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Edited Transcript of AMN.N earnings conference call or presentation 5-Nov-20 10:00pm GMT

·60 min read

Q3 2020 AMN Healthcare Services Inc Earnings Call San Diego Nov 6, 2020 (Thomson StreetEvents) -- Edited Transcript of AMN Healthcare Services Inc earnings conference call or presentation Thursday, November 5, 2020 at 10:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Brian M. Scott AMN Healthcare Services, Inc. - CAO, CFO & Treasurer * Kelly E. Rakowski AMN Healthcare Services, Inc. - Group President & COO of Strategic Talent Solutions * Landry Seedig AMN Healthcare Services, Inc. - Group President and COO of Nurse & Allied Solutions * Randle G. Reece AMN Healthcare Services, Inc. - Director of IR * Susan R. Salka AMN Healthcare Services, Inc. - President, CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Albert J. William Rice Crédit Suisse AG, Research Division - Research Analyst * Brian Gil Tanquilut Jefferies LLC, Research Division - Senior Equity/Stock Analyst * Kevin Mark Fischbeck BofA Merrill Lynch, Research Division - MD in Equity Research * Lalishwar Mitra Ramgopal Sidoti & Company, LLC - Healthcare Sell Side Analyst * Mark Steven Marcon Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst * Samuel Kusswurm William Blair & Company L.L.C., Research Division - Analyst * Tobey O'Brien Sommer Truist Securities, Inc., Research Division - MD ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Ladies and gentlemen, thank you for standing by, and welcome to AMN Healthcare Third Quarter 2020 Earnings Call. (Operator Instructions) I would now like to turn the call over to Randy Reece, Director of Investor Relations. Please go ahead. -------------------------------------------------------------------------------- Randle G. Reece, AMN Healthcare Services, Inc. - Director of IR [2] -------------------------------------------------------------------------------- Good afternoon, everyone. Welcome to AMN Healthcare's Third Quarter 2020 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; and Landry Seedig, Group President and COO of Nursing and Allied Solutions. I will now turn the call over to Susan. -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you so much, Randy, and welcome, everyone, to our third quarter 2020 conference call. I want to start first with the most important message we have to share today. The entire AMN team is incredibly grateful to our health care professionals and clients for the tireless and selfless work that they do every day to care for our families and communities. We are honored to partner with them and do everything we can to ensure every patient has the compassionate and quality care they deserve. We are 9 months into a pandemic that is among the biggest challenges our country has ever seen and certainly one of the most daunting events we have personally experienced. Our business inconveniences are minor compared with the harm experienced by the victims of COVID-19. We owe them our commitment to deliver the best-quality health care possible while preserving the safety and well-being of all caregivers. The AMN team feels a relentless responsibility to do more every day to make a positive impact in this environment. The nation's health care ecosystem has mobilized resources in impressive fashion to address regular health care needs amid the strains imposed by the pandemic. We are extremely proud of how health care professionals keep rising to the challenge. Still, we cannot forget that this all hands on deck response has come at a price. The health care labor force is under extreme duress. Average weekly hours for hospital workers appear to have reached record highs. Health systems are finding talent more and more scarce. It is no surprise that the needs are greatest in nursing, and this is also where the shortages are getting worse. Clients are dealing with increasing worker burnout, unanticipated attrition and the needs of health care professionals to have time off after months of stress and strain. Similarly, our clients' internal recruiting capabilities are being pushed to the max, and the labor demand pressure has challenged the ability of the health care staffing industry to respond. AMN has been adding resources over the past few months in response to these increased needs. This environment has further heightened interest for health care providers to have strong workforce partners for which AMN has translated to the addition of many new clients as well as the expansion and renewal of existing clients. This scarce labor environment also highlights the benefits of a staffing-led managed services program for which AMN is the nation's leading provider. Just as we are thankful for the efforts of our clients and many thousands of health care professionals, we are also deeply grateful for our AMN team members who have adapted so well and keep rising to clear new hurdles. We have great empathy and appreciation for our team members and continue to expand our support system for their well-being. The third quarter tested our resilience with the resurgence of COVID cases and growth in regular patient volumes. As an organization, it was also important that we address issues of social injustice and advancing health care equity. Our AMN colleagues responded wholeheartedly and delivered quarterly results that were much better than we expected. Our consolidated revenue was $552 million, and our adjusted EBITDA was $77 million. Revenue was down quarter-over-quarter and year-over-year as anticipated due to the pandemic-related disruptions. Our Nurse and Allied Solutions segment posted revenue of $383 million, down 4% year-over-year, with our largest business, travel nurse staffing, showing 12% growth. Allied staffing revenue was 28% lower than the year ago period driven by continued weakness in therapy. Our imaging, respiratory and lab specialties were far more resilient and down only single digits. And our school business was up year-over-year by double digits. For both Nurse and Allied, year-over-year volume comparisons improved throughout the quarter and continued into the fourth quarter. For example, our nursing volume hit a low point in July and has rebounded quickly, being down only in the mid-single digits today. Some of the same issues driving vacancies and high attrition for our clients also affect our ability to attract clinicians into the travel industry. While our new candidate recruiting in most specialties is above prior year levels and enabling growth, it's not enough to keep up with the record demand we are facing across Nursing and Allied. In the fourth quarter, we expect Nurse and Allied Solutions revenue to grow nearly 10% sequentially and to be flat to slightly down year-over-year. We project our largest business of travel nurse staffing to grow revenue approximately 8% sequentially and at least 15% over prior year. Our second largest division in this segment, allied staffing, is also expecting to grow sequentially by about 20% but still down about 15% year-over-year. For Physician and Leadership Solutions, third quarter revenue was $109 million, down 24% year-over-year but slightly higher than the second quarter and better than guidance. Within this segment, locum tenens' performance was a standout with 10% sequential revenue growth, although still down 19% from prior year. CRNA, anesthesia, radiology and dentist replacements led to better performance. Interim leadership revenue fell 31% compared with a year ago on the lower volumes. Our physician and executive search businesses continue to feel the pressures of the slowdown in new hires and experienced revenue 32% lower year-over-year. Demand for interim and search services has improved, but clients remained cautious on spending and hiring of new high-level leaders and physicians. We expect fourth quarter revenue for Physician and Leadership Solutions to be down year-over-year about 26% to 28%. This guidance reflects a sequential seasonal decline in the mid-single digits. Our Technology and Workforce Solutions segment reached revenue of $60 million in the third quarter, up 136% year-over-year. This was a combination of the additional revenue from the acquisitions of b4health in December and Stratus Video in February, partly offset by an 8% organic decline. We are extremely pleased with the performance and the positive impact being made by these teams. Stratus achieved $35 million in revenue in the third quarter, 25% higher than in second quarter, and they are on track to exceed our expectations for the year. Our VMS business grew revenue 2% year-over-year, although revenue was down organically by 6% amid the slowing of the overall health care staffing market. Our predictive analytics and scheduling division registered solid double-digit revenue growth as they continue to add new clients and expand existing accounts. For the fourth quarter, we expect Technology and Workforce Solutions' revenue to be up about 150% year-over-year, including 1% to 2% organic growth. While we are acutely aware of the importance of executing well in the current environment, AMN also continues to make investments to further strengthen and expand our leadership position. This pandemic will have lasting impacts on the health care industry and workforce, and we are dedicated to doing all we can to help clients and health care professionals in this changing environment. The AMN team is in this for the long haul. As we look to the future, we have 4 key areas of focus that will drive our strategy as a leading total talent solutions partner. The first is to ensure that we continue to deliver excellence for our clients and health care professionals and to further differentiate our service delivery. Second is to deepen our relationships and build even greater loyalty with our key stakeholders. Third is to invest in digital innovation and new solutions. And fourth is to support and develop our team members to reach or exceed their goals. We continue making investments to differentiate our service delivery, which includes things like process automation to increase speed to placement and to make us a more agile company in this dynamic environment. We are also streamlining our processes with more flexible technology and greater integration of our systems. Next, we have several initiatives underway to build stronger, deeper and more loyal relationships. Over the last decade, AMN has brought together a wide variety of solutions to serve our clients for their workforce management needs. We are committed to further integrating our capabilities into next-generation, comprehensive total talent solutions. Our clients have told us that this is the kind of partnership they want from AMN. Supporting our health care professionals and creating greater loyalty through their career journey is equally as important. AMN has long been known for the innovation we have brought to the market. Today, this includes things like creating personalized digital experience with mobile apps that empower health care professionals to discover their next career opportunity and to interface with AMN when and where they want. Our professionals want 24/7 access and a fast, familiar, easy-to-use experience, and we are committed to being the leader in providing this kind of experience. For clients, we are not only enhancing existing services through innovation but also creating new solutions. For example, we will continue making investments in our telehealth capabilities. In addition, our growing analytics platform will provide in-depth data and insights to enhance decision-making with our clients. This will be important to help us deliver more data-driven talent solutions. And finally, we are evolving ways to elevate our team members and enable them to reach their goals. This is particularly important today since most of the AMN team is still working from home. We have greatly expanded virtual training capabilities to all team members and to our leaders. Our leaders are building the necessary competencies to lead in this new environment. These new programs also enable us to align with and strengthen our commitment to diversity, equity and inclusion and ensure that we provide career growth opportunities to all of our wonderful colleagues. The AMN team is extremely energized and excited about the opportunities ahead, and we believe the events of the last 9 months have actually made us stronger and more capable of reaching our vision for the future. Before I hand it off to Brian, I want to take a moment to recognize an important milestone AMN has achieved in our commitment to adding unique and diverse talent to our organization. Recently, we welcomed Rear Admiral Sylvia Trent-Adams to our Board of Directors. Sylvia has built a distinguished career as a nurse researcher and officer and a policy administrator. She has led several key global and national initiatives to strengthen the health care ecosystem to improve care and outcomes, particularly for the disadvantaged populations. She served more than 30 years as an officer in the Army and the U.S. Public Health Service. We are excited to have a person of Sylvia's caliber and expertise on our Board. And we are already benefiting from her extensive experience and insights during such a critical time. With the addition of Sylvia, AMN has reached another level in Board diversity, with 5 of our 9 Board members being women, one of the highest ratios for a public company. Our leadership is completely aligned with AMN's broader strategy of pursuing diversity, equity and inclusion as an end in itself and a means to making AMN a smarter, more agile company that is committed to making a positive impact for all. In a few minutes, Kelly and Landry will join us for the question-and-answer session. By the way, Landry, happy anniversary. Landry is celebrating 19 years with AMN today. But for now, I will turn the call over to Brian who will provide more insights into our results. Brian? -------------------------------------------------------------------------------- Brian M. Scott, AMN Healthcare Services, Inc. - CAO, CFO & Treasurer [4] -------------------------------------------------------------------------------- Thank you, Susan, and good afternoon, everyone. Third quarter revenue of $552 million was well above our guidance range. As anticipated, revenue was lower sequentially and year-over-year due to impacts related to the pandemic. However, this falloff was less than expected as rising COVID-19 hospitalization drove significant revenue upside in nurse staffing. Consolidated revenue was down 9% sequentially and 3% year-over-year. On an organic basis, revenue was down 9% year-over-year. Gross margin for the quarter was 33.5%, consistent with prior year and up 100 basis points sequentially. On a year-over-year basis, the lower organic gross margin, particularly in Nurse and Allied, was offset by the higher-margin acquisitions of b4health and Stratus. The sequential gross margin increase is due primarily to a favorable revenue mix shift. Consolidated SG&A expenses were $111 million or 20.2% of revenue compared with $133 million or 23.5% of revenue in the same quarter last year. The year-over-year decrease in SG&A costs included lower employee expenses, along with lower travel and conventions, bad debt and acquisition-related and other costs. These decreases were partially offset by $6 million additional SG&A expenses associated with the acquired businesses. In the third quarter, Nurse and Allied revenue was $383 million, 4% lower than prior year and down 14% sequentially. For our travel nurse division, revenue was 12% higher than prior year. Although nurse travelers on assignment were down 12% from prior year, the average bill rate was higher by almost 20% and average hours worked were also well above our normal trend. Allied revenue was down 28% from prior year, and revenue cycle solutions was down more than 40% due to disruptions from the pandemic. Nurse and Allied gross margin of 27.4% was 110 basis points lower than prior year but 40 basis points higher sequentially. The year-over-year reduction was due to increased clinician compensation, along with higher workers' compensation costs related to COVID-19. Segment EBITDA margin of 13.8% was 60 basis points higher than prior year on a favorable SG&A margin. Physician and Leadership Solutions revenue in the quarter was $109 million, 24% lower year-over-year and flat sequentially. Locum tenens revenue was $68 million, 19% lower than prior year but up 10% sequentially on higher volume. The sequential increase reflected improving demand and placements and was aided by about $4 million of COVID-19 projects that were concluded in the quarter. Gross margin for this segment was 36.7%, 10 basis points lower than the prior year and up 30 basis points sequentially. Segment EBITDA margin was 14.2%, up 200 basis points from last year and up 10 basis points sequentially. The year-over-year improvement was driven by reduced SG&A expenses. Technology and Workforce Solutions revenue was $60 million in the third quarter, up 136% year-over-year and 8% sequentially. Organic revenue was down 8% year-over-year with declines in VMS and RPO. Gross margin was 66.1%, down from the prior year margin of 93% due in large part to the February acquisition of Stratus Video. Segment gross margin was down 260 basis points sequentially due to a change in revenue mix. Segment EBITDA margin of 42.9% was down 220 basis points year-over-year from the Stratus acquisition but was 340 basis points higher sequentially from SG&A cost savings and operating leverage. Consolidated third quarter adjusted EBITDA of $77 million was 11% higher year-over-year, aided by the high-margin acquisitions and SG&A leverage. Despite the lower revenue, adjusted EBITDA margin of 13.9% was 170 basis points higher year-over-year and up by 70 basis points sequentially. We reported net income of $26 million and diluted earnings per share of $0.55 in the quarter. Adjusted earnings per share was $0.82 compared with $0.81 in the year ago quarter. Our GAAP income tax rate in the quarter was 23% and was approximately 30% on an adjusted basis. Days sales outstanding at quarter end was 59 days, 4 days higher than last quarter driven by a significant increase in revenue in the last month of the quarter. Cash collections continue to be strong, with the majority of clients paying according to normal terms. Third quarter operating cash flow was $89 million, which included a $14 million increase in deferred payroll taxes stemming from the CARES Act. With the strong cash flow, we reduced our long-term debt by $62 million during the quarter. Capital expenditures in the quarter were $8 million. As of September 30, cash and equivalents stood at $58 million, and we ended the quarter with $912 million of long-term debt and a leverage ratio of 2.6x to 1. Capitalizing on very favorable credit market conditions, AMN recently executed on 2 financing actions. In August, we added $200 million to our unsecured notes maturing in 2027 at a 101 premium and used the proceeds to pay down the majority of our term loan. Then in October, we issued $350 million of unsecured notes at a 4% rate maturing in 2029 and used the proceeds to retire our $325 million notes at 5.125% rate maturing in 2024. These transactions significantly strengthened our balance sheet by extending the maturity profile, moving the majority of our debt to covenant-light, unsecured notes and freeing up our revolver borrowing capacity. Turning to fourth quarter guidance. We are projecting consolidated revenue to be in a range of $575 million to $585 million, which will be flat to down 2% from prior year. This guidance includes approximately $3 million of labor disruption revenue compared with $17 million in the year ago quarter. Fourth quarter gross margin is projected to be 32.4% to 32.7%. The sequentially lower gross margin is driven mainly by a normal seasonal impact, along with a change in segment mix. Reported SG&A expenses are projected to be approximately 20.5% of revenue. Operating margin is expected to be 7.6% to 8.1%, and adjusted EBITDA margin is expected to be 13.3% to 13.8%. Other fourth quarter estimates include the following: depreciation expense of $8 million, noncash amortization expense of $16 million, stock-based compensation expense of $4 million, interest expense of $11 million before onetime charges, integration and other expenses of $6 million and adjusted tax rate of 30%. And now we'd like to open the call for questions. ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) Your first question comes from A.J. Rice from Crédit Suisse. -------------------------------------------------------------------------------- Albert J. William Rice, Crédit Suisse AG, Research Division - Research Analyst [2] -------------------------------------------------------------------------------- Thanks for all the information. I'm not sure I got everything, Brian, all the statistics down, but we'd also calculated, I think, that the average bill rate on the labor on the Nurse and Allied, I know it was up 20% year-to-year and I know it was up a lot in the second quarter as well. I'm assuming a lot of that's COVID-related premium costs, but I wondered if you could sort of drill down. Is there any way to sense what sort of the baseline trend is in -- and especially in the nursing side for rate? -------------------------------------------------------------------------------- Brian M. Scott, AMN Healthcare Services, Inc. - CAO, CFO & Treasurer [3] -------------------------------------------------------------------------------- Sure. A.J., you're correct. I'll kick it off and maybe give Landry a chance to comment on as well. You're correct, we mentioned that the rate was up about 20% in nursing year-over-year, clearly driven in large part by the premium assignment in response to COVID-19 and a very high demand environment we're in. We were up north of 20% in the second quarter over that first wave, and we did see rates come down as we expected. I think in the last quarter, we actually thought rates would come down about 10% sequentially, ended up going down more like 5%. So -- but still well above prior year levels. And Landry, I don't know if you want to give any other color on what we're seeing in the great environment. -------------------------------------------------------------------------------- Landry Seedig, AMN Healthcare Services, Inc. - Group President and COO of Nurse & Allied Solutions [4] -------------------------------------------------------------------------------- No. Like you said, we had those really high rates kind of in that March, April time frame. And then we thought they would come down, and they did. But they actually popped back up as well whenever we saw some of the resurgence that was taking place. And now just with where the overall demand is in the marketplace, rates are remaining really high to continue to attract clinicians to our clients. And overall, we're not really anticipating much demand changes anytime soon, which things that we should see and we expect to see rates to kind of continue and not much fluctuation from where they are right now. So at some point, you have to assume that rates will likely come down some, but when and by how much is pretty hard to predict. -------------------------------------------------------------------------------- Albert J. William Rice, Crédit Suisse AG, Research Division - Research Analyst [5] -------------------------------------------------------------------------------- Okay. When you -- I appreciate the comments about how hard the nurses particularly are working and that there is an element of burnout that probably some are experiencing given the last 9 months. Can you just comment on what you're seeing in terms of applications? Are you still seeing a steady flow of applications? Are you able to fill positions? Or is your ability to fill positions getting a little more challenged as you're seeing some turnover even in the number of nurses that are willing to take travel assignments? -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [6] -------------------------------------------------------------------------------- Yes. I'll start with that, A.J., and then probably ask Landry to chime in. I've been really impressed with the team and the way that they've been able to pivot to increase our recruitment efforts, both through digital marketing capabilities. You've heard us talk a lot about AMN Passport as a mobile capability to get jobs in front of clinicians more quickly, and they're able to do more and more (inaudible) but also transacting on that app. We've also added resources to our nursing business, in particular, and within allied, moved resources around because allied is at record high orders as well, even though therapy is down. We have many areas within allied that are up pretty significantly. And our applications are up pretty significantly for nursing and allied. It's just not enough. When you have orders skyrocketing as much as we've had, we just can't keep up with it. But if you look at the volume growth that we've been able to drive within the nursing business just through the third quarter, as an example, travelers on assignment went up about 12%. And we've never seen that kind of ramp-up again. If we could get more applications in more quickly, we certainly could build upon that, but there are some limitations just in terms of the propensity of individuals to make a decision to move that quickly. But Landry, I'll ask you to add in any other color, that would be helpful. -------------------------------------------------------------------------------- Landry Seedig, AMN Healthcare Services, Inc. - Group President and COO of Nurse & Allied Solutions [7] -------------------------------------------------------------------------------- No, that was right. Our newly recruited clinicians are actually above prior year levels right now. And actually, they're the highest numbers that we've ever seen in the business. So a couple of different things to contribute that to, but a lot of the investments that we've been making are in digital and mobile initiatives. And then, of course, just kind of the overall execution of the team, whether that's our marketing team or our recruitment team or -- many different team members across AMN. And the reality is that while these numbers are looking good, it's just not enough to go around with the amount of demand that's out there right now. So for the clinicians that we are attracting, we got to make it easy for them to find us. We got to make it easy for them to apply, and we got to make it easy for them to get on assignment. Those clinicians have a lot of choices right now, and they want control and they want some self-service, and that's exactly what we're focused on providing them. -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [8] -------------------------------------------------------------------------------- A.J., another really important -- I'm sorry, I just want to add another really important factor in this environment is the relationships we have with our affiliate vendors that help us to fill open positions at our managed services programs. And we've always had, I think, a great rapport with our affiliate vendors, but we're doing more and more to try to make it easier for them to get their candidates placed as quickly as possible and just to continue to build those relationships. -------------------------------------------------------------------------------- Albert J. William Rice, Crédit Suisse AG, Research Division - Research Analyst [9] -------------------------------------------------------------------------------- Interesting. Maybe if I could just add one more. Obviously, one area that stands out in the quarter is the sequential growth that you saw in revenue, Stratus Video. And I have to admit, it wasn't -- it's not intuitive to me why they would have such a big jump. So I wonder if you might explain what that's all about. It was... -------------------------------------------------------------------------------- Kelly E. Rakowski, AMN Healthcare Services, Inc. - Group President & COO of Strategic Talent Solutions [10] -------------------------------------------------------------------------------- Sure. This is Kelly Rakowski. And you're right, pretty remarkable sequential growth. Now remember, Q2, they dramatically dropped off when health care services were shut down. So they had an immediate decline early in Q2 that they started to come back. So from a sequential perspective, we had strong growth over Q2. In addition to that, as we've seen health care utilization come back, our clients remain committed to supporting those in need of the language interpretation services, both limited English proficiency as well as the hearing impaired. We also see that there is some -- we think there's some element because of limited visitation and support in acute care settings, that there's even greater reliance on expert interpretation because limited number of family members with them. But we do continue to see growth. We're expecting certainly not that kind of sequential growth going into Q4, but more modest typical growth that will still be a double-digit growth compared to prior year. So the business is expanding as well. They had a very strong sales quarter, and some of that's coming from introduction into AMN clients. And some of that's on sort of direct business as well. So all of those elements are continuing to contribute to their growth. -------------------------------------------------------------------------------- Operator [11] -------------------------------------------------------------------------------- And your next question will come from Tobey Sommer from Truist Securities. -------------------------------------------------------------------------------- Tobey O'Brien Sommer, Truist Securities, Inc., Research Division - MD [12] -------------------------------------------------------------------------------- How long do you think the effects of the pandemic on the labor workforce may last? I understand there's a myriad of effects. We're just wondering if these impacts may linger beyond the period when case volume is high and what your perspective is. -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [13] -------------------------------------------------------------------------------- Thank you for that question, Tobey, because it's a really important one, not just for us but for the health care industry, and a lot of our clients are having that same discussion. They're very concerned about the long-term effects of the pandemic in both early retirements and losing some really great clinicians earlier than they expected. But also many clinicians making the decision to stay home rather than come back into the workforce or at least maybe go part-time because in this case, they need to stay home and maybe oversee child care or online education and/or they may take a different job. One of the things we're hearing from clients is as they try to recruit clinicians back into the care setting, they've moved on and taken a different role, perhaps not at the patient's bedside. So there's a pretty broad belief that this will accelerate and deepen the shortage of clinicians, particularly in nursing, right at a time when, of course, we've got an aging population and all kinds of reasons why we need more clinicians. That's our point of view as well. I think over the long, long term, hopefully, those things will change. But for the next couple of years, my 30-year educated guess would be we're going to be living in a severe shortage environment. -------------------------------------------------------------------------------- Tobey O'Brien Sommer, Truist Securities, Inc., Research Division - MD [14] -------------------------------------------------------------------------------- Could you give us some more color on the MSP market? In your response, try to touch on how the large MSP that you won in 2Q is ramping. -------------------------------------------------------------------------------- Kelly E. Rakowski, AMN Healthcare Services, Inc. - Group President & COO of Strategic Talent Solutions [15] -------------------------------------------------------------------------------- Yes. Yes. This is Kelly, Tobey. The MSP market remains strong, not only for our existing client base, which, of course, we are prioritizing and serving, and a lot of the demand is coming through those existing relationships. The expansion of the client you referred to in Q2 is going very well. We have made a very smooth transition and are fully ramped with them, particularly in the nurse and allied space, still implementing in some of our additional service lines as well. In addition, I'd say the activity in the market also remains very strong. I think our -- I think Susan mentioned this in the prepared remarks that clients in this time of very high demand are looking for workforce partners to help them fill that, and they see the value of a managed services partner, not only in providing talent but also in the consultation, the advice, the additional strategies that we can bring to them and considering different options. So our activity level from a new client perspective remains very high. We've well exceeded our sales goals for the year and continue to see very active engagement in this quarter and then heading into 2021. -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [16] -------------------------------------------------------------------------------- Tobey, Susan again. Now the flip side of that is because we have such strong strategic MSP partners and we have added and expanded more to that strategic portfolio, in this environment, we've needed to prioritize them and perhaps not be able to serve other clients where we might have been working through a third party. We do work through some, but we've had to perhaps decide not to post some orders with some third parties or through some third parties and likewise, even with direct clients because there's just not enough supply of clinicians to go around. So this is where I think our staffing-led MSP and our workforce solutions strategy is really most valuable for clients because if they're having difficulty recruiting people, we can bring RPO to the table or we can bring in advances and help them understand how they optimize their existing workforce, not just contingent workforce, which is why Avantas is doing very well. They had really nice double-digit growth, both in expansions and new clients, is because every health care organization is laser-focused on how do I optimize the precious staff that I have and how do I get more people here to help deliver care. -------------------------------------------------------------------------------- Tobey O'Brien Sommer, Truist Securities, Inc., Research Division - MD [17] -------------------------------------------------------------------------------- Right. Could you describe the potential productivity improvements among recruiter -- recruiting capacity from Advanced -- if I remember correctly, you were going to kind of migrate them onto your systems and be able to see your orders and maybe get a change from that. -------------------------------------------------------------------------------- Brian M. Scott, AMN Healthcare Services, Inc. - CAO, CFO & Treasurer [18] -------------------------------------------------------------------------------- This is Brian. I'll kick that one off and then see if Landry can give you some color. Yes, I mean we're very excited about the opportunity. We're already seeing it. We integrated Advanced nursing a few months ago. And not only did they not skip a beat through that, did an integration, which can be a distraction, but continue to see improving productivity. And we know when they move on to our platform and have direct access not only to all of our orders but all of the back office and clinical support that they -- production per person can go up. And so we've seen that happen exactly as we've seen in prior acquisitions like Onward. And so we're really very positive on that. The Allied integration is coming up here very soon, and we see that same opportunity to improve their production. And not only that with Allied, it really gives the recruiters the opportunity to pivot to where the greatest needs are. We've seen, as we talked about earlier in the prepared remarks, differing demand trends, therapy still down, but significant demand in respiratory and lab and other areas. And so as we have everybody on the same platform, we can pivot them to where the needs are greatest and drive our productivity as well. Landry, anything to add? -------------------------------------------------------------------------------- Landry Seedig, AMN Healthcare Services, Inc. - Group President and COO of Nurse & Allied Solutions [19] -------------------------------------------------------------------------------- No, not really, Brian. You mentioned that just real proud of the Advanced team and the integration there and getting them on our system. They were already performing well, but then having the ability to get something as simple as just real-time orders and being able to take advantage and help with our clients, speed is everything, and for them to have that advantage to get those orders, we'll see an increase in their productivity. And then you alluded to it, but we probably don't talk about it enough, just our ability across the organization to be able to shift resources around. So you have demand that's low in one area, and to be able to push those resources such as recruiters from maybe rehab where demand is lower and push them into travel nursing to help out is pretty powerful. But overall, we never did stop investing in our recruitment team, our account management team and our sales team. So overall, we're in a good spot there. -------------------------------------------------------------------------------- Operator [20] -------------------------------------------------------------------------------- And your next question will come from Brian Tanquilut from Jefferies. -------------------------------------------------------------------------------- Brian Gil Tanquilut, Jefferies LLC, Research Division - Senior Equity/Stock Analyst [21] -------------------------------------------------------------------------------- Congratulations on a great quarter. I guess, Susan, my first question, as I think about, obviously, COVID demand remaining strong this deep into the quarter, are you guys at this point thinking that this will carry over into -- or translate into strong demand carryover into Q1 as well? -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [22] -------------------------------------------------------------------------------- Yes, that is our view. We really don't see the demand slowing down. In fact, if anything, literally, day-by-day within nursing, in particular, it's been growing. So we believe it will continue to remain very strong going into the first quarter, probably even into the second. As I talk with health care leaders but also leaders in Washington with the HHS and disaster recovery, we are hearing they are thinking it's going to be another 12 months of surges and ongoing demand. And so I don't think we're going to see much of a slowdown. Quite honestly, the demand could drop significant -- it could drop 1/3, and it probably wouldn't make much of a difference in our ability to continue to grow volumes because we still have so much demand that goes unfilled within the industry, it's not just us. So we see a strong demand environment going into the first quarter. And I'm talking Nurse and Allied, but to be honest, the demand across all the businesses is growing. It's just not at those extraordinarily high levels that we're seeing in Nursing and Allied. But if we look at locums, as an example, their demand is growing across many of the specialties. Interim leadership seems to have bottomed out in the third quarter, and they're seeing stability, and we're expecting growth going into next year as well as even in our search businesses. So we expect most of our businesses to be on a growth trajectory as we enter the new year. -------------------------------------------------------------------------------- Brian Gil Tanquilut, Jefferies LLC, Research Division - Senior Equity/Stock Analyst [23] -------------------------------------------------------------------------------- That's awesome. And then if you don't mind sharing with us, what are you seeing on non-COVID demand at this point for Nursing and Allied? -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [24] -------------------------------------------------------------------------------- I think Landry would be best to answer that. -------------------------------------------------------------------------------- Landry Seedig, AMN Healthcare Services, Inc. - Group President and COO of Nurse & Allied Solutions [25] -------------------------------------------------------------------------------- Yes. It's really difficult for us to be able to decipher just how much of what we're seeing as COVID versus non-COVID. You can also -- you could probably say quite a bit of what we're seeing is somehow maybe directly or indirectly related to, of course, the pandemic. And what I mean by that, as an example, is maybe a hospital has moved their perm ER nurses to the ICU to take care of COVID patients there. And instead of -- and they'll utilize us for a backfill of ER nurses. So we have seen from some of the public reports as well as talking to our clients, the ER admits are not where they used to be. They're down, yet I can see with our own demand that our ER orders are up quite a bit above prior year. So just an example of where maybe it's not a nurse that's directly touching a COVID patient, but it's having an impact of demand even in other specialties. -------------------------------------------------------------------------------- Brian Gil Tanquilut, Jefferies LLC, Research Division - Senior Equity/Stock Analyst [26] -------------------------------------------------------------------------------- Got it. And then I guess piggybacking to the comment you just made. As I think about the locums business, we're starting to see seemingly side of service shifting, whether it's ED to urgent care and surgeries from the hospitals to ASCs. So how are you positioned -- or are you having to readjust, repositioning your sales and marketing efforts to make sure that you recapture or you capture the other side of it as things move out of traditional hospital settings? -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [27] -------------------------------------------------------------------------------- We think we're positioned extremely well in those studies. There just hasn't historically been as much demand there, but we began building relationships and kind of planting seeds in those markets many years ago. And so as they have matured a bit, we've been there and available to be a strong staffing partner. I do believe, going forward, we'll continue to be growing areas. And we actually see opportunities from a workforce solutions in like MSP standpoint where you have more consolidation occurring in those markets. Part of the issue in the past is there were a lot of individual players, small, very regional players. And now you're starting to see more consolidation and greater national presence. And when they get bigger and more complex, they need a more complex solution and partner. So we think those will be favorable trends for us going forward. -------------------------------------------------------------------------------- Brian Gil Tanquilut, Jefferies LLC, Research Division - Senior Equity/Stock Analyst [28] -------------------------------------------------------------------------------- Got it. Last question for me, just for Brian really quickly. G&A was down sequentially and down year-over-year. Is this a good starting quarter baseline to be thinking about going forward? -------------------------------------------------------------------------------- Brian M. Scott, AMN Healthcare Services, Inc. - CAO, CFO & Treasurer [29] -------------------------------------------------------------------------------- Yes, Brian, we've -- as we talked about in the last couple of quarters, we've reduced our SG&A in part of response to the demand decline we saw in the second quarter. We've pivoted back, been adding resources over the last several months to meet the growing demand. But we've also tried to make some adjustments to our -- the way we operate. And hopefully, we'll have some permanent benefits from that, whether we -- producing some of our office footprint, automating some of our processes to be able to do more with less people. And then, of course, there's just some natural things like lower travel and conventions that I think will take some time to come back as we go into '21, but it will be quite some time. And we will probably be smarter about how we do some of that spending. So if you look at the guidance we gave for the fourth quarter, if you kind of back out the stock comp and some of the integration costs, you'd be looking at somewhere around $110 million of adjusted SG&A. I think that's a good starting point for Q4. We do expect those numbers to increase as we move into next year. In part, there were some -- for example, we had suspended the matching of our retirement plans. We want to bring that back because we have more visibility next year. And so that will be a cost increase. And then we'll continue to invest in the people in our business. So it will increase through next year, but it's a good starting point for Q4, the guide we gave, and you should kind of build next year as we see the revenue grow as well. -------------------------------------------------------------------------------- Brian Gil Tanquilut, Jefferies LLC, Research Division - Senior Equity/Stock Analyst [30] -------------------------------------------------------------------------------- Awesome. Congratulations again. -------------------------------------------------------------------------------- Operator [31] -------------------------------------------------------------------------------- Your next question will come from Kevin Fischbeck from Bank of America. -------------------------------------------------------------------------------- Kevin Mark Fischbeck, BofA Merrill Lynch, Research Division - MD in Equity Research [32] -------------------------------------------------------------------------------- Wanted to dig into the Nurse and Allied Q4 guidance. I guess you're looking to flat to down a little bit. But it sounds like you're saying that the orders are kind of all-time highs, even the allied orders are high even though therapy is down, rates are high on either side. So what exactly is down? Is it that you can't fill the orders or you can't fill them? Or is there some other piece that explains why it's not the good growth you might think? -------------------------------------------------------------------------------- Brian M. Scott, AMN Healthcare Services, Inc. - CAO, CFO & Treasurer [33] -------------------------------------------------------------------------------- Kevin, this is Brian. I'll kick that one off. So as we talked about in the prepared remarks, there's a few different dynamics within that segment. For nursing, we did mention that we would be up at least 15% year-over-year. So that's a continuation of the recovery we saw through the third quarter heading into the fourth quarter where we do expect bill rates to be at pretty similar levels that we had in the third quarter but with a pretty significant sequential increase in volume. We'll see a little better year-over-year performance than we saw into the third quarter. Allied, although improving significantly sequentially, both through recovery and the normal seasonal increase in the schools business, it's still going to be down about 15% year-over-year in that range. And then we also mentioned that revenue cycle is down north of 40%. So that's also an offset. And then the last thing I'd mentioned is, last year, in the fourth quarter, we had a pretty significant strike quarter. We had about $17 million in the quarter versus this year, looking at about $3 million at this point. That in and of itself is about a 3% headwind on a year-over-year basis. So kind of when you net it all out, you end up pretty flat on a year-over-year basis but with some growth -- pretty strong growth in the nursing business. -------------------------------------------------------------------------------- Kevin Mark Fischbeck, BofA Merrill Lynch, Research Division - MD in Equity Research [34] -------------------------------------------------------------------------------- Okay. That makes sense. And then on the locum tenens side, I guess, sounds like maybe there's like a $4 million or so kind of benefit this quarter, but it does look like you're in for a slower growth rate year-over-year in Q4 versus Q3. Is it just that? Or is there anything else that you would highlight? I think the volumes, generally speaking, are kind of -- have improved. Is there something else you would highlight there? -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [35] -------------------------------------------------------------------------------- Yes. No, that was really the primary driver, Kevin. Actually, in the third quarter, if you took out that $4 million project, we would still have been up. So we are seeing continued good -- kind of a good trajectory. If you took out that project in the third quarter and just sort of did apples-to-apples third to fourth quarter, we'd only be down 2% sequentially. And that's actually a really good comp because usually, locums is down 5% to 8% from the third to fourth quarter. So that shows some good underlying growth in the business if we're only down about 2%. So some really good trends there. The team is executing fabulously, and our fill rates are actually up a little bit there. So I think we're on a good path. -------------------------------------------------------------------------------- Kevin Mark Fischbeck, BofA Merrill Lynch, Research Division - MD in Equity Research [36] -------------------------------------------------------------------------------- Okay. And then just maybe last question. As far as filling the demand, it sounds like you guys do a lot of things to kind of speed up the placement as you capture the orders. But is there anything that you can actually do to increase the number of nurses available besides, I guess, just raising pricing? Because it sounds like your orders are (inaudible), shifting them to capacity. Is there anything you can do there? Or is there anything that you think that is holding that back? Are nurses not willing to travel during a pandemic? And that will -- as that gets better, then the supply will get better? Or anything else you would look at the supply side? -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [37] -------------------------------------------------------------------------------- Yes. So as we mentioned earlier, I think our unique new applications are actually up significantly, and the number of new clinicians going on assignment is up quite nicely. Just as a aggregate number, it's not as much as the sheer volume of higher orders that we've received over the last few months. It does take some time and there's a bit of a lag from when you can recruit people and place them into those roles. And just quite honestly, just the massive amount of orders we've received would make it difficult. Even if we had more people pouring in, you have to get them matched to the right assignment, not that that's a problem for us, but convincing them that these are the assignments to take and then, of course, lining up, credentialing and whatnot. So we're actually quite pleased with the progress that the team has made and the number of new people that we've put on assignment. Could we get more? Absolutely. And so Landry talked about all the digital investments that we've been making, certainly continuing to train. Our existing recruiters are doing a great job, but they have more capacity probably. And then we are hiring additional recruiters and even redeploying some people internally so that we can have a more instant impact. Anything we can do to make it easier for those nurses to get on assignment, in addition to being more attractive, of course, with higher pay rates, we'll bring more people into the industry. So Landry, anything you want to add to that? -------------------------------------------------------------------------------- Landry Seedig, AMN Healthcare Services, Inc. - Group President and COO of Nurse & Allied Solutions [38] -------------------------------------------------------------------------------- No, that covers it. I mean we're just talking about an occupation that even before this pandemic had an excessively low unemployment rate. And I know they've gone through quite a bit out there, and there's just a lot of that burnout and fatigue. That's just put even further strain on the availability of the clinician. So it's not a reluctance to travel, it's just an overall short supply for the occupation. -------------------------------------------------------------------------------- Kevin Mark Fischbeck, BofA Merrill Lynch, Research Division - MD in Equity Research [39] -------------------------------------------------------------------------------- So just listen, where do you get these clinicians? Are you getting people who are just tired of working full-time and now they want to work part-time? Or are you -- you've gotten so far because you made it easier and you're actually getting a bigger share of the existing pool? -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [40] -------------------------------------------------------------------------------- It's really a bit of everything. Certainly, there are permanent nurses that have decided to convert into a travel position. Some of them are even what we would call lapsed travelers, people who used to work with us. Maybe a few years ago, they went into a permanent role, and now we're recruiting back into the industry. Those numbers are up for us as well. Some are with competitors, but quite honestly, everyone is having difficulty recruiting. So more so, we're recruiting from nurses who maybe were in a permanent position, perhaps they were laid off, or were doing something else. And then we're bringing them back into the workforce but in a traveler or flexible assignment. Some might be in a permanent role today. And they are burned out and overloaded in their current environment, and they want a break, but they do want to and need to continue to work and love what they do as a nurse. And so this is -- nurses are a very, very special profession and special people. They have a calling to run towards where they are needed most. And so I do think, as a profession, we probably see more of them running towards the challenges in the environment as opposed to running away. But with that said, there just aren't enough of them. We'll continue to, of course, ramp up our recruitment efforts, our marketing efforts. And the longer orders stay at higher levels with higher pay rates, it will continue to attract more people into the industry. That's what we've seen historically. -------------------------------------------------------------------------------- Operator [41] -------------------------------------------------------------------------------- Your next question will come from Mitra Ramgopal from Sidoti. -------------------------------------------------------------------------------- Lalishwar Mitra Ramgopal, Sidoti & Company, LLC - Healthcare Sell Side Analyst [42] -------------------------------------------------------------------------------- First, I was just wondering your thoughts in terms of the flu season. Obviously, a lot of people thinking it actually could be worse than what we've seen in previous years. And looking at the guidance, I was wondering if any of that is baked in there? -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [43] -------------------------------------------------------------------------------- We're not expecting any material impact from regular flu. We do staff into flu clinics and have some large clients that have utilized those services from us for many years. And this year, there was a little bit higher demand for flu clinic. But now what we're hearing is rather than that flu clinic staffing drop off, they're intending to perhaps keep those individuals on staff so that they can do testing, swabbing and/or when a vaccine is available, help with vaccine administration. So we think that while it won't be flu-related specifically, those clinicians that are brought into perhaps a flu clinic or flu-related environment will perhaps have longer extensions, and we'll see that volume continue more into the first quarter where it would have more normally dropped off at the end of the fourth quarter. And Landry, I'll ask you to chime in since you're a little bit closer to this. -------------------------------------------------------------------------------- Landry Seedig, AMN Healthcare Services, Inc. - Group President and COO of Nurse & Allied Solutions [44] -------------------------------------------------------------------------------- Yes. Nothing material on flu needs other than what Susan mentioned on the flu clinics. But that's -- even that, it's really -- it's not a real big part of our business. But it's just something that we're hearing that maybe they'll be able to utilize them for other things. And that wouldn't be isolated to just one area. You would anticipate that maybe we would see more of that. And then the other thing is on our winter orders, our winter orders that we received this year, nothing real noteworthy on that as well. The orders that did come in that we labeled as winter are very consistent with what we've seen in prior years. -------------------------------------------------------------------------------- Lalishwar Mitra Ramgopal, Sidoti & Company, LLC - Healthcare Sell Side Analyst [45] -------------------------------------------------------------------------------- Okay. No, that's great. And then I was just wondering if I can get an update on the Randstad partnership. I know given the shortages out there you're seeing, I think that was intended to help ease things on your end in terms of being able to meet the challenges out there. I was wondering if it's -- I know it's only 6 months into it, but if you're already starting to see maybe some incremental benefits or revenue being driven with that arrangement. -------------------------------------------------------------------------------- Kelly E. Rakowski, AMN Healthcare Services, Inc. - Group President & COO of Strategic Talent Solutions [46] -------------------------------------------------------------------------------- It's Kelly Rakowski. The Randstad relationship is a really important, strategic one for us and off to a really strong start. It's -- by its nature, it really helps round us out from a contingency standpoint, being able to staff nonclinical roles primarily and some other administrative professional roles. So from a nursing perspective, an allied perspective, it doesn't really give us a lot of additional support there, but what it is doing is really supporting our ability to serve our clients more holistically with all of their needs. And we've seen several of our renewals this year incorporate Randstad into our relationship. And I would say in our funnel of our kind of top 10 opportunities right now for next year, about half of them include Randstad in there as well. So the clients are really seeing the value again of consolidating partners and being able to help them more holistically. So we're really, really pleased with the traction that we've gotten so far in the market. -------------------------------------------------------------------------------- Lalishwar Mitra Ramgopal, Sidoti & Company, LLC - Healthcare Sell Side Analyst [47] -------------------------------------------------------------------------------- And again, given the -- well, that's progressing. Is that something we probably should look forward to in the future in terms of more such strategic partnerships? Or not necessarily? -------------------------------------------------------------------------------- Kelly E. Rakowski, AMN Healthcare Services, Inc. - Group President & COO of Strategic Talent Solutions [48] -------------------------------------------------------------------------------- Yes. I mean, absolutely. I mean we're looking -- we know we can't do it all. So as a strategic partner, we are going to look to where we have complementary capabilities that help round us out and make it easier for our clients to access that. So we'll certainly look to other strategic partnerships like that, that help us achieve that on behalf of the market. -------------------------------------------------------------------------------- Operator [49] -------------------------------------------------------------------------------- And your next question will come from Mark Marcon from Baird. -------------------------------------------------------------------------------- Mark Steven Marcon, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [50] -------------------------------------------------------------------------------- Congratulations. I was wondering if you could just talk a little bit about -- Susan, you mentioned the applications being up. How much are they up? And how are the fill rates running relative to a year ago? -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [51] -------------------------------------------------------------------------------- Applications are up double digits in aggregate. If you look at the number of unique new applications in nursing and in most specialties in allied, it's similar. Again, just the sheer volume is not quite enough to keep up with the rising demand that we've seen. So fill rates are actually, in aggregate, at the moment, lower than prior year because of the skyrocketing in demand just in the last couple of months. And that's why we need to have strong partners for our MSPs, and our affiliate vendors are a very critical part of our success in delivering and helping our clients. Landry, do you have anything else to add regarding new applications? -------------------------------------------------------------------------------- Landry Seedig, AMN Healthcare Services, Inc. - Group President and COO of Nurse & Allied Solutions [52] -------------------------------------------------------------------------------- Well, just as it relates to the fill rates, in aggregate, that's right, our fill rate percentages are down. But if you looked at it on our top accounts, you wouldn't see that much of an impact, and that's due to us going through and doing client prioritization whenever demand levels are this high. So we've got an obligation to support our more strategic customers. Of course, that's primarily our MSP customers. And so we put a lot of our efforts, if not all of our efforts, directed towards those accounts. The good news is that we really don't have to tell other customers know. We've got a lot of different solutions that we can help them with. So if you look at just our top, more strategic MSP customers, there hasn't been a significant impact on fill rate. -------------------------------------------------------------------------------- Mark Steven Marcon, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [53] -------------------------------------------------------------------------------- That's great. Does that mean that you're going to actually end up accelerating how some of those strategic MSP clients are going to end up deploying you for -- in other locations or for other services if you're able to hold up in terms of this -- the fill rates? -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [54] -------------------------------------------------------------------------------- Yes. That's a great point, Mark. You know very well that part of our strategy is to serve our clients in a very holistic way and to bring multiple services to them to -- they have a myriad of workforce management issues. And so we want to bring different solutions at the right time. Now understandably, right now, it is all hands on deck for nursing and allied for them even. So even though we're signing new clients, we're expanding, we're renewing and in some cases, we're adding additional services into those relationships, we may not launch all of those immediately because we need to help them get through this crisis situation for the next however many months. But over time, we've had great success in building the trust and the relationship in a way that we can add in additional services, whether it be at the time of renewal or even just as needs arise within their business. Kelly, anything else you'd like to add? -------------------------------------------------------------------------------- Kelly E. Rakowski, AMN Healthcare Services, Inc. - Group President & COO of Strategic Talent Solutions [55] -------------------------------------------------------------------------------- Yes. And all I would add to that too is I think when you have a crisis situation like this where the demands are so high and despite our fill rates being up, they are still -- have gaps in staffing. And so as we can bring more holistic solutions that help them look at how they optimize across their existing staff, how they hire and retain permanent staff, how they can schedule differently the myriad of solutions that we have, that makes us a stickier partner and a much more valuable partner because we can help them really focus on outcomes and different solutions. So -- but we've got to perform -- and you're right, back to your original point, we've got to perform in what we have so that they -- we have the credibility and trust of our clients to continue to serve them in other ways. -------------------------------------------------------------------------------- Mark Steven Marcon, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [56] -------------------------------------------------------------------------------- Great. And then can you just talk a little bit about the current nurse travelers, what is your -- what are you seeing in terms of their willingness to take follow-on assignments? I imagine everybody is being impacted a little bit by burnout and stress, so just wondering, what are you seeing from that perspective? What does it take? And what does -- what's the forecast in terms of thinking about premium pricing holding up over the course of not only this quarter but going into next year? -------------------------------------------------------------------------------- Landry Seedig, AMN Healthcare Services, Inc. - Group President and COO of Nurse & Allied Solutions [57] -------------------------------------------------------------------------------- Yes, this is Landry. So we had that time period there, if you went back to that -- the first wave or back in the end of March, April time frame, and the duration of assignments was a little bit lower then. So we kind of did -- we weren't seeing a whole lot of the 13-week assignment. We were seeing more of the kind of 4- and 6-week assignment. Things were just overall a little unpredictable. And then demand went down from there. And so it wasn't that the clinicians didn't want to stay with us. It was that we did not have the jobs for them. And so you actually saw our retention numbers go through a period where they weren't as high. And then now where we are, we measure -- it's what we call lapsed travelers. And these are clinicians that used to work for us and maybe they went away for a month, and now we're getting them back. And our lapsed traveler statistics are actually at a high point. So there's a lot of demand -- or I'm sorry, a lot of supply that we're getting back and putting back on assignment. So those are the 2 primary areas. We're getting lapsed travelers back and then our new applications are up, which means that our new clinicians, our new placements are up. So all that's positive. As it relates to the pricing, the demand, we don't think it's going away. We think that the levels that we're seeing right now is here to stay for some time. And so the best way to think about pricing is to relate it to the demand. And so right now, it's hard to predict, of course, but -- and at some point, the pricing will probably come down some, but we're not expecting that anytime soon. -------------------------------------------------------------------------------- Mark Steven Marcon, Robert W. Baird & Co. Incorporated, Research Division - Senior Research Analyst [58] -------------------------------------------------------------------------------- Great. And then one last one. Just if things continue to be difficult with the pandemic over the course of the next 12 months, how do you think that ends up impacting locum tenens? -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [59] -------------------------------------------------------------------------------- I think there will be some areas, such as we're seeing now, we will continue to see growth: advanced practice, CRNA, anesthesia, I mentioned radiology and others. Others will be a slower growth, if we're not seeing elective surgeries or dental offices reopen at a faster pace. We are seeing growth in those areas now that if we were to see such a big resurgence, that it shut everything back down again, it would impact those particular specialties. But I do think there would be some specialties that will continue to grow through it. And for that matter, it would bring back more of the COVID-related orders that we had that gave us perhaps some of the uplift in the third quarter. So we would rather, of course, things subside and we get back to normal volumes. But if we are in this resurgence environment, I still think we'll have some opportunities for locums to deliver some growth. -------------------------------------------------------------------------------- Brian M. Scott, AMN Healthcare Services, Inc. - CAO, CFO & Treasurer [60] -------------------------------------------------------------------------------- Mark, this is Brian. The other thing I'd add is this is, I think, a really good time for us to continue to engage with our clients around MSP for locums as well as they're hyper-focused on efficiency and cost savings. We believe there's -- we have a -- we can demonstrate that value through the experience in nursing and allied. So as we look at ways we can grow, even in an environment like this, we think this is a really good time to engage with customers to talk more about that. And if we could -- if we can transition more clients to a managed service program, we think that would give us opportunity as well. And again, there's a big value proposition for clients, and they're going to -- they're looking everywhere they can for efficiency and cost savings. -------------------------------------------------------------------------------- Operator [61] -------------------------------------------------------------------------------- Your final question for today will come from Sam Kusswurm from William Blair. -------------------------------------------------------------------------------- Samuel Kusswurm, William Blair & Company L.L.C., Research Division - Analyst [62] -------------------------------------------------------------------------------- I have 2 questions for telehealth, actually. With the acquisition of Stratus Video and Advanced Medical telehealth capabilities, I was kind of wondering if you could share where AMN seed itself within the larger telehealth market, both currently and in the future. -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [63] -------------------------------------------------------------------------------- Thank you for that great question, Sam, because we are very excited about our opportunity to participate in and enable the acceleration of telehealth. And it's been happening already to some degree. We certainly have been accelerating our relationships with other telehealth providers over the last 8 months, both from a temporary staffing standpoint, primarily in locums, but also even in some permanent searches that we've done with some of the up and coming telehealth providers. And then as it relates to our own telehealth capabilities with -- you mentioned Advanced, where we have the Televate schools, telehealth platform for speech therapists, that has been a very great benefit for our clients and speech therapists because it's enabled them to continue to deliver care during this time when schools aren't sure whether they're going to be in person or at home. And there's still a lot of uncertainty around that. But as we mentioned, our schools business is actually up over 20% year-over-year. And I think some of that is because of the adoption of the Televate platform and their willingness to be able to have the therapists either in person or remotely as necessary. Regarding Stratus, we've also seen great adoption, as Kelly mentioned earlier, and we think that platform gives us a really great place to build upon because we already have a device and a platform at the patient care site and we can continue to add on features and capabilities. We did a little bit of that during the second quarter as there was necessity to help our clients to connect clinicians with patients when they couldn't be there in person. But I think there's a greater opportunity going forward. I don't just think so. We have a strategy around it and a fantastic team that is working on developing the right capabilities to deliver on that strategy. And then as you can imagine, even between Televate and Stratus, there's an opportunity because if you have speech therapists interfacing with a child, oftentimes, an interpreter is necessary. And so we've integrated our Stratus platform and capability into Televate so that we can better help deliver. And there's multiple other opportunities I won't go into around things that we can do in partnering with other technology providers such as EMRs, where they want to integrate interpretation services into their platform. So we see this as a tremendous opportunity for us and for our clients for us to bring these capabilities to bear, which is why I called it out in my prepared remarks that we'd be continuing to invest. -------------------------------------------------------------------------------- Operator [64] -------------------------------------------------------------------------------- We have no further questions. We'll turn it back over for closing remarks. -------------------------------------------------------------------------------- Susan R. Salka, AMN Healthcare Services, Inc. - President, CEO & Director [65] -------------------------------------------------------------------------------- Thanks so much, Michelle. And thank you, everyone. I know it was a long call, but we had a lot to cover, a lot of fantastic questions. We are very grateful that everyone joined us today, and we wish you and your families well, and we look forward to updating you on our next earnings call in February. -------------------------------------------------------------------------------- Operator [66] -------------------------------------------------------------------------------- Thank you, everyone. This will conclude today's conference call. You may now disconnect.