Healthcare Services Group Inc.: Q1 FY2026 earnings call

What management said about Q1 FY2026, from the documents filed with the SEC on 22 April 2026: press release. Guidance figures: 5 kept. The quarter’s numbers.

Key takeaways

Revenue rose 3.4% on client wins: Revenue was $462.8 million, up 3.4% from $447.7 million a year earlier. Management credited new client wins and high retention rates for the year-over-year growth. Source
Net income and diluted EPS rose: Net income was $26.1 million, against $17.2 million a year earlier. Diluted EPS was $0.37, against $0.23. Income from operations was $33.8 million, against $23.0 million. Source
Adjusted EBITDA margin rose to 8.4%: Adjusted EBITDA was $38.9 million, or 8.4% of revenue, against $29.3 million or 6.5% a year earlier. EBITDA was $36.1 million. Source
Cost of services at 83.6% of revenue: Cost of services was $386.9 million, or 83.6% of revenue, against $379.7 million a year earlier. Source
Cash flow excluding payroll accrual $23.4 million: Excluding the change in payroll accrual, cash flow from operations was $23.4 million, against $32.1 million a year earlier. The payroll accrual increased $20.3 million. Source
Cash and securities of $214.6 million: Cash and marketable securities totaled $214.6 million at quarter end, with the $300.0 million credit facility unutilized. Source
Repurchased $24.0 million of stock: Share repurchases in the quarter totaled $24.0 million, leaving 9.2 million shares under the February 2026 authorization. Source

“New client wins and high retention rates drove our year over year topline growth, and our field-based teams’ operational excellence led to quality service outcomes and consistent margins.”
Ted Wahl, Chief Executive Officer

Guidance

Area	Period	Figure	Against last quarter
Revenue growth Source	2026	mid-single-digit	Kept
Cost of services as % of revenue Source	not stated	86% range	Kept
SG&A as % of revenue Source	not stated	9.5% to 10.5% range; longer-term 8.5% to 9.5%	Kept
Effective tax rate Source	2026	approximately 25.0%	Kept
Share repurchases Source	through January 2027	$75.0 million	Kept

What changed from last quarter

New: A Second Amendment to the Credit Agreement, dated April 7, 2026, provides a $300.0 million five-year revolver with improved SOFR-based pricing and enhanced covenant flexibility. Source

Results and growth drivers

Revenue rose 3.4% on client wins: Revenue was $462.8 million, up 3.4% from $447.7 million a year earlier. Management credited new client wins and high retention rates for the year-over-year growth. Source
Net income and diluted EPS rose: Net income was $26.1 million, against $17.2 million a year earlier. Diluted EPS was $0.37, against $0.23. Income from operations was $33.8 million, against $23.0 million. Source
Adjusted EBITDA margin rose to 8.4%: Adjusted EBITDA was $38.9 million, or 8.4% of revenue, against $29.3 million or 6.5% a year earlier. EBITDA was $36.1 million. Source

Segments and margins

Environmental Services revenue and margin: Environmental Services revenue was $208.3 million, with a segment margin of 12.1%. The prior quarter's Environmental margin was 12.6% on $210.8 million. Source
Dietary Services revenue and margin: Dietary Services revenue was $254.5 million, with a segment margin of 9.0%. The prior quarter's Dietary margin was 7.2% on $255.9 million. Source
Field teams cited for steady margins: Management attributed quality service outcomes and consistent margins to the operational excellence of its field-based teams. Source

“We are confident that continuing to execute on our strategic priorities, supported by our robust business fundamentals, will enable us to drive growth, while delivering sustainable, profitable results.”
Ted Wahl, Chief Executive Officer

Cost of services and SG&A

Cost of services at 83.6% of revenue: Cost of services was $386.9 million, or 83.6% of revenue, against $379.7 million a year earlier. Source
Adjusted SG&A at 9.4% of revenue: Reported SG&A was $42.0 million. Adjusting for a $1.6 million decrease in deferred compensation, SG&A was $43.6 million, or 9.4% of revenue. Source
Reported SG&A below prior year: Reported SG&A was $42.0 million, against $45.0 million a year earlier. Cost of services was $386.9 million, against $379.7 million. Source

Operating cash flow and payroll timing

Operating cash flow of $43.7 million: Cash flow from operations was $43.7 million, against $27.5 million a year earlier, as reported under GAAP. Source
Cash flow excluding payroll accrual $23.4 million: Excluding the change in payroll accrual, cash flow from operations was $23.4 million, against $32.1 million a year earlier. The payroll accrual increased $20.3 million. Source

Liquidity and share repurchases

Cash and securities of $214.6 million: Cash and marketable securities totaled $214.6 million at quarter end, with the $300.0 million credit facility unutilized. Source
Repurchased $24.0 million of stock: Share repurchases in the quarter totaled $24.0 million, leaving 9.2 million shares under the February 2026 authorization. Source
Total assets and equity rose: Total assets were $814.8 million and stockholders' equity $513.8 million, against $794.3 million and $510.2 million at December 31, 2025. Source

Tax rate and share count

Effective tax rate of 24.6%: The effective tax rate for the quarter was 24.6%, and the company expects a 2026 rate of approximately 25.0%. Source
Diluted share count down to 71.0 million: Diluted weighted average shares were 71.0 million, against 74.0 million a year earlier. Source
Basic EPS equal to diluted at $0.37: Basic income per share was $0.37, against $0.23 a year earlier, the same as diluted income per share. Source

Coming up, as management said on 22 April 2026

Non-deal roadshow in May: The company will join a William Blair non-deal roadshow in London, Stockholm and Zurich from May 5 to May 7. Source
RBC and Benchmark conferences: The company will participate in RBC's Global Healthcare Conference on May 20 in New York, and Benchmark's virtual conference on May 28. Source
Baird conference on June 3: The company will participate in Baird's Global Consumer, Technology and Services Conference on June 3 in New York. Source

Earlier plans management reported on

Not stated: Management reiterated the 2026 revenue growth expectation given in the prior release. Source

Other quarters

Summarised with AI from the documents the company filed with the SEC. Every point is checked against the filing before it is shown: management’s own words word for word, figures against the line or table row they come from. A point that fails the check is left out. Source opens the filing at that line.

As filed with the SEC

Open the filing on EDGAR

Healthcare Services Group

Reports First Quarter Results

Delivers Strong Revenue, Earnings and Cash Flow

Reiterates 2026 Growth Outlook

Revenue of $462.8 million, a 3.4% increase over the prior year.
Net income and diluted EPS of $26.1 million and $0.37.
Cash flow from operations of $43.7 million; cash flow from operations, excluding the change in payroll accrual, of $23.4 million.
Share repurchases of $24.0 million.
Reiterates 2026 mid-single-digit revenue growth outlook.

BENSALEM, PA--(BUSINESS WIRE)-- Healthcare Services Group, Inc. (NASDAQ:HCSG) today reported results for the three months ended March 31, 2026.

Ted Wahl, Chief Executive Officer, stated, “We delivered strong first quarter results across revenue, earnings, and cash flow, and we have carried that positive momentum into the second quarter. New client wins and high retention rates drove our year over year topline growth, and our field-based teams’ operational excellence led to quality service outcomes and consistent margins.”

Mr. Wahl continued, “We also returned $24 million of capital through our share repurchase program and ended the quarter with a strong balance sheet and ROIC profile, underscoring our focus on value-creating capital deployment.”

Mr. Wahl concluded, “We are confident that continuing to execute on our strategic priorities, supported by our robust business fundamentals, will enable us to drive growth, while delivering sustainable, profitable results.”

First Quarter Results

Revenue was reported at $462.8 million, a 3.4% increase over the prior year.
Segment revenues and margins for Environmental and Dietary Services were reported at $208.3 million and 12.1% and $254.5 million, and 9.0%, respectively.
Cost of services was reported at $386.9 million or 83.6%.
The Company’s goal is to manage cost of services in the 86% range.
SG&A was reported at $42.0 million. After adjusting for the $1.6 million decrease in deferred compensation, SG&A was $43.6 million or 9.4%.
The Company’s goal is to manage SG&A in the 9.5% to 10.5% range, with the longer term goal of managing those costs into the 8.5% to 9.5% range.
Effective tax rate was reported at 24.6%.
The Company expects its 2026 effective tax rate to be approximately 25.0%.
Net income and diluted EPS were reported at $26.1 million and $0.37.

Balance Sheet and Liquidity

The Company’s primary sources of liquidity are cash flow from operating activities, cash and cash equivalents, and its revolving credit facility. Cash flow from operations was reported at $43.7 million. After adjusting for the $20.3 million increase in the payroll accrual, cash flow from operations was $23.4 million. As of the end of the first quarter, the Company had cash and marketable securities of $214.6 million and an unutilized $300.0 million credit facility.

The Company entered into a Second Amendment, dated April 7, 2026, to its existing Credit Agreement, which provides for a $300.0 million five-year revolving credit facility with an improved SOFR-based pricing grid and enhanced covenant flexibility.

Share Repurchases

In February 2026, the Company announced its plan to further accelerate the pace of its share buybacks and repurchase $75.0 million of its common stock through January 2027. In the first quarter, the Company repurchased $24.0 million of its common stock. The Company has 9.2 million shares remaining under its February 2026 share repurchase authorization.

Conference Call and Upcoming Events

The Company will host a conference call on Wednesday, April 22, 2026, at 8:30 a.m. Eastern Time to discuss its results for the three months ended March 31, 2026. The call may be accessed via phone at 1 (800) 715-9871, Conference ID: 9951274. 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.

The Company will be participating in a Non-Deal Roadshow hosted by William Blair in London, Stockholm and Zurich May 5th through May 7th. The Company will be participating in RBC’s Global Healthcare Conference on May 20th in New York and Benchmark’s Virtual Healthcare House Call Conference on May 28th. In addition, the Company will be participating in Baird’s Global Consumer, Technology and Services Conference on June 3rd in New York.

About Healthcare Services Group, Inc.

Healthcare Services Group (NASDAQ: HCSG) is a leader in managing Environmental and Dietary services within the healthcare industry. With 50 years of experience, HCSG aims to provide improved operational, regulatory, and financial outcomes for its clients.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS

Forward-looking statements notice

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,” “intend” 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; credit and collection risks associated with the healthcare industry; the impact of bank failures; our claims experience related to workers’ compensation, general liability and other insurance programs; 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 impacts of past or future cyber attacks or breaches; global events including ongoing international conflicts and increased energy prices; and the risk factors described in Part I of our Form 10-K for the fiscal year ended December 31, 2025 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 undergoing restructurings, have resulted in, and could continue to result in, significant additional bad debts in the near future. Additionally, our operating results have been in the past and could in the future 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) 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 net cash flow from operations (excluding the impact of payroll accrual), earnings before interest, taxes, depreciation and amortization (“EBITDA”) and EBITDA excluding items impacting comparability (“Adjusted EBITDA”). We cannot provide a reconciliation of forward-looking non-GAAP 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.

Company Contacts:

Theodore Wahl

President and Chief Executive Officer

Vikas Singh

Executive Vice President and Chief Financial Officer

Matthew J. McKee

Chief Communications Officer

215-639-4274 investor-relations@hcsgcorp.com

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(in thousands, except per share data)

	For the Three Months Ended
	March 31,
	2026	2025
Revenue	$462,766	$447,662
Operating costs and expenses:
Cost of services	386,932	379,691
Selling, general and administrative	41,997	44,966
Income from operations	33,837	23,005
Other income, net	703	889
Income before income taxes	34,541	23,894
Income tax provision	8,481	6,666
Net income	$26,060	$17,228
Basic income per common share	$0.37	$0.23
Diluted income per common share	$0.37	$0.23
Basic weighted average number of common shares outstanding	69,860	73,670
Diluted weighted average number of common shares outstanding	71,049	73,961

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands)

	March 31, 2026	December 31, 2025
Cash and cash equivalents	$136,172	$125,189
Restricted cash equivalents	97	5,577
Marketable securities, at fair value	42,442	42,774
Restricted marketable securities, at fair value	35,898	30,352
Accounts receivable, net	299,443	281,303
Notes receivable - short-term, net	29,068	31,243
Other current assets	58,110	59,977
Total current assets	601,230	576,415
Property and equipment, net	27,032	27,586
Notes receivable - long-term, net	20,628	25,209
Goodwill	79,797	79,797
Other intangible assets, net	6,315	6,964
Deferred compensation funding	52,995	55,909
Other assets	26,848	22,373
Total assets	$814,845	$794,253
Accrued insurance claims - current	$22,481	$24,371
Other current liabilities	170,885	146,004
Total current liabilities	193,366	170,375
Accrued insurance claims - long-term	43,822	46,142
Deferred compensation liability - long-term	52,934	56,276
Lease liability - long-term	9,363	9,659
Other long-term liabilities	1,594	1,591
Stockholders' equity	513,766	510,210
Total liabilities and stockholders' equity	$814,845	$794,253

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

(Unaudited)

	March 31,
	2026		2025
Reconciliation of GAAP net income to EBITDA and Adjusted EBITDA (in thousands)		For the Three Months Ended
GAAP net income		$26,060		$17,228
Income tax provision		8,481		6,666
Interest, net		(2,256)		(2,209)
Depreciation and amortization		3,806		3,878
EBITDA		$36,091		$25,563
Share-based compensation		2,764		3,738
Adjusted EBITDA		$38,855		$29,301
Adjusted EBITDA as a percentage of revenue		8.4%		6.5%

	March 31,
	2026		2025
Reconciliation of GAAP cash flows from operations to cash flow from operations (excluding the change in payroll accrual)		For the Three Months Ended
GAAP cash flows from operations		$43,730		$27,501
Accrued payroll		(20,319)		4,591
Cash flow from operations (excluding the change in payroll accrual)		$23,411		$32,092

1.Includes right-of-use asset depreciation of $1.9 million and $2.1 million for the three months ended March 31, 2026 and 2025, respectively.

2.The accrued payroll adjustment reflects changes in accrued payroll for the three months ended March 31, 2026 and 2025. The Company processes payroll on set weekly and bi-weekly schedules, and the timing of payments may result in operating cash flow increases or decreases which are not indicative of the Company’s quarterly cash flow performance.