HCSG Reports Q4 2024 Results

Delivers Strong Earnings & Cash Flow,

Provides 2025 Growth Expectations 

• Revenue of $437.8 million.

• Net income and diluted EPS of $11.9 million and $0.16, inclusive of new business start-up costs.

• Reported cash flow from operations of $36.2 million; actual cash flow from operations, excluding the change in payroll accrual, of $27.0 million.

• Expects mid-single digit revenue growth in 2025 and Q1 revenue in the range of $440.0 to $450.0 million.

• Expects 2025 actual cash flow from operations, excluding the change in payroll accrual, in the range of $45.0 to $60.0 million.

Healthcare Services Group, Inc. (NASDAQ:HCSG) today reported results for the three months ended December 31, 2024.

Ted Wahl, Chief Executive Officer, stated, "2024 was a transitional year for HCSG, as it marked a pivotal shift from recovery to renewed growth. This shift was highlighted by our Q4 results and the positive momentum we're carrying into the new year. Looking ahead, we are confident that continuing to execute on our strategic priorities, supported by our strong business fundamentals, will enable us to further accelerate growth, enhance profitability, and maximize cash flow through 2025 and beyond."

Fourth Quarter Results

• Revenue was reported at $437.8 million.
  • Housekeeping & laundry and dining & nutrition segment revenues and margins were $192.7 million and 10.2% and $245.1 million and 4.7%, respectively.
  • The Company expects mid-single digit revenue growth in 2025 and Q1 revenue in the range of $440.0 to $450.0 million.
• Cost of services was reported at $379.2 million or 86.6%, inclusive of new business start-up costs.
  • The Company's 2025 goal is to manage cost of services in the 86% range.
• SG&A was reported at $44.8 million; after adjusting for the $0.4 million increase in deferred compensation, actual SG&A was $44.4 million or 10.1%, inclusive of new business start-up costs.
  • The Company's 2025 goal is to manage SG&A into the 8.5% to 9.5% range.
• Net income and diluted EPS were reported at $11.9 million and $0.16, inclusive of new business start-up costs.
• Cash flow from operations was reported at $36.2 million; after adjusting for the $9.2 million increase in the payroll accrual, actual cash flow from operations was $27.0 million.
  • The Company estimates 2025 actual cash flow from operations, excluding the change in payroll accrual, in the range of $45.0 to $60.0 million.

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 fourth quarter, the Company had cash and marketable securities of $135.8 million and a $500.0 million credit facility, inclusive of its $200.0 million accordion, which expires in November 2027.

Since the February 2023 share repurchase authorization, the Company has repurchased over $16.0 million of its common stock. The Company repurchased over $5.0 million of its common stock in 2024, including $1.0 million during the fourth quarter. The Company has 6.0 million shares remaining under its authorization.

Conference Call and Upcoming Events

The Company will host a conference call on Wednesday, February 12, 2025, at 8:30 a.m. Eastern Time to discuss its results for the three months ended December 31, 2024. 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 participating in Oppenheimer's 35th Annual Healthcare MedTech & Services Conference, which will be conducted virtually on March 19, 2025.

About Healthcare Services Group, Inc.

Healthcare Services Group (NASDAQ:HCSG) is an experienced leader in managing housekeeping, laundry, dining, and nutritional services within the healthcare industry. With more than 45 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," 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; and the risk factors described in Part I of our Form 10-K for the fiscal year ended December 31, 2023 under "Government Regulation of Customers," "Service Agreements and Collections," and "Competition" and under Item IA. "Risk Factors" in such Form 10K.

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 United States of America ("GAAP"), the Company believes that certain non-GAAP financial measures are useful in evaluating operating performance and comparing such performance to other companies.

The Company is presenting adjusted cash flows provided by operations, 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.

View source version on businesswire.com: https://www.businesswire.com/news/home/20250212259240/en/

Theodore Wahl

President and Chief Executive Officer

Vikas Singh

Executive Vice President and Chief Financial Officer

Matthew J. McKee

Chief Communications Officer

215-639-4274

[email protected]