Financial Data and Key Metrics Changes - Revenue for Q2 2025 was reported at $458.5 million, an increase of 7.6% year-over-year [12] - Cash flow from operations was reported at $28.8 million, with an adjusted figure of $8.5 million after accounting for a $20.3 million increase in payroll accrual [14] - The company raised its 2025 cash flow from operations forecast from $60 million to a range of $70 million to $85 million [7][14] Business Line Data and Key Metrics Changes - Segment revenues for Environmental Services were reported at $205.8 million, while Dietary Services revenues were $252.7 million [12] - Segment margins for Environmental Services were reported at 0.8%, impacted by a $20.3 million non-cash charge related to Genesis restructuring [13] - Dietary Services reported a segment margin of negative 10.1%, including a $40.9 million non-cash charge related to Genesis restructuring [13] Market Data and Key Metrics Changes - The company noted steady occupancy rates and increasing workforce availability in the industry [8] - The recent industry operating trends remain positive, with a stable reimbursement environment [8] Company Strategy and Development Direction - The company’s top three strategic priorities include driving growth through management development, managing costs through operational execution, and optimizing cash flow [10] - A $50 million share repurchase plan was announced to return capital to shareholders [11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the overall business environment, citing a multi-decade demographic tailwind benefiting the long-term and post-acute care system [7][10] - The company reiterated its mid-single-digit growth expectations for 2025 despite the challenges posed by Genesis restructuring [7][32] Other Important Information - Genesis Healthcare filed for Chapter 11 bankruptcy, but the company maintained its contractual relationship without disruption [5][6] - The company expects to manage SG&A expenses in the 9.5% to 10.5% range in the near term, with a long-term goal of 8.5% to 9.5% [13] Q&A Session Summary Question: Clarification on Genesis situation and recovery expectations - Management confirmed that after Q3, all exposure to Genesis will be effectively reserved, but it is still early to speculate on recovery outcomes [20][21] Question: Insights on growth and retention rates - Management highlighted that Q2 marked the fifth consecutive revenue increase, driven by new business wins and a 90% client retention rate [22][24] Question: Update on food inflation and cost management - Management stated that they have the ability to pass through food cost increases to clients and are actively managing inflation impacts [26][27] Question: Guidance for revenue growth and risks - Management reiterated mid-single-digit growth guidance due to the variability of new business ads, despite current trends suggesting higher growth [31][32] Question: Long-term outlook on Medicaid and state budgets - Management remains optimistic about industry fundamentals and demographic trends, despite potential pressures on Medicaid growth in certain states [40][41] Question: Cross-selling opportunities between Dining and Environmental Services - Management noted that cross-selling opportunities are strong, with a preference to initiate services with Environmental Services first [52][54] Question: Educational segment outlook - Management reported positive early returns in the educational segment, which remains a small but growing part of the business [56]

Core Viewpoint - Healthcare Services (HCSG) reported quarterly earnings of $0.21 per share, exceeding the Zacks Consensus Estimate of $0.20 per share, and showing an increase from $0.20 per share a year ago [1][2] Financial Performance - The company achieved revenues of $458.49 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.89% and increasing from $426.29 million year-over-year [3] - Over the last four quarters, Healthcare Services has exceeded consensus EPS estimates three times and has also topped consensus revenue estimates three times [2][3] Stock Performance - Since the beginning of the year, Healthcare Services shares have increased by approximately 12.4%, outperforming the S&P 500's gain of 7.3% [4] - The current Zacks Rank for the stock is 3 (Hold), indicating expected performance in line with the market in the near future [7] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.20 on revenues of $450.3 million, and for the current fiscal year, it is $0.84 on revenues of $1.8 billion [8] - The estimate revisions trend for Healthcare Services was mixed ahead of the earnings release, which may change following the recent report [7] Industry Context - The Business - Services industry, to which Healthcare Services belongs, is currently in the top 36% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [9]

```markdown [Performance Overview and Outlook](index=1&type=section&id=Performance%20Overview%20and%20Outlook) HCSG's Q2 results surpassed growth expectations driven by new client wins and higher retention; despite a significant non-cash charge from the Genesis HealthCare restructuring impacting net income, the company raised its full-year 2025 cash flow forecast and announced a new $50.0 million share repurchase plan, signaling confidence in its strategic priorities and future growth - Q2 growth exceeded expectations due to new client wins and higher retention, with positive momentum continuing into the second half of the year[3](index=3&type=chunk) - The company reiterates its expectation for mid-single-digit revenue growth for the full year 2025[5](index=5&type=chunk)[6](index=6&type=chunk) - The **2025** cash flow from operations forecast (excluding payroll accrual changes) was raised from **$60.0-$75.0 million** to **$70.0-$85.0 million**[5](index=5&type=chunk)[13](index=13&type=chunk) - A new 12-month, **$50.0 million** share repurchase plan has been announced[1](index=1&type=chunk)[5](index=5&type=chunk) [Second Quarter Financial Performance](index=1&type=section&id=Second%20Quarter%20Financial%20Performance) HCSG's Q2 2025 revenue grew 7.6% to $458.5 million, but a $61.2 million non-cash charge from Genesis restructuring led to a $32.4 million net loss, significantly impacting cost of services and segment margins, with future targets for cost of services at 86% and SG&A between 9.5% and 10.5% Q2 2025 Key Financial Metrics | Metric | Value | Note | | :--- | :--- | :--- | | Revenue | $458.5M | +7.6% YoY | | Net (Loss) | ($32.4)M | Includes $0.65/share non-cash charge | | Diluted EPS | ($0.44) | Includes $0.65/share non-cash charge | | Cash Flow from Operations | $28.8M | - | | Adjusted Cash Flow from Ops* | $8.5M | +$10.9M YoY | Q2 2025 Revenue by Segment | Segment | Revenue (in millions) | | :--- | :--- | | Environmental Services | $205.8 | | Dietary Services | $252.7 | | **Total Revenue** | **$458.5** | - Cost of services was **99.4%** of revenue, heavily impacted by a **$61.2 million (13.4%)** non-cash charge from the Genesis restructuring. The company's goal is to manage this in the **86%** range for the second half of 2025[6](index=6&type=chunk) - SG&A was reported at **$49.2 million**. Adjusted for deferred compensation, actual SG&A was **$44.5 million** or **9.7%**. The near-term management goal is **9.5%** to **10.5%**[6](index=6&type=chunk) - Segment margins were significantly impacted by the Genesis restructuring charge: Environmental Services margin was **0.8%** and Dietary Services margin was **(10.1%)**[6](index=6&type=chunk) [Balance Sheet and Capital Allocation](index=2&type=section&id=Balance%20Sheet%20and%20Capital%20Allocation) As of Q2 end, HCSG maintained strong liquidity with $164.1 million in cash and marketable securities and a $500.0 million credit facility, accelerating its share buyback program with plans to repurchase $50.0 million in common stock over the next 12 months, reflecting a balanced capital allocation strategy - The company's liquidity sources include cash from operations, **$164.1 million** in cash and marketable securities, and a **$500.0 million** revolving credit facility expiring in November 2027[7](index=7&type=chunk) - The company plans to repurchase **$50.0 million** of its common stock over the next 12 months under its February 2023 authorization[8](index=8&type=chunk) Share Repurchase Activity | Period | Amount Repurchased | | :--- | :--- | | Q2 2025 | $7.6 million | | Year to Date 2025 | $14.6 million | - Management believes the current stock valuation offers a unique opportunity to return significant capital to shareholders via buybacks while continuing to invest in growth initiatives[9](index=9&type=chunk) [Corporate Information](index=2&type=section&id=Corporate%20Information) HCSG will host a conference call on July 23, 2025, to discuss Q2 results and present at the Baird 2025 Global Healthcare Conference in September, leveraging its nearly 50 years of experience as a leading healthcare services provider - A conference call to discuss Q2 2025 results is scheduled for Wednesday, July 23, 2025, at 8:30 a.m. Eastern Time[10](index=10&type=chunk) - The company will present at the Baird 2025 Global Healthcare Conference on September 10, 2025[11](index=11&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section provides detailed unaudited consolidated financial statements for the three and six months ended June 30, 2025, including Consolidated Statements of (Loss) Income, Condensed Consolidated Balance Sheets, and Reconciliations of Non-GAAP Financial Measures like EBITDA and adjusted cash flow from operations [Consolidated Statements of (Loss) Income](index=4&type=section&id=Consolidated%20Statements%20of%20%28Loss%29%20Income) For Q2 2025, HCSG reported revenue of $458.5 million, up from $426.3 million in the prior year, but a significant increase in cost of services resulted in an operating loss of $46.2 million and a net loss of $32.4 million, or ($0.44) per share, compared to a net loss of $1.8 million, or ($0.02) per share, in Q2 2024 Consolidated Statements of (Loss) Income (in thousands, except per share data) | | For the Three Months Ended June 30, | For the Six Months Ended June 30, | | :--- | :--- | :--- | :--- | :--- | | | **2025** | **2024** | **2025** | **2024** | | **Revenue** | **$458,491** | **$426,288** | **$906,153** | **$849,721** | | Cost of services | 455,533 | 384,742 | 835,224 | 743,653 | | Selling, general and administrative | 49,163 | 44,437 | 94,129 | 91,348 | | **(Loss) income from operations** | **(46,205)** | **(2,891)** | **(23,200)** | **14,720** | | (Loss) income before income taxes | (41,888) | (1,986) | (17,994) | 19,328 | | **Net (loss) income** | **$(32,366)** | **$(1,788)** | **$(15,138)** | **$13,521** | | **Diluted (loss) income per common share** | **$(0.44)** | **$(0.02)** | **$(0.21)** | **$0.18** | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of June 30, 2025, HCSG's balance sheet shows total assets of $802.2 million, stable compared to December 31, 2024, with cash and cash equivalents increasing to $82.8 million and net accounts receivable decreasing to $292.2 million, while total liabilities increased to $325.2 million and stockholders' equity decreased to $477.0 million Condensed Consolidated Balance Sheet Highlights (in thousands) | | **June 30, 2025** | **December 31, 2024** | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $82,818 | $56,776 | | Accounts receivable, net | $292,210 | $330,907 | | Total current assets | $532,294 | $556,652 | | **Total assets** | **$802,200** | **$802,772** | | **Liabilities & Equity** | | | | Total current liabilities | $213,932 | $192,547 | | Total liabilities | $325,162 | $302,845 | | Stockholders' equity | $477,038 | $499,927 | | **Total liabilities and stockholders' equity** | **$802,200** | **$802,772** | [Reconciliations of Non-GAAP Financial Measures](index=6&type=section&id=Reconciliations%20of%20Non-GAAP%20Financial%20Measures) This section reconciles GAAP net income to non-GAAP measures like EBITDA and Adjusted EBITDA, showing Q2 2025 GAAP net loss of $32.4 million reconciled to an EBITDA of ($38.9) million and an Adjusted EBITDA of ($36.3) million, also reconciling GAAP cash flow from operations to an adjusted figure of $8.5 million excluding payroll accrual changes Reconciliation of GAAP Net (Loss) Income to Adjusted EBITDA (in thousands) | | For the Three Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | | GAAP net (loss) income | $(32,366) | $(1,788) | | Income tax (benefit) provision | (9,522) | (198) | | Interest, net | (1,976) | 184 | | Depreciation and amortization | 5,001 | 3,679 | | **EBITDA** | **$(38,863)** | **$1,877** | | Share-based compensation | 2,541 | 2,113 | | **Adjusted EBITDA** | **$(36,322)** | **$3,990** | Reconciliation of GAAP Cash Flow from Operations (in thousands) | | For the Three Months Ended June 30, | | :--- | :--- | :--- | | | **2025** | **2024** | | GAAP cash flows provided by (used in) operations | $28,787 | $16,319 | | Accrued payroll | (20,256) | (18,677) | | **Cash flows from operations (excluding the change in payroll accrual)** | **$8,531** | **$(2,358)** | [Disclosures](index=3&type=section&id=Disclosures) This section contains important disclosures, including cautionary statements on forward-looking information and the use of non-GAAP financial measures, identifying risks such as credit issues, inflation, and the need for new service agreements, while clarifying that non-GAAP measures like Adjusted EBITDA and adjusted cash flow from operations supplement GAAP reporting for performance evaluation - The release contains forward-looking statements based on current expectations, which are subject to various risks and uncertainties, including those related to the healthcare industry, credit risks, and regulatory changes[14](index=14&type=chunk) - Key business risks include customer payment delays, restructurings leading to bad debts, inflation impacting labor and supply costs, and the necessity of obtaining new customer agreements[15](index=15&type=chunk)[16](index=16&type=chunk) - The company uses non-GAAP financial measures, such as net cash flow from operations (excluding payroll accrual) and Adjusted EBITDA, to supplement GAAP reporting and evaluate operating performance[17](index=17&type=chunk)[18](index=18&type=chunk) ```

Group 1 - Healthcare Services (HCSG) is currently outperforming the Business Services sector with a year-to-date return of approximately 22.7%, while the sector has returned an average of -0.3% [4] - The Zacks Consensus Estimate for HCSG's full-year earnings has increased by 13.5% over the past quarter, indicating improved analyst sentiment and a stronger earnings outlook [4] - HCSG holds a Zacks Rank of 1 (Strong Buy), suggesting it has characteristics that may lead to outperformance in the market over the next one to three months [3] Group 2 - The Business Services sector includes 271 individual stocks and currently holds a Zacks Sector Rank of 3 among 16 different sector groups [2] - The Business - Services industry, which includes HCSG, consists of 26 companies and is ranked 32 in the Zacks Industry Rank, with an average year-to-date gain of 18.3% [6] - Loop Industries, Inc. (LOOP) is another stock in the Business Services sector that has performed well, returning 30.8% year-to-date and also holding a Zacks Rank of 1 (Strong Buy) [5]

Industry Overview - The business services industry is experiencing sustained expansion, with economic activity in the services sector growing for the 10th consecutive month as of April, indicated by a robust Services PMI remaining above the 50% threshold for the 56th time in 59 months, reflecting a post-pandemic recovery [1] - The industry is mature, with revenues, income, and cash flows now exceeding pre-pandemic levels, and it ranks in the top 19% of the Zacks Sector Rank, suggesting an expected outperformance over the next three to six months [3] Technological Impact - The rapid advancement and adoption of artificial intelligence and automation technologies are transforming the delivery of business services, promising enhanced efficiency and cost reduction while also presenting challenges such as workforce displacement and the need for continuous upskilling [2] Stock Recommendations - Five business services stocks with favorable Zacks Rank for investment are recommended: Cintas Corp. (CTAS), Thomson Reuters Corp. (TRI), Healthcare Services Group Inc. (HCSG), ZipRecruiter Inc. (ZIP), and Bright Horizons Family Solutions Inc. (BFAM), all currently carrying a Zacks Rank 2 (Buy) [4] Company Highlights Cintas Corp. (CTAS) - Cintas is well-positioned to benefit from strong momentum across its segments, with improved demand in its Uniform Rental and Facility Services segment and First Aid and Safety Services segment [7] - Expected revenue and earnings growth rates for CTAS are 7% and 10.8%, respectively, for the next year, with a 1.7% improvement in the Zacks Consensus Estimate for next-year earnings over the past 60 days [8] Thomson Reuters Corp. (TRI) - TRI operates as a content and technology company across various regions and segments, providing value-added information and technology in fields such as law, tax, accounting, and healthcare [9][10] - Expected revenue and earnings growth rates for TRI are 3.1% and 4.2%, respectively, for the current year, with a 1.3% improvement in the Zacks Consensus Estimate for current-year earnings over the past 30 days [10] Healthcare Services Group Inc. (HCSG) - HCSG provides management and operational services to healthcare facilities, making it a preferred choice for clients in the sector [11][12] - Expected revenue and earnings growth rates for HCSG are 5.1% and 58.5%, respectively, for the current year, with a 5% improvement in the Zacks Consensus Estimate for current-year earnings over the past seven days [12] ZipRecruiter Inc. (ZIP) - ZIP operates an online marketplace connecting job seekers and employers, offering various recruitment and hiring services [13] - Expected revenue and earnings growth rates for ZIP are 9% and 13%, respectively, for the next year, with a 3.8% improvement in the Zacks Consensus Estimate for next-year earnings over the past 30 days [14] Bright Horizons Family Solutions Inc. (BFAM) - BFAM provides employer-sponsored child care and early education solutions, managing child care centers for various organizations [15][16] - Expected revenue and earnings growth rates for BFAM are 7.6% and 18.4%, respectively, for the current year, with a significant 24.6% improvement in the Zacks Consensus Estimate for current-year earnings over the past 30 days [17]

Core Viewpoint - Healthcare Services (HCSG) shows a significant improvement in earnings outlook, making it an attractive investment option as analysts continue to raise earnings estimates for the company [1][2]. Earnings Estimates - Analysts' optimism regarding the earnings prospects of Healthcare Services is driving higher estimates, which is expected to positively impact the stock price [2]. - The current-quarter earnings estimate is projected at $0.20 per share, reflecting a year-over-year change of 0%, with a 5.26% increase in the Zacks Consensus Estimate over the last 30 days [5]. - For the full year, the earnings estimate is expected to be $0.84 per share, representing a year-over-year increase of +58.49%, with one estimate raised and no negative revisions in the past month [6]. Zacks Rank - Healthcare Services has achieved a Zacks Rank 1 (Strong Buy) due to favorable estimate revisions, indicating strong agreement among analysts in raising earnings estimates [3][7]. - Stocks with Zacks Rank 1 and 2 have historically outperformed the S&P 500, suggesting a positive outlook for Healthcare Services [7]. Stock Performance - Shares of Healthcare Services have increased by 57.1% over the past four weeks, indicating strong investor confidence in the company's earnings growth prospects [8].

Core Viewpoint - Momentum investing focuses on following a stock's recent price trends, aiming to buy high and sell higher, with the expectation that established trends will continue [1] Company Overview: Healthcare Services (HCSG) - HCSG currently holds a Momentum Style Score of B, indicating a positive momentum outlook [2] - The company has a Zacks Rank of 1 (Strong Buy), suggesting strong potential for outperformance in the market [3] Performance Metrics - Over the past week, HCSG shares increased by 3.71%, outperforming the Zacks Business - Services industry, which rose by 2.34% [5] - In a longer timeframe, HCSG's monthly price change is 57.07%, significantly higher than the industry's 6.55% [5] - Over the past quarter, HCSG shares rose by 41.71%, while the S&P 500 saw a decline of 2.63% [6] - Year-to-date, HCSG shares are up 29.53%, compared to the S&P 500's increase of 13.25% [6] Trading Volume - HCSG's average 20-day trading volume is 938,258 shares, indicating a bullish sign as the stock is rising with above-average volume [7] Earnings Outlook - In the past two months, one earnings estimate for HCSG has increased, raising the consensus estimate from $0.80 to $0.84 [9] - For the next fiscal year, one estimate has also moved upwards, with no downward revisions noted [9] Conclusion - Given the strong performance metrics and positive earnings outlook, HCSG is positioned as a 1 (Strong Buy) stock with a Momentum Score of B, making it a compelling investment opportunity [11]

Group 1: Kinross Gold Corporation (KGC) - Kinross Gold Corporation is a gold-mining company with a Zacks Rank of 1 [1] - The Zacks Consensus Estimate for its next year earnings has increased by 41.1% over the last 60 days [1] - The company has a price-to-earnings ratio (P/E) of 13.49, significantly lower than the S&P 500's P/E of 22.80 [1] - Kinross Gold possesses a Value Score of A [1] Group 2: Healthcare Services Group, Inc. (HCSG) - Healthcare Services Group, Inc. is a management, administrative, and operating services company with a Zacks Rank of 1 [2] - The Zacks Consensus Estimate for its next year earnings has increased by 7.1% over the last 60 days [2] - The company has a price-to-earnings ratio (P/E) of 18.34, which is lower than the industry average of 24.10 [2] - Healthcare Services possesses a Value Score of B [2]

Core Insights - The article emphasizes the importance of value investing and highlights Healthcare Services Group (HCSG) as a strong candidate for value investors due to its favorable financial metrics and Zacks Rank [1][2][3]. Company Overview - Healthcare Services Group (HCSG) currently holds a Zacks Rank of 2 (Buy) and has a Value grade of A, indicating strong potential for value investors [4]. - HCSG's P/E ratio is 17.26, significantly lower than the industry average P/E of 26.62, suggesting that the stock may be undervalued [4]. - Over the past 52 weeks, HCSG's Forward P/E has fluctuated between 11.54 and 19.66, with a median of 13.89 [4]. Financial Metrics - The company has a P/B ratio of 1.99, which is favorable compared to the industry's average P/B of 4.63, indicating a solid market value relative to its book value [5]. - HCSG's P/B ratio has ranged from 1.33 to 1.99 over the past 12 months, with a median of 1.67 [5]. - The P/S ratio for HCSG is 0.6, which is lower than the industry's average P/S of 1, further supporting the notion that HCSG may be undervalued [6]. Investment Outlook - The combination of HCSG's strong financial metrics and positive earnings outlook positions it as an impressive value stock in the current market [7].

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) ☑ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2025 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number: 0-12015 HEALTHCARE SERVICES GROUP, INC. (Exact name of registrant as specified in its charter) (State or other jurisdiction of inco ...