Core Viewpoint - The digital-asset treasury companies (DATs) are facing significant challenges as their stock prices decline and market confidence wanes, raising concerns about the sustainability of their business model [1][2][6]. Group 1: Market Performance - Shares of digital-asset treasury companies are experiencing a notable decline, with an average share drop of 15% last week among the 15 DATs tracked by Architect Partners [2] - ALT5 Sigma Corp. has seen its stock price decrease by approximately 50% in just over a week, while Kindly MD Inc. has dropped around 80% from its May high [3] - The overall market sentiment is shifting, with major players like Strategy and Metaplanet Inc. also witnessing significant stock price declines despite previous growth [11] Group 2: Industry Dynamics - There is an oversaturation of companies in the market, with over 100 firms entering the space this year, many lacking differentiation and offering little beyond the tokens they hold [4][6] - The model of publicly traded companies providing crypto exposure is becoming crowded, leading to a decline in confidence and premiums [6] - New data indicates a sharp decline in Bitcoin purchases by DATs, with only 14,800 Bitcoin bought in August compared to 66,000 in June, and a significant drop in average purchase sizes [7] Group 3: Financing and Risk - DATs are exploring innovative financing options, such as Bitcoin-backed loans and structured payouts, but these can introduce additional risks [8][13] - Nasdaq has begun requiring some token-holding companies to seek shareholder approval for new share issuances, impacting their capital-raising strategies [10] - The demand for flexible financing solutions is increasing, with firms like Two Prime seeing a rise in interest from DATs [13][14] Group 4: Investor Sentiment - Some investors are questioning the rationale behind investing in DATs instead of directly holding cryptocurrencies or through ETFs, indicating a lack of confidence in the current model [15]

Core Insights - Three stocks with strong value characteristics and a buy rank are highlighted for investors: Sally Beauty Holdings, ScanSource, and Healthcare Services Group [1][2][3] Company Summaries - **Sally Beauty Holdings, Inc. (SBH)**: - Niche retailer and distributor of professional beauty products - Zacks Rank 1 - Current year earnings estimate increased by 5.1% over the last 60 days - Price-to-earnings ratio (P/E) of 7.90, compared to 24.13 for the S&P 500 - Value Score of A [1] - **ScanSource, Inc. (SCSC)**: - Distributor of technology products and solutions - Zacks Rank 1 - Current year earnings estimate increased by 7.9% over the last 60 days - Price-to-earnings ratio (P/E) of 11.31, compared to 24.13 for the S&P 500 - Value Score of A [2] - **Healthcare Services Group, Inc. (HCSG)**: - Manages housekeeping, laundry, dining, and nutritional services in the healthcare industry - Zacks Rank 1 - Current year earnings estimate increased by 4.8% over the last 60 days - Price-to-earnings ratio (P/E) of 17.99, compared to 21.40 for the industry - Value Score of A [3]

Group 1: Jackson Financial - Jackson Financial is a U.S. retirement services provider with a Zacks Rank 1 (Strong Buy) [1] - The Zacks Consensus Estimate for Jackson Financial's current year earnings has increased by 5.9% over the last 60 days [1] - The company has a price-to-earnings ratio (P/E) of 4.83, significantly lower than the industry average of 10.60, and possesses a Value Score of A [2] Group 2: Smithfield Foods, Inc. - Smithfield Foods is a pork producer and food-processing company with a Zacks Rank 1 [2] - The Zacks Consensus Estimate for Smithfield Foods' current year earnings has increased by 3% over the last 60 days [2] - The company has a price-to-earnings ratio (P/E) of 10.53, slightly below the industry average of 11.60, and also possesses a Value Score of A [2] Group 3: Healthcare Services Group - Healthcare Services Group provides housekeeping, laundry, linen, facility maintenance, and food services to the healthcare industry, holding a Zacks Rank 1 [3] - The Zacks Consensus Estimate for Healthcare Services Group's current year earnings has increased by 9.2% over the last 60 days [3] - The company has a price-to-earnings ratio (P/E) of 17.74, lower than the industry average of 21.30, and possesses a Value Score of A [4]

Core Points - Healthcare Services Group, Inc. (HSGI) reported a data breach involving unauthorized access to its computer systems, which occurred between September 27, 2024, and October 3, 2024 [2] - The breach potentially exposed sensitive personal information of hundreds of thousands of consumers, including names, Social Security numbers, driver's license numbers, state identification numbers, and financial account information [2] - Barrack, Rodos & Bacine is investigating the breach and may pursue legal action on behalf of affected individuals [1][3] Company Summary - HSGI announced the breach on August 27, 2025, revealing that it had learned of the unauthorized access over ten months prior [2] - The investigation into the breach is ongoing, and the company is assessing the extent of the data compromised [2] - The firm Barrack, Rodos & Bacine specializes in class actions related to consumer rights and corporate misconduct, indicating a potential for legal repercussions for HSGI [5]

Group 1 - Healthcare Services Group, Inc. (HSG) announced a cybersecurity incident affecting the personal information of hundreds of thousands of individuals [1] - The data breach potentially compromised various types of personally identifiable information (PII), including names, Social Security numbers, driver's license numbers, state identification numbers, and financial account details [1] Group 2 - Lynch Carpenter, LLP is investigating claims against HSG related to the data breach, indicating potential legal repercussions for the company [2] - Individuals who received a data breach notification from HSG may be entitled to compensation, suggesting a significant impact on affected parties [2]

Group 1 - Healthcare Services (HCSG) is a stock that has shown strong year-to-date performance, returning approximately 31.1% compared to an average of 0% for Business Services stocks [4] - The Zacks Consensus Estimate for HCSG's full-year earnings has increased by 4.8% over the past 90 days, indicating improved analyst sentiment and earnings outlook [4] - HCSG currently holds a Zacks Rank of 1 (Strong Buy), suggesting it has favorable characteristics to outperform the market in the near term [3] Group 2 - The Business Services sector includes 254 individual stocks and has a Zacks Sector Rank of 6, which reflects the average Zacks Rank of stocks within the sector [2] - The Business - Services industry, which includes HCSG, consists of 26 stocks and is currently ranked 94 in the Zacks Industry Rank, with an average year-to-date gain of 8.4% [6] - Montrose Environmental (MEG), another stock in the Business Services sector, has outperformed with a year-to-date return of 47.8% and a Zacks Rank of 1 (Strong Buy) [5]

Group 1: Ardmore Shipping (ASC) - Ardmore Shipping is engaged in the ownership and operation of product and chemical tankers, carrying a Zacks Rank 1 (Strong Buy) [1] - The Zacks Consensus Estimate for Ardmore Shipping's current year earnings has increased by 2.6% over the last 60 days [1] - The company has a price-to-earnings ratio (P/E) of 9.15, significantly lower than the industry average of 19.5, and possesses a Value Score of A [2] Group 2: Dillard's (DDS) - Dillard's is a large departmental store chain featuring fashion apparel and home furnishings, also carrying a Zacks Rank 1 [2] - The Zacks Consensus Estimate for Dillard's current year earnings has increased by 2.6% over the last 60 days [2] - Dillard's has a price-to-earnings ratio (P/E) of 16.25, which is lower than the industry average of 19.80, and possesses a Value Score of A [3] Group 3: Healthcare Services Group (HCSG) - Healthcare Services Group provides housekeeping, laundry, linen, facility maintenance, and food services to the healthcare industry, including nursing homes and hospitals, and carries a Zacks Rank 1 [4] - The Zacks Consensus Estimate for Healthcare Services Group's current year earnings has increased by 4.8% over the last 60 days [4] - The company has a price-to-earnings ratio (P/E) of 17.31, compared to the industry average of 21.10, and possesses a Value Score of A [5]

Group 1 - Healthcare Services (HCSG) is currently outperforming its peers in the Business Services sector, with a year-to-date gain of approximately 19.2% compared to an average loss of 0.3% for Business Services stocks [4] - The Zacks Consensus Estimate for HCSG's full-year earnings has increased by 10% over the past quarter, indicating improved analyst sentiment and a more positive earnings outlook [4] - HCSG holds a Zacks Rank of 1 (Strong Buy), suggesting a strong potential for beating the market in the near term [3] Group 2 - The Business Services group includes 256 companies and is currently ranked 8 in the Zacks Sector Rank, which measures the strength of individual sector groups [2] - Huron Consulting (HURN), another stock in the Business Services sector, has a year-to-date return of 1.8% and a Zacks Rank of 2 (Buy) [5] - The Business - Services industry, which includes HCSG, has gained an average of 15.4% this year, indicating that HCSG is performing well within its industry [6]

PART I — FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) Unaudited H1 2025 financial statements show a **$15.1 million** net loss, primarily due to a significant bad debt provision [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Consolidated Balance Sheet Highlights (in thousands) | Balance Sheet Item | 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 | | Goodwill | $80,042 | $75,529 | | Total assets | $802,200 | $802,772 | | **Liabilities & Equity** | | | | Total current liabilities | $213,932 | $192,547 | | Total liabilities | $325,162 | $302,845 | | Total stockholders' equity | $477,038 | $499,927 | - Total assets remained relatively stable, while total stockholders' equity decreased by approximately **$22.9 million** from year-end 2024, primarily due to net loss and treasury stock purchases[13](index=13&type=chunk) [Consolidated Statements of Comprehensive (Loss)/Income](index=7&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20(Loss)%2FIncome) Q2 2025 vs Q2 2024 Performance (in thousands, except per share) | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Revenues | $458,491 | $426,288 | | Costs of services provided | $455,533 | $384,742 | | (Loss) income before taxes | $(41,888) | $(1,986) | | Net (loss) income | $(32,366) | $(1,788) | | Diluted (loss) income per share | $(0.44) | $(0.02) | H1 2025 vs H1 2024 Performance (in thousands, except per share) | Metric | H1 2025 | H1 2024 | | :--- | :--- | :--- | | Revenues | $906,153 | $849,721 | | Costs of services provided | $835,224 | $743,653 | | (Loss) income before taxes | $(17,994) | $19,328 | | Net (loss) income | $(15,138) | $13,521 | | Diluted (loss) income per share | $(0.21) | $0.18 | - The company experienced a significant shift from net income in H1 2024 to a net loss in H1 2025, primarily due to a substantial increase in the 'Costs of services provided', which includes a large bad debt provision[15](index=15&type=chunk) [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Six Months Ended June 30, Cash Flow Summary (in thousands) | Cash Flow Category | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $56,288 | $(9,714) | | Net cash used in investing activities | $(16,820) | $(16,039) | | Net cash (used in) provided by financing activities | $(16,455) | $970 | - Cash flow from operations improved significantly to **$56.3 million** in H1 2025 from a use of **$9.7 million** in H1 2024, largely driven by a high non-cash bad debt provision of **$73.4 million** and the receipt of **$20.0 million** in deferred Employee Retention Credits (ERC)[18](index=18&type=chunk) - Financing activities used **$16.5 million** in cash, primarily for purchases of treasury stock amounting to **$14.7 million**[18](index=18&type=chunk) [Notes to Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) - The company operates in two reportable segments: Housekeeping (laundry, linen, etc.) and Dietary department services, primarily serving the healthcare industry[27](index=27&type=chunk) - On July 9, 2025, Genesis Healthcare, Inc. filed for Chapter 11 bankruptcy, resulting in a **$61.2 million** bad debt expense recognized during the three and six months ended June 30, 2025[72](index=72&type=chunk) - During the six months ended June 30, 2025, the company received **$20.0 million** in Employee Retention Credit (ERC) refunds from the IRS, recorded as a deferred liability and not yet recognized as income[161](index=161&type=chunk) Segment Revenue and Profit (Loss) for Q2 2025 (in thousands) | Segment | Revenues | Segment Profit (Loss) | | :--- | :--- | :--- | | Housekeeping | $205,743 | $1,662 | | Dietary | $252,748 | $(25,471) | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q2 2025 revenue growth and liquidity, noting a **$61.2 million** bad debt expense impacted profitability [Results of Operations](index=41&type=section&id=Results%20of%20Operations) - Consolidated revenues for Q2 2025 increased by **7.6%** year-over-year, driven by a **7.7%** increase in Housekeeping and a **7.4%** increase in Dietary revenues[172](index=172&type=chunk)[177](index=177&type=chunk) - Consolidated costs of services provided for Q2 2025 increased by **18.4%** YoY, primarily due to recognizing **$61.2 million** in bad debt expense related to a large customer bankruptcy, with a **7.4%** increase excluding this impact[178](index=178&type=chunk) Segment Expenses as a % of Segment Revenue - Q2 2025 vs Q2 2024 | Segment | Key Expense | 2025 | 2024 | | :--- | :--- | :--- | :--- | | Housekeeping | Bad debt expense | 12.1% | 5.5% | | | Total segment expenses | 99.2% | 92.3% | | Dietary | Bad debt expense | 18.7% | 9.1% | | | Total segment expenses | 110.1% | 99.9% | [Liquidity and Capital Resources](index=49&type=section&id=Liquidity%20and%20Capital%20Resources) - As of June 30, 2025, the company had cash, cash equivalents, and marketable securities of **$134.5 million** and working capital of **$318.4 million**[210](index=210&type=chunk) - Net cash from operating activities was **$56.3 million** for the first six months of 2025, a significant improvement from a **$9.7 million** use of cash in the same period of 2024, largely due to non-cash bad debt charges and ERC refunds[211](index=211&type=chunk)[212](index=212&type=chunk) - The company repurchased **1.2 million** shares of its common stock for **$14.6 million** in the first six months of 2025 under its Repurchase Plan[215](index=215&type=chunk) - The company has a **$300 million** bank line of credit, with no borrowings as of June 30, 2025, and was in compliance with all financial covenants[217](index=217&type=chunk)[218](index=218&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company holds **$164.1 million** in cash and marketable securities, subject to interest rate risk from fixed and floating-rate investments - The company's primary market risk exposure is interest rate risk associated with its investments in fixed-rate and floating-rate securities[229](index=229&type=chunk) - As of June 30, 2025, the company had **$164.1 million** in cash and cash equivalents, restricted cash equivalents, and marketable securities[228](index=228&type=chunk) [Item 4. Controls and Procedures](index=51&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and internal financial reporting controls were effective as of June 30, 2025, with no material changes - Management concluded that the company's internal control over financial reporting was effective as of June 30, 2025[230](index=230&type=chunk) - No changes occurred during the quarter ended June 30, 2025, that have materially affected, or are reasonably likely to materially affect, the company's internal control over financial reporting[231](index=231&type=chunk) PART II — OTHER INFORMATION [Item 1. Legal Proceedings](index=54&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings in the ordinary course of business, not expecting a material adverse financial effect - The company is subject to various claims and legal actions in the ordinary course of business but does not expect them to have a material adverse effect on its financial condition[233](index=233&type=chunk) - For certain pending litigation, the company is currently unable to reasonably estimate possible losses or determine if an unfavorable outcome is probable or remote[234](index=234&type=chunk) [Item 1A. Risk Factors](index=54&type=section&id=Item%201A.%20Risk%20Factors) No material changes occurred to the risk factors previously disclosed in the company's 2024 Form 10-K - As of June 30, 2025, no material changes have been made to the Risk Factors disclosed in the company's 2024 Form 10-K[236](index=236&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=54&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased **522,696** shares for **$7.5 million** in Q2 2025, with **4.9 million** shares remaining for repurchase Share Repurchases for Q2 2025 | Period | Shares Repurchased | Average Price Paid | Aggregate Purchase Price (in thousands) | | :--- | :--- | :--- | :--- | | April 2025 | — | $— | $— | | May 2025 | — | $— | $— | | June 2025 | 522,696 | $14.38 | $7,515 | | **Q2 Total** | **522,696** | **$14.38** | **$7,515** | - As of June 30, 2025, the company has **4.9 million** shares remaining for repurchase under its authorized Repurchase Plan[237](index=237&type=chunk) [Item 5. Other Information](index=54&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, terminated, or modified Rule 10b5-1 or non-Rule 10b5-1 trading arrangements during Q2 2025 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 or non-Rule 10b5-1 trading arrangement during the three months ended June 30, 2025[241](index=241&type=chunk) [Item 6. Exhibits](index=55&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO and CFO certifications and iXBRL financial data - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[242](index=242&type=chunk)

Financial Data and Key Metrics Changes - Revenue for Q2 2025 was reported at $458.5 million, an increase of 7.6% compared to the prior year [12] - Net loss was reported at $32.4 million, with a diluted loss per share of $0.44, which includes a non-cash charge of $0.65 per share related to the Genesis restructuring [14] - Cash flow from operations was reported at $28.8 million, and after adjustments, it was $8.5 million [14][15] - The company raised its 2025 cash flow from operations forecast from $60 million to a range of $70 million to $85 million [15] Business Line Data and Key Metrics Changes - Segment revenues for Environmental Services were reported at $205.8 million, while Dietary Services were reported at $252.7 million [12] - Segment margins for Environmental Services were reported at 0.8%, and for Dietary Services, it was negative 10.1% due to non-cash charges related to the Genesis restructuring [13] Market Data and Key Metrics Changes - The company experienced its fifth consecutive sequential revenue increase, marking the highest growth rate since Q1 2018 [7] - The company anticipates Q3 revenue in the range of $455 million to $465 million, reiterating mid-single digit growth expectations for 2025 [12][33] Company Strategy and Development Direction - The company’s strategic priorities include driving growth through management development, converting sales pipeline opportunities, and retaining existing business [10] - Plans to repurchase $50 million of common stock over the next twelve months were announced, reflecting a commitment to capital allocation and shareholder value [11][18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the overall business environment, citing strong industry fundamentals and demographic trends supporting long-term growth [8][10] - The company views the recent Genesis Healthcare restructuring as an opportunity for stronger client facilities and improved balance sheet clarity [5][6] Other Important Information - The company is actively evaluating acquisition opportunities, although no acquisitions were completed in the quarter [17] - The company reported a strong liquidity position with cash and marketable securities totaling $164.1 million [16] Q&A Session Summary Question: Genesis situation and recovery expectations - Management confirmed that after Q3, exposure to Genesis will be effectively written off, but recovery expectations remain uncertain at this early stage [20][21] Question: Growth and retention rates - Management indicated that Q2 growth was driven by new business wins and a 90% client retention rate, which they expect to maintain [24][25] Question: Food inflation impact - Management confirmed the ability to pass through food inflation costs to clients, while also actively managing specific food item costs [27][28] Question: Guidance for revenue growth - Management reiterated mid-single digit growth guidance for 2025, despite current trends suggesting higher growth rates [33][34] Question: Collection strategy and Genesis impact - Management emphasized a focus on increasing payment frequency and leveraging promissory notes for better recovery expectations [35][36] Question: Macro environment and state healthcare budgets - Management remains optimistic about industry fundamentals despite potential state-level pressures, citing strong occupancy trends [41][42]