Healthcare Services Group, Inc. (NASDAQ:HCSG) (the “Company”)
reported for the three months ended March 31, 2021 revenue of
$407.8 million and net income of $24.7 million, or $0.33 per basic
and diluted common share. The Company’s Board of Directors declared
a quarterly cash dividend of $0.2075 per common share, the 71st
consecutive increase since the initiation of dividend payments in
2003.
Ted Wahl, Chief Executive Officer, stated, “The vaccine roll-out
is proving to be a real game changer for the industry, as new COVID
cases among patients and residents dropped over 90% between Q4 and
Q1. Vaccinations have not only helped stabilize census but have
also boosted morale for frontline caregivers and HCSG heroes, who
continue their tireless efforts to protect those most vulnerable.
And although the pace of census and overall industry recovery
remains uncertain, immunization is a critical first step.”
Mr. Wahl continued, “We delivered outstanding operational
outcomes in Q1, and I’m extremely pleased with our strong start to
the year. We remain laser-focused on the elements of our business
within our control: successful service execution, customer
satisfaction, systems adherence and regulatory compliance.”
Mr. Wahl concluded, “Looking ahead, we will continue to closely
monitor the path and pace of industry recovery and remain flexible
in order to deliver the best possible outcomes on all fronts in Q2.
While COVID remains a near-term headwind on revenue, some of the
recent, more positive industry and customer data have provided us
with improved top line visibility for potential growth
opportunities in the back of the year.”
First Quarter Results
Revenue for the quarter was $407.8 million, with housekeeping
& laundry and dining & nutrition segment revenues of $215.1
million and $192.7 million, respectively. Revenue included $3.9
million of COVID-19 supplemental billings, primarily related to
employee pay premiums passed through to customers.
Direct cost of services was reported at $336.6 million, or
82.6%, below the Company’s historical target of 86.0%.
Housekeeping & laundry and dining & nutrition segment
margins were 13.1% and 10.4%, respectively.
Selling, general and administrative (“SG&A”) was reported at
$40.0 million, or 9.8%; after adjusting for the $1.3 million
increase in deferred compensation, actual SG&A was $38.7
million, or 9.5%. During the quarter, SG&A was also impacted by
approximately $2.0 million of legal and professional fees related
to the previously announced SEC matter.
The Company reported an effective tax rate of 25.2% and expects
a 2021 tax rate of 24% to 26%.
Cash flow from operations for the quarter was $3.5 million. This
includes a $30.7 million decrease in accrued payroll.
Dividend & Share Repurchase
The Company’s Board of Directors declared a quarterly cash
dividend of $0.2075 per common share, payable on June 25, 2021 to
shareholders of record at the close of business on May 21, 2021.
This represents the 72nd consecutive quarterly cash dividend
payment, as well as the 71st consecutive increase since the
initiation of quarterly cash dividend payments in 2003.
Additionally, the Company remains authorized to repurchase 1.7
million shares of our common stock pursuant to the previous Board
of Directors’ authorization and expects to repurchase up to 1.0
million shares through February 2022.
SEC Matter Update
As previously disclosed, the Securities and Exchange Commission
(“SEC”) has been conducting an investigation into the Company’s
earnings per share (“EPS”) calculation practices. Following receipt
of a letter from the SEC in November 2017 regarding its inquiry
into those practices and a subpoena in March 2018, the Company
authorized its outside counsel to conduct an internal
investigation, under the direction of the Company’s Audit
Committee, into matters related to the SEC subpoena. This
investigation was completed in March 2019, and the Company has
continued to cooperate with the SEC’s investigation and document
requests since then. As previously announced, the Company and the
SEC have recently commenced discussions regarding a potential
resolution of the investigation, which focuses on periods prior to
2018 and expects to continue to work with the SEC in working toward
a final resolution.
Conference Call and Upcoming
Events
The Company will host a conference call on Wednesday, April 21,
2021, at 8:30 a.m. Eastern Time to discuss its results for the
three months ended March 31, 2021. 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 three months ended March 31,
2021; 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; changes in the federal
corporate tax rate; the impact of the Securities and Exchange
Commission investigation and related class action lawsuit; risks
associated with the reorganization of our corporate structure;
realization of our expectations regarding the impact of the Tax
Cuts and Jobs Act on our tax rates and financial results; and the
risk factors described in Part I of our Form 10-K for the fiscal
year ended December 31, 2020 under “Government Regulation of
Clients,” “Competition” and “Service Agreements and Collections,”
and under Item IA. “Risk Factors” in such Form 10-K.
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
March 31,
2021
2020
Revenues
$
407,751
449,150
Operating costs and expenses:
Cost of services provided
336,619
387,156
Selling, general and administrative
39,987
30,017
Income from operations
31,145
31,977
Other income, net:
Investment and other income, net
1,807
(5,195
)
Income before income taxes
32,952
26,782
Income tax expense
8,299
6,592
Net income
$
24,653
$
20,190
Basic earnings per common share
$
0.33
$
0.27
Diluted earnings per common share
$
0.33
$
0.27
Cash dividends declared per common
share
$
0.20750
$
0.20250
Basic weighted average number of common
shares outstanding
75,003
74,658
Diluted weighted average number of common
shares outstanding
75,224
74,767
HEALTHCARE SERVICES GROUP,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands)
March 31, 2021
December 31, 2020
Cash and cash equivalents
$
123,654
$
139,330
Marketable securities, at fair value
125,773
125,012
Accounts and notes receivable, net
252,778
255,474
Other current assets
69,985
52,587
Total current assets
572,190
572,403
Property and equipment, net
27,722
26,561
Notes receivable - long-term
31,795
34,417
Goodwill
51,084
51,084
Other intangible assets, net
17,146
18,187
Deferred compensation funding
46,981
46,825
Other assets
35,891
35,554
Total Assets
$
782,809
$
785,031
Accrued insurance claims - current
$
22,702
$
21,610
Other current liabilities
124,205
140,650
Total current liabilities
146,907
162,260
Accrued insurance claims - long-term
60,348
60,818
Deferred compensation liability
46,876
46,827
Other non-current liabilities
35,576
34,665
Stockholders' equity
493,102
480,461
Total Liabilities and Stockholders'
Equity
$
782,809
$
785,031
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210421005366/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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