Healthcare Services Group, Inc. (NASDAQ:HCSG) (the “Company”)
reported for the three months ended September 30, 2021 revenue of
$415.6 million and net income of $9.5 million, or $0.13 per basic
and diluted common share. The Company’s Board of Directors declared
a quarterly cash dividend of $0.21 per common share, the 73rd
consecutive increase since the initiation of dividend payments in
2003.
Ted Wahl, Chief Executive Officer, stated, “Our third quarter
results reflect the impact of the supply chain disruption, labor
availability, and significant inflation in the cost of goods that
many industries have experienced. Further, the Delta variant surge,
vaccine mandates and a broad workforce exit had an adverse impact
on nursing homes and contributed to rapid inflation during the
quarter. Despite these challenges, we remained steadfast in our
commitment to supporting our customers in caring for their patients
and residents, and our entire team rallied together in this effort.
I am extremely proud of the hard work and dedication our employees
demonstrated this quarter, particularly in the current
environment.”
Mr. Wahl continued, “In response to these challenges, we are
taking decisive action to bring stability and order to the
facilities we serve including making additional investments in
recruiting, increasing wage rates and premium pay, introducing
referral and retention bonuses, and leveraging vendor partnerships
to mitigate food supply challenges, just to name a few. While we
expect these market conditions to persist in the near term,
ultimately we expect that our efforts to secure wage rate and food
cost increases from our customers will eliminate the need for these
extraordinary actions and related costs.”
Mr. Wahl concluded, “Looking ahead, we will continue to closely
monitor industry recovery, occupancy trends and further government
funding. While the unprecedented environment is a headwind on
revenue growth and profitability, we remain confident in the
longer-term growth outlook for the Company given our market
leadership, efficient operating model and attractive
demographics.”
Third Quarter Results
Revenue for the quarter was $415.6 million, with housekeeping
& laundry and dining & nutrition segment revenues of $203.4
million and $212.2 million, respectively.
Direct cost of services was reported at $364.8 million, or
87.8%. Cost of services included new business start-up costs of
$2.3 million, primarily related to the addition of new dining &
nutrition service agreements with existing housekeeping &
laundry customers. Cost of services was also impacted by a $7.7
million increase in labor costs primarily driven by higher premium
pay and employee bonuses. Cost of services also included a 4.1%
increase in menu item costs, compared to Q2, resulting in increased
food spend of $2.5 million.
Housekeeping & laundry and dining & nutrition segment
margins were 8.5% and 3.4%, respectively.
Selling, general, and administrative (“SG&A”) was reported
at $38.8 million; after adjusting for the $0.2 million decrease in
deferred compensation, actual SG&A was $39.0 million. SG&A
was impacted by $1.0 million of start-up related costs and $0.6 of
SEC-related legal costs.
The Company reported an effective tax rate of 21.3%.
Cash outflow from operations for the quarter was $23.1 million
and was impacted by a $16.0 million increase in accrued payroll, a
$12.0 million increase in accounts receivable related to the recent
addition of new dining & nutrition service agreements with
existing housekeeping & laundry customers and the $6.0 million
SEC settlement. DSO for the quarter was 64 days.
Dividend & Share Repurchase
The Company’s Board of Directors declared a quarterly cash
dividend of $0.21 per common share, payable on December 23, 2021 to
shareholders of record at the close of business on November 19,
2021. This represents the 74th consecutive quarterly cash dividend
payment, as well as the 73rd consecutive increase since the
initiation of quarterly cash dividend payments in 2003.
Additionally, the Company repurchased $3.6 million of its common
stock, pursuant to its previous authorization, during the quarter.
The Company remains authorized to repurchase 1.4 million shares of
the Company’s common stock pursuant to the previous Board of
Directors’ authorization.
Board of Director Appointment
The Board of Directors of the Company appointed Kurt Simmons,
Jr., CPA, MBA as a member of the Board and Audit Committee,
effective November 1, 2021. Mr. Simmons is an audit partner at
WithumSmith+Brown, PC, a registered public accounting firm. Mr.
Simmons’ experience includes audit and consulting services
regarding Sarbanes-Oxley 404 integrated audits, technical
accounting and due diligence for domestic and international
clients. He is a past member of the National Association for Black
Accountants and previously served on the Board of the New Jersey
Technology Advisory Council. Kurt is currently a member of the
Association for Corporate Growth.
“We are thrilled to welcome Kurt to our Board of Directors. He
is a respected leader and seasoned professional who will
undoubtedly bring fresh perspective and insight as we work to
fulfill our Vision,” said Mr. Wahl. “The breadth and depth of
Kurt's expertise further underscores the Board and management
team’s commitment to maintaining strong internal controls and
adhering to best practices for compliance and corporate
governance."
“I am honored to be named a Board member for the leading service
provider in the healthcare space,” said Mr. Simmons. “HCSG
continues to be an innovative organization with a clear vision for
serving the evolving needs of its customers and the patients and
residents they serve.”
Conference Call and Upcoming
Events
The Company will host a conference call on Wednesday, October
20, 2021, at 8:30 a.m. Eastern Time to discuss its results for the
three months ended September 30, 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 the 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
federal securities laws, 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,” “estimates,”
“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 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, 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; 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, 2020 under “Government Regulation of
Clients,” “Service Agreements and Collections,” and "Competition"
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 by continued inflation particularly if 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 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,
2021
2020
2021
2020
Revenues
$
415,590
$
435,947
$
1,221,512
$
1,337,126
Operating costs and expenses:
Cost of services provided
364,822
365,443
1,037,852
1,140,116
Selling, general and administrative
38,780
37,337
128,818
108,819
Income from operations
11,988
33,167
54,842
88,191
Other income, net:
Investment and other income, net
133
3,965
5,294
6,135
Income before income taxes
12,121
37,132
60,136
94,326
Income tax expense
2,581
9,488
16,378
23,391
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
Cash dividends declared per common
share
$
0.21000
$
0.20500
$
0.62625
$
0.61125
Basic weighted average number of common
shares outstanding
74,943
74,700
74,983
74,684
Diluted weighted average number of common
shares outstanding
75,076
74,777
75,170
74,768
HEALTHCARE SERVICES GROUP,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands)
September 30, 2021
December 31, 2020
Cash and cash equivalents
$
79,582
$
139,330
Marketable securities, at fair value
125,583
125,012
Accounts and notes receivable, net
289,727
255,474
Other current assets
71,174
52,587
Total current assets
566,066
572,403
Property and equipment, net
27,817
26,561
Notes receivable - long-term
30,651
34,417
Goodwill
65,545
51,084
Other intangible assets, net
17,039
18,187
Deferred compensation funding
50,711
46,825
Other assets
35,776
35,554
Total Assets
$
793,605
$
785,031
Accrued insurance claims - current
$
24,164
$
21,610
Other current liabilities
129,692
140,650
Total current liabilities
153,856
162,260
Accrued insurance claims - long-term
63,135
60,818
Deferred compensation liability
50,747
46,827
Other non-current liabilities
45,662
34,665
Stockholders' equity
480,205
480,461
Total Liabilities and Stockholders'
Equity
$
793,605
$
785,031
View source
version on businesswire.com: https://www.businesswire.com/news/home/20211020005308/en/
Theodore Wahl President and Chief Executive Officer Matthew J.
McKee Chief Communications Officer 215-639-4274
investor-relations@hcsgcorp.com
Healthcare Services (NASDAQ:HCSG)
Historical Stock Chart
From Jun 2024 to Jul 2024
Healthcare Services (NASDAQ:HCSG)
Historical Stock Chart
From Jul 2023 to Jul 2024