Healthcare Services Group, Inc. Reports Results for the Three and Nine Months Ended September 30, 2017 and Announces Increased Third Quarter 2017 Cash Dividend

BENSALEM, Pa., Oct. 17, 2017 (GLOBE NEWSWIRE) — Healthcare Services Group, Inc. (NASDAQ:HCSG) reported that revenues for the three months ended September 30, 2017 increased approximately 25% to $491.4 million. Net income for the three months ended September 30, 2017 was $23.5 million, or $0.32 per basic and $0.31 per diluted common share, compared to the three months ended September 30, 2016 net income of $19.7 million, or $0.27 per basic and diluted common share.

Revenues for the nine months ended September 30, 2017 increased approximately 17% to $1.4 billion. Net income for the nine months ended September 30, 2017 was $68.0 million, or $0.93 per basic and $0.92 per diluted common share, compared to the nine months ended September 30, 2016 net income of $57.1 million, or $0.79 per basic and $0.78 per diluted common share.

In addition, our Board of Directors declared a quarterly cash dividend of $0.19 per common share, payable on December 22, 2017 to shareholders of record at the close of business on November 17, 2017. This represents the 58th consecutive quarterly cash dividend payment, as well as the 57th consecutive increase since our initiation of quarterly cash dividend payments in 2003.

The Company will host a conference call on Wednesday, October 18, 2017 at 8:30 a.m. Eastern Time to discuss its results for the three and nine months ended September 30, 2017. The call may be accessed via phone at 800-893-5360. The call will be simultaneously webcast under the “Events & Presentations” section of the investor relations page on our website, www.hcsg.com. A replay of the earnings call may be accessed through the phone number above through 10:00 p.m. Eastern Time on Wednesday, October 18, 2017. The webcast will also be available on our website for one year following the date of the earnings call.

The Company also announced that it will be presenting at the Credit Suisse Healthcare Conference on November 8, 2017 at The Phoenician in Scottsdale, Arizona, as well as at the Stifel Healthcare Conference on November 14, 2017 at the Lotte New York Palace Hotel in New York City, New York.

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 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,” 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 exclusively to the health care industry, primarily providers of long-term care; having one client which accounted for approximately 16% and another client which accounted for approximately 9% of our total consolidated revenues for the nine months ended September 30, 2017; credit and collection risks associated with this industry; our claims experience related to workers’ compensation and general liability insurance; the effects of changes in, or interpretations of laws and regulations governing the 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; continued realization of tax benefits arising from our corporate reorganization and self-funded health insurance program; risks associated with the reorganization of our corporate structure; and the risk factors described in Part I of our Form 10-K for the fiscal year ended December 31, 2016 under “Government Regulation of Clients,” “Competition’’ and “Service Agreements and Collections,” and under Item IA “Risk Factors” in such  Form 10-K.

These factors, in addition to delays in payments from clients and/or clients in bankruptcy or clients with which we are in litigation to collect payment, 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 if unexpected  increases in the costs of labor and labor-related costs, materials, supplies and equipment used in performing services could not be passed on to our clients.

In addition, we believe that to improve our financial performance we must continue to obtain service agreements with new clients, retain and provide new services to existing clients, achieve modest price increases on current service agreements with existing clients and 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.          

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   Senior Vice President of Strategy    
         
215-639-4274        
investor-relations@hcsgcorp.com        

HEALTHCARE SERVICES GROUP, INC.
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,
  2017   2016   2017   2016
Revenues $ 491,355     $ 392,734     $ 1,366,721     $ 1,164,097  
Operating costs and expenses:              
Cost of services provided 426,924     336,340     1,179,816     998,595  
Selling, general and administrative 32,940     27,182     93,141     78,192  
Income from operations 31,491     29,212     93,764     87,310  
Other income:              
Investment and interest 1,439     1,359     4,523     2,548  
Income before income taxes 32,930     30,571     98,287     89,858  
Income taxes 9,458     10,860     30,247     32,761  
               
Net income $ 23,472     $ 19,711     $ 68,040     $ 57,097  
               
Basic earnings per common share $ 0.32     $ 0.27     $ 0.93     $ 0.79  
               
Diluted earnings per common share $ 0.31     $ 0.27     $ 0.92     $ 0.78  
               
Cash dividends declared per common share $ 0.19000     $ 0.18500     $ 0.56625     $ 0.55125  
               
Basic weighted average number of common shares outstanding 73,461     72,839     73,272     72,718  
               
Diluted weighted average number of common shares outstanding 74,538     73,592     74,252     73,435  
                       

HEALTHCARE SERVICES GROUP, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands)
 
  September 30, 2017   December 31, 2016
  (Unaudited)    
Cash and cash equivalents $ 11,005     $ 23,853  
Marketable securities, at fair value 70,384     67,730  
Accounts and notes receivable, net 367,009     271,276  
Other current assets 67,144     51,765  
Total current assets 515,542     414,624  
       
Property and equipment, net 13,499     13,455  
Notes receivable – long term 11,495     7,531  
Goodwill 51,084     44,438  
Other intangible assets, net 32,075     14,409  
Deferred compensation funding 27,387     24,119  
Other assets 10,460     9,870  
Total Assets $ 661,542     $ 528,446  
       
Accrued insurance claims – current $ 24,827     $ 23,573  
Other current liabilities 150,555     77,298  
Total current liabilities 175,382     100,871  
       
Accrued insurance claims – long term 67,818     64,080  
Deferred compensation liability 27,886     24,653  
Stockholders’ equity 390,456     338,842  
Total Liabilities and Stockholders’ Equity $ 661,542     $ 528,446