AMN 2017 Annual Report

A LETTER TO OUR SHAREHOLDERS Dear Fellow Shareholders, I am pleased to report that AMN Healthcare reached milestone levels for revenue, profitability, and share price in 2017. This performance is a direct result of our organization’s unwavering focus on providing exceptional service to our clients, healthcare professionals, and community in an unpredictable year. Our differentiated suite of healthcare workforce management solutions provided AMN Healthcare a competitive advantage that was clearly visible in our 2017 results. Turning our vision into reality required the outstanding work, exceptional talent, and full engagement of our nearly 3,000 AMN corporate team members, and they delivered every day (along with many nights). In 2017, AMN extended our lead as the largest, most innovative provider of workforce solutions to the healthcare sector. We had our biggest year yet in being awarded new Managed Services Programs (MSP), while also successfully renewing several of our existing MSP relationships. This performance is a testament to the value we are delivering in helping our clients achieve their patient care and efficiency initiatives. Our suite of Workforce Solutions, which includes MSP, interim and permanent leadership, permanent placement services, staffing vendor management systems (VMS), workforce optimization, and health information management solutions, now represents over half of total revenue for AMN Healthcare. THE YEAR IN REVIEW AMN delivered a total shareholder return of 28% in 2017, compared with 18% for the S&P Health Care Services Select Industry Index. This marked the sixth consecutive year in which AMN investors saw better than 20% annual returns. After two extraordinary years, the healthcare staffing industry resumed more normalized growth rates in 2017. Supply of skilled labor remained tight, clinical workforce attrition remained high, and providers faced new uncertainties about the future of government policy toward health insurance. With that uncertain environment to start the year, the AMN team remained focused on helping clients efficiently flex their labor to match their staffing needs. As the year progressed, leading indicators of demand continued to improve, and the year ended with solid demand for workforce solutions that are expected to continue to grow as the population ages, the need for medical services expands, clinician retirements increase, and workforce shortages endure. For the year, we grew revenue by 5%, which enabled an 8% increase in adjusted EBITDA. Top-line performance was up 7% excluding a high level of labor disruption staffing revenue in 2016 that did not recur in 2017. AMN expanded adjusted EBITDA margin by 40 basis points for the full year, driven by better improvement in both our gross margin and operating leverage. We also pursued internal operating efficiencies that held corporate expenses relatively flat while revenues continued to grow. AMN continues to be on pace to reach our 14% adjusted EBITDA margin target by 2020. Most of our increase in revenue during the year came from our Nurse & Allied Solutions segment, which grew 5% over the prior year. Excluding our labor disruption staffing business, Nurse & Allied Solutions delivered 8% revenue growth in 2017. In our Other Workforce Solutions segment, leadership, VMS, and workforce optimization solutions all achieved solid double-digit revenue increases. At year end, AMN carried our lowest debt leverage in 15 years, enabling us to fund internal growth initiatives and share repurchases using internally generated free cash flow. Looking ahead, AMN is well positioned to continue those efforts and pursue opportunities to enhance organic growth with strategic acquisitions. THE ROAD AHEAD From now until 2025, the number of Americans turning age 65 will grow at a faster pace. In 2017, this figure reached 10,000 per day, more than 40% higher than it was when the Patient Protection and Affordable Care Act was enacted in 2010. The number of people turning 65 will rise by another 20% before leveling off at a figure more than two times what it was when AMN Healthcare became public in 2001. The over-65 group is the fastest-growing segment of the U.S. population, and this age bracket has the greatest need for healthcare services. Not only is the patient population aging into a higher-demand phase of life, but more and more caregivers also are nearing retirement age, putting increased pressure on labor supply. For the first time in our nation’s history, the number of people entering the workforce can barely match the number aging out. Meanwhile, as the U.S. economy expands, more households gain employer-sponsored health benefits.