HCSG Reports Second Quarter Results
Exceeds Growth Expectations
Raises 2025 Cash Flow Forecast
Announces
-
Revenue of
$458.5 million 7.6% over the prior year. -
Net income and diluted EPS of
( and ($32.4) million $0.44 $0.65 -
Cash flow from operations of
$28.8 million $8.5 million $10.9 million - Reiterates 2025 mid-single digit growth expectations.
-
Raises 2025 cash flow from operations forecast (excluding the change in payroll accrual) from
$60.0 $75.0 million $70.0 $85.0 million -
Announces
$50.0 million
Ted Wahl, Chief Executive Officer, stated, “Second quarter growth exceeded our expectations. New client wins and higher retention drove our organic growth, and we have carried that positive momentum into the back half of the year. Despite the previously announced Genesis news and resulting impact on our Q2 reported results, our 2025 growth plans and cash flow outlook remain strong. We are confident that continuing to execute on our strategic priorities, supported by our strong business fundamentals, will enable us to further accelerate growth, while delivering sustainable, profitable results.”
Second Quarter Results
-
Revenue was reported at
$458.5 million $205.8 million $252.7 million - The Company reiterated its expectation for 2025 mid-single digit revenue growth.
-
Cost of services was reported at
$455.5 million 99.4% and includes the impact of the$61.2 million 13.4% non-cash charge related to the previously announced Genesis restructuring.-
The Company’s goal is to manage the second half of 2025 cost of services in the
86% range.
-
The Company’s goal is to manage the second half of 2025 cost of services in the
-
SG&A was reported at
$49.2 million $4.7 million $44.5 million 9.7% .-
The Company expects to manage SG&A in the
9.5% to10.5% range in the near term, with the longer term goal of managing those costs into the8.5% to9.5% range.
-
The Company expects to manage SG&A in the
-
Segment margin for Environmental Services was reported at
0.8% and includes the impact of a$20.3 million 9.9% non-cash charge related to the previously announced Genesis restructuring. Segment margin for Dietary Services was reported at (10.1% ), and includes the impact of a$40.9 million 16.2% non-cash charge related to the previously announced Genesis restructuring. -
Net income and diluted EPS were reported at
( and ($32.4) million $0.44 $0.65 $61.2 million 22.7% ) related to the previously announced Genesis restructuring.-
As previously announced, the Company estimates a third quarter
$0.04
-
As previously announced, the Company estimates a third quarter
-
Cash flow from operations was reported at
$28.8 million $20.3 million $8.5 million -
The Company raised its 2025 cash flow from operations forecast (excluding the change in payroll accrual) from
$60.0 $75.0 million $70.0 $85.0 million
-
The Company raised its 2025 cash flow from operations forecast (excluding the change in payroll accrual) from
Balance Sheet and Liquidity
The Company’s primary sources of liquidity are cash flow from operating activities, cash and cash equivalents, and its revolving credit facility. As of the end of the second quarter, the Company had cash and marketable securities of
Share Repurchases
The Company also announced that it plans to accelerate the pace of its share buybacks, and over the next 12 months, intends to repurchase
Mr. Wahl stated, “Over the course of the last several years, we have continuously strengthened our balance sheet and expect strong cash flow generation over the next 12 months and beyond. We have demonstrated a prudent and balanced approach to capital allocation, including first and foremost investing in our growth initiatives. The current valuation of our stock relative to our long-term growth potential offers a unique opportunity with the buyback to return significant capital to shareholders.”
Conference Call and Upcoming Events
The Company will host a conference call on Wednesday, July 23, 2025, at 8:30 a.m. Eastern Time to discuss its results for the three months ended June 30, 2025. The call may be accessed via phone at 1 (800) 715-9871, Conference ID: 9951274. The call will be simultaneously webcast under the “Events & Presentations” section of the Investor Relations page on the Company’s website, www.hcsg.com. A replay of the webcast will also be available on the website for one year following the date of the earnings call.
The Company will be attending and presenting at the Baird 2025 Global Healthcare Conference on September 10, 2025 at the InterContinental Barclay NY.
About Healthcare Services Group, Inc.
Healthcare Services Group (NASDAQ: HCSG) is a leader in managing housekeeping, laundry, dining, and nutritional services within the healthcare industry. With nearly 50 years of experience, HCSG aims to provide improved operational, regulatory, and financial outcomes for our clients.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS
This release and any schedules incorporated by reference into it may contain forward-looking statements within the meaning of federal securities laws, which are not historical facts but rather are based on current expectations, estimates and projections about our business and industry, and our beliefs and assumptions. Words such as “believes,” “anticipates,” “plans,” “expects,” “estimates,” “will,” “goal,” “intend” and similar expressions are intended to identify forward-looking statements. The inclusion of forward-looking statements should not be regarded as a representation by us that any of our plans will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Such forward-looking information is also subject to various risks and uncertainties. Such risks and uncertainties include, but are not limited to, risks arising from our providing services to the healthcare industry and primarily providers of long-term care; credit and collection risks associated with the healthcare industry; the impact of bank failures; our claims experience related to workers’ compensation, general liability and auto insurance; the effects of changes in, or interpretations of laws and regulations governing the healthcare industry, our workforce and services provided, including state and local regulations pertaining to the taxability of our services and other labor-related matters such as minimum wage increases; the Company's expectations with respect to selling, general, and administrative expense; the impacts of past or future cyber attacks or breaches; global events including ongoing international conflicts; and the risk factors described in Part I of our Form 10-K for the fiscal year ended December 31, 2024 under “Government Regulation of Customers,” “Service Agreements and Collections,” and “Competition” and under Item 1A. “Risk Factors” in such Form 10-K.
These factors, in addition to delays in payments from customers and/or customers undergoing restructurings, have resulted in, and could continue to result in, significant additional bad debts in the near future. Additionally, our operating results have been in the past and could in the future be adversely affected by continued inflation particularly if increases in the costs of labor and labor-related costs, materials, supplies and equipment used in performing services (including the impact of potential tariffs) cannot be passed on to our customers.
In addition, we believe that to improve our financial performance we must continue to obtain service agreements with new customers, retain and provide new services to existing customers, achieve modest price increases on current service agreements with existing customers and/or maintain internal cost reduction strategies at our various operational levels. Furthermore, we believe that our ability to sustain the internal development of managerial personnel is an important factor impacting future operating results and the successful execution of our projected growth strategies. There can be no assurance that we will be successful in that regard.
USE OF NON-GAAP FINANCIAL INFORMATION
To supplement HCSG’s consolidated financial information, which are prepared in accordance with generally accepted accounting principles in
The Company is presenting net cash flow from operations (excluding the impact of payroll accrual), earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA excluding items impacting comparability (“Adjusted EBITDA”). We cannot provide a reconciliation of forward-looking non-GAAP measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. The presentation of non-GAAP financial measures is not meant to be considered in isolation or as a substitute for financial statements prepared in accordance with GAAP.
HEALTHCARE SERVICES GROUP, INC.
|
|||||||||||||||
|
For the Three Months Ended |
|
For the Six Months Ended |
||||||||||||
|
June 30, |
|
June 30, |
||||||||||||
|
2025 |
|
2024 |
|
2025 |
|
2024 |
||||||||
Revenue |
$ |
458,491 |
|
|
$ |
426,288 |
|
|
$ |
906,153 |
|
|
$ |
849,721 |
|
Operating costs and expenses: |
|
|
|
|
|
|
|
||||||||
Cost of services |
|
455,533 |
|
|
|
384,742 |
|
|
|
835,224 |
|
|
|
743,653 |
|
Selling, general and administrative |
|
49,163 |
|
|
|
44,437 |
|
|
|
94,129 |
|
|
|
91,348 |
|
(Loss) income from operations |
|
(46,205 |
) |
|
|
(2,891 |
) |
|
|
(23,200 |
) |
|
|
14,720 |
|
Other income, net |
|
4,317 |
|
|
|
905 |
|
|
|
5,206 |
|
|
|
4,608 |
|
(Loss) income before income taxes |
|
(41,888 |
) |
|
|
(1,986 |
) |
|
|
(17,994 |
) |
|
|
19,328 |
|
|
|
|
|
|
|
|
|
||||||||
Income tax (benefit) provision |
|
(9,522 |
) |
|
|
(198 |
) |
|
|
(2,856 |
) |
|
|
5,807 |
|
Net (loss) income |
$ |
(32,366 |
) |
|
$ |
(1,788 |
) |
|
$ |
(15,138 |
) |
|
$ |
13,521 |
|
|
|
|
|
|
|
|
|
||||||||
Basic (loss) income per share |
$ |
(0.44 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.21 |
) |
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted (loss) income per common share |
$ |
(0.44 |
) |
|
$ |
(0.02 |
) |
|
$ |
(0.21 |
) |
|
$ |
0.18 |
|
|
|
|
|
|
|
|
|
||||||||
Basic weighted average number of common shares outstanding |
|
73,161 |
|
|
|
73,853 |
|
|
|
73,414 |
|
|
|
73,889 |
|
|
|
|
|
|
|
|
|
||||||||
Diluted weighted average number of common shares outstanding |
|
73,161 |
|
|
|
73,853 |
|
|
|
73,414 |
|
|
|
74,048 |
|
HEALTHCARE SERVICES GROUP, INC.
|
|||||||
|
June 30, 2025 |
|
December 31, 2024 |
||||
Cash and cash equivalents |
$ |
82,818 |
|
$ |
56,776 |
||
Restricted cash equivalents |
|
326 |
|
|
|
3,355 |
|
Marketable securities, at fair value |
|
51,674 |
|
|
|
50,535 |
|
Restricted marketable securities, at fair value |
|
29,258 |
|
|
|
25,105 |
|
Accounts receivable, net |
|
292,210 |
|
|
|
330,907 |
|
Notes receivable — short-term, net |
|
31,628 |
|
|
|
51,429 |
|
Other current assets |
|
44,380 |
|
|
|
38,545 |
|
Total current assets |
|
532,294 |
|
|
|
556,652 |
|
|
|
|
|
||||
Property and equipment, net |
|
28,215 |
|
|
|
28,198 |
|
Notes receivable — long-term, net |
|
45,084 |
|
|
|
41,054 |
|
Goodwill |
|
80,042 |
|
|
|
75,529 |
|
Other intangible assets, net |
|
8,263 |
|
|
|
9,442 |
|
Deferred compensation funding |
|
51,548 |
|
|
|
49,639 |
|
Other assets |
|
56,754 |
|
|
|
42,258 |
|
Total assets |
$ |
802,200 |
|
|
$ |
802,772 |
|
|
|
|
|
||||
Accrued insurance claims — current |
$ |
24,578 |
|
|
$ |
25,148 |
|
Other current liabilities |
|
189,354 |
|
|
|
167,399 |
|
Total current liabilities |
|
213,932 |
|
|
|
192,547 |
|
|
|
|
|
||||
Accrued insurance claims — long-term |
|
50,833 |
|
|
|
51,869 |
|
Deferred compensation liability — long-term |
|
51,699 |
|
|
|
50,011 |
|
Lease liability — long-term |
|
7,048 |
|
|
|
8,033 |
|
Other long-term liabilities |
|
1,650 |
|
|
|
385 |
|
|
|
|
|
||||
Stockholders' equity |
|
477,038 |
|
|
|
499,927 |
|
Total liabilities and stockholders' equity |
$ |
802,200 |
|
|
$ |
802,772 |
|
HEALTHCARE SERVICES GROUP, INC.
|
||||||||||||||||
Reconciliation of GAAP net (loss) income to EBITDA and adjusted EBITDA (in thousands) |
|
For the Three Months Ended |
|
For the Six Months Ended |
||||||||||||
|
June 30, |
|
June 30, |
|||||||||||||
|
|
2025 |
|
|
|
2024 |
|
|
|
2025 |
|
|
|
2024 |
|
|
GAAP net (loss) income |
|
$ |
(32,366 |
) |
|
$ |
(1,788 |
) |
|
$ |
(15,138 |
) |
|
$ |
13,521 |
|
Income tax (benefit) provision |
|
|
(9,522 |
) |
|
|
(198 |
) |
|
|
(2,856 |
) |
|
|
5,807 |
|
Interest, net |
|
|
(1,976 |
) |
|
|
184 |
|
|
|
(4,186 |
) |
|
|
138 |
|
Depreciation and amortization(1) |
|
|
5,001 |
|
|
|
3,679 |
|
|
|
8,879 |
|
|
|
7,210 |
|
EBITDA |
|
$ |
(38,863 |
) |
|
$ |
1,877 |
|
|
$ |
(13,301 |
) |
|
$ |
26,676 |
|
Share-based compensation |
|
|
2,541 |
|
|
|
2,113 |
|
|
|
6,279 |
|
|
|
4,597 |
|
Adjusted EBITDA |
|
$ |
(36,322 |
) |
|
$ |
3,990 |
|
|
$ |
(7,022 |
) |
|
$ |
31,273 |
|
Adjusted EBITDA as a percentage of revenue |
|
|
(7.9 |
)% |
|
|
0.9 |
% |
|
|
(0.8 |
)% |
|
|
3.7 |
% |
Reconciliation of GAAP cash flows provided by (used in) operations to net cash flows from operations (excluding the change in payroll accrual) |
|
For the Three Months Ended |
|
For the Six Months Ended |
||||||||||||
|
June 30, |
|
June 30, |
|||||||||||||
|
|
2025 |
|
|
|
2024 |
|
|
|
2025 |
|
|
|
2024 |
|
|
GAAP cash flows provided by (used in) operations |
|
$ |
28,787 |
|
|
$ |
16,319 |
|
|
$ |
56,288 |
|
|
$ |
(9,714 |
) |
Accrued payroll(2) |
|
|
(20,256 |
) |
|
|
(18,677 |
) |
|
|
(15,665 |
) |
|
|
(1,862 |
) |
Cash flows from operations (excluding the change in payroll accrual) |
|
$ |
8,531 |
|
|
$ |
(2,358 |
) |
|
$ |
40,623 |
|
|
$ |
(11,576 |
) |
1. |
Includes right-of-use asset depreciation of |
||
2. |
The accrued payroll adjustment reflects changes in accrued payroll for the three and six months ended June 30, 2025 and 2024. The Company processes payroll on set weekly and bi-weekly schedules, and the timing of payments may result in operating cash flow increases or decreases which are not indicative of the Company’s quarterly cash flow performance. |
||
View source version on businesswire.com: https://www.businesswire.com/news/home/20250723023712/en/
Company Contacts:
Theodore Wahl
President and Chief Executive Officer
Vikas Singh
Executive Vice President and Chief Financial Officer
Matthew J.
Chief Communications Officer
215-639-4274
investor-relations@hcsgcorp.com
Source: Healthcare Services Group, Inc.
