[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=6&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for Q1 2019, highlighting a revenue decrease but a significant net income increase [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$722.9 million** by March 31, 2019, driven by receivables and property & equipment, while stockholders' equity remained stable at **$442.5 million** Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2019 | December 31, 2018 | | :--- | :--- | :--- | | **Total current assets** | $525,006 | $508,136 | | **Total assets** | $722,924 | $692,603 | | **Total current liabilities** | $175,482 | $163,391 | | **Total liabilities** | $280,375 | $251,823 | | **Total stockholders' equity** | $442,549 | $440,780 | [Consolidated Statements of Comprehensive Income](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Q1 2019 revenues decreased by **4.9%** to **$476.1 million**, but net income significantly increased to **$9.2 million** due to reduced bad debt provision Q1 2019 vs Q1 2018 Performance (in thousands, except per share data) | Metric | Three Months Ended Mar 31, 2019 | Three Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | **Revenues** | $476,111 | $500,562 | | **Costs of services provided** | $427,265 | $469,252 | | **Income (loss) before income taxes** | $11,892 | $(1,395) | | **Net income** | $9,156 | $72 | | **Diluted earnings per common share** | $0.12 | $0.00 | [Consolidated Statements of Cash Flows](index=9&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash from operations decreased to **$17.6 million** in Q1 2019, with **$2.0 million** used in investing and **$13.2 million** in financing activities Cash Flow Summary (in thousands) | Activity | Three Months Ended Mar 31, 2019 | Three Months Ended Mar 31, 2018 | | :--- | :--- | :--- | | **Net cash provided by operating activities** | $17,577 | $23,931 | | **Net cash used in investing activities** | $(2,010) | $(4,202) | | **Net cash used in financing activities** | $(13,230) | $(18,797) | | **Net change in cash and cash equivalents** | $2,337 | $932 | [Notes to Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail accounting policies, segment reporting, new accounting standard adoptions, a **$18.5 million** bad debt provision, and ongoing SEC investigation and related lawsuit - The company operates through two reportable segments: Housekeeping (cleaning, laundry, linen services) and Dietary (food purchasing, meal preparation, dietitian services)[28](index=28&type=chunk)[29](index=29&type=chunk)[30](index=30&type=chunk) - The company adopted the new lease accounting standard (ASC 842) on January 1, 2019, resulting in the recognition of right-of-use assets of **$18.1 million** and corresponding lease liabilities[42](index=42&type=chunk)[72](index=72&type=chunk)[75](index=75&type=chunk) - A bad debt provision of **$18.5 million** was recorded in Q1 2019, primarily due to the restructuring of a Northeast-based operator, compared to **$37.1 million** in Q1 2018[66](index=66&type=chunk) - The company is under an ongoing SEC investigation regarding its earnings per share (EPS) calculation practices, with a related shareholder class action lawsuit filed in March 2019, and cannot currently estimate potential losses[123](index=123&type=chunk)[124](index=124&type=chunk)[125](index=125&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the **4.9%** Q1 2019 revenue decrease due to contract adjustments, increased SG&A from legal fees, and strong liquidity with **$106.9 million** in cash Q1 2019 vs Q1 2018 Segment Revenue (in thousands) | Segment | Q1 2019 | Q1 2018 | % Change | | :--- | :--- | :--- | :--- | | Housekeeping | $233,134 | $245,161 | (4.9)% | | Dietary | $242,977 | $255,401 | (4.9)% | | **Consolidated** | **$476,111** | **$500,562** | **(4.9)%** | - The decrease in Dietary revenue and costs was primarily due to a modified contract with Genesis Healthcare®, effective December 1, 2018, where Genesis assumed direct payment responsibility for food purchases[143](index=143&type=chunk)[148](index=148&type=chunk) - Selling, general and administrative (SG&A) expense increased by **$4.1 million** (**12.3%**), excluding deferred compensation changes, primarily due to increased legal and professional fees related to the SEC inquiry[150](index=150&type=chunk)[151](index=151&type=chunk) - The company maintains a **$475 million** bank line of credit, with **$30.0 million** drawn as of March 31, 2019, and was in compliance with all financial covenants[165](index=165&type=chunk)[166](index=166&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) The company's primary market risk is interest rate risk on its **$106.9 million** portfolio of cash and marketable securities, managed through diversification and high credit quality investments - As of March 31, 2019, the company had **$106.9 million** in cash, cash equivalents, and marketable securities[180](index=180&type=chunk) - The main market risk is interest rate risk, where fixed-rate securities are impacted by rising rates and floating-rate securities by falling rates[181](index=181&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls were effective as of March 31, 2019, following the implementation of a new ERP system and related internal control modifications - Management concluded that disclosure controls and procedures were effective as of the end of the period[183](index=183&type=chunk) - During Q1 2019, the company implemented a new ERP system, resulting in modifications to existing internal controls and the implementation of new ones[184](index=184&type=chunk) [PART II - OTHER INFORMATION](index=45&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=45&type=section&id=Item%201.%20Legal%20Proceedings) This section details the ongoing SEC investigation into EPS calculation practices and a related shareholder lawsuit, with uncertain outcomes and financial impacts - The SEC is conducting an investigation into the company's EPS calculation practices, which began with an inquiry in November 2017[189](index=189&type=chunk) - A shareholder class action lawsuit was filed on March 22, 2019, against the company and its CEO, alleging federal securities law violations related to the EPS calculation matters[190](index=190&type=chunk) - Due to the early stage of the litigation, the company is unable to reasonably estimate possible losses or judge whether an unfavorable outcome is probable or remote[191](index=191&type=chunk) [Item 1A. Risk Factors](index=45&type=section&id=Item%201A.%20Risk%20Factors) The company highlights risks from the SEC investigation and related litigation, including potential sanctions, legal costs, management distraction, and reputational harm - The SEC investigation into EPS calculation practices could lead to potential sanctions, penalties, and significant costs, distracting management and adversely affecting financial results[193](index=193&type=chunk)[194](index=194&type=chunk) - The related shareholder lawsuit poses risks of significant expenses, diversion of management resources, and potential damages that could harm the business and financial condition[195](index=195&type=chunk) - There have been no other material changes in risk factors from those disclosed in the Annual Report on Form 10-K for the year ended December 31, 2018[196](index=196&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=46&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This item is not applicable for the current reporting period - Not applicable[197](index=197&type=chunk) [Item 3. Defaults Upon Senior Securities](index=46&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable for the current reporting period - Not applicable[198](index=198&type=chunk) [Item 4. Mine Safety Disclosures](index=46&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable for the current reporting period - Not applicable[199](index=199&type=chunk) [Item 5. Other Information](index=46&type=section&id=Item%205.%20Other%20Information) This item is not applicable for the current reporting period - Not applicable[200](index=200&type=chunk) [Item 6. Exhibits](index=46&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including SOX certifications from key officers and financial data in iXBRL format - The report includes certifications from the Principal Executive Officer and Principal Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[201](index=201&type=chunk) - Financial information from the Form 10-Q is also provided in iXBRL (Inline eXtensible Business Reporting Language) format as an exhibit[201](index=201&type=chunk) [Signatures](index=47&type=section&id=Signatures)

Healthcare Services Group, Inc. (NASDAQ:HCSG) Q1 2019 Earnings Conference Call May 1, 2019 8:30 AM ET Company Participants Ted Wahl - President & Chief Executive Officer Matt McKee - Vice President, Strategy Conference Call Participants Caleb Harris - Credit Suisse Andrew Wittmann - Robert W. Baird Jacob Johnson - Stephens Nick Spiekhout - William Blair Chad Banneker – Stifel Sean Dodge - Jefferies Mitra Ramgopal – Sidoti Operator Good day, ladies and gentlemen and welcome to the Healthcare Services Group, ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-K þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2018 ¨ 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 other jurisdiction of ...