AMN 2017 Annual Report

22 We typically experience modest seasonal fluctuations during our fiscal year and they tend to vary among our business segments. These fluctuations can vary slightly in intensity from year to year. Over the last four years, steadily and progressively increasing demand muted the effects of these quarterly fluctuations. 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 reflect 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 nurse and allied revenue derived from our managed services program clients. In our nurse and allied solutions segment, demand is favorable. Although we continue to negotiate bill rate increases with clients, we are experiencing a decrease in the utilization of premium bill rates, which is dampening 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 are expected to be disruptive to our productivity and revenue, and we expect this to continue through the second quarter of 2018. Outside of the above influences, demand in most specialties has remained strong. In our other workforce solutions segment, our interim leadership, vendor management systems, workforce consulting, and medical coding businesses are growing. We experienced declines in our permanent placement businesses during 2017 that we believe are primarily related to operational execution. In response, we have made organizational and operational changes designed to improve our performance in 2018. Results of Operations The following table sets forth, for the periods indicated, certain 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. The acquisitions during 2016 and 2015 impact the comparability of the results between the years presented. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (2), Business Combinations.” Our historical results are not necessarily indicative of our results of operations to be expected in the future. Years Ended December 31, 2017 2016 2015 Consolidated Statements of Operations: Revenue 100.0 % 100.0 % 100.0 % Cost of revenue 67.6 67.4 67.9 Gross profit 32.4 32.6 32.1 Selling, general and administrative 20.1 20.9 21.8 Depreciation and amortization 1.6 1.6 1.4 Income from operations 10.7 10.1 8.8 Interest expense, net, and other 1.0 0.8 0.5 Income before income taxes 9.7 9.3 8.3 Income tax expense 3.0 3.7 2.7 Net income 6.7 % 5.6 % 5.6 % Comparison of Results for the Year Ended December 31, 2017 to the Year Ended December 31, 2016