Ladies and gentlemen, thank you for standing-by. And welcome to the AMN Healthcare Full Year and Q4 2015 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. [Operator Instructions] As a reminder, today’s teleconference is being recorded. And at this time, I’ll turn the conference over to our host, CFO, Mr. Brian Scott. Please go ahead, sir.

Thank you, and good afternoon, everyone. Welcome to AMN Healthcare’s fourth quarter 2015 earnings call. A replay of this webcast will be available until March 3, 2016 at amnhealthcare.investorroom.com. Details for the audio replay of the conference call can be found in our earnings press release. Various remarks and characterizations we make during this call about future expectations, projections, plans, events, or circumstances constitute forward-looking statements. These statements reflect the company’s current beliefs based upon information currently available to it. Or actual results may differ materially from those indicated by these forward-looking statements as a result of various factors including those identified in our most recent Form 10-K and subsequent filings with the SEC. The Company does not intend to update guidance or any forward-looking statements provided today prior to its next earnings release. This call contains certain non-GAAP financial information. Information regarding and reconciliation of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and on the company’s website. On the call today is Susan Salka, our President and Chief Executive Officer; Ralph Henderson, our President of Professional Services and Staffing; and Dan White, our President of Strategic Workforce Solutions. I will now turn the call over to Susan.

Thank you so much, Brian. Good afternoon, everyone and welcome to AMN Healthcare’s quarterly earnings conference call. 2015 was a remarkable year for AMN Healthcare. We made significant strides in our long-term strategy of delivering the most innovative workforce solutions and staffing services to the healthcare community. And by staying passionately focused on the needs of our clients and clinicians, our team delivered industry-leading revenue and earnings growth. Our full year revenue of $1.46 billion was a record high and 41% over prior year with 26% organic growth and the remainder coming from acquisitions. Our adjusted EBITDA was $165 million, up 81% over prior year and reflecting a margin of 11.3%. As a result, we were also able to achieve our long-term profitability goal of an adjusted EBITDA margin of 10%, one year earlier than expected. Throughout the year we successfully integrated and began harvesting benefits from acquisitions closed in January of 2015. In the second half of the year we also expanded and strengthened our offerings by adding interim and permanent placement services for executive, physician and other leadership positions. These new offerings along with our core staffing expertise and other workforce solutions are shaping AMN into a more comprehensive partner for our clients. Our ability to bring innovative and integrated solutions to the market is resonating at a time when healthcare providers are in the early stages of what is expected to be the worst clinician shortage this company had ever experienced. Our fourth quarter revenue of $403 million represents an increase of 44% over the prior year and 5% sequentially. The strong year-over-year revenue increase was across all business segments, with 27% coming from organic growth. Fourth quarter adjusted EBITDA grew 85% over prior year, reflecting a margin of 11.6%, an increase of 260 basis points. Now…

Thank you, Susan. The company’s fourth quarter reported revenue of $402.6 million was 3% above the high end of our guidance, with contributions from all three business segments. Our gross margin for the quarter was 32.7%, up 240 basis points from last year, down 20 basis points from last quarter. The year-over-year improvement was due to continued increase in the mix of our higher margin workforce solutions and an improved gross margin in our Locum Tenens segment. SG&A expenses in the quarter totaled $90.2 million or 22.4% of revenue. SG&A expenses were up sequentially by approximately $7 million, due primarily to an increase in employees to support our higher volume levels. We’ve also added sales and recruitment resources to drive anticipated volume increases in 2016. The quarter included a $1.7 million favorable professional liability reserve adjustment in our Locum Tenens segment. This was equally offset by $1.7 million higher stock-based compensation expense, from an adjustment related to performance equity awards. SG&A expenses in the quarter included approximately $1.5 million of acquisition and integration related costs, which compares to about $700,000 last quarter. Our fourth quarter Nurse and Allied segment revenue increased 50.6% from the prior year and 8.4% sequentially to $288.6 million. Volume of 8,091 average healthcare professionals on assignment was higher by 34% year-over-year. The average bill rate for the segment was higher by approximately 8% over last year. Nurse and Allied gross margin of 31.6% was higher year-over-year by 300 basis points. Most of this year-over-year improvement was due to an increase in the mix of our higher margin workforce solutions. Fourth quarter Locum Tenens segment revenue of $99.3 million was up 30.3% from the prior year and down 2% sequentially. The year-over-year growth was driven by an 8% increase in the average bill rate and a 16%…

Thank you very much. [Operator Instructions] We will take our first question from A.J. Rice with UBS. Please go ahead.

Thanks. Hello, everybody. Maybe first just explaining a little bit on the MSP commentary, do you have the figure for the percent of revenues in nursing that was MSP-related? I know you gave it for allied and locum.

Yes, we didn’t give it. It’ close to 50%.

Okay.

And that’s been running pretty steady.

Okay.

And not surprising, we’ve seen it increase over the last three years, but we’re probably reaching that point. Although, I have to say the pipeline of new MSP contract is exceptionally strong, and we signed some really great deals at the end of last year and have already got several keyed up for the beginning of this year. So, we think we’re possibly seeing another surge of new MSPs coming into the market.

Okay. And the increase in penetration you’re seeing in both the allied and the locum businesses, is that cross-selling to MSPs in the nursing or is that more outright new clients that are signing up for those service lines?

It’s really both A.J., and I’m going to have Dan dive into that a little bit more because the team has fairly dramatically improved our cross-selling capabilities and being able to bring multiple services to our clients. So, Dan would you mind going into that a little bit more?

Sure, Susan. Hi, A.J., it’s Dan. A couple of points just to give you some color around our strategic accounts. So, if you just look at our top 20 accounts, 25% of them now utilize at least five or more of our offerings, 60% of them use more than four, and so it’s a really good indicator that that cross-selling is being very effective. Two of those, in fact two of the top 10 are now locum specific that answered sort of a question you had before. And then on the new sales side, almost every single one for the last really two quarters I’m going into this quarter all have included at least nursing and allied some locums as well.

Okay. Then maybe to switch gears. And I may have missed this Brian, but if you comment within the business lines a little bit on bill pays spread, what’s happening on pricing across the segments and some of your key inputs both to the clinician and to the housing cos, any update – any thoughts on those?

Sure. This is Brian, I’ll start and I’ll let Ralph add some color as well. So within the actual staffing part of our business and nursing and allied, the margins overall have been stable as we talk about the last several quarters. Most of the gross margin expansion has been more through, it’s stronger as we’ve seen in some of the other service workforce solution services. And locum, specifically we mentioned the fact that bill pay spread have improved both sequentially and year-over-year as well. And on the other direct cost, I’ll let Ralph talk about the pricing environment. Our housing costs have been up, which is not surprising, continues to be a very tight market. So we’ve been following a bit along with the market overall kind of a 5% range in our housing cost, but we use our bill rate increases to kind of – if you look at the entire compensation package, not just one line item, and make sure that we are maintaining a overall margin. So maybe Ralph a little bit on the pricing side.

Yes I’ll start on the – this is Ralph, I’ll start on the nursing and allied side. As Brian mentioned in his prepared comments, about 8% up on a year-over-year basis for the fourth quarter. About half of that comes from the winner needs phenomenon, we’ve talked about this I think once a year at least where we have clients primarily in California. So we just see spikes in volume that are seasonal in nature, they use quite a bit more travel nursing during those periods and they do any other time and we do a lot of staffing. And those needs can start anywhere from October, sometimes the push and back and they will start till December, but run into March or April on a typical basis. And those types of assignments are done at a premium price. Sometimes we refer to that as rapid response nursing. And so you kind of – out of that 8% you kind of have to look at is probably half is in the core underlying business. So 4% kind of the standard markup and then the other half of it comes from a make shift to that premium price winner needs phenomenon.

Got it.

On the locum side we also saw 8% increase, so make sure I call that out. And all of that is really just been getting ourselves back to market rate. We felt about three years ago like we fall in a little bit behind the market. And I think the team there has done an excellent job of getting us very close to market rates now. And I know our margins, I think are within, a few basis points of what our long-term target for margin was at locum.

Okay, that’s great. While I look to my SaaS question but, thanks a lot.

Okay, A.J.

Thank you. The next question will come from Jeff Silber with BMO Capital. Please go ahead.

Thanks so much. I wanted to get a little bit more color on how you expect to get to your long-term EBITDA margin goal of 14% over the next four years or five years or so?

Sure, Jeff. So it’s largely going to be the same four components that have gotten us to this point of exceeding the 10%. Although, couple of them will play a stronger role, as we go forward. So, it’s still going to be the increased mix of the higher margin workforce solutions that we’ve been talking about. Some of these businesses like recruitment process outsourcing, VMS, our workforce optimization, and maybe others that we might add on, that generally operate at 20% plus and EBITDA margins as they’ve grown at a faster pace, then we also see that impact our bottom line. I have to call out our physician perm placement business, which is just knocked it out of the park this last year and finished very strong in the fourth quarter. And they obviously have very strong margins as well we expect that to continue going forward. So that’s one component. Second is, continued improvement in our gross margins, which is largely continued improvement in the Locum Tenens gross margins. And the last two which are actually the bigger contributors are operating leverage, as we can improve our top line, we can certainly gain more leverage as we have certain fixed costs that we don’t have to replicate. And then SG&A efficiencies that we expect to gain out of technology and process improvement initiatives that we have underway, we’ve mentioned this in the last couple of years, a multi-year – multi-million dollar program that we have to really upgrade our front office and back office solutions have a more standardized platform across our staffing businesses. And we actually had our first two launches of that last year starting with our perm placement division. And I think some of the results you’re seeing with them are an outcrop of those benefits starting to actually mature. So going forward we would expect in the next two years to three years to see more benefit come through from the staffing businesses and particularly in the back office areas as we can gain more efficiency.

In terms of the ramp up to go from the 11.3% you just reported for last year to get to 14% in 2020. How quickly can we get there? Is it kind of a straight line? Is it more back-end loaded and front-end loaded?

It’s not back or front-end loaded, it’s a fairly straight line, obviously, a lot depends upon the revenue growth itself that gives us that opportunity. We mentioned the year 2020 it is possible to get there sooner if we can ramp up the revenues sooner. So we feel pretty confident in the ability to capture those SG&A efficiencies and our ability to continue to improve our margins and grow our workforce solutions. So probably the one last known variable out there are the external factors that can affect our ability to grow that hotline faster.

Of course, that makes sense. Brian, just a question for you, you gave some additional color on your guidance beyond what was in the press release. In terms of those items is that – are those kind of the run rates we should be using for the rest of the year, DNA, tax rates, stock-based comp et cetera?

Yes, I’ll give you a little more color on that. So for depreciation, as Susan alluded to as we are implementing some of these new technologies, the depreciation would expect to rise to the year side. I think about it being more like $3 million in the fourth quarter. So kind of built from that $2.5 million through that $3 million, the amortization would be at $4.4 million every quarter. The interest expense I said, Q1 at $3.2 million, that would – we expect it to come down by $100,000 to $200,000 each quarter during the year. Share count $49.2 million in Q1, we expect it to exit the year at $49.6 million, so again just kind of a build up to that $49.6 million in the fourth quarter. And the stock-based comp I mentioned $2.8 million, that we would be pretty steady through the year $2.8 million.

In tax rate, I’m sorry, excuse me as well.

Yes, $42 million is a good number to use.

Okay, great. And then one more and then I’ll let somebody else jump in. In terms of CapEx guidance for this year?

Pretty similar to 2015, we continue on the investments we’re making and as Susan mentioned, it is a multi-year program. So there’s about some – just like 2015 about $25 million of kind of core CapEx tied to those programs. We have expanded some of our facilities, there’s been some costs associated with that, and about $2 million of integration related CapEx that we saw this year, now with the most recent acquisitions will have a similar amount of integration CapEx in 2016. So kind of a repeat of 2015 at the end of day.

That’s all right. Fantastic, thanks again.

Thank you. The next question in queue will come from Tobey Sommer with SunTrust. Please go ahead.

Thanks. I wanted to ask question about the bill rate expectations for this year, it is – could you give us a little color on how you think they may unfold, understanding you don’t have – you don’t know exactly what October, November look like? Thanks.

Hi, this is Ralph. We did have a lot of momentum I guess in the last few quarters on bill rates. We don’t really see any trend that’s changing, the year-over-year, at some point, we start lapping more difficult period. So, I would guess it probably will settle in somewhere around the annual increase in nurse wages, which went from 3.5% 5.5% on an annual basis. So that’s probably for the nursing business. I think there’s more upside in allied, that the rate has been suppressed for quite some time due to the reimbursement rates being pushed down by several different rulings over the past couple of years. I think that that rates going to have to move in the near future in order to meet the demands of customers. We’re seeing big increase in allied demand and, but not – it’s not impacting pay rates yet, so it’s not attracting enough supply. So, that’s usually the early sign that the rates are about to go up. And I think locums bill rates will probably increase in the – probably that same range as that nurse, long-term nurse rate as well.

Thank you. A question on the MSP front in workforce solutions kind of broadly. Are you seeing any competitive reaction from other players in the healthcare staffing industry that maybe works as eager to embrace the concept, any changes in behavior that you’ve noticed?

This is Dan, Tobey. I don’t see dramatic changes at all from the competition, but what I would say is when we lead and when we are successful, it attracts a lot of attention from our customers, and our customers and prospects end up talking about it more. And as a result of that they end up having to react more. So, I know I have heard of others trying to get into RPO for example, I would just remind you that this is a business that we’ve been in for eight years now. It happens to be growing exceptionally well, but I think a lot of that has to do with the fact that we invested and matured that business. And it’s not something you can just sort of get into and figure it out. So hopefully that helps give you some color around that.

It does, thank you. Susan, on the – you mentioned that quite some difficulties that hospitals are having, managing their full time staff particularly nurses. Do you have a sense for how much of that is driven by full time nurses that are just kind of taking a temporary hiatus versus older nurses that maybe exiting the workforce on a more permanent basis?

Yes, I don’t know that we have an exact number we can put towards it, but as we look to some of the data points out there, as you said, the December information just came out from the BLS with job openings up 22% year-over-year and quits up 14% in healthcare. And when we hear from our clients that’s a very consistent with, why they’re reaching out to us. Not only for travel, but it’s also a driver for the RPO business, they’ve seen really dramatic increases in the order levels and interest levels from clients. So my sense is that the clients don’t think that that is going away because they’re really trying to do better planning for the long-term, not just in the next few months, but these contracts are often multi-year contracts, where they know they’re going to have to address both their permanent hiring and their short-term hiring. Also we just did a survey in November, it was a survey of 9,000 RNs which asked about new points on retirement and education in emerging roles. And in the area of retirement, it’s really quite startling to see the number of nurses, older nurses now that category is 54 and older now that I’m 51, I’m not thinking that so old, but nevertheless. In that category of nurses that are 54 and older almost two-thirds of them said that they were thinking about retiring. And of that two-thirds about 60% said they were thinking of retiring in the next three years. But about 30% said they were thinking of retiring in the next year. And about 20% of those nurses who said they weren’t going to retire, said they were going to part-time. So I think what you’re seeing is a beginning of the sort of the silver tsunami as they call it within healthcare where you have many of these clinicians particularly nurses that are reaching that age when they want to leave that most rigorous patient environment in the hospital and move on to something else and that’s what our clients tell us as well as we talk with them about their staffing challenges they’re very concerned about this aging clinical population.

Thank you. My last question, I’ll get back in the queues. I would presume that adding to the workforce solutions, the acquisitions as well as the organic growth maybe something that we could look for in coming years. Are there substantial properties out there to look at or these all kind of relatively small opportunities? Thanks.

So I think the majority of them would be on the – what you would think of a smaller size, of course, now at our size even something at a $100 million in revenue is relatively smaller in terms of the impact. But a lot of them are smaller companies that have maybe been around only for five years to ten years, and that’s a good opportunity for us because they’re really in emerging areas that are just gaining adoption and penetration into the marketplace. So, well, we’re not going to go in, it’s a very earliest stages, which might be the riskiest and we want to have the management team to help drive them. We can come in at a point where there’s still a lot of growth ahead. There are maybe a few larger organizations out there, but at the vast majority I think are sort of $100 million less or less in terms of revenue.

Great. If I can squeak in one numbers first question, the sales and recruiting staffs for sales generating staff, what would the change be year-over-year in the fourth quarter or around now? Thanks.

This is Ralph. The producer count is about a 50% year-over-year increase in our nursing business, 65% in allied and 15% in locum. So that does include the impact of the acquisitions.

I might add just on the RPO side, the producers there are up 500%.

Okey doke. Thank you very much.

Thanks, Tobey.

Thank you. Our next question in queue will come from Tim McHugh with William Blair. Please go ahead.

Hi, excuse me, yes, thanks. I guess first, just there’s been a number of hospitals have talked about this staffing service as an issue. You’ve heard some of the public companies talk about how they’ve ramped up the efforts to hire more full time workers. Now, they’re trying to invest in their training solutions, I guess, in general there. Besides, turning to you guys, they’re trying to find some other longer-term solutions, I guess. Can you talk about what you’re seeing there? And I guess, they’re still obviously turning to you a lot, but I guess, how do you think about that dynamic as we think about demand going across this year in terms of changes hospitals are trying to make to deal with the shortage?

Tim, this is Dan. I’ll start and then if someone else wants to add color, that’s great. In talking to customers and prospects, I’m hearing exactly what you’re talking about. Lots of focus on what Susan just said, we need to take a newer millennial kind of employee and develop them to their full skill set, we are looking at and have introduced some solutions in that area around training, development, precepting et cetera. And then on the full time staff, I think that’s one of the reasons why we’re having such dramatic increases in our RPO interest. That’s up literally, tripled year-over-year and I think a lot of that is just looking at contingent labor, and saying, hey, this demand is not going to slow down, it’s time for me to also look at my full time staff. So, yes, we’re seeing all the same things you are seeing.

And Tim, I’ll just add that in addition to the staff clinician physicians that need additional training for both current and emerging roles, we’re hearing a demand and desire to partner with us for leadership training, which was one of the very attractive pieces of some of our newer acquisitions like The First String and B.E. Smith even Millican that provide forms of training. The First String as an example has a CNO Academy, which helps to train up and coming nurse leaders who want to move into a higher level executive roles within their ranks. And that’s going to be needed as a lot of these retiring clinicians are in leadership roles today. So it’s a pretty significant gap that our clients have and we can be there to help them make sure they can transition the younger staff into those leadership roles over time.

Okay. And I guess, I was trying – a little bit allude to, I mean, I think one of the investor concerns is that eventually they’ll make changes that they don’t need to turn to as much. I mean, so do you sensing a – I guess you scrap a lot of changes positive for you in some ways I guess, but do you look at anything hospitals are doing to respond to the current environment that’s just it will eat into demand in the next year or two year?

I can’t say anything dramatically different and they are and should be focusing on how they can recruit and retain their permanent staff, but they’ve always done that. I think they’re getting better at it. But again they’re going to need to because the shortage of clinicians with a large group of demographics retiring and not enough supply coming into meet the demand increases are going to – I mean that there will be shortages. So we think it’s speaks more to the increase need that they’ll have for things like workforce optimization, help with those permanent recruitment efforts, as good as they can be, facilities and systems tend to be best at recruiting locally, and we can take that to a national stage. We are the largest recruiter and placement firm across the entire country, and so we can tap into networks and resources and technologies and recruitment expertise that no individual system or hospital can. So I think they will stay focused on it, but will they stall for the shortage? No, they won’t.

Okay. And I guess, Dan, you talked about you were successful in increasing the supply, but there’s still a gap between supply and demand as you look at, I guess your order book and your level of supply that you attract. I’m curious, I guess, as you weigh those two things, I mean, is the gap narrowing between supply and demand or is it still expanding even as you increase the supply?

I think, if you just look at that – your labor statistics data, you’ll see that the number of job openings, and the hires are getting further and further apart. So, that idea that hospital systems are becoming more efficient certainly isn’t happening yet. I’m sure they’re spending more money and they’re peaking up their internal recruitment departments, so they’re hiring us to do RPO that make them more effective quicker. But the gap continues to widen, I think we’re seeing jobs of almost a 1 million posted in healthcare every month and only filling somewhere near at 500,000 to 600,000 of those. So there’s just – it’s just stand-free broad right now. I guess, at some point you could see some improvement in it. I wouldn’t call that anytime soon.

And if you’re asking specifically about our demand versus supply and placement, yes, that gap has narrowed over time because we’ve been able to bring in more supply thank goodness. And our team has done a superb job of increasing our fill rates and, which is very important because our clients need these clinicians. And so, it’s enabled us to do a better job and be a better partner for them. So, I wouldn’t see that narrowing as being a negative thing, it’s actually been quite positive, and we still have plenty of room to grow within the order base that we have. When we look at our orders coming in, we look at the new orders that are being posted on a weekly basis. Those have remained very strong and up over prior year in a pretty meaningful way. So, we feel good about the demand environment that we’re in, and then it gives us plenty of room to continue to grow. Now we’re not going to continue to grow at 25% organically. I hope I’m wrong. And we do, but, within the order base that we have really across all of our businesses, including nurses, we think we have plenty of room to continue to grow at rate that should continue to please our shareholders.

Great, thank you.

Thanks, Tim.

Thank you. The next question in queue will come from Mitra Ramgopal with Sidoti. Please go ahead.

Yes, hi, good afternoon. As you look at acquisitions, clearly you’ve been very busy the past year and a half. Is there anything in your product and service portfolio you feel you need to have that clients are looking for? Or is it more a case now of just doing some nice tuck-ins and expanding upon what you already have?

I think, it’s expansion opportunity, but also there could be some consolidation opportunities, I’ll be opportunistic about it, make sure that we’re disciplined as we always are regarding valuation. Our first priority is to look at additional workforce solutions along the spectrum of helping our clients to recruit onboard, maybe credential, and then train and optimize their workforce and there is a lot of things along that spectrum as you can imagine. They mostly have some sort of technology component to them. And so we’re going to be very picky about which ones that we go after. But we don’t have to do anything but we feel there are opportunities to add things on that can be very beneficial to our clients and synergistic with our existing businesses. There are also potentially some additional staffing categories that would help us to fill gaps that we have the leadership acquisitions that we did over the last six months, are a great example of that, while we were beginning to do a few placements in interim leadership positions. We felt that the demand was so significant that we needed to be the strongest, in fact, now we are the leader in providing those services. So there could be some additional areas that would be newer, but still very adjacent to what we’re providing into this same client base. And then the third priority would be consolidation opportunities and probably the areas that I would be most interested there would be locum because of the growth that we’re seeing in MSP opportunities in particular but just demand in general, and knowing that we could keep more of those fill rate opportunities in-house if we had more supply. So we’ll continue to look for those opportunities along the way.

Thanks. And quickly on the supply side, I know immigration right now it’s a sensitive subject, but in terms of potential for in nurses and physicians et cetera, helping to meet the demand need. Is there a possibility? Are you seeing of that happening?

We continue to put in visa submissions for years after I think even the visa process slowdown quite a bit. So we actually have a pretty steady pipeline in our – that business is O’Grady Peyton is our travel – our nursing business it does long-term international nurses. I think it double over the prior year. The team there is doing a great job and if we can get more visas we could even grow it faster. There is not much activity on the physician side in terms of international. But always sometime we’ll keep an eye on it.

Okay, thanks for taking the questions.

Thank you, Mitra.

Thank you very much. Our next question will come from the Randle Reece with Avondale Partners. Please go ahead.

Good afternoon.

Hi, Randy.

Hi, Randy.

Hi, how are you doing? I have a question about more about coming over a year like 2015 from an operational execution perspective, the difficulty of managing client expectations. With the labor market tightens like it has and orders fill time stretch out, and difficulty in finding people. No matter what the staffing company is blamed to some extent for the pricing increase, it’s blamed for the change in the time to fill, going for all the measurable that the customers experiences. And I wanted you to discuss how you manage client expectations after a year like 2015 was?

So, Randy, this is Dan. Yes, first of all you’re absolutely right. And I would be remiss if I didn’t just give a little shout out to our strategic accounts teams. They do a fabulous job of talking our clients through the challenges that we are both facing. One of the really significant benefits of our scale at this point is just the data that we have. So, we have so much aggregate information that we’ve almost can give them insights that they just don’t have any more. So, where for example, if you’re a California clients, where for example are, you most likely to get your travelers from and how do we go about sourcing and recruiting and attracting those people. So we get into a lot of really deep discussions after sort of the noise that you started with subsides a little bit. Any time that you’re in a situation like we’re in today, where they’re dealing with challenges that many times they’ve never even seen before, they’re looking for us to be consultative. They’re looking for us to come in and give them more insights to how to go about doing this. And again, I think some of our acquisitions have helped us there. If you look at B.E. Smith or Avantas all of them have consulting aspects to their portfolio, and so, each of those insights also can contribute to answering some of those questions.

And then another question on a recent hot topic. If you do happen to have a large client that might reduce their demand in any particular location, suppose they are actively trying to manage down their use of contractors. How long does it take you to adjust? Do you experience any kind of ripple in your weekly business? Or is there enough demand elsewhere to make up for that in short order?

It’s really the latter Randy. There is so much more demand than we can fill that is unfortunate is it is that they may cancel an order or cancel a clinician that maybe they planned to have onsite or maybe is even already onsite. We can very rapidly get that clinician redeployed to another client who will be thrilled to have that clinician come on board and still an open slot that we didn’t may be think that we were going to be able to fill. It’s probably fastest in the nursing and allied space, because you have less licenser or it can be a little easier to get the licensers down with on the physician side. It can be more challenging to move people across state lines. But because of the diversity and so many orders that we have in so many state. That hasn’t proved to be a problem when we’ve had a particular client in a particular region that might have a drop in their demand. We can pretty quickly get that person moved over, and you can see that in our results. I know questions were raised in the second half of last year about a couple of clients that had reported lower staffing needs or wanting to make some changes in their contract staffing and that occurred for a couple of clients. But we were able to quickly move and transition those clinicians over to another client. But this is a – it’s a great point Randy, because it’s also a reason why when orders would drop say, in a recessionary time, we still get asked this, because of some of the noise out there regarding the economy, well, what if the economy did soften a little? And what if orders did drop? We have so many more orders than we can fill that whole could drop. And we would still have an opportunity I think to grow our volumes and our business because we’re not filling all of the demand that we have as it is. In fact, our clients would probably be happier. Overall, because it would mean that our fill rates would grow. And so the MSP strategy is really an excellent strategy. If you’re in a growth environment but it’s also a great mitigator you should see the economy soften a bit and see demand fall off.

Thank you very much.

Thanks, Randy.

Thank you. [Operator Instructions] Next in queue is Mark Marcon with RW Baird. Please go ahead.

Good afternoon and congrats on a great year.

Thanks Mark.

In terms of – just going back to the 14% EBITDA margin expansion, how much of that do you think would be coming from gross margin expansion roughly?

This is Brian, it would be somewhere around 50 basis points. It’s probably a midpoint number to use. It could be higher or lower just depending on the market environment that we’re in and how severe the charges are and what that turns into interim’s expansion. But as Susan alluded to kind of the leverage opportunities are the bigger part of it, and so, that the gross margin piece is somewhere around that 50 basis points plus or minus.

Okay, great. And then, with regards to the bill rate increases that have been going through in the quarter. Are you seeing any sort of like pushback from any of the clients, where they are saying, can you hold it down or tougher negotiations or anything along those lines?

Hey, Mark, this is Ralph, I’ll take that one. It’s part of our job is to help them keep their costs low. So, and that’s actually where the conversation starts, what the right rate to attract the right supply. And so, we get into a very detailed conversation about managing that right, I mean, right down to the quarter per hour kind of thing. So, we do work with them very, very closely to keep that in a reasonable range, right. We have to – we might have to remind, I mean, some of them haven’t had increases in two or three years, they’ve fallen behind and we moved those ones along as quickly as we can. [indiscernible] :

And with regards to the – to your own staff, how do you feel like you are from, where you’re sitting from a capacity perspective? Obviously demands been enrolling deep, how much more do you think you need to end up increasing the staff over this coming year? How should we think about that?

Well, as you know Mark, and we’ve discussed we added a lot of staff over the last year, in fact as our K comes out you’ll see where we ended the year at about 2,500 corporate staff. And some of that came from acquisition, but actually more came from adding on additional sales and support team members in order to make sure we’re delivering on these higher volume numbers. So, because we have such a large number of newer team members as part of the AMN family that actually gives us capacity, opportunity and productivity improvement, particularly in the sales areas where the ramp up time can be six months to even quite honestly a year before they are really hitting their stride in terms of productivity. And so we feel we still have a lot of capacity to add volume within the staff that we have, with said, we’re continuing to add into the first quarter based on the demand trends in the volumes that we see. We will be adding proportionately as much this year but we will be adding more staff and it’ll likely be first and foremost in the sales areas and then support functions to support the growing volume.

Great. And then with regards to B.E. Smith, what – you gave us kind of an assumption for the first quarter, what rate of growth would that end up being? How far are they seeing?

For the first quarter growth rate, I mean, the 2015 – this is Brian. The 2015 growth rate overall were not distinctly different than while we start AMN. So, they were north of 20% on a full year basis in 2015 over 2014. So they’re seeing still a very good environment and they’ve added more resources over the last year as well, that’s given them capacity to grow. So they’re facing a very similar environment that we’re seeing on our other business lines, which allows them to grow. So, as soon as, probably – may not probably we want see 20% plus again in 2016, coming after the great, great year, but still see plenty of opportunities to grow through the year.

Great. And then last one just in terms of your supply clinicians that are coming in, what are you seeing in terms of – can you give us a little bit more color with regards to the rebook rates, it’s sound like they are up, and how does that compare? And then what are you seeing in terms of newer traveling commissions that haven’t done before?

Yes, this is Ralph. I’ll handle that one as well. We have one of the best sourcing organizations in the entire country. I mean, I’d put them up against any other Silicon Valley firms, I think they’re really good at it by the way. The team is executing very well, there were double-digits across all of our different disciplines in terms of new applicants supply. And I think the market has warmed up, right to coming back to travel there might have been some nervousness I guess from the last pullback at some point. But certainly its causing us less actually, attract people than it has in the past. And they’re converting at a faster rate. And actually filling jobs faster because of that in particularly over the last three or four months. The kind of our long-term ability to do that, I guess was kind of a second part of that, I don’t think – I think their conditions are very, very good for us to continue to increase supply and keep up with at least the levels we’ve been able to get in the past couple of years.

Mark an interesting data point that I saw recently as the team were sharing some of their results, is that we’re getting more younger nurses coming into traveling, and remember they generally have to have a year or two of experience before they can join the travel range. But we have proportionately more 25 to 30-year olds joining, these are the career builders that want to go out and work hard, but also see the country and have fun and build a resume at the same time. And that’s a really good sign for us because new travelers tend to take multiple assignments, and younger travelers in particular tend to take more assignments. And so, we think that’s a really good sign for the industry and certainly good for our supply pool.

You know, you asked about, and I didn’t talk about rebook rate, so I want to come back to that. I know there was a second part to that question. The rebook rates have improved by about 500 basis points since the beginning of the year. Last time, I talked about all of the new travelers are – a good sign, right, that our recruiters are very good at their jobs, we’re expecting the right talent, and people are coming back into the industry. Those numbers remain very, very strong. The rebooks have actually strengthened even more in the last few quarters. And that’s they’ve got on the right assignment, their assignment went well, we got them out there in a smooth fashion and so they are rebooking at a much higher rate. And that again, helps us more efficient. We don’t have to do as much paper work, right, there are lot easier to get out an assignment, they know what they’re dealing with, they’re in apparel systems all of that.

500 basis points relative – what was the number before?

I don’t think we gave the number before.

Yes.

We generally don’t give specific rebook rates, besides its rough and tumble about two-thirds of our people coming off of an assignment rebook or another assignment. That gives you a general idea.

Yes, great. Thank you.

Thank you very much. At this time there are no additional questions in the queue. Please continue.

It’s terrific. Well, we really appreciate everybody joining us on the call today. And we appreciate your continued support of AMN. We look forward to updating you on our progress next quarter.

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