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 June 30, 2022 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 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 HEALTHCARE SERVICES GROUP, INC. (Exact name of registrant as specified in its charter) Pennsylvania 23-2018365 (State or oth ...

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, 2022 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) Pennsylvania 23-2018365 (State or ot ...

Financial Data and Key Metrics Changes - Revenue for Q1 2022 was reported at $426.8 million, with direct cost of services at $373.3 million, representing 87.5% of revenue, which is above the historical target of 86% [10][13] - Net income for the quarter was $11.3 million, translating to earnings of $0.15 per share [13] - Cash outflow from operations was $30.2 million, primarily due to a $27.2 million increase in accounts receivable and a $24.9 million increase in accrued payroll [13][91] Business Line Data and Key Metrics Changes - Housekeeping and laundry segment revenues were $201.7 million, while dining and nutrition segment revenues were $225.1 million [10] - Segment margins for housekeeping and laundry were 10.1%, and for dining and nutrition, they were 4.2% [11] Market Data and Key Metrics Changes - The company noted positive facility census trends, with occupancy increasing from 72.5% to 73.6% over an eight-week period [72] - The company expects to exit the year with cost of services aligned with the historical target of 86% [7][102] Company Strategy and Development Direction - The company is focused on modifying service agreements to account for inflation and aims to complete these modifications by the end of Q2 2022 [7][102] - There is an emphasis on operational efficiency and management development to support business growth [48][49] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the long-term growth outlook, citing favorable demographics and the value proposition of their services [9] - The company is actively engaged with clients to address inflation-related issues and is optimistic about achieving their financial targets [24][70] Other Important Information - The board approved an increase in the dividend to $0.2125 per share, marking the 76th consecutive cash dividend payment [15][16] - The company is not actively pursuing M&A opportunities but remains open to opportunistic acquisitions, particularly in the education space [76][78] Q&A Session Summary Question: Progress on service contract modifications - Management indicated that they are making good progress on modifying service agreements, with a goal to exit the year with cost of services at 86% [24][70] Question: One-time impacts on margins - Management clarified that there were no significant one-time impacts on margins for the quarter, attributing improvements to operational efficiencies [26] Question: Impact of food costs and supplemental billing revenue - Management noted that there was no benefit from supplemental billing revenue and discussed the lag in food cost adjustments due to inflation [33][84] Question: DSO and client payment ability - Management stated that while there are challenges, they have not seen systematic issues with client payments, attributing the increase in DSO primarily to timing [40][96] Question: Genesis contract pricing modifications - Management confirmed that the sunsetting of pricing adjustments contributed approximately $2.5 million in Q1 [44] Question: Management development and staffing - Management emphasized the importance of management development and noted that they are focused on recruiting and training to support business operations [48][49] Question: Client pushback on price increases - Management acknowledged that while there is some pushback from clients, most recognize the increased costs of doing business and appreciate the value of their partnership [57][61] Question: Dividend philosophy and cash balances - Management reiterated that dividend decisions are evaluated quarterly, with a focus on sustainability and organic growth as priorities [98]

PART I — FINANCIAL INFORMATION This section encompasses the company's unaudited financial statements, including balance sheets, income statements, cash flows, and detailed notes, along with management's discussion and analysis of financial performance and market risks [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements, including balance sheets, statements of comprehensive income, cash flows, and stockholders' equity, along with detailed notes explaining the company's business, accounting policies, and specific financial line items for the periods ended September 30, 2021, and December 31, 2020 [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) Presents the company's financial position, including assets, liabilities, and equity, at specific reporting dates | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Change (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------- | | Cash and cash equivalents | $79,582 | $139,330 | $(59,748) | | Accounts and notes receivable, net | $289,725 | $255,474 | $34,251 | | Goodwill | $65,545 | $51,084 | $14,461 | | Total assets | $793,603 | $785,031 | $8,572 | | Total current liabilities | $153,854 | $162,260 | $(8,406) | | Total stockholders' equity | $480,205 | $480,461 | $(256) | [Consolidated Statements of Comprehensive Income](index=6&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Details the company's revenues, expenses, and net income over specific reporting periods, reflecting overall financial performance | Metric | 3 Months Ended Sep 30, 2021 (in thousands) | 3 Months Ended Sep 30, 2020 (in thousands) | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Revenues | $415,590 | $435,947 | $1,221,512 | $1,337,126 | | Costs of services provided | $364,822 | $365,443 | $1,037,852 | $1,140,116 | | Selling, general and administrative expense | $38,780 | $37,337 | $128,818 | $108,819 | | Net income | $9,540 | $27,644 | $43,758 | $70,935 | | Basic earnings per common share | $0.13 | $0.37 | $0.58 | $0.95 | | Diluted earnings per common share | $0.13 | $0.37 | $0.58 | $0.95 | [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes the cash inflows and outflows from operating, investing, and financing activities for the reporting periods | Metric | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | Change (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :-------------------- | | Net cash provided by operating activities | $5,731 | $141,549 | $(135,818) | | Net cash used in investing activities | $(14,316) | $(4,862) | $(9,454) | | Net cash used in financing activities | $(51,163) | $(54,096) | $2,933 | | Net change in cash and cash equivalents | $(59,748) | $82,591 | $(142,339) | | Cash paid for acquisition | $6,000 | $0 | $6,000 | [Consolidated Statements of Stockholders' Equity](index=8&type=section&id=Consolidated%20Statements%20of%20Stockholders'%20Equity) Outlines changes in the company's equity accounts, including net income, dividends, and stock transactions, over the reporting periods | Metric | 9 Months Ended Sep 30, 2021 (in thousands) | 9 Months Ended Sep 30, 2020 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | | Total stockholders' equity (Dec 31/Jan 1) | $480,461 | $428,206 | | Net income for the period | $43,758 | $70,935 | | Dividends paid and accrued | $(47,099) | $(45,673) | | Purchases of treasury stock | $(5,397) | $0 | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations and disclosures supporting the consolidated financial statements, covering accounting policies and specific line items [Note 1—Description of Business and Significant Accounting Policies](index=10&type=section&id=Note%201%E2%80%94Description%20of%20Business%20and%20Significant%20Accounting%20Policies) Describes the company's business operations, segments, and the critical accounting policies used in preparing the financial statements - The Company provides management, administrative, and operating expertise and services to housekeeping, laundry, linen, facility maintenance, and dietary service departments of healthcare industry customers (nursing homes, retirement complexes, rehabilitation centers, hospitals) across the U.S[23](index=23&type=chunk) - Primarily operates under full-service agreements, responsible for day-to-day management of on-site employees and supply provision, also offers management-only agreements where customers retain payroll responsibility for non-supervisory staff, with agreements typically renewable one-year terms, cancellable with 30-90 days' notice after an initial 60-120 day period[24](index=24&type=chunk) - The Company is organized into two reportable segments: Housekeeping (housekeeping, laundry, linen, and other services) and Dietary (dietary department services)[25](index=25&type=chunk) - Unaudited interim financial statements are prepared in accordance with U.S. GAAP for interim financial information and Form 10-Q requirements, not including all information for a complete presentation[28](index=28&type=chunk) - Significant estimates are made for allowance for doubtful accounts, accrued insurance claims, valuations, deferred taxes, and impairment reviews, considering current/historical trends and potential COVID-19 effects[29](index=29&type=chunk) - The Company adopted ASC 326 (expected loss model) as of January 1, 2020, replacing the incurred loss model, leading to earlier recognition of credit losses[35](index=35&type=chunk) [Note 2—Revenue](index=13&type=section&id=Note%202%E2%80%94Revenue) Details the company's revenue recognition policies and provides a breakdown of revenues by operating segment Revenue by Segment (9 Months Ended Sep 30) | Segment | 2021 (in millions) | % of Total 2021 | 2020 (in millions) | % of Total 2020 | | :---------- | :----------------- | :---------------- | :----------------- | :---------------- | | Housekeeping | $621.3 | 50.9% | $675.4 | 50.5% | | Dietary | $600.2 | 49.1% | $661.8 | 49.5% | | **Total** | **$1,221.5** | **100%** | **$1,337.2** | **100%** | - The Company accounts for revenue under ASC 606, recognizing revenue as distinct goods and services are transferred over time, typically on a monthly or weekly basis[52](index=52&type=chunk)[53](index=53&type=chunk)[55](index=55&type=chunk) - As of September 30, 2021, **$298.9 million** in revenue is expected to be recognized from unsatisfied or partially unsatisfied performance obligations, with approximately **41.3%** expected within the next 12 months[57](index=57&type=chunk) [Note 3—Accounts and Notes Receivable](index=15&type=section&id=Note%203%E2%80%94Accounts%20and%20Notes%20Receivable) Presents the balances of accounts and notes receivable and discusses the company's credit and collection policies Accounts and Notes Receivable Balances | Category | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Short-term accounts and notes receivable, net | $289,725 | $255,474 | | Long-term notes receivable, net | $30,651 | $34,417 | | **Total net accounts and notes receivable** | **$320,376** | **$289,891** | - Credit decisions are made case-by-case, considering customer-specific factors and industry variables (e.g., fluctuating census, litigation, government reimbursement), with efforts including using interest-bearing promissory notes and amending contracts to minimize collection risk[58](index=58&type=chunk)[59](index=59&type=chunk) [Note 4—Allowance for Doubtful Accounts](index=15&type=section&id=Note%204%E2%80%94Allowance%20for%20Doubtful%20Accounts) Explains the methodology for estimating expected credit losses and provides a reconciliation of the allowance for doubtful accounts - The Company evaluates its accounts and notes receivable for expected credit losses quarterly using internally developed credit quality indicators based on aging for accounts receivable and management assessment for notes receivable[61](index=61&type=chunk) - Notes receivable are managed using a two-tiered approach: standard notes receivable (in good standing) and elevated risk notes receivable (e.g., bankruptcy, slow payers)[61](index=61&type=chunk) - The Company accounts for all notes receivable on a non-accrual basis, deferring interest income recognition until cash payments are received[62](index=62&type=chunk) Changes in Allowance for Doubtful Accounts (9 Months Ended Sep 30, 2021) | Portfolio Segment | Dec 31, 2020 (in thousands) | Write-Offs (in thousands) | Bad Debt Expense (in thousands) | Sep 30, 2021 (in thousands) | | :-------------------------- | :-------------------------- | :------------------------ | :-------------------------- | :-------------------------- | | Accounts receivable | $51,052 | $(7,807) | $10,801 | $54,046 | | Standard notes receivable | $13,258 | $(9) | $(864) | $12,385 | | Elevated risk notes receivable | $3,491 | $(2,761) | $853 | $1,583 | | **Total accounts and notes receivable** | **$67,801** | **$(10,577)** | **$10,790** | **$68,014** | [Note 5—Changes in Accumulated Other Comprehensive Income by Component](index=18&type=section&id=Note%205%E2%80%94Changes%20in%20Accumulated%20Other%20Comprehensive%20Income%20by%20Component) Details the components and changes in accumulated other comprehensive income, including unrealized gains and losses Accumulated Other Comprehensive Income (AOCI) - 9 Months Ended Sep 30 | Metric | 2021 (in thousands) | 2020 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | AOCI — beginning balance | $5,563 | $2,919 | | Net current period other comprehensive (loss) income | $(1,582) | $1,996 | | AOCI — ending balance | $3,981 | $4,915 | - For the nine months ended September 30, 2021, there was a net gain of **$161 thousand** reclassified from AOCI (from sales of available-for-sale securities), compared to a net loss of **$71 thousand** in 2020[71](index=71&type=chunk)[73](index=73&type=chunk) [Note 6—Property and Equipment](index=19&type=section&id=Note%206%E2%80%94Property%20and%20Equipment) Provides a breakdown of property and equipment, net, and reports depreciation expense for the periods Property and Equipment, Net | Category | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | | :-------------------------------- | :-------------------------- | :-------------------------- | | Housekeeping and dietary equipment | $13,145 | $13,862 | | Computer hardware and software | $5,402 | $6,015 | | Operating lease — right-of-use assets | $32,032 | $26,074 | | Total property and equipment, net | $27,817 | $26,561 | Depreciation Expense (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Total depreciation expense | $7,700 | $7,600 | | Related to ROU Assets | $4,700 | $4,200 | [Note 7—Leases](index=19&type=section&id=Note%207%E2%80%94Leases) Outlines the company's lease accounting policies, including right-of-use assets and lease liabilities, and presents lease costs - The Company recognizes Right-of-Use (ROU) Assets and Lease Liabilities for leases with terms greater than 12 months, including automobiles, office buildings, IT equipment, and storage units, in accordance with ASC 842[78](index=78&type=chunk)[79](index=79&type=chunk) Lease Cost (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :---------------- | :------------------ | :------------------ | | Operating lease cost | $4,547 | $4,153 | | Short-term lease cost | $558 | $388 | | Variable lease cost | $(458) | $450 | | **Total lease cost** | **$4,647** | **$4,991** | - ROU Assets and Lease Liabilities were reduced by **$0.6 million** for the nine months ended September 30, 2021, due to lease cancellations[83](index=83&type=chunk) Future Minimum Lease Payments (as of Sep 30, 2021) | Period/Year | Operating Leases (in thousands) | | :-------------------------- | :------------------------------ | | Total minimum lease payments | $19,908 | | Less: imputed lease discount | $1,700 | | **Present value of lease liabilities** | **$18,208** | [Note 8—Other Intangible Assets](index=21&type=section&id=Note%208%E2%80%94Other%20Intangible%20Assets) Details the company's intangible assets, their amortization, and estimated future amortization expense - The Company's other intangible assets consist of customer relationships, patents, non-compete agreements, and trademarks, amortized on a straight-line basis over their estimated useful lives (weighted average of **9.9 years**)[86](index=86&type=chunk) Amortization Expense (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :----------------- | :------------------ | :------------------ | | Amortization expense | $3,300 | $3,100 | Estimated Future Amortization Expense | Period/Year | Total Amortization Expense (in thousands) | | :-------------------------- | :-------------------------------------- | | Oct 1 to Dec 31, 2021 | $1,105 | | 2022 | $4,416 | | 2023 | $3,420 | | 2024 | $2,286 | | 2025 | $2,286 | | 2026 | $2,270 | | Thereafter | $1,256 | [Note 9—Fair Value Measurements](index=21&type=section&id=Note%209%E2%80%94Fair%20Value%20Measurements) Describes the company's financial assets measured at fair value and provides information on unrealized gains/losses and sales of securities - The Company's financial assets measured at fair value on a recurring basis include marketable securities (primarily tax-exempt municipal bonds, classified as available-for-sale and Level 2) and deferred compensation funding (classified as trading securities and primarily Level 1)[89](index=89&type=chunk)[91](index=91&type=chunk)[92](index=92&type=chunk) Unrealized Gains/Losses (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Unrealized losses on marketable securities (net of taxes) | $(1,582) | $1,996 (gain) | | Unrealized gains on deferred compensation fund investments | $4,000 | $4,200 | Sales of Marketable Securities (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Proceeds from sales | $12,400 | $6,000 | | Realized gains (losses) | $200 (gain) | $(100) (loss) | Contractual Maturities of Debt Securities (as of Sep 30, 2021) | Maturity Period | Amount (in thousands) | | :-------------------------- | :-------------------- | | One year or less | $6,207 | | Second through fifth year | $32,788 | | Sixth through tenth year | $52,902 | | After ten years | $33,686 | | **Total debt securities** | **$125,583** | [Note 10—Shared-Based Compensation](index=24&type=section&id=Note%2010%E2%80%94Shared-Based%20Compensation) Details the company's share-based compensation plans, including stock options, restricted stock units, and related expenses Total Pre-Tax Share-Based Compensation Expense (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | | :-------------------------------- | :------------------ | :------------------ | | Stock options | $1,381 | $1,594 | | Restricted stock units and deferred stock units | $4,797 | $3,898 | | Performance stock units | $299 | $0 | | Employee Stock Purchase Plan | $491 | $425 | | **Total expense** | **$6,968** | **$5,917** | - Unrecognized compensation cost related to unvested awards was **$20.0 million** as of September 30, 2021, with a weighted average vesting period of approximately **2.9 years**[96](index=96&type=chunk) - The 2020 Omnibus Incentive Plan, adopted on May 26, 2020, reserved **4.9 million shares**, with **2.0 million** available for future grant as of September 30, 2021[97](index=97&type=chunk)[98](index=98&type=chunk) - As of September 30, 2021, there were **2.196 million** stock options outstanding with a weighted average exercise price of **$33.35**[99](index=99&type=chunk) - As of September 30, 2021, there were **0.664 million** restricted stock units outstanding with a weighted average grant date fair value of **$31.01**[102](index=102&type=chunk) - **35,000 Performance Stock Units (PSUs)** were granted to executive officers in January 2021, contingent on TSR targets and continued employment through December 31, 2023[104](index=104&type=chunk)[105](index=105&type=chunk) - **10,000 Deferred Stock Units (DSUs)** were granted to non-employee directors in June 2021, vesting in one year[106](index=106&type=chunk) - The Employee Stock Purchase Plan (ESPP) was extended through 2026, with **2.1 million shares** available for future grant[107](index=107&type=chunk)[108](index=108&type=chunk)[214](index=214&type=chunk) - SERP expense for the nine months ended September 30, 2021, was **$458 thousand**[110](index=110&type=chunk) [Note 11—Income Taxes](index=28&type=section&id=Note%2011%E2%80%94Income%20Taxes) Explains the company's income tax accounting policies, effective tax rates, and the impact of discrete tax items - The Company uses the asset and liability method for income taxes and accrues for probable tax obligations[40](index=40&type=chunk)[114](index=114&type=chunk) - The effective tax rate is impacted by discrete items such as option exercises, vested awards, and the **$6.0 million** SEC settlement payment, which resulted in a **$2.2 million** impact on the income tax provision for the nine months ended September 30, 2021[112](index=112&type=chunk) - No significant uncertain tax positions requiring recognition were identified as of September 30, 2021[114](index=114&type=chunk) [Note 12—Segment Information](index=28&type=section&id=Note%2012%E2%80%94Segment%20Information) Provides financial information broken down by the company's reportable operating segments, including revenues and income before taxes - The Company manages and evaluates its operations in two reportable segments: Housekeeping (housekeeping, laundry, linen, and other services) and Dietary (dietary department services)[25](index=25&type=chunk)[116](index=116&type=chunk) Revenues by Segment (9 Months Ended Sep 30) | Segment | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------- | :------------------ | :------------------ | :--------- | | Housekeeping | $621,278 | $675,366 | (8.0)% | | Dietary | $600,234 | $661,760 | (9.3)% | | **Total** | **$1,221,512** | **$1,337,126** | **(8.6)%** | Income Before Income Taxes by Segment (9 Months Ended Sep 30) | Segment | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------- | :------------------ | :------------------ | :--------- | | Housekeeping | $68,025 | $73,983 | (8.1)% | | Dietary | $41,075 | $52,627 | (22.0)% | | Corporate and eliminations | $(48,964) | $(32,284) | 51.7% | | **Total** | **$60,136** | **$94,326** | **(36.2)%** | [Note 13—Earnings Per Common Share](index=30&type=section&id=Note%2013%E2%80%94Earnings%20Per%20Common%20Share) Presents the basic and diluted earnings per common share calculations for the reporting periods Earnings Per Common Share (3 Months Ended Sep 30) | Metric | 2021 | 2020 | | :-------------------------- | :----- | :----- | | Basic EPS | $0.13 | $0.37 | | Diluted EPS | $0.13 | $0.37 | Earnings Per Common Share (9 Months Ended Sep 30) | Metric | 2021 | 2020 | | :-------------------------- | :----- | :----- | | Basic EPS | $0.58 | $0.95 | | Diluted EPS | $0.58 | $0.95 | - **2.184 million** (3 months) and **1.788 million** (9 months) anti-dilutive outstanding equity awards were excluded from diluted EPS calculation in 2021[122](index=122&type=chunk) [Note 14—Other Contingencies](index=30&type=section&id=Note%2014%E2%80%94Other%20Contingencies) Discloses information regarding the company's bank line of credit, outstanding letters of credit, and significant legal settlements - The Company has a **$475 million** bank line of credit with no borrowings outstanding as of September 30, 2021, and was in compliance with all financial covenants[123](index=123&type=chunk)[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) - **$64.9 million** in irrevocable standby letters of credit were outstanding as of September 30, 2021, related to insurance programs, reducing the available line of credit[124](index=124&type=chunk)[190](index=190&type=chunk) - The Company, its former CFO, and Controller settled with the SEC on August 24, 2021, regarding EPS calculation practices, resulting in a **$6.0 million** civil monetary penalty paid in Q3 2021[128](index=128&type=chunk)[203](index=203&type=chunk) - A preliminary approval for a **$16.8 million** shareholder class action settlement was granted on September 15, 2021, which was funded by the Company's directors' and officers' liability insurance carriers[130](index=130&type=chunk)[133](index=133&type=chunk)[205](index=205&type=chunk) - Customers in the long-term care industry are significantly impacted by COVID-19, leading to increased operating costs, reduced admissions, and lower census, with government relief measures expected to provide support, but the full benefit is uncertain[132](index=132&type=chunk) [Note 15—Subsequent Events](index=32&type=section&id=Note%2015%E2%80%94Subsequent%20Events) Reports significant events that occurred after the balance sheet date but before the financial statements were issued - On October 15, 2021, the Company's directors' and officers' liability insurance carriers paid the **$16.8 million** settlement to resolve the putative shareholder class action lawsuit[133](index=133&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on the company's financial performance, condition, and liquidity, highlighting the impact of COVID-19, segment-specific results, and key financial trends for the three and nine months ended September 30, 2021, compared to the prior year, detailing revenue and cost drivers, changes in expenses, and capital management strategies [COVID-19 Considerations](index=33&type=section&id=COVID-19%20Considerations) Discusses the impact of the COVID-19 pandemic on the company's operations, financial results, and future outlook - The COVID-19 pandemic did not have a material net impact on consolidated operating results for the quarter ended September 30, 2021, with revenues including **$5.2 million** of COVID-19 supplemental billings, offset by temporary decreases in recurring billings due to census-driven cost reductions[136](index=136&type=chunk) - Future impacts on demand, workforce, and supply chain remain uncertain, but the company anticipates strong long-term demand for its essential services[136](index=136&type=chunk)[137](index=137&type=chunk) - The Company continued to generate operating cash flows to meet short-term liquidity needs and expects to maintain access to capital markets, with no material asset impairments observed due to COVID-19[138](index=138&type=chunk) [Overview of Business](index=33&type=section&id=Overview%20of%20Business) Provides a general description of the company's business, services, and market position within the healthcare industry - The Company provides management, administrative, and operating expertise for housekeeping, laundry, linen, facility maintenance, and dietary services to healthcare facilities across the U.S[140](index=140&type=chunk) - It is believed to be the largest provider of housekeeping and laundry management services to the long-term care industry in the U.S., serving approximately **3,000 facilities** as of September 30, 2021[140](index=140&type=chunk) - Services are primarily provided through full-service agreements, with limited management-only agreements[141](index=141&type=chunk) - Housekeeping services generated approximately **50.9% ($621.3 million)** of total revenues, and Dietary services contributed approximately **49.1% ($600.2 million)** for the nine months ended September 30, 2021[145](index=145&type=chunk) [Results of Operations - Three Months Ended September 30, 2021 and 2020](index=35&type=section&id=Results%20of%20Operations%20-%20Three%20Months%20Ended%20September%2030,%202021%20and%202020) Analyzes the company's financial performance for the three months ended September 30, 2021, compared to the prior year, detailing revenue and expense drivers [Revenues](index=36&type=section&id=Revenues_3M) Analyzes the company's consolidated and segment revenues for the three months ended September 30, highlighting key drivers of change Consolidated Revenues (3 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------------- | :------------------ | :------------------ | :--------- | | Revenues | $415,590 | $435,947 | (4.7)% | Segment Revenues (3 Months Ended Sep 30) | Segment | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------- | :------------------ | :------------------ | :--------- | | Housekeeping | $203,379 | $223,423 | (9.0)% | | Dietary | $212,211 | $212,524 | (0.1)% | - The decrease in revenues was primarily driven by decreases in recurring billings due to census-driven reductions in staffing and purchasing, a decrease in the number of facilities serviced, and modified pricing/payment terms with a customer, partially offset by **$0.5 million** in COVID-19 supplemental billings[151](index=151&type=chunk) [Costs of Services Provided](index=36&type=section&id=Costs%20of%20Services%20Provided_3M) Examines the costs incurred to provide services for the three months ended September 30, including labor, supplies, and other related expenses Consolidated Costs of Services Provided (3 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------------- | :------------------ | :------------------ | :--------- | | Costs of services provided | $364,822 | $365,443 | (0.2)% | Key Indicators as % of Consolidated Revenue (3 Months Ended Sep 30) | Metric | 2021 | 2020 | Change | | :---------------- | :----- | :----- | :----- | | Bad debt provision | 1.0% | 0.2% | 0.8% | | Self-insurance costs | 2.9% | 2.7% | 0.2% | Segment Costs as % of Segment Revenue (3 Months Ended Sep 30) | Segment | 2021 | 2020 | Change | | :-------------------------------- | :----- | :----- | :----- | | Housekeeping labor and other labor-related costs | 81.9% | 80.5% | 1.4% | | Housekeeping supplies | 6.7% | 6.7% | —% | | Dietary labor and other labor-related costs | 64.8% | 63.1% | 1.7% | | Dietary supplies | 28.8% | 25.8% | 3.0% | - The increase in labor costs as a percentage of revenue was driven by increased wage rates and premium pay to stabilize labor shortages, while the increase in dietary supplies was driven by continued inflation[155](index=155&type=chunk) [Selling, General and Administrative Expense](index=37&type=section&id=Selling,%20General%20and%20Administrative%20Expense_3M) Details the selling, general, and administrative expenses for the three months ended September 30, explaining changes and key components Consolidated SG&A Expense (3 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------------- | :------------------ | :------------------ | :--------- | | SG&A expense | $38,780 | $37,337 | 3.9% | SG&A excluding deferred compensation plan changes (3 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | $ Change | % Change | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | SG&A excluding deferred comp. | $38,996 | $34,127 | $4,869 | 14.3% | | (Loss) gain on deferred comp. investments | $(216) | $3,210 | $(3,426) | 106.7% | - The increase in SG&A (excluding deferred compensation plan changes) was driven by increased payroll costs and increased travel and entertainment costs incurred during the search for new business[157](index=157&type=chunk) [Investment and Other Income, net](index=37&type=section&id=Investment%20and%20Other%20Income,%20net_3M) Reports the company's net investment and other income for the three months ended September 30, primarily influenced by market fluctuations Investment and Other Income, net (3 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------------- | :------------------ | :------------------ | :--------- | | Investment and other income, net | $462 | $4,279 | (89.2)% | - The decrease was primarily due to market fluctuations in the value of trading security investments representing the funding for the deferred compensation plan[159](index=159&type=chunk) [Interest Expense](index=38&type=section&id=Interest%20Expense_3M) Presents the company's interest expense for the three months ended September 30, reflecting costs associated with borrowings Consolidated Interest Expense (3 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------------- | :------------------ | :------------------ | :--------- | | Interest expense | $(329) | $(314) | 4.8% | [Income Taxes](index=38&type=section&id=Income%20Taxes_3M) Details the income tax provision and effective tax rate for the three months ended September 30, including the impact of discrete items Income Tax Provision (3 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | Effective Tax Rate 2021 | Effective Tax Rate 2020 | | :---------------- | :------------------ | :------------------ | :---------------------- | :---------------------- | | Income tax provision | $2,581 | $9,488 | 21.3% | 25.6% | - The income tax provision for the three months ended September 30, 2021, included a **$0.7 million** impact from discrete items such as option exercises, vested awards, and the SEC settlement[161](index=161&type=chunk) [Results of Operations - Nine Months Ended September 30, 2021 and 2020](index=38&type=section&id=Results%20of%20Operations%20-%20Nine%20Months%20Ended%20September%2030,%202021%20and%202020) Analyzes the company's financial performance for the nine months ended September 30, 2021, compared to the prior year, detailing revenue and expense drivers [Revenues](index=39&type=section&id=Revenues_9M) Analyzes the company's consolidated and segment revenues for the nine months ended September 30, highlighting key drivers of change Consolidated Revenues (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------------- | :------------------ | :------------------ | :--------- | | Revenues | $1,221,512 | $1,337,126 | (8.6)% | Segment Revenues (9 Months Ended Sep 30) | Segment | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------- | :------------------ | :------------------ | :--------- | | Housekeeping | $621,278 | $675,366 | (8.0)% | | Dietary | $600,234 | $661,760 | (9.3)% | - The decrease in revenues was primarily driven by decreases in recurring billings due to census-driven reductions in staffing and purchasing, a decrease in the number of facilities serviced, and modified pricing/payment terms with a customer, partially offset by **$5.2 million** in COVID-19 supplemental billings[167](index=167&type=chunk) [Costs of Services Provided](index=39&type=section&id=Costs%20of%20Services%20Provided_9M) Examines the costs incurred to provide services for the nine months ended September 30, including labor, supplies, and other related expenses Consolidated Costs of Services Provided (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------------- | :------------------ | :------------------ | :--------- | | Costs of services provided | $1,037,852 | $1,140,116 | (9.0)% | Key Indicators as % of Consolidated Revenue (9 Months Ended Sep 30) | Metric | 2021 | 2020 | Change | | :---------------- | :----- | :----- | :----- | | Bad debt provision | 0.9% | 0.5% | 0.4% | | Self-insurance costs | 2.8% | 2.7% | 0.1% | Segment Costs as % of Segment Revenue (9 Months Ended Sep 30) | Segment | 2021 | 2020 | Change | | :-------------------------------- | :----- | :----- | :----- | | Housekeeping labor and other labor-related costs | 80.1% | 80.2% | (0.1)% | | Housekeeping supplies | 6.4% | 7.0% | (0.6)% | | Dietary labor and other labor-related costs | 63.8% | 63.5% | 0.3% | | Dietary supplies | 26.8% | 26.5% | 0.3% | - The increase in dietary supplies spend as a percentage of dining revenues was driven by continued inflation and the mix of business where the company provides all dining department supplies[171](index=171&type=chunk) [Selling, General and Administrative Expense](index=40&type=section&id=Selling,%20General%20and%20Administrative%20Expense_9M) Details the selling, general, and administrative expenses for the nine months ended September 30, explaining changes and key components Consolidated SG&A Expense (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------------- | :------------------ | :------------------ | :--------- | | SG&A expense | $128,818 | $108,819 | 18.4% | SG&A excluding deferred compensation plan changes (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | $ Change | % Change | | :-------------------------------- | :------------------ | :------------------ | :--------- | :--------- | | SG&A excluding deferred comp. | $124,827 | $104,846 | $19,981 | 19.1% | | (Loss) gain on deferred comp. investments | $3,991 | $3,973 | $18 | (0.5)% | - The increase in SG&A (excluding deferred compensation plan changes) was primarily a result of increased payroll costs, increased travel and entertainment costs for new business, and increased legal and professional fees, including **$6.0 million** related to the SEC settlement and **$3.0 million** related to California labor matters[173](index=173&type=chunk) [Investment and Interest Income, net](index=40&type=section&id=Investment%20and%20Interest%20Income,%20net_9M) Reports the company's net investment and other income for the nine months ended September 30, primarily influenced by market fluctuations Investment and Other Income, net (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------------- | :------------------ | :------------------ | :--------- | | Investment and other income, net | $6,311 | $7,197 | (12.3)% | - The decrease was primarily due to market fluctuations in the value of trading security investments representing the funding for the deferred compensation plan[175](index=175&type=chunk) [Interest Expense](index=40&type=section&id=Interest%20Expense_9M) Presents the company's interest expense for the nine months ended September 30, reflecting costs associated with borrowings Consolidated Interest Expense (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | % Change | | :---------------- | :------------------ | :------------------ | :--------- | | Interest expense | $(1,017) | $(1,062) | (4.2)% | - The decrease in interest expense was due to less interquarter borrowings[176](index=176&type=chunk) [Income Taxes](index=41&type=section&id=Income%20Taxes_9M) Details the income tax provision and effective tax rate for the nine months ended September 30, including the impact of discrete items Income Tax Provision (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | Effective Tax Rate 2021 | Effective Tax Rate 2020 | | :---------------- | :------------------ | :------------------ | :---------------------- | :---------------------- | | Income tax provision | $16,378 | $23,391 | 27.2% | 24.8% | - The income tax provision for the nine months ended September 30, 2021, included an approximate **$2.2 million** impact from discrete items such as option exercises, vested awards, and the SEC settlement[177](index=177&type=chunk) [Liquidity and Capital Resources](index=41&type=section&id=Liquidity%20and%20Capital%20Resources) Discusses the company's ability to generate and manage cash, including operating, investing, and financing activities, and its capital structure [Operating Activities](index=41&type=section&id=Operating%20Activities) Details the net cash provided by or used in operating activities, highlighting key factors influencing cash flow from core business operations Net Cash Provided by Operating Activities (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Net cash provided by operating activities | $5,731 | $141,549 | $(135,818) | - The substantial decrease in operating cash flow was primarily due to a **$32.3 million** increase in 2020 related to the deferral of payroll taxes under the CARES Act, along with the timing of cash receipts and payments, and decreased net income[181](index=181&type=chunk) [Investing Activities](index=41&type=section&id=Investing%20Activities) Summarizes the net cash provided by or used in investing activities, including purchases of securities, capital expenditures, and acquisitions Net Cash Used in Investing Activities (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Net cash used in investing activities | $(14,316) | $(4,862) | $(9,454) | - Key uses of cash included purchases of marketable securities and capital expenditures, with the Company acquiring a business on April 26, 2021, for **$16.5 million**, including **$6.0 million** in cash and **$10.5 million** in accrued variable consideration[182](index=182&type=chunk) [Financing Activities](index=42&type=section&id=Financing%20Activities) Outlines the net cash provided by or used in financing activities, such as dividends paid and share repurchases Net Cash Used in Financing Activities (9 Months Ended Sep 30) | Metric | 2021 (in thousands) | 2020 (in thousands) | Change (in thousands) | | :-------------------------------- | :------------------ | :------------------ | :-------------------- | | Net cash used in financing activities | $(51,163) | $(54,096) | $2,933 | - Primary uses of cash included **$46.7 million** in regular quarterly cash dividends paid and **$5.4 million** for the repurchase of **0.2 million shares** of common stock under a 10b5-1 plan[184](index=184&type=chunk)[185](index=185&type=chunk) [Line of Credit](index=42&type=section&id=Line%20of%20Credit) Provides information on the company's available bank line of credit, outstanding borrowings, and compliance with financial covenants - The Company has a **$475 million** bank line of credit, with no outstanding borrowings as of September 30, 2021, and was in compliance with all financial covenants[186](index=186&type=chunk)[187](index=187&type=chunk)[188](index=188&type=chunk) Covenant Compliance (as of Sep 30, 2021) | Covenant | Requirement | Actual | | :-------------------------- | :------------------ | :----- | | Funded debt to EBITDA ratio | less than 3.50 to 1.00 | 0.26 | | EBITDA to Interest Expense ratio | not less than 3.00 to 1.00 | 85.51 | - The Company is monitoring the discontinuation of LIBOR after 2021 and working with lenders to ensure a minimal impact on its financial condition[189](index=189&type=chunk) [Capital Expenditures](index=43&type=section&id=Capital%20Expenditures) Reports on the company's capital spending and future capital expenditure estimates, along with its liquidity outlook - Estimated capital expenditures for 2021 are **$5.0 million to $7.0 million**, with **$4.2 million** incurred through September 30, 2021[191](index=191&type=chunk) - The Company believes its cash from operations, existing cash and cash equivalents, and credit line will be adequate to satisfy future operational needs and anticipated growth[191](index=191&type=chunk) [Material Off-Balance Sheet Arrangements](index=43&type=section&id=Material%20Off-Balance%20Sheet%20Arrangements) Discloses any significant off-balance sheet arrangements, such as guarantees or commitments, that could impact the company's financial position - The Company has no material off-balance sheet arrangements, other than its irrevocable standby letter of credit[192](index=192&type=chunk) [Critical Accounting Policies and Estimates](index=43&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Highlights the company's most significant accounting policies and estimates that require subjective judgment and could materially affect financial results - Significant accounting policies and critical estimates are described in the Company's Annual Report on Form 10-K for the period ended December 31, 2020[193](index=193&type=chunk) - These estimates involve subjectivity and judgment for highly uncertain matters, with potential material impact on financial condition and operating performance if actual results differ[194](index=194&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=43&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's exposure to market risks, primarily interest rate risk, related to its cash, cash equivalents, and marketable securities, noting that investments are managed according to credit quality standards, but changes in interest rates could affect investment income and fair value - As of September 30, 2021, the Company had **$205.2 million** in cash, cash equivalents, and marketable securities[196](index=196&type=chunk) - The fair value of cash equivalents and marketable securities is determined based on 'Level 1' or 'Level 2' inputs[196](index=196&type=chunk) - Investments in both fixed-rate and floating-rate instruments carry interest rate risk, which could adversely impact future investment income or the fair value of investments if interest rates change[197](index=197&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) This section confirms the effectiveness of the company's disclosure controls and procedures as of September 30, 2021, and states that no material changes occurred in internal controls over financial reporting during the nine-month period, also mentioning the inclusion of officer certifications [Evaluation of Disclosure Controls and Procedures](index=43&type=section&id=Evaluation%20of%20Disclosure%20Controls%20and%20Procedures) Assesses the effectiveness of the company's disclosure controls and procedures in ensuring timely and accurate financial reporting - Management, including the Principal Executive Officer and Principal Financial Officer, concluded that the Company's disclosure controls and procedures were effective as of September 30, 2021[199](index=199&type=chunk) [Changes in Internal Controls over Financial Reporting](index=45&type=section&id=Changes%20in%20Internal%20Controls%20over%20Financial%20Reporting) Reports on any material changes in the company's internal controls over financial reporting during the reporting period - There were no material changes in the Company's internal controls over financial reporting during the nine months ended September 30, 2021[200](index=200&type=chunk) [Certifications](index=45&type=section&id=Certifications) Confirms the inclusion of officer certifications regarding the accuracy and completeness of the financial statements - Certifications of the Principal Executive Officer and Principal Financial and Accounting Officer regarding disclosure controls and procedures are included as exhibits to this Form 10-Q[201](index=201&type=chunk) PART II — OTHER INFORMATION This section covers legal proceedings, risk factors, equity security sales, and other disclosures not included in the financial statements [Item 1. Legal Proceedings](index=46&type=section&id=Item%201.%20Legal%20Proceedings) This section details the company's involvement in various legal proceedings, including the settlement of an SEC investigation with a **$6.0 million** civil penalty and a **$16.8 million** shareholder class action settlement funded by insurance carriers, with the company continuing to defend against active litigation - The Company paid a **$6.0 million** civil monetary penalty during the third quarter of 2021 to settle an SEC investigation into its EPS calculation practices[203](index=203&type=chunk) - A **$16.8 million** shareholder class action settlement was preliminarily approved on September 15, 2021, and subsequently paid by the Company's directors' and officers' liability insurance carriers on October 15, 2021[205](index=205&type=chunk) - The Company continues to vigorously defend against all active litigation claims, acknowledging potential substantial costs and adverse effects on business or reputation[206](index=206&type=chunk) [Item 1A. Risk Factors](index=46&type=section&id=Item%201A.%20Risk%20Factors) This section states that there have been no material changes to the risk factors previously disclosed in the company's Annual Report on Form 10-K for the year ended December 31, 2020 - There have been no other material changes in the risk factors set forth in Part I, Item 1A, 'Risk Factors' in the Company's Annual Report on Form 10-K for the year ended December 31, 2020[208](index=208&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section details the company's share repurchase activities under a 10b5-1 plan, reporting the number of shares repurchased and the aggregate cost for the nine months ended September 30, 2021 - The Company entered into a 10b5-1 plan on March 12, 2021, to assist in implementing its share repurchase plans[210](index=210&type=chunk) Share Repurchase Activity (9 Months Ended Sep 30, 2021) | Period | Shares Repurchased | Average Price Paid per Share | Aggregate Purchase Price (in thousands) | Remaining Shares Authorized | | :------------- | :----------------- | :--------------------------- | :-------------------------------------- | :-------------------------- | | Year-to-date | 193,250 | $28.93 | $5,397 | 1,452,000 | [Item 3. Defaults Upon Senior Securities](index=47&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - This item is not applicable[212](index=212&type=chunk) [Item 4. Mine Safety Disclosures](index=47&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company for the reporting period - This item is not applicable[213](index=213&type=chunk) [Item 5. Other Information](index=47&type=section&id=Item%205.%20Other%20Information) This section reports the adoption of Amendment No. 4 to the Employee Stock Purchase Plan (ESPP), extending its duration for an additional five years through 2026 - On July 20, 2021, Amendment No. 4 to the Healthcare Services Group, Inc. Employee Stock Purchase Plan (ESPP) was adopted, extending the ESPP for an additional five years through 2026[214](index=214&type=chunk) [Item 6. Exhibits](index=47&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed as part of the Form 10-Q, including the ESPP amendment, officer certifications, and financial information in iXBRL format - Exhibits filed include Amendment No. 4 to the Employee Stock Purchase Plan, Section 302 and 906 certifications of Principal Executive and Financial Officers, and iXBRL formatted financial information[215](index=215&type=chunk) SIGNATURES This section contains the official certifications and signatures of the company's executive officers, affirming the accuracy and completeness of the report [Signatures](index=48&type=section&id=Signatures) This section contains the official signatures of the company's President & Chief Executive Officer and Principal Accounting Officer, certifying the report's submission - The report was signed on October 22, 2021, by Theodore Wahl, President & Chief Executive Officer, and Andrew M. Brophy, Principal Accounting Officer[219](index=219&type=chunk)

Healthcare Services Group, Inc. (NASDAQ:HCSG) Q2 2021 Results Conference Call July 21, 2021 8:30 AM ET Company Participants Ted Wahl - President and CEO Matt McKee - Head of Corporate Communications Conference Call Participants Nat Putnam - Credit Suisse Thomas Keller - RBC Capital Markets Andrew Wittmann - Baird Nick Spiekhout - William Blair Jack Slevin - Jefferies Mitra Ramgopal - Sidoti Tao Qiu - Stifel Operator The matters discussed on today's conference call include forward-looking statements about th ...

Revenue Performance - Consolidated revenues decreased by 9.2% to $407.8 million for the three months ended March 31, 2021, compared to $449.2 million for the same period in 2020[149]. - Housekeeping revenues decreased by 4.1% to $215.1 million, while Dietary revenues decreased by 14.3% to $192.7 million for the three months ended March 31, 2021[150]. - COVID-19 supplemental billings contributed $3.9 million to revenues for the quarter ended March 31, 2021, primarily related to employee pay premiums[134]. Cost Management - Consolidated costs of services provided decreased by 13.1% to $336.6 million for the three months ended March 31, 2021, compared to $387.2 million for the same period in 2020[151]. - The costs of services provided for Housekeeping decreased to 86.9% of Housekeeping revenues, down from 89.3% in the corresponding period in 2020[153]. - Dietary labor and other labor-related costs were 63.4% of Dietary revenues for the three months ended March 31, 2021, a slight decrease from 63.6% in the same period in 2020[154]. Expenses - Selling, general and administrative expenses increased by $2.9 million or 8.1% for the three months ended March 31, 2021, primarily due to increased payroll costs and higher legal fees[156]. - Selling, general and administrative expenses increased by 33.2% to $39.987 million for the three months ended March 31, 2021, compared to $30.017 million in the same period of 2020[157]. Financial Position - Cash, cash equivalents, and marketable securities totaled $249.4 million at March 31, 2021, down from $264.3 million at December 31, 2020[162]. - The company has a $475 million bank line of credit with no borrowings as of March 31, 2021, and is in compliance with its financial covenants[171][172]. - The company remains authorized to repurchase 1.7 million shares of common stock, having purchased 9,000 shares for a total cost of $259,000 after March 31, 2021[170]. Income and Taxation - Investment and other income rose by 144.9% to $2.2 million for the three months ended March 31, 2021, primarily due to market fluctuations in trading security investments[158]. - Consolidated interest expense decreased by 2.7% to $0.4 million for the three months ended March 31, 2021, due to fewer interquarter borrowings[159]. - The provision for income taxes was $8.3 million with a 25.2% effective tax rate for the three months ended March 31, 2021, compared to $6.6 million and a 24.6% effective tax rate in the same period of 2020[160]. Cash Flow - Net cash provided by operating activities was $3.502 million for the three months ended March 31, 2021, compared to $12.688 million in the same period of 2020[163]. - The company expects to continue paying regular quarterly cash dividends, having paid $15.5 million in dividends during the first quarter of 2021[168]. Litigation and Risks - The Company is actively defending against all ongoing litigation claims, which may result in substantial costs and affect business conditions[192]. - Uncertainties from pending lawsuits could lead to increased volatility and a potential reduction in the Company's stock price[192]. - The ultimate outcome of litigation matters could materially impact the Company's results of operations depending on the size of the loss or liability and the level of operating income[193]. Capital Expenditures - Capital expenditures for 2021 are estimated to be between $4.0 million and $6.0 million, with $0.9 million spent through March 31, 2021[176]. Liquidity - The company maintained operating cash flows to meet short-term liquidity needs and did not observe material impairments of assets due to the COVID-19 pandemic[136].

Financial Data and Key Metrics Changes - Revenue for Q1 2021 was reported at $407.8 million, with net income at $24.7 million and earnings per share at $0.33 [15][16] - Direct cost of services was $336.6 million, representing 82.6% of revenue, which is below the historical target of 86% [16] - SG&A expenses were reported at $40 million, or 9.8%, but adjusted for deferred compensation, actual SG&A was $38.7 million, or 9.5% [16][17] - Cash flow from operations for the quarter was $3.5 million, including a $30.7 million decrease in accrued payroll [19] Business Line Data and Key Metrics Changes - Housekeeping & laundry segment revenues were $215 million, while dining & nutrition segment revenues were $192.8 million [15] - Margins for housekeeping & laundry and dining & nutrition segments were reported at 13.1% and 10.4%, respectively [16] Market Data and Key Metrics Changes - The vaccine rollout has led to a significant drop in new COVID cases among patients and residents, decreasing over 90% from Q4 to Q1 [9][10] - Stabilization in occupancy levels has been observed, which is seen as a positive indicator for recovery [10][31] Company Strategy and Development Direction - The company anticipates a gradual recovery over the next 12 to 18 months, with ongoing federal and state support being crucial [10][11] - The focus remains on managing costs efficiently while preparing for potential growth opportunities in the latter half of the year [12][28] - The company is exploring new business opportunities, particularly in cross-selling dining services to existing clients [67][68] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about recovery, citing the vaccine's impact and the stabilization of occupancy as key factors [10][31] - The company is closely monitoring federal and state funding actions that could affect financial stability [94] - There is confidence in retaining a high percentage of business during customer transitions, with a historical retention rate of over 90% [82] Other Important Information - The company announced an increase in the dividend to $0.2075 per share, marking the 72nd consecutive cash dividend payment [21][22] - The ongoing SEC investigation remains a concern, but discussions for resolution are in progress [13][6] Q&A Session Summary Question: What are the drivers behind the margin improvement? - Management highlighted efficient cost management and the expectation of maintaining some margin improvements despite potential inefficiencies as growth resumes [26][28] Question: What needs to happen for revenue growth to resume in the second half of the year? - Management indicated that stabilization in census levels and ongoing vaccination efforts are critical for recovery [31][32] Question: How is the relationship with Genesis, the largest customer, affecting growth outlook? - The partnership remains strong, and management expects to retain business even as Genesis divests facilities [39][42] Question: What is the outlook on bad debt expense given the repayment of advance Medicare payments? - Management expressed confidence in the collection process and indicated that they are monitoring the situation closely [44][95] Question: What is the company's approach to new business opportunities amid industry deconsolidation? - Management emphasized a bottoms-up approach to business development, focusing on local relationships and operational execution [87]

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K (Mark One) ☑ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2020 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 ...

Healthcare Services Group, Inc. (NASDAQ:HCSG) Q4 2020 Earnings Conference Call February 10, 2021 8:30 AM ET Company Participants Ted Wahl - President and Chief Executive Officer Matt McKee - Chief Communications Officer Conference Call Participants A.J. Rice - Credit Suisse Sean Dodge - RBC Capital Markets Nick Spiekhout - William Blair Bill Sutherland - The Benchmark Company Brian Tanquilut - Jefferies Mitra Ramgopal - Sidoti & Company Operator The matters discussed on today's conference call include forwa ...

Healthcare Services Group, Inc. (NASDAQ:HCSG) Q3 2020 Earnings Conference Call October 21, 2020 8:30 AM ET Company Participants Ted Wahl - President and Chief Executive Officer Matt McKee - Chief Communications Officer Conference Call Participants Andrew Wittmann - Baird A.J. Rice - Credit Suisse Sean Dodge - RBC Capital Markets Nick Spiekhout - RBC Brian Tanquilut - Jefferies James Terwilliger - Northland Capital Mitra Ramgopal - Sidoti Operator Ladies and gentlemen, thank you for standing by and welcome t ...