AMN HEALTHCARE SERVICES INC (AMN) FY 2021 MD&A

Item 7.     Management’s Discussion and Analysis of Financial Condition and Results of Operations

You should read the following discussion in conjunction with our consolidated financial statements and the notes thereto and other financial information included elsewhere in this Annual Report on Form 10-K. Certain statements in this “Management’s Discussion and Analysis (“MD&A”) of Financial Condition and Results of Operations” are “forward-looking statements.” See “Special Note Regarding Forward-Looking Statements” under Item 1, “Business.” We intend this MD&A section to provide you with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. The following sections comprise this MD&A:

•Overview of Our Business

•Operating Metrics

•Recent Trends

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Policies and Estimates

•Recent Accounting Pronouncements

Overview of Our Business

We provide healthcare workforce solutions and staffing services to healthcare facilities across the nation. As an innovative total talent solutions partner, our managed services programs, or “MSP,” vendor management systems, or “VMS,” workforce consulting services, predictive modeling, staff scheduling, telehealth services, credentialing services, revenue cycle solutions, language interpretation services and the placement of physicians, nurses, allied healthcare professionals and healthcare leaders into temporary and permanent positions enable our clients to successfully reduce staffing complexity, increase efficiency and lead their organizations within the rapidly evolving healthcare environment.

For the year ended December 31, 2021, we recorded revenue of $3,984.2 million, as compared to $2,393.7 million for 2020. We recorded net income of $327.4 million for 2021, as compared to $70.7 million for 2020. Nurse and allied solutions segment revenue comprised 75% and 71% of total consolidated revenue for the years ended December 31, 2021 and 2020, respectively. Physician and leadership solutions segment revenue comprised 15% and 19% of total consolidated revenue for the years ended December 31, 2021 and 2020, respectively. Technology and workforce solutions segment revenue comprised 10% of total consolidated revenue for both of the years ended December 31, 2021 and 2020. For a description of the services we provide under each of our business segments, please see, “Item 1. Business—Our Services.”

We believe we are recognized as the market-leading innovator in providing healthcare talent solutions in the United States. We seek to advance our market-leading position through a number of strategies that focus on market penetration, expansion of our talent solutions, increasing operational efficiency and scalability and increasing our supply of qualified healthcare professionals. Our market growth strategy continues to focus on broadening and investing, both organically and through strategic acquisitions, in service and technology offerings beyond our traditional temporary staffing and permanent placement services, to include more strategic and recurring revenue sources from innovative talent solutions offerings such as MSP, VMS, credentialing, workforce optimization service, and other technology-enabled services. We also seek strategic opportunities to expand into complementary service offerings to our staffing businesses that leverage our core capabilities of recruiting and credentialing healthcare professionals.

As part of our long-term growth strategy to add value for our clients, healthcare professionals, and stockholders, on April 7, 2021, February 14, 2020, December 19, 2019, June 14, 2019, January 30, 2019, we acquired Synzi (including its wholly-owned subsidiary SnapMD), Stratus Video (which we have since rebranded as AMN Language Services), b4health, Advanced (which we have since rebranded as American Mobile and Med Travelers for the travel nurse staffing and allied staffing divisions, respectively), and Silversheet, respectively. Synzi and SnapMD offer virtual care technology platforms; Synzi focuses on the care management and home health markets and primarily serves as a patient communication and engagement platform, while SnapMD focuses on the outpatient market and primarily serves as a clinical communication and documentation platform. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (2), Acquisitions.”

Operationally, our strategic initiatives focus on investing in and further developing our processes and systems to achieve market leading efficiency and scalability, which we believe will provide operating leverage as our revenue grows. From a healthcare professional supply perspective, we continue to invest in new candidate recruitment and engagement initiatives and

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technologies to access and effectively utilize our network of qualified healthcare professionals to capitalize on the demand growth we are experiencing, which we expect to continue in the future due to the combined effects of healthcare reform, the aging population and labor shortages within certain regions and disciplines.

Over the last several years, we have worked to execute on our management strategies and intend to continue to do so in the future. Over the past five years, we have grown our business both organically and as a result of a number of acquisitions.

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 past five years, these quarterly fluctuations have been muted in our consolidated results.

Operating Metrics

In addition to our consolidated and segment financial results, we monitor the following key metrics to help us evaluate our results of operations and financial condition and make strategic decisions. We believe this information is useful in understanding our operational performance and trends affecting our businesses.

•average travelers on assignment represents the average number of nurse and allied healthcare professionals on assignment during the period, which is used by management as a measure of volume in our nurse and allied solutions segment;

•bill rates represent the hourly straight-time rates that we bill to clients, which are an indicator of labor market trends within our nurse and allied solutions segment;

•billable hours represent hours worked by our healthcare professionals that we are able to bill on client engagements, which is used by management as a measure of volume in our nurse and allied solutions segment;

•days filled is calculated by dividing total locum tenens hours filled during the period by eight hours, which is used by management as a measure of volume in our locum tenens business within our physician and leadership solutions segment; and

•revenue per day filled is calculated by dividing revenue of our locum tenens business by days filled for the period, which is an indicator of labor market trends in our locum tenens business within our physician and leadership solutions segment.

Recent Trends

Demand for our temporary and permanent placement staffing services is driven in part by U.S. economic and labor trends, and since early 2020 through present, the COVID-19 pandemic has impacted demand. When the imposition of “shelter-in-place” orders and the suspension of elective and “non-essential” healthcare services occurred in March 2020 in response to the COVID-19 health crisis, demand for many of our businesses declined significantly. With these orders and suspensions lifted, general utilization of healthcare has continued to improve and has generally returned to pre-COVID-19 levels. Since late 2020, we have been experiencing historically high demand for nurses and certain allied healthcare professionals. In addition, recently, demand across all segments and business lines has been above pre-COVID-19 levels.

In our nurse and allied solutions segment, prior to the COVID-19 pandemic, our ability to recruit enough nurses to meet the then-current demand levels was impacted by the tight labor market and modest bill rate increases. At the peak of the pandemic, demand for nurses was most concentrated in specialties including ICU and telemetry nurses. Now, the current historic demand levels are dispersed across many specialties. Our clients are faced with increased labor shortages resulting from nurse burnout, attrition, retirements and, to a lesser extent, the impact of mandatory vaccination requirements. The bill rates we charge our clients and wages for these nurses have continued to remain well above prior year levels due to the significantly higher demand and our clients’ need to frequently fill positions quickly. Although the number of nurses on travel assignments has increased since July 2020, our ability to adequately meet the high client demand is constrained by the tight labor market.

The overall demand in our allied staffing division reached all-time highs in the third quarter, which declined in the fourth quarter but remains higher compared to prior year. We have recently seen strong demand in our imaging, respiratory, and laboratory specialties, driven by COVID-19 hospitalizations, testing, and vaccination support, as well as our therapy specialties. Demand in other modalities were driven by the continued surge in elective procedures as more of the population has become comfortable re-entering physician offices and outpatient centers. The return to in-person learning and additional federal funding has driven our school modality to strong year-over-year increases in all healthcare specialties.

In our physician and leadership solutions segment, demand has recovered and now exceeds pre-pandemic levels. We are seeing strong demand for locum tenens and interim leadership as well as for permanent physicians and leaders. In our locum tenens division, we have seen particularly high demand for certain specialties, such as anesthesiologists, certified registered nurse anesthetists and advanced practice clinicians. Longer term, we expect continued strong core demand resulting from an increased level of burnout and turnover of healthcare leadership roles.

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In our technology and workforce solutions segment, our VMS technologies experienced increased utilization and revenue growth this year due to increased demand levels and elevated bill rates.

The utilization of our language services business continued to grow as healthcare utilization returned to a more normal level and with the increased need and importance of these services during the pandemic.

The demand for our recruitment process outsourcing increased in the second half of the year as clients look for solutions to help address the increased labor shortages and the need to address vacancies in their permanent roles. We expect this increased demand to continue in the current constrained labor market.

As our businesses have continued to grow, we have increased our sales and operations workforce to support our clients and healthcare professionals. We have also increased spending to support our current team members and retain talent.

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) physician and leadership solutions, and (3) technology and workforce solutions. The acquisitions during 2021, 2020 and 2019 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), Acquisitions.” Our historical results are not necessarily indicative of our results of operations to be expected in the future.

Comparison of Results for the Year Ended December 31, 2021 to the Year Ended December 31, 2020

Revenue. Revenue increased 66% to $3,984.2 million for 2021 from $2,393.7 million for 2020, primarily attributable to higher organic revenue across our segments along with additional revenue of $23.4 million from our Stratus Video, Synzi and SnapMD acquisitions.

Nurse and allied solutions segment revenue increased 76% to $2,990.1 million for 2021 from $1,699.3 million for 2020. The $1,290.8 million increase was primarily attributable to an approximately 31% increase in the average bill rate, a 28% increase in the average number of travelers on assignment, a 2% increase in billable hours, and an approximately $103.0 million increase in labor disruption revenue during the year ended December 31, 2021.

Physician and leadership solutions segment revenue increased 27% to $594.2 million for 2021 from $466.6 million for 2020. The $127.6 million increase was attributable to growth across businesses within the segment. Revenue in our locum tenens business grew approximately 27% during 2021 due to a 20% increase in the number of days filled and a 6% increase in the revenue per day filled. This growth was driven by a return in core demand and volume as well as COVID-19 project work. Our interim leadership business experienced an approximately 30% growth, while our physician permanent placement and executive search businesses grew 22% during 2021.

Technology and workforce solutions segment revenue increased 76% to $399.9 million for 2021 from $227.8 million for 2020. The $172.1 million increase was primarily attributable to organic growth within our VMS, language services, and outsourced solutions businesses along with additional revenue of $23.4 million from our Stratus Video, Synzi and SnapMD

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acquisitions during 2021. Revenue growth for our language services and VMS businesses was 56% and 113%, respectively, during 2021.

For 2021 and 2020, revenue under our MSP arrangements comprised approximately 56% and 50% of our consolidated revenue, 71% and 65% for nurse and allied solutions segment revenue, 15% and 17% for physician and leadership solutions segment revenue, and 2% and less than 1% of our technology and workforce solutions segment revenue, respectively.

Gross Profit. Gross profit increased 65% to $1,309.6 million for 2021 from $791.8 million for 2020, representing gross margins of 32.9% and 33.1%, respectively. The decline in in consolidated gross margin for the year ended December 31, 2021 was primarily due to (1) a change in sales mix resulting from higher revenue in our nurse and allied solutions segment, which was partially offset by higher revenue in our technology and workforce solutions segment, and (2) a lower margin in our physician and leadership solutions segment driven by a change in sales mix within the segment due to higher revenue in our locum tenens and interim leadership businesses. Gross margin by reportable segment for 2021 and 2020 was 27.4% and 27.4% for nurse and allied solutions, 35.8% and 36.7% for physician and leadership solutions, and 69.4% and 67.9% for technology and workforce solutions, respectively.

Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses were $730.5 million, representing 18.3% of revenue, for 2021, as compared to $549.7 million, representing 23.0% of revenue, for 2020. The increase in SG&A expenses was primarily due to higher employee compensation and benefits and other expenses associated with our revenue growth. The overall increase was partially offset by a $30.5 million decrease related to acquisition, integration, changes in the fair value of contingent consideration liabilities from acquisitions, restructuring, and certain legal expenses, which was primarily due to a $20.0 million increase in legal accruals during the fourth quarter of 2020. SG&A expenses broken down among the reportable segments, unallocated corporate overhead, and share-based compensation are as follows:

Depreciation and Amortization Expenses. Amortization expense decreased 1% to $63.0 million for 2021 from $63.8 million for 2020, primarily attributable to the reduction of useful lives of certain tradename intangible assets during the third quarter of 2020, which was partially offset by additional amortization expenses related to the intangible assets acquired in the Stratus Video, Synzi and SnapMD acquisitions. Depreciation expense (exclusive of depreciation included in cost of revenue) increased 32% to $38.1 million for 2021 from $28.9 million for 2020, primarily attributable to an increase in purchased and developed hardware and software placed in service for our ongoing information technology investments to support our total talent solutions initiatives and to optimize our internal systems. Additionally, $2.5 million and $1.4 million of depreciation expense for our language services business is included in cost of revenue for 2021 and 2020, respectively.

Interest Expense, Net, and Other. Interest expense, net, and other, was $34.1 million for 2021 as compared to $57.7 million for 2020. The decrease is primarily due to (1) a $8.3 million premium payment associated with the redemption of the 5.125% senior notes due 2024 (the “2024 Notes”) in the fourth quarter of 2020, (2) a $6.7 million gain related to the change in fair value of an equity investment during 2021, (3) $5.0 million of write-offs of unamortized financing fees during 2020, and (4) a lower average debt outstanding balance during 2021, which resulted from repayments of the Credit Facilities (as defined below in this Item 7). The overall decrease was partially offset by a higher weighted average interest rate during 2021, which was primarily due to the issuances of higher interest bearing senior notes during the third and fourth quarters of 2020.

Income Tax Expense. Income tax expense was $116.5 million for 2021 as compared to $20.9 million for 2020, reflecting effective income tax rates of 26.3% and 22.8% for these periods, respectively. The increase in the effective income tax rate was primarily attributable to the recognition of discrete tax benefits of $3.4 million and $4.7 million in relation to income before income taxes of $443.9 million and $91.5 million for 2021 and 2020, respectively. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Income Taxes, and Note (1), Summary of Significant Accounting Policies.”

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Comparison of Results for the Year Ended December 31, 2020 to the Year Ended December 31, 2019

We describe in detail the comparison of results for the years ended December 31, 2020 and 2019 in “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations—Comparison of Results for the Year Ended December 31, 2020 to the Year Ended December 31, 2019” of our 2020 Annual Report on Form 10-K.

Liquidity and Capital Resources

In summary, our cash flows were:

Historically, our primary liquidity requirements have been for acquisitions, working capital requirements, and debt service under our credit facilities and senior notes. We have funded these requirements through internally generated cash flow and funds borrowed under our credit facilities and senior notes.

At December 31, 2021, (1) no amount was drawn with $378.6 million of available credit under the Senior Credit Facility (as defined below), (2) the aggregate principal amount of our 2027 Notes (as defined below) outstanding equaled $500.0 million, and (3) the aggregate principal amount of our 2029 Notes (as defined below) outstanding equaled $350.0 million. We describe in further detail our Amended Credit Agreement (as defined below), under which our Senior Credit Facility is governed, the 2027 Notes, and the 2029 Notes in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement.”

At December 31, 2021, the total of our contractual obligations under operating leases with initial terms in excess of one year was $25.7 million. We describe in further detail our operating lease arrangements in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (5), Leases.” We also have various obligations and working capital requirements, such as certain tax and legal matters, contingent consideration and other liabilities, that are recorded on our consolidated balance sheets. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (3), Fair Value Measurement, Note (6), Balance Sheet Details, Note (7), Income Taxes, and Note (12), Commitments and Contingencies.”

In addition to our cash requirements, we have a share repurchase program authorized by our board of directors, which does not require the purchase of any minimum number of shares and may be suspended or discontinued at any time. See additional information in “Item 5. Market For Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities” and “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (10)(b), Capital Stock—Treasury Stock.”

We believe that cash generated from operations and available borrowings under our Senior Credit Facility will be sufficient to fund our operations and liquidity requirements, including expected capital expenditures, for the next 12 months and beyond. We intend to finance potential future acquisitions with cash provided from operations, borrowings under our Senior Credit Facility, or other borrowings under our Amended Credit Agreement, bank loans, debt or equity offerings, or some combination of the foregoing. The following discussion provides further details of our liquidity and capital resources.

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Operating Activities

Net cash provided by operating activities for 2021, 2020 and 2019 was $305.4 million, $256.8 million and $224.9 million, respectively. The increase in net cash provided by operating activities for 2021 from 2020 was primarily attributable to (1) an increase in net income excluding non-cash expenses of $259.2 million primarily due to improved operating results in our nurse and allied solutions and technology and workforce solutions segments, (2) an increase in accounts payable and accrued expenses between periods of $250.6 million primarily due to an increase in associate vendor usage and timing of payments, (3) an increase in accrued compensation and benefits between periods of $103.4 million primarily due to increases in pay rates, billable hours, and the average number of travelers on assignment in our nurse and allied solutions segment and increased employee compensation and benefits, and (4) an increase in other liabilities between periods of $81.0 million primarily due to an increase of client deposits related to labor disruption services, which was partially offset by (a) our election in the prior year to defer employer payroll taxes in accordance with the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) of which half was paid during the fourth quarter of 2021, (b) the payment of a lease termination fee during the third quarter of 2021, and (c) an increase in accruals established in connection with a legal matter during 2020. The overall increase in net cash provided by operating activities was partially offset by (1) an increase in accounts receivable and subcontractor receivables between periods of $576.7 million due to a higher average receivables balance in the current year, which was due to increases in revenue and associate vendor usage along with timing of collections and (2) increases in prepaid expenses and other current assets between periods of $57.4 million and $24.3 million, respectively, primarily due to prepayments and refunds owed to us by third-party vendors related to labor disruption services. Our Days Sales Outstanding was 53 and 55 days at December 31, 2021 and December 31, 2020, respectively.

Investing Activities

Net cash used in investing activities for 2021, 2020 and 2019 was $107.4 million, $538.2 million and $291.8 million, respectively. The year-over-year decrease from 2020 to 2021 in net cash used in investing activities was primarily attributable to (1) $41.3 million used for acquisitions in 2021 as compared to $476.5 million in 2020 and (2) a net purchase of restricted investments of $3.1 million during 2021 as compared to a net purchase of $15.5 million during 2020. In addition, capital expenditures were $53.6 million, $37.7 million and $35.2 million for the years ended December 31, 2021, 2020 and 2019, respectively. Our capital expenditures in recent years were primarily related to information technology investments to support our total talent solutions initiatives and efforts to optimize our internal systems.

Financing Activities

Net cash provided by (used in) financing activities for 2021, 2020 and 2019 was $(34.9) million, $211.5 million and $136.6 million, respectively. Net cash used in financing activities for 2021 was primarily due to (1) repayments of $70.0 million under the Senior Credit Facility and $21.9 million under the Additional Term Loan, (2) $7.2 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards, and (3) $3.1 million of acquisition earn-out payments, partially offset by borrowings of $70.0 million under the Senior Credit Facility. Net cash provided by financing activities for 2020 was primarily due to (1) gross proceeds received in connection with the issuances of the New 2027 Notes (as defined below) and the 2029 Notes (as defined below) of $552.0 million and (2) borrowings of $245.0 million under the Senior Credit Facility (as defined below) and $250.0 million under the Additional Term Loan (as defined below), partially offset by (1) the repayments of $245.0 million under the Senior Credit Facility and $228.1 million under the Additional Term Loan, (2) $333.3 million of payments related to the redemption of the 2024 Notes, (3) $11.5 million of financing costs paid in connection with the Amended Credit Agreement (as defined below) and the issuances of the 2027 Notes and the 2029 Notes, (4) $10.6 million of acquisition earn-out payments, and (5) $6.9 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards.

Amended Credit Agreement

On February 9, 2018, we entered into a credit agreement (the “New Credit Agreement”) with several lenders to provide for a $400.0 million secured revolving credit facility (the “Senior Credit Facility”) to replace our then-existing credit agreement. On June 14, 2019, we entered into the first amendment to the New Credit Agreement (the “First Amendment”) to provide for, among other things, a $150.0 million secured term loan credit facility (the “Term Loan”). In connection with our issuance of the Existing 2027 Notes (as defined below), we used a portion of the proceeds to repay our entire indebtedness under the Term Loan during the fourth quarter of 2019.

On February 14, 2020, we entered into the second amendment to the New Credit Agreement (the “Second Amendment”) to provide for, among other things, a $250.0 million secured term loan credit facility (the “Additional Term Loan” and, together with the Senior Credit Facility, the “Credit Facilities”). The Second Amendment (together with the New Credit Agreement and the First Amendment, collectively, the “Amended Credit Agreement”) extended the maturity date of the Senior Credit Facility

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to be coterminous with the Additional Term Loan. The Senior Credit Facility includes a $75.0 million sublimit for the issuance of letters of credit and a $75.0 million sublimit for swingline loans. Our obligations under the Amended Credit Agreement are secured by substantially all of our assets. During the first quarter of 2021, we paid off the remaining balance of our Additional Term Loan. The terms of the Amended Credit Agreement, including maturity dates, payment and interest terms, are described in further detail in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (8), Notes Payable and Credit Agreement.”

4.625% Senior Notes Due 2027

On August 13, 2020, AMN Healthcare, Inc., a wholly owned subsidiary of the Company, completed the issuance of an additional $200.0 million aggregate principal amount of 4.625% senior notes due 2027 (the “New 2027 Notes”), which were issued at a price of 101.000% of the aggregate principal amount. The New 2027 Notes were issued pursuant to the existing indenture, dated as of October 1, 2019, under which we previously issued $300.0 million aggregate principal amount of 4.625% senior notes due 2027 (the “Existing 2027 Notes” and together with the New 2027 Notes, the “2027 Notes”). The New 2027 Notes will be treated as a single series with the Existing 2027 Notes and will have the same terms (other than issue price, issue date and the date from which interest accrues) as those of the Existing 2027 Notes. The 2027 Notes will mature on October 1, 2027. Interest on the 2027 Notes is payable semi-annually in arrears on April 1 and October 1 of each year, commencing October 1, 2020 with respect to the New 2027 Notes. The 2027 Notes are fully and unconditionally and jointly guaranteed on a senior unsecured basis by us and all of our subsidiaries that guarantee the Amended Credit Agreement.

On and after October 1, 2022, we may redeem all or a portion of the 2027 Notes upon not less than 30 nor more than 60 days’ notice, at the redemption prices (expressed in percentages of principal amount on the redemption date) set forth below, plus accrued and unpaid interest, if any, to (but excluding) the redemption date, if redeemed during the twelve month period commencing on October 1 of the years set forth below:

Prior to October 1, 2022, we may also redeem 2027 Notes with the net cash proceeds of certain equity offerings in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the 2027 Notes issued, at a redemption price (expressed as a percentage of principal amount) of 104.625% of the principal amount thereof plus accrued and unpaid interest, if any, to (but excluding) the applicable redemption date.

In addition, we may redeem some or all of the 2027 Notes prior to October 1, 2022 at a redemption price equal to 100% of the principal amount of the 2027 Notes redeemed, plus accrued and unpaid interest thereon, if any, to (but excluding) the applicable redemption date, plus a “make-whole” premium based on the applicable treasury rate plus 50 basis points.

Upon the occurrence of specified change of control events as defined in the indenture governing the 2027 Notes, we must offer to repurchase the 2027 Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to (but excluding) the purchase date.

The indenture governing the 2027 Notes contains covenants that, among other things, restrict our ability to:

•sell assets,

•pay dividends or make other distributions on capital stock, make payments in respect of subordinated indebtedness or make other restricted payments,

•make certain investments,

•incur or guarantee additional indebtedness or issue preferred stock,

•create certain liens,

•enter into agreements that restrict dividends or other payments from our restricted subsidiaries,

•consolidate, merge or transfer all or substantially all of our assets,

•engage in transactions with affiliates, and

•create unrestricted subsidiaries.

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These covenants are subject to a number of important exceptions and qualifications. The indenture governing the 2027 Notes contains affirmative covenants and events of default that are customary for indentures governing high yield securities. The 2027 Notes and the guarantees are not subject to any registration rights agreement.

We used the proceeds from the issuance and sale of the Existing 2027 Notes to (1) repay $149.1 million of our indebtedness under the Term Loan, (2) repay $146.0 million under our Senior Credit Facility, and (3) pay fees and expenses related to the transaction during the fourth quarter of 2019. We used the proceeds from the issuance of the New 2027 Notes to repay $200.0 million of our indebtedness under the Additional Term Loan during the third quarter of 2020.

4.000% Senior Notes Due 2029

On October 20, 2020, AMN Healthcare, Inc., a wholly owned subsidiary of the Company, completed the issuance of $350.0 million aggregate principal amount of 4.000% Senior Notes due 2029 (the “2029 Notes”). The 2029 Notes will mature on April 15, 2029. Interest on the 2029 Notes will be payable semi-annually in arrears on April 15 and October 15 of each year, commencing April 15, 2021.

At any time and from time to time on and after April 15, 2024, we will be entitled at our option to redeem all or a portion of the 2029 Notes upon not less than 10 nor more than 60 days’ notice, at the redemption prices (expressed in percentages of principal amount on the redemption date) set forth below, plus accrued and unpaid interest, if any, to (but excluding) the redemption date (subject to the right of holders of record of the 2029 Notes on the relevant record date to receive interest due on the relevant interest payment date), if redeemed during the twelve month period commencing on April 15 of the years set forth below:

At any time and from time to time prior to April 15, 2024, we may also redeem 2029 Notes with the net cash proceeds of certain equity offerings in an aggregate principal amount not to exceed 40% of the aggregate principal amount of the 2029 Notes issued, at a redemption price (expressed as a percentage of principal amount) of 104.000% of the principal amount thereof plus accrued and unpaid interest, if any, to (but excluding) the applicable redemption date.

In addition, we may redeem some or all of the 2029 Notes at any time and from time to time prior to April 15, 2024 at a redemption price equal to 100% of the principal amount of the 2029 Notes redeemed, plus accrued and unpaid interest thereon, if any, to (but excluding) the applicable redemption date, plus a “make-whole” premium based on the applicable treasury rate plus 50 basis points.

Upon the occurrence of specified change of control events as defined in the indenture governing the 2029 Notes, we must offer to repurchase the 2029 Notes at 101% of the principal amount, plus accrued and unpaid interest, if any, to (but excluding) the purchase date.

The indenture governing the 2029 Notes contains covenants that, among other things, restricts our ability to:

•sell assets;

•pay dividends or make other distributions on capital stock, make payments in respect of subordinated indebtedness or make other restricted payments;

•make certain investments;

•incur or guarantee additional indebtedness or issue preferred stock;

•create certain liens;

•enter into agreements that restrict dividends or other payments from our restricted subsidiaries to us;

•consolidate, merge or transfer all or substantially all of their assets;

•enter into transactions with affiliates; and

•create unrestricted subsidiaries.

These covenants are subject to a number of important exceptions and qualifications. The indenture governing the 2029 Notes contains affirmative covenants and events of default that are customary for indentures governing high yield securities. The 2029 Notes and the guarantees are not subject to any registration rights agreement.

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We used the proceeds from the issuance of the 2029 Notes, along with cash generated from operations, to (1) redeem all of our outstanding $325.0 million aggregate principal amount of 2024 Notes on November 4, 2020, (2) pay the associated redemption premium and all accrued and unpaid interest on the 2024 Notes, (3) repay $40.0 million under the Senior Credit Facility, and (4) pay fees and expenses related to the transaction during the fourth quarter of 2020.

Letters of Credit

At December 31, 2021, we maintained outstanding standby letters of credit totaling $23.6 million as collateral in relation to our workers compensation insurance agreements and a corporate office lease agreement. Of the $23.6 million of outstanding letters of credit, we have collateralized $2.2 million in cash and cash equivalents and the remaining $21.4 million is collateralized by the Senior Credit Facility. Outstanding standby letters of credit at December 31, 2020 totaled $24.1 million.

Critical Accounting Policies and Estimates

Our critical accounting policies are described in Note (1) to our audited consolidated financial statements contained in Item 8 of this Annual Report on Form 10-K. Critical accounting policies are those that we believe are both important to the portrayal of our financial condition and results and require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. The preparation of our consolidated financial statements in conformity with United States generally accepted accounting principles requires us to make estimates and judgments that affect our reported amounts of assets and liabilities, revenue and expenses, and related disclosures of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates and base them on the information that is currently available to us and on various other assumptions that we believe are reasonable under the circumstances. Actual results could vary from these estimates under different assumptions or conditions. We believe that the following critical accounting policies affect the more significant judgments and estimates used in the preparation of our consolidated financial statements:

Goodwill and Indefinite-lived Intangible Assets

Our business acquisitions typically result in the recording of goodwill and other intangible assets. The determination of the fair value of such intangible assets involves the use of appropriate valuation techniques and requires management to make estimates and assumptions that affect our consolidated financial statements. Significant judgments required to estimate the fair values include estimated future cash flows, growth rates, customer attrition rates, brand awareness and discount rates. Changes in these estimates and assumptions could materially affect the determination of fair value for each intangible asset. Management may engage independent third-party specialists to assist in determining the fair values. For intangible assets purchased in a business acquisition, the estimated fair values of the assets received are used to establish their recorded values, which may become impaired in the future.

In accordance with accounting guidance on goodwill and other intangible assets, we perform annual impairment analysis to assess the recoverability of goodwill and indefinite-lived intangible assets. We assess the impairment of goodwill of our reporting units and indefinite-lived intangible assets annually, or more often if events or changes in circumstances indicate that the carrying value may not be recoverable. We may first assess qualitative factors to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after assessing the totality of events and circumstances, we determine that it is more likely than not that the fair value of the reporting unit is greater than its carrying amount, the quantitative impairment test is unnecessary. If the reporting unit does not pass the qualitative assessment, then the reporting unit’s carrying value is compared to its fair value. The fair values of the reporting units are estimated using market and discounted cash flow approaches. Goodwill is considered impaired if the carrying value of the reporting unit exceeds its fair value. Application of the goodwill impairment test requires judgment, including the identification of reporting units, assignment of assets and liabilities to reporting units, assignment of goodwill to reporting units, and determination of the fair value of each reporting unit. Valuation techniques consistent with the market approach and income approach are used to measure the fair value of each reporting unit. Significant judgments are required to estimate the fair value of reporting units including estimating future cash flows, and determining appropriate discount rates, growth rates, company control premium and other assumptions. Changes in these estimates and assumptions could materially affect the determination of fair value for each reporting unit. We perform our annual impairment test on October 31 of each year.

Intangible assets with estimable useful lives are required to be amortized over their respective estimated useful lives and reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment evaluation is based on an undiscounted cash flow analysis at the lowest level at which cash flows of the long-lived assets are largely independent of other groups of assets and liabilities. We assess potential impairments to intangible assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset or

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asset group may not be recovered. Our judgments regarding the existence of impairment indicators and future cash flows related to intangible assets are based on operational performance of our businesses, market conditions and other factors. Although there are inherent uncertainties in this assessment process, the estimates and assumptions we use, including estimates of future cash flows, volumes, market penetration and discount rates, are consistent with our internal planning. If these estimates or their related assumptions change in the future, we may be required to record an impairment charge on all or a portion of our long-lived intangible assets. Furthermore, we cannot predict the occurrence of future impairment-triggering events nor the impact such events might have on our reported asset values. Future events could cause us to conclude that impairment indicators exist and that long-lived intangible assets associated with our acquired businesses are impaired.

Professional Liability Reserve

We determine the adequacy of our accrual for professional liability by evaluating our historical experience and trends, loss reserves established by our insurance carriers, management and third-party administrators, and our independent actuarial studies. We obtain actuarial studies on a semi-annual basis to assist us in determining the adequacy of our accrual. For periods between the actuarial studies, we record accruals based on loss rates provided in the most recent actuarial study and management’s review of loss history. Our accrual for professional liability includes provisions for estimated losses incurred but not yet reported (“IBNR”), as well as provisions for known claims. We determine the amount of estimated losses IBNR by following a detailed actuarial process that involves the use of assumptions that are primarily based upon historical loss experience, industry data and other actuarial assumptions. The ultimate settlements of our professional liability claims may vary significantly from our estimates if future changes in claim frequency or severity differ from historical trends and actuarial assumptions, which could have a material effect on our consolidated financial condition or results of operations.

Contingent Liabilities

We are involved in various lawsuits, claims, investigations, and proceedings that arise in the ordinary course of business. These matters typically relate to professional liability, tax, compensation, contract, competitor disputes and employee-related matters and include individual and class action lawsuits, as well as inquiries and investigations by governmental agencies regarding the Company’s employment and compensation practices. Additionally, some of our clients may also become subject to claims, governmental inquiries and investigations and legal actions relating to services provided by our healthcare professionals. From time to time, and depending upon the particular facts and circumstances, we may be subject to indemnification obligations under our contracts with such clients relating to these matters.

Certain of the above-referenced matters may include speculative claims for substantial or indeterminate amounts of damages. We record a liability when we believe that it is both probable that a loss has been incurred and the amount can be reasonably estimated. In assessing the probability of loss and the estimated amount, we consider the following factors, among others: (a) the nature of the matter and any related facts, circumstances and data; (b) the progress of the case; (c) the opinions or views of legal counsel and other advisers; (d) our experience, and the experience of other entities, in similar cases; (e) how we intend to respond to the matter; and (f) reasonable settlement values based on the foregoing factors. Significant judgment is required to determine both probability and the estimated amount. Where a range of loss can be reasonably estimated with no best estimate in the range, we record the minimum estimated liability. We review these provisions at least quarterly and adjust these provisions accordingly to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and updated information. We believe that the amount or estimable range of reasonably possible loss beyond the accruals that we have established, will not, either individually or in the aggregate, have a material adverse effect on our business, consolidated financial position, results of operations, or cash flows with respect to loss contingencies for legal and other contingencies as of December 31, 2021. However, the outcome of litigation is inherently uncertain. Therefore, if one or more of these legal matters were resolved against us for amounts in excess of management’s expectations, our results of operations and financial condition, including in a particular reporting period, could be materially adversely affected.

Recent Accounting Pronouncements

In October 2021, the FASB issued ASU 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and Contract Liabilities from Contracts with Customers.” The new guidance will require companies to apply the definition of a performance obligation under Accounting Standards Codification (“ASC”) Topic 606, Revenue from Contracts with Customers, to recognize and measure contract assets and contract liabilities, such as deferred revenue, relating to contracts with customers that are acquired in a business combination. Under existing guidance, an acquirer generally recognizes assets acquired and liabilities assumed in a business combination, including contract assets and contract liabilities arising from revenue contracts with customers, at their acquisition-date fair values in accordance with ASC Subtopic 820-10, Fair Value Measurements—Overall. Generally, this new guidance will result in the acquirer recognizing acquired contract assets and liabilities on the same basis that would have been recorded by the acquiree prior to the acquisition under ASC Topic 606. This standard is effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2022, with

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early adoption permitted. We are currently evaluating the impact of adopting this standard on our consolidated financial statements.

There have been no other new accounting pronouncements issued but not yet adopted that are expected to materially affect our consolidated financial condition or results of operations.