# AMN Healthcare Services Inc: Form 10-Q for the period ended Mar 31, 2018

- Company: [AMN Healthcare Services Inc](/companies/amn.md) (CIK 1142750)
- Form: 10-Q
- Filed: 2018-05-04
- Accepted by EDGAR: May 4, 2018, 17:22 ET
- Period: 2018-03-31
- Accession: 0001142750-18-000007
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1142750/000114275018000007/amn-20180331x10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1142750/000114275018000007/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2018-03-31.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Cost of revenue | 3 months, 2018-01-01 to 2018-03-31 | $354.7m | us-gaap:CostOfRevenue |
| Gross profit | 3 months, 2018-01-01 to 2018-03-31 | $167.8m | us-gaap:GrossProfit |
| Selling, general and administrative | 3 months, 2018-01-01 to 2018-03-31 | $104.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2018-01-01 to 2018-03-31 | $55.2m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2018-01-01 to 2018-03-31 | $5.3m | us-gaap:InterestExpense |
| Income tax | 3 months, 2018-01-01 to 2018-03-31 | $7.2m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2018-01-01 to 2018-03-31 | $42.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2018-01-01 to 2018-03-31 | $0.87 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2018-01-01 to 2018-03-31 | $0.89 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2018-01-01 to 2018-03-31 | 49,116,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 3 months, 2018-01-01 to 2018-03-31 | $59.7m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 3 months, 2018-01-01 to 2018-03-31 | $5.7m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Cash and equivalents | at 2018-03-31 | $54.5m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2018-03-31 | $489.4m | us-gaap:AssetsCurrent |
| Total assets | at 2018-03-31 | $1.27bn | us-gaap:Assets |
| Current liabilities | at 2018-03-31 | $251.2m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2018-03-31 | $673.3m | us-gaap:Liabilities |
| Shareholders' equity | at 2018-03-31 | $599.2m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 32,637 characters.

### of Operations

The following discussion should be read in conjunction with our consolidated financial statements and the notes thereto and other financial information included elsewhere herein and in our Annual Report on Form 10-K for the fiscal year ended December 31, 2017, filed with the Securities and Exchange Commission (“SEC”) on February 16, 2018 (“2017 Annual Report”). Certain statements in this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” are “forward-looking statements.” See “Special Note Regarding Forward-Looking Statements.” We undertake no obligation to update the forward-looking statements in this Quarterly Report. References in this Quarterly Report to “AMN Healthcare,” the “Company,” “we,” “us” and “our” refer to AMN Healthcare Services, Inc. and its wholly owned subsidiaries.

### Overview of Our Business

We provide healthcare workforce solutions and staffing services to healthcare facilities across the nation. As an innovative workforce solutions partner, our managed services programs, or “MSP,” vendor management systems, or “VMS,” recruitment process outsourcing, or “RPO,” workforce consulting services, predictive modeling, staff scheduling, mid-revenue cycle management and the placement of physicians, nurses, allied healthcare professionals and healthcare executives into temporary and permanent positions enable our clients to successfully reduce staffing complexity, increase efficiency and lead their organizations within the rapidly evolving healthcare environment.

We conduct business through three reportable segments: (1) nurse and allied solutions, (2) locum tenens solutions, and (3) other workforce solutions. For the three months ended March 31, 2018, we recorded revenue of $522.5 million, as compared to $495.2 million for the same period last year. For the three months ended March 31, 2018, we recorded net income of $42.7 million, as compared to $32.0 million for the same period last year.

Nurse and allied solutions segment revenue comprised 65% and 63% of total consolidated revenue for the three months ended March 31, 2018 and 2017, respectively. Through our nurse and allied solutions segment, we provide hospitals and other healthcare facilities with a comprehensive managed services solution in which we manage and staff all of the temporary nursing and allied staffing needs of a client and traditional clinical staffing solutions of variable assignment lengths.

Locum tenens solutions revenue comprised 20% and 21% of total consolidated revenue for the three months ended March 31, 2018 and 2017, respectively. Through our locum tenens solutions segment, we provide a comprehensive managed services solution in which we manage all of the locum tenens needs of a client and place physicians of all specialties, as well as dentists and advanced practice providers, with clients on a temporary basis as independent contractors. These locum tenens providers are used by our clients to fill temporary vacancies created by vacation and leave schedules and to bridge the gap while they seek permanent candidates or explore expansion. Our locum tenens clients represent a diverse group of healthcare organizations throughout the United States, including hospitals, health systems, medical groups, occupational medical clinics, psychiatric facilities, government institutions, and insurance entities. The professionals we place are recruited nationwide and are typically placed on contracts with assignment lengths ranging from a few days to one year.

Other workforce solutions segment revenue comprised 15% and 16% of total consolidated revenue for the three months ended March 31, 2018 and 2017, respectively. Through our other workforce solutions segment, we provide hospitals and other healthcare facilities with a range of workforce solutions, including: (1) identifying and recruiting physicians and healthcare leaders for permanent placement, (2) placing interim leaders and executives across all healthcare settings, (3) a software-as-a-service (“SaaS”) VMS through which our clients can manage all of their temporary staffing needs, (4) RPO services that leverage our expertise and support systems to replace or complement a client’s existing internal recruitment function for permanent placement needs, (5) an education program that provides custom healthcare education, research, professional practice tools, and professional development services, (6) mid-revenue cycle management and related consulting services, and (7) workforce optimization services that include consulting, data analytics, predictive modeling, and SaaS-based scheduling technology.

As part of our long-term growth strategy to add value for our clients, healthcare professionals, and shareholders, on April 6, 2018 and April 9, 2018, we acquired Phillips DiPisa and Leaders For Today (“PDA and LFT”) and MedPartners HIM, LLC (“MedPartners”), respectively. MedPartners provides mid-revenue cycle management solutions, including case management, clinical documentation improvement, medical coding and registry services to hospitals and physician medical groups nationwide. PDA and LFT offer a range of leadership staffing and permanent placement solutions for the healthcare industry. See additional information in the accompanying Note (10), “Subsequent Events.”

### Recent Trends

Demand for our temporary and permanent placement staffing services is driven in part by U.S. economic and labor trends.

The U.S. Bureau of Labor Statistics’ survey data reflects near record levels of healthcare job openings and quits. We view this data, along with a nearly 20-year-low unemployment rate and continued economic growth as positive trends for the healthcare staffing industry. The low unemployment rate has led to some wage growth to attract healthcare professionals. We work to pass these increases on to our clients but have experienced margin pressure in some divisions, particularly locum tenens.

We continue to see the benefits of our workforce solutions strategy, particularly with our managed services programs. As

a result of our ongoing focus on these strategic relationships, we continue to increase the percentage of our

revenue derived from our managed services program clients.

In our nurse and allied solutions segment, demand for our services remains stable. Although we continue to negotiate bill rate increases, our clients are decreasing the portion of nursing placements utilizing premium bill rates, which has lowered the overall average bill rate in this segment.

In our locum tenens solutions segment, we have seen a decline in demand from some large physician practice management firms that has negatively impacted our hospitalist volumes and, as a result, revenue in this segment. Additionally, we are in the process of making operating model changes and implementing new front and back office technologies in locum tenens. Although these changes are expected to have a long-term positive impact on our growth and profitability, in the short-term, these changes have been disruptive to our productivity and revenue, and we expect this to continue through the third quarter of 2018. Other than the above-mentioned influences, overall, demand for our locum tenens solutions segment is above prior year.

In our other workforce solutions segment, our interim leadership, workforce consulting, and mid-revenue cycle management businesses are growing. With respect to our permanent placement businesses, we have made organizational and operational changes designed to improve our performance in 2018 that have resulted in sequential improvement from prior quarter.

### Critical Accounting Policies and Estimates

The preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles (“U.S. GAAP”) requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to asset impairments, accruals for self-insurance, compensation and related benefits, accounts receivable, contingencies and litigation, earn-out liabilities, and income taxes. We base these estimates on the information that is currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could vary from these estimates under different assumptions or conditions. If these estimates differ significantly from actual results, our consolidated financial statements and future results of operations may be materially impacted. There have been no material changes in our critical accounting policies and estimates, other than the adoption of the Accounting Standards Updates (“ASUs”) described in Item 1. Condensed Consolidated Financial Statements—Note 1, “Basis of Presentation,” as compared to the critical accounting policies and estimates described in our 2017 Annual Report.

### Results of Operations

The following table sets forth, for the periods indicated, selected unaudited condensed consolidated statements of operations data as a percentage of revenue. Our results of operations include three reportable segments: (1) nurse and allied solutions, (2) locum tenens solutions, and (3) other workforce solutions. Our historical results are not necessarily indicative of our future results of operations.

*Unaudited Condensed Consolidated Statements of Operations:*

|  | Three Months Ended March 31, 2018 | 2017 |
| --- | ---: | ---: |
| Revenue | 100.0% | 100.0% |
| Cost of revenue | 67.9 | 67.3 |
| Gross profit | 32.1 | 32.7 |
| Selling, general and administrative | 20.0 | 20.6 |
| Depreciation and amortization | 1.5 | 1.6 |
| Income from operations | 10.6 | 10.5 |
| Interest expense, net, and other | 1.1 | 1.0 |
| Income before income taxes | 9.5 | 9.5 |
| Income tax expense | 1.3 | 3.0 |
| Net income | 8.2% | 6.5% |

### Comparison of Results for the Three Months Ended March 31, 2018 to the Three Months Ended March 31, 2017

***Revenue.*** Revenue increased 6% to $522.5 million for the three months ended March 31, 2018 from $495.2 million for the same period in 2017, primarily attributable to the higher revenue in our nurse and allied solutions segment.

Nurse and allied solutions segment revenue increased 8% to $338.2 million for the three months ended March 31, 2018 from $313.5 million for the same period in 2017. The $24.7 million increase was primarily attributable to a 6% increase in the average number of healthcare professionals on assignment, partially offset by a 2% decrease in the average bill rate during the three months ended March 31, 2018.

Locum tenens solutions segment revenue increased slightly to $103.1 million for the three months ended March 31, 2018 from $102.8 million for the same period in 2017. The $0.3 million increase was primarily attributable to a 5% increase in the revenue per day filled during the three months ended March 31, 2018, partially offset by a 4% decrease in the number of days filled.

Other workforce solutions segment revenue increased 3% to $81.2 million for the three months ended March 31, 2018 from $78.8 million for the same period in 2017. The $2.4 million increase was primarily attributable to growth in our VMS, interim leadership and mid-revenue cycle management businesses, partially offset by declines in our permanent placement businesses during the three months ended March 31, 2018.

***Gross Profit.*** Gross profit increased 4% to $167.8 million for the three months ended March 31, 2018 from $161.8 million for the same period in 2017, representing gross margins of 32.1% and 32.7%, respectively. The decrease in consolidated gross margin was due to an unfavorable change in business mix in our other workforce solutions segment and a lower bill-to-pay spread in the locum tenens solutions segment, partially offset by a higher gross margin in the nurse and allied solutions segment driven primarily by lower direct costs during the three months ended March 31, 2018. Gross margin by reportable segment for the three months ended March 31, 2018 and 2017 was 28.0% and 27.7% for nurse and allied solutions, 28.7% and 30.7% for locum tenens solutions, and 53.6% and 55.0% for other workforce solutions, respectively.

***Selling, General and Administrative Expenses.*** Selling, general and administrative (“SG&A”) expenses were $104.7 million, representing 20.0% of revenue, for the three months ended March 31, 2018, as compared to $102.1 million, representing 20.6% of revenue, for the same period in 2017. The increase in SG&A expenses was primarily due to higher employee compensation expenses, partially offset by operating leverage on the higher revenue. SG&A expenses broken down among the reportable segments, unallocated corporate overhead, and share-based compensation are as follows:

|  | (In Thousands) Three Months Ended March 31, 2018 | 2017 |
| --- | ---: | ---: |
| Nurse and allied solutions | $42,985 | $40,877 |
| Locum tenens solutions | 19,591 | 19,359 |
| Other workforce solutions | 23,634 | 23,484 |
| Unallocated corporate overhead | 15,663 | 15,672 |
| Share-based compensation | 2,864 | 2,681 |
|  | $104,737 | $102,073 |

***Depreciation and Amortization Expenses.*** Amortization expense decreased 4% to $4.4 million for the three months ended March 31, 2018 from $4.6 million for the same period in 2017, with the decrease primarily attributable to having more intangible assets fully amortized during the three months ended March 31, 2018. Depreciation expense increased 13% to $3.5 million for the three months ended March 31, 2018 from $3.1 million for the same period in 2017, primarily attributable to an increase in purchased and developed hardware and software placed in service for our ongoing front and back office information technology initiatives.

***Interest Expense, Net, and Other.*** Interest expense, net, and other, was $5.3 million during the three months ended March 31, 2018 as compared to $5.1 million for the same period in 2017. The increase is primarily due to the write-off of unamortized deferred financing fees in connection with the refinancing of our credit facilities during the three months ended March 31, 2018, partially offset by additional interest from the term loan outstanding during the three months ended March 31, 2017. See additional information in the accompanying Note (5), “New Credit Agreement.”

***Income Tax Expense.*** Income tax expense was $7.2 million for the three months ended March 31, 2018 as compared to income tax expense of $14.9 million for the same period in 2017, reflecting effective income tax rates of 14% and 32% for the three months ended March 31, 2018 and 2017, respectively. The difference in the effective income tax rate was primarily attributable to the impact of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) which reduced the U.S. federal corporate tax rate from 35 percent to 21 percent, effective 2018. In addition, the Company recorded a net tax benefit of $2.5 million during the three months ended March 31, 2018 to adjust for the tax treatment of fair value changes in the cash surrender value of its Company Owned Life Insurance ("COLI") for prior years. These fair value changes had not previously been included as a benefit in the tax provisions of the related years. The decrease in the rate was partially offset by provisions of the Tax Act which disallowed certain fringe benefits, meals and entertainment deductions and performance based compensation for covered employees (Chief Executive Officer, Chief Financial Officer and the top three highest paid executive officers). We currently estimate our annual effective income tax rate to be approximately 25% for 2018. The 14% effective tax rate in the three months ended Mach 31, 2018 differs from our estimated annual effective income tax rate of 25% primarily due to a discrete tax benefit of $4.5 million in the three months ended March 31, 2018 relating to the application of ASU 2016-09, “Stock Compensation - Improvements to Employee Share-Based Payment Accounting” and the out of period discrete tax benefit of $2.5 million recorded in the three months ended March 31, 2018 relating to COLI as discussed above. We have described in further detail on ASU 2016-09 in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (1)(r), Recently Adopted Accounting Pronouncements” of our 2017 Annual Report on Form 10-K.

### Liquidity and Capital Resources

In summary, our cash flows were:

|  | (In Thousands) Three Months Ended March 31, 2018 | 2017 \*As Adjusted |
| --- | ---: | ---: |
| Net cash provided by operating activities | $59,735 | $44,684 |
| Net cash used in investing activities | (9,613) | (13,300) |
| Net cash used in financing activities | (14,970) | (11,928) |

\* See Note (1) to the accompanying Condensed Consolidated Financial Statements, “Basis of Presentation” for a summary of adjustments resulting from the adoption of ASU 2016-18, “Statement of Cash Flows (Topic 230): Restricted Cash.”

Historically, our primary liquidity requirements have been for acquisitions, working capital requirements, and debt service under our credit facilities and the Notes. We have funded these requirements through internally generated cash flow and funds borrowed under our credit facilities. During the third quarter of 2017, we paid off the remaining balance of our term debt. On February 9, 2018, we replaced our then-existing credit agreement with our New Credit Agreement (as defined below). As of March 31, 2018, zero was drawn from $389.8 million of available credit under the Senior Credit Facility (as defined below) and the aggregate principal amount of our 5.125% Senior Notes due 2024 (the “Notes”) outstanding equaled $325.0 million. We describe in further detail our New Credit Agreement, under which our Senior Credit Facility is governed, and the Notes in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement” of our 2017 Annual Report on Form 10-K.

We believe that cash generated from operations and available borrowings under our Senior Credit Facility will be sufficient to fund our operations, including expected capital expenditures, for the next 12 months and beyond. We intend to finance potential future acquisitions with cash provided from operations, borrowings under our Senior Credit Facility or other borrowings under our New Credit Agreement, bank loans, debt or equity offerings, or some combination of the foregoing. The following discussion provides further details of our liquidity and capital resources.

### Operating Activities

Net cash provided by operating activities for the three months ended March 31, 2018 was $59.7 million, compared to $44.7 million for the same period in 2017. The increase in net cash provided by operating activities was primarily attributable to (1) improved operating results, (2) a decrease in accounts receivable and subcontractor receivable between periods due to timing of collections, and (3) a decrease in income taxes receivable. The overall increase was partially offset by (1) a decrease in accounts payable and accrued expenses between periods due to timing of payments and (2) a decrease in income taxes payable between periods. Our Days Sales Outstanding (“DSO”) was 58 days at March 31, 2018, 63 days at December 31, 2017, and 61 days at March 31, 2017.

### Investing Activities

Net cash used in investing activities for the three months ended March 31, 2018 was $9.6 million, compared to $13.3 million for the same period in 2017. The decrease was primarily due to net proceeds from restricted investments related to our captive insurance company of $0.8 million during the three months ended March 31, 2018, as compared to a net purchase of $2.8 million during the three months ended March 31, 2017. Capital expenditures were $5.7 million and $5.5 million for the three months ended March 31, 2018 and 2017, respectively.

### Financing Activities

Net cash used in financing activities during the three months ended March 31, 2018 was $15.0 million, primarily due to (1) $2.3 million payment of financing costs in connection with the new credit agreement, (2) $1.7 million for acquisition contingent consideration earn-out payments, and (3) $10.9 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards. Net cash provided by financing activities during the three months ended March 31, 2017 was $11.9 million, primarily due to $3.7 million for acquisition contingent consideration earn-out payments and $7.3 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards.

### New Credit Agreement

On February 9, 2018, we entered into a credit agreement (the “New Credit Agreement”) with several lenders to provide for a $400 million secured revolving credit facility (the “Senior Credit Facility”) to replace our then-existing Credit Agreement. The Senior Credit Facility includes a $50 million sublimit for the issuance of letters of credit and a $50 million sublimit for swingline loans. Our obligations under the New Credit Agreement and the Senior Credit Facility are secured by substantially all of our assets. Borrowings under the Senior Credit Facility bear interest at floating rates, at our option, based upon either LIBOR plus a spread of 1.00% to 2.00% or a base rate plus a spread of 0.00% to 1.00%. The applicable spread is determined quarterly based upon our consolidated net leverage ratio. The Senior Credit Facility is available for working capital, capital expenditures, permitted acquisitions and general corporate purposes. The maturity date of the Senior Credit Facility is February 9, 2023.

In connection with obtaining the New Credit Agreement, we incurred $2.3 million in fees paid to lenders and other third parties, which were capitalized and are amortized to interest expense over the term of the Senior Credit Facility. In addition, we wrote off $0.6 million of unamortized financing fees during three months ended March 31, 2018 related to our prior credit facilities. To help finance the MedPartners acquisition, we borrowed $195.0 million from the Senior Credit Facility in April 2018. The acquisition is more fully described in Note (10) to the accompanying Condensed Consolidated Financial Statements, “Subsequent Events.”

### Letters of Credit

At March 31, 2018, we maintained outstanding standby letters of credit totaling $12.9 million as collateral in relation to our workers’ compensation insurance agreements and a corporate office lease agreement. Of the $12.9 million of outstanding letters of credit, we have collateralized $2.7 million in cash and cash equivalents and the remaining amounts are collateralized by the Senior Credit Facility. Outstanding standby letters of credit at December 31, 2017 totaled $22.0 million.

### Off-Balance Sheet Arrangements

At March 31, 2018, we did not have any off-balance sheet arrangement that has or is reasonably likely to have a current or future effect on our financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that is material to investors.

### Contractual Obligations

There have been no material changes, other than the New Credit Agreement described in the accompanying Note (5), “New Credit Agreement” and the associated borrowings described in the accompanying Note (10), “Subsequent Events,” to the table entitled “Contractual Obligations” in Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” set forth in our 2017 Annual Report that occurred during the three months ended March 31, 2018.

### Recent Accounting Pronouncements

In February 2016, the FASB issued ASU 2016-02, “Leases.” This standard requires organizations that lease assets to recognize the assets and liabilities created by those leases. The standard also will require disclosures to help investors and other financial statement users better understand the amount, timing, and uncertainty of cash flows arising from leases. The ASU becomes effective for public companies for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. We are required to adopt the guidance on a modified retrospective basis and can elect to apply optional practical expedients. We are in the process of analyzing the impact of this standard and evaluating the impact on our consolidated financial statements. This includes reviewing current accounting policies and practices to identify potential differences that would result from applying the requirements under the new standard. We expect to complete the evaluation and validate results by the end of the third quarter of 2018. We expect to complete the evaluation of the impact of the accounting and disclosure requirements on our business processes, controls and systems by the end of the fourth quarter of 2018. We will adopt this standard in the first quarter of 2019, and apply the modified retrospective approach. The adoption of this standard will result in a significant increase to our consolidated balance sheet for lease liabilities and right-of-use assets, which has not yet been quantified.

In January 2017, the FASB issued ASU 2017-04, “Intangibles – Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment.” The standard simplifies the subsequent measurement of goodwill by removing the requirement to perform a hypothetical purchase price allocation to compute the implied fair value of goodwill to measure impairment. Instead, any goodwill impairment will equal the amount by which a reporting unit’s carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. Further, the guidance eliminates the requirements for any reporting unit with a zero or negative carrying amount to perform a qualitative assessment and, if it fails that qualitative test, to perform Step 2 of the goodwill impairment test. This standard is effective for annual or any interim goodwill impairment test in fiscal years beginning after December 15, 2019, with early adoption permitted for impairment tests performed after January 1, 2017. While we continue to assess the timing of adopting this standard, we do not expect the adoption of this standard to have a material impact on our consolidated financial statements.

There have been no other new accounting pronouncements issued but not yet adopted that are expected to materially affect our consolidated financial condition or results of operations.

### Special Note Regarding Forward-Looking Statements

This Quarterly Report contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. We base these forward-looking statements on our expectations, estimates, forecasts, and projections about future events and about the industry in which we operate. Forward-looking statements are identified by words such as “believe,” “anticipate,” “expect,” “intend,” “plan,” “will,” “should,” “would,” “project,” “may,” variations of such words, and other similar expressions. In addition, any statements that refer to projections of financial items, anticipated growth, future growth and revenues, future economic conditions and performance, plans, objectives and strategies for future operations, expectations, or other characterizations of future events or circumstances are forward-looking statements. All forward-looking statements involve risks and uncertainties. Our actual results could differ materially from those discussed in, or implied by, these forward-looking statements. Factors that could cause actual results to differ materially from those implied by the forward-looking statements in this Quarterly Report are set forth in our 2017 Annual Report and include but are not limited to:

- the effects of economic downturns or slow recoveries, which could result in less demand for our services and pricing pressures;
- any inability on our part to anticipate and quickly respond to changing marketplace conditions, such as alternative modes of healthcare delivery, reimbursement, or client needs;
- the negative effects that intermediary organizations may have on our ability to secure new and profitable contracts with our clients;
- the level of consolidation and concentration of buyers of healthcare workforce solutions and staffing services, which could affect the pricing of our services and our ability to mitigate concentration risk;
- the ability of our clients to increase the efficiency and effectiveness of their staffing management and recruiting efforts, through predictive analytics, online recruiting or otherwise, which may negatively affect our revenue, results of operations, and cash flows;
- the repeal or significant erosion of the Patient Protection and Affordable Care Act without a corresponding replacement may negatively affect the demand for our services;
- any inability on our part to grow and operate our business profitably in compliance with federal and state healthcare industry regulation, including conduct of operations, costs and payment for services and payment for referrals as well as laws regarding employment practices and government contracting;
- any challenge to the classification of certain of our healthcare professionals as independent contractors, which could adversely affect our profitability;
- the effect of investigations, claims, and legal proceedings alleging medical malpractice, violation of employment and wage regulations and other legal theories of liability asserted against us, which could subject us to substantial liabilities;
- security breaches and other disruptions that could compromise our information and expose us to liability, which could cause our business and reputation to suffer and could subject us to substantial liabilities;
- any technology disruptions or our inability to implement new infrastructure and technology systems effectively may adversely affect our operating results and our ability to manage our business effectively;
- disruption to or failures of our SaaS-based technology within certain of our service offerings or our inability to adequately protect our intellectual property rights with respect to such technology, which could reduce client satisfaction, harm our reputation, and negatively affect our business;
- the effect of cybersecurity risks and cyber incidents, which could adversely affect our business and disrupt our operations;
- any inability on our part to recruit and retain sufficient quality healthcare professionals at reasonable costs, which could increase our operating costs and negatively affect our business and profitability;
- any inability on our part to properly screen and match quality healthcare professionals with suitable placements, which may adversely affect demand for our services;
- any inability on our part to successfully attract, develop and retain a sufficient number of quality sales and operations personnel;
- our increasing dependence on third parties for the execution of certain critical functions;
- the loss of our key officers and management personnel, which could adversely affect our business and operating results;
- any inability to consummate and effectively integrate acquisitions into our business operations may adversely affect our long-term growth and our results of operations;
- any inability on our part to maintain our positive brand awareness and identity;
- any recognition by us of an impairment to the substantial amount of goodwill or indefinite-lived intangibles on our balance sheet;
- our substantial indebtedness and any inability on our part to generate sufficient cash flow to service our debt, which could adversely affect our ability to raise additional capital to fund operations and limit our ability to react to changes in the economy or our industry;
- the terms of our debt instruments that impose restrictions on us that may affect our ability to successfully operate our business; and
- the effect of significant adverse adjustments by us to our insurance-related accruals, which could decrease our earnings or increase our losses, as the case may be.

## Market risk

As filed, 732 characters.

Market risk is the risk of loss arising from adverse changes in market rates and prices, such as interest rates, foreign currency exchange rates, and commodity prices. During the three months ended March 31, 2018, our primary exposure to market risk was interest rate risk associated with our variable interest debt instruments. A 100 basis point increase in interest rates on our variable rate debt would not have resulted in a material effect on our unaudited condensed consolidated financial statements for the three months ended March 31, 2018. During the three months ended March 31, 2018, we generated substantially all of our revenue in the United States. Accordingly, we believe that our foreign currency risk is immaterial.

## Controls and procedures

As filed, 1,199 characters.

We carried out an evaluation, under the supervision and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures as of March 31, 2018 were effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

There were no changes in our internal control over financial reporting that occurred during the quarter ended March 31, 2018 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

## Risk factors

As filed, 135 characters.

We do not believe that there have been any material changes to the risk factors disclosed in Part I, Item 1A of our 2017 Annual Report.

Filed May 4, 2018.
Source: SEC EDGAR, the filing index for accession 0001142750-18-000007. Last ingested by Listed: Nov 5, 2026, 17:59 ET. No prices; not investment advice.