AMN Healthcare Services, Inc. Reports First Quarter Results

Business Wire, May 9, 2005

SAN DIEGO -- AMN Healthcare Services, Inc. (NYSE:AHS) today reported revenue for the first quarter of 2005 of $156.8 million, compared to $161.3 million for the first quarter of 2004, and $158.3 million for the fourth quarter of 2004. The company generated net income of $4.0 million for the first quarter of 2005, resulting in diluted earnings per share of $0.13. This compares to net income of $4.6 million, or diluted earnings per share of $0.15 for the first quarter of 2004, and net income of $4.5 million, or diluted earnings per share of $0.14 for the fourth quarter of 2004. Revenue declined slightly in the first quarter of 2005 as compared to the fourth quarter of 2004 due mainly to two fewer billing days. The modest year-over-year decline in revenue was reflective of a slight decrease in revenue per traveler per day and one less billing day in the three months ended March 31, 2005.

"We are pleased to report strong first quarter results, which were at the higher end of our guidance range issued last quarter. Most importantly, the average number of travelers on assignment increased by 1% over the fourth quarter of 2004 to 6,350, representing the second consecutive quarter of sequential traveler count growth. Additionally, the first quarter traveler count was flat on a year-over-year basis, reversing a trend of seven consecutive quarters of year-over-year declines and reflecting the continued stabilization and modest growth dynamics of our market environment," said Susan R. Nowakowski, president and chief executive officer.

Gross profit margin for the first quarter of 2005 was 22.8%, which was higher than the 22.2% reported in the first quarter of 2004, and lower than the 23.3% reported in the fourth quarter of 2004. Gross profit for the first quarter of 2005 was $35.7 million, slightly lower than the first quarter of 2004, and down 3% from $36.9 million reported in the fourth quarter of 2004. The decline in gross profit in the first quarter from the fourth quarter was due to the combined impact of slightly lower revenue due to the two fewer billing days in the quarter and an adjustment of $0.9 million to the workers' compensation reserve. Absent the adjustment to the workers' compensation reserve, the gross margin in the first quarter of 2005 would have been comparable to the 23.3% reported in the fourth quarter of 2004.

Selling, general and administrative ("SG&A") expenses for the first quarter of 2005 were $26.2 million, compared to $24.6 million in the first quarter of 2004, and $26.4 million in the fourth quarter of 2004. SG&A expenses in the first quarter of 2005 were relatively stable as compared to the fourth quarter of 2004 and unchanged as a percentage of revenue. The year-over-year increase in SG&A expense was due mainly to normal growth in employee expenses and professional liability insurance costs.

Income from operations was $8.4 million for the first quarter of 2005, compared to $9.5 million for the first quarter of 2004, and $8.9 million for the fourth quarter of 2004. Income from operations margin for the first quarter of 2005 was 5.3%, as compared to 5.9% reported in the first quarter of 2004, and 5.6% reported in the fourth quarter of 2004. The decrease in income from operations margin as compared to the prior quarter reflected the small declines in revenue and gross margin and flat SG&A spending levels. The year-over-year decrease in operating margin was mainly attributable to higher SG&A spending in the first quarter of 2005.

Net interest expense in the first quarter of 2005 was $1.8 million, compared to net interest expense of $2.1 million in the first quarter of 2004, and $1.8 million in the fourth quarter of 2004. The decrease in interest expense from the prior year was reflective of the company's aggressive debt reduction during the year using strong cash flow generated from operations.

AMN generated $16.9 million in cash flow from operations during the first quarter of 2005 and, as of March 31, 2005, cash and cash equivalents totaled $10.5 million. Total debt outstanding at March 31, 2005 was $92.5 million, which represented a reduction of $9.2 million, or 9% since December 31, 2004, and a reduction of $44.5 million, or 32% since March 31, 2004. Weighted average diluted shares outstanding were 31.5 million during the quarter.

Revenue and Earnings Guidance for Second Quarter 2005

Revenue in the second quarter of 2005 is expected to range from $159 million to $162 million, resulting in diluted earnings per share of approximately $0.13 to $0.15. The average number of travelers on assignment in the second quarter of 2005 is expected to range from 6,375 to 6,475. Management reaffirms full year 2005 guidance previously issued on March 8, 2005, with full year revenue ranging from $654 to $660 million and diluted earnings per share ranging from $0.64 to $0.68.

"The projected rise in second quarter revenue, which is being driven by a strong demand and a growing supply of travelers on assignment, is a positive sign for our business. Recruiting more quality nurses and allied healthcare professionals to help our clients with their critical staffing needs is a priority for us, but we will also continue to focus on controlling SG&A spending levels and paying down debt with our positive operating cash flow," said Ms. Nowakowski.