AMN Healthcare Services (NYSE:AMN) Q1 2026 Earnings Call

0:00 Good day, and thank you for standing by. Welcome to the AMN Healthcare First Quarter twenty twenty six Earnings Call. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Randy Reiss, Vice President, Investor Relations and Strategy. Please go ahead. Good afternoon, everyone. Welcome to AMN Healthcare's first quarter twenty twenty six earnings call.

0:49 A replay of this webcast will be available at ir.amnhealthcare.com at the conclusion of this call. 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 because of various factors and cautionary statements, including those identified in our most recently filed Forms 10 ks and 10 Q, our earnings release, and subsequent filings with the SEC.

1:36 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 with me today are Carrie Graefe, President and Chief Executive Officer, and Brian Scott, Chief Financial and Operating Officer. I will now turn the call over to Carrie. Thank you, Randy, and good afternoon, everyone. We appreciate you joining us today.

2:25 The AMN team made important achievements since the start of the year. The first quarter was defined by unusually large labor disruption activity. From an operational standpoint, it was a major milestone for AMN. We successfully supported several large events, two of which for long duration, while continuing to serve the day to day showcase our rapid scaling, disciplined execution, broad and deep clinician network, and high touch service delivery. This experience also validated the investments we've made over the past few years in our technology capabilities, including our event management system and AI recruitment.

3:12 Technology that enables coordination, compliance, and real time execution at scale and it highlighted the strength of our mission driven teams working across the company. The energy and endurance of the AMN team, event specific needs and driving business as usual, were awe inspiring, demonstrating all the values and principles that make AMN special. For the first quarter, AMN delivered revenue of 1,380,000,000 above our guidance range and consensus. Gross margin was 26.8%, well above our guidance range. Adjusted EBITDA was $166,000,000 or 12.1% of revenue.

4:04 The first quarter included $722,000,000 in labor disruption revenue and $656,000,000 in revenue from all other AMN businesses. Nurse and Allied Solutions recorded year over year growth in traveler volume excluding labor disruption travelers for the first time since 2022. Our nurse and allied staffing businesses performed better than we expected in the first quarter and are on track for continued strong performance in the second quarter. Our international staffing business grew revenue by 17% quarter over quarter and 1% year over year. This was our first quarter of year over year growth in this business since the fourth quarter of twenty twenty three, shortly after the State Department implemented Visa retrogression.

5:00 Our Leadership Search business also returned to year over year revenue growth. While the revenues from labor disruption events are hard to predict, our ability to move thousands of clinicians to meet the urgent needs of our strategic clients delivered great value on a scale we could not have done just a few years ago. Our solid performance in the quarter enabled us to pay down our revolver and increase our cash balance, improving our leverage ratio to 1.6 times at quarter end. Our strong balance sheet positions us well in the industry to advance our growth strategy and drive value for our shareholders, clients, and other stakeholders. While we view the labor disruption execution as a defining accomplishment, we remain focused on the underlying drivers that enable our long term growth plans: broader and deeper client and clinician relationships, scaled service execution, and technology enablement of our solutions.

6:08 In our Solutions segment, first quarter revenue for Nurse and Allied Solutions was $1,130,000,000 our second highest revenue for the segment in company history. Beyond the labor disruption revenue and international nurse growth, travel nurse revenue grew 13% year over year and Allied was up 3%. Bill rates and hours also moved favorably with average bill rate up 6% year over year due to a surge in rapid response placements. Nurse demand has been muted, though demand in recent weeks improved to be flat year over year. Allied demand has been growing year over year since 2025.

6:55 Our teams are executing very well at filling the available demand. For the second quarter, we expect Nurse and Allied Solutions revenue to be flat to down 2% year over year, including a normalization of the segment bill rate. First quarter revenue for Physician and Leadership Solutions was $164,000,000 lower by 6% year over year. LocumTenens volume was down 9% year over year and revenue per day filled was up 3%. Interim leadership volume was down, partially offset by an increase in pricing. Our search business was highlighted by strong growth in physician permanent placement and new executive searches.

7:46 We continue to see Locum's clients focused on managing spend by centralizing program management and hiring permanent physicians. And we have both a healthy pipeline of locums MSP prospects as well as a new locums MSP client in the quarter. We also renewed and expanded the contract with our largest locums client. MSP volume was up year over year and we are driving toward making MSP a higher percentage of our revenue mix. Overall, locums demand has been softer with more demand in the third party channel, which is more competitive and harder to fill. Our lower fill rates in that channel more than offset our MSP progress.

8:37 Similar to what we did in our nurse business to improve performance in vendor neutral programs, we have initiatives in place to tech enable and automate our locums recruiting process to increase speed as well as adding more recruiters to enable higher fill rates. Leadership Solutions has rolled out refreshed go to market approaches for executive and leadership search and interim to align with clients' current challenges, including accelerating healthcare C suite turnover, rising demand for digitally fluent data driven leaders, and developing sustainable workforce strategies. Operationally, the team is improving fill rates with AI enabled candidate matching and enhanced tech and data capabilities to support our search consultants.

9:27 In the second quarter, we expect Physician and Leadership Solutions revenue to be down approximately 6% to 8% year over year. Quarter revenue in Technology and Workforce Solutions was $87,000,000 down 15% year over year or 10% excluding the business we divested last year. Language services continued the rollout of our tiered service and pricing strategy and we are pleased with our progress, including increased new sales wins and gross margin improvements in the first quarter. Our updated model enables us to serve our clients with the broadest set of language access services while delivering superior clients and patient experience and outcomes.

10:17 On our Workwise workforce technology platform, we rolled out new AI driven tools designed to help our customers fill roles faster and improve the quality of candidate matches. We added automated candidate scoring, improved search across open orders and available staff, and made it easier to create clear job descriptions, improving speed and overall hiring efficiency. We already used our AI Recruiter to deploy more than 10,000 clinicians in the first quarter. We also introduced supplier performance analytics, which gives clients more transparency into supplier quality, responsiveness, and outcomes. Overall, these updates further differentiate Workwise and reinforce our ability to help healthcare organizations make better workforce decisions and manage staffing more efficiently.

11:16 Our technology enablement has also strengthened our engagement with healthcare professionals. Our market leading clinician app AMN Passport plays a critical role in how we improve the connection between client needs and the labor force. Over the past year we increased the features and utility of Passport and as a result Passport users are up more than 30% year over year with monthly active users up more than 50%. Based on positive client reception, we are accelerating our go to market strategy for Workwise beyond our current client base and we expect this acceleration to support new sales heading into the second half of the year.

12:03 For the second quarter, we expect Technology and Workforce Solutions revenue to be down approximately 14% to 16% year over year, which implies an improved sequential trend compared with the past 0.5. Overall, we are encouraged by our start to the year with some key solutions returning to year over year growth and plans for additional solutions to return to year over year growth this year and into next year. We remain confident that we are moving toward a business model in which we can sustain long term revenue growth and grow adjusted EBITDA at twice the rate of revenue growth. Our first quarter performance was a significant demonstration of AMN's capability to scale quickly and deliver at a high level.

12:54 Integrating technology, operational execution, and a mission driven team under intense conditions. Great people are at the center of our mission and our culture. As we celebrate National Nurses Week this week, we are grateful to and for the tens of thousands of nurses we have the privilege of working with who enable continuous high quality patient care delivered across a wide range of care settings and locations. With that, I'll turn the call over to Brian to walk through the financial details and outlook considerations. Thank you, Carrie, good afternoon, everyone.

13:40 First quarter consolidated revenue was $1,380,000,000 significantly above the high end of our guidance range, driven in large part by labor disruption revenue exceeding our guidance by 122,000,000 We also had better than expected performance from our Travel Nurse, Allied and International businesses. Consolidated gross margin for the quarter was 26.8%, above the high end of guidance. Year over year gross margin declined 190 basis points and sequentially was up 70 basis points. First quarter consolidated SG and A expenses were $218,000,000 adjusted SG and A, excluding certain items, was $2.00 $5,000,000 up compared to the prior year and prior quarter, driven by over $70,000,000 in costs related to the large labor disruption event.

14:30 First quarter nurse and allied revenue was $1,100,000,000 up 173% year over year, about 130 sequentially. Excluding $722,000,000 in labor disruption revenue, nurse and allied revenue was $4.00 5,000,000 up 8% year over year and up 11% sequentially. Nurse revenue excluding labor disruption was $254,000,000 up 12% year over year and 16% sequentially. The growth was driven in part by strong rapid response volume and associated higher bill rates, along with the international business recovery. Allied revenue was $151,000,000 up 3% both year over year and sequentially. Year over year segment volume increased 3%, average bill rate increased 6%, and average hours worked increased 1%.

15:23 Sequentially, volume and average bill rate increased 6%, and average hours worked increased 2%. The higher bill rate was driven mostly by the rapid response revenue that is not expected to recur in the second quarter. Nurse and Allied gross margin in the quarter was 25.1%, up two forty basis points year over year and three fifty basis points sequentially, as labor disruption and rapid response revenue had a favorable impact on the segment margin. Moving to Physician and Leadership Solutions, first quarter revenue was 164,000,000 down 6% year over year and 3% sequentially. LocumTenens revenue was $131,000,000 down 7% year over year and 4% sequentially.

16:09 Interim leadership revenue was 23,000,000 down 4% year over year and 5% sequentially, while search revenue of $10,000,000 was up 4% both year over year and sequentially. Segment gross margin for the first quarter was 26.1%, down 120 basis points year over year and 140 basis points sequentially. The decrease in gross margin is primarily due to a lower margin in Locums and a drag of 110 basis points from increased sales reserves booked in the quarter. In Technology and Workforce Solutions, first quarter revenue was $87,000,000 down 15% year over year and 1% sequentially. Excluding the July 2025 sale of SmartSquare, revenue was down 10% year over year, driven mainly by a decrease in pricing and billed minutes in Language Services.

16:59 First quarter Language Services revenue was $69,000,000 down 8% year over year and 1% sequentially. BMS revenue was $16,000,000 down 18% year over year and 2% sequentially. Segment gross margin was 50%, down five fifty basis points year over year, driven by pricing pressure in Language Services and an unfavorable business mix. Sequentially, gross margin increased by 190 basis points, which included a 200 basis point improvement in the Language Services margin, reflecting the service model changes Carrie mentioned in her opening comments. First quarter net income was $62,000,000 This compared with a net loss of $1,000,000 in the prior year period and a net loss of $8,000,000 in the prior quarter. First quarter consolidated adjusted EBITDA was $166,000,000 Adjusted EBITDA margin for the quarter was 12.1%, above the high end of guidance and up two eighty basis points from the prior year period and four eighty basis points sequentially.

18:01 Days sales outstanding for the quarter was twenty six days. Excluding working capital effects from the large labor disruption events, DSO was fifty four days, four days lower year over year and two days lower sequentially. Operating cash flow for the quarter was $562,000,000 and capital expenditures were $7,000,000 At quarter end, we had $561,000,000 in cash and equivalents, with a large portion of this cash increase from excess client deposits with the labor disruption events. We ended the first quarter with $367,000,000 in client deposits, of which we have already refunded approximately $250,000,000 this quarter. Assuming the remainder of the deposits are repaid this quarter, we would anticipate having approximately $175,000,000 in cash at quarter end.

18:50 We ended the first quarter with total debt of $750,000,000 and our leverage ratio as calculated per our credit agreement was 1.6 times. Moving to the second quarter outlook, we expect consolidated revenue in the range of $620,000,000 to $635,000,000 Gross margin is expected to be 28% to 28.5%. Reported SG and A is projected to be approximately 23% to 23.5% of revenue, reflecting continued cost discipline while supporting growth initiatives. Operating margin is expected to be minus 0.6% to plus 0.1%, and adjusted EBITDA margin is expected to be 6.7% to 7.2%. Additional guidance details are provided in our earnings release. To echo Carrie's comments, we remain confident that we have the team and strategy to deliver leading tech enabled solutions that will drive sustainable revenue growth with improved operating leverage.

19:46 With that, operator, please open up the line for questions. Thank you. At this time, we will conduct the question and answer session. Our first question comes from the line of Trevor Romeo of William Blair. Your line is now open. Hey, guys. Thank you for taking the questions. This is Melissa on for Trevor. I guess just to start out, what are conversations with the major hospital operators sounding like on contract labor today? Notice that it's not being called out on their earnings calls anymore. So are you seeing any bill rate normalization going on outside of those crisis and strike type situations?

20:38 I know you mentioned seeing it in some pockets last quarter. Thanks. Yeah, thanks Melissa. Overall, we are seeing clients continue to focus on cost management, as well as ensuring that they have the workforce in place to be able to support increasing levels of patient utilization. Those two themes have continued. To your point, the conversation has shifted with clients where getting to more normalized both utilization levels and bill rate levels of contract labor was a lever, a big lever coming out of the pandemic. That really has normalized, and we've seen stability for a couple of quarters now.

21:26 The conversations with clients have really shifted back to what are the levers that we can use to more sustainably create a high quality, cost effective workforce and get into more of a total talent type of solution platform, which we are well positioned against. And it's conversations around how do I do more predictive analytics about what my needs are? How do I ensure that I am leveraging the talent that I have most effectively? How am I tech enabling some of my solutions to be able to close some of the gap between increasing levels of patient utilization and staffing. So we have seen those conversations really shift back to what are the more sustainable total talent strategies that you're going to be able to utilize to support your patient growth volume.

22:18 Great, thank you so much, Carrie. And then maybe if I could just squeeze one more follow-up. On the labor disruption revenue, is there any additional color you guys could give on the client relationships that you guys developed coming out of that large windfall? And just any additional revenue opportunities that came from that this quarter? Yes, so we supported in the quarter five labor disruption events. Three of them were large. Two of the three were indefinite. That was historic for us. That was historic for the industry. And when you go through those types of crisis events with clients, your relationships get deeper and stronger. It was an incredibly important moment for the clients that we were supporting in those events.

23:09 And so we were able to do that successfully, help ensure that they were able to go through and deliver continuous high quality care for their patients. And that is a very important service, not only what we did in the first quarter that took years of planning to get there, but what we would expect to do in future years with clients going through those events. Great. Thank you so much again for the color. Thanks, Melissa. Thank you. Our next question comes from the line of Jeffrey Silber of BMO Capital Markets. Your line is now open. Thanks so much. In your prepared remarks, you alluded a few times to your RapidResponse revenues this quarter. Can you just remind us what the difference between that and your typical labor disruption revenues are and the impact on margins, etcetera?

24:05 Yes. Hey, Jeff. Well, typically, they are shorter duration assignments, where the client is also looking for us to get somebody deployed very quickly. So, this case, there was some kind of carryover between the or crossover between the labor disruption events and these rapid response orders. And so the rates are typically higher, but it's also comes to that as a much higher pay rate as well. So I wouldn't think of it as much as a significant margin answer, but it does have an impact on the volume and a higher revenue. So we mentioned the bill rate being much higher in the first quarter. That was in part because of the mix of those rapid response orders that we had in the quarter. The underlying trend around bill rates hasn't changed a whole lot in the last several quarters, but it was elevated. That's why we made a point of calling it out as we look at the second quarter, we expect the rates to normalize.

24:57 But it was very valuable for clients because, again, they need they had that rapid need and we're able to deliver really high fill rates on those orders. Hey Jeff, one of the things that happens when you're in a longer duration crisis, like two of the labor disruption events that we supported, is you can layer in rapid response. It's still an immediate need, but it is more cost effective for the client. So it was part of a strategy that we were utilizing with clients to be able to really minimize the cost of them being able to support a long duration crisis. Okay, that's really helpful. Second, my follow-up question is just regarding the competitive landscape. You obviously saw one of your larger competitors looks like they're going private again.

25:46 I'm just curious what you're seeing from those dynamics. Have you seen some of the smaller players leave? And are the larger players consolidating? I'm just wondering your thoughts on that. Let me start and then I know Brian has thoughts on this as well. We've talked for some period of time that we expected there to be consolidation in the industry for a whole host of reasons coming out of the pandemic, you had too much supply of competitors. And as you continue to see the tech enablement of these services playing a bigger role, that tends to have a bias towards more skilled players. You've seen some of that consolidation pick up more recently. Obviously, there's an announcement yesterday about one competitor, but you've seen some merging in some places, both of more traditional staffing companies, but also of some of the more tech enabled types of solutions.

26:41 You've seen over the past year, some workforce farms that had gotten into nursing get out of nursing. So you're seeing it play out in a couple of different ways. But we would expect for that consolidation to continue. Yeah, absolutely. I think that's you said it's taken a little longer and we know that there's still some of our competitors that have are dealing with larger amounts of leverage and working through that. And so, I think that will tend to ultimately drive more consolidation as well. And then some the platform players, again, as they consolidate, think it's a reflection of many clients really looking for partners to help them more effectively manage their labor force and be thoughtful about the right mix and fulfillment. So if you're purely just a platform player, you may be able to just deliver on some fill, but you're not really bringing incremental value to the clients as they're trying to really manage their costs in the most effective way.

27:36 So we think that's an important part of our strategy is really being a thought partner with our customers to help them optimize their utilization of perm, contingents, how do we help them on both of those fronts. And I think that's more and more of those are the conversations and where we can really be a bigger partner for our customers. All right. Appreciate the color. Thanks so much. Thank you. Our next question comes from the line of AJ Rice of UBS. Your line is now open. Hi, everybody. Thanks for the question. Maybe first, just to ask, you know, you've you've had a lot of moving parts, the labor disruption, your comments about rapid response. When you look at the underlying market dynamics, do you have an updated view on whether you think the key areas nursing, allied, local tenants, what is the year to year trend there?

28:32 Is it growing? What would you say the over when you normalize, what do you think the underlying market looks like these days? Let me give you some comments about what we're seeing in demand and Brian can kind of layer in. We gave a lot of numbers taking out labor disruption very intentionally so you could get a good sense of where we are in businesses without those events coming through. We feel good about how we started the year overall. Nurse and Allied, you are seeing healthy demand in Allied. You're seeing particularly the past couple weeks an uptick in demand in Nurse, so we're about flat year over year with where we were this time last year. Allied turned to year over year demand growth in 2025 and has continued.

29:30 And so we see into Q2 continued strong, especially fill performance across Nurse and Allied. If we look at PLS, in locums, I made some comments in my beginning statement where we've seen weaker demand as we started off the year. We've seen a bit of an uptick over the past couple weeks, but a lot of that demand structurally is in the third party channel where it's typically the most competitive when we have harder fill rates. We have a number of initiatives and a lot of successful proof points with what we did in that space in Nurse and Allied, We have that underway in LOCAMS. So as we go through the year, we feel better about our capabilities in LOCAMS to be able to compete in that space.

30:17 I would expect to get to year over year growth in the first part of twenty twenty seven. Search is already there and we expect it to stay there in year over year growth. And then if we go into the TWS segment, we talked about, both Brian and I, what we're seeing already from the service model rollout that we've talked about the past two quarters. We We feel very good about how that's being operationalized and the outcomes, and we expect that service model improvements to continue throughout the course of this year. And for BMS, we would expect us to continue to onboard new client wins as we go through the year and get to year over year growth in 2027. The only thing I'd add is that. I appreciate that. Go ahead, Brian. I was going to add AJ, just to say, Allied team has done a really fantastic job, both in our traditional disciplines with therapy, imaging lab and respiratory, all of them are up. And then our schools business continues to have really strong momentum, as we talked about in the last couple of quarters. And so both demand and fulfillment teams performing really well. And as Kerry mentioned, international is back to the growth as well. On the so if you look at the Nurse and Allied segment in total, excluding labor disruption, we're back to the guide would presume kind of flat to slightly up and that's where we see the potential to continue to have a positive year over year comp going forward here, driven more right now by international Allied, including the schools business. The travel nurse business

31:48 is right on the cusp of getting back to a positive year over year growth on a consistent basis. I feel really good about the momentum in that segment. No, I appreciate all that. I guess I was also just sort of trying to get a sense. I know you're doing a lot of things to get back on a solid growth trajectory. I just was wondering, is the underlying market on some of those key segments help? Or is it still sort of trudging along? I was thinking more in terms of the overall market from what I you may ask if there's anything on that, fine. But I was you made the comment again about the revenue. You're moving toward a model where revenues well, adjusted EBITDA grows twice as fast as revenues.

32:36 I wondered if you could flush that out a little bit. Is that business efficiencies you're working on? Is that just operating leverage as the market starts to rebound? What are some of the pieces that would allow you to have adjusted EBITDA growth consistently 2x revenue growth? Yes. Thanks, AJ. I think we talked about that a few months ago and that's really meant to be kind of our longer term growth algorithm. And as we kind of lay that out, there was a working assumption that we'd have the businesses all predominantly back into a growth mode. And so as Carey kind of walked through some of the service lines and where we are, we have confidence as we move into 2027. We have good opportunity to get back to a growth model across our service lines. That's really where you start to see that kick in. So, it's partly a function of with top line growth more we laid out more in a 4% to 6% range.

33:35 That would occur some point later in 2027 as we get all the businesses growing. When that happens in conjunction with a lot of the operational changes we continue to make to be a more efficient model, that's process changes, automation, more deployment of AI, we think can drive a more efficient model and we've got to be able to leverage our platform already. So I think the combination of continued process improvements and technology improvements along with getting the top line business growing consistently, that would absolutely give us the opportunity to get that double digit EBITDA growth. And AJ, the other things that we'd want to see in terms of just things we track beyond the demand comment that I made is we continue to see stabilization in bill rates in nurse. You've seen some modest increases in allied and Locum.

34:31 We want to see as we leave this year increases in those bill rates. We're seeing that with some clients as they want to get orders filled, you want to see that more sustainably to mirror what you would expect to be some increases in labor market. We saw some modest uptick in average hours worked. That would also be something that as we leave this year, that would be something else that would be very constructive overall of the industry turning from stabilization to more sustained growth. Okay. Thanks so much. Thanks, Ajay. Our next question comes from the line of Tobey Sommer of Truist. Your line is now open. Good afternoon. This is Tyler Barish on for Toby.

35:20 On your net leverage, you took that down to 1.6. How should we think about it through the remainder of the year? Yes. Thanks, Tyler. So that interest dynamic, as we talked about in the prepared remarks with the cash balance, our credit agreement actually has a governor on the amount of cash we can apply towards our net debt. So that's where we get that 1.6 times. But as I mentioned, as we work through a refunding of a fair amount of that cash balance during the second quarter, that would basically end up with a pretty similar leverage ratio at the end of Q2 based on our guidance. And right now, if you just if you roll that for the rest of the year, we'd expect to have a leverage ratio that would be at two times or less through the remainder of this year. So we feel really positive about our position in the balance sheet. We paid off our revolver. We've extended the maturities of our existing debt out to 2029 and 2031.

36:17 And so this, we think, puts us in a really strong position on the balance sheet to really focus exclusively on how we grow in the business here. And that's investing in our teams and our operations, accelerating some of the capital investments that we have already laid out to grow the business as well and gives us a lot more flexibility to consider different capital allocation options as we go through this year and into 2027. Got it. And you mentioned Nurse and Allied had volume growth for the first time ex strike since 2022. Can you maybe talk about that and how that's looking for the rest of the year? Do you think that trend can sustain? Yeah, for the segment overall, we absolutely see the ability for us to maintain positive year over year growth in our volume.

37:08 Again, I kind of laid out and really all the teams are executing really well. Carrie mentioned, the demand environment in nursing has stable, but a bit muted. I think we expect to see that pick up and we continue to look for ways to expand our client relationships and bring in new clients, both our strategic MSP and VMS, but also more direct relationships. So that will open up more demand opportunity. But the teams are doing a fantastic job of filling into the demand that we have across our Nurse, Allied and International businesses. So I think that's where we have confidence we can continue to grow volume as we go through this year. Thank you. Thank you. Our next question comes from the line of Jack Slavin of Jefferies. Your line is now open.

37:56 Hey, guys. This is Brett Grokowski on for Jack Slavin. Thanks for taking the question. I was wondering if you could provide a little bit of additional color here to help us bridge the second quarter gross margin guide. So they're bridging from Q1 to Q2? Correct. Yes. So there are a couple of moving pieces, as you can imagine, particularly with the large amount of labor disruption revenue in the first quarter. So the 26.8% that we reported, as I mentioned in the prepared remarks, we did have some drag from some sales adjustments that predominantly hit our position of leadership segment. So what I'd say is if you really tried to strip out some of the different kind of one time items, you'd look at gross margin in the first quarter, a little over 27% or 27.3270.4% range. The guidance we've given for Q2, the midpoint is 28.2%.

38:57 As we talked about, there's about $10,000,000 of labor disruption revenue embedded in that guidance. Part of that is actual contractual activities that we've got. There's also a part as we reconciled some prior year events and finalized those invoices, there was some benefit from that, which is at a kind of flow straight through. So that gross margin is a bit elevated in our guide for the second quarter. You should think about it still being a little bit more in the twenty seven point five percent range for Q2. I think it's important as you think about that even as you're looking at our expectations for the remainder of the year. That's really the right way to think about the launching point for the third and fourth quarter as well. Great. Thanks. That's helpful. And then maybe for my follow-up, just with the update to Visa retrogressions, how should we be thinking about the progression for the international business this year and then as we move into next year?

39:50 Yes. So overall consistent with what we talked about last quarter, we would expect high teen year over year growth in international this year. We had improvement in the retrogression date over the past quarter, but what you're really seeing now is those candidates going into the next phase of the approval process, which is sitting at the embassies. We haven't assumed any significant acceleration of those candidates through the embassy process. We'll know more over the coming, I'd say, quarter plus how that's going. But if that goes faster than what we're anticipating, then you would see maybe some lift at the very end of this year that would help support some low double digit growth into next year.

40:39 We are not assuming at this point that you're going to see any lift of any of the travel bans or the travel suspensions. That would also be a tailwind to our assumptions and would predominantly affect and be accretive to 2027 growth. Great. Thank you. Thank you. Our next question comes from the line of Kevin Fischbeck of Bank of America. Your line is now open. Great. Thanks. Maybe to ask a question that was asked earlier, maybe a little bit differently. Do you guys have insight into, like, what percentage of your clients are back down to temp staffing as a percentage of their total workforce today, like relative to where they were in 2019?

41:30 And how many are still kind of at elevated levels versus that level? We don't have total insight. Obviously, for companies that are more public about their results, we have some insights. And I think the piece that we always focus on is what is the percentage, because obviously the underlying cost of labor, whether it's contingent or permanent, has gone up since 2019. I would say overall, when we compare our current client base to clients that we see or I should say prospects that we see in our pipeline, we see more of our non clients who may still have a little bit of work to do to get the utilization levels down. We were very partnering with our clients post the pandemic to get them down to more sustainable utilization levels.

42:24 I would say generally across our client base, they're more focused and shifting towards how do I build and retain my workforce as opposed to how am I reducing that. Yeah, and I think there's more and more recognition of this inflection we've seen where the aggressive permanent hiring that was done post pandemic has also led to significant wage increases for permanent labor. And you look at the reset that's occurred in bill rates for contract labor and you're certainly at this point where we talked before the differential can be very small. Sometimes there's no differential. And so as clients think about fluctuating patient volumes, managing their total workforce cost, I think that's for shifting more to that dialogue versus just purely focusing on the contract labor volume. It's more what is their total cost of their labor and what is the value of having flexibility. And so I think that's where we're seeing more dialogue and less focus on that reduction at this point.

43:26 Okay. And then you mentioned the Language Services margin is up a couple of 100 basis points year over year. I guess, can you talk a little bit more about what drove that and I guess where generally pricing is going? Has pricing stabilized for that business? Yes, let me do a high level and then I'm going turn it over to Nishan to add some color. So we have been operationalizing a new service model that we talked about the past couple of quarters that really has three enhancements to it. One is an increased offshore mix of resources. We always have an onshoreoffshore mix. It's them utilizing their devices as opposed to us providing it and more accommodating SLAs. So kind of longer speed answer in some cases.

44:16 So we have been rolling that out since the end of last year. And I would attribute that to most of what you've seen on the margin piece. But Nishan, maybe talk a little bit the competitive environment and pricing. Yeah, it's a great question, Kevin. Competitive environment continues to be there, although we did see it maybe coming down a little bit through this year. But we expect staying through the balance of this year, but it is starting to stabilize a bit more. So feeling much more positive about our competitive position and posture in that market. And I just want to point out that the 200 basis points was sequential, so we're still down. We're down year over year, but we've seen that decline. We saw it throughout 2025. And so with the model changes, this is the first quarter we've seen it start to inflect back up again. So even though we're seeing pricing come down, changes we've made in our cost structure for how we're delivering our services, which again focus is still always on the highest quality in the industry, but we've been able to do it in a way we've been able to bring down our cost for the delivery that's helping us improve that margin.

45:22 I guess, maybe is this the bottom then? Do you think this is you can keep going up from here? Is this the right way to think about it as those two things cost better pricing pressure still there offset? I think there's going to be a cycle that you have to work through for some of these pricings as maybe some contracts come up. I think there's still going be a tail of that, that we've already factored into this. But we do believe that, to Nishanth's comment, it's a much more stable environment than we had seen in the past. We're also seeing and expect minutes quarter over quarter to be flat, so there's more stability that we're seeing than we had seen in the past. But we think it's going to be competitive.

46:07 And we think there's going to continue to be competition for the business and particularly consolidation. We've been very focused on not just getting new clients, but consolidating spend with some of our larger clients. The other piece that I'll mention, I know we talked about this on the last call as well, is one of our areas of focus in our service model is how do we support the end to end patient experience. So while there is a moat around the clinical experience that there has to be a human involved in that interpretation, There is an opportunity for us from an admission standpoint, discharge standpoint, to use more AI enabled capabilities that we are working on.

47:05 Thank you. Our next question comes from the line of Mark Marcon of Baird. Your line is now open. Hey, good afternoon and thanks for taking my questions. You mentioned some changing dynamics with the clients that are less focused on reducing their contract labor. I was wondering if you could talk about any sort of impact that, that could potentially have with regards to their willingness to see increased bill rates and to raise them to levels where we could actually they're more compelling to the nurses and we can have bigger fill rates. I think we continue to see overall focus on cost management.

47:51 So where we're seeing clients increase fill rates is when physicians are not getting filled. And so I think that dynamic is going to be the dynamic that is going to really be the tailwind behind bill rates increasing. When you have positions that are priced appropriately, you see them filled. So that dynamic, I think, will continue. And as clients need more of these positions, with a higher degree of urgency, you will see more of those bill rates increase. But I would expect that to happen over time and it'll really be probably market by market and client by client. Great. And then with regards to just the cost consciousness, are you seeing any sort of attitudinal change at all with regards to the pressures that they were feeling when we were going through the early stages of Doge?

48:53 Is that starting to lift at all? Is that going to have any impact with regards to leadership within PLD and how we should think about that portion of the business? What I would say overall is, while we saw this time last year much more of a pause to step back and assess, okay, what are the implications of big beautiful bill? What we're seeing now is really a focus on just how do we support what is expected to be an increase in patient utilization just from an aging population demographic, and do that when we know there is going to be at some point a limited amount of clinicians.

49:48 So how do we start having those strategies and do that in a way that is cost effective? Because our costs are going up higher than what we are getting reimbursed for. So I'd say that is still the general theme that we are hearing, and what we are feeling is still a focus on those cost spending strategies for the workforce, including how do we ensure on the physician side that we are fully staffed so that we can maximize revenue. And to your other question on the leadership side, we did talk about that in the prepared remarks that as we talk about the aging clinical population, in fact, you're also seeing an aging leadership population within healthcare and the changing of the skill sets needed to navigate this environment. And so, as we drive our go to market strategy and the way we're interacting with clients and bringing value, I think there's a lot of opportunity for us to help them find the right talent for where they are in that journey. And so, I think we're feeling good about our position in that market to grow our leadership, both interim and our search businesses, to address some of the talent kind of the pending talent gaps we think are going to occur, well as some of the new skills that are needed to help our clients navigate this world as well.

51:08 That's very helpful. Thank you so much. Thank you. I am showing no further questions at this time, so I would like to turn it back to Carrie Grace for closing remarks. Thank you all for your interest in AMN, and a very special thank you to our extraordinary team and the strong partnerships that we have with our clients, clinicians, and suppliers who collectively helped us get off to a very strong start to the year. Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.