AMN Healthcare Services Q3 2026 Earnings Call Transcript

AMN Healthcare Services (NYSE:AMN) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

AMN Healthcare Services reported third quarter 2026 revenue of $717 million, a 13% increase year-over-year, with significant growth in the Nurse and Allied segment and Search revenue.

The company highlighted its strategic focus on technology-enabled solutions to meet growing demand for flexible workforce solutions, positioning it well for future growth.

Challenges in the international nurse business due to embassy visa delays were noted, with expectations of a slowdown in placements into 2027.

Fourth quarter revenue is projected between $655 million to $670 million, with a decline in labor disruption revenue compared to the previous year, but an expected growth in Nurse and Allied revenue excluding disruptions.

Management expressed confidence in ongoing strategic initiatives, including AI-driven recruitment and process improvements in Locum tenens, with anticipated growth in 2027.

Full Transcript

OPERATOR

All lines are in listen-only mode. Following the presentation, we will conduct a question-and-answer session. If at any time during this call you require immediate assistance, please press star-zero for the operator. This call is being recorded on Thursday, November 5th of 2026. I would now like to turn the conference over to Randy Rees, Vice President of Investor Relations. Please go ahead.

Randy Rees (Vice President of Investor Relations)

Good afternoon, everyone. Welcome to AMN Healthcare Services’ third quarter 2026 earnings call. 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-K and 10-Q, our earnings release, and subsequent filings with the SEC.

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 Cary Grace, President and Chief Executive Officer, and Brian Scott, Chief Financial and Operating Officer. I will now turn the call over to Cary.

Caroline Grace (Chief Executive Officer)

AMN Healthcare Services continued to deliver on our mission of empowering the future of care. As reflected in our third quarter results, revenue of $717 million grew 13% year over year, or 6% excluding labor disruption activities. Nurse and Allied segment revenue grew 27% from a year ago, or 15% without labor disruption. Search revenue saw 15% year-over-year revenue growth. Net income for the third quarter was $33 million, or $0.83 per share, and adjusted EBITDA was $94 million.

Third quarter results included a $51 million favorable reserve adjustment for past labor disruption events. We see healthcare organizations taking a broader view of their workforce while clients remain focused on cost and flexibility. Increasingly, they want better insights and visibility into demand, supply, and performance across their workforce. That plays to AMN Healthcare Services’ strengths. Our combination of talent depth, trusted client relationships, operational expertise, and technology-enabled solutions allows us to help clients not simply fill positions but also make better workforce decisions.

Underlying demand in most of our businesses continued to grow, and our teams executed well against this demand. Third quarter performance benefited from the market uplift along with our company-specific gains in candidate acquisition and placements across sales channels. Five of our businesses have returned to year-over-year growth, and we see a path for the remaining businesses to return to growth in 2027. We are particularly encouraged by the growth in our Nurse and Allied business. Demand has strengthened, and our teams are capturing that demand through the improvements we have made in AI recruiting speed and 24/7 execution.

We still view core staffing demand as the bellwether for long-term growth in our total addressable market. We hear common themes from our network of 2,300 clients, which includes some of the country’s largest health systems. The most prevalent drivers of travel staffing demand are growth in patient volume and persistent vacancies and turnover in core staff positions across healthcare. Permanent hiring has slowed to a level of little more than one-to-one parity with attrition. Many healthcare leaders recognize the flexibility and cost-effectiveness of our total talent solutions.

The cost premium for travelers over the all-in cost of permanent clinical staff is at a historic low. Improved demand boosted third quarter revenue for Nurse and Allied to $460 million. Volume was 16% higher than a year ago, including 21% growth in travel nurse and a 12% increase for allied. The average number of nursing and allied travelers in the third quarter was 3% higher than Q2, defying typical seasonality. Our education volume is up over 25% year over year. Nursing and allied demand increased by 70% from the low point in February through October.

While demand and volume have grown, gross margins are holding relatively stable from a combination of flat bill rates and a market that remains highly competitive. Though we have seen healthy increases in supply, we are beginning to see clinicians hold out for higher rates. Historically this dynamic has led to increased pricing, which would be a positive for margin and operating leverage in the future. Offsetting some of the strength in the short term is our international nurse business, where ongoing delays in embassy visa appointments will result in near-term headwinds for the business. We have very recently seen some appointments come through, but they have been limited, and we expect a slowdown to constrain placements in 2027 until appointments return to more normalized levels.

In the fourth quarter, we project Nurse and Allied revenue to be down 13% to 15% year over year, with labor disruption revenue being $5 million this quarter compared with $124 million in Q4 2025. Excluding labor disruption, Nurse and Allied revenue is projected to grow 13% to 15% year over year. Our international business is expected to be down in the low teens sequentially, though still achieving high single-digit year-over-year growth. Physician and Leadership Solutions revenue was $171 million in the third quarter, down 4% year over year, though 4% higher sequentially. Locum tenens revenue of $138 million was up 6% sequentially and down 5% year over year. The 15% growth in search reflects particular strength in executive search and physician permanent placement. Our executive and interim search businesses benefit from leadership turnover in healthcare from both planned retirements as well as organizations focused on accelerating their growth, transformation, and technology strategies.

Similar to the technology and process improvements made in our Nurse and Allied businesses, our Locums business is in the middle of its own growth acceleration program, targeting year-over-year revenue growth in 2027. Our teams have already begun executing organizational and process improvement efforts that have energized the team, with larger technology enhancements rolling out in the coming months. For the fourth quarter, we project Physician and Leadership Solutions revenue to be down 5% to 7% year over year.

Third quarter revenue for Technology and Workforce Solutions was $86 million, down 9% year over year and modestly better than our expectations. Language services revenue was $69 million, down 8% year over year and down less than 1% sequentially. Minutes were up slightly year over year, while pricing was down 9%. BMS revenue was $15 million, lower by 11% year over year, though flat sequentially. Segment gross margin reflected the cost pressure we anticipated due to renegotiated language services contracts hitting in advance of completing the rollout of our lower-cost service model.

Our global interpreter capacity will take a step higher in the first half of 2027, which should enable us to recover gross margins. We are continuing to empower WorkWise, our data, technology, and workforce optimization platform, while expanding our relationships across the AMN Healthcare Services solution set. We continue to drive innovation in our Passport app for healthcare professionals, and we have enhanced its capabilities. One example is natural-language job search, which is already having a positive impact on supply. These efforts are designed to improve outcomes for clients and healthcare professionals and to support more durable, profitable growth over time.

As we broaden our scope with advisory and AI innovation, we also expect the market opportunity for total talent solutions to expand. AMN Healthcare Services has improved execution and recruiter productivity, broadened access to market segments, advanced our technology enablement, and demonstrated our ability to perform at scale. Now these capabilities are helping our clients manage their workforce more strategically, which we expect to become increasingly important to our success in the long run. Our teams are leading the way in the industry, simultaneously delivering great performance and innovative solutions for our healthcare professionals and clients.

Now I will turn over the call to Brian for more details about our results and outlook.

Brian Scott (Chief Financial Officer)

Thank you, Carrie. I’d like to expand on our third quarter financial results published this afternoon. Consolidated third quarter revenue of 717 million grew 13% year over year and 7% sequentially. Revenue was nearly 10% above the upper end of our guidance range with the upside coming from strong performance in Travel Nurse and Allied along with higher labor disruption revenue. Our third quarter guidance assumed 7 million of labor disruption revenue compared with 59 million recognized in the quarter.

The additional revenue consisted almost entirely of reserve adjustments associated with prior labor disruption events. Reported gross margin was 31.9%, 440 basis points above the top end of guidance. The higher margin resulted from the labor disruption reserve adjustments which positively impacted gross margin by 520 basis points. Third quarter net income was 33 million compared to 29 million in the prior year period and 21 million in the prior quarter.

Adjusted EBITDA was 94 million or 13% of revenue. Adjusted EPS was $1.16. Consolidated SG&A expenses in the quarter were 149 million. Adjusted SG&A excluding certain items was 138 million, up 7% compared to the prior year, driven primarily by higher professional liability-related costs and changes to the allowance for credit losses. The Nurse and Allied segment reported revenue of $460 million with a 30.9% gross margin and 17.5% segment operating margin. The labor disruption reserve adjustments favorably impacted the segment gross margin by 860 basis points and the segment operating margin by 1,030 basis points. Segment revenue excluding labor disruption activity increased 15% year over year, demonstrating strong execution in Travel Nurse and Allied on higher demand. Travel nurse volume increased 21% year over year while Allied volume increased 12%.

International Nurse also experienced growth during the quarter with revenue increasing 32% year over year. However, we are expecting international volume to decline sequentially starting in Q4 until embassy visa appointments resume with some level of normalcy. Nurse and Allied average bill rate was flat year over year while average hours increased approximately 1%. For Physician and Leadership Solutions, revenue of 171 million was up 4% sequentially and down 4% year over year. Locum tenens revenue was 138 million, up 6% sequentially and down 5% over prior year. The sequential growth included a 3% increase in days filled volume.

In our Technology and Workforce Solutions segment, revenue of 86 million was down 9% year over year and 1% sequentially. Segment trends continue to reflect pricing pressure and a dynamic operating environment for Language Services and client-specific utilization trends in the VMS business. Language Services revenue was down 1% sequentially, minutes increased 1% sequentially and were up slightly year over year. Pricing declined 1% sequentially and 9% year over year.

While our tiered service strategy transition remains a near-term headwind to revenue, it is helping retain clients and position the business for new client wins. We expect notable progress on our global workforce strategy to deliver gross margin benefits starting in the first half of next year, helping offset lower pricing. VMS revenue in the quarter was flat sequentially. Platform volume remained below the prior year while bill rates were up modestly both sequentially and year over year.

We expect the business to stabilize around current revenue levels with prospects for sequential growth in the second half of 2027 through both new client wins and increased volume. Days sales outstanding for the quarter was 54 days, consistent with the prior quarter. Highlighting some additional balance sheet and cash flow details, we ended the quarter with 256 million in cash and equivalents. Cash flow from operations was a use of 88 million for the third quarter with year-to-date operating cash flow of 285 million. The third quarter use of cash resulted from refunding most client deposits from previous labor disruption events.

We ended the third quarter with total debt of 750 million and our leverage ratio as calculated for our credit agreement was 1.3 times. Moving to the fourth quarter outlook, we expect consolidated revenue in the range of 655 million to 670 million, including 5 million of labor disruption revenue. Gross margin is expected to be 25.7% to 26.2%. Reported SG&A is projected to be 21.2% to 21.7% of revenue. Operating margin is expected to be minus 0.1% to 0.5% and adjusted EBITDA margin is expected to be 5.8% to 6.3%. Additional guidance details are provided in our earnings release. Our consolidated gross margin guidance is similar to the 26.1% margin we reported in the fourth quarter of 2025.

This guidance includes a Nurse and Allied margin that is in line with a year ago. We expect Physician and Leadership gross margin to be down approximately 200 basis points year over year driven by lower margin in locum tenens and we project Technology and Workforce Solutions gross margin to be down approximately 100 basis points from a year ago due to revenue mix and a lower margin in Language Services. Now, Operator, let’s open up the call for questions.

OPERATOR

Thank you, ladies and gentlemen. We will now begin the question-and-answer session. Should you have a question, please press star one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star two. If you’re using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. Your first question comes from Trevor Romeo of William Blair.

Your line is already open.

Caroline Grace (Chief Executive Officer)

Hi, Trevor.

Trevor Romeo (Analyst at William Blair)

Hey, thank you for taking the questions, and great to see some underlying acceleration in the volumes — excuse me — for the travel business. So I wanted to ask first on that, just in the momentum that you’re seeing. Maybe I’ll ask this two different ways. How much would you attribute to market share gains, and then maybe ask a different way: I think you had about 16% volume growth for the segment. How much of that is underlying growth of existing clients and how much are new clients, or maybe, I don’t know, higher fill rates on MSP programs?

Or just any more color you can shed on those dynamics.

Caroline Grace (Chief Executive Officer)

Yeah, so if I look at the growth that we’ve seen in Travel Nurse, we’ve seen that demand growth across all channels, and I think that’s very consistent with what the overall market has seen. And if I go at our fill rates by those channels, we have improved our fill rates across every single channel. And so our performance is really a combination of two things. One is the higher demand that we and others in the market are seeing. And the second part of that — and I will give a huge callout to our Nurse and Allied teams — they have done just an extraordinary job on executing against that higher demand.

We’ve been talking about this over the past three years about what we’re doing in terms of operational improvements, technology improvements to build a better platform. We are now on track to have the highest levels of productivity in Nurse and Allied that we have ever had, and that includes the high watermark in 2022 with COVID demand. So I would say what we’re seeing is both this continuation of demand across all the channels and our ability to execute against that demand across all those channels.

Trevor Romeo (Analyst at William Blair)

That’s great, Cary, thank you. And then, I guess on the international business, maybe just to dig in a little bit more there — you mentioned the embassy-visit headwinds. Is your current view that the low-teens sequential decline for Q4 would be a one-time step down and then that would be the run rate going forward? Do you think that could get maybe a little bit lower going into the rest of, I guess, going into 27? And then kind of a separate question, but related: we did get a pretty significant shift in the political backdrop this week with the midterms.

What’s your outlook on whether the winds could shift on the international business maybe once these near-term delays work their way through?

Caroline Grace (Chief Executive Officer)

Yeah. Let me take the second part of the question first and then we’ll talk about international. If we go and look at the policy areas that would have the biggest impact on our business from a national standpoint, it would be two areas. One is generally where you had more favorable healthcare policies, either from a reimbursement rate, from expanded access that would drive higher patient utilization levels. So it’s too early for us to tell what that is going to look like, but generally anything that would move in a positive direction on those two would be positive for our business.

And then I’d say the second piece would be immigration policy, and so that would have a positive impact both on our international business as well as on our Language Services business. On a state level, we are tracking, and we always track, a number of different state-level policies that may go into impact. And I’d say generally we would want more restrictive regulations at the state level. But I think it’s too early for us to tell from Tuesday night what direction those national policies will go.

From an International Nurse standpoint, we are still going to be up year over year. So we’re on track this year to drive over 150 million of revenue growth in International Nurse. What we have seen since the summertime — and we talked about this because we had started to see it on our last call — is embassy appointments really virtually being nonexistent. And so we hadn’t seen that in past periods when visa retrogression had improved, so we don’t really have any historical context for it.

We have very recently, in the past two weeks, started to see some appointments come back through for those that had already been scheduled. We are assuming at this point that we have that slowdown in the fourth quarter that would result in our run rate going into 2027 being lower. On a more cautious standpoint, if we didn’t see a lot of improvement, you would expect to be flat from that step down that you would see in the first part of 2027. If we got improvement in the availability of some of those appointments, that would have a positive impact in the back half of the year.

It would still take four to five months once we get those appointments to get our clinicians on the ground.

Brian Scott (Chief Financial Officer)

Trevor, just to add a little bit: from the third to the fourth quarter guide, it’s about a 5 million reduction in revenue in the international business. There would be another smaller step down from Q4 to Q1. Fortunately, with the stronger performance in the early part of the year, we’ve gotten a lot of new clinicians on assignment and, as you know, they’re multiyear. So that gives us more durability in 27. But again, without more new starts, that’s where we start to kind of just level out from that first quarter.

We do have some expectation for some improvement in the back half, but to Cary’s point, it’s just hard to predict the timing of the embassies reopening for appointments, and that’s why we’re trying to be a little more cautious in our outlook right now.

Trevor Romeo (Analyst at William Blair)

Understood. All right. Well, Cary, Brian, thank you very much. I appreciate it.

OPERATOR

The next question comes from Jeff Silber of BMO Capital Markets. Your line is already open.

Jeff Silber (Analyst at BMO Capital Markets)

Thank you so much. I know in past calls you’ve talked about a large client where the contract was up for renewal. I was wondering if we can get an update on that.

Caroline Grace (Chief Executive Officer)

Yeah, so this is public. The Kaiser contract goes through the end of 2026. Kaiser is well into a long expected RFP process and that is a normal part of their governance process for, you know, a contract of this size. While this is a competitive RFP, we feel very well positioned. Our partnership and our program are strong and we have built our strike capabilities over the past two years with and for Kaiser and we deliver strongly on those programs.

The best analogy for what we’re doing in Locums is actually what we did in our nurse and allied business that we started almost three years ago. And so if we look at our Locums business, thing one is we want to make sure that we are effectively competing in all channels. So we want to run strong MSPs, we want to have strong vendor-neutral offerings, we want to have strong direct fill as well as in third parties. And so we’ve done things to be able to compete against competitors in all those channels.

We rolled out Locums CMS capabilities in the early part of last year and what you have seen us embark on over the past two quarters is really improving our speed to fill in very competitive third-party channels. You need to be really strong and fast to be able to get your candidates in. And so we are going through the same process that we went through in Nurse and Allied. It includes looking at every part of that process. How do we automate, how do we tech-enable, how do we shorten every part of that process so that work is going on. It will build over time. We should start to see some improvements in the beginning of 2027. I would expect that to build as we go into 2027 and return the business to growth sometime next year.

OPERATOR

The next question comes from Kevin Bechtek of Bank of America. Your line is already open.

Kevin Bechtek (Analyst at Bank of America)

All right, great, thanks. I just want to get a better sense of kind of the underlying performance in the quarter. I guess if we strip out that reserve, you know, adjustment. From an EBITDA perspective, it looks like you guys were maybe at the low end of what your guidance was. From an EBITDA perspective, even though the revenue number was a good few percentage points above kind of where you thought the quarter would end up. Can you just kind of talk about on a core basis kind of the puts and takes around the excess revenue growth margins, how that played out?

Brian Scott (Chief Financial Officer)

Yeah, sure. I don’t think there were any major surprises. You see, we, you know, with that adjustment out, we still ended up above the high end of our guidance range in revenue. The gross margin was at the low end of our range and in part that’s, you know, a bit of a mix component with Nurse and Allied having a lower gross margin that has an influence there. We did have a nearly $3 million actuarial adjustment for workers’ compensation. The normal process we go through two times a year, so that’s a drag directly on the gross margin and that flowed directly into EBITDA as well.

So that’s probably the most significant variable that impacted the EBITDA dollars relative to the guide we gave. Outside of that, it was, you know, most things were relatively in line with what we expected again and seeing strong, you know, nice. Obviously the strong upside on the revenue that we’re seeing flow through for Nurse and Allied in the fourth quarter is definitely a bright spot for us.

Kevin Bechtek (Analyst at Bank of America)

Okay, so I guess if I could just say that back. So the way you guys are looking at it, strong demand, better-than-expected revenue. If you adjust for that, I guess the two reserves that you had to take, one positive, one negative, you’d be at the high end of the EBITDA number. Okay. And then I guess, Kerry, you said something along the lines of some signs that, you know, the supply is good, but people are starting to look at maybe holding the line on rates that they would accept. Can you talk a little bit more about kind of what you’re seeing there and maybe how long it might take for when you see these types of signs before, when pricing, you know, starts to firm?

Caroline Grace (Chief Executive Officer)

Yeah. So what we have seen, if I normalize for supply that we saw coming in when we had some large strikes—so the fourth quarter of last year and the first quarter—we’ve seen a steady increase in supply really going back to last year. And when we look at that supply, what we have started to see very recently, because there’s a lot more demand out there, is you will see some clinicians hold off actually booking to see if bill rates are going to increase.

They’re always maximizing and looking for both the opportunity and maximizing their pay rates with that opportunity. And so I think, Kevin, we’re starting to see what we would expect, what we really look at as normal market behavior. When you start to see that demand, supply starts really having more choice. And so we would expect, especially in places where you have unfilled orders, that you would start to see and build on more clients that were increasing their bill rates to fill those orders.

Bill rates overall had been stable for 18 months. We’ve seen pockets underneath that where bill rates have increased. We just need to see that more consistently. I would say some early signs that we’re seeing around trying to get more supply on behalf of the systems are things like guaranteed work weeks. We did see in the third quarter some increase in rapid response orders. It’s too early to call it a trend, but those types of signs would be, you know, we believe, precursors to starting to see bill rates start to go up in 2027.

Kevin Bechtek (Analyst at Bank of America)

All right, great, thanks.

OPERATOR

Your next question comes from A.J. Rice of UBS. Your line is already open.

A.J. Rice (Analyst at UBS)

Hi, everybody. Just to think about ’26, there’s been a lot of puts and takes in terms of disruption, revenue and some of the other things you’re calling out. And then obviously to think about modeling for ’27, getting a baseline to jump off of, should we think of what a normalized year of ’26, making adjustments for things that are sort of unusual, and use that to compare to ’27? Would you take your normalized fourth quarter and anticipate some growth off of that going into next year?

Just conceptually help us out on that. And I wondered, beyond the comments on International, are there other puts and takes that you would want to make sure we keep in mind when we’re starting to think about our build-up for ’27?

Brian Scott (Chief Financial Officer)

Thanks, Ajay. I think it’s probably easier to use Q4 as a building block because then it will reflect some of the things, some of the changes we’ve seen throughout this year. And even, for example, with International, you see we’ve seen the step down from Q3 to Q4. So it’s kind of a better launching point along with the improvements we’ve seen in our nurse and allied business. And so our typical path is that Q4 you see the gross margin down some.

Again, part of that is reflected by the lower International business, which has a higher gross margin attached to it. But there’s also some seasonality. In Q4 we typically see the margin down as some lower search volume. The Minutes and Language Services are typically a little bit lower. So this is not unusual for the margin to be lower. And then we’d see that start to pick back up in the first quarter. And then as Kerry mentioned, some of our businesses that we expect to get back to growth during ’27 have a higher margin profile as well.

So we see an opportunity to see that gross margin improve through the year. And then you kind of build on the revenue components that you typically see in the business. And again we’ve got parts like Locums where we’ve seen some declines during this year. A little bit of day sale volume in the third quarter is positive to see the fourth quarter revenue is pretty reflective of normal seasonality. But we would start to see that accelerate as we go through ’27 as well.

A.J. Rice (Analyst at UBS)

Okay. And two other things just quickly. One is the $51 million favorable reserve adjustment. Does that sort of reset the balance sheet? Are you carrying other reserves that you’re waiting for something to materialize on before making a decision on, or how should we think about that? And then you mentioned Kaiser, but I was wondering about broader commentary on what you’re seeing in terms of RFP activity. There’s some of your competitors that seem like they’re in financial distress, as best I can determine.

There’s others that are going through major consolidation. Is that generating more RFP activity around MSP, or are you just seeing more new customer interest? And how would you characterize that?

Caroline Grace (Chief Executive Officer)

Let me answer the second part of the question. I’ll turn it over to Brian for the first. Generally what we are seeing in the market is we have had very strong client retention. The flip side of that is it is harder to get clients to move. What we are seeing, and our pipeline is up quarter over quarter, is clients really looking for the combination of a partner who can help them across the spectrum of talent solutions, have innovative technology and be able to put those together.

So we are well positioned for what we’re seeing as a trend of what clients want in the marketplace. And our financial strength is a part of us going into that process in a really strong position. I will say of note, for the third quarter in a row, if we look at our total pipeline, more than half of our pipeline is MSP. So we have seen more clients talking about wanting to have partners that are going to be risk sharing with them and having SLAs against being able to get the fill. So that’s a trend that we have started to see over the past couple quarters. But we feel good about our pipeline build, about our commercial team, and about our positioning of our solutions against the needs that clients are talking about, what they need to build a workforce of the future.

A.J. Rice (Analyst at UBS)

Okay, thanks so much. Oh, go ahead.

Brian Scott (Chief Financial Officer)

No, I was going to share another point. I mean, we still have some remaining strike events from prior periods. So there are some remaining reserves as well as some deposits left, but that covered a lot of the deck during the third quarter. But we always have some until we finalize all of our invoices and reconcile them with the clients. We want to make sure we’ve got sufficient coverage there. But this is obviously a pretty significant amount of it.

A.J. Rice (Analyst at UBS)

Okay, thanks so much.

OPERATOR

Your next question comes from Constantine Savitas of Citizens. Your line is already open.

Constantine Savitas (Analyst at Citizens)

Thank you. Just a question on sort of seasonality, and I know we’re seeing a somewhat earlier start to the flu season. How should we think about that impact? Did you see some of that impact demand in the third quarter? What does that say about sort of fourth quarter, one quarter? Just trying to think through the impact of that, if that’s material to you guys at all.

Caroline Grace (Chief Executive Officer)

Yeah, if you look at—we look at overall demand and then we look at what you would call winter orders. If we look at winter orders so far this year, it’s in line with both what we expected and last year. And so we’re seeing consistency of what we would have thought we would have had in winter orders. Beyond that, we’re seeing much more of this broad-based demand. So the demand growth that we are seeing is really broad-based demand growth and not coming from any kind of specific increases in winter orders.

Yeah, we’ve had really strong rates, which can be, you know, for flu, it’s sometimes difficult for clients to predict it. And by the time that they may be experiencing, you know, increases, maybe in ER visits, it’s hard to then catch up to that with new orders. So we don’t typically get a, you know, tremendous amount of flu-related orders. But it usually will have a positive impact on extensions. If they have clinicians there, they’re going to want to maintain them if they’re seeing an increase in census.

So that’s simply a positive trend when you have a higher seasonal flu environment.

Brian Scott (Chief Financial Officer)

And the other thing, Constantine, I would say is in addition to just the overall patient utilization increases, some of our clients are telling us that they’re seeing some increases in acuity levels. So it’s not just kind of the census going up, but also on the margin, some higher acuity.

Constantine Savitas (Analyst at Citizens)

Okay, great, thanks for that color. And then Kerry, just on the language services business, to what extent do you believe you can see some relief from some of the pricing dynamics you’ve experienced this year as you enter next year? And then you made a remark about interpreter capacity and maybe that benefiting margins from Q4 to Q1. I just wanted to drill into that a little bit as well.

Caroline Grace (Chief Executive Officer)

So if you look at the pricing headwind that we had this year, it should be, we expect it to be in the high single digits. And so you’ve seen a little bit of offset in terms of just minutes growth. But really the big driver of what we’ve seen from a revenue standpoint has been that pricing. We would expect to still have an impact on pricing next year, but it should be more moderated than what we experienced this year. So we’ve been talking about, if this year was high single digits, it’s more like mid single digits next year.

We’ve gotten through a number of our clients renewing and kind of going to those potentially new service models. And so we would still have some in 2027 and then a tail of that into 20. But we will also be rolling out by the end of the first quarter the last part of our new service model. And so that’s where we would have access to a broader supply of global clinicians and we would expect to recapture some of our margin.

Constantine Savitas (Analyst at Citizens)

And where is the gross margin on that business today, just the language part,

Caroline Grace (Chief Executive Officer)

It’s still in the kind of mid-30s right now. We’ve historically been up over 40%. So that’s where we think we can find our way back closer to a 40% margin, which is, we think it’s pretty normalized with where our competition is with this broader global workforce. And I’d say the other part, and we talked about this a bit over the past two quarters and we continue to see it, is we are seeing a focus, a more balanced focus on cost per minute and quality. We had had a shift, I’d say, in 2025 and into the first part of this year, where you really had more of a, you know, mono focus on cost per minute. And we’re starting to see both on the clinical side and in procurement, a focus back into, we want, you know, really competitive price per minute, but we also don’t want to sacrifice quality.

And so we had a win-back of a client for that. And so we think that that will be a strong differentiator for us, that we can deliver both.

Constantine Savitas (Analyst at Citizens)

Okay, thank you.

OPERATOR

Your next question comes from Toby Summer of Truist. Your line is already open.

Toby Summer (Analyst at Truist)

Thank you. What are your expectations for incremental labor disruption activity both over the near term and into next year?

Caroline Grace (Chief Executive Officer)

Maybe I’ll start with this, then have Brian add. I always say this quote, and it continues to be true, there’s an 80% chance a strike will happen. 80% chance it won’t. We have under contract support for some medium and large strikes. So it’s hard to predict when those may happen. But our team has gotten very good at this, particularly over the past 12 plus months. We have incorporated into our guidance about $50 million of strike revenue, for next year, and we have a pipeline that is healthy.

You just never know, even if you get contracted to support a strike, whether or not that strike will actually happen.

Brian Scott (Chief Financial Officer)

Toby, I mean, to Kerry’s point, we have multiple clients we’re already contracted with for events that could, they could still happen this year, but there are several also that are more likely to be in the first half of next year. It’s just the difficulty is just predicting if they will happen, how long they would be, and revenue impact. But we’ve seen for sure, just industry-wide, a greater preponderance of labor disruption events actually occurring.

We know there’s one right now. There’s been notice given for an indefinite strike in the East Coast. It’s not one of our events, but it’s indicative that you’re just seeing a little more tension between the unions and the hospitals and more events occurring. And so this is a high-value offering for clients at a critical time and we’re proud to be able to provide, we think, a top-tier service. So we expect there will be activity next year as we’ve had each of the last several years.

But it’s always difficult to predict the exact timing and magnitude.

Caroline Grace (Chief Executive Officer)

Yeah. And Toby, the other interesting thing that we are seeing in strikes that you really hadn’t seen before is you didn’t see indefinite strikes. And so to have some of those indefinite strikes is also something that we continue to monitor. Is that a trend that we’ll continue to see in the future?

Toby Summer (Analyst at Truist)

Great, thank you. And then I know you just in a previous question talked about margin trends in the language services business. But if we can continue to get some revenue growth in Locums and Nurse and Allied, some of the bigger parts of the portfolio, how long do you think gross margins will lag and still contract before eventually hopefully flattening out and expanding? Because the competitive nature of the markets, despite some financial pressure at some competitors, hasn’t really abated now for years.

Brian Scott (Chief Financial Officer)

Toby, you’re talking more on a consolidated basis, just our overall margin,

Toby Summer (Analyst at Truist)

Maybe Nurse and Allied as well as Locums, a couple of the larger buckets, because you already walked through Language Services. Thanks.

Caroline Grace (Chief Executive Officer)

Yeah, I mean with Nurse and Allied, again if you kind of take out some of the, you know, the labor disruption activity obviously has created, you know, quite a bit of variability and we’ve mentioned that we’ve had stable margins there. We saw some, you know, some improvement during this year with the growth in international. And we had expected originally for that trend to continue in 27 until some of the more recent events with the embassies. And so, you know, again, we would expect to see some rate improvements over time and even, you know, having more as our pipeline of programs grows, that creates more opportunity to have more direct relationships, which typically has a better margin profile attached to it. So there are certainly opportunities between bill rates and program activation to see some improvements over time. But right now we’re, you know, we’re looking again, stability is a good thing and we’re seeing really good flow-through in our EBITDA with the volume growth.

But we would expect over time, if history repeats, that we would see some improvement. But I think it’ll be a slow build over time with Nurse and Allied. And then on the Locum side, I think we’ve kind of hit what we believe is more of the low point as we go into the fourth quarter into Q1. And so now our opportunity is, as we make these process and technology changes, to grow into some of the specialties that have higher margins. We’ve had good success over the last couple quarters in winning more direct contracts. We just need, again, to execute better into them. And I think that’s going to be another catalyst for margin improvement in Locums.

And then we’re seeing really, really great performance in our search businesses. We’re getting close to turning the corner for interim leadership business in physician and leadership. And both of those service lines both have a higher margin profile as well. So we have a good degree of confidence as we go through 27 that we should see margin improvement in that segment.

Toby Summer (Analyst at Truist)

Thanks. And lastly I have a modeling question. Can you remind us of the 4Q to 1Q sequential changes in gross margin and EBITDA margin to help us bridge that as we try to get our quarters right for 27 in whatever you would consider a normal year?

Brian Scott (Chief Financial Officer)

Sure. I mean, again, we would normally expect to see some improvements in kind of all of our, I think these days in all of our businesses from Q4 to Q1. It’s probably a little more muted in our Technology Workforce Solutions right now just as we’re going through some of these transitions. But, you know, for the Nurse and Allied business, stable, some modest growth, and the same thing in the Physician Leadership, as you see Locums usually improve from the fourth quarter.

And then on the gross margin we would again expect to see some modest improvement, again just from mix, going from Q4 to Q1. The one headwind is that we have a higher payroll tax on our staffing business in the first quarter. But we are expecting to see a little bit of improvement in gross margin in Q1. The net of all that, it probably wouldn’t be a significant change in EBITDA from Q4 to Q1, but that becomes kind of the building block for the rest of the year.

We expect to see growth top and bottom line to the year.

Toby Summer (Analyst at Truist)

Thank you.

OPERATOR

Your next question comes from Jack Levin of Jefferies. Your line is already open.

Jack Levin (Analyst at Jefferies)

Hey, good evening. Thanks for taking the question. I want to touch on DMS a bit. Starting to see sort of a turn in some of the, you know, the non-strike corners and allied revenues. And I get that it’s not an exact tie and you have fill rates and other pieces that tie into VMS. But maybe just thinking about some of the difference between that turning back to growth and VMS still, you know, staying stable. If you could give a little more color on how to think about, you know, what we might see with the progression there, what’s happening underneath the surface, be great.

Caroline Grace (Chief Executive Officer)

Yes. So, Jack, what we typically see is you see the VMS business kind of mirror what you see in the Nurse and Allied business. We had one client that went off the platform, and that came through in the second quarter of this year. And so think of what we have seen kind of this quarter as we exit this year as being more specific—client specific—to our platform than it not necessarily, you know, kind of correlating. You’re always going to have puts and takes of, you know, specific clients and what they’re trying to achieve, which will have some difference.

But as we look into 2027, we have wins from this year that we are in process of onboarding. So you’ll start to see those come through and build as we go into 2027. And then we would expect, you know, between what you’re seeing in overall demand increases in the market and onboarding of these new clients, particularly because we built so many capabilities in Workforce that are playing and being received very well in the market, that as we exit 2027, you’d be, you know, back in a position of year-over-year growth.

Jack Levin (Analyst at Jefferies)

Got it. Very helpful. Appreciate it.

OPERATOR

Your next question comes from Mark Morgan from Baird. Your line is already open.

Mark Morgan (Analyst at Baird)

Good evening. Most of my questions have been asked, but I wanted to go back to one thing that you mentioned before, Carrie. In terms of the nurses being a little bit more selective because they’re sensing an uptick in terms of demand, are you seeing any sort of behavior in terms of nurses that were previously not travelers starting to sample or are becoming more engaged with looking at travel opportunities? Anything along those lines?

Caroline Grace (Chief Executive Officer)

We’re not seeing it. We’re seeing new applicants come in. I think we’re not seeing just significant influx of nurses who have never traveled. I think you need to see much higher pay rates for that phenomena to start happening. But I will say, even as we look into this next leg of growth, we would expect as you get higher bill rates that would attract additional new nurses into the market. But we haven’t necessarily seen it be a huge factor yet.

Mark Morgan (Analyst at Baird)

Okay, and those nurses that are travelers but are holding out for higher bill rates, are they actually seeing success ultimately in terms of waiting and ultimately getting a higher bill rate?

Caroline Grace (Chief Executive Officer)

I guess it depends on where they end up going. We haven’t seen widespread movement of bill rates. And so there’s such transparency, both for the client and for the clinician, around all these roles. And I think that has just increased with all these tech platforms. Between Passport and what we do on our Workwise platform, we have certainly created a lot of transparency. So they have an ability, more than they have before, to be able to really go and compare and contrast different options.

And so I don’t know that they’ve uniformly seen success in doing it right now because bill rates haven’t been consistently increasing. But it’s a behavior that we watch just in terms of feedback to clients about if they want to lock down some of the supply. Really getting bill rates at market levels is going to help do that. Increasingly, as we end the year and go into 27 demand growth we’ve had, I mean, there are some of those orders, clearly, have.

They have good bill rates that allow for a more compelling compensation package, and those ones we’re able to fill pretty effectively. It’s just that part of the reason why I see orders growing faster than volume is that, you know, some of those are just competitive with others. But it’s also, you know, there’s going to be a large quadrant that just still have rates that may just not be attractive enough. And that’s the longer that goes on, and there’s a greater urgency from clients.

That’s when the rates will start to increase, and that will allow us to pull more supply. So, you know, there’s enough now for us to continue to see this growth. But it could be even greater if you had more of those orders with rates that were really attractive. And to Kerry’s point, it’s very transparent. We want to partner with our clients to get them the right rate, make sure the order’s filled, and they’re, you know, it just takes time for them to kind of work through that.

And when the urgency is great enough, we’re seeing rate adjustments. When they happen, we can fill the orders faster than we’ve ever done historically. Yeah. Mark, one point on the fast piece, and we’ve touched on this in past conversations, we have gotten so fast that even if you looked at, like, weekly open orders, there is a healthy portion of orders that won’t even be on next week’s report because we filled them literally within a couple days. And so we look at that velocity and the speed because we want to get them filled fast, and we want them to be priced appropriately for clients and clinicians both.

And then we do the same thing when we see orders really starting to be out there for a while around what is the level of urgency for that and give guidance to clients around what they would need to be to get that order filled if it is an urgent need.

Mark Morgan (Analyst at Baird)

In terms of the premiums that you’re currently seeing relative to full time, you’ve gone through multiple quarters where you’ve said it’s at the lowest level in terms of when it. Have you seen a difference in terms of the regions where there’s actually been, you know, significant strike actions in terms of what that premium looks like, and has that resulted in any sort of change in terms of the ability to fill even faster?

Caroline Grace (Chief Executive Officer)

I don’t think we’ve seen necessarily a premium difference relative to strike. If we look at what that level is, and this is fully loaded, including recruitment costs, you’re in the low single digits. And so it is at historic low levels, which is one of the reasons why we will have some clients come and say to us, this is a very affordable option, particularly with the flexibility and access to potentially permanent talent that it gives me. What I will say is when you have regions that overall have higher pay rates because they’re more expensive geographies, you can attract talent from outside that region because that is an attractive pay rate relative to where they may be otherwise and what their permanent role opportunities are there.

Mark Morgan (Analyst at Baird)

Got it. Thank you,

OPERATOR

Mark. There are no further questions at this time. I would hand over the call to Caroline Grace for closing comments. Please go ahead.

Caroline Grace (Chief Executive Officer)

Thank you for your interest in AMN Healthcare Services, and thank you to our clients, our clinicians, our team members and suppliers who work tirelessly every day to ensure quality, workforce outcomes and care are delivered.

OPERATOR

Ladies and gentlemen, this concludes today’s conference call. Thank you for your participation and you may now disconnect.

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