AMN Healthcare's Q3 2025: Contradictions Emerge on Gross Margins, Labor Disruption, and Competitive Strategy

Date of Call: November 6, 2025

Financials Results

• Revenue: $634.0M in Q3, $9M above the high end of guidance; down 8% YOY and down 4% sequentially
• EPS: GAAP diluted EPS $0.76 in Q3; adjusted EPS $0.39, compared with $0.61 prior year and $0.30 prior quarter
• Gross Margin: Consolidated gross margin 29.1% in Q3 (at high end of guidance); declined 190 bps YOY and 70 bps sequentially
• Operating Margin: Q3 operating income $48M (includes $39M gain on sale of Smart Square); Q4 operating margin guided 0.2%–0.8%

Guidance:

• Q4 consolidated revenue guidance $715M–$730M (includes ~ $100M Labor Disruption); midpoint a little above $720M (ex-Labor Disruption just over $620M)
• Q4 consolidated gross margin 25.5%–26% (would be ~100 bps higher excluding Labor Disruption)
• Q4 reported SG&A ~20%–20.5% of revenue (includes ~$5M incremental Labor Disruption costs)
• Q4 Nurse & Allied gross margin ~21%; Nurse & Allied revenue up low-single-digits YoY including Labor Disruption (down ~6%–8% ex-Labor)
• Q4 operating margin 0.2%–0.8%; adjusted EBITDA margin 6.8%–7.3% (ex-Labor Disruption ~mid-6% range)

Business Commentary:

* Revenue Growth and Demand Recovery:

- AMN Healthcare reported revenue of $634 million for Q3 2025, which exceeded the high end of their guidance range by $9 million. - Staffing demand recovered moderately in Q3, with extension rates rebounding and Travel Nurse winter orders slightly favorable to the prior year. - The recovery was driven by increased patient utilization and a shift in workforce strategies from permanent to contingent labor to meet flexibility needs.

• Segment Performance and Outlook:
• Nurse and Allied Solutions segment reported revenue of $361 million, exceeding the high end of guidance but down 9% year-over-year.
• Physician and Leadership Solutions segment revenue grew 2% sequentially, with Locum Tenens revenue up 3% year-over-year.

• The Q4 outlook projects revenue of $720 million, with expectations for continued growth in Travel Nurse and Allied revenue due to improved demand trends.

• Gross Margin and Cost Management:

• Consolidated gross margin reached 29.1% for Q3, aligning with the high end of guidance despite an unfavorable revenue mix shift.
• SG&A expenses were $139 million, down from the prior year and previous quarter, due to lower bad debt expense and a fortunate adjustment to professional liability reserve.

• The Q4 outlook anticipates gross margin to be between 25.5% to 26%, influenced by seasonality and a $5 million Labor Disruption-related cost.

• Financial Strength and Strategic Positioning:

• AMN Healthcare ended Q3 with a 0 balance on its revolving line of credit, down from $210 million at year-end 2024.
• A debt refinancing transaction improved the corporate debt rating and extended maturities, providing balance sheet resilience.
• The company's aggressive technology improvements and customer focus have led to a 700 basis point year-over-year improvement in client satisfaction and strategic client interest in comprehensive talent solutions.
  

  Sentiment Analysis:

  Overall Tone: Neutral

  • Management highlighted Q3 beat (revenue $634M, above guidance) and recovery trends: 'demand recovered moderately in Q3...Travel Nurse winter orders slightly favorable,' but results remain down YOY (revenue down 8%) and margins pressured by mix. They guided cautious improvement into 2026 driven by international nurse growth, VMS recovery and bill-rate normalization.

Q&A:

• Question from Trevor Romeo (William Blair & Company L.L.C., Research Division): Could you help us think about the individual drivers and magnitudes of the sequential gross-margin decline (Q3 to Q4), after normalizing Labor Disruption?
  Response: Normalized sequential decline driven mainly by revenue‑mix shifting away from higher‑margin segments, seasonal lower hours, and Q3 reserve favorability; ex‑Labor Disruption normalized gross margin sits in the high‑26%/~27% range.

• Question from Trevor Romeo (William Blair & Company L.L.C., Research Division): Excluding the Labor Disruption event, what would underlying EBITDA look like and how should we model going forward?
  Response: Excluding Labor Disruption, adjusted EBITDA margin for Q4 is expected in the mid‑6% range.

• Question from Trevor Romeo (William Blair & Company L.L.C., Research Division): Is the Q3→Q4 sequential volume growth primarily a winter phenomenon or does it reflect broader underlying demand improvement and a contingent vs permanent shift?
  Response: Both — travel‑nurse demand recovered materially (≈50% up from the mid‑May low), allied is flat YoY and locums improving, so the pickup is broader than seasonal winter orders.

• Question from Kevin Fischbeck (BofA Securities, Research Division): Can you talk about the outlook for gross margins next year across the businesses?
  Response: Management expects 2026 margin tailwinds from mix improvement — international nursing (+20%+ revenue), VMS recovery and leadership/search growth — plus potential bill‑rate improvement.

• Question from Kevin Fischbeck (BofA Securities, Research Division): Is the VMS improvement next year tied to nurse demand or other factors?
  Response: VMS recovery is driven by clients coming off the marketplace and recent client wins, not necessarily a large underlying nurse‑demand surge.

• Question from Kevin Fischbeck (BofA Securities, Research Division): How do you view the current competitive backdrop?
  Response: Market remains competitive but rational; demand favors total‑talent platforms, which benefits AMN's positioning.

• Question from Tobey Sommer (Truist Securities, Inc., Research Division): Do federal funding cuts (e.g., Medicaid) imply higher or lower contingent labor demand over time?
  Response: Clients focus on revenue growth and cost containment; contingent labor is increasingly seen as affordable (premium under ~10%), supporting contingent demand.

• Question from Tobey Sommer (Truist Securities, Inc., Research Division): Can bill rates rise enough to cover inflationary elements like per diems and housing?
  Response: Bill rates are showing a modest increase in Q4 (first up in 3 years); near‑term rate increases are aimed at filling orders and driving volume, not expanding margins.

• Question from Tobey Sommer (Truist Securities, Inc., Research Division): If a public competitor is acquired, is that good or bad for AMN and the industry?
  Response: It doesn't change AMN's strategy; industry consolidation is expected but the deal does not alter AMN's 2026 plans.

• Question from Albert Rice (UBS Investment Bank, Research Division): What are you seeing on clinician supply — re‑upping, new applicants — and what rates are needed to attract incremental clinicians?
  Response: Overall supply is healthy where orders are priced right; AMN is investing in clinician engagement and speed‑to‑fill to attract and convert supply.

• Question from Albert Rice (UBS Investment Bank, Research Division): Any shifts in demand across allied or locums specialties?
  Response: Locums shows broad‑based growth (8 of 10 specialties), with recent strength in surgery, hospitalist, dentistry and anesthesia; allied led by therapy, imaging and a growing schools business.

• Question from Albert Rice (UBS Investment Bank, Research Division): Where are new business opportunities concentrated — MSP turnover, non‑MSP clients, etc.?
  Response: Pipeline grew QoQ with a bias toward MSP; momentum in extensions/expansions and most losses are to incumbency/inertia rather than pricing.

• Question from Mark Marcon (Robert W. Baird & Co. Incorporated, Research Division): When you say orders are trending up, is that only orders priced right or inclusive of unfillable orders?
  Response: Order trends include all orders, but fill rates are materially higher for orders priced at market; aged open orders showed only a slight uptick.

• Question from Mark Marcon (Robert W. Baird & Co. Incorporated, Research Division): Any differences in demand trends from rural hospitals, especially those impacted by Medicaid cuts?
  Response: No discernible difference; international nurses remain especially important for rural systems as a cost‑effective longer‑term solution.

• Question from Mark Marcon (Robert W. Baird & Co. Incorporated, Research Division): Stripping out Labor Disruption, how should we think about normal Q4→Q1 seasonality?
  Response: Seasonality unchanged — winter orders often carry into Q1 so nominal nursing growth Q4→Q1 is reasonable; schools support Allied and locums seasonality expected.

• Question from Constantine Davides (Citizens JMP Securities, LLC, Research Division): What did you do to better leverage MSP relationships for Locums and why has MSP contribution stayed in high‑teens?
  Response: We integrated Locums into core platforms (ShiftWise Flex, Passport), proactively sold Locums to clients and improved MSP fill rates, boosting Locums MSP performance.

• Question from Constantine Davides (Citizens JMP Securities, LLC, Research Division): How is collective bargaining shaping up for 2026?
  Response: We expect continued elevated strike activity relative to history, a healthy strike pipeline and an active strike business supporting clients over the next 12 months.

• Question from Constantine Davides (Citizens JMP Securities, LLC, Research Division): Can you comment on language services demand, pricing compression and long‑term outlook given technology changes?
  Response: Minutes grew modestly but pricing pressure compressed revenue; management expects operating‑model changes to lower cost‑to‑serve and deliver modest growth in 2026.

• Question from Jack Slevin (Jefferies LLC, Research Division): Clarify strike margin impact — did Labor Disruption benefit Q3 and how to reconcile mid‑6s ex‑strike EBITDA commentary?
  Response: Yes — Labor Disruption timing benefited Q3 by roughly 100 bps; normalized Q3 closer to 28% and normalized Q4 around 27%, with ex‑strike adjusted EBITDA in the mid‑6% range.

• Question from Jack Slevin (Jefferies LLC, Research Division): Is ex‑strike Q4 margin a reasonable floor for margins going forward?
  Response: Yes — ex‑strike Q4 margin (~26.5%–27%) is a reasonable floor, with upside from the 2026 mix and volume opportunities.

• Question from Jeffrey Silber (BMO Capital Markets Equity Research): Update on academic medical centers — any change?
  Response: Academic medical centers still lag non‑academic systems but are stabilizing; management expects them to be close to stabilized in 2026.

• Question from Jeffrey Silber (BMO Capital Markets Equity Research): What percentage of the business are academic medical centers?
  Response: 20%.

Contradiction Point 1

Gross Margin Expectations

It involves changes in financial forecasts, specifically regarding gross margin expectations, which are critical indicators for investors.

Could you clarify the factors contributing to the gross margin guidance, particularly the Q3 to Q4 sequential decline and the effect of Labor Disruption revenue? - Trevor Romeo (William Blair & Co. L.L.C.)

2025Q3: The 29% gross margin in Q3 included a timing benefit from Labor Disruption activities. The expected decline in Q4 gross margin is partly due to revenue mix and seasonality. - Brian Scott(CFO & COO)

Will Blackwell's Q4 revenue be additive, and what's the expected gross margin exit rate? - Stacy Rasgon (Bernstein Research)

2025Q2: Gross margins for Q3 are expected around 75%, with full-year guidance in the mid-70s. - Brian Scott(CFO & COO)

Contradiction Point 2

Labor Disruption Revenue Impact

It involves the impact of Labor Disruption revenue on gross margins, which affects the company's financial performance.

What drove the sequential decline in gross margin guidance from Q3 to Q4 and the impact of Labor Disruption revenue? - Trevor Romeo (William Blair & Co. L.L.C.)

2025Q3: The 29% gross margin in Q3 included a timing benefit from Labor Disruption activities. - Brian Scott(CFO & COO)

How is the Smart Square sale progressing? What is the strategic rationale for the transaction? Are there potential portfolio adjustments within the business? - Kevin Mark Fischbeck (BofA Securities, Research Division)

2025Q2: Labor Disruption revenue is not materially included in Q2, and we expect labor disruption to be approximately $5 million in Q3. - Caroline Sullivan Grace(President, CEO & Director)

Contradiction Point 3

Bill Rate Increases and Order Filling Strategy

It highlights differing perspectives on the company's strategy for bill rate increases and its impact on order filling, which directly affects revenue generation.

Can bill rates increase to cover rising costs such as per diems and housing? - Tobey Sommer (Truist Securities)

2025Q3: Expect mild bill rate increases in Q4, the first in 3 years, but consistency is needed. The focus is on using rate increases to fill more orders, with the belief that clients will recognize the need for higher rates to fill orders. - Caroline Grace(President, CEO & Director)

Are competitors acting rationally on low-margin orders, or are clients raising bill rates to meet demand? - Trevor Romeo (William Blair)

2025Q1: Unfilled orders are typically addressed by increasing bill rates for immediate needs. Clients are recognizing the need to adjust rates to reflect market conditions and clinician wages. - Cary Grace(President, CEO & Director)

Contradiction Point 4

Competitive Landscape and Market Positioning

It reflects differing views on the competitive landscape and market positioning, which are crucial for strategic planning and investor confidence.

What is the outlook for gross margins in 2026 and the competitive landscape? - Kevin Fischbeck (BofA Securities)

2025Q3: We anticipate favorable revenue mix with international nurse growth, VMS improvement, and healthy demand in leadership and search. Competition remains rational, with a focus on total talent solutions platforms. - Caroline Grace(President, CEO & Director)

Has competition eased due to a peer's acquisition, and is the competitive environment improving? - Tyler Barishaw (Truist)

2025Q1: Competition remains intense, with rationalization and consolidation ongoing. AMN's capabilities, platforms, and client wins indicate strong positioning despite competition. - Cary Grace(President, CEO & Director)

Contradiction Point 5

Gross Margin and Revenue Mix

It involves changes in financial performance expectations, specifically regarding gross margin and revenue mix, which are critical indicators for investors and stakeholders.

What drives the gross margin guidance, particularly the sequential decline from Q3 to Q4 and the impact of Labor Disruption revenue? - Trevor Romeo (William Blair & Co. L.L.C.)

2025Q3: The 29% gross margin in Q3 included a timing benefit from Labor Disruption activities. The expected decline in Q4 gross margin is partly due to revenue mix and seasonality. - Brian Scott(CFO & COO)

Can you provide assumptions for Nurse and Allied volumes, bill rates, and gross margin for Q2? - Joanna Gajuk (Bank of America Securities)

2025Q1: Normal seasonal decline expected in nurse volumes. Allied demand remains strong but will see typical summer declines. Rates and margins are stable with minor seasonal adjustments. - Brian Scott(CFO & COO)