Exhibit 99.1 HCSG Reports Q3 2024 Results Delivers QoQ and YoY Growth In Revenue, Earnings and Cash Flow • Revenue of $428.1 million, in line with expectations. • Net income and diluted EPS of $14.0 million and $0.19. • Reported and adjusted cash flow from operations of $4.3 million and $19.0 million. • Reaffirms Q4 revenue estimate of $430.0 to $440.0 million and FY 2024 cash flow forecast of $40.0 to $55.0 million. BENSALEM, PA--(BUSINESS WIRE)-- Healthcare Services Group, Inc. (NASDAQ:HCSG) today reporte ...

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HCSG Reports Q2 2024 Results Raises Second Half 2024 Revenue Estimates, Reaffirms Full-Year 2024 Cash Flow Forecast Exhibit 99.1 Ted Wahl, Chief Executive Officer, stated, "Our field-based team delivered strong service execution leading to another successful quarter of managing cost of services, excluding CECL, within our targeted range. Additionally, we achieved over 96% cash collections during the quarter, which, while short of our target, showed improvement compared to last quarter and the same period la ...

PART I - FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited consolidated financial statements as of March 31, 2024, detail the company's financial position and performance Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | **Total current assets** | $580,414 | $571,696 | | **Total assets** | $803,880 | $790,652 | | **Total current liabilities** | $209,375 | $216,928 | | **Total liabilities** | $329,299 | $334,036 | | **Total stockholders' equity** | $474,581 | $456,616 | Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Revenues** | $423,433 | $417,230 | | **Income before income taxes** | $21,314 | $16,155 | | **Net income** | $15,309 | $11,671 | | **Diluted earnings per common share** | $0.21 | $0.16 | Consolidated Cash Flow Highlights (in thousands) | Cash Flow Activity | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | **Net cash used in operating activities** | $(26,033) | $(16,290) | | **Net cash from (used in) investing activities** | $11,716 | $(743) | | **Net cash from financing activities** | $13,970 | $6,907 | | **Net decrease in cash** | $(347) | $(10,126) | [Note 1: Business Description and Accounting Policies](index=10&type=section&id=Note%201%E2%80%94Description%20of%20Business%20and%20Significant%20Accounting%20Policies) The company provides housekeeping and dietary services to the healthcare industry through two reportable segments - The company is organized into two reportable segments: **Housekeeping** (housekeeping, laundry, linen) and **Dietary** (food purchasing, meal preparation, dietitian services)[24](index=24&type=chunk)[25](index=25&type=chunk)[26](index=26&type=chunk) - For Q1 2024, a single customer, Genesis Healthcare, Inc, accounted for **9.2% of consolidated revenues ($38.8 million)**, down from 11.5% ($48.1 million) in Q1 2023[48](index=48&type=chunk) - The company has filed for the Employee Retention Credit (ERC) but has **not recognized any related amounts** in its financial statements due to uncertainty of receipt[50](index=50&type=chunk) [Note 3: Revenue](index=16&type=section&id=Note%203%E2%80%94Revenue) Revenue is disaggregated by the Dietary (55.0%) and Housekeeping (45.0%) segments and recognized over time Revenue by Segment (in millions) | Segment | Q1 2024 Revenue | % of Total | Q1 2023 Revenue | % of Total | | :--- | :--- | :--- | :--- | :--- | | Housekeeping | $190.6 | 45.0% | $193.5 | 46.4% | | Dietary | $232.9 | 55.0% | $223.7 | 53.6% | - Revenue is recognized using the output method based on the delivery of goods and services, with contracts typically for a renewable one-year term[59](index=59&type=chunk) [Note 5: Allowance for Doubtful Accounts](index=18&type=section&id=Note%205%E2%80%94Allowance%20for%20Doubtful%20Accounts) The allowance for doubtful accounts increased to $95.6 million due to a bad debt expense of $4.9 million in Q1 2024 Changes in Allowance for Doubtful Accounts (in thousands) | Portfolio Segment | Dec 31, 2023 Balance | Bad Debt Expense Q1 2024 | Write-Offs Q1 2024 | March 31, 2024 Balance | | :--- | :--- | :--- | :--- | :--- | | Accounts receivable | $80,819 | $4,301 | $(1,033) | $84,087 | | Notes receivable | $10,880 | $620 | $0 | $11,500 | | **Total** | **$91,699** | **$4,921** | **$(1,033)** | **$95,587** | - The company evaluates receivables for expected credit losses quarterly using internally developed credit quality indicators[66](index=66&type=chunk) [Note 13: Segment Information](index=31&type=section&id=Note%2013%E2%80%94Segment%20Information) Dietary segment revenue and income grew in Q1 2024, while the Housekeeping segment experienced declines Segment Financial Performance (in thousands) | Metric | Segment | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | :--- | | **Revenues** | Housekeeping | $190,559 | $193,519 | | | Dietary | $232,874 | $223,711 | | **Income before income taxes** | Housekeeping | $18,442 | $20,053 | | | Dietary | $17,627 | $14,666 | [Note 15: Other Contingencies](index=32&type=section&id=Note%2015%E2%80%94Other%20Contingencies) The company maintains a $300.0 million line of credit, with $187.6 million available for borrowing as of March 31, 2024 - As of March 31, 2024, the company had a **$300.0 million line of credit** with **$40.0 million in borrowings**[126](index=126&type=chunk) - The amount available under the line of credit was reduced by **$72.4 million for outstanding letters of credit**, leaving $187.6 million available for borrowing[127](index=127&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenue increased 1.5% in Q1 2024, driven by Dietary segment growth, while operating cash flow was negative [Results of Operations](index=34&type=section&id=Results%20of%20Operations) Consolidated revenue grew 1.5% in Q1 2024, driven by a 4.1% increase in the Dietary segment Segment Revenue and Income Change (Q1 2024 vs Q1 2023) | Segment | Revenue % Change | Income Before Taxes % Change | | :--- | :--- | :--- | | Housekeeping | (1.5)% | (8.0)% | | Dietary | 4.1% | 20.2% | | **Consolidated** | **1.5%** | **31.9%** | - Costs of services provided as a percentage of revenue **decreased from 86.9% in Q1 2023 to 84.8% in Q1 2024**[148](index=148&type=chunk) - The decrease in the bad debt provision was impacted by a **non-recurring $4.7 million charge in Q1 2023**[152](index=152&type=chunk) [Liquidity and Capital Resources](index=38&type=section&id=Liquidity%20and%20Capital%20Resources) The company had $104.9 million in cash and marketable securities, with negative operating cash flow of $26.0 million - **Negative operating cash flow** in Q1 2024 was driven by an increase in accounts receivable, partly due to a cybersecurity incident at a third-party claims processor[164](index=164&type=chunk) - On February 14, 2023, the Board authorized a repurchase of up to 7.5 million shares; **no shares were repurchased in Q1 2024**[167](index=167&type=chunk) - The company was in **compliance with its two financial covenants** (Funded debt to EBITDA and EBITDA to Interest Expense) as of March 31, 2024[169](index=169&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=40&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk exposure is interest rate risk on its $129.6 million in cash and investments - The company's primary market risk exposure is **interest rate risk** on its fixed-rate and floating-rate investments[178](index=178&type=chunk) - As of March 31, 2024, the company had **$129.6 million in cash, cash equivalents, and marketable securities** subject to this risk[177](index=177&type=chunk) [Controls and Procedures](index=40&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that internal control over financial reporting was not effective due to a material weakness - Management concluded that as of March 31, 2024, the company's internal control over financial reporting was **not effective**[180](index=180&type=chunk) - A **material weakness** was identified related to controls over accrued payroll liabilities for employee vested vacation[182](index=182&type=chunk) - A **remediation plan is underway**, which includes instituting enhanced controls and review processes related to the vacation accrual[184](index=184&type=chunk) PART II - OTHER INFORMATION [Legal Proceedings](index=42&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings for which potential losses cannot be reasonably estimated at this time - The company is subject to various claims and legal actions in the **ordinary course of business**[188](index=188&type=chunk) - For certain pending litigation, the company is **unable to reasonably estimate possible losses** or determine if an unfavorable outcome is probable[189](index=189&type=chunk) [Risk Factors](index=42&type=section&id=Item%201A.%20Risk%20Factors) There have been no material changes to the risk factors previously disclosed in the 2023 Annual Report on Form 10-K - **No material changes** have occurred in the risk factors from those set forth in the company's 2023 Form 10-K[191](index=191&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=42&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No shares were repurchased in Q1 2024 under the existing 7.5 million share repurchase authorization - The Board of Directors authorized the repurchase of up to **7.5 million shares** on February 14, 2023[192](index=192&type=chunk) - **No shares were repurchased** during the three months ended March 31, 2024, and 6.5 million shares remain authorized for purchase[192](index=192&type=chunk) [Defaults Upon Senior Securities](index=42&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) Not applicable [Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Not applicable [Other Information](index=42&type=section&id=Item%205.%20Other%20Information) No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement in Q1 2024 - **No directors or officers modified trading arrangements** during the three months ended March 31, 2024[195](index=195&type=chunk) [Exhibits](index=43&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed as part of the Form 10-Q report, including officer certifications and iXBRL data

Financial Data and Key Metrics Changes - For Q1 2024, the company reported revenue of $423.4 million, net income of $15.3 million, and diluted EPS of $0.21, with adjusted net income of $16.5 million and adjusted diluted EPS of $0.22, reflecting a 10.7% increase in adjusted EBITDA compared to Q1 2023 [4][12][24] - The adjusted cost of services was 84.4%, with SG&A at $46.9 million, and adjusted SG&A at 10.1%, which is outside the target range of 8.5% to 9.5% [30][34] Business Line Data and Key Metrics Changes - Revenue from the Housekeeping and Laundry segment was $190.5 million, while the Dining & Nutrition segment generated $232.9 million, with margins of 9.7% and 7.6% respectively [11] - The company managed adjusted cost of services under 86% and aims to maintain this target moving forward [23][26] Market Data and Key Metrics Changes - The healthcare industry added nearly 100,000 jobs since the beginning of 2023, with workforce availability expected to match pre-pandemic levels by the end of 2025 [6] - Occupancy rates have risen to 79%, just 1% below pre-pandemic levels, supported by a stable reimbursement environment, including a proposed 4.1% increase in Medicare rates for fiscal year 2025 [6][25] Company Strategy and Development Direction - The company is focused on organic growth through hiring, training, and converting sales opportunities into new business, with expectations for significant new business additions in the second half of 2024 [8][23] - The company is committed to managing adjusted cost of services and improving cash collections, viewing cash collections as a lagging indicator of industry recovery [27][66] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the impact of the February Change Healthcare cyberattack on cash collections and billing activities, but expressed confidence in recovering from this disruption [5][24] - The company reiterated its adjusted cash flow range for 2024 of $40 million to $55 million, with expectations for improved cash collections throughout the year [9][61] Other Important Information - The company is facing opposition to the recently published minimum staffing rule, with expectations that it may not be implemented or will undergo significant revisions [7][25] - The company is actively working on plans to make up for cash collection shortfalls caused by the Change Healthcare issue, with expectations for gradual recovery [50][82] Q&A Session Summary Question: Client retention in the quarter - Client retention was greater than 90%, with modest new business adds offsetting some exits, and expectations for additional facility adds in the second half of the year [33] Question: Adjusted SG&A being outside the target range - The increase in adjusted SG&A was attributed to investments in branding and technology, which are viewed as critical for future growth [34][35] Question: Signs of collections in April - Collections in April were pacing as forecasted, with confidence that the impact of the Change Healthcare disruption is temporary [38][61] Question: Expected second half ramp in organic growth - The company expects ongoing revenue growth in the second half, with more new business onboarding compared to the first half [44][45] Question: Impact of minimum staffing requirements - Management believes the rule will not be implemented or will undergo significant changes, and uncertainty in the industry creates demand for the company's services [68][69] Question: Cash flow expectations for the remainder of the year - The company reaffirmed its cash flow range of $40 million to $55 million, with expectations for gradual recovery from the Change Healthcare impact [70][72]

Healthcare Services (HCSG) came out with quarterly earnings of $0.22 per share, beating the Zacks Consensus Estimate of $0.18 per share. This compares to earnings of $0.17 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 22.22%. A quarter ago, it was expected that this provider of housekeeping, laundry and dietary services to health care facilities would post earnings of $0.16 per share when it actually produced earnings of $0. ...

[Performance Overview & Management Commentary](index=1&type=section&id=Performance%20Overview%20%26%20Management%20Commentary) HCSG reported strong Q1 2024 results, exceeding earnings and reaffirming full-year forecasts despite temporary cash collection challenges - The company delivered strong Q1 results, managing **adjusted cost of services under the 86% target** and growing new business and manager-in-training pipelines[2](index=2&type=chunk) - The February Change Healthcare cyberattack disrupted customer billing, impacting cash collections, though the company achieved **95% cash collections** and views the impact as temporary[2](index=2&type=chunk) - The company reiterated its **2024 adjusted cash flow forecast of $40.0 million to $55.0 million**, confident in recovering collection delays[2](index=2&type=chunk) - Positive industry fundamentals include improving workforce availability, **79% occupancy** (near pre-pandemic levels), and a proposed **4.1% increase in Medicare rates** for fiscal year 2025[2](index=2&type=chunk) [Q1 2024 Financial Highlights](index=1&type=section&id=Q1%202024%20Financial%20Highlights) HCSG reported Q1 2024 revenue of **$423.4 million**, with adjusted diluted EPS of **$0.22** and adjusted EBITDA growth of **10.7%** Q1 2024 Key Financial Metrics (in millions, except EPS) | Metric | GAAP | Adjusted | | :--- | :--- | :--- | | Revenue | $423.4 | $423.4 | | Cost of services | $358.9 | $357.3 | | Selling, general and administrative | $46.9 | $42.8 | | Earnings per share | $0.21 | $0.22 | | Cash flows used in operating activities | ($26.0) | ($9.2) | - Adjusted EBITDA increased by **10.7% to $28.9 million** compared to Q1 2023[4](index=4&type=chunk) [Detailed Financial & Operational Results](index=2&type=section&id=Detailed%20Financial%20%26%20Operational%20Results) Q1 2024 saw Dining & Nutrition as the primary revenue driver, with effective cost control reflected in **84.4% adjusted cost of services** and **10.1% adjusted SG&A** Q1 2024 Segment Performance | Segment | Revenue (in millions) | Margin | | :--- | :--- | :--- | | Housekeeping & Laundry | $190.5 | 9.7% | | Dining & Nutrition | $232.9 | 7.6% | - Adjusted cost of services was **84.4%**, within the company's target range of **86%**[7](index=7&type=chunk) - Adjusted SG&A was **10.1% of revenue**, slightly above the company's goal of **8.5% to 9.5%**[7](index=7&type=chunk) [Financial Condition and Liquidity](index=2&type=section&id=Financial%20Condition%20and%20Liquidity) HCSG maintained a robust Q1 2024 balance sheet with a **2.8 to 1 current ratio** and **$129.6 million in cash**, reiterating its full-year adjusted cash flow forecast - As of Q1 end, the company maintained a strong liquidity position with **$129.6 million in cash and marketable securities** and a **$500.0 million credit facility**[5](index=5&type=chunk) - The current ratio stood at **2.8 to 1** at the end of the first quarter[5](index=5&type=chunk) - The company reiterated its **2024 adjusted cash flow from operations forecast of $40.0 million to $55.0 million**[5](index=5&type=chunk) [Business Outlook](index=1&type=section&id=Business%20Outlook) HCSG forecasts Q2 2024 revenue between **$420.0 million and $430.0 million** and reaffirms its full-year adjusted cash flow from operations forecast - The company estimates Q2 2024 revenue will be in the range of **$420.0 million to $430.0 million**[7](index=7&type=chunk) - The company expects year-over-year revenue growth in 2024, with most new business additions anticipated in the second half[2](index=2&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents the unaudited consolidated statements of income and condensed consolidated balance sheets as of March 31, 2024 [Consolidated Statements of Income](index=4&type=section&id=Consolidated%20Statements%20of%20Income) Q1 2024 revenue grew to **$423.4 million**, leading to a net income increase to **$15.3 million** (**$0.21 per diluted share**) Q1 Income Statement Comparison (in thousands, except EPS) | Metric | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | Revenue | $423,433 | $417,230 | | Income from operations | $17,611 | $14,804 | | Net income | $15,309 | $11,671 | | Diluted EPS | $0.21 | $0.16 | [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, total assets reached **$803.9 million**, driven by higher accounts receivable, with stockholders' equity increasing to **$474.6 million** Balance Sheet Highlights (in thousands) | Account | March 31, 2024 | December 31, 2023 | | :--- | :--- | :--- | | Cash and marketable securities | $104,906 | $147,461 | | Accounts and notes receivable, net | $407,140 | $383,509 | | Total current assets | $580,414 | $571,696 | | Total assets | $803,880 | $790,652 | | Total current liabilities | $209,375 | $216,928 | | Total stockholders' equity | $474,581 | $456,616 | [Non-GAAP Financial Measures & Reconciliations](index=3&type=section&id=Non-GAAP%20Financial%20Measures%20%26%20Reconciliations) HCSG uses non-GAAP measures, with Q1 2024 Adjusted EBITDA increasing to **$28.9 million** and adjusted cash flows from operations at **($9.2 million)** - The company uses non-GAAP measures including adjusted cost of services, adjusted SG&A, adjusted net income, Adjusted EBITDA, and adjusted cash flows to evaluate operating performance[12](index=12&type=chunk)[13](index=13&type=chunk) Reconciliation of GAAP Net Income to Adjusted EBITDA (in thousands) | Description | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | GAAP net income | $15,309 | $11,671 | | Adjustments (Taxes, Interest, D&A, etc.) | $9,488 | $8,306 | | EBITDA | $24,797 | $19,977 | | Other Adjustments (Share-based comp, etc.) | $4,118 | $6,137 | | **Adjusted EBITDA** | **$28,915** | **$26,114** | Reconciliation of GAAP to Adjusted Cash Flows from Operations (in thousands) | Description | Q1 2024 | Q1 2023 | | :--- | :--- | :--- | | GAAP cash flows used in operations | $(26,033) | $(16,290) | | Accrued payroll adjustment | $16,815 | $21,167 | | **Adjusted cash flows (used in) provided by operating activities** | **$(9,218)** | **$4,877** | [Cautionary Statement Regarding Forward-Looking Statements](index=3&type=section&id=Cautionary%20Statement%20Regarding%20Forward-Looking%20Statements) This section outlines inherent risks in forward-looking statements, including dependence on the healthcare industry, credit challenges, inflation, regulatory changes, and the need for new customer contracts - The report contains forward-looking statements based on current expectations, subject to various risks and uncertainties[9](index=9&type=chunk) - Key risks include dependence on the healthcare industry, credit and collection risks, workers' compensation claims, and changes in government regulations[9](index=9&type=chunk) - The company's ability to improve financial performance depends on securing new service agreements, retaining existing customers, and effective internal cost management[11](index=11&type=chunk)

Part I [Business](index=5&type=section&id=Item%201.%20Business) The company provides housekeeping, laundry, and dietary services to US healthcare facilities, with revenue split between its Housekeeping and Dietary segments - HCSG provides housekeeping, laundry, and dietary services to approximately **2,700 healthcare facilities** across the United States as of December 31, 2023[12](index=12&type=chunk) - **Genesis Healthcare, Inc.** is a significant customer, accounting for **10.9% ($181.4 million)** of consolidated revenues in 2023[21](index=21&type=chunk) - The company's bad debt provisions have increased, representing **2.1% of total revenues in 2023**, reflecting collection challenges in the long-term care industry[35](index=35&type=chunk) - As of December 31, 2023, the company employed approximately **33,400 people**, with a diverse workforce of **69% women** and **62% BIPOC**[40](index=40&type=chunk)[43](index=43&type=chunk) 2023 Revenue and Cost Structure by Segment | Segment | 2023 Revenue | % of Total Revenue | Key Cost Components (% of Segment Revenue) | | :--- | :--- | :--- | :--- | | **Housekeeping** | $766.7 million | 45.9% | Labor: 82.2%, Supplies: 7.0% | | **Dietary** | $904.7 million | 54.1% | Labor: 59.3%, Food Supplies: 34.2% | [Risk Factors](index=10&type=section&id=Item%201A.%20Risk%20Factors) The company faces significant risks from customer concentration, industry financial instability, and a material weakness in internal controls - A significant risk is customer concentration, with **Genesis Healthcare contributing 10.9%** of total consolidated revenues in 2023[54](index=54&type=chunk) - The company's collections are vulnerable to changes in government reimbursement rates and customer cash flow issues due to its healthcare industry focus[55](index=55&type=chunk) - A **material weakness in internal control** over financial reporting was identified in 2023 related to accrued payroll liabilities from employee vested vacation[65](index=65&type=chunk) - The company retains substantial risk through its high-deductible insurance plan for general liability and workers' compensation[60](index=60&type=chunk) - Service agreements are typically for one-year terms and are cancellable with **30 to 90 days' notice**, creating a risk of customer loss[61](index=61&type=chunk) [Unresolved Staff Comments](index=17&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the Securities and Exchange Commission - There are no unresolved staff comments[81](index=81&type=chunk) [Cybersecurity](index=18&type=section&id=Item%201C.%20Cybersecurity) The company's cybersecurity program is based on the NIST Framework and overseen by the Board's Audit Committee - The company's cybersecurity risk management is governed by an Information Security Policy based on the **NIST Cybersecurity Framework**[83](index=83&type=chunk) - Day-to-day cybersecurity risk management is handled by the Executive VP, Chief Compliance Officer, and the Senior VP of Information and Technology[86](index=86&type=chunk) - The Board of Directors' **Audit Committee oversees** the company's cybersecurity risk mitigation efforts[88](index=88&type=chunk) [Properties](index=19&type=section&id=Item%202.%20Properties) The company leases its corporate headquarters and regional offices, with no single property considered materially significant - The company leases its corporate offices in Bensalem, PA, and other regional offices in various states, with no individual property considered materially significant[89](index=89&type=chunk) [Legal Proceedings](index=19&type=section&id=Item%203.%20Legal%20Proceedings) The company is involved in various legal proceedings incidental to its business but cannot currently estimate possible losses - The company is involved in various legal proceedings incidental to its business but is currently unable to reasonably estimate possible losses for certain claims[91](index=91&type=chunk) [Mine Safety Disclosures](index=19&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Not applicable[93](index=93&type=chunk) Part II [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=20&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's stock trades on Nasdaq, and a share repurchase plan was active in Q4 2023 - As of the end of Q4 2023, **6.5 million shares** remain authorized for repurchase under the current plan[108](index=108&type=chunk) Equity Compensation Plan Information (as of Dec 31, 2023) | Plan Category | Securities to be Issued Upon Exercise (thousands) | Weighted-Average Exercise Price | Securities Remaining for Future Issuance (thousands) | | :--- | :--- | :--- | :--- | | Equity compensation plans approved by security holders | 3,715 | $30.43 | 5,204 | Q4 2023 Share Repurchases | Period | Total Shares Repurchased | Average Price Paid | Aggregate Purchase Price (thousands) | | :--- | :--- | :--- | :--- | | Oct 2023 | 102,200 | $9.75 | $996 | | Nov 2023 | 406,200 | $9.81 | $3,983 | | Dec 2023 | — | $— | $— | | **Q4 Total** | **508,400** | **$9.80** | **$4,979** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=22&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Revenues decreased slightly in 2023, but lower service costs and higher SG&A expenses led to a 19.1% increase in pre-tax income - Consolidated selling, general and administrative expense, excluding deferred compensation plan changes, **increased by $10.6 million (7.1%)** in 2023 compared to 2022[131](index=131&type=chunk) - The effective tax rate increased to **27.7% in 2023** from 23.1% in 2022[135](index=135&type=chunk) - The company maintains a **$300 million bank line of credit**, with $25.0 million borrowed as of December 31, 2023, and was in compliance with all financial covenants[154](index=154&type=chunk)[157](index=157&type=chunk) - In February 2023, the Board authorized a share repurchase plan and **suspended the quarterly dividend** as part of a capital rebalancing strategy[151](index=151&type=chunk) Consolidated Financial Performance Summary (2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | % Change | | :--- | :--- | :--- | :--- | | **Consolidated Revenues** | **$1,671,389** | **$1,690,176** | **(1.1)%** | | Housekeeping Revenues | $766,651 | $795,687 | (3.6)% | | Dietary Revenues | $904,738 | $894,489 | 1.1% | | **Costs of services provided** | **$1,456,643** | **$1,496,865** | **(2.7)%** | | **Income before income taxes** | **$53,056** | **$44,553** | **19.1%** | [Quantitative and Qualitative Disclosures About Market Risk](index=33&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is exposed to interest rate risk on its $147.5 million portfolio of cash and marketable securities - The company has **$147.5 million** in cash, cash equivalents, and marketable securities, which are subject to interest rate risk[168](index=168&type=chunk) - The market value of fixed-rate securities may be adversely impacted by rising interest rates, while floating-rate securities may produce less income if rates fall[169](index=169&type=chunk) [Financial Statements and Supplementary Data](index=34&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) The auditor issued an adverse opinion on internal controls due to a material weakness, and prior period financials were revised for an accounting error - The independent auditor issued an **adverse opinion on the company's internal control** over financial reporting as of December 31, 2023, due to a material weakness[176](index=176&type=chunk)[185](index=185&type=chunk)[187](index=187&type=chunk) - The company **revised its 2022 and 2021 financial statements** to correct a prior period accounting error related to the estimate for accrued vacation[248](index=248&type=chunk)[251](index=251&type=chunk) Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | Dec 31, 2022 | | :--- | :--- | :--- | | Total current assets | $571,696 | $508,632 | | Total assets | $790,652 | $720,836 | | Total current liabilities | $216,928 | $189,014 | | Total stockholders' equity | $456,616 | $418,279 | Consolidated Income Statement Highlights (in thousands) | Account | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Revenues | $1,671,389 | $1,690,176 | $1,641,959 | | Income before income taxes | $53,056 | $44,553 | $65,512 | | Net income | $38,386 | $34,243 | $48,543 | | Diluted EPS | $0.52 | $0.46 | $0.65 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=75&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no disagreements with its accountants on accounting or auditing matters - None reported[354](index=354&type=chunk) [Controls and Procedures](index=75&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that disclosure controls were not effective as of year-end 2023 due to a material weakness in internal control - The CEO and PAO concluded that **disclosure controls and procedures were not effective** as of December 31, 2023[355](index=355&type=chunk) - A **material weakness** was identified related to controls over accrued payroll liabilities from employee vested vacation[359](index=359&type=chunk) - The company is implementing a remediation plan that includes enhanced controls, review processes, and reconciliations related to the vacation accrual[361](index=361&type=chunk) [Other Information](index=76&type=section&id=Item%209B.%20Other%20Information) The company amended its by-laws in February 2024 to align with the SEC's universal proxy rules - On February 13, 2024, the company amended its by-laws to address the **SEC's universal proxy rules (Rule 14a-19)** and enhance requirements for director nominees[366](index=366&type=chunk) Part III [Directors, Executive Officers and Corporate Governance](index=78&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information regarding directors, officers, and governance is incorporated by reference from the 2024 proxy statement - Information is incorporated by reference from the **2024 definitive proxy statement**[371](index=371&type=chunk) - The company has adopted a code of ethics applicable to all employees, officers, and directors, which is available on its website[372](index=372&type=chunk) [Executive Compensation](index=78&type=section&id=Item%2011.%20Executive%20Compensation) Information regarding executive compensation is incorporated by reference from the 2024 proxy statement - Information is incorporated by reference from the **2024 definitive proxy statement**[373](index=373&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=78&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information regarding security ownership is incorporated by reference from the 2024 proxy statement - Information is incorporated by reference from the **2024 definitive proxy statement**[374](index=374&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=78&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information regarding related transactions and director independence is incorporated by reference from the 2024 proxy statement - Information is incorporated by reference from the **2024 definitive proxy statement**[375](index=375&type=chunk) [Principal Accountant Fees and Services](index=78&type=section&id=Item%2014.%20Principal%20Accountant%20Fees%20and%20Services) Information regarding accountant fees and services is incorporated by reference from the 2024 proxy statement - Information is incorporated by reference from the **2024 definitive proxy statement**[376](index=376&type=chunk) Part IV [Exhibits and Financial Statement Schedules](index=79&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists filed exhibits and includes a schedule detailing the activity in the Allowance for Doubtful Accounts Schedule II — Allowance for Doubtful Accounts (in thousands) | Year | Beginning Balance | Charged to Costs and Expenses | Deductions | Ending Balance | | :--- | :--- | :--- | :--- | :--- | | **2023** | **$73,464** | **$35,604** | **$17,369** | **$91,699** | | 2022 | $65,584 | $31,969 | $24,088 | $73,464 | | 2021 | $67,801 | $10,483 | $12,700 | $65,584 | [Form 10-K Summary](index=79&type=section&id=Item%2016.%20Form%2010-K%20Summary) No Form 10-K summary is provided by the company - None[381](index=381&type=chunk)

Financial Data and Key Metrics Changes - Adjusted EBITDA for Q4 2023 was $26.5 million, representing a 14.2% increase compared to Q4 2022 [2][31] - Cash flow from operations was $49.5 million, with adjusted cash flow from operations at $27.9 million, marking a 7.1% increase over Q4 2022 [2][10] - Revenue for Q4 2023 was reported at $423.8 million, with adjusted revenue at $425 million, aligning with expectations [23][29] - Net income was $22.6 million, with diluted earnings per share at $0.31; adjusted net income was $14.6 million, with adjusted diluted earnings per share at $0.20 [9][51] Business Line Data and Key Metrics Changes - Housekeeping & Laundry segment revenues were $191.4 million, with adjusted revenues at $191.7 million and a margin of 7.5% [8] - Dining & Nutrition segment revenues were $232.4 million, with adjusted revenues at $233.3 million and a margin of 6.2% [8] Market Data and Key Metrics Changes - The healthcare services industry added over 60,000 jobs in 2023, bringing the total workforce to 1.45 million, which is still 140,000 jobs below pre-pandemic levels [3] - Occupancy rates in the sector improved to 79.2%, just 100 basis points below pre-pandemic levels [3] Company Strategy and Development Direction - The company aims to manage adjusted cost of services at 86% and has made contract enhancements to better capture wage inflation and cost increases [5][30] - The focus for 2024 includes organic growth through hiring, training, and developing future manager candidates, as well as converting sales pipeline opportunities into new business [27][55] - The company is prioritizing cash collections as a lagging indicator of industry recovery, expecting improvements throughout 2024 [6] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to capitalize on growth opportunities in 2024, emphasizing a strong operational momentum and improved customer experience [5][28] - The company is optimistic about the industry's recovery, citing a favorable demographic tailwind and a solid reimbursement environment [52] Other Important Information - The company reported a DSO (Days Sales Outstanding) of 82 days for the quarter [32] - SG&A expenses were $46.3 million, with adjusted SG&A at $42.2 million, aiming for a range of 8.5% to 9.5% [59] Q&A Session Summary Question: Inquiry about new business pipeline and manager training - Management indicated that the new business ramp-up is expected to be non-linear, with a heavier contribution anticipated in the second half of the year [35] Question: Update on client restructurings - Management confirmed that the client restructurings noted in the previous quarter were resolved and no residual impact is expected in 2024 [39] Question: Discussion on capital allocation and growth areas - Management stated that organic growth remains the priority, while they continue to evaluate inorganic opportunities [55]

PART I [Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20%28Unaudited%29) Unaudited financial statements for Q3 2023 show a net loss, while nine-month net income declined, with total assets increasing to $750.7 million [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) As of September 30, 2023, total assets increased to $750.7 million, driven by receivables, while liabilities rose due to increased borrowings Consolidated Balance Sheet Highlights (in thousands) | Account | Sep 30, 2023 (unaudited) | Dec 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $31,313 | $26,279 | | Accounts and notes receivable, net | $396,577 | $369,386 | | Total current assets | $533,363 | $508,632 | | Total assets | $750,716 | $718,334 | | **Liabilities & Equity** | | | | Borrowings under line of credit | $45,000 | $25,000 | | Total current liabilities | $187,774 | $178,619 | | Total liabilities | $308,983 | $292,162 | | Total stockholders' equity | $441,733 | $426,172 | [Consolidated Statements of Comprehensive (Loss) Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20%28Loss%29%20Income) The company reported a net loss of $5.5 million for Q3 2023, a decline from prior year, while nine-month net income decreased to $15.8 million Q3 Financial Performance (in thousands, except per share data) | Metric | Q3 2023 | Q3 2022 | | :--- | :--- | :--- | | Revenues | $411,388 | $414,488 | | Costs of services provided | $377,554 | $376,894 | | Selling, general and administrative | $39,047 | $35,803 | | Net (loss) income | $(5,494) | $322 | | Diluted (loss) earnings per share | $(0.07) | $0.00 | Nine-Month Financial Performance (in thousands, except per share data) | Metric | Nine Months 2023 | Nine Months 2022 | | :--- | :--- | :--- | | Revenues | $1,247,549 | $1,266,156 | | Costs of services provided | $1,106,260 | $1,129,526 | | Selling, general and administrative | $120,523 | $100,820 | | Net income | $15,788 | $18,471 | | Diluted earnings per share | $0.21 | $0.25 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities significantly improved to $5.9 million for the nine months ended September 30, 2023, leading to a $5.0 million net cash increase Cash Flow Summary - Nine Months Ended Sep 30 (in thousands) | Cash Flow Activity | 2023 | 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,947) | $(31,060) | | Net cash (used in) from investing activities | $(1,910) | $2,872 | | Net cash from (used in) financing activities | $12,891 | $(22,973) | | **Net increase (decrease) in cash** | **$5,034** | **$(51,161)** | - The company paid no dividends in the first nine months of 2023, compared to $47.4 million in the same period of 2022. Instead, it used **$6.2 million** for treasury stock purchases and increased short-term borrowings by **$20.0 million**[18](index=18&type=chunk) [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The notes provide details on business segments, accounting policies, and significant customer concentration, with Dietary services contributing 53.9% of revenue - The company is organized into two reportable segments: Housekeeping (housekeeping, laundry, linen) and Dietary (dietary department services)[25](index=25&type=chunk) - For the nine months ended September 30, 2023, one customer, Genesis Healthcare, Inc., accounted for **$141.3 million**, or **11.3%** of consolidated revenues[47](index=47&type=chunk) - In Q2 2023, the company filed a claim for the Employee Retention Credit (ERC) for wages paid in 2020 and 2021, but has not recognized any related amounts as receipt is not yet reasonably assured[49](index=49&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses Q3 2023 net loss driven by a significant bad debt provision, and a decline in nine-month net income, while liquidity is supported by cash and a credit facility [Results of Operations - Three Months Ended September 30, 2023 and 2022](index=34&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20September%2030%2C%202023%20and%202022) Q3 2023 consolidated revenues decreased by 0.7% to $411.4 million, resulting in a net loss primarily due to a $9.1 million bad debt provision Q3 Revenue by Segment (in thousands) | Segment | Q3 2023 | Q3 2022 | % Change | | :--- | :--- | :--- | :--- | | Housekeeping | $190,920 | $196,941 | (3.1)% | | Dietary | $220,468 | $217,547 | 1.3% | | **Consolidated** | **$411,388** | **$414,488** | **(0.7)%** | - A customer group's bankruptcy in Q3 2023 resulted in a **$9.1 million** increase to the bad debt provision, significantly impacting profitability[150](index=150&type=chunk) - Consolidated interest expense increased by **166.8%** to **$2.1 million** due to increased short-term borrowings and higher market interest rates[157](index=157&type=chunk) [Results of Operations - Nine Months Ended September 30, 2023 and 2022](index=37&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%20Ended%20September%2030%2C%202023%20and%202022) Nine-month consolidated revenues decreased by 1.5% to $1.25 billion, with income before taxes falling 12.0% due to lower Housekeeping revenue and increased bad debt provisions Nine-Month Revenue by Segment (in thousands) | Segment | Nine Months 2023 | Nine Months 2022 | % Change | | :--- | :--- | :--- | :--- | | Housekeeping | $575,256 | $597,710 | (3.8)% | | Dietary | $672,293 | $668,446 | 0.6% | | **Consolidated** | **$1,247,549** | **$1,266,156** | **(1.5)%** | - Bad debt provision as a percentage of revenue increased to **2.6%** from **1.8%** year-over-year, driven by changes in the credit risk profile of two customer groups, which added **$13.8 million** to bad debt expense[165](index=165&type=chunk) [Liquidity and Capital Resources](index=40&type=section&id=Liquidity%20and%20Capital%20Resources) As of September 30, 2023, the company maintained $121.3 million in liquid assets and a $300 million credit facility, while initiating a share repurchase plan after suspending dividends - The company maintains a **$300 million** bank line of credit, with **$45.0 million** in borrowings and **$85.7 million** in letters of credit outstanding as of September 30, 2023, leaving **$169.3 million** available[126](index=126&type=chunk)[127](index=127&type=chunk) - On February 14, 2023, the Board of Directors suspended the quarterly dividend and authorized a repurchase of up to **7.5 million** shares[180](index=180&type=chunk) - For the nine months ended September 30, 2023, the company repurchased **0.5 million** shares for **$6.2 million**[181](index=181&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company is primarily exposed to interest rate risk on its $121.3 million investments, where rate fluctuations could impact fixed and floating-rate securities - The company's primary market risk is interest rate risk associated with its investments. The market value of fixed-rate securities may be negatively impacted by rising interest rates[193](index=193&type=chunk) [Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023, with no material changes to internal controls during Q3 - Management concluded that the company's disclosure controls and procedures were effective as of September 30, 2023[195](index=195&type=chunk) - There were no changes in internal controls over financial reporting during Q3 2023 that have materially affected, or are reasonably likely to materially affect, these controls[196](index=196&type=chunk) PART II — OTHER INFORMATION [Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) The company is involved in various legal proceedings in the ordinary course of business, with no expected material adverse effect on financial condition - The company is subject to various legal actions in the ordinary course of business but does not expect them to have a material adverse effect on its financial condition[200](index=200&type=chunk) - For certain pending litigation, the company is unable to reasonably estimate possible losses or determine if an unfavorable outcome is probable, reasonably possible, or remote[201](index=201&type=chunk) [Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) No material changes have occurred in the risk factors previously disclosed in the company's 2022 Annual Report on Form 10-K - No material changes have occurred in the risk factors from the company's 2022 Form 10-K[203](index=203&type=chunk) [Unregistered Sales of Equity Securities, Use of Proceeds and Issuer Purchases of Equity Securities](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%2C%20Use%20of%20Proceeds%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The Board authorized a share repurchase plan for up to 7.5 million shares, with 345,612 shares repurchased for $4.0 million during Q3 2023 Q3 2023 Share Repurchases | Period | Shares Repurchased | Average Price Paid | Total Cost (in thousands) | | :--- | :--- | :--- | :--- | | July 2023 | 58,601 | $12.53 | $734 | | August 2023 | 102,011 | $12.34 | $1,259 | | September 2023 | 185,000 | $10.68 | $1,977 | | **Total Q3** | **345,612** | **$11.49** | **$3,970** | - As of the end of Q3 2023, approximately **7.0 million** shares remain authorized for repurchase under the current plan[204](index=204&type=chunk) [Other Information](index=46&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 Q3 2023 - No directors or officers adopted, terminated, or modified a Rule 10b5-1 trading arrangement during Q3 2023[208](index=208&type=chunk) [Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including required certifications from the Principal Executive Officer and Principal Financial Officer - Exhibits filed include CEO and CFO certifications pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[209](index=209&type=chunk)