AMN HEALTHCARE SERVICES INC
For the period ended Dec 31, 2024. Filed Feb 21, 2025.
View on SEC.govAbout this filing
A company's yearly report to the SEC, with audited financial statements. It is the fullest account a company gives of its business, its finances and the risks it sees.
FY2024 · Filed Feb 21, 2025
AMN$36.19-23.7%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-K
Period ended 2023-12-31; filed 2024-02-22.
0001142750-24-000016
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsPageCurrent report: 10-K
Period ended 2024-12-31; filed 2025-02-21.
0001142750-25-000011
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of OperationsPageThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 113 previous paragraphs and 126 current paragraphs.
73 unchanged; 31 reworded; 20 added; 8 removed; 1 previous and 2 current paragraphs rearranged.
Tables are not compared: 6 previous and 7 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (20)
Current report
•Results of Operations
Current report
We provide technology-enabled healthcare workforce solutions and staffing services to healthcare organizations across the nation. The Company provides access to a comprehensive network of healthcare professionals through its recruitment strategies and breadth of career opportunities. We help providers optimize their workforce to reduce complexity and increase efficiency. Our total talent solutions include vendor neutral and managed services programs (“MSP”), clinical and interim healthcare leaders, temporary staffing, permanent placement, executive search, vendor management systems (“VMS”), recruitment process outsourcing, predictive modeling, language services, revenue cycle solutions, and other services. Clients include acute-care hospitals, community health centers and clinics, physician practice groups, retail and urgent care centers, home health facilities, schools and many other healthcare settings.
Current report
Through our nurse and allied solutions segment, we provide hospitals, other healthcare facilities, and schools with a comprehensive set of staffing solutions, including direct, vendor neutral, and managed services solutions in which we manage and staff all the temporary and permanent nursing and allied staffing needs, as well as the revenue cycle management needs, of a client. A majority of our placements in this segment are under our managed services solution.
Current report
Through our physician and leadership solutions segment, we place physicians of all specialties, as well as dentists and advanced practice providers, with clients on a temporary basis, generally as independent contractors. We also recruit physicians and healthcare leaders for permanent placement and place interim leaders and executives across all healthcare settings. The interim healthcare leaders and executives we place are typically placed on contracts with assignment lengths ranging from a few days to one year.
Current report
Through our technology and workforce solutions segment, we provide hospitals and other healthcare facilities with a range of workforce solutions, including: (1) language services, (2) software-as-a-service (“SaaS”)-based VMS technologies through which our clients can self-manage the procurement of contingent clinical labor and their internal float pool, (3) workforce optimization services that include consulting, data analytics, predictive modeling, and SaaS-based scheduling technology, and (4) recruitment process outsourcing services in which we recruit, hire and/or onboard permanent clinical and nonclinical positions on behalf of our clients.
Current report
Since the COVID-19 pandemic subsided, healthcare organizations have aggressively hired permanent staff and focused on cost containment and alternative staffing models that enabled them to reduce utilization of contingent labor. As a result, overall demand for our nurse and allied solutions segment declined significantly and remains below pre-pandemic levels. Within the segment, travel nurse demand has experienced the most significant decline, but has seen an increase in demand as measured by open orders from the second quarter through the fourth quarter. Demand for our allied staffing business has remained steady and continues to be above pre-pandemic levels with high demand in therapy and imaging.
Current report
Staffing volumes for our nurse and allied solutions segment during the fourth quarter were flat to the prior quarter after sequential declines throughout 2023 and 2024. Visa retrogression has negatively impacted international nurse volumes, which we expect to continue into next year. Additionally, we supported a significant labor disruption event in the fourth quarter, which favorably impacted the segment’s revenue. Bill rates in the fourth quarter were flat to the prior quarter after a modest sequential decline, which we believe indicates stabilization of market rates.
Current report
In our physician and leadership solutions segment, demand for our locum tenens staffing business in the fourth quarter declined from the prior year though it was higher compared with the prior quarter. Certified registered nurse anesthetists (CRNAs) continue to be the largest specialty for our locum tenens staffing business. Revenue per day filled increased in the fourth quarter as compared to both the prior year and prior quarter. Demand for our interim leadership and search businesses in the fourth quarter was below prior year, but demand in our interim leadership business was up sequentially. Demand for these businesses has been impacted by healthcare organizations deferring hiring decisions or increasing insourcing.
Current report
In our technology and workforce solutions segment, our language services business continued to experience an increase in minutes from our existing clients and growth from new clients. Volumes in our VMS business followed similar trends as our travel nurse business as compared to the prior year and prior quarter. VMS bill rates in the fourth quarter were down sequentially and year over year.
Current report
Cost of Revenue. Cost of revenue, which consists predominantly of compensation, benefits, housing, travel and allowance costs for healthcare professionals and medically qualified interpreters, decreased 19% to $2,064.4 million for 2024 from $2,539.7 million for 2023. The $475.3 million decrease was attributable to a decline in our nurse and allied solutions segment, partially offset by increases in our physician and leadership solutions and technology and workforce solutions segments. The decrease in our nurse and allied solutions segment was primarily attributable to a $555.1 million decrease in provider pay package costs, including housing, travel and allowances, primarily due to the aforementioned decrease in the average number of travelers on assignment. The increase in our physician and leadership solutions segment was driven by a $71.8 million increase in provider pay package costs, primarily due to the MSDR acquisition. The increase in our technology and workforce solutions segment was primarily attributable to $13.1 million of higher compensation and benefits mainly from the aforementioned increase in minutes in our language services business. Cost of revenue broken down among the reportable segments is as follows:
Current report
Goodwill Impairment Losses. Goodwill impairment losses of $123.3 million and $99.2 million were recognized in the nurse and allied solutions segment and physician and leadership solutions segment, respectively, during the year ended December 31, 2024. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (4), Goodwill and Identifiable Intangible Assets.”
Current report
We performed a quantitative impairment test of our goodwill as of October 31, 2024 and determined that the estimated fair values of the nurse and allied solutions and physician and leadership solutions reporting units were below their respective carrying amounts. The estimated fair value of the technology and workforce solutions reporting unit exceeded its carrying amount by more than 100 percent. As a result, we recognized goodwill impairment losses of $222.5 million in the consolidated financial statements as of and for the year ended December 31, 2024.
Current report
We consider the following assumptions used in the income and market approaches to be significant assumptions in estimating the fair value of our reporting units: revenue growth rates, long-term growth rates, weighted average cost of capital, and selection of market multiples.
Current report
Under the income approach, the discounted cash flow method uses estimated future cash flows, including revenue growth rates, based on our internal forecasts, which are estimated considering our historical experience, expectations of future business performance, and assessment of current and future market conditions. Keeping all other assumptions constant and excluding the effect of deferred income taxes, a change in the revenue growth rates over the entire forecast period of 25 basis points would have increased or reduced the goodwill impairment losses by approximately $37.0 million.
Current report
A long-term growth rate is used to calculate the terminal value of our reporting units in the discounted cash flow method and is based on estimated economic and industry growth. According to the U.S. Inflation Calculator, healthcare inflation has ranged from 0.5% to 5.2% (average of 3.3%) over the last 25 years. And according to the U.S. Census Bureau, the number of adults age 65 or older is projected to grow an estimated 31% between 2022 and 2035. Based on the expectations of an increasingly aging population requiring additional healthcare services and the historical levels of inflation in the healthcare industry, we used an estimated long-term growth rate of 4.0% in the annual impairment test as of October 31, 2024. Keeping all other assumptions constant and excluding the effect of deferred income taxes, a change in the estimated long-term growth rates of 25 basis points would have increased or reduced the goodwill impairment losses by approximately $7.0 million.
Current report
In the discounted cash flow method, each reporting unit’s estimated future cash flows are discounted at a rate that is consistent with a weighted-average cost of capital (WACC), which represents the after-tax rate of return required by a market participant, which is based on observed market return data and company-specific risk factors. The Company engaged a third-party valuation specialist to assist in the determination of the WACC, which ranged from 13.5% to 14.0% for our reporting units in the most recent impairment test. Keeping all other assumptions constant and excluding the effect of deferred income taxes, a change in the WACC of 50 basis points would have increased or reduced the goodwill impairment losses by approximately $30.0 million.
Current report
Under the market approach, we utilize the guideline company method, which involves the selection of valuation multiples based on the market capitalization of similar publicly traded companies. Multiples derived from these companies provide an indication of how much a market participant would be willing to pay for a company. These multiples are applied to the forecasted financial metrics for our reporting units to arrive at an indication of value. The market multiples used are revenue and earnings before interest, taxes, depreciation, and amortization (EBITDA). Keeping all other assumptions constant and excluding the effect of deferred income taxes, a change in the market multiples of 10% would have increased or reduced the goodwill impairment losses by approximately $53.0 million.
Current report
Although the accounting guidance does not require impairment testing of long-lived assets in a reporting unit that is tested for goodwill impairment, we assess whether the related circumstances result in evidence that the carrying amounts of our long-lived assets may not be recoverable. As such, prior to the quantitative impairment test of our goodwill as of October 31, 2024, we evaluated the recoverability of the carrying amounts of asset groups within the nurse and allied solutions and physician and leadership solutions reporting units and determined that the undiscounted cash flows for all the asset groups tested were above their respective carrying amounts. Therefore, no impairment loss on our long-lived assets was recognized.
Current report
In November 2024, the FASB issued ASU 2024-03, “Income Statement—Reporting Comprehensive Income—Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses,” which is intended to improve disclosures about the expenses of public entities. The new guidance requires more detailed information about the types of expenses in commonly presented expense captions (such as cost of sales and selling, general, and administrative expenses) and requires public entities to disclose, on an annual and interim basis, the amounts of expenses included in each relevant expense caption presented on the face of the income statement within continuing operations, in a tabular format. Additionally, public entities will be required to disclose a qualitative description of the amounts remaining in relevant expense captions that are not separately disaggregated quantitatively, the total amount of selling expenses and, in annual reporting periods, the definition of selling expenses. This standard is effective on either a prospective or retrospective basis for fiscal years beginning after December 15, 2026 and interim periods within fiscal years beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of adopting this standard on our disclosures.
Removed paragraphs (8)
Previous report
We provide healthcare workforce solutions and staffing services to healthcare facilities across the nation. As a tech-centric total talent solutions partner, our managed services programs, or “MSP,” vendor management systems, or “VMS,” workforce consulting services, predictive modeling, staff scheduling, 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.
Previous report
Demand for our temporary and permanent placement staffing services is driven in part by U.S. economic and labor trends, and from early 2020 through 2022, the COVID-19 pandemic and the “Great Resignation” impacted demand. From late 2020 through most of 2022, these conditions resulted in historically high demand for our nurses, allied healthcare professionals and vendor-neutral VMS technologies supporting the placement of these professionals. Since 2022, healthcare organizations have hired permanent staff aggressively, enabling them to reduce what had been historically high utilization of contingent labor. As a result, in 2023, demand in our travel nurse business declined significantly over the course of the first quarter and into the early second quarter. In the third and fourth quarter, demand for our travel nurse business was relatively stable but remained below pre-pandemic levels. Demand in our allied business continues to be above pre-pandemic levels, and certain specialties such as therapy and imaging are up significantly year over year, offsetting the decline in laboratory and other specialties involved in treating COVID-19 patients.
Previous report
In our nurse and allied solutions segment, we have seen a decrease in overall staffing volume from prior year due to lower travel nurse demand with fourth quarter staffing volume relatively flat to the prior quarter. Overall staffing volume remains above pre-pandemic levels with favorable demand in international nurse staffing and allied staffing. Bill rates decreased slightly in the fourth quarter, at a slower rate than the first three quarters of the year, and remain well above pre-pandemic levels across the nurse and allied solutions segment.
Previous report
In our physician and leadership solutions segment, demand for our locum tenens business is well above pre-pandemic levels. We have seen several years of growth in certified registered nurse anesthetists (CRNAs), the specialty that represents the largest percentage of revenue in this business. Elevated demand levels for locum tenens staffing drove a double digit increase to revenue per day filled in 2023 as compared to the prior year. We experienced a seasonal dip in demand for locum tenens staffing in the fourth quarter but expect it to continue to be above pre-pandemic levels. Demand has been declining in our interim leadership and executive search businesses since the second half of 2022 as some healthcare organizations streamlined leadership roles, deferred hiring decisions, or increased permanent staff hiring.
Previous report
In our technology and workforce solutions segment, our language services business continued to experience increased utilization and shift to more virtual interpretation. Bill rates and volumes in our VMS business followed similar trends, although to a greater extent, as our nurse and allied solutions segment, declining from historic highs. Bill rates continued to decrease in the fourth quarter but are expected to remain above pre-pandemic levels.
Previous report
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.
Previous report
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.
Previous report
In November 2023, the FASB issued Accounting Standards Update (“ASU”) 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures,” which expands the breadth and frequency of reportable segment disclosure requirements, primarily though enhanced disclosures about significant segment expenses. The new guidance requires public entities to disclose, on an annual and interim basis, significant segment expenses that are regularly provided to the chief operating decision maker (“CODM”), the amount and composition of other segment items by reportable segment, any additional measures of a segment’s profit or loss used by the CODM when assessing performance and deciding how to allocate resources, and the CODM’s title and position. Additionally, public entities will be required to provide in interim periods all disclosures about a reportable segment’s profit or loss that are currently required annually by Topic 280. This standard is effective on a retrospective basis for fiscal years beginning after December 15, 2023 and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. We are currently evaluating the impact of adopting this standard on our disclosures.
Reworded paragraphs (31)
Previous wording
For the year ended December 31, 2023, we recorded revenue of $3,789.3 million, as compared to $5,243.2 million for 2022. We recorded net income of $210.7 million for 2023, as compared to $444.1 million for 2022. Nurse and allied solutions segment revenue comprised 69% and 76% of total consolidated revenue for the years ended December 31, 2023 and 2022, respectively. Physician and leadership solutions segment revenue comprised 18% and 13% of total consolidated revenue for the years ended December 31, 2023 and 2022, respectively. Technology and workforce solutions segment revenue comprised 13% and 11% of total consolidated revenue for the years ended December 31, 2023 and 2022, respectively. For a description of the services we provide under each of our business segments, please see, “Item 1. Business—Our Services.”
Current wording
For the year ended December 31, 2024, we recorded revenue of $2,983.8 million, as compared to $3,789.3 million for 2023. We recorded net income (loss) of $(147.0) million for 2024, as compared to $210.7 million for 2023. Nurse and allied solutions segment revenue comprised 61% and 69% of total consolidated revenue for the years ended December 31, 2024 and 2023, respectively. Physician and leadership solutions segment revenue comprised 24% and 18% of total consolidated revenue for the years ended December 31, 2024 and 2023, respectively. Technology and workforce solutions segment revenue comprised 15% and 13% of total consolidated revenue for the years ended December 31, 2024 and 2023, respectively. For a description of the services we provide under each of our business segments, please see, “Item 1. Business—Our Services.”
Previous wording
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, 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.
Current wording
We believe we are recognized as a market-leading innovator in providing healthcare talent solutions in the United States. We seek to advance our 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, 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.
Previous wording
As part of our long-term growth strategy to add value for our clients, healthcare professionals, and stockholders, we acquired MSI Systems Corp. and DrWanted.com LLC (together “MSDR”) on November 30, 2023 and Connetics on May 13, 2022. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (2), Acquisitions.”
Current wording
Over the last several years, we have worked to execute on our management strategies and intend to continue to do so in the future. As part of our long-term growth strategy to add value for our clients, healthcare professionals, and stockholders, we acquired MSI Systems Corp. and DrWanted.com LLC (together “MSDR”) on November 30, 2023 and Connetics on May 13, 2022. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (2), Acquisitions.”
Previous wording
•Billable hours represent hours worked by our healthcare professionals that we are able to bill on client engagements, which are used by management as a measure of volume in our nurse and allied solutions segment;
Current wording
•Billable hours represent the number of hours worked by our healthcare professionals that we are able to bill on client engagements, which are used by management as a measure of volume in our nurse and allied solutions segment;
Previous wording
•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
Current wording
•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;
Previous wording
•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 and costs in our locum tenens business within our physician and leadership solutions segment.
Current wording
•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 and costs in our locum tenens business within our physician and leadership solutions segment; and
Previous wording
Revenue. Revenue decreased 28% to $3,789.3 million for 2023 from $5,243.2 million for 2022, attributable to a decline in revenue across our segments with the greatest decline in our nurse and allied solutions segment.
Current wording
Revenue. Revenue decreased 21% to $2,983.8 million for 2024 from $3,789.3 million for 2023, attributable to a decline in organic revenue across our segments with the greatest decline in our nurse and allied solutions segment.
Previous wording
Nurse and allied solutions segment revenue decreased 34% to $2,624.5 million for 2023 from $3,982.5 million for 2022. The $1,357.9 million decrease was primarily attributable to a 17% decrease in the average number of travelers on assignment, an approximately 15% decrease in the average bill rate, a 3% decrease in billable hours during the year ended December 31, 2023, and an approximately $99.0 million decrease in labor disruption revenue.
Current wording
Nurse and allied solutions segment revenue decreased 31% to $1,815.7 million for 2024 from $2,624.5 million for 2023. The $808.8 million decrease was primarily attributable to a $592.1 million decline driven by a 24% decrease in the average number of travelers on assignment, a $257.0 million decline driven by an approximately 10% decrease in the average bill rate, and a $41.1 million decline driven by a 2% decrease in average billable hours during the year ended December 31, 2024. The overall decrease was partially offset by a $50.0 million increase in labor disruption revenue.
Previous wording
Physician and leadership solutions segment revenue decreased 4% to $669.7 million for 2023 from $697.9 million for 2022. The $28.2 million decrease was attributable to lower revenue in our interim leadership, physician permanent placement and executive search businesses, which was partially offset by higher revenue in our locum tenens business. Revenue in our locum tenens business grew 9% during 2023 primarily due to a 10% increase in the revenue per day filled on an organic basis and additional revenue of $13.2 million in connection with the MSDR acquisition, partially offset by a 4% decrease in the number of days filled on an organic basis. Our interim leadership business experienced an approximately 26% decline, while our physician permanent placement and executive search businesses declined 20% during 2023.
Current wording
Physician and leadership solutions segment revenue increased 9% to $728.6 million for 2024 from $669.7 million for 2023. The $58.9 million increase was attributable to higher revenue in our locum tenens business, which was partially offset by lower revenue in our interim leadership, physician permanent placement and executive search businesses. Revenue in our locum tenens business grew $101.6 million (or 22%) during 2024 primarily due to the favorable impact of $23.9 million as a result of a 6% increase in the revenue per day filled on an organic basis and additional revenue of $121.2 million in connection with the MSDR acquisition, partially offset by a $43.5 million decline driven by a 10% decrease in the number of days filled on an organic basis. As a result of a decline in demand, revenue in our interim leadership business experienced a decline of $21.3 million (or 16%), while our physician permanent placement and executive search businesses declined $21.4 million (or 31%) during 2024.
Previous wording
Technology and workforce solutions segment revenue decreased 12% to $495.0 million for 2023 from $562.8 million for 2022. The $67.8 million decrease was primarily attributable to a decline within our VMS business, partially offset by growth within our language services business. Revenue for our VMS business declined 36% for similar reasons as nurse and allied solutions segment revenue, while our language services business grew 20% primarily due to a 24% increase in minutes during 2023.
Current wording
Technology and workforce solutions segment revenue decreased 11% to $439.5 million for 2024 from $495.0 million for 2023. The $55.6 million decrease was primarily attributable to declines within our VMS business and outsourced solutions businesses, partially offset by growth within our language services business. Revenue for our VMS business declined $65.1 million (or 38%) for similar reasons as nurse and allied solutions segment revenue and our outsourced solutions business declined $25.5 million (or 62%) primarily due to a decline in demand, while our language services business grew $38.1 million (or 15%) primarily due to growth of $43.2 million as a result of a 17% increase in minutes during 2024.
Previous wording
For 2023 and 2022, revenue under our MSP arrangements comprised approximately 54% and 64% of our consolidated revenue, 72% and 81% for nurse and allied solutions segment revenue, 20% and 18% for physician and leadership solutions segment revenue, and 2% and 2% of our technology and workforce solutions segment revenue, respectively.
Current wording
For 2024 and 2023, revenue under our MSP arrangements comprised approximately 45% and 54% of our consolidated revenue, 67% and 72% for nurse and allied solutions segment revenue, 15% and 20% for physician and leadership solutions segment revenue, and 3% and 2% of our technology and workforce solutions segment revenue, respectively.
Previous wording
Gross Profit. Gross profit decreased 27% to $1,249.6 million for 2023 from $1,716.7 million for 2022, representing gross margins of 33.0% and 32.7%, respectively. The increase in consolidated gross margin for the year ended December 31, 2023 was primarily due to (1) a change in sales mix resulting from lower revenue in our nurse and allied solutions segment and (2) a higher margin in our nurse and allied solutions segment driven by a revenue mix shift within the segment. The overall increase was partially offset by a lower margin in our technology and workforce solutions segment primarily due to a change in sales mix resulting from lower revenue in our VMS business and its higher margins as compared to our other businesses within the segment. Gross margin by reportable segment for 2023 and 2022 was 26.4% and 26.3% for nurse and allied solutions, 34.3% and 34.5% for physician and leadership solutions, and 66.2% and 76.0% for technology and workforce solutions, respectively.
Current wording
Gross Profit. Gross profit decreased 26% to $919.4 million for 2024 from $1,249.6 million for 2023, representing gross margins of 30.8% and 33.0%, respectively. The decline in consolidated gross margin for the year ended December 31, 2024 was primarily due to (1) lower margins in our nurse and allied solutions and physician and leadership solutions segments driven by higher provider pay packages, including housing, travel and allowances and (2) a lower margin in our technology and workforce solution segment primarily due to a change in sales mix resulting from lower revenue in our higher-margin VMS business and higher revenue in our lower-margin language services business. The overall decline was partially offset by a change in sales mix resulting from lower revenue in our nurse and allied solutions segment. Gross margin by reportable segment for 2024 and 2023 was 24.5% and 26.4% for nurse and allied solutions, 29.7% and 34.3% for physician and leadership solutions, and 58.9% and 66.2% for technology and workforce solutions, respectively.
Previous wording
Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses were $756.2 million, representing 20.0% of revenue, for 2023, as compared to $936.6 million, representing 17.9% of revenue, for 2022. The decrease in SG&A expenses was primarily due to $164.5 million of lower employee compensation and benefits (inclusive of share-based compensation) and a $22.1 million decrease in the provision for expected credit losses. SG&A expenses broken down among the reportable segments, unallocated corporate overhead, and share-based compensation are as follows:
Current wording
Selling, General and Administrative Expenses. Selling, general and administrative (“SG&A”) expenses consist predominantly of compensation and benefits costs for corporate employees, in addition to professional service fees, legal matter accruals and other overhead costs. SG&A expenses were $632.5 million, representing 21.2% of revenue, for 2024, as compared to $756.2 million, representing 20.0% of revenue, for 2023. The decrease in SG&A expenses was primarily due to $60.4 million of lower employee compensation and benefits (inclusive of share-based compensation) in response to the lower revenue, a $34.1 million decrease in professional services, legal and other expenses driven by a $21.0 million increase in the legal settlement accrual for the Clarke matter recognized in the prior year and prudent expense management, an approximately $22.1 million decrease in other expenses associated with our revenue decline, and a $2.4 million decrease related to changes in the fair value of contingent consideration liabilities from acquisitions recognized in the prior year. The year-over-year increase in SG&A expenses in our physician and leadership solutions segment was driven by $22.9 million of additional SG&A expenses from the MSDR acquisition, partially offset by $18.6 million of lower segment expenses amid the decline in organic revenue. SG&A expenses broken down among the reportable segments, unallocated corporate overhead, and share-based compensation are as follows:
Previous wording
Depreciation and Amortization Expenses. Amortization expense increased 8% to $89.8 million for 2023 from $83.1 million for 2022, primarily attributable to (1) the reduction of useful lives of certain staffing database assets and (2) additional amortization expense related to the intangible assets acquired in the MSDR and Connetics acquisitions. Depreciation expense (exclusive of depreciation included in cost of revenue) increased 31% to $65.2 million for 2023 from $49.9 million for 2022, 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 front and back-office systems. Additionally, $6.0 million and $4.1 million of depreciation expense for our language services business is included in cost of revenue for 2023 and 2022, respectively.
Current wording
Depreciation and Amortization Expenses. Amortization expense increased 3% to $92.8 million for 2024 from $89.8 million for 2023, primarily attributable to additional amortization expense related to the intangible assets acquired in the MSDR acquisition, partially offset by having more intangible assets fully amortized during the year ended December 31, 2024. Depreciation expense (exclusive of depreciation included in cost of revenue) increased 14% to $74.3 million for 2024 from $65.2 million for 2023, primarily attributable to an increase in purchased and developed hardware and software placed in service for our ongoing technology investments to support our tech-centric total talent solutions initiatives and to optimize our internal front and back-office systems. Additionally, $6.7 million and $6.0 million of depreciation expense for our language services business is included in cost of revenue for 2024 and 2023, respectively.
Previous wording
Interest Expense, Net, and Other. Interest expense, net, and other, was $54.1 million for 2023 as compared to $40.4 million for 2022. The increase was primarily due to a higher average debt outstanding balance during 2023.
Current wording
Interest Expense, Net, and Other. Interest expense, net, and other, was $69.9 million for 2024 as compared to $54.1 million for 2023. The increase was primarily due to a higher average debt outstanding balance during 2024.
Previous wording
Income Tax Expense. Income tax expense was $73.6 million for 2023 as compared to $162.7 million for 2022, reflecting effective income tax rates of 26% and 27% for these periods, respectively. The decrease in the effective income tax rate was primarily attributable to the recognition of net discrete tax benefit of $5.4 million during 2023 compared to $1.7 million of net discrete tax expense recognized during 2022, in relation to income before income taxes of $284.3 million and $606.7 million for 2023 and 2022, 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.”
Current wording
Income Tax Expense. Income tax benefit was $25.6 million for 2024 as compared to income tax expense of $73.6 million for 2023, reflecting effective income tax rates of 15% and 26% for these periods, respectively. Although the amount of annual non discrete items has remained relatively similar year over year, income (loss) before income taxes has declined year over year mostly related to impairment losses. This resulted in an $18.0 million tax expense which, due to loss before income taxes, contributed to the decline in the year over year effective income tax rates. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (7), Income Taxes, and Note (4), Goodwill and Identifiable Assets.”
Previous wording
As of December 31, 2023, (1) $460.0 million was drawn with $269.2 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 was $500.0 million, and (3) the aggregate principal amount of our 2029 Notes (as defined below) outstanding was $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.”
Current wording
As of December 31, 2024, (1) $210.0 million was drawn with $519.6 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 was $500.0 million, and (3) the aggregate principal amount of our 2029 Notes (as defined below) outstanding was $350.0 million. As of December 31, 2024, we were in compliance with the various covenants under our debt instruments. 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.”
Previous wording
As of December 31, 2023, the total of our contractual obligations under operating leases with initial terms in excess of one year was $55.1 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.”
Current wording
As of December 31, 2024, the total of our contractual obligations under operating leases with initial terms in excess of one year was $50.2 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.”
Previous wording
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.” Under the repurchase program, we entered into an accelerated share repurchase (“ASR”) agreement with a counterparty on May 8, 2023 to repurchase $200.0 million of our outstanding common stock and received an initial delivery of 1.8 million shares. On August 10, 2023, we received an additional 0.3 million shares of our common stock upon settlement of the ASR agreement. The ASR was funded through borrowings under the Senior Credit Facility. See additional information in “Item 8. Financial Statements and Supplementary Data—Notes to Consolidated Financial Statements—Note (10)(b), Capital Stock—Treasury Stock.”
Current wording
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.”
Previous wording
Net cash provided by operating activities for 2023, 2022 and 2021 was $372.2 million, $653.7 million and $305.4 million, respectively. The decrease in net cash provided by operating activities for 2023 from 2022 was primarily attributable to (1) a decrease in net income excluding non-cash expenses of $232.0 million primarily due to a decline in operating results in our nurse and allied solutions and technology and workforce solutions segments, (2) a decrease in accounts payable and accrued expenses between periods of $232.3 million primarily due to decreased associate vendor usage, and (3) a decrease in accrued compensation and benefits between periods of $69.6 million primarily due to prior year increases in pay rates and the average number of travelers on assignment in our nurse and allied solutions segment and increased employee compensation and benefits in 2022, including accrued bonuses and commissions that were paid during the first quarter of 2023, and (4) increases in prepaid expenses and other current assets between periods of $55.3 million and $13.6 million, respectively, primarily due to prepayments and deposits that were made in 2021 and refunded by third-party vendors in 2022 related to labor disruption services. The overall decrease in net cash provided by operating activities was partially offset by (1) a decrease in accounts receivable and subcontractor receivables between periods of $192.1 million primarily due to a larger decrease in the receivables balance in the current year as compared to the prior year, which was due to decreases in revenue and associate vendor usage along with timing of collections, (2) an increase in other liabilities between periods of $116.3 million primarily due to lower cash paid for income taxes, and (3) a decrease in income taxes receivable between periods of $12.7 million primarily due to an overpayment of estimated taxes during 2022. Our Days Sales Outstanding (“DSO”) was 70 and 55 days at December 31, 2023 and December 31, 2022, respectively. Our consolidated results for the year ended December 31, 2023 include only one month of MSDR’s revenue, but our consolidated balance sheet includes the full amount of MSDR’s accounts receivable. Excluding the acquisition of MSDR, our DSO was 66 days at December 31, 2023.
Current wording
Net cash provided by operating activities for 2024, 2023 and 2022 was $320.4 million, $372.2 million and $653.7 million, respectively. The decrease in net cash provided by operating activities for 2024 from 2023 was primarily attributable to (1) a decrease in net income (loss) excluding non-cash expenses of $187.8 million primarily due to a decline in segment operating income in each of our segments, (2) an increase in other current assets between periods of $12.7 million primarily due to subcontractor deposits related to labor disruption services in the current year, and (3) an increase in income taxes receivable between periods of $7.8 million primarily due to a larger overpayment of estimated taxes during the current year as compared to 2023. The overall decrease in net cash provided by operating activities was partially offset by (1) an increase in accrued compensation and benefits between periods of $68.8 million primarily due to bonuses and commissions that were paid during the first quarter of 2023, (2) an increase in other liabilities between periods of $54.7 million primarily due to client deposits related to labor disruption services in the current year, and (3) an increase in accounts payable and accrued expenses between periods of $28.6 million primarily due to (a) a larger decrease in the subcontractor payable balance in the prior year as compared to the current year primarily attributable to declines in associate vendor usage and (b) a decrease in the accrued expenses balance in the current year as a result of a decrease in operating expenses associated with our revenue decline and timing of payments, partially offset by a payment of the legal settlement amount for the Clarke matter in the current year. Our Days Sales Outstanding (“DSO”) was 55 and 70 days at December 31, 2024 and December 31, 2023, respectively. Our consolidated results for the year ended December 31, 2023 included only one month of MSDR’s revenue, but our consolidated balance sheet included the full amount of MSDR’s accounts receivable. Excluding the acquisition of MSDR, our DSO was 66 days at December 31, 2023.
Previous wording
Net cash used in investing activities for 2023, 2022 and 2021 was $412.5 million, $170.7 million and $107.4 million, respectively. The year-over-year increase from 2022 to 2023 in net cash used in investing activities was primarily attributable to $292.2 million used for acquisitions in 2023 as compared to $69.6 million in 2022. In addition, capital expenditures were $103.7 million, $75.8 million and $53.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. Our capital expenditures in recent years were primarily related to ongoing information technology investments to support our total talent solutions initiatives and to optimize our internal front and back-office systems.
Current wording
Net cash used in investing activities for 2024, 2023 and 2022 was $79.9 million, $412.5 million and $170.7 million, respectively. The year-over-year decrease from 2023 to 2024 in net cash used in investing activities was primarily attributable to (1) no cash paid for acquisitions in 2024 as compared to $292.2 million in 2023 and (2) $8.4 million of payments to fund the deferred compensation plan in 2024 as compared to $24.9 million in 2023. In addition, capital expenditures were $80.9 million, $103.7 million and $75.8 million for the years ended December 31, 2024, 2023 and 2022, respectively. Our capital expenditures in recent years were primarily related to ongoing technology investments to support our tech-centric total talent solutions initiatives and to optimize our internal front and back-office systems.
Previous wording
Net cash provided by (used in) financing activities for 2023, 2022 and 2021 was $10.7 million, $(591.9) million and $(34.9) million, respectively. Net cash provided by financing activities for 2023 was primarily due to borrowings of $815.0 million under the Senior Credit Facility (as defined below), partially offset by (1) $424.7 million paid in connection with the repurchase of our common stock, (2) repayments of $355.0 million under the Senior Credit Facility, and (3) $13.1 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards. Net cash used in financing activities for 2022 was due to $576.8 million paid in connection with the repurchase of our common stock and $15.1 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards.
Current wording
Net cash provided by (used in) financing activities for 2024, 2023 and 2022 was $(259.4) million, $10.7 million and $(591.9) million, respectively. Net cash used in financing activities for 2024 was primarily due to (1) repayments of $375.0 million under the Senior Credit Facility (as defined below), (2) $4.8 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards, and (3) $3.7 million in cash paid for excise tax on prior year share repurchases, partially offset by borrowings of $125.0 million under the Senior Credit Facility. Net cash provided by financing activities for 2023 was primarily due to borrowings of $815.0 million under the Senior Credit Facility, partially offset by (1) $424.7 million paid in connection with the repurchase of our common stock, (2) repayments of $355.0 million under the Senior Credit Facility, and (3) $13.1 million in cash paid for shares withheld for payroll taxes resulting from the vesting of employee equity awards.
Previous wording
On February 10, 2023, we entered into the third amendment to our credit agreement (the “Third Amendment”). The Third Amendment (together with the credit agreement, the first amendment and the second amendment, collectively, the “Amended Credit Agreement”) provides for, among other things, an increase to the secured revolving credit facility (the “Senior Credit Facility”) from $400.0 million to $750.0 million. The Senior Credit Facility includes a $125.0 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. 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.”
Current wording
On February 10, 2023, we entered into the third amendment to our credit agreement (the “Third Amendment”). The Third Amendment (together with the credit agreement, the first amendment and the second amendment, collectively, the “Amended Credit Agreement”) provides for, among other things, an increase to the secured revolving credit facility (the “Senior Credit Facility”) from $400.0 million to $750.0 million. The Senior Credit Facility includes a $125.0 million sublimit for the issuance of letters of credit and a $75.0 million sublimit for swingline loans. On November 5, 2024, we entered into the fourth amendment to our credit agreement (the “Fourth Amendment”) which increased our consolidated net leverage ratio covenant for the year ending December 31, 2025. Our obligations under the Amended Credit Agreement are secured by substantially all of our assets. 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.”
Previous wording
As of December 31, 2023, we maintained outstanding standby letters of credit totaling $21.3 million as collateral in relation to our workers’ compensation insurance agreements and a corporate office lease agreement. Of the $21.3 million of outstanding letters of credit, we have collateralized $0.6 million in cash and cash equivalents and the remaining $20.8 million is collateralized by the Senior Credit Facility. Outstanding standby letters of credit at December 31, 2022 totaled $22.0 million.
Current wording
As of December 31, 2024, we maintained outstanding standby letters of credit totaling $20.9 million as collateral in relation to our workers’ compensation insurance agreements and a corporate office lease agreement. Of the $20.9 million of outstanding letters of credit, we have collateralized approximately $0.6 million in cash and cash equivalents and the remaining approximately $20.4 million is collateralized by the Senior Credit Facility. Outstanding standby letters of credit at December 31, 2023 totaled $21.3 million.
Previous wording
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. We last performed a quantitative impairment test of our goodwill in the first quarter of 2020 and the estimated fair value of each reporting unit exceeded the respective carrying value by more than 100 percent. As of December 31, 2023, we do not have any indefinite-lived intangible assets.
Current wording
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 amount 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 amount is compared to its fair value. The fair values of the reporting units are estimated using market and income approaches. Goodwill is considered impaired if the carrying amount 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, 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. As of December 31, 2024, we do not have any indefinite-lived intangible assets.
Previous wording
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 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.
Current wording
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 of the asset group, which is the lowest level at which cash flows of the long-lived assets are largely independent of other groups of assets and liabilities. If the asset group’s undiscounted cash flows are less than its carrying amount, the asset group’s fair value is measured. An impairment is recognized if the carrying amount of the asset group exceeds the fair value of the asset group.
Previous wording
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.
Current wording
If these estimates or their related assumptions change in the future, we may be required to record an impairment loss on all or a portion of our long-lived 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 assets are impaired.
Previous wording
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. Expense recognized for accruals (inclusive of actuarial-based decreases) was $5.5 million, $7.2 million and $7.2 million for the years ended December 31, 2023, 2022 and 2021, respectively.
Current wording
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. Expense recognized for accruals (inclusive of actuarial-based adjustments) was $7.8 million, $5.5 million and $7.2 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Previous wording
We determine estimated IBNR losses by developing our historical loss data to its ultimate level (“ultimate losses”) and subtracting incurred losses to date; the remainder is IBNR losses. We determine ultimate losses through the use of several actuarial methods, including (but not limited to) loss development methods and Bornhuetter Ferguson methods. These methods use our specific historical claims data related to paid losses and loss adjustment expenses, historical and current case reserves, reported and closed claim counts, and industry and other data. The actuarial assumptions used in the aforementioned methods include paid and incurred loss development patterns, our growth and mix of business, inflation, law changes, and claim frequency and severity trends.
Current wording
We determine estimated IBNR losses by developing our historical loss data to its ultimate level (“ultimate losses”) and subtracting incurred losses to date; the remainder is IBNR losses. We determine ultimate losses through the use of several actuarial methods, including (but not limited to) loss development methods and Bornhuetter-Ferguson method. These methods use our specific historical claims data related to paid losses and loss adjustment expenses, historical and current case reserves, reported and closed claim counts, and industry and other data. The actuarial assumptions used in the aforementioned methods include paid and incurred loss development patterns, our growth and mix of business, inflation, law changes, and claim frequency and severity trends.
Previous wording
We consider the frequency and severity of claims to be significant assumptions in estimating our accrual for professional liability. A 10% change in the expected frequency is within a reasonable range of possibilities and would increase or reduce the accrual estimate by approximately $2.0 million. A 10% change in the expected claim severity is within a reasonable range of possibilities and would increase or reduce the accrual estimate by approximately $4.0 million. Additionally, the average time period between the occurrence and final resolution of our professional liability claims is approximately 5 years; however, the facts and circumstances of individual claims could result in a timeframe that significantly varies from this average. 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.
Current wording
We consider the frequency and severity of claims to be significant assumptions in estimating our accrual for professional liability. A 10% change in the expected frequency is within a reasonable range of possibilities and would increase or reduce the accrual estimate by approximately $2.0 million. A 10% change in the expected claim severity is within a reasonable range of possibilities and would increase or reduce the accrual estimate by approximately $5.0 million. Additionally, the average time period between the occurrence and final resolution of our professional liability claims is approximately 5 years; however, the facts and circumstances of individual claims could result in a timeframe that significantly varies from this average. 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.
Previous wording
We cannot predict with assurance the outcome of claims brought against us. 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 and the final outcome may ultimately be materially different. 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 generally record changes in accruals related to legal matters in selling, general and administrative expenses in the consolidated statements of comprehensive income. The most significant matters for which the Company has established accruals in connection with loss contingencies are class and representative actions related to wage and hour claims under California and Federal law.
Current wording
We cannot predict with assurance the outcome of claims brought against us. 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 and the final outcome may ultimately be materially different. 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 generally record changes in accruals related to legal matters in selling, general and administrative expenses in the consolidated statements of comprehensive income (loss). The most significant matters for which the Company has established accruals in connection with loss contingencies are class and representative actions related to wage and hour claims under California and Federal law.
Rearranged current paragraphs (2)
Current report — wording carried from elsewhere
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Current report — wording carried from elsewhere
We assess potential impairments to long-lived assets when there is evidence that events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recovered. Our judgments regarding the existence of impairment indicators and future cash flows related to long-lived 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.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
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.