Healthcare Services Group, Inc. (NASDAQ:HCSG) (the “Company”)
reported for the three months ended September 30, 2020 revenue of
$435.9 million, net income of $27.6 million, or $0.37 per basic and
diluted common share, and cash flow from operations of $49.2
million. Additionally, the Company’s Board of Directors declared a
quarterly cash dividend of $0.205 per common share, the 69th
consecutive increase since the initiation of dividend payments in
2003.
Ted Wahl, Chief Executive Officer, stated, “During the quarter,
our customers and their caregivers continued to meet the challenges
of the pandemic with innovation, resolve and compassion. Our HCSG
heroes have been right there with them on the frontlines since the
beginning, tirelessly supporting our customers and helping to
ensure the well-being of America’s most vulnerable. The health and
safety of our employees and the communities we serve will remain
our highest priority.”
Mr. Wahl continued, “Our strong financial results underscore our
ability to thrive in even the most challenging environments. We
were particularly pleased with our service execution during the
quarter, as our relentless focus on customer satisfaction, systems
adherence and regulatory compliance delivered extraordinary
operational outcomes.”
Third Quarter Results
Revenue for the quarter was $435.9 million, with housekeeping
& laundry and dining & nutrition segment revenues of $223.4
million and $212.5 million, respectively. Revenue included $9.1
million of COVID-19 supplemental billings, primarily related to
employee pay premiums passed through to customers.
Direct cost of services was reported at $365.4 million, or
83.8%. Overall, the Company’s near-term goal remains to manage
direct cost at or below 86.0%.
Housekeeping & laundry and dining & nutrition segment
margins were 11.1% and 9.2%, respectively.
Selling, general and administrative (“SG&A”) was reported at
$37.3 million, or 8.6%; after adjusting for the $3.2 million
increase in deferred compensation, actual SG&A was $34.1
million, or 7.8%. The Company continues to target SG&A of
7.5%.
The Company reported an effective tax rate of 25.6% and expects
a 2020 tax rate of 24% to 26%.
Cash flow from operations for the quarter was $49.2 million.
This includes an $18.7 million decrease in accrued payroll offset
by a $17.0 million increase in deferred payroll taxes under the
CARES Act.
Mr. Wahl continued, “While the pandemic continues to create
uncertainty around near-term occupancy and costs trends, the
industry is much better prepared with enhanced operating protocols.
Additionally, we continue to be encouraged by the government’s
ongoing financial support of the industry, which we view as a
necessary bridge from the short-term challenges to a more stable
operating environment and, ultimately, a vaccine.”
Mr. Wahl concluded, “As the industry continues to adjust to the
new normal, we maintain our sharp focus on delivering strong
operational and financial results in Q4. While the current
environment necessitates a cautious view on growth, longer term,
our growth outlook remains positive as our value proposition is
more compelling than ever before. Above all, we remain committed to
making decisions that best position us to deliver shareholder
value.”
Dividend
The Company’s Board of Directors declared a quarterly cash
dividend of $0.205 per common share, payable on December 24, 2020
to shareholders of record at the close of business on November 20,
2020. This represents the 70th consecutive quarterly cash dividend
payment, as well as the 69th consecutive increase since the
initiation of quarterly cash dividend payments in 2003.
Conference Call and Upcoming
Events
The Company will host a conference call on Wednesday, October
21, 2020, at 8:30 a.m. Eastern Time to discuss its results for the
three months ended September 30, 2020. The call may be accessed via
phone at 877-395-7164. The call will be simultaneously webcast
under the “Events & Presentations” section of the Investor
Relations page on the Company’s website, www.hcsg.com. A replay of
the webcast will also be available on our website for one year
following the date of the earnings call.
CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING
STATEMENTS
This release and any schedules incorporated by reference into it
may contain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended, which are
not historical facts but rather are based on current expectations,
estimates and projections about our business and industry, and our
beliefs and assumptions. Words such as “believes,” “anticipates,”
“plans,” “expects,” “will,” “goal,” and similar expressions are
intended to identify forward-looking statements. The inclusion of
forward-looking statements should not be regarded as a
representation by us that any of our plans will be achieved. We
undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information,
future events or otherwise. Such forward-looking information is
also subject to various risks and uncertainties. Such risks and
uncertainties include, but are not limited to, risks arising from
our providing services exclusively to the healthcare industry,
primarily providers of long-term care; the impact of and future
effects of the COVID-19 pandemic or other potential pandemics
having a significant portion of our consolidated revenues
contributed by one customer during the nine months ended September
30, 2020; credit and collection risks associated with the
healthcare industry; our claims experience related to workers’
compensation and general liability insurance (including any
litigation claims, enforcement actions, regulatory actions and
investigations arising from personal injury and loss of life
related to COVID-19); the effects of changes in, or interpretations
of laws and regulations governing the healthcare industry, our
workforce and services provided, including state and local
regulations pertaining to the taxability of our services and other
labor-related matters such as minimum wage increases; the Company's
expectations with respect to selling, general, and administrative
expense; continued realization of tax benefits arising from our
corporate reorganization and self-funded health insurance program;
the impact of the Securities and Exchange Commission investigation
and related class action lawsuit; risks associated with the
reorganization of our corporate structure; and the risk factors
described in Part I of our Form 10-K for the fiscal year ended
December 31, 2019 under “Government Regulation of Clients,”
“Service Agreements and Collections,” and “Competition” and under
Item 1A. “Risk Factors” in such Form 10-K, and in Item 1A. "Risk
Factors" of our Form 10-Q for the quarters ended March 31, 2020 and
June 30, 2020.
These factors, in addition to delays in payments from customers
and/or customers in bankruptcy, have resulted in, and could
continue to result in, significant additional bad debts in the near
future. Additionally, our operating results would be adversely
affected if unexpected increases in the costs of labor and
labor-related costs, materials, supplies and equipment used in
performing services (including the impact of potential tariffs and
COVID-19) could not be passed on to our customers.
In addition, we believe that to improve our financial
performance we must continue to obtain service agreements with new
customers, retain and provide new services to existing customers,
achieve modest price increases on current service agreements with
existing customers and/or maintain internal cost reduction
strategies at our various operational levels. Furthermore, we
believe that our ability to sustain the internal development of
managerial personnel is an important factor impacting future
operating results and the successful execution of our projected
growth strategies.
Healthcare Services Group, Inc. is the largest national provider
of professional housekeeping, laundry and dietary services to
long-term care and related health care facilities.
HEALTHCARE SERVICES GROUP,
INC.
CONSOLIDATED STATEMENTS OF
INCOME
(Unaudited)
(in thousands, except per
share data)
For the Three Months
Ended
For the Nine Months
Ended
September 30,
September 30,
2020
2019
2020
2019
Revenues
$
435,947
$
455,606
$
1,337,126
$
1,393,818
Operating costs and expenses:
Cost of services provided
365,443
398,404
1,140,116
1,226,154
Selling, general and administrative
37,337
33,479
108,819
113,189
Income from operations
33,167
23,723
88,191
54,475
Other income, net:
Investment and other income, net
3,965
(7
)
6,135
4,750
Income before income taxes
37,132
23,716
94,326
59,225
Income tax expense
9,488
5,372
23,391
13,539
Net income
$
27,644
$
18,344
$
70,935
$
45,686
Basic earnings per common share
$
0.37
$
0.25
$
0.95
$
0.61
Diluted earnings per common share
$
0.37
$
0.25
$
0.95
$
0.61
Cash dividends declared per common
share
$
0.20500
$
0.20000
$
0.61125
$
0.59625
Basic weighted average number of common
shares outstanding
74,700
74,387
74,684
74,347
Diluted weighted average number of common
shares outstanding
74,777
74,507
74,768
74,615
HEALTHCARE SERVICES GROUP,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands)
September 30, 2020
December 31, 2019
Cash and cash equivalents
$
109,920
$
27,329
Marketable securities, at fair value
94,042
90,711
Accounts and notes receivable, net
277,031
340,930
Other current assets
56,526
56,762
Total current assets
537,519
515,732
Property and equipment, net
27,807
28,820
Notes receivable - long-term
39,458
46,992
Goodwill
51,084
51,084
Other intangible assets, net
19,229
22,353
Deferred compensation funding
40,969
37,247
Other assets
38,265
20,364
Total Assets
$
754,331
$
722,592
Accrued insurance claims - current
$
25,776
$
23,256
Other current liabilities
108,520
125,395
Total current liabilities
134,296
148,651
Accrued insurance claims - long-term
70,296
64,366
Deferred compensation liability
41,045
37,621
Other non-current liabilities
43,944
11,649
Stockholders' equity
464,750
460,305
Total Liabilities and Stockholders'
Equity
$
754,331
$
722,592
View source
version on businesswire.com: https://www.businesswire.com/news/home/20201021005246/en/
Theodore Wahl President and Chief Executive Officer
Matthew J. McKee Chief Communications Officer
215-639-4274 investor-relations@hcsgcorp.com
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