AMN Healthcare Services Inc

NYSE:AMN

Earnings Call Transcript 2021-Q1

[Operator]

Good day, and thank you for standing by. Welcome to the AMN Healthcare First Quarter 2021 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions]

I would now like to hand the conference over to your speaker today, Randy Reece, Director of Investor Relations. Please go ahead.

[Randle Reece, executive]

Good afternoon, everyone. Welcome to AMN Healthcare's First Quarter 2021 Earnings Call. A replay of this webcast will be available at ir.amnhealthcare.com following the conclusion of this call. Details for the audio replay of the conference call are in our earnings release issued this afternoon.

Various remarks we make during this call about future expectations, projections, trends, plans, events or circumstances constitute forward-looking statements. These statements reflect the company's current beliefs based upon information currently available to it. Our actual results may differ materially from those indicated by these forward-looking statements as a result of various factors and cautionary statements, including those identified in our most recently filed forms 10-K and 10-Q, our earnings release and subsequent filings with the SEC. The company does not intend to update guidance or any forward-looking statements provided today prior to its next earnings release.

This call contains certain non-GAAP financial information. Information regarding and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and on our financial reports page at ir.amnhealthcare.com.

On the call 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; and James Taylor, Group President and COO of Physician & Leadership Solutions.

I will now turn the call over to Susan.

[Susan R. Salka, executive]

Thank you so much, Randy, and welcome, everyone, to our earnings call. We have a lot of positive news to share with you today. However, the most meaningful message is one of gratitude, the impact made by our colleagues, clients and, of course, health care professionals to care for and heal our communities is more important than any financial results we are reporting. It is fitting that we are celebrating the international year of the nurse, recognizing nurses and midwives around the globe for their importance and contribution.

Today is the first official day of Nurses Week. And as the largest provider of nurse staffing solutions, I would like to extend our congratulations and deep appreciation to nurses around the world, including those who are a special part of the AMN family. It is hard to believe that just 12 months ago, we were in the early stages of what we thought would be a somewhat short-lived disruption from COVID-19. Little did we know that the pandemic and other events of the last year would have profound and lasting impact on our country, our communities and our company. Fortunately, today, we have more reasons for hope and uncertainty, and we stand together in a much better place than we were a year ago.

Though we saw surges of infections last April and July, in the middle of winter, new COVID-19 cases were occurring at 5x the rate we have seen at the end of September and hospitalization rates soared even faster. Americas health care workers dealt with each surge with tremendous poise, compassion, stamina and grace. Thanks to our health care heroes and everyone supporting them, we have made tremendous progress since the worst days of winter.

While we are moving closer to the end of the pandemic, our health care labor force will likely feel the aftershocks for years to come. Some workers were traumatized by what they dealt with on the front line. Many saw their work schedules become longer and more challenging. Others had their careers disrupted. In some cases, people decided to retire sooner than planned. Others have left the professional together or are taking extended leaves. This all adds to high levels of vacancies across many health care professions.

We entered this year in the mix of urgent health care labor demand surges to levels the industry has never seen before. The AMN team and our supplier partners ramped delivery at an unprecedented pace. The impact on our financial results was record high revenue of $886 million for the first quarter, 40% higher than the fourth quarter with contributions from all of our businesses.

Our largest segment, Nurse and Allied Solutions had first quarter revenue of $657 million, growing a remarkable 55% year-over-year. We surpassed 12,000 average travelers on assignment for the first time and had our highest ever number of new assignment starts. The entire placement and service delivery team at AMN was nothing short of astonishing in their efforts to meet these demands.

Travel nurse staffing was up 74% year-over-year on higher volume, bill rates and hours worked. The availability of clinician talent for such elevated needs was extremely constrained for our clients and the temporary staffing industry. This short supply and high demand environment has driven a temporary rise in market wages to attract the critically needed health care professional. Pandemic-related demand peaked in January and in March, travel nurse orders have returned to historically normal levels. Recently, however, we have seen demand move higher again, in large part, because health care organizations are experiencing higher-than-expected attrition, which they cannot fully offset with permanent hiring. In fact, our total travel nurse orders have risen steadily for 6 straight weeks with demand growth across all major nurse specialties and geographies.

All nurse businesses grew significantly during the first quarter. One standout I'd like to mention, however, is our local staffing business. While a relatively smaller part of this segment, revenue was up about 150% year-over-year. You might recall that we made a strategic shift several years ago to close our branch offices and move to a centralized technology-driven staffing model. It was bumpy for us in this transition. However, these changes proved to be a vital part of the success of this team during the last year and it enabled us to achieve the highest quarterly revenue in AMN history for this business.

For the first time ever, Allied staffing surpassed $100 million in revenue, up in the quarter by 17% year-over-year and 33% sequentially. Imaging, respiratory and lab staffing made a dramatic surge in the quarter, but our schools and therapy businesses also enjoyed 10% sequential growth. Demand is solid across all major Allied disciplines and our team is executing extremely well in this market. Allied bookings continued to improve through April, and we expect stronger year-over-year revenue growth in the second quarter.

Our revenue cycle solutions business also grew 8% sequentially in the first quarter, and this business should return to year-over-year growth in the current quarter.

For the second quarter of 2021, we expect Nurse and Allied Solutions segment revenue to be 34% to 37% higher year-over-year. Physician and Leadership Solutions was the segment most disrupted during the first 6 months of the pandemic, and we were pleased to see all businesses in this segment rebounding nicely in the first quarter. Revenue came in at $141 million, rising 27% above the fourth quarter and up 2% year-over-year.

Locum tenens revenue was $86 million, growing 9% year-over-year. Locum's revenue included more than $25 million from pandemic-related projects. Core business continues to rebound, which gives us the promise of even better year-over-year growth in the second quarter.

Interim leadership also had its best recovery quarter since the pandemic began with revenue jumping 34% above fourth quarter levels from a strong return of core business, coupled with vaccination projects. The team delivered high fill rates on strong demand led by our MSP and strategic account relationship.

Physician and executive search improved by 12% over the fourth quarter and the year-over-year comparison was down 16%, which is half the rate of decline in the previous quarter. Our second quarter segment outlook for Physician and Leadership Solutions is for revenue to be up approximately 20% year-over-year. This is particularly positive considering that we expect only 5% of second quarter to revenue to be pandemic-related compared with more than 20% in the first quarter.

In the Technology and Workforce Solutions segment, first quarter revenue grew 120% year-over-year. This included organic growth of 84% as our VMS and RPO businesses did an excellent job capturing demand.

AMN language services, formerly known as Stratus Video, had another outstanding quarter with $41 million in revenue. We owned this business for only half a quarter a year ago. On a pro forma basis, language services grew 37% versus the prior year.

In VMS, the past year brought a number of new client wins, which were bolstered by our open talent marketplace solution. First quarter revenue for VMS was $32 million for a growth rate of 91% year-over-year and 60% sequentially. In the second quarter, we expect segment revenue for Technology and Workforce Solutions to be up more than 60% compared with the prior year. Over the past year, Technology and Workforce Solutions has greatly improved our ability to help our clients deliver services in the most cost-effective manner by leveraging technology. We expanded these solutions in April with the acquisition of Synzi.

Synzi is a virtual care platform that enables organizations to conduct virtual visits and use secure communication, clinician to patient and clinician to clinician. Multiple participants can be included in virtual visits, including physicians, nurses, medically certified interpreters, family and caregivers. This acquisition is part of a strategy to further position AMN for marketplace changes over the next 5 to 10 years as more care moves out of the hospital.

Outpatient in post-acute care in their traditional forms have been difficult for the health care staffing industry to serve. Virtual care offers flexibility in ways regular staff augmentation cannot, AMN sees great opportunity for technology-enabled solutions to support care delivery in outpatient and post-acute care.

AMN's mission and strategy are deliberately holistic and aspirational. We start with how we can support and positively impact our colleagues through our culture and creating opportunities for AMN team members to reach their goals and beyond. Our commitment to diversity, equity, equality and inclusion is a cornerstone to how we act, how we invest and how we hold ourselves accountable.

Next is the difference we make in our communities through our volunteer efforts and financial support, but also through our attention to our environment, social issues and good governance. We've had an excellent track record with BEI and ESG. However, we know we can and should always strive to do more.

And for our clients and health care professionals, our strategy to be the most trusted and comprehensive total talent solution partner has never been more critical than it is today and into the future. By carefully building and diversifying our talent and technology solutions over the past 3 decades, we are fortunate to serve our clients as their talent partner and to innovate alongside them. As a leader in providing managed services programs and the most comprehensive staffing and technology solutions, we are increasing the at the table for strategic workforce discussions, and we're able to target our investments in the solutions that matter most to health care organizations. Our stepped up investments in technology are paying off with expanded solutions for our clients, more speed and flexibility for our health care professionals and greater efficiency in our business.

Over the past year, the AMN team has accomplished more than we could have previously imagined. Everyone has been working hard and with a passion and commitment that is true to the AMN values and the desire to make a positive impact every day. In addition to our gratitude, we are constantly seeking and implementing more ways to support and elevate the well-being of our health care professionals and our team members. Caring for our colleagues in supporting them has long been a cornerstone of AMN's culture, but it is also a crucially important factor in the success of business. While we have much to be proud of, we know that every day there is more work to be done to make a greater impact.

In a few minutes, Kelly, Landry and James will join us for the Q&A session. But for now, I will turn the call over to our colleague, Brian, who will provide more insight on our results.

[Brian Scott, executive]

Thanks, Susan, and thanks, everyone, for joining the call today. First quarter revenue of $886 million was well above our guidance range. It's a very tight labor market and recovery in non-COVID demand caused volume and pricing to be stronger than expected this quarter, and the trend is continuing into the second quarter.

Included in the first quarter was approximately $25 million of vaccine project-related revenue, which was in line with our expectations. First quarter consolidated revenue grew 47% year-over-year and 40% sequentially.

Gross margin for the quarter was above the high end of our guidance range at 32.6%, which was 90 basis points lower than prior year and down 30 basis points sequentially. The margin was lower year-over-year from expected compressed pay-to-bill spread in nurse staffing and the outsized growth of nurse and allied staffing relative to our overall business mix. Sequentially, the change in business mix was also the biggest driver of the margin decline.

Consolidated SG&A expenses were $161 million or 18.2% of revenue compared with $146 million or 24.3% of revenue than a year ago quarter, and $155 million or 24.6% of revenue in the previous quarter. The lower SG&A margin reflects favorable operating leverage from the increase in revenue. On a sequential basis, SG&A expenses rose due to higher end support revenue growth and vaccine-related projects, increases in variable compensation and other employee benefits and additional marketing costs to drive Canada supply.

In the first quarter, Nurse and Allied revenue was $657 million, 55% higher than prior year and up 47% sequentially. For travel nurse, our largest business in the segment, revenue grew 74% over prior year with average travelers and assignment growing 8%, the average nurse bill rate up by approximately 50% and higher average hours worked. Allied revenue returned to year-over-year growth, up 17% from the prior year and up 33% sequentially. Allied volume was up 2% over prior year after being down 17% in the fourth quarter. Nurse and Allied gross margin of 26.9% was 160 basis points lower than prior year and up 20 basis points sequentially. The segment gross margin was lower year-over-year primarily from increases in clinician pay packages to fill more positions.

Segment EBITDA margin of 15.5% was 150 basis points higher than prior year from strong operating leverage.

Physician and Leadership Solutions revenue in the first quarter was $141 million, growing 2% year-over-year and up 27% sequentially. Gross margin for this segment was 37%, 30 basis points higher than the prior year and down 10 basis points sequentially on a higher-margin locum tenens and business mix shifts within the segment. Segment EBITDA margin was 15.1%, up 450 basis points from last year and down 10 basis points sequentially. The year-over-year improvement was driven by operating leverage and a higher gross margin.

Technology and Workforce Solutions revenue was $89 million in the first quarter, growing 120% year-over-year and 22% sequentially. VMS was the main driver of the sequential growth, along with an 8% increase in our language services business. Segment gross margin was 67.7%, down from the prior year margin of 75.7% as the addition of language services business changed the segment margin profile. The segment gross margin was up 320 basis points sequentially due to an increased mix of VMS revenue. Segment EBITDA margin of 47.5% was up 950 basis points year-over-year and was 550 basis points higher sequentially due to the operating leverage from revenue growth.

Consolidated first quarter adjusted EBITDA of $141 million was 90% higher year-over-year driven by organic and acquired revenue growth. Adjusted EBITDA margin of 15.9% was 360 basis points higher year-over-year and better by 180 basis points sequentially.

We reported net income of $70 million and diluted earnings per share of $1.47 in the first quarter. Adjusted earnings per share was $1.70 compared with $0.79 in the year ago quarter. Days sales outstanding was 57 days, 2 days higher than last quarter as strong cash collections were offset by the significant growth in revenue and accounts receivable during the quarter.

Operating cash flow for the quarter was $39 million and capital expenditures were $12 million. As of March 31, we had cash equivalent of $78 million, which included a $45 million draw on our line of credit for the Synzi acquisition. We ended the quarter with $905 million of debt and a leverage ratio of 2.2x to 1.

Now turning to second quarter guidance. We are projecting consolidated revenue to be in the range of $810 million to $830 million, 33% to 36% higher than prior year. This includes approximately $30 million of revenue related to vaccination project.

Second quarter gross margin is projected to be 32.4% to 32.8%. Reported SG&A expenses are projected to be 18.6% to 19% of revenue. Operating margin is expected to be 10.5% to 11% and adjusted EBITDA margin is expected to be 14.4% to 14.9%.

Other second quarter estimates include the following: depreciation expense of $8 million; noncash amortization expense of $16 million; stock-based compensation expense of $6 million; interest expense of $10 million; integration and other expenses of $3 million; and an adjusted tax rate of 28%.

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

[Operator]

[Operator Instructions]

Your first response is from Mark Marcon of Baird.

[Mark Marcon, analyst]

Congratulations to you and the entire team for the results and also what you've done in order to address the crisis. I'm wondering, how are you thinking about the second quarter from a bill rate perspective in Nurse and Allied? And how do you think that unfolds as the year progresses? Do you think that just because with the nursing burnout that's occurred and the shortages that we're likely to see elevated bill rates through the remainder of the year? How are you thinking about that?

[Brian Scott, executive]

Thanks, Mark. Appreciate the question. Yes, I'll give a little bit of color and it would be great to have Landry provide some additional commentary as well. So as we mentioned on the last call, we did feel like the bill rates would peak in the first quarter and then start to decline to the second quarter. We are already in discussions with clients coming out of the first quarter around that. And it's something we are supportive of. We think it's better for the industry overall and for our clients. That has occurred. It was a little bit more delayed than we expected. I think with a really kind of labor market and we talked about orders actually started to rise again, it kept things very tight and it's difficult to see that step down maybe at the rate that our clients would like to see, but we're trying to be very thoughtful with them to make sure they have the staff need every day to deliver patient care.

As we look through the second quarter, the guidance that we've given does reflect a decline in bill rates in the second quarter. It's kind of steady from April to May to June, and we expect that will continue into the third quarter. But again, that's the kind of starting point of that decline was a little bit later than expected, and the rate of decline has been a little bit slower as well. Landry, anything to -- okay. So that's -- I think what we -- we still expect right now that by the time we get to the end of the year, we'll be kind of closer to a normalized bill rate that was already last time again, just a little bit of a late start on that. We'll still end up higher than we were pre-COVID just through normal inflation and that it's just a tightening the layer market further. So we're -- eventually, land is unknown, but we certainly have seen that number come down.

[Mark Marcon, analyst]

Okay. And how are you -- you obviously have still a really high level of demand. How do you manage the internal capacity, the internal hiring, while things continue to be so strong, but with the anticipation that the bill rate might come down?

[Susan R. Salka, executive]

Thanks, Mark. It's Susan. We are seeing really relatively strong demand across most of our business. So while we're talking, I think your questions about nursing, specifically, I want to make the point that we have strong demand and growing demand across most all of our staffing-related businesses as kind of core health care utilization, return, elective surgeries return. And then you layer on the shortages and high attrition, which aren't just a factor in nursing. They're very much a factor across the Allied discipline, physician, advanced practicing even in executive search. And so in those cases, we're trying to help our clients not only in filling the temporary jobs, but of course, helping them in their permanent position.

We started hiring. I've seen that demand grow across various businesses. We began adding staff last year and are continuing to do so this year. So our recruiter and sales staff is up on a sequential basis, obviously, more in, say, nursing and allied and some of the others, but we are adding team members across the businesses. And then on top of that, our technology has really enabled us to both attract and get people placed more quickly. I can't say enough about the great job our business and technology teams have done in rapidly deploying some new capabilities so that we are getting out and reaching clinicians more quickly and in a way that they want to view jobs. So things take AMN Passport that we've been talking about has really helped us to move faster and actually put more of the power in the hands of the clinician to make those decisions.

So that's just a couple of things that we're doing to make sure that we can handle the capacity of -- Landry, I don't know if I stole all your thunder or if there's anything else you want to add there.

[Landry Seedig, executive]

No. I mean you covered most of it. Of course, we -- our recruiter counts are higher than prior year. Our sales team accounts are higher than prior year. It's kind of in the low teens right now, but as Sue just mentioned, we also have some of this digital investment that we have. So it's actually helped a lot on our production per person. So we're seeing those quite a bit sequentially, but also over prior year.

So a couple of things that related to that, that we talked about on the digital side, but also the advanced medical team. So the acquisition that we did, and we got them integrated, both on the Nurse and Allied side, and we've seen their production double since we got them onto our system. So it's just a great success story of getting them integrated. It's just a great team that we've been able to retain and really up our clients out quite a bit.

[Operator]

Your next response is from Tobey Sommer with Truist Securities.

[Tobey Sommer, analyst]

Could you discuss what you're hearing from clients about their internal staff? You did make some comments in your prepared remarks about the pressure there. And if there's a good way to translate that deficit either in percentage terms or available full-time FTEs versus prepandemic or weekly hours of available or some other metric to kind of -- to solidify our understanding of that.

[Kelly Rakowski, executive]

Tobey, it's Kelly. Thank you for the question. I think the first part of your question, just to give you a feel for what we're hearing from clients, significantly elevated rates of vacancies. Most of our clients, I would say, have hit sort of double-digit percentage. And there's, obviously, a combination of things impacting that, and they're still facing growing levels of attrition, extended leaves of absence. And I think from their work -- existing workforce as well, that level of fatigue and exhaustion that they're responding to is also limiting some of the hours from a full-time employee perspective.

I don't know that we have a good analytics yet to quantify that, Tobey, but I will tell you that those trend we expect to continue. We're working with our clients on how they address the overall workforce. I mean we have to take care of all of our clinicians and respond, and make sure that they can continue to provide safe care. There's strategies we're working through our workforce optimization solutions to help them maximize or optimize their existing FTEs and of course, continuing to supplement them appropriately with contingent staff. But the -- a little difficult to know sort of what those gaps are in FTEs and how long those will persist.

[Landry Seedig, executive]

Yes. Tobey, it's Landry. I would just add that, I mean, we've been talking about this for a long time and it was kind of a prediction. And what we're seeing today is it's just very real. We're hearing it, not just from a few clients, but almost kind of across the board from our clients that the amount of vacancy that they have. And we believe that a lot of the demand that we're seeing today relates to those shortages that they have due to a lot of the kind of mental health and burnout and fatigue of the clinician.

[Tobey Sommer, analyst]

From a -- if we look at your business mix by setting, sort of where your clinicians are actually doing the work for the customers, how do you see that mix changing over time, acute, outpatient, home?

[Susan R. Salka, executive]

Yes, Tobey. So it's Susan here. We absolutely believe we will be following the trends within health care to have more care delivered outside of the acute care setting. Now certainly acute care, we'll continue to see volumes grow with an aging population and the acuity of that aging population. So we expect that our acute care clients will continue to be a very important part of our client base. And for that matter, they are becoming much more diversified, vertically integrated across the many studies. So to be a good partner for them, we need to be able to serve them, not just in the acute care setting, but also in home health, in the ambulatory surgery, special projects, telehealth as well. And so it becomes important that we have not only the staff, but the technologies and capabilities.

But in addition to that, there are clients that just serve those outpatient markets, which is why we're very keenly focused on continuing to build those relationships. Yes, staffing into them, but with the acquisition of Synzi that we just made, it provides us yet another opportunity to assist those clients with the workforce challenges that they have. So you'll see us continue to make these investments to make sure that we are adapting our strategy into those growing and evolving markets.

[Tobey Sommer, analyst]

I'm curious where the pandemic has had the most impact on the industry, not just the company. And I'm curious if among the areas might be changes in licensing, credentialing and/or sort of the candidate experience, so make it open-ended play.

[Susan R. Salka, executive]

Sure. I'll address licensing and then open it up to Landry and James to perhaps talk about the candidate experience because it's really across the board. In terms of licensing, I think you know that most states have put in crisis licensure exception and those orders are going to be continuing, but also likely expiring and/or extended. It's always a little hard to tell, they tend to extend them at the last minute, but we would expect that most of them will continue through the year. But the good news is we continue to also hone our processes and automation and the way that we are able to more swiftly in less -- with less friction, get our clinicians credentialed quickly.

A lot of those investments that we've made over the last year have really paid off. So we think even when crisis licensure comes to an end, we'll be able to actually retain a lot of the progress that's been made in speeding up the credentialing kind of process for them. And having AMN Passport is a big part of that. We really put more of the self-serve opportunity in the hands of our clinicians. They can submit and upload documents. They can see where they're at in the process. It's easier for them to communicate with our team.

So I think this last year has actually forced the industry to be more efficient and use technology in smarter ways to create that better experience for candidates. So Landry, maybe start with you and see if you have anything else to add about their experience.

[Landry Seedig, executive]

Yes. Tobey, so some of the things that Susan mentioned, I mean, the more that we can make it easy to be able to move clinicians around the country, the easier it is and the faster that we can be. So in the first quarter, we saw the highest number of new clinician starts that we've ever seen, and a lot of that has to do with some of the executive orders that were out there for licensure and then standardizing credentialing across our clients. So I don't -- not all of that will stick, but a lot of it will continue to happen, and it just helps us be able to move those clinicians around easier throughout the country. So I know the teams are working hard to work with our clients on that and standardize it as much as possible.

[James Taylor, executive]

This is James. The only thing that I would add to that is 90 days into the organization, I was really humbled by our values and mission of who we are as an organization being stood up and being lived day in and day out, overwhelmed by the generosity, the compassion and the enthusiasm of our teams to really create an environment that allows people to bring their authentic selves to work and to be successful. Amazed by the learning and the drive of our team to really serve and deliver to helping that candidate to have the best possible experience that they can have with inside of our organization. I'd say that -- I know a different [ key point ], but humbled by the experience that -- and the great work that was done before me, with Kelly and with Landry, in place of building a solid foundation. I think it comes to how do we drive solutions for physicians, how do we drive solutions for the whole leadership side of it. And a piece of that puzzle, and I'll [ give it ] the diversity and equity and inclusion aside to that. We'll say that we have stood up because we think that a diverse workforce at all levels is going to be -- become compelling. And as it becomes compelling, we wanted to have, make sure that we had a diversity action plan.

Vaccine is around from a client standpoint. How do we offer clients with white papers, with webinars and doing public speaking or creating diverse pipelines, how do we help them with a new tool that we're going to be introducing the job neutrality that helps take biased phrases and words out of a job description, out of the market material to be ensuring that we get -- they get the best candidate before that placement. How do we help them partner with HBCUs to ensure that we are at their career centers, that we're at their career for a day. And we're partnering with them to be able to drive job opportunities to position our brand in such a way that helps our individuals to really live their best life inside of our organization.

I think something that's just as important is the training that we're helping our clients that we do it internally and do it externally of teaching unconscious bias. And I think that all of these things add up to helping create an environment that hopefully drives a candidate experience and helping -- helps to really attract the best and be able to deliver that to our clients.

[Operator]

Your next response is from A.J. Rice with Credit Suisse.

[Albert Rice, analyst]

I guess the company has done an amazing job capitalizing on the opportunities and challenges, too, that the pandemic has presented. I guess -- I appreciate the comments about bill rates as you think about the second half of the year. I guess I'd broaden it out and ask, if you look at the financial profile of the company, the industry and how the business has evolved, 3 months almost since you last commented on this, but as you think about that back half, as we're going back to some new normal, how do you think of the financial profile or the business profile looks different than maybe you would even said 3 months ago or certainly relative to prepandemic?

[Susan R. Salka, executive]

Yes. A.J., thank you for asking this. This is Susan, and it's a really important question because I think this is one of the areas that AMN really differentiates ourselves. It's certainly very important that we differentiate ourselves for our clients and for our candidates. But also when you think about the financial profile and operating model of the organization, it's much more diverse today than it was 10 years ago, and certainly much more diverse than others within our industry. And we've got this broad and deep set of comprehensive solutions. And that means that as we face headwinds and bill rates coming down as they should, over time, we will have more of a counterbalance and offset in other businesses where the core underlying demand and volumes are continuing to grow. And in particular, I'd say in the Technology and Workforce Solutions, helpful that those also happen to have higher margin profiles for us.

We also have been able to build a much more diversified client base. Getting back to the earlier question of the various settings that we're in, yes, we certainly are the leader in providing services to acute care hospitals and systems and very proud of that. But we also have built a tremendous client base in other areas, whether it be schools or ambulatory surgery or home health and well, dental. So there will be many areas that will continue to build relationships. And if anything, the last year has enabled us to create more of those unique relationships that I think will pay off more.

Telehealth is another really important area. And we made great size in the last year in building not only our own capabilities but also relationships with others. And then we mentioned the tech investments that we've made internally. That also helps change the profile and efficiency of the organization going forward as we use more automation and more self-serve capabilities, not only does it create a better experience for the candidate, it also creates efficiency for the business. So I'm just talking from sort of the business profile and a strategic standpoint. But Brian, I don't know if you want to share any more specifics on how that relates to our business mix.

[Brian Scott, executive]

Thanks, Susan. Some things are different. Some are very much the same. We walked into the beginning of last year feeling really confident about our business strategy and bringing together our solutions for our clients in a really differentiated way. And we were seeing that translate into strong financial performance both at the top and bottom line. And I think if you move through some of maybe the noise of what's going on right now, that will start to reappear as you get into the back half of this year and moving into 2022. So we're -- we feel really confident in the mix of our business. And that foundation that Susan talked about is going to lead to a more sustainable, predictable revenue growth for us, and we'll continue to turn out more and more operating leverage from that as well. So yes, we feel -- I think we feel more confident ever, not only in the mix of the business, but our team's ability to really execute well.

And the investments we've made in seeing true results from that day in and day out, it's emboldened us to double down on that. And we've accelerated some of those investments. And those will pay off -- they're paying off now, they have in the last year. I'm really excited about some of the things we're going to be rolling out through the remainder of this year, and that's an experience that will improve for our clients and our commissions and all of our team members. And I think that will continue to translate into better results as we move into the remainder of this year or next year as well.

[Albert Rice, analyst]

I wanted to just ask you about operating unit. You didn't mention the business that sort of comes alongside, strikes and so forth. It seems like to me we're in an environment that may persist for a while where union activity covering the hospital companies is on the rise and May, like I said, being there for a while. I know your strike business often gets discussed as a one-off here, a quarter here, a quarter there. I wonder if we're entering an environment where that may become more of a steady source of revenues. What are you seeing in your discussions? And do you think that will increase -- will it be something that's a steady contributor to results in the next few years?

[Landry Seedig, executive]

A.J., it's Landry. Yes, you're exactly right. There is a very strong pipeline right now, potential labor disruption events. And you never really know when they might happen, but there's certainly a lot of noise out there and some potential events that could happen as soon as this year. But currently, we don't have anything in our guidance numbers that we're giving for Q2.

[Albert Rice, analyst]

Okay. Maybe just last question. I would ask you to comment a little more about what the Synzi platform does for you. As I read the press release, I'm not -- is this sort of coming alongside competing with a Teladoc or Amwell? Or is there some -- this platform is focused in the marketplace in a different way. Can you just maybe expand a little bit about what that capability gives you and what the opportunity you see is?

[Kelly Rakowski, executive]

You got it. A.J., it's Kelly again. We're really excited to have Synzi and SnapMD, which is a subsidiary of Synzi as well, join us. It's really not a competitive solution. It's -- think of it as a platform that helps us bring together disparate communication vehicle in a way that really streamline communication between the patient, their clinician, their entire sort of caregiving group. So things like phone, video messages, even remote patient monitoring, bring that all together. So it's a very easy-to-use, secure communication platform.

So it's really focused on creating that experience and that ability for whether it be telehealth companies, whether it be our direct clients, the caregivers to really engage with that customer base. They're particularly focused today in the post-acute space, the home health space and the physician office space. So we're really excited to help expand that because it can be from -- mostly from a patient's experience, but it also allows us potentially to sort of wrap around additional services and our staffing services on that technology to be more holistic. So we're early days in welcoming them to the family, but I hope that helps, A.J., to kind of describe a little bit more about that capability.

[Operator]

Your next response is from Brian Tanquilut of Jefferies.

[Brian Tanquilut, analyst]

Congratulations. So Susan, just a question on the growth outlook for the business, right? Obviously, you've had a strong run here in the last few quarters. So if we take a step back and think of where you thought your long-term growth was, say, January of 2020 and where you stand today, how different is that outlook if we say 3- to 5-year outlook for you guys?

[Susan R. Salka, executive]

Well, of course, the last year has been nothing like what we thought it would be. And so we're, in many cases, much further ahead of where we thought we would be. And in other cases, still feeling the effects of the pandemic. But when I think about what does that mean going forward for the next 3 to 5 years, I think we're in a much stronger, better position. Unfortunately, some of it is driven by the acceleration and exaggeration of the shortages that we knew as a country were already going to occur over the next 3 to 5 years, but they've been exacerbated and accelerated by the pandemic far beyond what I think any of us thought would be possible. So that will likely drive more demand across all of our disciplines over the next several years.

Also, when we think about our client relationships, we have strengthened many of our capabilities and the relationships that we have. We talked last call, I think, about our renewals. Many of our large clients over the last year, and we feel that we have actually strengthened and deepened those relationships because we've been through so much together. And while none of us probably delivered perfectly, I would -- I think it's possible during the environment, I mean we all did far more than we thought was possible. And we built strong trust and collaboration with those clients, and it really fostered a commitment to do more going forward.

We -- many health care organizations fully acknowledge that the health care shortages and workforce challenges are not going to go away. They -- we've likely seen some permanent changes and no one knows exactly what it will look like, but likely it's going to be harder to attract and keep talent than it was previously. So they're wanting to have more conversations about how they can plan for that. It's why our international recruitment business is doing fabulously right now. Our team is great there, and they always execute well, but the demand is far more than we can build because clients know that they need not only staff now, but they're going to need that core staff, which O'Grady-Peyton, our international division, helps fulfill. They're going to need that core staff 3 to 5 years from now. So I would say I am much more bullish and feel that we're in a better position, both strategically from a relationship standpoint and a growth opportunity.

[Brian Tanquilut, analyst]

Got it. And then shifting gears a little bit. As we think about your tech investments, I remember when you bought Stratus, there was a little bit of, I guess, apprehension from some investors who didn't understand the strategy at that point, but obviously, it's been highly successful. So can you provide an update on how you've integrated Stratus in your sales process? And also, I guess to that point, can you speak to the plan for integrating Synzi into the suite of offerings? Or how do you plan to leverage the assets of Synzi into that enterprise?

[Susan R. Salka, executive]

Yes. We'd love to because, yes, the language services team has done an amazing job over the last year and certainly the team is integrating them. I'm not telling you it since those businesses are part of her team, so she'll best answer those questions.

[Kelly Rakowski, executive]

Yes, Brian. And like you said, the language services, the addition to our team, number one, it's been a terrific offering. But number two, it really serves such a purpose in the market in addressing health and equities and access challenges, particularly for the limited English proficiency population, which continues to grow across the country. So first and foremost, we just are honored to be able to serve and reach that community in ways that obviously we couldn't before. We continue to develop out ways that our clients can help support that community. And I think our greatest learning in the past year has been how does that platform extend. And the virtual nature of that really allowed our hospital and other clients to take care of that population. So we see a really natural synergy when it comes to addressing patient care.

I'll tell you, we still have a lot of opportunities to integrate that into our strategic and MSP accounts. A lot of their growth has come from new clients and expansion, and we have a lot more opportunity to introduce and bring them into our MSP relationships. So I will say that it hasn't been what fuels the growth the most as that gives then -- really gives us a lot of confidence in how we do that going forward.

Synzi was actually a spin-off, if you will, from Stratus. So that capability was built within the Stratus organization prior [ to work ]. And we have the opportunity to work with Synzi in a partnership during the pandemic, creating some solutions, leveraging their capabilities and ours. So they have incorporated language services, for example, on to their platform in that secure messaging and their virtual care protocols and capabilities. So a lot of opportunities for us to bring those 2 platforms together as well as bring that together with some of our other services, as I mentioned earlier.

[Brian Tanquilut, analyst]

Got it. And then last question for me, I'll just a follow-up to a point you made, Susan. So as we think about your international recruitment efforts, are we seeing a shortening of the lag time before the nurses get their immigration documents? And I guess, looking forward, as we think about immigration reform, is there anything that you guys have seen that could change for nurses?

[Susan R. Salka, executive]

Well, on reform, we are hopeful but not optimistic because, of course, immigration reform includes many different facets of both reform for legal and illegal immigration. And oftentimes, those 2 get convoluted and things get dragged down and then almost nothing gets done. So those reports, I read are that we shouldn't count on, there being any kind of broad change that would enable us to increase the number of visas available for clinicians. With that said, there has been some talk of improving the processes to make it faster for that to occur, not necessarily opening up more visas, but just trying to smooth out the process. We've not seen it occur yet, in fact, almost the opposite. The last year has created quite a few bottlenecks as many of the embassies have been closed or have had limited resources and of course, you have travel bans on top of that.

And so it's actually been quite amazing how well our team has been considering all the obstacles. If those obstacles open up more, they'll be able to grow at an even faster pace because certainly, they have the supply, the infrastructure, the capabilities, we just need more throughput on the immigration front. And Landry, I don't know if there's anything else you want to share about the OGP team have done such a great job.

[Landry Seedig, executive]

No. You had a lot of the points there, and they're an amazing team. They've been hitting it out of the park for sure here recently. I guess the only other thing that I would add is that they are expected to hit a new all-time high of our international clinicians on assignment, looks like towards the end of Q2, if not the beginning of Q3. So really just kind of shows the execution of that team have got the right strategy and such a good name out in the marketplace to be able to attract supply from other countries and bring them into the United States to help out our clients.

[Operator]

Your next response is from Kevin Fischbeck with Bank of America.

[Kevin Fischbeck, analyst]

I just wanted to kind of better understand this kind of second surge, if you will, in referrals and demand. I mean, I guess, it sounds like you're saying it's -- I think you specifically said burnout is one of the reasons. I guess how much visibility do you have into the exact reason why a client has been asking for someone? Like do you know whether that referral is coming in because the hospital is growing volumes and need someone to staff it? Or the hospital is just having higher turnover and need someone to replace it? I'm just trying to understand. It feels like this dynamic of burnout and being able to kind of measure that from quarter-to-quarter would give us a lot more visibility and sustainability of rates and demand.

[Landry Seedig, executive]

Yes. It's Landry. So we don't tag every order for kind of a reason code of why it might be coming in. But we're, of course, very close to our clients all the way up into the C-suite. And that's exactly what we're hearing right now is that, a lot of the demand is just purely their vacancy rates that they have, the attrition rates that they've had at their own facility. So I think it's probably one of the biggest reasons. It's just not the reason that we've seen some of the pretty big increases over the last 5 to 6 weeks. So seeing sequential increases over the last 5 or 6 weeks, we're nowhere close to where the orders were in that December-January time frame. They were extremely high at that point.

But another thing to point out is that it's not any one client. It's not any one specialty. It's not any one geography. We're seeing it across the board, new demand and total demand being up. I'd also mention Allied even with the COVID hospitalizations that declined there, they have continued to see a really, really strong demand there. They've actually -- even today, they're at all-time highs that we've never seen in the business. And one of the good things there is that it's rare that we would see every specialty within Allied being up, and that's what we're seeing today.

So I know we've talked previously about therapies. So physical therapy and occupational therapy having some headwinds at the end of 2019. And if you look at the demand that we're experiencing there right now, it's -- if you look last year, it was at double digits and now it's in the hundreds of orders that we have. So really high numbers and the good thing about that is that we have really great recruiters there. We have a great database. We're really good at staffing physical therapy and occupational therapy. So interested to see what they do here over the next couple of months. They're on a great trajectory.

If there was one specialty within Allied that I would point out that is down year-over-year, it's respiratory. And really the biggest reason for that is against some really high comps from prior year. But where we are today is still quite a bit higher than what we would have seen prepandemic.

[Susan R. Salka, executive]

Kevin, if it's okay, I think it would be helpful for James to also comment on what we're hearing from clients regarding the locums and interim leadership demand and what's driving that.

[James Taylor, executive]

Thank you, Susan, and thank you, Kevin, for the question. I would add, it's very difficult, as much as what Landry said, in quantifying specifically a specific information around the whole burnout side. But this year are just a few numbers for us. The locums' demand, total demand, is at 98% pre-COVID, and it's at 93% of core business pre-COVID. The drivers of those recoveries include anesthesiology, CRNA, surgery, dental and AP specialties, and we're within 10% of being at the pre-COVID numbers. Like Landry, we do have a few lagging of specialties in that EM and radiology. And interim, which had a phenomenal first quarter, there's a sequential demand in quarter 1 was flat, but they had a high level uptick in quarter 4. So they held the fourth quarter numbers.

And just keep in mind, 10%, 12% of their order volume results from -- are COVID-related. So demand is expected to sustain at elevated levels going through quarter 2. Just by way of just how we see this ending year, we just expect interim to reach its pre-COVID core revenue numbers in late 2021, and locums in early 2022 to get to their number of pre-COVID numbers, search in quarter 3 of 2022.

[Kevin Fischbeck, analyst]

Okay. That's helpful. And I guess last question, just trying to reconcile the difference and it's not necessarily new, so maybe it's not something I have to worry about. But I guess when we talk to the hospital companies, I know it's a small sliver of the industry, but hearing you talk about demand and burnout, that all makes sense. But then when you talk to the hospital companies, they often talk about, we won't need as many nurses because we won't have nurses on quarantine. So we wanted to fill that, so demand will go down, [ nurses ] will be back.

And so I guess, this seems like there's potential offset to some of this. So they're talking about pretty swift reduction in temporary labor, and it sounds like you're talking about more kind of sustaining this for 2 more quarters elevated. Is there some way to kind of reconcile a bridge what seems to be contradicting commentary about temporary staffing over the next few quarters?

[Susan R. Salka, executive]

Yes. Kevin, I don't think it's contradicting. As Landry mentioned, the demand while it's grown over the last 6 weeks is still quite a bit lower than where we peaked in December and January. So we would say that the demand and the need has come down as well. It did come down and then it actually has come back up, but not nearly back to those levels. So I actually think we're in sync. And I do think that the issues around attrition and vacancies is something that no one could fully anticipate the level of impact because it's hard to know how many nurses are going to come back into roles as facilities need them to come back. And I think what they're finding is not as many want to come back into full-time roles. Also, some clinicians who work through the pandemic are burned out, and they felt so much trauma that they want to need to take time off and/or do something different or retire early. So they sort of hung in there into what they thought was near the end, and now they're departing.

You just look at the JOLTS data, and we've got the highest level of job openings in February of '21. 27% above prior year and the number of openings, the hires is at a record high of 2.3:1. So these issues, I think, are just now really manifesting themselves as they're wanting to get staff back up and they're finding that they can't find the permanent staff to rehire. So hopefully, that helps you to reconcile the commentary a little bit.

[Kevin Fischbeck, analyst]

Yes. No, I think that is -- I guess, basically you're saying that you think that overall demand is going to continue to increase, but bill rates are going to be coming down. So from the hospital's perspective, total spending might be coming down even though you're seeing firming demand as far as number?

[Susan R. Salka, executive]

Yes. Yes. I think that's a fair characterization.

[Kevin Fischbeck, analyst]

And I guess why -- if the number of placements is going up, that just feels to me like that says the supply-demand balance and the bill rates should necessarily be coming down as rapidly. Why is there a mismatch of higher demand yet lower bill rates?

[Brian Scott, executive]

This is Brian. Keep in mind, again, demand is elevated above what we consider normal level, kind of prepandemic, but still significantly off the very highest point. And it led you some really unprecedented pricing levels that everybody wants to get off of. That's really where the dialogue is, but yes, they're still elevated. We've talked about the fact that we expect that to remain at that level. But off that very highest point that we saw, though it peaked in March, it will come down just again because demand is above normal levels, but still off that peak level. I think that's part to kind of think about that it's not as strong, and it's really not sustainable. As you have a little more predictability in the needs right now and a little more lead time, it just allows us to be able to fill more jobs at a lower level -- lower rate than we had before, but it will sustain at a higher level.

So I think that -- again, that pace of decline is the hardest thing to predict. We are seeing it come down as we have new bookings through the second quarter and the third quarter. But if everything right now says it will stay elevated above, again, levels that we saw, say, 1.5 years ago because of the shortages and the higher level of demand than we saw 1.5 years ago.

[Operator]

Thank you. Your next response is from Jeff Silber with BMO Capital Markets.

[Jeffrey Silber, analyst]

I know it's late. I'll just ask one. If we're expecting bill rates to continue to go down sequentially, I'm maybe putting words in your mouth, but how will you be able to maintain the bill rate spread? What should we be expecting over the next few quarters?

[Landry Seedig, executive]

Well, again, the rates -- bill rates are somewhat tied to pay rates. And so that's where we've been really thoughtful with our clients, making sure we do this in a methodical way and don't have big jarring changes in the rates and we kind of work -- will work our way down. And I think most clinicians understand that the higher pay rates they saw at the peak of pandemic were very unique to the situation. And so we still have a very compelling proposition for clinicians beyond just pay as well. And so I think as long as it's done in a kind of thoughtful way over a period of time, we'll likely see -- we expect to see spreads improve because as we've talked about even in the prepared remarks, we were taking a lower margin on the higher bill rates during this time very deliberately. And so as you start to renormalize back to more reasonable bill rates, pay rates will come down and the spreads will actually improve a little bit as well.

[Operator]

Your next response is from Mitra Ramgopal with Sidoti.

[Mitra Ramgopal, analyst]

Again, just one quick question from me also. I was just curious if you'll take a longer-term view in terms of the growth opportunities if the pandemic has resulted, as it relates to your MSP relationships, maybe accelerating clients and maybe changing their mindset in terms of being willing now to come on board so to speak.

[Susan R. Salka, executive]

Yes. So I think I mentioned earlier, we definitely have seen a strengthening in relationships that we have, but also those organizations that perhaps didn't have a strong managed services partner and someone to help them not just through the crisis, but now to think ahead about how they're going to tackle the longer-term shortages and challenges. We've seen some of those dialogues emerge and opportunities in a pipeline for potential new client relationships that gives us a lot of kind of positive optimism about the future and how we can continue to build our client base. But in addition to new clients, we have actually a greater opportunity just to continue to partner with our existing clients and find opportunities to help them in areas where we might not already be.

So if we have an MSP client where we have Nurse and Allied services, we can bring in the language services solutions so that we can help them to consolidate and save dollars and have a more consistent experience around their language interpretation services. We can bring in locums. We can bring in our executive leadership businesses. So there's still a lot of opportunity for us to cross-sell and add and expand many of our existing relationships.

[Mitra Ramgopal, analyst]

Okay. Congrats again on the great quarter.

[Operator]

Your next response is from Sam Kusswurm with William Blair.

[Samuel Kusswurm, analyst]

I just have a quick clarifying question. I think you mentioned in the prepared remarks that only 5% of the second quarter revenue expected to be from -- related to pandemic. Was that only for position leadership? And if so, can you share what you're expecting for the company as a whole here?

[Brian Scott, executive]

That is correct. That was specific to the physician and leadership segment. And really, that's the area where we're able to provide that type of color. It's very difficult in -- for nursing and allied. Even Landry mentioned this, not every order gets tagged in a certain way and it was -- the hospitals are able to move the hours around where needed during these times. So it's very difficult to isolate that.

I mean I think we're -- as you think about the second quarter, the majority, I'd say, the pure pandemic-related demand is dissipated, right? The majority of what we're seeing now is based on just the hospital volumes and their staffing levels they need in meeting as well. So I don't have an exact percentage, but I think we would look at it as a very low percentage of our second quarter guide would be related to now. We did mention the vaccine-related projects. I guess you could say that's partly related to pandemic, but we were able to isolate that project quite a little bit more when we provided that number. But outside of that are just the normal recurring business revenue in the guide, it's -- the vast majority of it is we look at as more normal operation.

[Operator]

There are no further questions in the queue at this time.

[Susan R. Salka, executive]

Wonderful. Well, thank you, everyone, for joining us today. We truly are so grateful for all the contributions that so many people and organizations are making during this critical time. We have brighter days ahead for sure, and you can rest assured that the AMN team is focused on always evolving and making a positive impact, not just through our business, but in our communities and through all issues that I think any good organization should be focused on. So thank you, everyone.

[Operator]

Thank you for joining us today. This concludes today's conference call. You may now disconnect.