AMN Healthcare (AMN) Q2 2025 Earnings Call Transcript

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Date

Thursday, Aug. 7, 2025, at 5 p.m. ET

Call participants

President and Chief Executive Officer — Cary Grace
Chief Financial and Operating Officer — Brian Scott

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Risks

Brian Scott reported a non-cash goodwill impairment charge of $110 million related to the Physician and Leadership Solutions segment, resulting in a GAAP net loss of $116 million.
Cary Grace cited uncertainty about government policy impacts, which placed the healthcare sector in a more cautious stance and caused declines in staffing orders and traveler extensions.
Grace noted academic medical centers, which constitute about 20% of consolidated revenue year to date, have taken the strongest measures to reduce spending in response to cuts in federal funding for research.
Scott said, "Adjusted EBITDA margin for the quarter was 8.9%, down 380 basis points from the prior year period and 40 basis points sequentially."

Takeaways

Revenue-- $658 million, at the high end of guidance, but down eleven percent year over year. Interim leadership revenue decreased five percent sequentially.
Gross margin-- 29.8% consolidated gross margin, eighty basis points above guidance range. Consolidated gross margin increased one hundred ten basis points sequentially, but decreased one hundred twenty basis points year over year.
Adjusted EBITDA-- Adjusted EBITDA was $58 million, down 38% year over year compared to fiscal second quarter ended June 30, 2024, and down 9% sequentially.
Net loss-- GAAP net loss was $116 million, compared to net income of $16 million in fiscal second quarter ended June 30, 2024, and a $1 million GAAP net loss in the previous quarter, driven by impairment charges.
SG&A expenses-- $155 million reported SG&A expenses; adjusted SG&A was $140 million, reflecting $5 million in professional liability reserve adjustment and $2 million in higher bad debt expense, offset by lower employee-related costs.
Nurse and Allied revenue-- $382 million Nurse and Allied revenue, down fourteen percent year over year and eight percent sequentially, with segment volume down sixteen percent year over year.
Travel nurse revenue-- $208 million travel nurse revenue, a 25% year-over-year decline, and down 4% sequentially.
Allied revenue-- $146 million, down four percent year over year and one percent sequentially for Allied revenue; Allied orders in July were up 3% from March, highlighting outpatient therapy and imaging strength.
Physician and Leadership Solutions revenue-- $175 million, down 6% year over year and flat sequentially; Locum Tenens revenue of $103 million was flat year over year and up one percent sequentially.
Locum Tenens demand-- Locum Tenens demand so far in fiscal third quarter ending Sept. 30, 2025, is 5% higher than in fiscal second quarter ended June 30, 2025. Management expects year-over-year growth to begin in fiscal third quarter ending Sept. 30, 2025.
Physician and Leadership gross margin-- 28.2% gross margin for the Physician and Leadership Solutions segment, down two hundred thirty basis points year over year, but up ninety basis points sequentially.
Technology and Workforce Solutions revenue-- $102 million revenue for the Technology and Workforce Solutions segment, down nine percent year over year, driven by declines in VMS and outsourced solutions; segment gross margin was 55.1%, a decrease of 510 basis points from the prior year period in Technology and Workforce Solutions segment gross margin.
Language services revenue-- $76 million language services revenue, up 1% year over year and sequentially; utilization was up 6% year over year, offset by competitive pricing pressure.
Smart Square sale-- Completed in July 2025 for $75 million ($65 million cash, $10 million note). This will reduce annualized revenue by approximately $17 million and adjusted EBITDA by about $6 million starting in fiscal third quarter ending Sept. 30, 2025.
Labor disruption revenue-- $16 million labor disruption revenue, down from $39 million in fiscal first quarter ended March 31, 2025, and zero in the prior year quarter; $5 million is included in fiscal third quarter ending Sept. 30, 2025, guidance, with upside possible from further contract wins.
Impairment charges-- Scott reported a non-cash goodwill impairment charge of $110 million related to the Physician and Leadership Solutions segment and a non-cash intangible asset impairment charge of $18 million (Nurse and Allied).
Operating cash flow-- $79 million operating cash flow, with capex of $10 million; cash flow was impacted by an approximately $50 million increase in client deposits related to labor disruption events.
Debt position-- Ended the quarter with $42 million in cash, $920 million total debt as of June 30, 2025, and $70 million on the revolver; net leverage ratio of 3.3x.
Guidance-- Fiscal third quarter ending Sept. 30, 2025, consolidated revenue is expected to be between $610 million-$625 million; gross margin is projected to be between 28.7% and 29.2% for fiscal third quarter ending Sept. 30, 2025; SG&A (reported) is projected to be approximately 23% of revenue for fiscal third quarter ending Sept. 30, 2025. Operating margin is expected to be six percent to 6.5% for fiscal third quarter ending Sept. 30, 2025; adjusted EBITDA margin is expected to be 7.7%-8.2% for fiscal third quarter ending Sept. 30, 2025.
Travel nurse orders-- Travel nurse orders fell fifteen percent from March to June 2025 and have been "stable since June 2025," but remain below prior year levels. July 2025 traveler extension rates rebounded sharply.
Academic medical centers-- Represent twenty percent of consolidated revenue year to date; have implemented the strongest spending reductions in response to federal research funding cuts.
Vendor-neutral vs. supplier-led MSPs-- Pipeline now shows a "slight bias back to supplier-led MSPs" for 2025, reversing a previous trend.
Passport platform-- Now serves travel and per diem nurse, allied, and locum tenens specialties; surpassed 300,000 registered users as of fiscal second quarter ended June 30, 2025. More than twenty percent of Nurse and Allied placements are now assisted by Passport automation.
International nurse staffing-- Revenue for international nurse staffing is down roughly $100 million from the 2023 peak ($225 million in 2023 to approximately $125 million). Double-digit growth in revenue and EBITDA is anticipated for 2026 in the international nurse staffing business as retrogression improves.
Days sales outstanding-- Fifty-four days, nine days lower than a year ago and one day lower sequentially.

Summary

Brian Scott stated that consolidated gross margin rose one hundred ten basis points sequentially, driven by unique quarter-specific items, but decreased by one hundred twenty basis points year over year. Cary Grace highlighted that competitive pricing in language services offset six percent growth in utilization, resulting in modest segment revenue growth. Management emphasized that the sale of Smart Square would trim annualized revenue by $17 million and adjusted EBITDA by $6 million beginning in fiscal third quarter ending Sept. 30, 2025. Volume declines in Nurse and Allied, travel nurse, interim leadership, and search were identified as primary drivers of consolidated revenue and margin contraction, while Locum Tenens remains flat or modestly positive. AMN Healthcare Services(AMN -0.30%) signaled a stabilization of order and extension rates entering July 2025, pointing to potential sequential improvement in fiscal fourth quarter ending Dec. 31, 2025, while reasserting a strategic focus on diversified solutions, automation, and technology platforms.

Cary Grace reported that "extension rates in July rebound sharply back … delayed decision-making [is] really start[ing] to break free as we've entered the third quarter."
Management expects "double-digit volume growth" in the allied school business in fiscal fourth quarter ending Dec. 31, 2025, with July bookings indicating improvement over earlier quarters.
Brian Scott noted that proceeds from the Smart Square sale will be partially offset by repayments of approximately $50 million in client deposits in fiscal third quarter ending Sept. 30, 2025, affecting cash balances and liquidity metrics.
Cary Grace stated international nurse staffing will return to volume and revenue growth in fiscal fourth quarter ending Dec. 31, 2025, with "outsized growth opportunities over the next two to three years as visa retrogression dates move forward."
Management described competitive stability in nurse and allied bill rates and confirmed that operational changes and new client contracts are expected to improve fill rates and incremental order capture through the back half of 2025.

Industry glossary

Visa retrogression: A regulatory delay in processing employment-based visas due to annual quota limits, directly impacting foreign nurse staffing deployment.
Labor disruption revenue: Income from staffing services provided during strikes or collective bargaining-related labor shortages at healthcare facilities.
MSP (Managed Services Program): A vendor arrangement in which a single provider manages the procurement and administration of contingent healthcare staffing for a client organization.
VMS (Vendor Management System): Technology platform used to manage and procure contingent labor across multiple staffing vendors.
Passport automation: AMN Healthcare Services' in-house digital tool used to streamline placement and assignment management for clinical staff.

Full Conference Call Transcript

Cary Grace, President and Chief Executive Officer, and Brian Scott, Chief Financial and Operating Officer. I will now turn the call over to Cary.

Cary Grace: Thank you, Randle, and welcome to our second quarter conference call. Second quarter revenue of $658 million was at the upper end of our guidance range. Adjusted EBITDA of $58 million and gross margin of 29.8% exceeded the high end of guidance. At the end of the second quarter, the balance on our revolving line of credit was down to $70 million after we repaid $80 million during the quarter, and we expect further debt reduction this quarter. Through the quarter, uncertainty about government policy impacts placed the healthcare sector in a more cautious stance compared with the first quarter, directly impacting our industry. The strongest indications we had of clients' uncertainty were declines in staffing orders and extensions.

Travel nurse orders in June were 15% lower than March, and our rebook retention rate for travelers fell through the quarter. Our Language Services business also billed fewer minutes in June compared with May. Hiring freezes hampered our physician search business and likely affected demand and volume in locum tenens. Our academic medical center clients have taken the strongest measures to reduce spending in response to cuts in federal funding for research. Academic medical centers made up about 20% of our consolidated revenue year-to-date. Other hospitals have seen some slowing in patient utilization, though still growing year over year.

With the new tax bill now finalized, our clients have some clarity on future changes to reimbursement and their insured population mix, much of which will happen gradually over several years. July saw improvement in key metrics across most of our businesses. In Nurse and Allied, traveler extension rates rebounded sharply in July, which underscores that our clients still have the need for flexible staffing. Travel nurse is largely an acute care business, and while orders have been stable since June, they are running below prior year levels, and we need to see higher order levels to regain volume growth. Allied draws from a more diverse client base with about half of its business coming from non-acute care.

While travel nurse orders fell more than 10% from March to July, Allied orders in July were up 3% from March, benefiting from our strength in outpatient therapy rehabilitation and imaging. We also anticipate a strong year for our allied schools built on robust bookings in the first half selling season and the benefit of innovative solutions like our Televate virtual care platform. Q3 is the seasonally lowest quarter of the year for school staff, and our improved bookings will be more visible in Q4, where we expect double-digit volume growth from the prior year. Our international nurse staffing business is positioned to resume sequential growth in volume and revenue in the fourth quarter, with growth trends continuing into 2026.

We expect this business to have outsized growth opportunities over the next two to three years as visa retrogression dates move forward. Language services revenue was up 1% year over year in the second quarter, with utilization up 6% from a year ago, mostly offset by competitive pricing pressure. Utilization declined from May to June and grew again in July, and our sales pipeline continued to increase and progress over the past three months. Revenue for our Locum Tenens business was flat year over year in the second quarter, and we see good opportunity to deliver consistent year-over-year growth starting in the third quarter. Locum Tenens demand so far this quarter is 5% higher than Q2.

We recently completed the last stages of the MSCR integration and are seeing traction in adding more locums programs into our existing MSP clients as clients seek consistency and cost efficiency in their locum spend. We expect MSP revenue to reach a historic high this year with higher same-client sales and new opportunities for additional growth in Locum. Our labor disruption business has had a successful start to the year, and we could have more activity from now into 2026 supporting a number of clients in large upcoming collective bargaining agreements. Our recently completed AI-enabled event management technology has had positive client reaction and combined with our deep expertise enables us to scale to support more clients.

The staffing industry analysts recently released 2024 market share rankings, showing that AMN Healthcare Services, Inc. retained market share in an intense competitive environment in Travel Nurse and Allied while gaining share due to acquisition in Locum Tenens. In May, AMN Healthcare Services, Inc. was named the largest healthcare leadership search firm by Modern Healthcare. This year to date, our growth strategy to serve all market channels has progressed, supported by our Workwise technology infrastructure. Our operational speed and automation initiatives have resulted in steadily improving fill rates in both our AMN-led MSPs and vendor-neutral programs.

These efforts have been greeted by a healthy pipeline of vendor-led and vendor-neutral MSP opportunities, and we are also building up our client list for direct staffing relationships. We continue to make good progress on diversifying our revenues and building on our technology-enabled services. AMN Passport is one of our best success stories. Passport, our industry-leading app for healthcare professionals, now covers travel and per diem nurse, allied, and locum tenens specialties. We also have extended Passport capabilities to manage float pool work and labor disruption events. These additions have given a boost to Passport, which recently surpassed 300,000 registered users. More significant is the impact Passport is making on our efficiency and user engagement.

More than 20% of our Nurse and Allied placements are now assisted by Passport automation. We have seen other early successes from our rollout of AI capabilities across all facets of our operations, and this will continue to be a key area of focus for us. In early July, we completed the sale of our Smart Square scheduling software to a new commercial business partner, Simpler. This transaction enables us to expand the potential Workwise network of technology partners to deliver workforce planning, staffing, and talent deployment to the benefit of our current and future clients. In two and a half years, we have rebuilt our ability to address all channels of the healthcare staffing market.

We have stabilized and, in some areas, modestly grown our staffing market share, and we are well-positioned to win as demand recovers. For the near term, we continue to manage our cost structure and drive for operational efficiency. Our financial strength and level of innovation stand out in the industry at a time when many competitors are struggling. Now I will hand over the call to Brian for a review of second quarter results and third quarter guidance.

Brian Scott: Thank you, Cary, and good afternoon, everyone. Second quarter consolidated revenue was $658 million at the high end of guidance, driven primarily from better-than-expected performance in our Nurse and Allied segment. Revenue was down 11% from the prior year and down 5% sequentially. Consolidated gross margin for the second quarter was 29.8%, 80 basis points above the high end of our guidance range. Year over year, gross margin decreased 120 basis points, while sequentially, gross margin increased by 110 basis points. Consolidated SG&A expenses were $155 million compared with $149 million in the prior year and $148 million in the previous quarter.

Adjusted SG&A, which excludes certain expenses, was $140 million in the second quarter, compared with $137 million in the prior year and $136 million in the previous quarter. The sequential SG&A increase was primarily due to a $5 million unfavorable professional liability reserve adjustment and $2 million in higher bad debt expense, more than offsetting lower employee costs and other expense management efforts. The majority of the professional liability reserve adjustment was recorded in the Nurse and Allied segment, while the bad debt charge was in the Physician and Leadership Solutions segment. Second quarter Nurse and Allied revenue was $382 million, down 14% from the prior year, driven mainly by lower volume, partially offset by labor disruption revenue.

Sequentially, segment revenue was down 8%, primarily due to lower layered assessment revenue and seasonally lower volume. Labor disruption revenue in the quarter was $16 million compared with $39 million in the first quarter and zero in the prior year quarter. Year over year, segment volume decreased 16%. Average rate was down 2%, and average hours worked were down 1%. Sequentially, volume was down 3%, while the average rate and hours worked were both flat. Travel nurse revenue in the second quarter was $208 million, a decrease of 25% from the prior year period, and 4% from the prior quarter. Allied revenue in the quarter was $146 million, down 4% year over year and 1% sequentially.

Nurse and Allied gross margin in the second quarter was 23.9%, an increase of 10 basis points year over year. Sequentially, gross margin was up 120 basis points due to lower payroll taxes and a favorable business mix. Moving to the Physician and Leadership Solutions segment, second quarter revenue of $175 million was down 6% year over year, driven by lower volume across the search and interim leadership businesses. Sequentially, revenue was flat. Locum Tenens revenue in the quarter was $103 million, flat year over year and up 1% sequentially. Interim leadership revenue of $23 million decreased 25% from the prior year period and 5% sequentially. Search revenue of $9 million was down 29% year over year and 2% sequentially.

Gross margin for the Physician and Leadership Solutions segment was 28.2%, down 230 basis points year over year on a lower bill-pay spread and an adverse revenue mix shift. Sequentially, gross margin increased 90 basis points mainly due to a favorable sales allowance adjustment in the Locums business. Technology and Workforce Solutions revenue in the second quarter was $102 million, down 9% year over year, primarily driven by declines in our VMS and outsourced solutions businesses. Sequentially, revenue was flat. Language services revenue for the quarter was $76 million, up 1% both year over year and sequentially. VMS revenue for the quarter was $19 million, a decrease of 31% year over year and 2% sequentially.

Segment gross margin was 55.1%, down 510 basis points from the prior year period, primarily due to lower revenue from VMS outsourced solutions. Sequentially, gross margin declined 40 basis points. In July, we completed the sale of Smart Square for $75 million, with $65 million paid at closing and $10 million in an eighteen-month note. This business was included in our Technology and Workforce Solutions segment. Starting in the third quarter, this transaction will reduce annualized revenue by approximately $17 million and adjusted EBITDA by about $6 million. Second quarter consolidated adjusted EBITDA was $58 million, down 38% year over year and 9% sequentially.

Adjusted EBITDA margin for the quarter was 8.9%, down 380 basis points from the prior year period and 40 basis points sequentially. During the second quarter, we recorded a non-cash goodwill impairment charge of $110 million related to our Physician and Leadership Solutions segment. We also recorded a non-cash intangible asset impairment charge of $18 million related to our Nurse and Allied segment. Second quarter net loss was $116 million, driven by the goodwill and intangible asset impairment charges. This compared with net income of $16 million in the prior year period and a net loss of $1 million in the prior quarter. Second quarter GAAP diluted loss per share was $3.20.

Adjusted earnings per share for the quarter was $0.30, compared with $0.98 in the prior year period and $0.45 in the prior quarter. Days sales outstanding for the quarter is fifty-four days, which was nine days lower than a year ago and one day lower sequentially. Operating cash flow in the second quarter was $79 million, and capital expenditures were $10 million. The quarter and year-to-date cash flow has been favorably impacted by an approximately $50 million increase in client deposits related to labor disruption events. These deposits will be repaid during the third quarter, somewhat offsetting the proceeds received from the Smart Square sale.

As of June 30, we had cash and equivalents of $42 million and total debt of $920 million, including $70 million drawn on a revolver. We ended the quarter with a net leverage ratio of 3.3 times to one. Moving to third quarter guidance, we project consolidated revenue to be in a range of $610 to $625 million. This revenue guidance includes $5 million related to labor disruption support. Gross margin is projected to be between 28.7% and 29.2%. Reported SG&A expenses are projected to be approximately 23% of revenue. Operating margin is expected to be 6% to 6.5%, and adjusted EBITDA margin is expected to be 7.7% to 8.2%.

Additional third quarter guidance details can be found in today's earnings release. And now let's go back to Cary for some closing remarks.

Cary Grace: Thank you, Brian. Before I open the call for questions, I want to acknowledge the recent passing of AMN Healthcare Services, Inc.'s former Chairman, Doug Wheat, last month. Doug will always be a pivotal figure in both the growth story of AMN Healthcare Services, Inc. and as a friend and mentor to so many of us. Doug served on our Board of Directors for twenty-six years and was the Board's Chairman for seventeen years. Doug's legacy lives on in the values he championed, the people he impacted, and the continued impact of AMN Healthcare Services, Inc. on the lives of healthcare professionals and patients across the country.

We are grateful for his extraordinary contributions and extend our deepest sympathies to his wife Laura and his entire family. I know I speak for many in saying how deeply he will be missed. Among the many great things about AMN Healthcare Services, Inc., our people and our culture are the foundation of what makes AMN Healthcare Services, Inc. so special, and we are grateful for the many years Doug was a part of the wonderful AMN Healthcare Services, Inc. team. Operator, you can open the call for questions now.

Operator: Thank you. At this time, we will conduct a question and answer session. As a reminder, to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please standby while we compile the Q&A roster. Our first question comes from Trevor Romeo with William Blair. Your line is now open.

Trevor Romeo: Hey, good afternoon, everybody. Thanks for taking the question. The first one I had was, you would just love, I guess, any more color on how your clients are kind of thinking about their contingent labor needs at this point. I think, Cary, you noted the slower decision-making in Q2 followed by some improvement in July. I think there were a few comments you already had on kind of the demand levels, but would love maybe just more color on how you saw the trends move throughout the quarter and maybe more importantly, what your clients are telling you as far as where their contingent labor needs could go forward with the various uncertainties out there?

Cary Grace: Yeah. So let me take demand first, and then I'll maybe more broadly talk about what we're seeing in terms of their needs around workforce solutions. So I mentioned this in the call, but what we really saw as we kicked off the year is a very healthy start to the year. We saw year-over-year increases in demand. As we got into the second quarter, we really started to see the uncertainty of some pending policy changes, whether it was around tariffs, around healthcare funding as part of the spending bill, and for academic medical centers, potential cuts in research budgets. And so we saw that uncertainty result in delays in decision-making throughout the second quarter.

What we've seen really starting in July, and we've, you know, we're only kind of a week into August, but we have seen demand stabilize in nurse. We are seeing demand up in allied and in locum. And we saw extension rates in July rebound sharply back. And so we've seen some of the delayed decision-making really start to break free a little bit as we've entered the third quarter. Now what we experienced in the second quarter plays through to what we see in the third quarter. And so some of the stabilization or increase in demand we would expect to start to come through more in the fourth quarter or towards the end of the year.

If I step back and think a little bit about what clients are thinking about contingent labor, we really are at a period where for many clients, they have normalized both their utilization of labor. And when we look at where premium contingent cost over fully loaded permanent cost is, we're down to high single digits. This past quarter, we were more at 9%, which is at a really kind of low end of what you would see historically. And so we've seen that contingent spend normalize. As systems were focused on permanent hiring, and they were focused on building flexibility, whether that was in flexible or other ways.

We are very focused on helping them across all of their total talent solutions. So throughout this, we help them in permanent hiring. We help them with building up their internal float pools, whether we're running that or they're running that. Whether they want to do programs or they want to do per diem. So we are seeing the start of broader conversations about how you're really gonna manage and sustain a quality, cost-effective workforce in the future. Things like predictive analytics, more data, we're seeing interest in program management, particularly in historically decentralized areas like Locum.

And so we would expect, Trevor, those trends to continue, particularly as organizations are dealing with still increasing patient utilization and a limited supply of clinicians.

Trevor Romeo: Interesting. Yeah. Thank you very much, Cary. That's really helpful color. And then I guess I also just wanted to ask on your gross margins, particularly in the Nurse and Allied segment. I think they picked up nicely from last quarter. I was just wondering if you could give us a little bit more color on the drivers there. I think Brian talked about a favorable mix, but did you actually see underlying spreads improve a bit there or the competitive activity stabilize? And then what's your outlook for spreads in kind of the core Nurse and Allied moving forward?

Brian Scott: Yeah. Thanks, Trevor. Yeah. The underlying spreads in Nurse and Allied have been more stable. So we did have a little bit of better gross margin performance from what we guided in both the Nurse and Allied and Physician Leadership segments. But most of that was more either a couple of one-time items like sales allowance. We had a payroll tax benefit in the second quarter as well. And then we picked up a little bit of additional international perm placement revenue at a very high margin. So there were a couple of good guys in the quarter, which helped out. Same on Physician Leadership, we had a sales allowance reduction.

So with the same thing in locums, we didn't see an improvement in margin. And so as we think about our focus right now, it's actually on just trying to drive as much volume as possible, and there's been pretty stable bill rates. And so that has led to pretty stable margins. And we would expect to see that as we go into the third and fourth quarter as well.

Trevor Romeo: Got it. Yeah. Nice to see some stabilization there. Thank you both. I really appreciate it.

Cary Grace: Thank you.

Operator: Our next question comes from Kevin Fischbeck with Bank of America.

Kevin Fischbeck: Great. Thanks. I was just wondering if you could provide a little more color, I guess, in when you kind of think that these numbers will have kind of actually bottomed. I guess when you talk about some of the firming and demand that you're seeing, are those comments like seasonally adjusted? I know that oftentimes, timing through the year can change when orders start to rebound or would be expected to rebound. So just wanted to get more color on when you thought we might start to see year-over-year growth again.

Cary Grace: Yeah. Number one, welcome back. Nice to hear your voice. Thanks. A couple of things in demand. If I look at second quarter year over year, and what we're seeing in clients, if you look at the decrease in utilization, the vast majority of that year-over-year decrease came from a concentrated number of clients. And the majority of that concentrated group of clients was academic medical centers. And so we saw the biggest change in utilization from a relatively small group of clients. In the remainder of the utilization declined year over year, it was concentrated in clients that were at the tail end of rolling off that we had lost in 2023 or early 2024.

So think of that as really that tail end has played through. If we look at what we're seeing in the early days of Q3, we are seeing academic medical centers in aggregate, their volumes up from what we saw over the past four quarters. So, Kevin, what I would say is in terms of where we have seen some of the declines, we're seeing even into this quarter some stabilization of those clients. And you're always gonna have puts and takes in any given month or quarter for some clients. But I think some of the challenges that we had seen over the past year, we've seen that play out over the past couple of quarters.

Brian Scott: Yeah. I'd just add. So when you, as Cary mentioned at the beginning of the call, we saw the extension rates decline during the second quarter. That had some nominal impact on Q2, but you were gonna feel it more in the third quarter, which is reflected in the guidance in the sequential decline in travel nurse. And, again, the decline in orders that also, yeah, we started to see a little bit in April, but more so in May and June. That also compounded the impact we're seeing on volume in the third quarter. Orders have been stable now for the last, you know, two-plus months. Still at a lower level than they were earlier in the year.

But they've, you know, with the extension rates picking back up again, and stability in order levels, it feels like we're kind of at this current normal level right now. We've had some better booking trends. And so our expectation is that as we go through the back half of the year, just like, conservatively, is that we'll start to see more winter orders come in the next, you know, sixty days. We're already having some conversations with clients about that. And so that as you think about the shape of our volume, you'll see some declines from July through the end of the quarter, which is already really just a function of what happened in the second quarter.

But as we continue to look at our booking trends and moving into the fourth quarter, that will start to turn back positive on a month-to-month basis heading through the fourth quarter. And as we move into 2026 as well. So overall, it feels like the backdrop is stable. Now it's a question of just if that extension rate is kind of the first sign of clients getting back to a little bit more normal buying behavior. The next thing we'd wanna see is orders start to improve again as well. And in the meantime, of course, we're not just waiting for that to happen.

We're making very proactive steps around improving our fill rates with the orders that we have, building our pipeline of MSP opportunities to access more orders. And we talked about improving our internal capture on third-party as well. All those things are gaining traction. And so that would be incremental as we move into the back half of the year.

Kevin Fischbeck: Okay. And then I guess I appreciate the commentary around legislative uncertainty, I guess, particularly among teaching hospitals. But I guess we did also see during the quarter sequential declines in growth rates of volumes. You know, I guess, to what extent have hospitals been talking to you about that and how it might relate to their need for temp staffing?

Cary Grace: What we're seeing is when you get into kind of July and into August, we start to see demand either stabilize in nurse and or pick up in allied and in Locum, we would typically see, Kevin, and clients have told us to expect similar timing this year. We would start to see winter order needs come in the end of this month and early September. So we kind of look at demand both in terms of what we've been seeing in the base business, and then we would expect in the next, you know, six weeks, eight weeks to start seeing some future orders come in around some of their winter needs.

Brian Scott: But I don't, you know, this does rate of growth in patient volume has slowed down, it's still up. You know, it was up last year. It's still up on a year-over-year basis. I don't think that's really the major, you know, driver of any change in client's buying behavior. I think in some of these other factors that we've talked about, that have been, you know, more impactful but really haven't had, you know, client feedback around with the volume slowing down so that's a big driver of any change in their buying.

Kevin Fischbeck: Alright. Great. That's helpful. Thank you.

Operator: Our next question comes from A.J. Rice with UBS.

A.J. Rice: Maybe the flip side of these academic medical centers and hospitals generally putting hiring freezes on and being a little tougher on the permanent hires might be a step up in people being willing to consider travel nurse assignments or allied assignments. Have you seen what's happening with respect to new applicants and so forth?

Cary Grace: So we have seen we still have healthy supply. Take aside, you know, certain specialties or locations. This really is about demand, not about supply. And so if you have an order that is priced right, we don't have a challenge filling it. And in fact, you know, even when, you know, people will pull up and look at, like, demand week to week, if you have orders that come in that are priced appropriately, that'll get filled immediately. It won't even kind of, you know, have more than a couple days of time. And so it's not a supply challenge right now and an interest challenge. It's is the package attractive enough for them to sign on?

That is true overall. I'd say that's particularly true in locum, where you still see, you know, healthy demand in locums and have seen that throughout the year. It really is you have to have attractive pay packages to be able to get them to sign on because they have a number of options.

Brian Scott: I mean, A.J., it's a good point. I think that's, you know, slowed down in some slowdown in healthcare hiring. They're still hiring, but usually, there's a lag effect of that. So if they go through, if they continue to slow down on their permanent hiring, and you have, you know, kind of normal attrition, it takes a few months, but then we've seen that before where then you start to start to feel more of a tension on their staffing levels. And that's where you could see demand pick up. But it hasn't, we haven't seen that yet, but it's certainly we've seen that trend historically.

A.J. Rice: Okay. You called out some wins in MSP. I wondered if you could step back. There was some debate a while back, but it seemed like it was normalizing. People either moving away from MSP or people churning contracts generally. What are you seeing now? Are you seeing more activity? And that's part of what you're picking up? I know the market is somewhat disruptive with deals out there and so forth. Is that creating opportunities? What's happening on the MSP side and your ability to potentially grab incremental share?

Cary Grace: Yeah. What we have seen so far is coming out of COVID, we saw two things around programs. Number one is almost no matter what model a client was in, they weren't happy with what the outcomes were during COVID. So they were open to new models. We have seen, we still see clients that may look at different models. But we've seen, you know, I'd say, a little bit of normalization of that sentiment coming out that we saw coming out of COVID. The other thing we saw is we saw a bias towards vendor neutral, really in 2023 and '24. In 2025, if you look at our pipeline, we have a slight bias back to supplier-led MSPs.

And so you are seeing some of that normalize. We've had a couple of examples in our pipeline where we had a client who may have gone to a tech-only solution. They're having challenges filling. And so they're open now to going back in more of a risk-aligned, risk-sharing type of program, like a supplier-led MSP. So our strategy has been to serve clients in the model that they choose, whether that's a supplier-led or vendor-neutral MSP, whether that's direct. We have had success in all of those over the past, you know, eighteen months, which is really why you saw an SIA with the recent market share rankings, us holding our market share.

And so we want to serve that growing group of clients that wants MSPs. We also simultaneously want to serve clients who want vendor-neutral and direct relationships and build from there.

A.J. Rice: Okay. Thanks a lot.

Brian Scott: Pleasure.

Operator: Our next question comes from Tobey Sommer with Truist.

Tobey Sommer: Thanks. We want to start out with just a question on the guidance. How do we square the revenue below and gross margin down but SG&A better? What are the moving pieces? Bonus accruals came to mind, but perhaps there are other moving pieces you could illustrate for us.

Brian Scott: Hey, Tobey. Well, no. I'll just start on the SG&A. As you mentioned in the prepared remarks, our second quarter SG&A, the team's done great work in, you know, trying to manage our cost effectively. You know, made process and automation changes to be able to bring down some of our costs. And so that was really playing through in the second quarter, but then we had the actuarial adjustments and higher bad debt that, you know, collectively was, you know, $7 million and change. So if you remove that and look at the underlying SG&A, you're looking at something, you know, in the low one-thirties.

And then with the sale of SmartSquare, kind of third quarter is the first quarter reflecting about a $2 million reduction in SG&A from that as well. So we're in the low one-thirty range of SG&A, which is what's that's adjusted SG&A. So excluding stock-based comp and a small amount of the write-backs, that's where you end up with the guidance that we gave for the third quarter. And that and reflecting through to the EBITDA margin. On the gross margin side, I kind of mentioned that Q2 had a couple of unique items that were favorable. The SmartSquare divestiture, it's about a 30 basis point impact to gross margin on a consolidated basis. 100 to the segment.

But if you think about the second quarter actual to the third quarter guide, of the midpoint, again, about 30 basis points related to that sale. And then the balance of it is a few things that happened in the second quarter that aren't gonna occur in the third. Underneath that, you've got a pretty stable margin profile across the businesses. Appreciate that. Thank you.

Tobey Sommer: With respect to Strike opportunities going forward, are you still managing that aspect of your business only for kind of your best core clients where you can manage the whole experience, or are you pursuing business sort of more broadly in a different fashion?

Cary Grace: We are using our strike support to support our clients. So both our MSP clients as well as our VMS clients. And there is strong interest in both of those groups. The technology that we have built enables us to be able to scale more effectively in supporting strikes without disrupting our core business. The challenge we had historically, Tobey, is, you know, when we were supporting a strike for a strategic client, it really took so many resources away from our core business. That it was hard to do both simultaneously. We've made a lot of operational efficiencies. Brian just talked about a number of them.

And the technology that we built that we can do both, and we were able to do both in the fourth and first quarter. In the strikes that we supported. We have a healthy pipeline that we were intentional about building for the back half of the year that we are supporting a number of clients in some large CBAs that they are negotiating. You never know if a strike is gonna go or not. But we feel like this is both an important capability that matters greatly to clients that we wanna support, and we have a differentiated ability to support it now than we did in the past.

Brian Scott: Thanks. If I could sneak one in and then, you know, get back in the queue one more about language services? What's the growth algorithm and expectation from here, after, I think, what you described as a slowdown in February. Thank you.

Cary Grace: Yeah. Let me tell you a little bit about what we're seeing in language services. So first, we love this business. It is an important service that we provide both in acute and non-acute settings. When we look at quarter over quarter, we had mid-single-digit growth in utilization, but that was offset. We've seen significant competitive pressure on price per minute. And so that resulted in, from a net basis, very, very modest growth. We would expect those trends to continue. From a top-line standpoint, the softness in utilization that we saw really kind of in the second quarter going into the third quarter. When we talk to others in the industry, they are seeing something similar.

So our focus is not just on, you know, continuing to strongly manage this business. But we have built over the past couple of quarters a strong pipeline that we would expect to progress as we go through the next couple of quarters that would help us get back some stronger top-line growth ending this year going into next year.

Brian Scott: Thank you.

Tobey Sommer: Thanks, Kevin.

Operator: Our next question comes from Brian Tanquilut with Jefferies.

Brian Tanquilut: Hey. Good afternoon. You've got Jack Slevin on. Just wanted to maybe turn a little more broadly just to the competitive environment. And appreciate your comments on sort of being able to hold share with some of the latest SIA data that's out there. But maybe thinking about opportunities to potentially win share. I guess, the chatter we get is that plenty of the private comps of yours are under significant pressure. And I'm just wondering if you could maybe just dive into a little bit of what you're seeing in terms of actions, whether it's on price or other things from the competitors in the landscape?

And then maybe just how you think about what does that look like on a multiyear basis if you are to sort of win out in the market? Is it more of just the same and then waiting for others to capitulate, or is there, you know, more action that needs to be taken? Thanks.

Cary Grace: Yeah. So a couple of things. One, I'll talk about just the, you know, kind of winning share dynamics. And then I know we've also started to see what we think are the beginnings of consolidation that will continue. The industry is still relatively fragmented. So in terms of what we're seeing from a competitive dynamic, our goal is to gain share. And so stabilizing and, in some cases, growing our share, which, you know, happened in 2024, is a step to gaining market share. We are very focused on how we do that in a couple of ways. One is how do we continue to build on net new clients? On strategic net new clients.

So net new wins, expansions, net of losses, year to date, we are up modestly. We continue to build our pipeline and progress our pipeline. To be able to get new brand new clients to be able to sell more of our solutions to. Second is how do we continue to expand, which we have had success in. I'd say particularly in locum, strike, and to a lesser degree in language services, to some of our MSP clients. And then how do we fill more? So Brian talked about this a little bit earlier in some of our operational initiatives. We have higher fill rates both on our internal capture of our MSPs, but also on our own VMS platforms.

And you will see us continue to focus on those areas. So that is the trifecta of how we continue to work on gaining market share. From a competitive standpoint, we think that the challenging position that some of our competitors are in is gonna give us an ability to continue to have differentiated solutions to be able to win more clients with. Strike is a great example of a very important solution for clients that have unionized populations. That we now can uniquely support in ways that other competitors can't. What we're doing with Passport and being able to support float pools is another great example.

So we think that we will extend our differentiation during this period with competitors having challenges. We've also seen the beginnings of some consolidation over the past two quarters. We think that will continue into 2026. And we think there's always opportunity over the coming years. That consolidation will benefit us.

Brian Tanquilut: Okay. Got it. Really, really helpful color. I'll just jump with one quick follow-up here and just say on the international piece, appreciate some of the updated commentary there. I'm wondering if you can just dig in a little bit deeper in terms of exactly we see the turn probably later this year, but then what the path to sort of grow that over time, you know, I guess, what the checks we would wanna see are to know that is on track and the extent of the recovery in revenues that you can get on a multiyear basis? Thanks.

Cary Grace: So let me give you a little bit of the shape of what that will look like. And then between Brian and I, we can talk through, you know, different scenarios of what that could look like. So we expect an international that we will go back to growth. It will be very modest in the fourth quarter. The bigger thing for us in the fourth quarter is that this has been a significant headwind for us for the past two years as retrogression has taken place. So us getting back to being neutral with a very slight positive in the fourth quarter is important to us.

As we get into 2026, we would expect, even under conservative assumption, for us to grow both revenue and EBITDA in the double digits depending on different scenarios of how much forward movement of retrogression you would get. That could, you know, range, you know, more highly in terms of how you get the recovery. It'll be a multiyear recovery. But we know enough now and even under conservative assumptions that you will get into double-digit growth both top and EBITDA for international next year.

Brian Scott: Yeah. I'll say if we, you know, all the talk of immigration, it's, let's say, it hasn't, we have ever listened directly impact the business as much. Maybe a little bit of a slowdown in some of the state department processing, but, you know, those visas that are allocated still exist. And so, you know, we still see, you know, good demand from clients. There's still a, you know, we have a large and growing pipeline. And so to Cary's point, it's as we talked about before, it's still feel like it's not a matter of if, just a matter of when. It's just very difficult to predict, you know, how the dates will continue to move forward.

We know they will. There'll be, you know, got a new budget year coming up soon. We typically see in the heels of that, you know, movement on the dates, and so we're, you know, we're just being a little bit cautious on our forecast of what that will look like. If you went back into history, we've had retrogression. There's been periods where there's been pretty significant movement forward. But we just, it's just really hard to predict at this point what's gonna happen. But to Cary's point, even in very conservative scenarios, we absolutely expect to resume growth, particularly as we move into 2026. It's just that the magnitude is still the part that we can't quite predict.

Cary Grace: And the last piece that I'll mention is whether it's, you know, the hospital association or other lobbying groups, there's really broad support for bringing in clinicians. It is an incredibly important source of clinical supply really for all, but I'd say really acutely for rural hospitals. And so we would expect, you know, there to continue to be a strong level of support into 2026.

Brian Tanquilut: Got it. Super helpful. Appreciate all the questions.

Operator: Our next question comes from Mark Marcon with Baird.

Mark Marcon: Afternoon. Most of my questions have been asked, but I wanted to just dig in a little bit deeper on some of them. So starting with visa retrogression, can you remind us, like, what was the peak level of revenue on the international nursing side? Where is it currently so that we have a base level that we're gonna build double digits from?

Cary Grace: Brian's getting you that number. Yeah. I mean, just as a reminder, we've come down by about $100 million from the peak in 2023. So we were at about $225 million of revenue in 2023. We're running it now more like $125 million. So that's when we've talked historically, you know, previously about just, you know, just getting back to that level, that $100 million and the flow through from. And we have pipeline that could take us beyond that, but that gives you kind of more magnitude in our EBITDA margin is north of 30% in that business.

Mark Marcon: Great. And then on the labor disruption side, it sounds like we're building it. We did $16 million last quarter. We're building in $5 million for this quarter, but it sounds like there are a lot of CBAs. So is $5 million a really conservative number?

Cary Grace: We have line of sight to the $5 million in the third quarter. We always put mark $5 million in because we can't really, you know, with any degree of precision, like, both timing and magnitude, be able to predict more than that. There is upside in the third quarter from that number. If some of those CBAs, if the union strikes, there is also upside potential in the fourth quarter as well. Based on the CBAs that we know we are supporting. So there is both third quarter and fourth quarter upside.

Brian Scott: Yeah. It's but it's a bigger, the more likely the larger revenue I pay would be season four and first quarter next year. There are a couple of smaller things that could happen in the third quarter, but, again, it's just we have good, like I said, we have contracted work that supports the guidance we gave. There's a couple others that may or may not happen that are smaller that, but, you know, I don't feel conservative. You know, maybe, but I think it's appropriate based on what we know right now.

Mark Marcon: Okay. And then on the competitive environment, you, we all know there's a number of players out there that are struggling, and then we also have consolidation. In terms of the players that are struggling, are there any sort of negative impacts that you're currently seeing from a pricing perspective just as they struggle to maintain viability, or is pricing staying from a competitive perspective staying, you know, fairly stable? And then how should we think about pricing as we do get that stabilization or rationalization in terms of industry capacity?

Cary Grace: I, you know, I think what we've seen more in terms of the pricing is just the competitive environment, and we've really been in that for several years. So I don't know that anything has incrementally changed. I think, Mark, when you look at, you know, we've had relative stability in bill rates in nursing. You know, revenue per day in locums has continued to increase. But you've seen relative stability in our Nurse and Allied business. So what you'd really wanna see as you get into 2026 is you still have underlying increases in, you know, wages that are going on, and you'd really want to see that reflected in bill rates.

Because the premium spread from contingent to permanent is high single digits. And so I don't know that there's a lot of room to go from there. So that's what you wanna see more competitively. And I think that, you know, regardless of financial position, there's gonna be an interest in, you know, all players being able to maintain some level of margin.

Mark Marcon: Great. And then you have the SmartSquare divestiture. You're not anticipating any other divestitures, are you?

Cary Grace: No. You know, from a background standpoint, I know we talked about this in the press release, what we were seeing in SmartSquare, which really led to the strategic decision of a divestiture is it's a great platform. It's a great team. That buy and the implementation was increasingly becoming part of a broader ERP buy and decision. And it was tied in a lot of cases to time and attendance. And so for us, we looked at it as a win-win, which is we found a great partner in home in Simpler. It was a great outcome for the clients of that platform.

And for us, it allows us to focus our CapEx spend on areas that are growing more strongly. And it really created for us an ability to more robustly partner with all these different providers that also have some scheduling systems. We had kind of a competitive friction with them in the past. So we view that whole opportunity as a very strategic decision.

Mark Marcon: And then just from a financial perspective, you've got that $50 million that you're gonna be paying back, but then you ended up getting the cash. How are you thinking about, and then you also mentioned that you plan to pay some more of the revolver. Where do we think cash flow is going to be for the third quarter?

Brian Scott: We'll, on an operating cash flow, we'll have a use of cash because of the debt deposit refund. But at your point, we'll have all the proceeds from that sale. So maybe I'll answer a little bit differently. We are, and we're getting, like other companies, some cash tax benefit from the tax bill. We would expect all of our balance to be somewhere around $30 million at the end of the third quarter. So wait. That's quite easy. Probably trying to get to there. We're obviously continuing to make really good progress on reducing that revolver balance and have, you know, more and more line of sight to getting that fully paid off here.

If not, at the end of the year, you know, shortly thereafter.

Mark Marcon: Fantastic. Thank you.

Operator: Our next question comes from Jeffrey Silber with BMO Capital Markets.

Jeffrey Silber: Hey. Good afternoon. This is for Jeff. I was just hoping to dig into the underlying bill rate and volume assumptions for the third quarter Nurse and Allied guide. I think you mentioned pretty stable bill rates and perhaps some softness on the volume front. Was just hoping to get some more color there. Thank you.

Brian Scott: Yeah. I mean, that's, you've kind of characterized it pretty well. The way it's, the bill rates have been pretty stable, and so we, you know, really, as Cary mentioned, that would be, you know, that would unlock more volume if, you know, clients are still testing low rates in certain markets and certain clients. And so that's, you know, we can fill, but it takes longer. Or in some cases, they just, they can't be filled by us or anybody else. When we get an appropriate price order, we're able to fill them very quickly.

So as you look at the guide we gave for the third quarter, it really, for the travel nurse business, it's the, that decline is really all volume-driven. We really haven't seen any, you know, change in hours worked as well. So that's the bulk of the sequential change. Allied is also a down a little bit, partly just again with the school year. This is kind of the low point in the season. And that's probably the main drivers for the Nurse and Allied segment.

Jeffrey Silber: Got it. And then for the follow-up, was wondering what your exposure is to rural hospitals?

Cary Grace: You know, we pulled that up a couple months ago. I, we don't have, I'd say, kind of disproportionate exposure to rural versus urban. So I'd say it's not kind of oversized or undersized.

Jeffrey Silber: Great. Thank you.

Operator: This concludes the question and answer session. I would now like to turn it back to Cary Grace for closing remarks.

Cary Grace: Thank you for joining our second quarter earnings call. Our entire team appreciates your interest in AMN Healthcare Services, Inc.

Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.