Good day, and thank you for standing by. Welcome to AMN Healthcare Second Quarter 2021 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised, that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today Randy Reece, Director of Investor Relations. Please go ahead.

Good afternoon, everyone. Welcome to AMN Healthcare's Second Quarter 2021 Earnings Call. A replay of this webcast will be available at ir.amnhealthcare.com following the conclusion of this call. Details to the audio replay of the conference call are in our earnings release issued this afternoon. Various remarks we make during this call about future expectations, projections, trends, plans, events or circumstances constitute forward-looking statements. These statements reflect the company's current beliefs based upon information currently available to it. Our actual results may differ materially from those indicated by these forward-looking statements as a result of various factors and cautionary statement including those identified in our most recently filed forms 10-K and 10-Q, our earnings release 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 reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are included in our earnings release and on our financial reports page at ir.amnhealthcare.com. On the call today are Susan Salka, Chief Executive Officer; Brian Scott, Chief Financial Officer; Kelly Rakowski, Group President and COO of Strategic Talent Solutions; Landry Seedig, Group President and COO of Nursing and Allied Solutions; James Taylor, Group President and COO of Position and Leadership Solutions. Also joining for the first time is Chris Schwartz, AMN Controller who will serve as our interim Principal Financial Officer due to the impending departure of our friend and colleague Brian Scott from AMN. I will now turn the call over to Susan.

Thank you so much, Randy and welcome everyone to our earnings call. As always, it's a pleasure and honor to be with this team and with all of you today. The AMN team continues to make a greater impact in healthcare and this last quarter was another testament to our relentless commitment to patients nationwide. More than 330 million Americans depend on eight million professionals who provide health care in this country. AMN and our industry have always been an important part of the health care ecosystem. The pandemic has created short-term and permanent workforce shifts that increase our opportunity and the need to help change the paradigm of staffing for the future. Creating, supporting and empowering a quality and agile workforce requires a multifaceted approach, particularly in the face of persistent workforce challenges. Healthcare organizations are increasing their hiring efforts, as regular patient care volume is getting back to normal. However, they continue to struggle with a high volume of quick and long-term vacancies. On top of this, the pandemic is resurging. Our colleagues at AMN have stepped up in a way true to our values to help our clients deliver great patient care. Demand for contingent labor increased throughout the second quarter and that trend has accelerated through today. Most of our staffing businesses are experiencing record high levels of demand across all geographies and almost all specialties. Our team has addressed the growing client need by expanding our technology solution footprint and placing tens of thousands of health care professionals where needed most. We are simultaneously investing heavily in our people and infrastructure to ensure that we're able to empower the future of care with our growing and new solutions. Our positive impact enabled us to exceed financial expectations in the second quarter. Consolidated revenue was $857…

Well, thank you Susan for those very kind words, definitely a bittersweet day. And before I jump into the numbers, I want to just take a moment to acknowledge all of my amazing colleagues. During my 17-plus years at AMN I have been inspired every day by your passion, your drive, your dedication to serving our customers, our communities and each other. You are truly the best of the best both professionally and personally. And while I'm so proud of what we've accomplished, I'm just as excited about the future of this organization and all that you will continue to do to advance our really important mission and strategy. I'd also like to personally thank Susan for her mentorship and friendship through all these years, and also the AMN and Board for their continued guidance and support. So with that, we'll turn back to the results. Second quarter revenue of $857 million was 3% above the upper end of our guidance with outperformance across all three segments. Second quarter consolidated revenue grew 41% year-over-year. Sequentially revenue was down 3% due to an expected reduction in COVID-related projects and lower Travel Nurse bill rates. As Susan mentioned earlier, we are very proud to partner with FEMA to vaccinate underserved communities. The ultimate financial impact from the project was minimal in the second quarter. And as of now we do not expect any revenue from this contract in the third quarter -- any material revenue. Gross margin for the quarter was 32.7%, which was 20 basis points higher than prior year and up 10 basis points sequentially. The improvements in the margin were driven primarily by a revenue mix shift toward our higher margin segments. Consolidated SG&A expenses were $157 million or 18.3% of revenue compared with $137 million or 22.5% of…

[Operator Instructions] And your first question comes from the line of Mark Marcon from Baird.

Hi. Congratulations everybody, and Brian, congratulations to you. It's been great working with you, over the years. I've got several questions related to Nurse and Allied. Obviously demand is extremely strong in both, Nurse and Allied. I'm wondering, you mentioned, where you're thinking about pricing being for the upcoming quarter. I'm wondering, if you can expand a little bit on that with regards to Travel Nursing, just in terms of the pricing expectations for the coming quarter, but also as you're thinking about the year unfolding, because clearly there -- the shortages don't seem to be abating. And then, how are you thinking about that with regards to, Allied as well?

Hi, Mark. It's Landry. So maybe it might be helpful to just kind of talk about, the trend that we've seen even starting in January. So our bill rates actually peaked at the end of the first quarter. And then, since that point, they've been steadily decreasing. They really have not been declining quite as steep as what we'd originally thought. From what we can tell though, especially where the demand is today, and we can see of course the rate for all of our new orders, we would expect that, it would probably take a turn again and we'd start to see increases in our average bill rates as we exit the third quarter. So we're seeing increases across almost all the specialties in nursing, even the orders that aren't tied to specialties that are there to take care of COVID patients. It's really probably extremely high demand that's driving up the rates. There is a lag because, there's a lot of instances where you might see, rates that are impacting orders, which then of course would impact future placements. But it looks like we should start to see our average bill rates increase two to three months, from whenever you would see some of the peak demand, which we're experiencing right now. So still a little bit too early to tell, but that's how we're currently thinking about it.

Landry, how much are you thinking that those bill rates could actually go up on a year-over-year basis once that starts occurring?

Yeah. It's still really hard to tell Mark, just because we are still booking in -- even today we're still booking in a little bit into the third quarter. And we can see the orders. And -- but there's some other things there such as mix, that to make it a little bit difficult right now to fully predict it. Originally we thought that, it likely decline even throughout the entire year. And just with where we're seeing the demand right now, we think that it will take a turn right at the end of the third quarter. And to potentially come up as we exit the year.

That's great. And then, can you just talk a little bit about, what you're seeing in terms of fill rates? And also just given the dynamics that are occurring at various units, what you're seeing in terms of follow-on assignments? And lastly, related to that, I imagine, your fill rates are better than the vendor-neutral MSPs that are out there. To what extent are you actually seeing an increasing level of interest, in terms of using you as the MSP given your superior ability in terms of filling positions?

Yeah. Mark, I'll hit on a couple of those. And then, maybe I'll turn it over to Kelly to talk about, customers as it relates to utilizing our VMS vendor-neutral program versus our MSP product. On the fill rate side, we did see fill rates across the industry at the beginning of this year that were lower than what it had historically been. And that's, of course, because of the really high demand that we saw at the peak of the pandemic. And then it got to a point back to where it was respectable, it was at the levels that we had experienced before the pandemic and that would have been kind of the March, April time frame. And then, right now what the entire industry is experiencing, just over the past couple of months on fill rates is, that they have declined a little bit. Which you would expect with the excessive demand that we have out there, right now, across the entire industry. Within our own MSP programs, as well as our vendor-neutral programs, we do rely heavily on our supplier partners. So they've been able to help quite a bit with those fill rates to help support our clients. Of course, we're very appreciative of those partners. As it relates to retention of our own health care professionals, of course, we've seen that kind of go up and down throughout the past year as well. If we kind of went back to, like, Q2, Q3 time frame of last year, we did see some declines in our retention rates, in skills such as like OR whenever electric procedures were paused and then it did return to some of the levels that we would experience historically. Q2 of this year actually did go down again on our retention, but that was more of a skill mismatch. So you had some of these COVID vaccine projects that were in place or replacing pharmacy techs, for example, and for the most part those COVID vaccine projects have gone away. And so there's no where to put those clinicians. Of course, we're only one month into the third quarter, but the retention rates of clinicians across both Nurse and Allied are back to where they were pre pandemic.

Might be good opportunity for Kelly to chime in regarding our MSP programs. And you asked Mark about the preference of clients to have a staffing-led MSP versus VMS. Of course, we're really fortunate that we can offer both, which was extremely valuable during the last year. And as you heard me mention, we added many new clients in our technology VMS platform and that certainly has helped make an impact there, help drive that revenue for that division, but we're finding more and more clients are wanting to have that staffing-led offering. So maybe, Kelly, you could chat a little bit about that.

Yes. A couple of comments on that. Thank you, Susan and Mark. We certainly see stronger performance from a fill perspective with our AMN-led program. So we have seen a strong -- part of our overperformance in Technology and Workforce Solutions this quarter was due to the strength of VMS. We've seen higher demand sustain as well. We have a little less influence, despite really strong partnerships with our suppliers. Our ability to partner with our clients in our MSP program, strategize with them around utilization, around bill rates, around marketing strategies, certainly benefits those MSP programs. And they see that in higher fill rates, as well as other value that they receive from that. We are seeing in the market, from a new program perspective, many clients who were without workforce solution partners throughout the pandemic, really turning now towards reassessing their strategies and engaging us in conversations and that's evidence -- and the new business we brought on the last quarter and a very strong pipeline going forward to the end of the year. So we're very bullish and continue to prioritize our current managed services programs, but looking to, with our expansion, take on more and be able to provide more support to the industry.

That sounds really promising. Congratulations.

Thank you.

Your next question comes from the line of Tobey Sommer from Truist Securities.

Thank you. I was wondering if you could describe what you're hearing from clients and seeing. Do you think you have visibility into the full-time labor supply and the shortness to the extent to which there are short to medium-term issues, such as, hopefully, I'm describing it accurately, the burn out, the need to take vacations, do other things, a full-time staff that may remain in the labor force, versus structural things, like the retirements or early and/or catch-up from last year, where we may have seen delays, I imagine? Thanks.

Yes. Very important question, Tobey. This is Susan. And as you can imagine, those conversations are happening pretty much daily earlier today. Landry and I were on a call with one of our largest clients about their outlook and it's very similar to what we hear from other large systems and large clients in that, they don't see this ending anytime soon. They believe that there's been a shift in the workforce that will have impacts for many years to come, whether it be -- it's a combination of all of those things that you've just described. Its retirement, people choosing to do other things, their existing staff being burned out, fatigued, wanting to get to good staffing levels from a quality of care standpoint. But it becomes a little bit of a vicious circle, right, where if you're understaffed, people are getting burned out and they quit and it just makes the scenario that much more difficult. And so, because of that, we're talking with them about, certainly, urgent immediate actions and collaborative things we can do to get them the staff they need immediately, but then also, what can we do midterm and longer term. And some of the solutions that we have to offer are things like RPO. In fact, our RPO business had a phenomenal second quarter and has a great pipeline going forward, because so many clients are wanting assistance and new ways, new best practices to recruit their permanent staff. We're talking with clients about new grad programs, where we can provide -- and we've done this before with some of our large clients, where we provide new grads in a preceptor program and those individuals can ultimately go permanent. Our international business, O'Grady-Peyton. That team has done a phenomenal job of serving clients. Remember international nurses come over on green cards and are on assignment with us for generally two years before they go permanent and they are seen as a core staffing solution, as opposed to a temporary solution. So when we're having these conversations with clients we're fortunate that we have the ability to discuss multiple solutions for them that address that kind of short-term, mid-term and long-term needs that they have. And I'll just add one more thing. There's also a need for flow pool management and how do they optimize the availability of nurses that they may have locally and use technology, which is why things like our b4health technology become very valuable.

Right. Thank you. Have you heard any legislative or industry-wide measures to any, sort of, changes to improve supply that could impact the market over any sort of medium-term because doing something to encourage students is many years away from impacting supply?

Right. There are -- I'll start with there's nothing material or significant. There certainly are things being discussed and there's advancement albeit slow on things like the Nursing License -- Licensure Compact which now has 38 states that are members of that compact. The advanced practice compact is really just getting started with only North Dakota involved. The physical therapy compact has 21 memberships. All of those things help the mobility of clinicians crossing state lines and enabling to deliver care faster. We have the TREAT Act that's been introduced at a national level would help a bit in times of national healthcare crisis, which we're in to be able to get clinicians moved around and utilizing their licensure across state lines as well. But none of that is going to materially change the supply of clinicians in the next year.

Okay. Last question from me. Can you comment on your internal efforts to streamline recruiting and implement technology and onboard people in a as automated a fashion as possible credentialing, et cetera? And then maybe juxtapose that with what's going on in the market as you see it if there is a juxtaposition to be had? Because these -- a lot of times crises spur innovation, acceptance of frameworks and processes that maybe in normal times wouldn't be embraced.

Absolutely. The last year has certainly advanced innovation both within AMN and across the industry. And I think adoption as well. In many cases maybe the tool or technology was there, but there was a hesitancy whether it be with candidates or clients to utilize it. So we've definitely seen faster adoption of digital capabilities. One great example is our AMN Passport app which enables clinicians to search for jobs and look for their next great assignment certainly gives us the ability to personalize the experience for them and push out personalized opportunities that are going to be of the greatest interest to them. But it also enables them to get their credentials uploaded and accelerate the process of getting onboarded. We've seen great adoption of the AMN Passport. And every week practically are rolling out new features and functionality. We're not the only ones doing these things within the industry, but we do believe that we are ahead of the majority of our industry we should be as the leader in the industry. But we're learning new things every day that we can do differently. Landry, did I miss anything there you want to add?

No, that was right. I mean, we're -- you mentioned adoption. We're ahead of -- beating our expectations of the clinicians wanting that technology wanting to be able to do things and take more control over the process and within their career. But you still have to have the talent. So we're making investments there in our talent not only our existing team members, but doing a lot to attract new talent to the organization. We've made investments recently actually this entire year in our account management team. We've also made investments in our recruitment team. In the second quarter, we increased our number of producers as a percentage double-digits and it's even higher today. So we continue to make those investments. And then Tobey you probably remember the advanced acquisition -- or I'm sorry Advanced Medical acquisition that we did and all of those team members are now in our systems and within our processes. And their productivity per person is more than double what it was before the acquisition. So that team is just doing an excellent job.

I appreciate that. If I can do a little follow up. You know we love quantification in this business. To the extent that the passport has improved or kind of improved the credentialing time, could you give us an example of what that might look like today versus under a more human intervention process?

So why don't you let us work on that Tobey? Yes, we have those metrics internally, but why don't you let us come back to you with something that we think would be meaningful externally for you. We have of course tons of – yes.

Report that. Thank you.

We'll take that as an action item.

Thanks, Tobey.

The next question comes from the line of A.J. Rice with Credit Suisse.

Hi, everybody. A couple of questions. First of all, you mentioned the strength you saw this quarter in the interim leadership and permanent placement and also in the Allied side the rebound and therapy of demand. I guess, I'm trying to understand some of those areas and maybe there's some others that I'm not thinking of were -- didn't fare as well in the height of the pandemic and now seem to be coming back. Do you think they're back to normal, or do you think there's still further room for them to rebound as we see the coming months unfold?

Hi, A.J., this is James. I'll jump in and I'll start with the search business. So our search business was the hardest hit business through the pandemic and it ends the disclosure recovering coming back to pre-pandemic demand levels. But I will say the good news is that we have had four quarters of sequential growth in our search business. And our search business continues to see strong pipeline significantly or specifically within sort of our mid-level management and with inside of academia. I will say we have forecasted and we're seeing that from getting back to pre-pandemic is H1 of 2022 which is going to be faster than what our guidance was of H2 of 2022. So, the search business is coming back a little bit slower but we are seeing some pickup on demand there. From a interim standpoint we feel very confident and very good about where the interim business is. Our interim business has had a second quarter finishing above 7% of its pre-COVID levels and three consecutive quarters of record orders volume contributing to really eight consecutive months of improving interim on assignment. Our demand has returned back to pre-pandemic levels and that's been driven by our core direct and also our MSP clients. So, we feel very good about where we are from a demand standpoint and the revenues to be able to travel from that.

Hey A.J., it's Landry. I'll hit on a couple of things as it relates to Allied. Well, that business has become very large for us. They are number one in their space. And that team has just done a fantastic job of executing up against the demand that they have. They actually did not see that same dip in demand like we saw in Travel Nursing in that April time frame. Their demand just has continued an upward trajectory. And today they are at record levels and those record levels are just about across every single specialty that they support. So, I know we talked about probably five quarters ago therapy being down due to some reimbursement changes. That demand is back and the team is executing well against that. Imaging demand is at the highest level that I've seen it, same with laboratory. And then respiratory is up significantly from prior year, but probably more flat from the peak of the pandemic as you would expect.

Okay. I wonder on your bill rate comments. That was I think aggregate bill rates. Is there any way to parse out what you're seeing? Obviously, you got the COVID premium rates and the percentage of those assignments is probably coming down it sounds like. And then you've got just sort of your traditional assignments. Given the tightness of the supply, what is happening on pricing for those non-COVID assignments? And I don't know if you have a statistic you'd share as to how many of your assignments in the recent quarter were COVID-related versus the last few quarters is it materially changing?

A.J. this is Brian. I'll start off and then Landry may add some color. I think to start with we don't really try to separate COVID versus non COVID. The reality is in this environment our clients need our help really across the board. And the rates as we mentioned were at the peak level in the first quarter. And of course, you can attribute some of that to the highest hospitalizations in COVID and the significant demand it drove and inside the high levels. As we came off of that peak level in March, we had anticipated that we would see rates come down. And that has happened but not as much as we expected because they're now all the dynamics that Susan talked to in our opening remarks. It's somewhat COVID-related of course but this burnout we're seeing and the very high vacancy rates on staff in conjunction with an increased utilization of health care it's created this dynamic. Again, it's kind of a byproduct of the pandemic that's driven really record levels of demand across all geographies and all specialties. And so that's what's driving rates up overall. It's not really COVID-specific at this point. It's just a lot of competition for scarce talent. So again it comes down because there was kind of the -- at one point in time where the work rates were very high. You're seeing now, maybe not the highest levels of bill rates that we had in the first quarter. But now we have more orders at a higher bill rate in totality. And so as we're booking into those it's keeping the overall rates at very elevated levels. So, we mentioned being down a little under 10% sequentially in Q2. And down again in the third quarter. But those rates are still significantly above where they were in the early part of 2020. And at this point with demand where it is, it's just harder to see that coming down. In fact, if anything as Landry mentioned they might even come up a little bit in the fourth quarter just because there's just so much need across the country.

Okay. That's great. I want to add my best wishes to you Brian as well. Maybe just a last question. Lead generation and new applicants trying travel assignments and so forth for the first time. We talked a little bit about what you're seeing when people come off on assignment. But are you -- how is the applicant pool? Is that expanding? Are people more open to considering taking on an assignment like this?

A.J. it's Landry. Yes, although our supply metrics look really good. Of course, we're tracking a lot -- we track it a lot of different ways. In particular though our new applicant numbers are really strong. Last year was our highest year on record. And this year we are pacing ahead of prior year. So, I think that's a really good stat and a good thing to see that nice supply that's coming into the business. And then conversion rates look good also. I think a lot of that has probably contributed to some of the improvements that we've made in the process and AMN Passport that we've mentioned too that allows people an easier experience still to make it through all the way to on assignment.

Okay. Great. Thanks so much.

Thanks A.J.

Our next question comes from the line of Kevin Fischbeck from Bank of America.

Hey thanks. Great. Just wanted to dig into the guidance I guess like -- in doing it right it looks like your revenue guidance is sequentially to be down. And it looks like -- obviously the biggest part of that is the Nurse and Allied. But the Physician and the workforces also look like they're going to be down sequentially which was a little bit less clear to me why that would be the case. If you could just go into what would be driving that outlook for each business?

Sure. I'll provide some color to kick off on that. So I think on the Nurse and Allied bill rates should be the number one reason we talked about that as they come down again even though they're elevated levels they're off that peak of -- that really was at the March point. And so even as they kind of hit their lowest point in July and are slightly up in August, September. But even as you kind of average out the quarter, it's down sequentially. Nurse volume is down just slightly as well at this point. And that's -- it's really driven by some of the vaccine projects that we had in the second quarter. So we did pick up some revenue from those projects that you can imagine for the most part ended at this point. And so you're kind of stripping some of that out, you'd actually see volume up just slightly on a sequential basis third quarter, but that's -- the reality is you'll still be down because of that change. On the Allied side, you've got a little bit of a decline mainly from the schools business. As you get into the summer months, you have obviously lower number of therapists on assignment during the summer, but outside of that the core business outside of schools is still growing as well. Physician and leadership, it's relatively similar on a sequential basis. The math you do might be slightly down depending on where you put in that range. Some of the interim revenue was again projects-related, so down slightly there. Even though again the underlying business performance trends are really positive as we look to the back half of the year. And then on the Technology and Workforce solutions, the same driver for Nursing with rates does have an impact on VMS. So again, you've got good trends there, but with the rate -- average rate down kind of across the industry that has a direct impact on the top line revenue. So those were the biggest ones. I would say in Technology and Workforce Solutions, we also had a contact tracing project we mentioned last year and that also ended in the second quarter. So, we've got a tougher comp sequentially as you go into the third quarter.

Okay. Great. That's helpful. And then I guess just maybe going back to some of the earlier questions about supply and whether there's any kind of risk to that coming back. I guess when you talk to the providers some of them seeing very acute staffing issues, but everyone's talking about labor pressure to some degree. But the companies who seem to be more comfortable with the labor outlook seemed to point to, hey, in September unemployment benefits go away kids go back-to-school, and so nurses they'll have to stay home to take care of them. COVID coming down, so fewer quarantine days. And it seems like they think that these are relatively meaningful tailwinds from a supply perspective. It sounds like that's not what you're hearing on average. Why aren't those potentially risks to the back half?

Yes. We aren't hearing that from our clients at all, in fact, like you said, quite the opposite. We're hearing they expect it to continue to be very challenging certainly for the remainder of the year and even really going into next year and beyond that there's been some sort of structural shift. The unemployment benefits aren't as likely to affect our supply and placement of clinicians. I mean, there could be some element of the schools of nurses that maybe have stayed home. But I think all nurses are being highly incented to be at work today. So if they want to be at work there's a reason for them to be there and they've got the financial incentive to do so. So we're just not hearing that from our clients that they expect there to be some sort of relief around the corner.

Okay. And then last question, I guess, you talked about utilization, I should say, bill rates starting to kind of flatten and then maybe start to pick up. How should we think about gross margins during this kind of period? Oftentimes your bill rates and pay rates have lags versus each other. Is there anything that we should be keeping in mind as we think about that trajectory over the next several quarters?

The only thing I'd mention for the Q3 guidance -- you saw that the guidance, we gave was around 100 basis points up sequentially. And part of that is because of the strike-related revenue that we mentioned. Just the way that dynamics work in that there's some upfront revenue we get in preparation for an event and that has a favorable margin influence on it. So outside of that, I'd say, there's a pretty stable margin trends as we go into the third and fourth quarter. And the team has done a really effective job even, as they're navigating a very challenging time with shifting rates and pay packages, giving really nice stability across the board. So I think the bigger influence is really going to be driven more by a mix shift between the businesses and -- but at a business unit level, we should expect to see stability.

All right. Great. Thanks.

Your next question comes from the line of Brian Tanquilut with Jefferies.

Hey, good afternoon guys. Brian congrats on the move and good luck as well. I guess, my first question, just looking at the strength in the Technology and Workforce Solutions business. How should I think about the different drivers of that? I mean, is it cross-selling? Is it new business? Is it selling into existing relationships? And then, I guess, the follow-up to that would just be your thoughts on the margin opportunity for that business given the continued strength that we're seeing from that.

So I'll start and Kelly may want to add in here. Some of the drivers have been a bit different for the various businesses that are included in there. So for language services, it's been increased volumes from existing clients as they continued to expand their utilization, seeing the benefit from using the service and they expanded into more areas of their facility or other facilities. They had some really nice new client wins over the last year, and so getting those launched and starting to see some volumes from those. Although, I have to say it was a little bit of a delay in some of those launches just because of the pandemic. So, more of that benefit will really come into the future. We are cross-selling into our existing MSPs, but the majority of what you saw in their growth did not come from that, because we've been pretty preoccupied with other things in dealing with the overall growth. So we probably haven't made quite as much progress as we would have normally expected in getting them cross-sold. Brian mentioned VMS, a lot of the drivers there are the additional clients that we added over the last year. A lot of really great wins as clients were seeking solutions vendor-neutral or really any solution that would help them to better access their talent. And then, of course, the bill rate increase did improve or did help them a bit although volumes are also very, very strong across VMS. RPO, I mentioned has had some really great success. The margins in that segment did get impacted a bit by the growth of those various businesses, right? Some of the stronger or higher margins such as in VMS has certainly been additive to the gross margin. As we might see bill rates come down across the Travel Nurse and Allied industry that will affect the growth of the VMS business. It will still be super positive, but it won't maybe be as big of a mix as other parts of the segment grow. So Kelly, what else you want to add?

Yes. The only thing I would add -- great job Susan. Brian is that another thing to think about that will fuel growth is a lot of the more complex solutions we've delivered this year for things like mass vaccination sites. We've really used multiple technology solutions and integrated those to deliver a full comprehensive solution. So, bringing together the Smart Square scheduling, utilizing our VMS integrating that with our language services platform. And we continue to see clients looking for that. Synzi, the Synzi platform is a telehealth platform as we start to talk of clients' very receptive market to how we bring full solutions that bring both the staffing and labor component on a platform that can be delivered virtually. So, that will fuel growth that, I think goes beyond just cross-selling but really integrated solutions.

I have to give a call out to the Synzi team that just joined us, because they've been such a wonderful addition. And we had a fabulous win of a new MSP in the home health space, and they were a very instrumental part of helping us win that client and improve our commitment and capabilities within the non-acute category. So, thanks to our Synzi colleagues.

That's awesome. I guess my second question, just on the capital deployment side. I mean free cash flow was really strong $160 million this quarter. I mean if you're generating this much cash, how are you thinking about redeploying that? And where should we be thinking you'd allocate that?

Well first, we're of course, investing internally. We talked about that and I think you're seeing the benefit of those investments, whether it be in digital or in our own infrastructure and certainly in our people. So never want to lose sight of that. When we think about additional opportunities to add in other capabilities strategic services, and we just mentioned Synzi was a great example of how we continue to add in technology capabilities. And in that case, helps us to really address a growing part of the market that we want to make sure that we've got a presence in, in the sub-acute and the home health space. So we'll always be looking at what does the client want and need how do we build stronger relationships, so those technology workforce solutions are absolutely a priority for us. It could be in addition to something that we're already doing in that space, something that helps us to consolidate within a fragmented part of the market or could be something new, a net new capability like Synzi brought to us. Also consolidation opportunities, I'd say particularly in our Nurse and Allied space, Locum has great growth as does interim leadership. But, when we look at these longer-term trends of shortages in really all the clinical disciplines, it probably raises our interest more than it was two years ago, in terms of consolidation opportunities that might be out there in our staffing services. That's always been on the table, but I'm just kind of recognizing that since we've seen this shift in the shortage and very high demand, we want to make sure that we are as capable as possible to deliver to our clients.

Thank you, guys.

Thanks, Brian.

Your next question comes from the line of Tim Mulrooney from William Blair.

Hey, guys. This is Sam on for Tim. Hope you're all doing well, got a few questions here. I think you previously thought bill rates would settle maybe 10% to 15% higher relative to the pre-pandemic levels by the end of this year. But it sounded like that's not the case anymore. Can you update us on the timing when you now expect this to occur? And if you think they might settle higher or lower than that 10% to 15% during a more normalized environment?

Yes. Difficult to say, but honestly at this point, the magnitude of the demand that we're seeing is definitely more than we've anticipated. We knew on those heels of the pandemic as things improve, there would be more vacancies and that has definitely played out but even in a more severe way than we anticipated. And that's led to these higher and more elevated rates. So we do expect them to come down. But at this point, if you take the kind of metrics we've given it would still point to a rate in the fourth quarter 20%-plus above where it was pre pandemic. And quite honestly, I don't -- we're not really in a position at this point to say when that would go down further. If demand stays where it is, it's hard to imagine the scenario would change materially. And so that's really something we'll have to see how that plays down into 2022.

No. It's super fair, and still good color there. Maybe switching gears to more of the Delta variant here. But it seems with COVID case is on the rise, you've had some contingency conversations with clients should this pandemic continue worsening. I guess there's really two questions I wanted to ask around that. First, how are you thinking about Delta as it relates to ER nurse demand? And maybe second, do you think this might negatively affect demand for OR nurses, or are hospital utilization rates continuing to move higher even despite the recent rise in cases?

One of the things that happened over the last year, and I think through all the lessons learned in the pandemic is health care organizations figured out, how they could continue to deliver normal patient care and keep their procedures moving and even things such as isolating COVID patients outside of the normal facility patient flow. And what we're hearing from them is they are committed to keeping the doors open and keeping the patients coming in to be seen. And if anything, because of the pent-up demand, there's a greater urgency to make sure that they have their ORs open. So it's absolutely still a huge – right now, the gating factor is staff. If they're having to close down an OR it's because they don't have nurses or scrub techs to come in and assist. So we think that, it's not likely going to affect the normal sort of patients demand, or the demand that kind of drives more utilization of clinicians, if that's what you're asking?

Yeah. Yeah. No, that's good to hear. I appreciate that. I think, I'll leave it at that then. But Brian, I know I speak for Tim as well, best of luck in your next endeavor here.

Appreciate it.

And your next question comes from – and your last question comes from the line of Mitra Ramgopal from Sidoti.

Yes. Hi. Good afternoon. Thanks for taking the questions. I just had a quick one. Based on the need to acquire talent and address staffing needs, I was just wondering, if you had an update on as it relates to the Randstad partnership, and how has all worked out for you? And if you might need to make – or enter into even more partnerships like that?

Hi, Mitra, it's Kelly. Yeah, the Randstad partnership is going very well. We continue to collaborate together with existing clients bringing together their full complement of contingent needs and integrating our program, so we can support them in a comprehensive way. We of course continue to increase our investment with many suppliers in our MSP programs. And so at the moment, we don't see any kind of real gaps in certain labor pools. But with Randstad, we're also looking at other ways that we can influence and provide capabilities to our clients that go beyond even just staffing looking at some of our data and insights and analytics and other capabilities that we both bring to the table different best practices that we can bring to our health care clients that they might have in other industries or globally. So we're going to continue to invest and focus on that jointly.

Okay. No that's great. And Brian, best wishes and good luck in your new endeavor.

Thanks, Mitra.

And there are no further questions at this time.

Great. Well, thank you everyone for joining us today. As always, we are proud and honored to serve our country, but also to collaborate alongside our clients and our clinicians with this really amazingly passionate and talented team that, we're all a part of. We see them lean in and bring their heart and their soul and their talent every single day. So we just want to say thank you to all of our incredible colleagues across the country.

This concludes today's conference call. Thank you for participating. You may now disconnect.