AMN Delivers in the December Quarter with More to Come in 2017
Late this week, Aging of the Population position AMN Healthcare (AMN) reported better than expected December quarter results on both the top and bottom line, which propelled the shares higher 8 percent this week. For the quarter AMN delivered EPS of $0.62 per share vs. the expected EPS of $0.54 on revenue of $487.0 million, up more than 20% year over year, and well ahead of the consensus estimate of $476.6 million. Offsetting that upside surprise, AMN issued current quarter guidance with a revenue range that had the top of that range ($489-$495 million) in line with the consensus revenue expectation of $494.7 million.
While we acknowledge the company is poised to face tough year over year comparisons in the first half of 2017, however, the healthcare worker shortage, especially for nurses is a longer-term problem that bodes well for AMN’s healthcare staffing business. We’ve also seen that AMN tends to issue conservative guidance, particularly when it comes to margins, one of the key determinant of EPS generation. We’re also encouraged by the momentum behind the company’s vendor management system (VMS) and managed services bookings. Fourth quarter revenue from the VMS business was up over 20% year-over-year as AMN continued to add new clients and expand existing client relationships. Much the way
We’re also encouraged by the momentum behind the company’s vendor management system (VMS) and managed services bookings. Fourth quarter revenue from the VMS business was up over 20% year-over-year as AMN continued to add new clients and expand existing client relationships. Much the way Connected Society company Amazon (AMZN) keeps adding capabilities to its Amazon Web Services, so too does AMN with VMS, which in our view should help win new customers and keep the service offering rather sticky with existing ones.
The bottom line is we continue to see AMN’s business extremely well positioned to benefit from the healthcare worker shortage that we continue to see in the monthly JOLTS report.
- Our price target for AMN remains $47, which offers 15 percent upside and keeps our rating a Buy at current levels.
Now, let’s review the quarter…
AMN consolidated revenue for the quarter was $488 million, an increase of 21% year-over-year, including 10% organic growth. During 2016, AMN finished integrating its B.E. Smith, HealthSource Global and Peak Health Solutions acquisitions. More impressive was the 30% year over year increase in adjusted EBITDA that hit $61 million. During the quarter, AMN repurchased 443,353 shares of our stock at an average price of $29.88 per share for an aggregate purchase price of $13 million.
Nurse and Allied Solutions segment revenue (63% of total company revenue) rose 17% year over year and 7% sequentially with segment gross margins ticking modestly higher year over year. Organic revenue for the segment clocked in around 12%, with the quarter including greater than forecasted projected labor disruption revenue. Both the Travel Nurse and Allied division saw double-digit revenue increases year over year. Year over year, the number of average health care professional on assignment rose to 8,764 from 8,032 in the year-ago quarter. In our view, the quarter’s results at the core Nurse and Allied Solutions business are in sync with the monthly JOLTS data that we’ve been tracking and are in tune with the pain point of the current nursing shortage.
Turning to the Locum Tenens Solutions segment (21% of revenue), revenue rose just over 4% year on year, while Other Workforce Solutions rose 89% year over year driven by acquisitions during the year and growth in its vendor management solutions (VMS), interim nurse leadership, and workforce optimization businesses. In the Locum Tenens business, the number of days filled rose to 57,008, up from 55,929 in the year ago quarter, and revenue per day filed climbed to $1,821, up more than 2.5% year over year.