Healthcare Services Group, Inc. (NASDAQ:HCSG) (the “Company”)
reported for the three months ended December 31, 2021 revenue of
$420.4 million and net income of $2.1 million, or $0.03 per basic
and diluted common share. The Company’s Board of Directors declared
a quarterly cash dividend of $0.21125 per common share, the 74th
consecutive increase since the initiation of dividend payments in
2003.
Ted Wahl, Chief Executive Officer, stated, “Our fourth quarter
results reflect continued margin pressures resulting from workforce
availability, inflation and supply chain disruption. We remain
actively engaged with our customers to modify our service
agreements to adjust for the extraordinary inflation experienced
during the second half of 2021, as well account for future
inflation on a real-time basis. We expect these service agreement
modifications to be completed throughout the first half of 2022,
with a goal of exiting the year with cost of services in line with
our historical target of 86%.”
Mr. Wahl concluded, “We are encouraged that we’ve seen relative
stability in industry census since August as operators have worked
through the clinical challenges of both the Delta and Omicron
strains. Having managed through those challenges, we are cautiously
optimistic that the availability of staff improves, labor market
pressure stabilizes and operators are able to build back their
census in the year ahead. We will continue to monitor industry
recovery and remain confident that, despite near-term headwinds,
the long-term growth outlook for the Company remains strong given
our market leadership, efficient operating model and the attractive
demographics.”
Fourth Quarter Results
Revenue for the quarter was $420.4 million, with housekeeping
& laundry and dining & nutrition segment revenues of $200.0
million and $220.4 million, respectively.
Direct cost of services was reported at $377.2 million, or
89.7%. Cost of services was impacted by increases in labor and
supply costs. The Company expects the aforementioned service
agreement modifications to be completed throughout the first half
of 2022, with a goal of exiting the year with cost of services in
line with its historical target of 86%.
Housekeeping & laundry and dining & nutrition segment
margins were 5.7% and 2.1%, respectively.
Selling, general and administrative (“SG&A”) was reported at
$44.3 million; after adjusting for the $2.7 million increase in
deferred compensation, actual SG&A was $41.6 million. SG&A
was impacted by $2.0 million of non-recurring items. In the year
ahead, the Company expects SG&A to approximate 8.5% to 9.5%,
with the opportunity for ongoing efficiencies.
The Company reported an effective tax rate of 25.8% for the
year. Its Q4 effective tax rate was impacted by lower income before
taxes and other discrete items related to the quarter. The Company
expects a 2022 tax rate of 24% to 26%.
Cash flow from operations for the quarter was $31.4 million and
was impacted by a $3.9 million increase in accrued payroll,
including the impact of one-half, or $22.1 million, of the CARES
Act deferred payroll tax repayment. DSO for the quarter was 64
days.
Dividend & Share Repurchase
The Company’s Board of Directors declared a quarterly cash
dividend of $0.21125 per common share, payable on March 25, 2022 to
shareholders of record at the close of business on February 25,
2022. This represents the 75th consecutive quarterly cash dividend
payment, as well as the 74th consecutive increase since the
initiation of quarterly cash dividend payments in 2003.
Additionally, the Company repurchased $16.1 million of its common
stock, pursuant to its previous authorization, during the
quarter.
Conference Call and Upcoming
Events
The Company will host a conference call on Wednesday, February
9, 2022, at 8:30 a.m. Eastern Time to discuss its results for the
three months ended December 31, 2021. The call may be accessed via
phone at 1 (888) 330-3451, Conference ID: 4431380. 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 year
ended December 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; the impact of the concluded Securities and Exchange
Commission investigation and related class action lawsuit; 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 1A. “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 projected
growth strategies. There can be no assurance that we will be
successful in that regard.
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 Year Ended
December 31,
December 31,
2021
2020
2021
2020
Revenues
$
420,447
$
423,177
$
1,641,959
$
1,760,303
Operating costs and expenses:
Cost of services provided
377,230
352,201
1,415,082
1,492,317
Selling, general and administrative
44,290
41,959
173,108
150,778
Income from operations
(1,073
)
29,017
53,769
117,208
Other income, net:
Investment and other income, net
2,760
5,843
8,054
11,978
Income before income taxes
1,687
34,860
61,823
129,186
Income tax (benefit) expense
(418
)
7,113
15,960
30,504
Net income
$
2,105
$
27,747
$
45,863
$
98,682
Basic earnings per common share
$
0.03
$
0.37
$
0.61
$
1.32
Diluted earnings per common share
$
0.03
$
0.37
$
0.61
$
1.32
Cash dividends declared per common
share
$
0.21125
$
0.20625
$
0.83750
$
0.81750
Basic weighted average number of common
shares outstanding
74,318
74,730
74,816
74,696
Diluted weighted average number of common
shares outstanding
74,342
74,837
74,962
74,785
HEALTHCARE SERVICES GROUP,
INC.
CONDENSED CONSOLIDATED BALANCE
SHEETS
(Unaudited)
(in thousands)
December 31, 2021
December 31, 2020
Cash and cash equivalents
$
70,794
$
139,330
Marketable securities, at fair value
114,396
125,012
Accounts and notes receivable, net
293,388
255,474
Other current assets
67,804
52,587
Total current assets
546,382
572,403
Property and equipment, net
28,102
26,561
Notes receivable - long-term
29,259
34,417
Goodwill
74,755
51,084
Other intangible assets, net
20,805
18,187
Deferred compensation funding
46,691
46,825
Other assets
31,535
35,554
Total Assets
$
777,529
$
785,031
Accrued insurance claims - current
$
24,310
$
21,610
Other current liabilities
166,815
140,650
Total current liabilities
191,125
162,260
Accrued insurance claims - long-term
65,084
60,818
Deferred compensation liability
46,888
46,827
Other non-current liabilities
21,755
34,665
Stockholders' equity
452,677
480,461
Total Liabilities and Stockholders'
Equity
$
777,529
$
785,031
View source
version on businesswire.com: https://www.businesswire.com/news/home/20220209005355/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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