Investing.com -- Fitch Ratings has downgraded the Long-Term Issuer Default Rating (IDR) of AMN Healthcare Services (NYSE:AMN), Inc. and its subsidiary, AMN Healthcare, Inc., to ’BB’ from ’BB+’. The downgrade reflects the ongoing decline in demand for its services, particularly in temporary nurse staffing, due to cyclical industry contraction and share erosion. Despite the downgrade, the outlook remains stable.
Fitch anticipates that leverage will remain in the 2.5x-3.5x range over the rating horizon, which is appropriate for an IDR of ’BB’ rather than ’BB+’. The ’BB’ IDR takes into consideration AMN’s top three market position in U.S. healthcare staffing, moderate leverage, strong Free Cash Flow (FCF), and commitment to deleveraging. These factors are balanced against limited end-market diversification and the challenging dynamics of a highly competitive, cyclical business.
AMN Healthcare Services is one of the largest U.S. staffing providers for travel nurses, temporary nurses, locum tenens, and allied healthcare professionals. Despite recently losing some market share, the company’s historical growth remains a positive attribute. Over the past decade, AMN has tripled its revenue from about $1.0 billion and more than tripled EBITDA from under $100 million.
The company’s Technology & Workforce Solutions (TWS) segment has been expanding and now contributes EBITDA on par with the core Nurse & Allied Solutions (NAS) segment. This segment carries AMN’s highest margins and offers diversification since the majority of EBITDA is generated by the NAS and Physician & Leadership Solutions (PLS) segments.
Fitch expects the NAS segment’s decline to continue for 12-18 months before stabilizing in 2026 and EBITDA growth resuming in 2027. The PLS segment is expected to stabilize in 2026 and grow in 2027 due to an anticipated recovery in locum tenens demand amid physician shortages. The TWS unit is expected to stabilize in 2026 and generate EBITDA growth again in 2027.
AMN’s ’BB’ IDR is supported by its history of positive FCF over the full economic cycle. Fitch expects AMN to generate FCF in the $150 million-$200 million range over its forecast period, equating to a healthy 6%-7% of revenue.
Fitch views AMN’s commitment to sub-2.5x net leverage positively. After reducing EBITDA estimates to reflect a later rebound in demand, Fitch now sees EBITDA leverage rising from 2.3x at YE 2023 to 3.2x at YE 2024 and 3.5x at YE 2025, then declining within the 2.5x-3.0x range in 2026-2027.
As of Sept. 30, 2024, AMN’s liquidity totaled about $475 million, with $31 million of cash and $445 million available under AMN’s $750 million senior secured revolver due February 2028. Fitch expects AMN to generate annual FCF of about $150 million-$200 million over its rating horizon, which is sufficient to operate the business and repay all borrowings under the revolver.
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