins with a normal level of labor disruption revenue would look like and what's embedded in the Q1 guidance from that perspective?

Sure. We tried to provide some of that information in both the release and the prepared remarks. For example, if you consider the total revenue and remove the $600 million we included, that would place you in the $625 million to $640 million revenue range, entirely excluding any impact from labor disruption. Regarding the gross margin, we mentioned a range of 23.5% to 24%, with about a 300 basis points impact from that. If you exclude that, you're looking more at around 26.8%, close to 27%, which is just slightly down from the fourth quarter. As for the underlying SG&A, it would be within the 130 to 135 range. You can work through the numbers from there. This adjusted SG&A can help infer what the underlying adjusted EBITDA would be, which is quite similar to what we observed in the fourth quarter when excluding the strike, and that's our current run rate.

Okay. That's helpful. And then I guess I just wanted to follow up on the long-term targets. You talked about, I guess, 4% to 6% organic growth on the top line beyond this year. Just given that there have been a lot of changes to some of your businesses over the last few years, would love to narrow down what are your expectations for each of the segments over the long term? And maybe just the moving pieces that could get you to the bottom end or the top end of those ranges would be great.

Yes, to begin with, we anticipate some recovery in year-over-year growth this year. We expect businesses like Search and International to be either flat or show growth in the first quarter. Throughout the year, we anticipate regaining positive growth in different quarters, which is why we mentioned that the longer-term outlook moving into 2027 involves navigating through these various quarters to return to positive growth. We expect our segments to experience similar growth rates, staying within the 4% to 6% range, without significant deviations from that. As the market for our core staffing businesses stabilizes, we foresee ongoing demand for health care services driven by both volume and rates. We believe this is a reasonable expectation for our revenue. Additionally, we anticipate modest improvements in our product mix that will positively impact gross margins. A key factor will be our ability to leverage operating efficiencies as our revenue grows. The initiatives and investments we've made in recent years to upgrade our core systems are beginning to pay off, especially with the integration of AI into our operations. Although it's still early, we're starting to see some benefits that allow us to scale more cost-effectively. We are confident that as we progress into the future, we will achieve a solid incremental margin from our revenue growth, leading us to the double-digit EBITDA growth rate we aim for in the long term.

And the next question is coming from the line of Tobey Sommer of Truist.

I wanted to ask a question about seasonality past the first quarter. Sometimes after the winter period where there's seasonally better demand, Travel Nurse and perhaps sometimes Allied can be down sequentially in 2Q to the extent you care to, could you comment about seasonal patterns that you expect to unfold for the balance of the year?

Sure, I think you described it well to start. As Cary mentioned earlier, it's normal to expect a sequential decline from Q1 to Q2 in nursing as winter orders taper off. We're still in the middle of this quarter, but based on the demand and booking trends, we anticipate that decline in the second quarter, which we consider to be a typical seasonal pattern. Allied has been performing strongly and is currently doing very well. However, as we approach summer, we do see some expected declines in the Schools segment of the business. Overall, we expect international growth both sequentially and year-over-year in the second quarter, but for Nurse and Allied, we anticipate a sequential decrease. On the other hand, the Physician and Leadership segment usually sees growth in locum tenens from the first to the second quarter, and we expect the same trends in interim search. This segment should increase, helping to offset the decline in Nurse and Allied. Regarding Technology and Workforce Solutions, particularly in Language Services, our changing strategies have enabled us to start winning new contracts, with several wins in the first quarter and more on the way. We faced some challenges in Q1 due to weather impacts early in the quarter, so we expect improved performance in Language Services during the second quarter. Overall, if we consider the impacts of strikes, we’re likely looking at a relatively flat second quarter, which would be a reasonable expectation given our usual seasonal behavior and the momentum we are seeing in certain business areas.

I appreciate that. And just one question on the strike for me with the $600 million. Is there a date upon which if the strikes end prior to that, that it will be less than $600 million and a period of time that it would be perhaps greater than that just as we ride out the rest of the quarter, how do we interpret news flow relative to those numbers?

Yes. We're basically trying to provide it up to kind of where we are today as best we can. So I'll just say that. So to the extent that they continue, obviously, all parties are I'm sure working through trying to get these resolved. But if they continue longer, then we've historically not wanted to try to predict whether these happen or how long they'll be in duration. So we'll only really give what we can see in front of us right now.

Got you. And one more for me, if I could. There was a study out about the relative pricing and cost of full-time nurse labor versus contingent staff that showed things close to parity. In the context of these strikes, which invariably end in a new contract that guarantees full-time comp increases, what's your expectation for bill rates in that relationship between contingent travel nurses and their full-time equivalents?

Yes. The data that Randy compiles would indicate something quite similar to the report you mentioned. We have already begun to see interest from clients, especially in finance and among CFOs, who are considering contingent labor as an appealing option. This is not only due to relative cost but also because it offers flexibility along with the cost parity you noted. Looking ahead to 2026, we really want to see increases in bill rates. We have seen stabilization in bill rates throughout 2025, but in 2026, it is important for us to observe increases that align with natural wage expectations. We have started noticing these increases in certain areas, but we would like to see them become more consistent.

And our next question is coming from the line of Mark Marcon of Robert W. Baird.

Most of mine have been asked, but just going on the strike, if it continues, are there any sort of downsides that you foresee in terms of just the reputation or the branding with regards to other nurses that may not participate in a strike or anything along those lines or from a legislative perspective? I imagine the clients are really grateful but just wondering about this general reputation. And then obviously, unions are typically averse to travel nursing and any sort of legislative pressure they might put on.

Clients appreciate our services greatly, and the support we provide is crucial to them. We focus our assistance on strategic clients due to the extensive requirements involved in delivering this support. From the perspective of clinicians and unions, our solutions empower unions to strike. Legally, without the capacity to support patient care, their ability to strike would be compromised. Therefore, we view our offerings as essential not only for clients but also for clinicians, fundamentally aimed at ensuring continuity of care. These crisis support opportunities are highly appealing to many clinicians, enhancing our capacity to offer a diverse range of roles that cater to their needs, positioning us as a vital link to these opportunities.

Great. Can you clarify if the $600 million figure is current as of today? We can then determine the daily revenue, and if the strikes continue, we could potentially see an increase in the estimates you provided. Is that an accurate way to interpret it?

Doing revenue per day would be hard because you can't think of these strikes as being static. They're dynamic. You might have some of their union members coming back at different points in time. So it's not kind of a take the number and try to do an average number.

Yes. The needs are dynamic. I understand that we are likely to take that approach, but it would be an oversimplification to think about it this way going forward.

Okay. Great. And then just on the 4% to 6% long-term growth rate, are you being a little conservative? Just when we take a look at the patient and clinician demographics, from a longer-term perspective, it looks like we should end up seeing some very healthy long-term demand. So I'm just kind of wondering how you're thinking about that. Or are you thinking just long term, meaning just '27, '28? Or is that truly long term?

I appreciate your perspective, but we need to keep in mind that there are external factors, such as economic shifts, that could impact our industry along with the unpredictability of the future. We believe this cautious approach is sensible for a long-term market outlook. We will always aim to outperform that expectation. A significant aspect will be our capacity to increase market share over time, and I believe we are well positioned for that. However, we also want to ensure that we acknowledge the potential uncertainties ahead. Sharing our long-term vision is part of this, as we believe we are returning to a more stable market environment, which will enhance our interactions with clients and create opportunities for growth and margin improvement over time. We will consistently strive to achieve the best possible outcomes for our shareholders, but given the uncertainties, it seems more reasonable to maintain a prudent approach regarding any expectations we set.

Also because we really only provide guidance one quarter out, I think giving a framework that is longer than that is also helpful, particularly given the comments that we talked about last year around stabilization and some of the factors that not only you mentioned, but also Brian talked about.

Our next question is coming from the line of Constantine Davides of Citizens.

Brian, I guess, first question for you. Anything you can articulate around cash flow expectations for the year? And I guess I'm thinking specifically of what you might see in the first quarter with the outside strike benefit, but any other factors we should be contemplating? I know you took CapEx way down in '25. So wondering if that's the right level for '26 as well. But any kind of factors or considerations on cash flow?

Thank you for your question. I'll address the second part regarding capital expenditures. For 2025, we initially anticipated spending between $40 million and $45 million, but we ended up in the high 30s. We expect to remain in the low to mid-40s range. The increased capital expenditures from previous years allowed us to upgrade many of our systems and advance projects like our ShiftWise VMS. The positive aspect is that with much of that work completed, we can devote a larger portion of our capital expenditures to enhancements and innovations, including our accelerated AI initiatives. If we continue to see strong returns, we have the opportunity to invest more, which we believe provides us with a competitive edge, especially as many competitors may be scaling back. This allows us to continue advancing our strategy. Regarding cash flow, for 2025, we achieved a very high conversion rate of EBITDA to free cash flow, influenced by favorable working capital components, resulting in levels higher than our usual range of 60% to 65%. However, in 2026, we expect some working capital challenges that will affect this. Over the two years, we anticipate staying above the 60% range, but we do not expect to reach the same level in 2026 as we had in 2025. Nonetheless, we still expect healthy free cash flow, which has enabled us to pay off our revolving credit facility and invest back into the business while continuing to reduce our leverage ratio, with a long-term goal of getting below 3. With our guidance for the first quarter, we expect to be below 3 on a last twelve months basis in Q1. We are very optimistic about our balance sheet and our capacity to invest in the business.

Great. I appreciate that color, Brian. And then, Cary, just I guess, any commentary around pipeline for new business in Nurse and Allied? And I guess, specifically, what are you seeing in terms of volume of opportunities this part in '26 versus maybe what you saw last year and any kind of trends you'd call out?

#1, we have a healthy pipeline, and it's broad-based. And so it's relatively evenly split, maybe with a slight bias to vendor neutral in the pipeline. We started to see a theme in 2025 that we talked about that even if there were RFPs going out, there was a bias towards incumbency. That kind of cuts both ways. It helps us from an incumbency standpoint, but you have to have a pipeline sufficient enough to get enough of those opportunities through. As we left 2025 and into this year, we have seen wins both on the MSP side and on the vendor-neutral side, which we would expect to come on sometime in the next quarter, quarter-plus, which will help us on a volume standpoint. We also have sales teams that are focused on direct opportunities, which we've seen momentum on both in 2025 and as we go into 2026, as well as cross-selling to our existing client base, which we think is a significant opportunity for us. We got traction on that in '24, '25 and into this year. But we see a balanced and healthy sales pipeline as well as conversion of that pipeline as we left last year.

And the next question is coming from the line of Jack Slevin of Jefferies.

Congrats on the quarter. And I appreciate you sneaking me in here at the end of the call. I'll just leave it to one. Most of mine have been asked. And I don't know if it's just me, but I guess the size of the strike number is frankly a little disorienting, and I'm still sort of just coming out of it on that one. So maybe just to like level set on expectations. I know you don't guide for the full year, but that '26 base scenario you had sort of talked about in January at a conference. I guess when you think about the 1Q guide ex strike, and I know it's a little hard to parse those numbers, but sort of that trajectory and the trajectory in general of the business versus sort of how you've been speaking to it earlier this year, it seems like it's a little better, but I'd just love to get your thoughts like maybe more specifically on the margin front about are things shaping up the way that you've been thinking about when we try to parse away as best we can this big opportunity you've got in front of you in the first quarter?

I'll start by saying that our outlook for the year remains largely unchanged. I recognize that the guidance reflects two unprecedented events in terms of their size and duration, which have impacted the first quarter. However, if you look beyond that, we have provided enough insight into the underlying business trends. Overall, things are consistent with our expectations as we entered the year, which is encouraging. We are confident in our growth strategy and are observing positive trends across the board. For areas that are not progressing as anticipated, we are actively addressing those issues. Therefore, I wouldn't describe any significant changes in our outlook. Taking the first quarter into account, excluding the effects of labor disruptions, our performance aligns with overall consensus, likely reflecting our prior comments. I believe the trends we have shared for the year continue to hold true. Cary, do you have anything to add?

Yes. The key point I want to emphasize is the importance of providing support for our clients. It's crucial that they can maintain continuity of care. Additionally, regarding our revolving credit facility, its current zero balance is significant for how we manage cash and our goal to reduce our leverage ratio. This situation has altered our outlook, given its magnitude. We have confidence in the systems we are developing and automating, which allows us to perform well in a high-demand environment while simultaneously supporting our core business. This has been a real test of the capabilities we've built over the past three years, and it strengthens our confidence as industry demand starts to recover.

Yes. Another exciting aspect is that, as Cary mentioned earlier, the deployment of AI tools has been essential due to the need for a significant number of clinical workers in a short timeframe, along with the logistics and operational support required. The technology team has done an excellent job collaborating with the business to enhance our AI recruiting and reporting capabilities more quickly than we might have otherwise. While this work initially focused on labor disruption, it is also highly applicable to our core business. This presents an opportunity that we are now bringing more attention to, which we believe will aid us throughout this year and accelerate the pace of our recruiting and other operations. The team is very enthusiastic about this development.

Yes. And the last part that I probably know this is a call about numbers, and there's a lot of them in this. Our people are extraordinary. And so we talk about our culture being different, about it being something that is incredibly important to how we go to market and how we serve clients. If you spent one minute with any of our teams that are supporting these events, you would have a very clear view about how that is incredibly differentiating for us.

Thank you. This does conclude today's Q&A session. I would now like to turn the call over to Cary Grace for closing remarks. Please go ahead.

Thank you for your interest in our company and for the opportunity not only to talk about 2025 but also to get a sense of our very busy start to 2026. So thank you for your interest.

This concludes today's conference call. You may all disconnect.