Healthcare Services Group Inc.: Q3 FY2026 earnings call

What management said about Q3 FY2026, from the documents filed with the SEC on 21 October 2026: press release. Guidance figures: 1 raised, 2 new, 4 kept. The quarter’s numbers.

Key takeaways

Revenue rose from a year earlier: Revenue was $479.6 million, up from $464.3 million in the third quarter of 2025 and from $470.8 million in the second quarter of 2026. Source
Organic growth inflection feeds Q4 range: Management said the organic growth inflection it planned for is now being delivered, and that it sets the stage for fourth quarter revenue of $535 million to $545 million. Source
2027 revenue growth expectation raised: Management raised its 2027 revenue growth expectation to low double-digits from mid single-digits. Source
Operating cash flow of $30.2 million: Cash flow from operations was $30.2 million, against $71.3 million a year earlier and $21.9 million in the second quarter. Source
Genesis recovery of $6.1 million recorded: An estimated $6.1 million recovery was recorded after the court-approved sale of Genesis on October 14, 2026. The company said a substantially higher upper-range recovery remains possible. Source
NEXDINE acquired for $93.5 million: The acquisition of NEXDINE Hospitality closed on October 6, 2026, for an upfront price of $93.5 million, funded with cash on hand. Source
NEXDINE expected to add over $150 million: NEXDINE is expected to contribute over $150 million in annual revenue at comparable margins and to be immediately accretive to earnings. Source

“Our strong third quarter results reflect the underlying strength of our business fundamentals and disciplined operational execution.”
Ted Wahl, Chief Executive Officer

Guidance

Area	Period	Figure	Against last quarter
Revenue Source	fourth quarter 2026	$535 to $545 million	New
Revenue growth Source	2027	low double-digits	Raised from mid single-digits
Effective tax rate Source	full year 2026	approximately 25.0%	Kept
Cost of services ratio Source	ongoing goal	86% range	Kept
SG&A ratio Source	ongoing goal; longer-term goal	9.5% to 10.5%; longer-term 8.5% to 9.5%	Kept
Revenue from NEXDINE Hospitality Source	annual	over $150 million	New
Share repurchases Source	February 2026 plan, through January 2027	$75.0 million	Kept

What changed from last quarter

Guidance raised: The 2027 revenue growth expectation was raised to low double-digits from mid single-digits. Source
New guidance: A fourth quarter 2026 revenue range of $535 million to $545 million was given. Source
New: NEXDINE Hospitality was acquired on October 6, 2026, for an upfront price of $93.5 million in cash. Source
New: An estimated $6.1 million Genesis bankruptcy recovery was recorded after the court-approved sale. Source

Results and growth drivers

Revenue rose from a year earlier: Revenue was $479.6 million, up from $464.3 million in the third quarter of 2025 and from $470.8 million in the second quarter of 2026. Source
Organic growth inflection feeds Q4 range: Management said the organic growth inflection it planned for is now being delivered, and that it sets the stage for fourth quarter revenue of $535 million to $545 million. Source
Operating income fell year on year: Income from operations was $31.9 million against $45.9 million a year earlier. Other income, net was $1.8 million against $11.4 million. Source
Net income and EPS below prior year: Net income was $24.9 million and diluted EPS $0.36, against $43.0 million and $0.59 a year earlier, and up from $22.7 million and $0.32 in the second quarter. Source
2027 revenue growth expectation raised: Management raised its 2027 revenue growth expectation to low double-digits from mid single-digits. Source

Segment performance

Dietary Services margin at 8.7%: Dietary Services revenue was $262.4 million for the quarter, at an 8.7% margin. Source
Environmental Services revenue at 13.3%: Environmental Services revenue was $217.2 million for the quarter, at a 13.3% margin. Source
Second-quarter segment comparison: In the second quarter, Environmental Services was $213.2 million at 13.3% and Dietary Services was $257.6 million at 7.5%.

“Our acquisition of NEXDINE Hospitality in early October represents a significant milestone, deepening our health and hospitality services capabilities and unlocking new growth pathways in senior living and hospitality-driven markets.”
Ted Wahl, Chief Executive Officer

Costs, margins and tax

Cost of services at 83.2% of revenue: Cost of services was $399.2 million, or 83.2% of revenue, compared with $367.9 million a year earlier. Source
SG&A adjusted for deferred compensation: Adjusted for a $0.6 million decrease in deferred compensation, SG&A was $49.1 million, or 10.2% of revenue, against 9.7% in the second quarter. Source
Tax provision and rate for the quarter: The income tax provision was $8.9 million, a 26.2% effective rate, which is above the full-year rate management expects. Source
Adjusted EBITDA margin rose to 8.0%: Adjusted EBITDA was $38.6 million, or 8.0% of revenue, against $56.4 million or 12.1% a year earlier and 7.6% in the second quarter. Source

Cash flow and liquidity

Operating cash flow of $30.2 million: Cash flow from operations was $30.2 million, against $71.3 million a year earlier and $21.9 million in the second quarter. Source
Payroll accrual shifted reported cash: Excluding a $9.5 million increase in the payroll accrual, cash flow from operations was $20.7 million, against $87.1 million a year earlier. The company stated payroll timing is not indicative of quarterly cash flow. Source
Cash and securities of $204.3 million: Cash and marketable securities were $204.3 million, up from $200.9 million at the second quarter end, with $300.0 million of credit facility unused. Source

“With the industry at the beginning of a multi-decade demographic tailwind, our unified health and hospitality services platform strategically positions us to fulfill our Vision and drive sustained long-term value creation for our shareholders.”
Ted Wahl, Chief Executive Officer

Share repurchases and share count

Third-quarter buybacks of $11.7 million: The company repurchased $11.7 million of its stock in the third quarter, against $20.9 million in the second quarter. Source
$56.6 million repurchased year to date: Year-to-date repurchases total $56.6 million, leaving 7.7 million shares under the authorization, down from 8.3 million at the second quarter. Source
Diluted share count declined: Weighted-average diluted shares were 69.4 million in the third quarter, against 73.0 million a year earlier. Source

Customers, receivables and Genesis

Genesis recovery of $6.1 million recorded: An estimated $6.1 million recovery was recorded after the court-approved sale of Genesis on October 14, 2026. The company said a substantially higher upper-range recovery remains possible. Source
Receivables rose since December: Accounts receivable, net was $309.6 million at September 30, 2026, up from $281.3 million at December 31, 2025. Source
Other current liabilities increased: Other current liabilities were $185.1 million at September 30, 2026, up from $146.0 million at December 31, 2025. Source

NEXDINE acquisition and strategy

NEXDINE acquired for $93.5 million: The acquisition of NEXDINE Hospitality closed on October 6, 2026, for an upfront price of $93.5 million, funded with cash on hand. Source
NEXDINE expected to add over $150 million: NEXDINE is expected to contribute over $150 million in annual revenue at comparable margins and to be immediately accretive to earnings. Source
NEXDINE keeps brand and leadership: NEXDINE continues to operate as a wholly-owned subsidiary, retaining its brand identity and leadership team. Source
Health and hospitality platform positioning: Management described the acquisition as deepening its health and hospitality capabilities and positioning the company for growth in senior living and hospitality-driven markets. Source

Coming up, as management said on 21 October 2026

UBS Global Healthcare Conference presentation: The company will attend and present at the UBS Global Healthcare Conference on November 9 in Palm Beach Gardens, FL. Source
Stephens investment conference presentation: The company will attend and present at the Stephens Annual Investment Conference on November 18 in Nashville, TN. Source
Evercore healthcare conference presentation: The company will attend and present at the 9th Annual Evercore Healthcare Conference on December 1 in Coral Gables, FL. Source

Risks management discussed

Financial: The company stated the Genesis recovery's remaining variables and contingencies cannot yet be reasonably estimated. Source
Financial: The company noted that payroll payment timing can move operating cash flow up or down, so quarterly cash flow may not reflect performance. Source

Earlier plans management reported on

Not stated: Management refers to an organic growth inflection it planned for, which it describes as now being delivered, without a status label. Source
Not stated: Management refers to the February 2026 plan to repurchase $75.0 million through January 2027, with $56.6 million repurchased year to date. 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 Third Quarter Results

Delivers Strong Results

Raises 2027 Growth Expectations

Revenue of $479.6 million
Net income and diluted EPS of $24.9 million and $0.36
Cash flow from operations of $30.2 million; cash flow from operations, excluding the change in payroll accrual, of $20.7 million
Expands footprint in senior living and hospitality markets through the acquisition of NEXDINE Hospitality
Raises 2027 revenue growth outlook from mid single-digits to low double-digits

BENSALEM, PA--(BUSINESS WIRE)-- Healthcare Services Group, Inc. (NASDAQ: HCSG) today reported results for the three months ended September 30, 2026.

Ted Wahl, Chief Executive Officer, stated, “Our strong third quarter results reflect the underlying strength of our business fundamentals and disciplined operational execution. The organic growth inflection we planned for, and are now delivering, sets the stage for fourth quarter revenue in the range of $535 to $545 million and low double-digit top-line growth in 2027.”

Mr. Wahl continued, “Our acquisition of NEXDINE Hospitality in early October represents a significant milestone, deepening our health and hospitality services capabilities and unlocking new growth pathways in senior living and hospitality-driven markets. We are excited to partner with the NEXDINE team in their next phase of growth and innovation.”

Mr. Wahl concluded, “Looking ahead, the strong demand for our services, our expanded operational expertise, and extraordinary team members give us great confidence in our growth trajectory across healthcare, senior living, and campus environments. With the industry at the beginning of a multi-decade demographic tailwind, our unified health and hospitality services platform strategically positions us to fulfill our Vision and drive sustained long-term value creation for our shareholders.”

Third Quarter Results

Revenue was reported at $479.6 million.
Segment revenues and margins for Environmental and Dietary Services were reported at $217.2 million and 13.3% and $262.4 million and 8.7%, respectively.
Cost of services was reported at $399.2 million or 83.2%.
The Company’s goal is to manage cost of services in the 86% range.
SG&A was reported at $48.5 million. After adjusting for the $0.6 million decrease in deferred compensation, SG&A was $49.1 million or 10.2%.
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 26.2%.
The Company expects its full-year effective tax rate to be approximately 25.0%.
Net income and diluted EPS were reported at $24.9 million and $0.36, respectively.

Balance Sheet and Liquidity

The Company’s primary sources of liquidity remain cash flow from operating activities, cash and cash equivalents, and its revolving credit facility. Cash flow from operations was reported at $30.2 million.

After adjusting for the $9.5 million increase in the payroll accrual, cash flow from operations was $20.7 million. As of the end of the third quarter, the Company had cash and marketable securities of $204.3 million and an unutilized $300.0 million credit facility.

NEXDINE Hospitality Acquisition

On October 6, 2026, the Company completed the acquisition of NEXDINE Hospitality for an upfront purchase price of $93.5 million, funded with cash on hand. NEXDINE will continue to operate as a wholly-owned subsidiary of HCSG, retaining its brand identity and leadership team, and is expected to contribute over $150 million in annual revenue at comparable margins to the Company’s while being immediately accretive to earnings.

Genesis Bankruptcy Update

As a result of recent key developments in the Genesis Bankruptcy case, including the court approved sale of Genesis to 101 W. State Street on October 14, 2026, the Company recorded an estimated recovery of $6.1 million. There remains a substantially higher potential upper-range recovery, subject to certain variables and contingencies. The resolution of such variables and contingencies are not known and cannot be reasonably estimated at this time.

Share Repurchases

Under its February 2026 plan to repurchase $75.0 million of common stock through January 2027, the Company repurchased $11.7 million of common stock during the third quarter. Year to date, the Company has repurchased $56.6 million of common stock and has 7.7 million shares remaining under its authorization.

Conference Call and Upcoming Events

The Company will host a conference call on Wednesday, October 21, 2026, at 8:30 a.m. Eastern Time to discuss its results for the three months ended September 30, 2026. The call may be accessed via phone at (833) 461-5787, Conference ID: 231251110. 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 be available on the website for one year following the date of the earnings call.

The Company will be attending and presenting at the UBS Global Healthcare Conference on November 9 in Palm Beach Gardens, FL. The Company will also be attending and presenting at the Stephens Annual Investment Conference on November 18 in Nashville, TN. Additionally, the Company will be attending and presenting at the 9th Annual Evercore Healthcare Conference on December 1 in Coral Gables, FL.

About Healthcare Services Group, Inc.

Healthcare Services Group, Inc. (NASDAQ: HCSG) is a premier health and hospitality services platform offering comprehensive solutions across healthcare, senior living, and campus environments. With 50 years of experience, HCSG and its family of brands deliver operational excellence, an enhanced customer experience, and specialized environmental and culinary expertise for its client-partners nationwide.

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 Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, 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 primarily 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 presents cash flow from operations (excluding the change in 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		For the Nine Months Ended
	September 30,		September 30,
	2026	2025	2026	2025
Revenue	$479,604	$464,338	$1,413,178	$1,370,491
Operating costs and expenses:
Cost of services	399,215	367,933	1,182,161	1,203,157
Selling, general and administrative	48,452	50,541	143,034	144,670
Income from operations	31,937	45,864	87,983	22,664
Other income, net	1,791	11,444	11,289	16,650
Income before income taxes	33,728	57,308	99,272	39,314
Income tax provision	8,851	14,355	25,639	11,499
Net income	$24,877	$42,953	$73,633	$27,815
Net income per common share
Basic	$0.37	$0.59	$1.07	$0.38
Diluted	$0.36	$0.59	$1.05	$0.38
Weighted-average common shares outstanding
Basic	68,005	72,237	68,873	73,019
Diluted	69,379	72,966	70,110	73,505

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(in thousands)

	September 30, 2026	December 31, 2025
Cash and cash equivalents	$134,598	$125,189
Restricted cash equivalents	115	5,577
Marketable securities, at fair value	34,223	42,774
Restricted marketable securities, at fair value	35,367	30,352
Accounts receivable, net	309,595	281,303
Notes receivable - short-term, net	24,504	31,243
Other current assets	44,359	59,977
Total current assets	582,761	576,415
Property and equipment, net	30,777	27,586
Notes receivable - long-term, net	42,350	25,209
Goodwill	90,456	79,797
Other intangible assets, net	16,860	6,964
Deferred compensation funding	59,018	55,909
Other assets	28,176	22,373
Total assets	$850,398	$794,253
Accrued insurance claims - current	$21,353	$24,371
Other current liabilities	185,069	146,004
Total current liabilities	206,422	170,375
Accrued insurance claims - long-term	41,156	46,142
Deferred compensation liability - long-term	59,122	56,276
Lease liability - long-term	11,433	9,659
Other long-term liabilities	814	1,591
Stockholders' equity	531,451	510,210
Total liabilities and stockholders' equity	$850,398	$794,253

RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES

(Unaudited)

Reconciliation of GAAP net income to EBITDA and Adjusted EBITDA	For the Three Months Ended				For the Nine Months Ended
September 30,				September 30,
2026		2025		2026		2025
	(in thousands)
GAAP net income	$24,877		$42,953		$73,633		$27,815
Income tax provision	8,851		14,355		25,639		11,499
Interest, net	(2,166)		(7,546)		(6,179)		(11,731)
Depreciation & amortization	4,056		4,029		11,382		12,908
EBITDA	$35,618		$53,791		$104,475		$40,491
Share-based compensation	2,942		2,602		8,527		8,881
Adjusted EBITDA	$38,560		$56,393		$113,002		$49,372
Adjusted EBITDA as a percentage of revenue	8.0%		12.1%		8.0%		3.6%

1.Includes right-of-use asset depreciation of $1.9 million and $5.2 million for the three and nine months ended September 30, 2026, respectively, and $2.1 million and $6.3 million for the three and nine months ended September 30, 2025, respectively.

Reconciliation of GAAP cash from operations to cash flow from operations (excluding the change in payroll accrual)	For the Three Months Ended				For the Nine Months Ended
September 30,				September 30,
2026		2025		2026		2025
	(in thousands)
GAAP cash from operations	$30,170		$71,293		$95,770		$127,581
Change in accrued payroll	(9,491)		15,799		(23,786)		134
Cash flow from operations (excluding the change in payroll accrual)	$20,679		$87,092		$71,984		$127,715

1.The accrued payroll adjustment reflects changes in accrued payroll for the three and nine months ended September 30, 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.