8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 20, 2022

HEALTHCARE SERVICES GROUP, INC.

(Exact name of registrant as specified in its charter)

Commission File Number: 0-12015

Pennsylvania	23-2018365
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification number)

3220 Tillman Drive, Suite 300, Bensalem, Pennsylvania

(Address of principal executive office)

19020

(Zip Code)

Registrant's telephone number, including area code: (215) 639-4274

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

( ☐ )    Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

( ☐ )    Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

( ☐ )    Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

( ☐ )    Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $.01 par value	HCSG	NASDAQ Global Select Market

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o

Item 2.02 Results of Operations and Financial Condition.

On July 20, 2022, Healthcare Services Group, Inc. (the "Company") issued a press release (the "Press Release") announcing its earnings for the three months ended June 30, 2022. A copy of the Press Release is being furnished hereto as Exhibit 99.1 and is hereby incorporated by reference to this Current Report.

The information furnished herein, including Exhibit 99.1 shall not be deemed "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act.

Item 8.01 Other Events.

The Press Release also announced the Company's second quarter 2022 quarterly cash dividend of $0.21375 per common share, payable on September 23, 2022 to shareholders of record at the close of business on August 19, 2022.

Item 9.01 Financial Statements and Exhibits.

( a )    Not applicable

( b )    Not applicable

( c )    Not applicable

( d )    Exhibits.

Exhibit Number	Description
99.1	Press Release and financial tables dated July 20, 2022, issued by Healthcare Services Group, Inc.
104	Cover page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		HEALTHCARE SERVICES GROUP, INC.
Date: July 20, 2022	By:	/s/ Andrew M. Brophy
		Name: Andrew M. Brophy Title: Vice President, Controller & Principal Accounting Officer

EX-99.1

Exhibit 99.1

Healthcare Services Group, Inc.

Reports Q2 2022 Results

BENSALEM, Pa.--(BUSINESS WIRE)-- Healthcare Services Group, Inc. (NASDAQ:HCSG) (the “Company”) reported for the three months ended June 30, 2022 revenue of $424.9 million and net income of $6.8 million, or $0.09 per basic and diluted common share. The Company’s Board of Directors declared a quarterly cash dividend of $0.21375 per common share, the 76th consecutive increase since the initiation of dividend payments in 2003.

Ted Wahl, Chief Executive Officer, stated, “We have now either completed or are in the final stages of negotiation with our clients in modifying our service agreements, a goal we very aggressively pursued throughout the second quarter.”

Mr. Wahl continued, “As we continue to engage with our clients to capture recent and future inflation on a more real-time basis, several components of the partnership may be considered in the negotiations. Among those are restructuring our notes receivable with certain clients, altering the timing of collections with others, and even exercising our termination rights when we are unable to reach agreement.”

Mr. Wahl concluded, “While we recognize that some of these decisions have a temporary impact on our reported results, we remain confident that these service agreement modifications will further strengthen our client partnerships and position us to exit the year with cost of services in line with our historical target of 86%.”

Second Quarter Results

Revenue for the quarter was $424.9 million, with housekeeping & laundry and dining & nutrition segment revenues of $199.1 million and $225.8 million, respectively.

Direct cost of services was reported at $379.4 million, or 89.3%. Cost of services was impacted by a $7.0 million increase in AR reserves related to a client group placed into receivership. The Company remains on track to meet its 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 9.0% and 4.5%, respectively.

Selling, general and administrative (“SG&A”) was reported at $29.3 million; after adjusting for the $6.4 million decrease in deferred compensation, actual SG&A was $35.7 million, or 8.4%. The Company expects 2022 SG&A to approximate 8.5% to 9.5%.

The Company reported an effective tax rate of 17.3% and expects a 2022 tax rate of 24% to 26%.

Cash flow from operations for the quarter was $9.0 million and was impacted by a $31.6 million increase in accounts receivable primarily related to the timing of cash collections, offset, in part, by a $19.4 million increase in accrued payroll. DSO for the quarter was 71 days.

Dividend

The Company’s Board of Directors declared a quarterly cash dividend of $0.21375 per common share, payable on September 23, 2022 to shareholders of record at the close of business on August 19, 2022. This represents the 77th consecutive quarterly cash dividend payment, as well as the 76th consecutive increase since the initiation of quarterly cash dividend payments in 2003.

1

Exhibit 99.1

Conference Call and Upcoming Events

The Company will host a conference call on Wednesday, July 20, 2022, at 8:30 a.m. Eastern Time to discuss its results for the three months ended June 30, 2022. 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.

2

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 six months ended June 30, 2022; 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; heightened volatility of commodity food prices partially due to constrained global production as a result of the Russia-Ukraine conflictand the risk factors described in Part I of our Form 10-K for the fiscal year ended December 31, 2021 under “Government Regulation of Customers,” “Service Agreements and Collections,” and “Competition” and under Item IA. “Risk Factors" in such Form 10K, and in Item 1A. "Risk Factors" of our Form 10-Q for the quarter ended March 31, 2022.

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.

Company Contacts:
Theodore Wahl	Matthew J. McKee
President and Chief Executive Officer	Chief Communications Officer
215-639-4274
investor-relations@hcsgcorp.com

3

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,
	2022		2021		2022		2021
Revenues	$	424,857	$	398,171	$	851,668	$	805,922
Operating costs and expenses:
Cost of services provided	379,370		336,411		752,632		673,030
Selling, general and administrative	29,281		50,051		65,017		90,038
Income from operations	16,206		11,709		34,019		42,854
Other (expense) income, net:
Investment and other (loss) income, net	(7,956)		3,354		(9,988)		5,161
Income before income taxes	8,250		15,063		24,031		48,015
Income tax expense	1,430		5,498		5,882		13,797
Net income	$	6,820	$	9,565	$	18,149	$	34,218
Basic earnings per common share	$	0.09	$	0.13	$	0.24	$	0.46
Diluted earnings per common share	$	0.09	$	0.13	$	0.24	$	0.45
Cash dividends declared per common share	$	0.21375	$	0.20875	$	0.42625	$	0.41625
Basic weighted average number of common shares outstanding	74,337		75,005		74,332		75,004
Diluted weighted average number of common shares outstanding	74,358		75,212		74,345		75,218

4

HEALTHCARE SERVICES GROUP, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands)

	June 30, 2022		December 31, 2021
Cash and cash equivalents	$	31,681	$	70,794
Marketable securities, at fair value	97,488		114,396
Accounts and notes receivable, net	331,534		293,388
Other current assets	61,149		67,804
Total current assets	521,852		546,382
Property and equipment, net	25,632		28,102
Notes receivable — long-term	32,901		29,259
Goodwill	75,529		74,755
Other intangible assets, net	18,371		20,805
Deferred compensation funding	32,320		46,691
Other assets	33,453		31,535
Total Assets	$	740,058	$	777,529
Accrued insurance claims — current	$	26,378	$	24,310
Other current liabilities	157,551		166,815
Total current liabilities	183,929		191,125
Accrued insurance claims — long-term	69,233		65,084
Deferred compensation liability — long-term	32,789		46,888
Lease liability — long-term	9,856		11,299
Other long term liabilities	6,406		10,456
Stockholders' equity	437,845		452,677
Total Liabilities and Stockholders' Equity	$	740,058	$	777,529

5

XML

Cover	Jul. 20, 2022
Cover [Abstract]
Document Type	8-K
Document Period End Date	Jul. 20, 2022
Entity Registrant Name	HEALTHCARE SERVICES GROUP, INC.
Entity File Number	0-12015
Entity Incorporation, State or Country Code	PA
Entity Tax Identification Number	23-2018365
Entity Address, Address Line One	3220 Tillman Drive
Entity Address, Address Line Two	Suite 300
Entity Address, City or Town	Bensalem
Entity Address, State or Province	PA
Entity Address, Postal Zip Code	19020
City Area Code	215
Local Phone Number	639-4274
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Entity Emerging Growth Company	false
Amendment Flag	false
Entity Central Index Key	0000731012
Title of 12(b) Security	Common Stock, $.01 par value
Trading Symbol	HCSG
Security Exchange Name	NASDAQ