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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Healthcare Services Group Inc | NASDAQ:HCSG | NASDAQ | Common Stock |
Price Change | % Change | Share Price | Bid Price | Offer Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|---|---|
-0.18 | -1.54% | 11.54 | 11.30 | 12.00 | 11.75 | 11.47 | 11.75 | 546,775 | 22:59:00 |
Robust New Business Pipeline Sets Stage For Second Half Of Year Growth
Healthcare Services Group, Inc. (NASDAQ:HCSG) reported for the three months ended June 30, 2023 revenue of $418.9 million, GAAP net income of $8.6 million, or $0.12 per basic and diluted common share, and adjusted EBITDA of $26.3 million.
Q2 Results
Ted Wahl, Chief Executive Officer, stated, “In Q2, we delivered strong core earnings and added to an already robust new business pipeline, while navigating a difficult cash collections environment. Industry fundamentals continue to improve, and a stabilizing labor market and select state-based reimbursement increases have contributed to the gradual but steady occupancy recovery. While there remains uncertainty as to what a minimum staffing requirement might look like for the industry, we remain hopeful that CMS will fully consider the impact on operators before finalizing a rule, and have confidence in our customers’ ability to manage any such rule.”
Mr. Wahl concluded, “We enter the second half of the year with three clear priorities. The first is continuing to manage direct costs at 86%, excluding CECL. The second is collecting what we bill, building on the strong momentum gained in May and June. The third and perhaps the most impactful is the realization of our business development efforts yielding new facility starts. There is a high level of internal enthusiasm as we pivot to growth mode through the back half of 2023 and into 2024.”
Conference Call and Upcoming Events
The Company will host a conference call on Wednesday, July 26, 2023, at 8:30 a.m. Eastern Time to discuss its results for the three months ended June 30, 2023. 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 and 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 six months ended June 30, 2023; credit and collection risks associated with the healthcare industry; the impact of bank failures; 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; and the risk factors described in Part I of our Form 10-K for the fiscal year ended December 31, 2022 under “Government Regulation of Customers,” “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) cannot 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.
USE OF NON-GAAP FINANCIAL INFORMATION
To supplement HCSG’s consolidated financial information, which are prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”), the Company believes that certain non-GAAP financial measures are useful in evaluating operating performance and comparing such performance to other companies.
The Company is presenting earnings before interest, taxes, depreciation and amortization ("EBITDA"), and excluding items impacting comparability ("Adjusted EBITDA"). We cannot provide a reconciliation of forward-looking EBITDA and Adjusted EBITDA margin measures to GAAP due to the inherent difficulty in forecasting and quantifying certain amounts that are necessary for such reconciliation. The presentation of non-GAAP financial measures is not meant to be considered in isolation or as a substitute for financial statements prepared in accordance with GAAP.
HEALTHCARE SERVICES GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands, except per share data)
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Revenues
$
418,931
$
424,857
$
836,161
$
851,668
Operating costs and expenses:
Costs of services provided
367,728
379,370
728,706
752,632
Selling, general and administrative
41,429
29,281
81,476
65,017
Income from operations
9,774
16,206
25,979
34,019
Other income (expense), net
1,636
(7,956
)
2,987
(9,988
)
Income before income taxes
11,410
8,250
28,966
24,031
Income tax provision
2,812
1,430
7,684
5,882
Net income
$
8,598
$
6,820
$
21,282
$
18,149
Basic earnings per common share
$
0.12
$
0.09
$
0.29
$
0.24
Diluted earnings per common share
$
0.12
$
0.09
$
0.29
$
0.24
Basic weighted average number of common shares outstanding
74,478
74,337
74,488
74,332
Diluted weighted average number of common shares outstanding
74,567
74,358
74,543
74,345
HEALTHCARE SERVICES GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands)
June 30, 2023
December 31, 2022
Cash and cash equivalents
$
28,662
$
26,279
Marketable securities, at fair value
93,185
95,200
Accounts and notes receivable, net
380,061
336,777
Other current assets
47,178
50,376
Total current assets
549,086
508,632
Property and equipment, net
26,932
22,975
Notes receivable — long-term
30,740
32,609
Goodwill
75,529
75,529
Other intangible assets, net
13,539
15,946
Deferred compensation funding
37,020
33,493
Other assets
28,912
29,150
Total assets
$
761,758
$
718,334
Accrued insurance claims — current
$
24,891
$
23,166
Other current liabilities
164,773
155,453
Total current liabilities
189,664
178,619
Accrued insurance claims — long-term
68,920
65,541
Deferred compensation liability — long-term
37,171
33,764
Lease liability — long-term
11,560
8,097
Other long term liabilities
3,854
6,141
Stockholders' equity
450,589
426,172
Total liabilities and stockholders' equity
$
761,758
$
718,334
HEALTHCARE SERVICES GROUP, INC.
RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
(in thousands)
For the Three Months Ended
For the Six Months Ended
June 30,
June 30,
2023
2022
2023
2022
Reconciliation of Net Income to EBITDA and Adjusted EBITDA
Net income
$
8,598
$
6,820
$
21,282
$
18,149
Income tax provision
2,812
1,430
7,684
5,882
Interest, net
488
(616
)
591
(1,033
)
Depreciation & amortization
3,595
3,618
7,315
7,765
EBITDA
$
15,493
$
11,252
$
36,872
$
30,763
Share-based compensation
2,351
2,372
4,409
4,768
Gain/loss on deferred compensation, net
38
167
82
456
Bad debt expense adjustments(1)
8,379
12,398
12,414
13,506
Adjusted EBITDA
$
26,261
$
26,189
$
53,777
$
49,493
(1) The bad debt expense adjustment reflects the difference between GAAP bad debt expense (CECL) and historical write-offs as a percentage of revenues, both of which are based on the same seven year look-back period.
View source version on businesswire.com: https://www.businesswire.com/news/home/20230726944567/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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