Healthcare Services Group(US:HCSG)2020-07-22 16:57Financial Data and Key Metrics Changes - Revenue for Q2 2020 was $452 million, including $17.2 million of COVID-19 related supplemental billings, which were offset by temporary decreases in recurring billings due to census-driven cost reductions [16][18] - Net income for the quarter was $24.3 million, with earnings per share at $0.31 [18] - Direct cost of services was $387.5 million, representing 85.7% of revenue, with a near-term goal to manage direct costs at or below 86% [18][19] - Cash flow from operations was $79.7 million, with a current ratio better than 3:1 and cash and marketable securities exceeding $170 million [21][24] Business Line Data and Key Metrics Changes - Housekeeping and laundry segment revenue was $227.6 million, while dining and nutrition segment revenue was $224.4 million [16] - Margins for housekeeping and laundry and dining and nutrition segments were 11.1% and 8.3% respectively [19] Market Data and Key Metrics Changes - The company entered Q3 with a recurring billing run rate of approximately $430 million, expecting temporary reductions in costs and recurring billings to remain until census recovers [17] - Days Sales Outstanding (DSO) for the quarter was 60 days, down 2 days from the previous quarter [23] Company Strategy and Development Direction - The company remains committed to supporting customers in patient care while ensuring employee safety, focusing on operational impacts of COVID-19 [11][12] - Future growth is viewed cautiously, with a focus on innovation and flexibility in response to client needs [14] - The company aims to leverage existing growth opportunities while maintaining a robust pipeline for future business [76] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the return of favorable operating trends post-pandemic, citing demographic tailwinds and needs-based nature of the industry [13] - There is a belief that government support will continue until recovery is achieved, with a focus on targeted stimulus for the most impacted providers [52][54] Other Important Information - The Board of Directors approved an increase in the dividend to $0.20375 per share, marking the 68th consecutive quarterly increase [24][25] - The company has seen a significant increase in cash collection frequency, with over 60% of customers paying more frequently than monthly [33] Q&A Session Summary Question: Demand for new outsourcing and facilities - Management indicated a cautious view on growth due to uncertainty in the current environment, with stronger demand than ever but timing considerations for onboarding new facilities [30][32] Question: Cash collections and future expectations - Management highlighted strong cash flow driven by increased payment frequency from customers, with expectations for Q3 and Q4 cash collections to be impacted by payroll accruals [34][35] Question: Revenue trends and supplemental billings - Supplemental billings related to COVID-19 have no margin, and lower occupancy has driven a need for less labor, impacting revenues [40][42] Question: Government support and future funding - Management believes more government support is needed, with significant opportunities for clarity around testing and potential COVID-related immunity [52][53] Question: Long-term behavior changes in healthcare preferences - Management expressed reluctance to forecast long-term changes but noted that the need for 24/7 care in long-term facilities remains a significant factor [62][63] Question: Recruitment and turnover in the current environment - Management reported continued applications for positions, indicating a commitment to the industry despite challenges posed by the pandemic [80][82] Question: Visibility into census-driven adjustments - Management noted that most adjustments were outside the contract and made in collaboration with customers, with no indications of troubled waters ahead [88][90]