AMN Healthcare Services, inc (AMN) Q2 2021 Earnings Call Transcript

Image source: The Motley Fool.

AMN Healthcare Services, inc (AMN -1.64%)
Q2 2021 Earnings Call
Aug 5, 2021, 5:00 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good day and thank you for standing by. Welcome to am in healthcare second quarter 2021 earnings call. [Operator Instructions]

I would now like to hand the conference over to your speaker today. Randy Reese, Director of investor relations. Please go ahead.

Randy Reece -- Director of Investor Relations

Good afternoon, everyone. Welcome to amen healthcare second quarter 2021 earnings call. The replay of this webcast will be available that I are adopting America ir.amnhealthcare.com following the conclusion of this call. Details to the audio replay of the conference call are in our earnings release issues this afternoon. Various remarks we make during this call about future expectations, projection trend, plans, events or circumstances constitute forward looking statements. These statements reflect the company's current beliefs based upon the information currently available to our actual results may differ materially from those indicated by these forward looking statements. As a result of various factors and cautionary statements, including those identified in our most recently filed forms 10k 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 gap financial information. information regarding and reconciliations of these non GAAP measures to the most directly comparable GAAP measures are included in our earnings release. And on our financial reports page at ir.amnhealthcare.com. On the call today are Susan Salka Chief Executive Officer, Brian Scott, Chief Financial Officer, Kelly Rakowski, Group President and COO of Strategic Talent Solutions; Landry Seedig, Group President and COO of Nursing and Allied Solutions; James Taylor Group President and COO of Physician and Leadership Solutions. Also joining for the first time is Chris Schwartz, AMN Controller who will serve as our Interim Principal Financial Officer due to the impending departure of our friend and colleague Brian Scott from AMN.

I will now turn the call over to Susan.

Susan Salka -- Chief Executive Officer

Thank you so much, Randy, and welcome everyone to our earnings calls. Always, it's a pleasure and honor to be with this team. And with all of you today, the amen team continues to make a greater impact in healthcare. And this last quarter was another testament to our relentless commitment to patients nationwide. More than 330 million Americans depend on 8 million professionals who provide healthcare in this country. Amen and our industry have always been an important part of the healthcare ecosystem. The pandemic has created short term and permanent workforce shifts that increase our opportunity and the need to help change the paradigm of staffing for the future. Creating, supporting and empowering a quality and agile workforce requires a multi faceted approach, particularly in the face of persistent workforce challenges. healthcare organizations are increasing their hiring efforts, as regular patient care volume is getting back to normal. However, they continue to struggle with a high volume of quick and long term vacancies. On top of this, the pandemic is researching. Our colleagues at amm has stepped up in a way true to our values to help our clients deliver great patient care. Demand for contingent labor increased throughout the second quarter and that trend has accelerated through today. Most of our staffing businesses are experiencing record high levels of demand across all geographies in almost all specialties. Our team has addressed the growing client need by expanding our technology solution footprint and placing 10s of 1000s of healthcare professionals where needed most. We are simultaneously investing heavily in our people and infrastructure to ensure that we're able to empower the future of care with our growing And news solutions are positive impact enabled us to exceed financial expectations in the second quarter, consolidated revenue was 857,000,041% higher than prior year without performance and growth year over year from all segments.

Our largest segment nurse and allied solutions reported revenue of 624,000,041%. year over year, we hit another record high for average travelers on assignment, including some better partners through our MSP and BMS platform, our program placed over 70,000 nurse and ally clinician during the quarter. Travel nurse staffing grew above our expectations at 37% year over year. This increase was driven primarily by volume growth. After a brief decline in demand earlier in the year, orders began climbing again in April and now are at record levels. Total orders in nursing doubled in July, compared with a second quarter level. Our allied staffing team hit another record with 100 and 13,000,002nd quarter revenue up 44%. year over year, our imaging respiratory and lab revenue led our allied growth again rising 76% year over year. Also important was it continued comeback of therapy, which had been slower in 2020. New therapy orders in the second quarter were more than 50% higher than the first quarter level. Overall allied demand has seen consistent growth over the last three quarters and today, the demand is at record high levels. Across nursing and allied the labor market is experiencing extreme supply constraints, high demand and intense competition for talent. Clients are citing problems not only with permanent hiring, but also with retention. We're hearing about vacancy rates at very high levels all across the board all across the country. Most of the demand is not related to COVID patients but rather leaves of absence, clinician fatigue normal patient volumes rising and operating room backlog. Our clients are telling us that this is unlikely to change anytime soon. In anticipation of these trends continuing, we have increased investment in each phase of the recruiting placement and onboarding process. We continue to hire additional recruiters and invest in our digital platform.

These are leading to hire new applicants although not enough to satisfy the extraordinary demand. For the third quarter of 2021. We expect nurse and ally solution segment revenue to be approximately 45% higher year over year. physician and leadership solution segment revenue for the second quarter was 139,000,028% higher year over year, which was better than our guidance of 20% growth. locum tenens revenue was 78,000,026% over prior year. Overall locums demand has recovered nicely with many specialties exceeding the pre pandemic level. Our highest demand specialties include anesthesiology, advanced practitioners, internal medicine, primary care and psychiatry. Interim leadership revenue grew 30% year over year, as the business delivered a third consecutive quarter of strong sequential volume growth. Core demand for interim leaders is growing and has recovered to pre pandemic levels. physician and executive search revenue rose by 33%. over the year ago quarter and permanent placement demand continues to strengthen. For the third quarter we expect physician and leadership solutions revenue to be 25 to 27%. Higher year over year. Second quarter revenue for the technology and Workforce Solutions segment groups 70% year over year, language services excelled again with revenue of 46,000,061% higher than the year ago period. This is due to strong demand as healthcare utilization has returned to normal levels, but also due to new and expanded clients and the appeal of our video platform that enables virtual on demand service Second quarter revenue for our vns business was 31 million growing an incredible 76% year over year. The primary drivers here is the continued high demand across all clinician needs, and the several new customers added over the last year.

In the third quarter, we expect revenue for the technology and Workforce Solutions segment to be 44 to 48%, compared with the prior year, over the past decade, we invested significantly in the evolution of Amazon to become the leading largest and most diversified total talent solutions partner that we are today. healthcare organizations continue to turn to and then as a strategic partner, finding ways to increase the efficiency of the workforce and improve access to care. As an outcome, we have seen strong growth in our outsource and technology solutions, including remote language services, telehealth workforce and scheduling, optimization and recruitment process outsourcing. In addition, our managed services programs continue to grow. We are adding new clients and existing clients are engaging us for additional solutions. I am very proud of the amm team and the recognition they are receiving for their outstanding efforts for example, and then recently earned hrs today's highest ranking for customer satisfaction in healthcare MSP we have a nearly 5 billion growth spend under management through our MSP and Vmf platform. By far, the leader in healthcare also advantages currently has the highest overall class score for nurse and staff scheduling. Our RPO solution was recently recognized as a star performer by Everest group. These honors are just a few examples of how the nn team is making a difference for healthcare professionals and clients. We work in a great industry with lots of amazing partners and people, which makes these accolades that much more meaningful. We are particularly proud of the positive impact we are having on health equity and access. We are honored to have been awarded the eastern region of the theme of vaccine administration programs for underserved communities. We mobilized clinicians who administer nearly 100,000 vaccines many delivered by mobile unit two limited access area, our telehealth and remote language services are enabled in care and alternative and rural setting. In their first quarter with amsn Cindy delivered 60,000 telehealth visits. Our television platform for schools supports remote access to critical therapeutic services for students and supporting over 130,000 sessions throughout the pandemic.

Over the last year, we have increased investments across our operations to be the best partner possible for our clients and our candidates. The most important investment we can make is always within our own team. Of course, we've added many wonderful new colleagues to the admin family over the last year. We have also increased our investment in our team members to ensure that we're supporting them and helping them to achieve their personal and professional goals. We've increased our benefits. We've increased our wellness and mental health support. We've increased our actions in line with our commitment to diversity, equality, equity, inclusion, and other critical social issues. We've seen tremendous participation in our employee resource groups and now have a thriving args to support our increasingly diversity. We've increased our charitable activities and community impact which is a very important part of the amen culture and team member engagement. The benefit of all of this can be measured in our strong retention levels. But most importantly, we see the strong engagement of our teams show up every day in the caring, courageous and committed support that they give our clients, our clinicians and to one another. Now and then one of our great colleagues does decide to depart and pursue a new personal or professional goal outside of amm. you're all aware I believe that brian scott made that decision recently. Brian has been an amazing friend and colleagues me and many of Over the past 17 years, including the last 10 years, plus as our CFO, since that's more than twice the average tenure of a typical public company, CFO, I think that says a lot about Brian's talents, but also his commitment to his colleagues and to our purpose. I've learned a great deal from you, Brian, over the years, and I will forever be grateful as I know, we all will be for all you've done to evolve Amen.

One of the greatest legacies that Brian leads for us is the strength of his team, the team that he's created and developed, all of the leaders across our finance, accounting tax audit, customer service teams are exceptionally strong, which is why we did not feel the need to name an interim CFO. When we are conducting the search for Brian's replacement. We are super fortunate that Chris Schwartz is seamlessly stepping into the role as interim principal financial officer, which is of course, a natural extension for him as comptroller, since he's already responsible for most of the elements of financial sec reporting, and interface with our auditors among many other things. Chris has been a colleague with amm since 2005, and has done a phenomenal job in a variety of financial leadership and Investor Relations roles. And he has been instrumental in our evolution. He also happens to be a great role model for our culture and our values. So I thank you and all of our leaders, Chris, for everything you do, including through this transition. In a few minutes, Kelly Landry, James and Chris will join us for the Q&A session.

But for now, I will turn the call over to Brian who will give us more insights.

Brian Scott -- Chief Financial Officer

Well, thank you, Susan, for those very kind words, definitely a bittersweet day. And before I jump into numbers, I want to just take a moment to acknowledge all of my amazing colleagues. During my 17 plus years of Amen, I have been inspired every day by your passion, your drive your dedication to serving our customers, our communities and each other, you are truly the best of the best, both professionally and personally. And while I'm so proud of what we've accomplished, I'm just as excited about the future of this organization and all that you will continue to do to advance our really important mission and strategy. I'd also like to first thank Susan for her mentorship and friendship throughout the years. It also the board for their continued guidance and support. So with that, we'll turn back to the results. Second quarter revenue 857 million was 3% of the upper end of our guidance with outperformance across all three segments. Second quarter consolidated revenue grew 41% year over year sequentially revenue was down 3% due to an expected reduction in COVID related projects and lower travel nurse bill rates. as Susan mentioned earlier, we are very proud to partner with Siemens vaccinate underserved communities. The ultimate financial impacts on the project was minimal in the second quarter, and it doesn't matter we did not expect any revenue from the contract in the third quarter in the material revenue. Gross Margin for the quarter was 32.7%, which was 20 basis points higher than prior year and up 10 basis points sequentially. The improvements in the margin were driven primarily by a revenue mixture toward our higher margin segments. consolidated SGA expenses were 157 million or 18.3% of revenue, compared with 137 million or 22.5% of revenue in the year ago quarter and 161 million or 18.2% of revenue in the previous four year over here. Even with a significant investment in employee expenses and marketing costs to support our growth.

We achieved strong operating leverage on increased revenue on a sequential basis as expenses declined due in part to lower stock based compensation and a favorable professional liability reserve adjustments more than offsetting growth in employee headcount and related expenses. In the second quarter, nursing allied revenue was 624,000,041% higher than the prior year and down 5% sequentially. The travel nurse our largest business revenue grew 37% over prior year, with average travelers and assignment of 22%. The average bill rate out 14% and slightly higher average hours worked. As expected, the average bill rates declined sequentially from the first quarter peak levels that were fueled by COVID related needs. However, the sequential decline of about 9% was less than anticipated as demand has increased through the second quarter. We are expecting the repo rates to be down again sequentially in the high single digits, but remaining at elevated levels throughout the balance of either Allen revenue was 113 million up 44% from the prior year and up 4% sequentially. Allied volume was up nearly 40% over prior year with the average bill rate higher by 4%. There's an allied gross margin of 26.6% was 40 basis points lower than prior year and down 30 basis points sequentially. The segment gross margin was lower year over year primarily from increases in clinician pay packages to fill more position. Segment EBITDA margin of 14.4% was 60 basis points higher than prior year on improved operating leverage. position and leadership solutions revenue in the second quarter was 139 million, which is 28% higher year over year and down 1% sequentially gross margins but the segment was 36.6% 20 basis points higher than the prior year and down 40 basis points sequentially. The year over year reverse due to a favorable mix shift for the interim leadership and search businesses. The sequential reduction in gross margin was due primarily to a shift toward lower margin specialties and locum tenens, along with a reduction in COVID related projects. Segment EBITDA margin was 15.7% of 160 basis points from last year and up 60 basis points sequentially.

The year over year improvement was driven primarily by operating leverage on the strong revenue growth. Technology Workforce Solutions segment revenue was 94 million in the second quarter, growing 70% year over year and 6% sequentially, with strong growth across all service lines in the segment. Segment gross margin was 67.7% down 200 basis points year over year and flat sequentially. The year over year change was due to a revenue mix shift within the segment segment EBIT margin of 45.4% was 590 basis point here here and with 210 basis points lower sequentially consolidated second quarter just to deal with 134 million was 66% higher year over year, driven by revenue growth and improved operating leverage. adjusted EBIT margin and 15.6% was 240 basis points higher year over year and lower by 30 basis points sequentially. We reported net income of 67 million and diluted earnings per share of $1.39 in the second quarter. adjusted earnings per share was $1.64 compared with 83 cents in the year ago for data outstanding approved and 50 days, seven days lower than last quarter, as strong cash collections caught up with the large increases in revenue and accounts receivable that occurred in the first quarter. operating cash flow for the quarter was 171,000,200 11 million year to date. capital expenditures in the quarter where 11 million as of June 30, we had cash and equivalents of 130 million long term database turned 50 million and a leverage ratio of 1.7 times to one. Now turning to third quarter guidance, we are projecting consolidated revenue to be in a range of 770 to 790,000,040 to 43% higher than per year. This includes approximately 20 million of revenue related to labor disruption activities. Third quarter gross margin is projected to be 33.4 to 33.9%. reported SGA expenses have rejected the 19.8 to 20.2% of revenue. operating margins expect to be 10 to 10.5%. And adjusted EBITDA margins expected to be 14.2 to 14.7% are the third quarter estimates include the following depreciation expense of 10 million non cash amortization expense of 16 million stock based compensation expense of 3.5 million interest expense of 10 million integration and other expenses of 3 million and an adjusted tax rate of 20%.

And now we'd like to open up the call for questions.

Questions and Answers:

Operator

[Operator Instructions] And your first question comes from some line of Mark Marcon from Baird.

Mark Marcon -- Baird -- Analyst

Congratulations, everybody. And Brian, congratulations to you. It's been great working with you over the years. I've got several questions related to to nurse an ally. Obviously demand is extremely strong. In both nurse and allied, wondering, you mentioned where you're thinking about pricing being for for the upcoming quarter. I'm wondering if you can expand a little bit on that with regards to travel nursing, just in terms of the pricing expectations for the coming quarter, but also as you're thinking about the year unfolding, because, you know, clearly there, the shortages don't seem to be abating. And then how are you thinking about that with regards to allied as well?

Landry Seedig -- Group President and Chief Operating Officer, Nursing and Allied Solutions

Hey, Marcus Its Landry. So maybe it might be helpful to kind of talk about the trend that we've, we've seen even starting in January. So our, our bill rates actually paid at the end of the first quarter. And then since that point, they've been steadily decreasing. They really have not been declining quite as steep as what we originally thought, from what we can tell, though, especially where the demand is today. And we can see, of course, the rates on all of our new borders, we would expect that they would probably take a turn again, and we start to see increases in our average bill rates as we exit the third quarter. So we're seeing increases across almost all the specialties in nursing. Even the orders that aren't tied to specialties that they're that are there to take care of patients, you know, really provided extremely high demand is traveling up the ranks, there is a lag, because there's a lot of instances where you might see rates that are impacting orders, which then of course, would impact future placement. But it looks like we should, you know, start to see our average bill rates increase two to three months, whenever you would see some of the peak demand that we're experiencing right now. So be a little bit too early to tell. But that's how we're currently thinking about it.

Mark Marcon -- Baird -- Analyst

Landry, how much are you thinking that those bill rates could actually go up on a year over year basis is once once that starts occurring?

Landry Seedig -- Group President and Chief Operating Officer, Nursing and Allied Solutions

Yeah, it's still really hard to tell mark, just because we are, you know, still looking in new even today, we're still looking a little bit into the third quarter. And you know, we can see the orders. And but you know, there's some other things there such as MCs that make it a little bit difficult right now to fully predict it, you know, originally, we thought that they'd likely declined, even throughout the entire year. And this was where we're seeing the demand right now, we think that it will take a turn right at the end of the third quarter, and potentially come up, you know, as we exit the year.

Mark Marcon -- Baird -- Analyst

That's great. And then can you just talk a little bit about what you're seeing in terms of fill rates. And, and also this, you know, given the dynamics that are occurring at various units, what you're seeing in terms of follow on assignments? And lastly, related to that, I imagine your fill rates are better than the vendor neutral msps that are out there. To what extent are you actually seeing an increasing level of of interest in terms of using you as as, as the MSP given your your superior ability in terms of filling positions?

Landry Seedig -- Group President and Chief Operating Officer, Nursing and Allied Solutions

Yeah, Mark, I'll, I'll hit on a couple of those. And then maybe I'll turn it over to Kelly to talk about customers as it relates to utilize in our BMS, vendor neutral program versus our MSC product. You know, on the on the fill rate side, you know, we did see fill rates across the industry at the beginning of this year, that were, you know, lower than what it had historically been. And that's, of course, because of the really high demand that we saw at the peak of the pandemic. And then it got to a point back to where it was, was respectable is that levels that we had experienced before the pandemic, and that would have been kind of the march april timeframe. And then right now, what the entire industry is experiencing just over the past couple of months on fill rates as if they have declined a little bit, what to expect with the excessive demand that we have out there right now across the entire industry. within our own MSC programs, as well as our vendor neutral programs, we do rely heavily on our supplier partners. So they've been able to help quite a bit. With those fill rates to help support our clients. We're very appreciative of those partners. As it relates to a retention of our own healthcare professionals. Of course, we've seen that kind of go up and down throughout the past year as well. It's kind of a back to like, two to three timeframes of last year, we did see some declines in our retention rates in skills such as like a war, whenever elective procedures were paused, and that it did return to some of the levels that we would experienced historically, q2 of this year actually did go down again on our retention, but that was more of a skill mismatch. So you had some of these COVID vaccine projects that were in place. We're replacing pharmacy techs, for example. And for the most part, those those COVID vaccine projects have gone away. And so there's nowhere to put those clinicians, of course, really one month into the third quarter that the retention rate of clinicians across both nurse and allied are back to where they work with pandemic.

Susan Salka -- Chief Executive Officer

Might be a good opportunity for Kelly to chime in regarding our MSP programs and you ask Mark about the press Friends of clients to have a staffing lead MSP versus BMS, of course, we're really fortunate that we can offer both, which was extremely valuable during the last year. And as you heard me mentioned, we added many new clients in our technology Vmf platform, and that certainly helps make an impact there helped drive that revenue for that division, but we're finding more and more clients are wanting to have that staffing level offering. So maybe Ellie, you could chat a little bit about.

Kelly Rakowski -- Group President and Chief Operating Officer, Strategic Talent Solutions

Yeah couple of comments on there. Thank you Susan, you know, and marketing certainly see, you know, stronger performance. From a sales perspective with our AML programs, we have seen a strong part of our overclock performance and technology Workforce Solutions this quarter was due to the strength of BMS, we've seen higher demand sustain as well, you know, we have a little less influence, you know, despite really strong partnerships with our suppliers, our ability to partner with our clients in our MSP program, strategize with them around utilization around bill rates around marketing strategies, certainly benefits those MSP programs. And they see that in, in higher fill rates, as well as other value that they received from that we are seeing in the market from a new program perspective, many clients who are without workforce solution partners throughout the pandemic, really turning now toward reassessing their strategies and engaging in conversations. And that evidence, then you've been able to be brought on the last quarter and a very strong pipeline going forward to the end of the year. So we're very bullish, and, you know, continue to prioritize our current services programs, but you know, looking to, you know, with our expansion, take on more and be able to provide more support for the industry.

Mark Marcon -- Baird -- Analyst

That sounds really promising. Congratulations.

Kelly Rakowski -- Group President and Chief Operating Officer, Strategic Talent Solutions

Thank you.

Operator

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

Tobey Sommer -- Truist Securities -- Analyst

Thank you. I was wondering if you could describe what you're hearing from clients and seeing to the extent you have visibility into the full time labor supply and the shortness the extent to which there are short to medium term issues such as hopefully, hopefully, I'm describing accurately, the burnout, the the need to take vacations, do other things, a full time staff that may remain in the labor force versus structural things like the retirements and early and or catch up from, from last year where we may have seen blades, I imagine.

Susan Salka -- Chief Executive Officer

Yeah, very important question, Toby. This is Susan. And as you can imagine, those conversations are happening pretty much daily. Earlier today, Landry and I were on a call with one of our largest clients about their outlook. And it's very similar to what we hear from other large systems and large clients and that they don't see this ending anytime soon. They believe that there's been a shift in the workforce that will have impact for many years to come. Whether it be is a combination of all of those things that you've just described, you know, it's retirements, people choosing to do other things, their existing staff being burned out fatigue, wanting to get to good staffing levels from a quality of care standpoint, but it becomes a little bit of a vicious circle, right, where if you're understaffed, people are getting burned out and they quit. And it just makes the scenario that much more difficult. And so because of that, we're talking with them about certainly urgent, immediate action, and collaborative things we can do to get them the staff they need immediately.

But then also, what can we do make term and longer term and some of the solutions that we have to offer are things like our PA, and in fact, our RPO business had a phenomenal second quarter and is a great pipeline going forward because so many clients are wanting assistance and a new way new best practices to recruit their permanent staff. We're talking with clients about new grad programs where we can provide we've done this before with some of our large clients, where we provide new grads and a preceptor program, and those individuals can alternate legal, permanent or international business. But Grady Payton's that team has done a phenomenal job of serving clients. Remember international nurses come over on green cards and are on assignment with us for generally two years before they go permanent and they are seen as a core staffing solution as opposed to a temporary solution. So when we're having these conversations with clients, we're we're fortunate that we have the ability To discuss multiple solutions for them that address that kind of short term midterm and long term need that they have. And I'll just add one more thing. There's also a need for flow pool management and how do they optimize the availability of nurses that they may have locally and use technology, which is why things like our before health technology become very valuable.

Tobey Sommer -- Truist Securities -- Analyst

Right, thank you. Have you heard any legislative or industry wide measures to that you need any sort of changes to improve supply that could impact the market and over any sort of medium term? Because doing something to encourage students is many years away from impacting spot? Right?

Susan Salka -- Chief Executive Officer

There are, I'll start with there's nothing material or significant there certainly are things being discussed in there. There's advancement, albeit slow on things like the nursing license, licensure compact, which now has 38 states that are, are members of that compact, the Advanced Practice compact is really just getting started with only North Dakota involved. You know, the physical therapy compact has 21 member states, all of those things help the mobility of conditions, crossing state lines and enabling to deliver care faster, we have to treat that that's been introduced at a national level would help a bit in times of national healthcare crisis, which we're in to be able to get clinicians moved around and utilizing their licensure across state lines as well. But none of that is going to materially change the supply of clinicians in the next year.

Tobey Sommer -- Truist Securities -- Analyst

Okay, last question for me. The comments on your internal efforts to streamline recruiting and implement technology and you know, onboard people in a is automated a fashion as possible credentialing, etc. And then maybe juxtapose that with what's going on in in the market, as you see it, if there if there is a juxtaposition to be had. Because a lot of times crises, spur innovation, acceptance of frameworks and processes that maybe in normal times wouldn't be embraced.

Susan Salka -- Chief Executive Officer

Absolutely, that the last year has certainly advanced innovation both within the dmn and across the industry. And I think adoption as well, in many cases may be the tool or technology was there but there was a hesitancy whether it be with candidates or clients to to utilize it. So we definitely see faster adoption of digital capabilities we have one great example is our amen passport app, which enables clinicians to search for jobs and look for their next grade assignments certainly gives us the ability to personalize the experience for them and, and push out personalized opportunities that are going to be of the greatest interest to them. But it also enabled them to get their credentials uploaded and accelerate the process of getting on boarded. The same great adoption of amen passport and every, every week practically are rolling out new features and functionality. We're not the only one doing these things within the industry. But we you believe that we are ahead of the majority of our industry, we should be as the leader in the industry. But we are we're learning new things every day that we can do differently. Landry. Did I miss anything here you want to add?

Landry Seedig -- Group President and Chief Operating Officer, Nursing and Allied Solutions

No, that was right. I mean, we're, as you mentioned, adoption, we're ahead of beating our expectations of the conditions, wanting that technology, one to be able to do things and take more control over the process and within their career. But you still have to have the talent. So we're making investments there in our in our talent, not only our existing team members, but doing a lot to attract new talent to the organization. We've made investments. Recently, actually this entire year. In our account management team, we've also made investments in our recruitment team. In the second quarter, we increased our number of producers as a percentage, double digits, and it's even higher today so it can take to make those investments. And then some of you probably remember the advanced acquisition, or I'm sorry, advanced medical acquisition that We did. And all of those team members are now in our systems and within our processes and their productivity per person is more than double what it was before the acquisition. So that teams is doing an excellent job.

Tobey Sommer -- Truist Securities -- Analyst

I appreciate that. If I can do a little follow up, you know, we love quantification in this business, into the extent to the passport has improved or kind of improved the credentialing time. Can you give us an example of what that might look like today versus under a more human intervention process?

Kelly Rakowski -- Group President and Chief Operating Officer, Strategic Talent Solutions

You know what to let us work on that, Toby? Yes, we have those metrics internally. But But why don't you let us come back to you with an something that we think would be meaningful, externally for you? We will take that as an action item.

Tobey Sommer -- Truist Securities -- Analyst

Thanks Kelly.

Operator

So the next question comes from one of AJ Rice with Credit Suisse.

AJ Rice -- Credit Suisse -- Analyst

Hi, everybody. couple questions. First of all, you mentioned the strength you saw this quarter and the interim leadership and permanent placement. And also, in the Allied side, the rebound and therapy demand. I guess I'm trying to understand some of those areas. And maybe there's some others I'm not thinking of, or didn't fare as well in the height of the pandemic, and now seem to be coming back, you think they're back to normal? Or do you think there's still further room for them to to rebound, as we see the next coming months unfold?

James Taylor -- Group President and Chief Operating Officer, Physician and Leadership Solutions

Hi A,J, Its James says are jumping in I'll start with the search business. So our first business was the hardest hit business after the pandemic, and it is slowly recovering, coming back to pre pandemic demand levels. But I will say the good news is that we have had four quarters of sequential growth in our search business in our search results continues to be strong the pipeline significantly, or specifically was inside of our mid level management and with inside of academia, I will say we have forecasted or we're saying that from getting back to predict pandemic is h1 of 2022, which we want to be fast to build our guidance was the page two of 2022. So the first good news is coming back to the floor. Now that we are seeing some pickup on demand there. From an internal standpoint, we feel very confident very good about where the interim business is, our entire business has had a second quarter finishing about 7% of its pre COVID levels and three consecutive quarters of record orders by contributing to really eight consecutive months of improvement in terms on assignment are demanded or returned back to level up the German buyer for direct and also our MSP clients. So we feel very good about where we are from a demand standpoint in the revenues to be able to troll from that.

Landry Seedig -- Group President and Chief Operating Officer, Nursing and Allied Solutions

Hey, Dave its Landry. I'll hit on a couple of things as it relates to allied well, that businesses become very large for us, they are number one in their space. And that team has just done a fantastic job of executing up against the demand that they have, they actually did not see that same dip and demand like we saw in travel nursing in that April timeframe. Their demand is just has continued an upward trajectory. And today, they are at record levels. And those record levels are just about across every single specialty that they support. So I know we've talked about probably five quarters ago, therapy being down because reimbursement changes, that demand is back and the team is executing well against that imaging demand as at a highest level that I've seen it thing with laboratory. And then respiratory is up significantly from prior year but probably more flat from the peak of the pandemic as you would expect.

AJ Rice -- Credit Suisse -- Analyst

Okay, thanks a lot. I wonder on your bill rate comments. That was I think, aggregate bill rates, is there any way to parse out what what you're saying? Obviously, you got the COVID premium rates, and the percentage of those assignments is probably coming down, it sounds like and then you've got just sort of your traditional assignments, given the tightness of the supply, what is happening on pricing for those non COVID assignments. And I don't know if you have a statistic chair as to how many of your assignments in the recent quarter were COVID related versus the last few quarters Is it is it materially changing.

Brian Scott -- Chief Financial Officer

Hey A.J. this is Brian, I'll start off in laundromats and color. I think to start with I don't, we don't really try to separate COVID versus non COVID. The reality is in this environment, our clients need our help really across the board and the race. As we mentioned, we're at the peak level in the first quarter. But of course, you can attribute some of that to the, you know, the highest hospitalizations and COVID. And the significant demand it drove inside the highest levels as we came off of that that peak level in March, you know, we anticipated that we would see rates come down. And that has happened, but not as much as we expected. Because there now all the dynamics that Susan talked to in our opening remarks, is it's somewhat COVID related, of course, but this burnout, we're seeing in the in the very high vacancy rates down in conjunction with a with an increased utilization of healthcare, it's created this dynamic, again, it's kind of a byproduct of the pandemic, this driven, really large record levels of demand across all geographies and all specialties. And so that's, that's what's driving rates up overall, it's not really COVID specific at this point, it's just a lot of competition for scarce talent. And so, again, it comes down because there was a kind of a one point in time where the rates were very high, you're seeing now maybe not the highest levels of their rates that we had in the first quarter. But now we have more orders at a higher bill rate, in totality. And so as we're booking into those, it's keeping the overall rates at very elevated levels, that we mentioned being down a little under 10%, sequentially in q2, down again in the third quarter. But those are those rates are still significantly above where they were in the early part of 2020. And at this point, with demand where it is, it's just hard to foresee that coming down. In fact, if anything, as I mentioned, there, there might come up a little bit in the fourth quarter, just because there, there's just so much need across across the country.

AJ Rice -- Credit Suisse -- Analyst

Okay, that's great. And my best wishes to Brian as well, maybe just the last question, lead generation and new applicants trying travel assignments and so forth. For the first time. We talked a little bit about what you're seeing when people come off the assignment. But are you? How, how's the applicant pool? Is that expanding? Are people more open to considering taking them on assignment like this?

Landry Seedig -- Group President and Chief Operating Officer, Nursing and Allied Solutions

Hey A.J. Its Landry. Yes, although our supply metrics look really good. Of course, we're tracking a lot of tracking a lot of different ways. In particular, though, our our new applicant numbers are really strong last year was our highest year on record. And this year, we're pacing ahead of prior year. So I think that's a really good stat and a good thing to say that nice supply that's coming into the business. And then conversion rates Listen, and also, I think a lot of that has probably contributed to some of the improvements that we've made in the process. And, you know, payment passport that we've mentioned, too, that allows people an easier experience to build and make it through all the way to on assignment.

AJ Rice -- Credit Suisse -- Analyst

Okay, great. Thanks so much.

Landry Seedig -- Group President and Chief Operating Officer, Nursing and Allied Solutions

Thanks A.J.

Operator

Next question comes from one of Kevin Fischbeck with Bank of America.

Kevin Fischbeck -- Bank of America -- Analyst

Hey thanks, just wanted to begin to the guidance, I guess it's like, in doing it, right, it looks like your revenue guidance is is sequentially to be down. And it looks like obviously, the biggest part of that is the nursing allied but but the physician and the resources has also looked like they're going to be down sequentially, which was a little bit less clear to me as to why that would be the case, if you just go into what would be driving that outlook for each business.

Brian Scott -- Chief Financial Officer

Sure, I'll provide some color to kick off an AP Friday Come on the nurse and allied is Bill rate to be the number one reason we talked about that as they come down again, even though they're elevated levels, they're they're off that peak away, there really was at the mark points. And so even as they they kind of hit their lowest point in July and are slightly up and August, September, but even as you've kind of average out, the quarter is down sequentially. Nurse volume is down just slightly as well, at this point, and it's really driven by some of the vaccine projects that we have in the second quarter said we didn't pick up some revenue from those projects that you can imagine, for the most part ended at this point. And so you're kind of stripping some of that out. you'd actually see volume up just slightly on a sequential basis or quarter. But that's you know, the reality is you'll still be down because of that, that change in the on the Allied side. You've got a little bit of a decline mainly from the School of Business. As you get into the summer months. You have a you have an obviously lower number of therapists on assignment during the summer but outside of that, that the core business of that school is still growing as well. Finishing and leadership is row We're typically similar on a sequential basis, Matthew might be slightly different depending on where you put in that range. The some of the interim revenue was getting project related. So down slightly there, even though again, the underlying business performance trends are really positive as we looked at the back half of the year. And then on the technology Workforce Solutions, the same driver for nursing with rates doesn't have an impact on DMS. So again, you've got good, good trends there. But with a rate average rate down kind of across the industry, that has a direct impact on on the top line revenue. So those are the biggest technology Workforce Solutions. We also had a contact tracing project we mentioned last year, and that also ended in the second quarter. So we've got to cover consequentially as you go into the third quarter.

Kevin Fischbeck -- Bank of America -- Analyst

Okay, great. That's, that's helpful. And then again, just maybe going back to the earlier questions about, you know, supply in whether there's any kind of risk to that coming back. I guess, when you talk to the providers, some of them seem very acute staffing issues that everyone's talking about labor pressure to some degree, but the companies who seem the more comfortable with with the legal outlook, seem to point to a in September, unemployment benefits, you know, go away, kids go back to school, and so nurses, they'll have to stay home and take care of COVID coming down. So if you were quarantine days, it seems like they think that these are relatively meaningful tailwinds. From a supply perspective, it sounds like that's not what you're hearing on average is what why are those potentially risks to the, to the backup?

Kelly Rakowski -- Group President and Chief Operating Officer, Strategic Talent Solutions

Yeah, we aren't hearing that from our clients at all. In fact, like I said, quite the opposite we're hearing they expect it to continue to be very challenging, certainly for the remainder of the year, and even really going into next year. And, and beyond that there's been some sort of structural shifts, the unemployment benefits aren't as likely to affect our supply and placement of clinicians mean, there could be some element of the schools of nurses that maybe have stayed home. But, you know, I think all nurses are being highly incentive to be at work today. So if they want to be at work there, there's a reason for them to be there. And they've got the financial incentive to do so. So we're just not hearing that from our clients that they expect there to be some sort of relief around the corner.

Kevin Fischbeck -- Bank of America -- Analyst

Okay, and then, last question, I guess, you talked about utilization. Or I should say, Bill rates starting to kind of flatten, and then maybe start to tick up? How should we think about gross margins during this kind of period? Oftentimes, your bill rates and pay rates have lags versus each other? Is there anything that we should be keeping in mind, you know, as we think about that, that trajectory of the next several quarters?

Brian Scott -- Chief Financial Officer

The only thing I mentioned for the q3 guidance, he thought that the guidance he gave was around 100 basis points, sequentially. And part of that is because of the strike related revenue that we mentioned, just the way that dynamics work that that there's that there's a prime revenue we get in preparation for an event that has a favorable margin influence on it. So outside of that, I'd say there's a pretty pretty stable margin trends as we go into the third and fourth quarter and the teams are really effective job even as they're navigating a very challenging time with these shifting rates and and and pay packages, keeping really nice stability across the board. So I think the bigger influences are really going to be driven more by mix shift between the businesses and but at a business unit level, we should expect to see stability.

Kevin Fischbeck -- Bank of America -- Analyst

Okay great thanks.

Operator

Next question comes from line of Brian Tanquilut of Jefferies.

Brian Tanquilut -- Jefferies -- Analyst

Hey, good afternoon, guys. Brian, congrats on the move, and good luck as well. I guess my first question is just looking at the strength in the technology and Workforce Solutions business. How should I think about, you know, the different drivers that I mean? Is it cross selling? Is it new business? Is it selling in existing relationships? And then I guess the follow up to that would just be your thoughts in the margin opportunity for that business given the contained stress that we're seeing from that.

Susan Salka -- Chief Executive Officer

So I'll start and Kelly may want to add in here. You know, some of the drivers have been a bit different for the various businesses that are included in there. So for language services, it's been increased volumes from existing clients as they continue to expand their utilization. You're seeing the benefit from using the service and they expand it into more areas of their facility or other Their facilities, they have some really nice new quiet wins over the last year. And so getting those launched and, and you're starting to see some volumes from those, although I have to say there was a little bit of a delay in some of those launches just because of the pandemic. So more of that benefit will really come into the future. We are crop selling into our existing entities, but the majority of what you saw in their growth did not come from that, because we've been pretty preoccupied with the other things and dealing with the overall growth. So we probably haven't made quite as much progress, as we wouldn't normally expect in getting them croscill. Brian mentioned via math, a lot of the drivers there are the additional clients that we added over the last year a lot of really great wins his clients were seeking solutions of vendor neutral or really any solution that will help them to better access their talent. And then of course, the bill rate increased did improve, or did help them a bit other volumes are also very, very strong. Across vmfs RPO, I mentioned has had some really great success, the margins in that segment do get impacted a bit by the growth of those various businesses, right. Some of the stronger higher margins such as nvns, has certainly been additive to the gross margin, as we might see bill rates come down across the travel nursing allied industry that will affect the growth of the vns business, it will still be super positive, but it won't maybe be as big of a mix as other parts of the segment grow. So Kelly, what else want to add?

Kelly Rakowski -- Group President and Chief Operating Officer, Strategic Talent Solutions

Yeah, the only thing I would add great job students. Bryan is that you know, another thing to think about that will feel gross is you know, a lot of the more complex solutions we've delivered this year for things like mass vaccination site, we've really used multiple technology solutions and integrated those to deliver a full comprehensive solution. So bringing together this smart square scheduling user was utilizing our BMS integrating that with our language services platform, and we continue to see clients looking for that, Suzy, the Cynthia platform is a telehealth platform as we start to talk with clients very receptive market to how do we bring full solutions that bring both the staffing and labor component on a on a platform that can be delivered virtually. So that will fuel growth, I think goes beyond just cross selling, but really integrated solutions. You know, I have to give a call as to the Cindy team that just joined us because they can such a wonderful addition. And we had a fabulous win of a new MSP in the home health space. And they were a very instrumental part of helping us win that client and improve our commitment and capabilities within the non acute category. So I think it's our Sydney colleagues.

Brian Tanquilut -- Jefferies -- Analyst

That's awesome. I guess my second question, just on the capital deployed, citing free cash flow is really strong 106 million this quarter. I mean, if you're generating this much cash, how you think about redeploying that and where should we be thinking you allocate that?

Kelly Rakowski -- Group President and Chief Operating Officer, Strategic Talent Solutions

Well, first, we're, of course, investing internally, we talked about that. And I think you're seeing the benefits of those investments, whether it be in digital, or in our own infrastructure, and certainly in our people. So never want to lose sight of that. When we think about additional opportunities to add in other capabilities. Strategic Services. Can we just mentioned since he was a great example of how we continue to add in technology capabilities, and in that case, helps us to really address a growing part of the market that we want to make sure that we got a presence in the subacute and home health space. So we'll always be looking at what is the client wants and needs? How do we build stronger relationships. So this technology, Workforce Solutions are absolutely a priority for us. It could be in addition to something that we're already doing in that space, something that helps us to consolidate within a fragmented parts of the market or it could be something new and that new capability like Cindy brought to us. I also consolidation opportunities. I'd say particularly in our nursing allied space that locums has great growth as interim leadership. But when we look at these longer term trends of shortages in really all the clinical disciplines, it probably raises our interest more than it was two years ago in terms of consolidation opportunities that might be out there in our staffing services, as well. He's been on the table, but I'm just kind of recognizing that. Since we've seen this shift in the shortage and very high demand, we want to make sure that we are as capable as possible to deliver to our clients.

Brian Tanquilut -- Jefferies -- Analyst

Thank you guys.

Operator

The next question comes from Tim Mulrooney from William Blair. Hey, guys, this is Sam, on Tim, hope you're all doing well got a few questions here. I think you've previously thought bill rates would settle, maybe 10 to 15% higher relative to the pre pandemic levels by the end of this year. But it sounds like that's not the case anymore. Can you update us on the timing when you now expect this to occur? And if you think they might settle higher or lower than that 10 to 15%, during the more more normalized environment?

Brian Scott -- Chief Financial Officer

Difficult to say. But honestly, at this point, you know, the magnitude of the demand that we're seeing is, is definitely more than we've anticipated. We knew on those heels of the pandemic, as things improved, there would be more vacancies, and that is definitely played out. But even in a more severe way than we anticipated that that's led to these higher and more elevated rates. So we do expect them to come down. But at this point, if you take the kind of metrics we've given, it would still point to a rate in the fourth quarter of 20%. Plus about where it was pre pandemic. And quite honestly, I don't, you know, we're not really in a position at this point, to say when that would go down further, if demand stays where it is, it's hard to imagine a scenario where it would change materially. And so that's, that's really something wants to see down into 2022.

Sam Kusswurm -- William Blair -- Analyst

No, it's super fair. And so good, good calling there. Maybe switching gears to more than delta variant hair. But no, it seems like COVID cases on the rise you had been continuously in conversations with clients. Should this pandemic continue worsening? I guess there's really, two questions. I want to ask around that. First, how are you thinking about Delta as it relates to ER nurse demand? And maybe second, do you think this might negatively affect demand for our nurses, or our hospital utilization rates continuing to move higher, even despite the recent rise in cases?

Susan Salka -- Chief Executive Officer

You know, one of the things that happened over the last year and I think through all the lessons learned in the pandemic is healthcare organizations, figured out how they could continue to deliver normal patient care, and keep their procedures moving. And you know, even things such as isolating COVID patients outside of the normal facility, patient flow, and what we're hearing from them is they are committed to keeping the doors open and keeping the patients coming in to be seen. And if anything, because of the pent up demand, there's a greater urgency to make sure that they have their alarms open, so is absolutely still a huge need there. Right now, the gating factor is staff there, if they're having to close down in a war, it's because they don't have nurses or scrub techs to come in and assist. So if we face it, it's not likely going to affect the normal sort of patients demand or the demand that kind of rise more utilization of, of clinicians, if that's what you're asking.

Sam Kusswurm -- William Blair -- Analyst

Yeah, yeah. No, that's, that's good to hear. I appreciate that. I think I'll leave it at that then.

Operator

And your next question comes in your last question comes from Mitra Ramgopal with Sidoti.

Mitra Ramgopal -- Sidoti -- Analyst

Yes. Hi. Good afternoon. Thanks for taking the questions. I just had a quick one. Based on the need to acquire talent and address staffing needs. I was just wondering if you had an update and as relates to the rents that are issued, and how has that worked out for you? And if you know, you might need to make even more partnerships like that.

Kelly Rakowski -- Group President and Chief Operating Officer, Strategic Talent Solutions

Hi Mitra its Kelly, yeah, the front that partnership gone very well. We continue to collaborate together with existing clients bringing together their full complement of contingent needs and integrating our programs so we can support them in a comprehensive way. We of course continue to increase our investment with many suppliers and our MSP programs. You know, and so At the moment, we don't see any kind of real gaps in certain labor pools. But you know, with Ron's that we're also looking at, you know, other ways that we can, you know, influence and provide capabilities to our clients that go beyond even just staffing looking at some of our data and insights and analytics, and other capabilities that we both bring to the table different best practices that we can bring to our healthcare clients that they might have in other industries or globally. So we're going to continue to invest and focus on that jointly.

Mitra Ramgopal -- Sidoti -- Analyst

Okay, that's great. Thanks again, and Brian, best wishes and good luck in your new endeavor.

Brian Scott -- Chief Financial Officer

Thank you Mitra.

Operator

There are no further questions at this time.

Susan Salka -- Chief Executive Officer

Great. Well, thank you, everyone, for joining us today. As always, you know, we are proud and honored to serve our country, but also to collaborate alongside our clients and our clinicians. And with this really amazingly passionate and talented team that we're all part of. We see them lean in and bring their hearts and their soul and their talents every single day. So we just want to say thank you to all of our incredible colleagues across the country.

Operator

[Operator Closing Remarks]

Duration: 67 minutes

Call participants:

Randy Reece -- Director of Investor Relations

Susan Salka -- Chief Executive Officer

Brian Scott -- Chief Financial Officer

Landry Seedig -- Group President and Chief Operating Officer, Nursing and Allied Solutions

Kelly Rakowski -- Group President and Chief Operating Officer, Strategic Talent Solutions

James Taylor -- Group President and Chief Operating Officer, Physician and Leadership Solutions

Mark Marcon -- Baird -- Analyst

Tobey Sommer -- Truist Securities -- Analyst

AJ Rice -- Credit Suisse -- Analyst

Kevin Fischbeck -- Bank of America -- Analyst

Brian Tanquilut -- Jefferies -- Analyst

Sam Kusswurm -- William Blair -- Analyst

Mitra Ramgopal -- Sidoti -- Analyst

More AMN analysis

All earnings call transcripts