HCSG

This article first appeared on GuruFocus. - Revenue: $479.6 million in Q3 2026; ninth sequential revenue increase over past 10 quarters. - Environmental Services Revenue: $217.2 million. - Environmental Services Margin: 13.3%. - Dietary Services Revenue: $262.4 million. - Dietary Services Margin: 8.7%. - Cost of Services: $399.2 million, or 83.2% of revenue; benefited from strong service execution and lower bad debt expense. - SG&A: $48.5 million; $49.1 million or 10.2% after adjusting for $600,000 decrease in deferred compensation. - Effective Tax Rate: 26.2% reported; approximately 25% expected for 2026. - Net Income: $24.9 million. - Diluted EPS: $0.36. - Cash Flow from Operations: $30.2 million; $20.7 million after adjusting for $9.5 million decrease in payroll accrual. - Cash and Marketable Securities: $204.3 million at end of Q3. - Credit Facility: $300 million unutilized revolving credit facility. - Share Repurchases: $11.7 million in Q3; $56.6 million year-to-date; 7.7 million shares remaining under authorization. - Q4 Revenue Guidance: $535 million to $545 million. - 2027 Revenue Growth Outlook: Raised from mid-single digits to low-double digits. - NEXDINE Acquisition: Expected to contribute over $150 million in annual revenue at comparable margins; immediately accretive to earnings. - Genesis Recovery: Estimated recovery of pre-petition claims at $6.1 million. - Warning! 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Release Date: October 21, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. - Healthcare Services Group Inc (NASDAQ:HCSG) reported Q3 revenue of $479.6 million, marking the ninth sequential revenue increase over the past 10 quarters, driven by new client wins and high retention rates. - The acquisition of NEXDINE Hospitality is expected to contribute over $150 million in annual revenue at comparable margins and be immediately accretive to earnings, expanding Healthcare Services Group Inc (NASDAQ:HCSG)'s footprint in senior living and hospitality-driven markets. - Healthcare Services Group Inc (NASDAQ:HCSG) raised its 2027 revenue growth outlook from mid-single digits to low-double digits, reflecting strong demand and organic growth momentum. - Cost of services was well below the 86% target at 83.2%, benefiting from strong service execution and lower bad debt expense, with bad debt expense at less than 0.5% of revenue excluding the Genesis benefit. - Healthcare Services Group Inc (NASDAQ:HCSG) maintains a strong balance sheet with $204.3 million in cash and marketable securities and an unutilized $300 million credit facility, providing flexibility for organic growth, M&A, and share repurchases. - The Genesis bankruptcy recovery is estimated at only $6.1 million, with no scenario for 100% recovery, and the timing and final amount remain uncertain due to contingencies. - SG&A increased in Q3 due to higher professional fees, including legal and M&A-related expenses, and Healthcare Services Group Inc (NASDAQ:HCSG) expects continued upward pressure from investments and future M&A activity. - Bad debt expense remains lumpy and unpredictable, and while recent performance has been strong, it could revert to historical averages of 1% to 1.5% of revenue, impacting cost of services. - Workers' compensation costs are driven by incident frequency and severity, and despite efforts to manage them, unexpected spikes could reverse cost of services improvements. - The NEXDINE acquisition will result in the loss of interest income on $90 million to $100 million of cash used for the deal, partially offsetting the expected EPS accretion. Q: On the 2027 outlook for low-double-digit top-line growth, is there a likelihood that organic growth could accelerate to high-single digits given demographic tailwinds? A: CEO Theodore Wahl confirmed the low-double-digit outlook includes mid-single-digit organic growth plus NEXDINE. He noted the organic outlook is grounded in positive top-line momentum, a strong new business pipeline, and management capacity, while the company continues to retain over 90% of its base business. He added that as the 2027 pipeline matures, updates will be shared. Q: Regarding the Genesis recovery, did the $6.1 million have any flow-through impact to Q3 earnings, and is the ~$65 million accounts receivable the top end of potential recoveries? A: CFO Vikas Singh said the $6.1 million flows through the P&L as a bad debt offset and benefits cost of sales, falling to net income on an after-tax basis. He noted the ~$65 million figure is closer to total exposure, and the company does not expect 100% recoverythe $6.1 million takes the write-off from 100% down to a level in excess of 90%, consistent with historical bankruptcies. Recoveries could improve based on contingencies, but a 100% recovery scenario is not expected. Q: Cost of services was again well below the 86% target. How much of the strength came from service execution versus lower bad debt? A: CCO Matthew McKee attributed the primary driver to overall service executioncustomer experience, systems adherence, regulatory compliance, and budget disciplineand expects this to carry through the balance of 2026 and beyond. CFO Vikas Singh added that the bad debt benefit was $3.6 million, driven by the Genesis assessment; even including the $6.1 million benefit, bad debt expense was only about $2.5 million, or less than 0.5% of revenuethe lowest in six quarters versus a pre-CECL historical average of 1% to 1.5%. Q: What is NEXDINE's growth trajectory and cash conversion, and do its contracts have similar pass-through protections? A: CEO Theodore Wahl described NEXDINE as a natural extension of the dining offering with highly complementary, aligned cultures, and sees it as a double-digit growth opportunity. CFO Vikas Singh added that NEXDINE's contracts, similar to HCSG's upgraded contracts, allow pass-through of price increases, a system that has worked well during periods of elevated food price movement. Q: The Q4 revenue guidance midpoint implies roughly a $60 million sequential increase. How much comes from the acquisition versus organic, and what gives confidence in the organic acceleration? A: CEO Theodore Wahl said the $535 million to $545 million Q4 range includes NEXDINE's annual revenues in excess of $150 million, with the remainder of the growth coming from organic business momentum, which is very strong heading into Q4 and expected to carry into the new year. Q: With SG&A within the short-term guidance range this quarter, what are the key drivers for additional operating leverage, and is reaching the low end a realistic 2027 opportunity? A: CFO Vikas Singh described SG&A as roughly half fixed and half variable, with organic and inorganic growth naturally bringing it down as a percentage of revenue over time. He cautioned that investments in people, training, and technology, plus M&A-related professional fees (which rose this quarter), can pressure SG&A, but the company intends to bring SG&A down over time without committing to a timeframe and will not let that objective impede appropriate investments. Q: Are there specific NEXDINE integration milestones to watch, or is it assumed fully integrated as of the October 6 close? A: CFO Vikas Singh said a comprehensive integration plan is in place across departments, but externally the integration should be treated as a done deal at announcement, given the transaction is less than 10% of top line. Finance, accounting, and reporting integration is well underway, with other areas on a more spread-out timeline; internal milestones are expected to be hit by the end of the year. Q: Are there revenue synergy opportunities contemplated in NEXDINE's double-digit growth goal, and does that include further inorganic growth? A: CEO Theodore Wahl said nothing is planned on the inorganic side presently with NEXDINE, but the company will proactively leverage existing client relationships, vendor partnerships, and industry organizations, and share best practices among HCSG, Campus Services Group, Meriwether Godsey, and NEXDINE. NEXDINE will retain its brand identity and people culture within the broader health and hospitality platform. Q: Is there an updated timing on a final resolution of the Genesis case and the remainder of the recovery? A: CEO Theodore Wahl said timing is TBD, citing key variables and contingencies including claim allowances, the ultimate amount of claims filed, and assets available for distribution. Because these are not known, the company cannot specify a time period or an amount reasonably estimable beyond what was recorded for the quarter. Q: Can you split the $6.1 million Genesis benefit by segment, and what explains the gap between the adjusted cost of services and the 86% target? A: CFO Vikas Singh said the split was roughly even and did not significantly affect segment margins. On the 86% target, he noted the three-year average prior to 2026 was closer to 87%, and excluding bad debt and workers' comp benefits, the LTM cost of sales is comparable to that three-year average. He said there isn't enough historical data to move off 86%, given the unpredictable and lumpy nature of bad debt and workers' comp across a ~40,000-employee base. Q: How should we model NEXDINE's SG&A impact, intangible amortization, and any earnout liability on the balance sheet? A: CFO Vikas Singh said to keep using the existing company-wide margin profile given NEXDINE's size and similar margins, noting any SG&A percentage difference cannot move the needle on a blended basis. He said intangible and contingent payment figures are still being worked through and will be shared on the next earnings call. He added a caveat that accretion is partly offset by losing interest income on roughly $90 million to $100 million of cash used for the deal, but the transaction For the complete transcript of the earnings call, please refer to the full earnings call transcript.

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., October 21, 2026--(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 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. 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, | 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 HEALTHCARE SERVICES GROUP, INC.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 HEALTHCARE SERVICES GROUP, INC.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 & amortization1 | | 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 | % 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(1) | | (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 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. View source version on businesswire.com: https://www.businesswire.com/news/home/20261021303146/en/ Contacts 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 [email protected]

Image source: The Motley Fool. Wednesday, Oct. 21, 2026 - Chief Executive Officer - Ted Wahl - Chief Communications Officer - Matt McKee - Executive Vice President and Chief Financial Officer - Vikas Singh Operator: Matters discussed on today's conference call include forward-looking statements about the business prospects of Healthcare Services Group Inc. For Healthcare Services Group Inc's most recent forward-looking statement notice, please refer to the press release issued this morning, which can be found on our website, www.hcsgcorp.com. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties, and important factors, including those discussed in the Risk Factors, MD&A, and other sections of the annual report on Form 10-K and Healthcare Services Group Inc's other SEC filings, and as indicated in our most recent forward-looking statements notice. Additionally, management will be discussing certain non-GAAP financial measures. A reconciliation of these items to US GAAP can be found in this morning's press release. I will now hand the conference over to Ted Wahl, Chief Executive Officer. Please go ahead. Ted Wahl: Good morning, everyone, and welcome to HCSG's third quarter 2026 earnings call. With me today are Matt McKee, our Chief Communications Officer, and Vikas Singh, our Chief Financial Officer. Earlier this morning, we released our third quarter results and plan on filing our 10-Q by the end of the week. Today, in my opening remarks, I'll discuss our Q3 highlights, share our perspective on the general business environment, and discuss our outlook for Q4 and 2027. Matt will then provide a more detailed discussion on our Q3 results, and Vikas will provide an update on our liquidity position and capital allocation progression. We will then open up the call for Q&A. With that overview, I'd like to now discuss our Q3 highlights. Our strong third quarter results reflect the underlying strength of our business fundamentals and disciplined operational execution. New client wins and high retention rates drove our Q3 top-line growth, our ninth sequential revenue increase over the past 10 quarters, and our field-based team's operational excellence led to high-quality service outcomes and consistent margins. The acquisition of NEXDINE Hospitality on October 6 represents a significant milestone as it expands our footprint in the senior living and hospitality-driven markets and deepens our service capabilities across our family of brands. NEXDINE is expected to contribute over $150 million in annual revenue at comparable margins and be immediately accretive to earnings. We are thrilled to partner with our NEXDINE colleagues in their next phase of growth and innovation. On October 14, the Bankruptcy Court approved the sale of Genesis to 101 West State Street. The outcome of the Genesis restructuring creates stronger, healthier HCSG client facilities, provides balance sheet clarity for our stakeholders, and enables future expansion opportunities with a growth-oriented client partner. Our current estimated recovery of pre-petition claims is $6.1 million. There remains a substantially higher potential upper-range recovery subject to certain variables and contingencies, the resolutions of which are not known and cannot be reasonably estimated at this time. I'd like to now share our perspective on the general business environment. Overall industry fundamentals continue to gain strength, highlighted by the multi-decade demographic tailwind that is now beginning to work its way into the broader senior care environments. In 2026, the first of the baby boomers are turning 80, and by the year 2030, all 70 million+ boomers will be over the age of 65, with the oldest being in their mid-80s. We expect the demand and opportunities for senior care service providers in the health and hospitality space, especially for those with compelling value propositions, durable business models, and market-leading positions to only increase in the months and years ahead. Beyond our core industry trends, we continue to monitor the broader macro landscape, including sustained volatility in energy and supply markets. Our role as financial stewards for our clients remains our highest priority in this environment, and the depth of our longstanding vendor partnerships provides the critical visibility to pivot sourcing and mitigate direct exposure. Ultimately, our enhanced contractual frameworks allow us to pass through unavoidable cost increases, ensuring we are preserving our margins while continuing to deliver market-leading service. Looking ahead to Q4 in 2027, the organic growth inflection we planned for and are now delivering sets the stage for fourth quarter revenue in the range of $535 million-$545 million. We expect to carry that positive momentum into 2027 and are raising our 2027 revenue growth outlook from the mid-single digits to low double digits. 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 platform strategically positions us to fulfill our vision and drive sustained long-term value creation for our shareholders. With those introductory comments, I'll turn the call over to Matt. Matt McKee: Thanks, Ted, and good morning, everyone. Revenue was reported at $479.6 million. Segment revenues and margins for Environmental Services were reported at $217.2 million and 13.3%. Segment revenues and margins for Dietary Services were reported at $262.4 million and 8.7%. As Ted mentioned in his remarks, we are expecting Q4 revenue in the $535 million to $545 million range and low double-digit revenue growth in 2027. Cost of services was reported at $399.2 million or 83.2%. Cost of services benefited from strong service execution and lower bad debt expense. Our goal is to manage the cost of services in the 86% range. SG&A was reported at $48.5 million. After adjusting for the $600,000 decrease in deferred compensation, SG&A was $49.1 million or 10.2%. Our goal is to manage SG&A in the 9.5%-10.5% range with the longer-term goal of managing these costs into the 8.5%-9.5% range. Our effective tax rate was reported at 26.2%, and we expect our 2026 effective tax rate to be approximately 25%. Net income and diluted earnings per share were reported at $24.9 million and $0.36 per share. I'd now like to turn the call over to Vikas. Vikas Singh: Thank you, Matt, and good morning, everyone. Starting with our liquidity and cash flows, our primary sources of liquidity are cash flows from operating activities, cash and cash equivalents, and our revolving credit facility. Cash flow from operations was reported at $30.2 million. After adjusting for the $9.5 million decrease in the payroll accrual, cash flow from operations was $20.7 million. As of the end of the third quarter, we had cash and marketable securities of $204.3 million and an unutilized $300 million credit facility. We continue to execute on our capital allocation priorities across organic growth, M&A, and share repurchases. Our approach continues to be grounded in discipline, and our balance sheet provides us the flexibility to pursue all of these priorities in tandem. With regards to share repurchases, we announced plans in February 2026 to further accelerate the pace of our share buybacks and target $75 million of our common stock over 12 months. In the third quarter, we repurchased $11.7 million of our common stock, bringing our year-to-date total to $56.6 million. We now have 7.7 million shares remaining under our share repurchase authorization. With that, we will conclude our opening remarks and open up the call for Q&A. Operator: We will now begin the question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first question from the line of A.J. Rice with UBS. Your line is open. Please go ahead. James: Hi, this is James on for A.J Rice. Congrats on the good quarter. I guess on the 2027 outlook, calling for low double-digit top-line growth, seems like that's embedding some mid-single-digit organic growth. If so, is there any likelihood that organic growth could accelerate potentially to the high single digits, just given that demographic tailwinds you've been pointing to in the nursing home industry and potential likelihood for that happening? Ted Wahl: James, you are right in that our outlook of low double digits is inclusive of that mid-single-digit growth target organically as well as NEXDINE Hospitality. That organic growth outlook is grounded in the positive top-line momentum we expect to carry into the new year, along with the strength of our new business pipeline, and then our assessment of the timing considerations related to management capacity and client start date preference. We continue to successfully execute on the organic growth strategy by developing management candidates to support new business opportunities while retaining greater than 90% of our base business. So the momentum is very strong. As far as additional updates on 2027 pipeline developments, as the pipeline matures, we will most certainly share those updates. Very strong momentum heading into the new year. Speaker 4: Okay, great. Thank you. Maybe just one more. On the Genesis, there was a $6.1 million recovery you mentioned. Did that have any flow-through impact to Q3 earnings, or expected to be a potential benefit in Q4? Then maybe on the upper-end range you called out, I think previously you had accounts receivable in the amount of $65 million. Would that be considered the top end of potential recoveries? Any color there would be great. Thank you. Vikas Singh: Yeah. The $6.1 million is flowing through the P&L like any other bad debt expense. In this case, it is a bad debt offset. It is a benefit to our cost of sales, so it is flowing through the P&L and falling down to the net income line on a post-tax basis. In terms of the higher end, the number you quoted is closer to our total exposure, and we do not expect just about every other bankruptcy to have 100% recovery here. Our expectation is what we have recognized at $6.1 million basically takes our write-off from 100% down to a level that is in excess of 90%. If we look back at our history of bankruptcies, it is fairly consistent in terms of what that percentage and number implies. Based on recent events, there is a possibility based on a number of contingencies that the number could go higher and our recoveries could improve, but we do not see a scenario where we will end up with 100% recoveries. Speaker 4: Okay, great. Thanks for taking my questions. Operator: Your next question from the line of Sean Dodge with BMO Capital Markets. Your line is open. Please go ahead. Chris Charles: Hey, good morning. It's Chris Charles on for Sean here. Thanks for taking our questions. Maybe beginning on the cost. Cost of services was again well below the 86% target. Is there anything more you can share just on the strength from service execution versus the lower bad debt and how much of a benefit this was compared to the prior few quarters? Matt McKee: Yeah, good morning, Chris. Just at a high level, as we previously stated, the primary driver, as you note, is the overall service execution, right? From our perspective, the recent positive trends in customer experience, systems adherence, which is critical both operationally and from a budgetary compliance perspective, that regulatory adherence and compliance and ultimately yielding budget discipline. All of those components are near-term margin drivers, and that carried into Q3. The expectation is that carries through the balance of 2026 and beyond. That's why we remain confident in our ability to continue to manage cost of services in that 86% range. And we want to recognize the field-based management teams for executing to deliver on those expectations, and they certainly deserve a lot of credit for that execution. There's no guarantee, and it is a daily grind to deliver on all of those marks relative to the systems adherence, the compliance, the budgetary discipline, all of that yielding the great customer experience. That said, this has always been the case that there's going to be some movement month to month, quarter-to-quarter, and the timing of certain items can have an impact in any given quarter. Vikas Singh: Yeah. Chris, to add on topics like bad debt expense. If you think about this quarter, the bad debt benefit, it was not an expense this quarter, was $3.6 million, and that was driven by our Genesis assessment. But even if you include the Genesis assessment, the benefit of $6.1 million, our bad debt expense for the quarter was only about $2.5 million or less than half a percent of revenue. That is much lower than what we've been doing in the recent past. That number by itself would have been our lowest bad debt number in the last six quarters. So I think combined with the operational execution that Matt talked about, all the attempts and efforts we've been putting into managing bad debt have been yielding results. Now, obviously with bad debt, I constantly like to remind everyone that while we are very pleased with what we've achieved in the last few quarters, performance in any given quarter does not predict what will happen in the next one, and bad debt by its very nature can be a little more lumpy in terms of when we come across bad debt expenses. But keep in mind, our historical average in the pre-CECL era was between 1%-1.5% of revenue. So the fact that without Genesis, we would've been sitting at half a percent of revenue in bad debt expense does provide a nice uplift to our cost of sales story in addition to the operational excellence. Chris Charles: Okay. Great. That's helpful. Is there anything else you can share on NEXDINE's profile? I appreciate the commentary on the comparable margins, but how should we think about the growth trajectory of this business or its cash conversion? Do the contracts here, do they have similar pass-through protections? Matt McKee: Yeah. I would start with the premise of the opportunity as a natural extension of our dining offering that favorably positions us in a compelling way within senior living, healthcare, and the campus end market. Our businesses are highly complementary of one another, starting with our deeply aligned cultures in that we share a common belief system that is grounded in a greater purpose and serving which are foundational to behaviors and expectations. That is foundational to the partnership and to the acquisition. NEXDINE Hospitality promotes an environment for an entrepreneurial spirit and promotion from within pathways very similar to HCSG, which then allows our differences in size scale, and end market focus to be a strength and a massive opportunity to learn from one another. Ted Wahl: To share ideas and create even more possibilities for the future. We are thrilled to have them as a partner in their future growth journey and as part of our unified health and hospitality platform. I think specifically to the growth opportunities that lie ahead, we do see them as a double-digit growth opportunity as we evaluate it currently. So that will add to our family of brands, including Campus Services Group and Meriwether Godsey on the campus side, NEXDINE, with a focus more on the senior living and hospitality-driven markets, and then Healthcare Services, HCSG, is that core healthcare offering. So we are very well-positioned for future growth and we are excited about the possibilities. Chris Charles: Great. [inaudible] Vikas Singh: Yeah. On the contracts and the ability to pass along costs, NEXDINE Hospitality is similar to how we have modified and upgraded our contracts over the last few years. They have contracts in place that allow them to pass along any price increase they encounter, and that system has been working fairly well for them. If we look back over the last few years when there have been periods and pockets of elevated price movement with respect to food purchases. Chris Charles: Great, thanks. Operator: Your next question from the line of Ryan Daniels with William Blair. Your line is open. Please go ahead. Matthew Mardula: Yeah. Hello, this is Matthew Mardula, I'm for Ryan. Thank you for taking all the questions. I want to talk about the Q4 revenue guidance. When I'm taking the midpoint of the Q4 revenue guidance, it implies roughly a $60 million sequential increase from Q3, compared with quarterly increases of about $8 million-$9 million over the past two quarters. How much of the Q4 increase is coming from the acquisition versus the organic segment? Then within the organic segment, it still seems like an increase compared to previous quarters, and of course, timing is going to be a big factor for revenue. With that accelerated growth for the organic segment, what's giving you that confidence for Q4? Ted Wahl: Yeah. To your point, Matthew, as far as the Q4 breakdown, our revenue range, $535 million to 545 million, with NEXDINE Hospitality contributing annual revenues in excess of $150 million to that total. The remainder of that growth in Q4 is organic business momentum. As I mentioned earlier in the call, we have very strong momentum heading into Q4 and expect to carry that into the new year. Matthew Mardula: Got it. With SG&A as a percentage of revenue coming within the short-term guidance range this quarter, as you look forward, what are the key drivers that could create maybe some additional operating leverage and the timing of that for SG&A? Then how should we think about the company reaching the maybe low end of that short-term guidance as a realistic 2027 opportunity? Or is this kind of more of a longer-term goal? Vikas Singh: Yeah. On the SG&A front, from our perspective, as we think about the composition of how SG&A is built up for us, I would approximate it as something that's, call it half-fixed, half-variable. We have the growth momentum, and we have the discipline around how we manage our costs with respect to vendors, employees, and other programs that go within SG&A. So we see a natural cadence driven by organic growth, inorganic growth, such that SG&A comes down over time as a percentage of revenue. So that's the story to an improving profile. That said, we'll always have situations and quarters where the requisite investments in the business. So in the past, we've talked about investments with respect to people, training, technology. Anytime we decide to make those decisions, it does put upward pressure on SG&A. So that's one counter to the improvement story. The other could be what we encountered this quarter, for example, which is we did see our SG&A number go up in the third quarter, and the key reason for that was an increase in professional fees such as legal fees and M&A related expenses. We do intend to continue down the path of inorganic growth driven by M&A. We don't have a fixed number of deals we want to do each year or each quarter, but we will remain active in evaluating those situations and moving ahead with situations that seem like the best fit. That obviously adds to some expenses with respect to advisors and legal and other M&A related fees. So you will see that element be present as well. But we do think over a period of time, without committing to a time frame, we will look to bring SG&A down. That said, we will not let that objective come in the way of appropriate investments, be it people, be it technology, be it M&A. We'll try and create the balance between the two objectives there. Matthew Mardula: Great. Thank you so much for taking my questions, and nice job on the quarter. Operator: Your next question from the line of Ryan Halsted with RBC Capital Markets. Your line is open. Please go ahead. Ryan Halsted: Morning. Thanks for taking my questions. Maybe just to come back to the NEXDINE acquisition, just to clarify the first point, are there specific integration milestones that we should be looking out for, or is the assumption that it's fully integrated effective the October 6th close date? Vikas Singh: Yeah. From our perspective, obviously, we do have a very comprehensive integration plan in place that applies at the broader corporate level for NEXDINE Hospitality, but then goes down to each department and touches just about every individual in the organization. But from an external and reporting perspective, I think you should take the integration as a done deal the moment we announce. Again, I think we say that not because we don't prioritize integration. It is very important, but we also want to be cognizant of the fact that we're talking about a transaction that is less than 10% of our top line. So it is an important milestone, but it is not a size and scale such that we will put out milestones for integration. That said, internally, we are working through different departments in terms of speed of integration. Some departments will get integrated much faster. Accounting and finance and reporting, that integration is well underway. There will be other integrations which will be on a more spread out timeline, but our expectation is those milestones, internal milestones, will all be hit by the end of the year. Ryan Halsted: Got it. Great. Just on the strategic rationale, just in terms of potential synergies. I think you called out that you are looking at it as having a NEXDINE Hospitality having a double-digit growth opportunity. Are there revenue synergy opportunities contemplated in that goal? Is that also inclusive of some of the commentary that you made about continuing to pursue inorganic growth opportunities? Is that assuming you are going to continue to grow around the senior housing opportunity and the NEXDINE Hospitality platform? Appreciate it. Ted Wahl: Yeah. Nothing planned on the M&A or inorganic side presently with NEXDINE Hospitality, but certainly, it gets back to my thoughts and comments around team play. We are going to proactively, in a collaborative way, leverage existing client relationships to the extent they exist, vendor partnerships, even industry organizations. Then certainly there is an opportunity among and between HCSG, CSG, Meriwether Godsey on the Campus side, and then NEXDINE Hospitality to share ideas and create possibilities and opportunities for the future. In terms of the day-to-day that is happening in the field with our clients, they will continue with their brand identity and people culture, which is aligned with the broader health and hospitality platform we have created. Beyond that, the lines of communication are wide open, and there is plenty of opportunity to leverage one another's best ideas, share best practices, and continue on our growth journey. Ryan Halsted: Great. Maybe just one last one from me. Good to see the update on the Genesis case, and the recovery. Is there a potential updated timing on a final resolution? How should we think about the remainder? Ted Wahl: That's TBD. Vikas spoke to the key variables and contingencies that remain, certainly for HCSG, but really any general unsecured creditor as part of the distribution process. Claim allowances are one part of it and how they're determined, the ultimate amount of claims filed, and then the amount of assets available for distribution. The resolutions of those variables, Ryan, are just not known, and that's why we aren't able to specify a time period or an amount that can be reasonably estimated beyond what we've recorded for the quarter. Ryan Halsted: Got it. Congrats on the NEXDINE acquisition and the quarter. Thanks. Ted Wahl: Thank you, Ryan. Operator: Your next question from the line of Andy Wittmann with Baird. Your line is open. Please go ahead. Andy Wittmann: Great. Thanks. Good morning, guys. I just wanted to ask some questions to help understand the quarter and maybe kind of the model here. First one here, Vikas, the $6.1 million benefit that you took, can you talk about the split by segment so we can just understand underlying what those segments reported in gross margins? Vikas Singh: It's near about even. That split did not fluctuate the segment margins in a significant fashion one way or the other, Andy. Andy Wittmann: Okay. Even if you take that $6.1 million and add it back and you look at your underlying, you kind of talked about this earlier, but you're still better than the 86%. I don't know, and this isn't new, but are you protecting in case bad debt steps up again? Is that the swing factor? Is there something else that we should think about that would take you to that 86% level? Again, just wondering if there's anything else there in the delta between the target and even the adjusted actual here that we should be considering as we think about the go forward. Vikas Singh: Yeah. No, that's a very fair question, Andy. Look, we've been fortunate to deliver the kind of performance we've delivered year to date or on a LTM basis. But the way we look at these metrics and goalposts is on a more longer-term basis before we implement any change. Just to put it in context, if we look at the three-year average prior to 2026 for where cost of sales has been, that number is closer to 87%. So we are trending in the right direction. Look, with the passage of time, if we keep delivering this kind of performance, we will want to go back, revisit that number. But for now, we don't have enough historical data to suggest that we need to move off the 86%. If you were to look at the data in an alternative fashion, strip out bad debt expense, strip out the workers' comp benefit from cost of sales, then look at the cost of sales number exclusive of those two factors, our LTM percentage for that metric is very much comparable to the three-year average. Andy Wittmann: Okay. Vikas Singh: Again, we have improved operationally. It is making a difference, but there is also the unpredictable and lumpy workers' comp and bad debt elements to it. Now, we feel we are doing whatever we can to contain bad debt in terms of internal resources, people, technology, how much time we spend with clients, how we interact with them. But that will not guarantee that. There could be clients who could intentionally or unintentionally face challenges, and performance in the first three quarters gives us no ability to predict what will happen in the next quarter. That remains a variable. I know workers' comp, we have talked about extensively in the past with you on the last call as well. We are trying our best to taper that number off. But again, when you talk about an organization with close to 40,000 employees, and workers' comp being a metric that is driven by number of incidents and the severity, all the efforts we have put into managing that expense down through education, through safety procedures are valid. But you could always find yourself in a situation where there is an unpredicted spike in incidents and severity, which reverses the course for us on cost of sales. So your question is completely valid. It is just that we just do not have the right data points to go back and say 86% should be something else. Andy Wittmann: Yeah. Okay, that is a totally fair answer. I appreciate you running me through that. Next, I wanted to ask a little bit more on NEXDINE Hospitality here. Just maybe Vikas, I know you have only owned this thing for a couple of weeks here, but to the extent you can help us, I think it help you to get the street numbers right here. So a couple of the questions that come up is, you said comparable margins, so we can do that math. But just in terms of where it falls, what do you think the SG&A impact could be in terms of maybe like a quarterly run rate? Because obviously, there is going to be some of the costs that are going to fall there. I would be also curious to an initial view that you might have on the increase in intangible amortization. You did say that you expect the deal to be immediately accretive and that amort number, obviously non-cash, but has an effect there. Just wanted to get a first view from you on that one. Keeping going on this kind of trend here, you're going to have to put a liability on your balance sheet for your expected payment of an earn-out. I think you'd mentioned that there was an earn-out associated with this. So maybe if you give us ballpark what that liability on the balance sheet's going to be, so we could think about it like you're thinking about it, would be some of the questions as it relates to NEXDINE Hospitality accounting. Thanks. Vikas Singh: Yeah, fair enough. So again, as we think about the P&L margin impact, I think the best way to model this out would be, again, if this was a company with revenues of $500 million or $1 billion, the assessment and analysis would be a little different. But given the size and scale, I think from a modeling perspective, looking at the revenue guidance we've given, that this is a $150 million-odd revenue company and the margin profile is similar. I think as you decide to model out the future P&Ls for us, you can keep using the existing company-wide margin profile. Am I saying that their SG&A percentage is identical to ours? No, we are not. But that said, even if the SG&A for NEXDINE Hospitality is different from our percentage, on a blended basis, it cannot move the needle given its limited size. And we feel comfortable that our current guidance around margins in the aggregate will continue to hold. The story with NEXDINE Hospitality will be more about how we can combine with them, give them the infrastructure resources to grow faster than what they've done. It will not be a story about how our margin profile got altered because of NEXDINE Hospitality. So I think that's the best way to think about the margin profile for now. In terms of elements such as the contingent payment or the intangible, we're working through those numbers right now. I think it'll be appropriate, perhaps, to touch upon that topic in our next earnings call when NEXDINE Hospitality will get picked up in our reported numbers. But we don't have much to share on that topic right now. And to give you an example, the intangible assessment typically takes a few weeks after transaction close. So we are working through that. It's not a number that is available yet, but again, if you think about what the company does, it's a services company, and at the end of the day, it's not asset heavy. So you can use some ballparks if you want to, but we are still working through those numbers, and we'll share those. The one caveat I will add as you model out the P&L and look at the accretion impact would be, yes, their margin profile is similar to ours, does uplift our net income and EPS numbers, but there is also the offset. We've basically used $90 million+ of our own cash that was earning interest in money market mutual funds and the likes, which will no longer be at our disposal. There will be an offset to net income from basically losing interest income on close to $90 million-$100 million of cash that was providing interest income. But other than that, we don't have much other color to add on the margin profile beyond saying very similar, very consistent to the overall company profile. Andy Wittmann: All right. But just to be clear here, you expect it to be accretive to EPS even including the penalty of not having the interest income. Is that correct? Vikas Singh: Yes. Andy Wittmann: It's going to earn more than the outcome. Just want to make sure. Vikas Singh: Absolutely. Andy Wittmann: Yep. Okay. And then, Matt, just on the accrual days, can you just remind us how many days accrual is in 4Q? And then I think where all of us are going to be flipping to look more closely at 2027. And so maybe people are going to want to try to get the seasonality for cash flows dialed in for 2027, maybe a little bit closer here. Can you just take us through 2027 and the days accruals and maybe remind for everyone's benefit what each day is currently worth at this new run rates of revenue at the stepped-up level here? Matt McKee: Yeah. If we look at the fourth quarter, it is going to be a six-day increase from 11 days in the third quarter to five days in the fourth quarter. Rough numbers, the change in the accrual will have about an $18 million negative impact on the reported cash flow. Looking ahead to 2027 Q1, it will be about a $19 million positive effect. It is a six-day increase from five days in Q4 to 11 days in Q1. Q2 should have about a -$9 million effect on reported cash flow. That is a two-day decrease from 11 days in Q1 to nine days in Q2. Q3 will be about a $13 million positive effect on reported cash flow. That is a two-day increase from nine days in Q2 to 11 days in Q3. In Q4 of 2027, it should have an $18 million or so negative effect on reported cash flow. That is a five-day decrease from 11 days in Q3 to six days in Q4. Obviously, Andy, as we continue to grow the business and grow payroll, there will be modest impact as to the effect of a particular day of payroll. Directionally, hopefully this is helpful for you from a modeling perspective. Andy Wittmann: Yes. I wanted to make sure I captured that correctly with the NEXDINE Hospitality acquisition contributing more revenue now. That is why I wanted the refresh there. I knew you would be ready for us on that one too, so I definitely appreciate that. Have a great day, guys. Operator: There are no further questions at this time. I will now turn the call back to Ted Wahl for closing. Ted Wahl: Okay, great. Thank you, Ben. As we enter the fourth quarter of our 50th anniversary year, the company's underlying fundamentals are more robust than ever. Our leadership and team members, our enhanced value proposition, our business model, and the visibility we have into that business model, our positive KPI and key business trends, and our strong balance sheet and ROIC profile. 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. On behalf of Matt, Vikas, and all of us at Healthcare Services Group, Ben, thank you for hosting the call today, and thank you again to everyone for joining us. Operator: This concludes today's call. Thank you for attending. You may now disconnect. Before you buy stock in Healthcare Services Group, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Healthcare Services Group wasn't one of them. The 10 stocks that made the cut could produce monster returns in the coming years. 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As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool recommends Healthcare Services Group. The Motley Fool has a disclosure policy. HCSG Q3 2026 Earnings Call Transcript was originally published by The Motley Fool

- Interested in Healthcare Services Group, Inc.? Here are five stocks we like better. - Healthcare Services Group reported strong Q3 results, with revenue of $479.6 million and net income of $24.9 million, supported by new business, client retention and operational execution. Management expects Q4 revenue of $535 million to $545 million and raised its 2027 revenue-growth outlook to the low double digits. - The acquisition of NEXDINE Hospitality, completed October 6, is expected to add more than $150 million in annual revenue at comparable margins and be immediately accretive to earnings. The deal expands HCSG's senior living and hospitality presence. - Liquidity remained solid, with $204.3 million in cash and marketable securities plus an unused $300 million revolver. The company repurchased $11.7 million of stock during Q3, while also recording a $6.1 million Genesis restructuring-related bad-debt recovery. - Cigna Considers Humana Acquisition – What It Means for the Stocks Healthcare Services Group (NASDAQ:HCSG) reported third-quarter 2026 revenue of $479.6 million and net income of $24.9 million, or $0.36 per diluted share, as new client wins, retention and operational execution supported growth and margins. Chief Executive Officer Ted Wahl said the quarter marked the company's ninth sequential revenue increase in the past 10 quarters. He said the company's field-based teams helped produce service outcomes and consistent margins, while industry conditions are benefiting from demographic trends in senior care. → The AI Sell-Off Continues—These 3 Stocks Keep Raising Guidance Anyway - Is Cigna Group the Nation's Best-Run Health Insurance Company? "The organic growth inflection we planned for and are now delivering" supports fourth-quarter revenue of $535 million to $545 million, Wahl said. The company also raised its 2027 revenue-growth outlook to low double digits from a prior mid-single-digit outlook. Environmental Services revenue was $217.2 million in the third quarter, with a segment margin of 13.3%. Dietary Services revenue was $262.4 million, with a segment margin of 8.7%. → Tesla's Roadster Reveal Hints at 2 Much Bigger Moves Cost of services totaled $399.2 million, or 83.2% of revenue. Chief Communications Officer Matt McKee said the result benefited from service execution and lower bad-debt expense. The company's stated goal is to manage cost of services at about 86% of revenue. McKee said execution was supported by customer experience, adherence to operating systems and regulatory requirements, and budget discipline. He cautioned, however, that quarterly results can vary based on the timing of certain items. → Luxury's Middle Market Is Cracking—These 3 Stocks Could Win Chief Financial Officer Vikas Singh said the company recorded a $3.6 million bad-debt benefit during the quarter, driven by its assessment of the Genesis restructuring. Excluding the $6.1 million Genesis-related benefit, bad-debt expense would have been about $2.5 million, or less than 0.5% of revenue, which Singh said was lower than the company's recent results. Singh said management is not changing its 86% cost-of-services target yet, despite recent performance below that level. He cited potentially variable items such as bad debt and workers' compensation expense, noting that the company's three-year average cost of sales before 2026 was closer to 87%. Selling, general and administrative expense was $48.5 million. After adjusting for a $600,000 decrease in deferred compensation, SG&A was $49.1 million, or 10.2% of revenue. Healthcare Services Group's current target range is 9.5% to 10.5%, with a longer-term goal of 8.5% to 9.5%. Singh said roughly half of SG&A is fixed and half is variable, creating the potential for operating leverage as revenue grows. He also said investments in people, training, technology and acquisitions, as well as professional and legal fees, can pressure SG&A in individual periods. Healthcare Services Group completed its acquisition of NEXDINE Hospitality on Oct. 6. Wahl said the acquisition expands the company's presence in senior living and hospitality-focused markets and is expected to contribute more than $150 million of annual revenue at comparable margins. Management said the transaction is immediately accretive to earnings. Wahl described NEXDINE as a double-digit growth opportunity and said it complements the company's existing Healthcare Services, Campus Services Group and Meriwether Godsey businesses. He said the combined organization expects to share ideas, client relationships, vendor partnerships and best practices while allowing NEXDINE to retain its brand identity and people culture. Singh said NEXDINE's contracts include provisions enabling the business to pass along price increases, similar to Healthcare Services Group's updated contractual framework. While the company has an integration plan spanning corporate functions and departments, Singh said management does not expect to provide external integration milestones because NEXDINE represents less than 10% of company revenue. Internal integration milestones are expected to be completed by year-end. Management did not provide figures for contingent consideration or intangible amortization from the acquisition, saying those assessments were still underway. Singh noted that the company used more than $90 million of cash for the transaction, reducing interest income on cash balances, but reiterated that the deal is expected to be accretive even after that impact. On Oct. 14, the Bankruptcy Court approved the sale of Genesis to 101 West State Street. Healthcare Services Group estimated a $6.1 million recovery of pre-petition claims. Singh said the recovery was reflected in the third-quarter income statement as an offset to bad-debt expense and benefited cost of sales and net income on a post-tax basis. The company said a higher recovery remains possible, but the outcome depends on unresolved variables, including claim allowances, total claims filed and assets available for distribution. Management said it does not expect a full recovery of its Genesis exposure and could not provide a timetable for final resolution. For 2027, Wahl said low-double-digit revenue growth will include a mid-single-digit organic growth target as well as NEXDINE's contribution. He said the organic outlook reflects current revenue momentum, a strong new-business pipeline, management capacity and client implementation timing. The company said it continues to retain more than 90% of its base business. Cash flow from operations was $30.2 million in the third quarter. After adjusting for a $9.5 million decrease in payroll accruals, operating cash flow was $20.7 million. At quarter-end, Healthcare Services Group held $204.3 million in cash and marketable securities and had an unused $300 million revolving credit facility. The company repurchased $11.7 million of common stock during the quarter, bringing year-to-date repurchases to $56.6 million. Healthcare Services Group had announced plans in February to target $75 million of repurchases over 12 months and had 7.7 million shares remaining under its authorization at the end of the quarter. Healthcare Services Group, Inc (NASDAQ:HCSG) provides outsourced support services to healthcare facilities in the United States. Its customers primarily include nursing homes, skilled nursing facilities, continuing care retirement communities, assisted-living facilities and other institutional healthcare providers. The company's principal service offerings include housekeeping, laundry and linen services, as well as dining and nutritional services. These services are designed to help healthcare operators manage nonclinical functions, maintain facility standards and support the daily needs of residents and patients. Healthcare Services Group was founded in 1976 and is headquartered in Bensalem, Pennsylvania. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "What Healthcare Services Group (HCSG) Said on Its Q3 Earnings Call" was originally published by MarketBeat. View MarketBeat's top stocks for October 2026.

Healthcare Services (HCSG) came out with quarterly earnings of $0.36 per share, beating the Zacks Consensus Estimate of $0.22 per share. This compares to earnings of $0.23 per share a year ago. These figures are adjusted for non-recurring items. This quarterly report represents an earnings surprise of +63.64%. A quarter ago, it was expected that this provider of housekeeping, laundry and dietary services to health care facilities would post earnings of $0.2 per share when it actually produced earnings of $0.32, delivering a surprise of +60%. Over the last four quarters, the company has surpassed consensus EPS estimates four times. Healthcare Services, which belongs to the Zacks Business - Services industry, posted revenues of $479.6 million for the quarter ended September 2026, missing the Zacks Consensus Estimate by 0.07%. This compares to year-ago revenues of $464.34 million. The company has topped consensus revenue estimates two times over the last four quarters. The sustainability of the stock's immediate price movement based on the recently-released numbers and future earnings expectations will mostly depend on management's commentary on the earnings call. Healthcare Services shares have added about 12.5% since the beginning of the year versus the S&P 500's gain of 12.7%. While Healthcare Services has underperformed the market so far this year, the question that comes to investors' minds is: what's next for the stock? There are no easy answers to this key question, but one reliable measure that can help investors address this is the company's earnings outlook. Not only does this include current consensus earnings expectations for the coming quarter(s), but also how these expectations have changed lately. Empirical research shows a strong correlation between near-term stock movements and trends in earnings estimate revisions. Investors can track such revisions by themselves or rely on a tried-and-tested rating tool like the Zacks Rank, which has an impressive track record of harnessing the power of earnings estimate revisions. Ahead of this earnings release, the estimate revisions trend for Healthcare Services was mixed. While the magnitude and direction of estimate revisions could change following the company's just-released earnings report, the current status translates into a Zacks Rank #3 (Hold) for the stock. So, the shares are expected to perform in line with the market in the near future. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here. It will be interesting to see how estimates for the coming quarters and the current fiscal year change in the days ahead. The current consensus EPS estimate is $0.24 on $491.76 million in revenues for the coming quarter and $1.14 on $1.91 billion in revenues for the current fiscal year. Investors should be mindful of the fact that the outlook for the industry can have a material impact on the performance of the stock as well. In terms of the Zacks Industry Rank, Business - Services is currently in the top 38% of the 250 plus Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1. Another stock from the same industry, Bowman Consulting (BWMN), has yet to report results for the quarter ended September 2026. This professional services firm is expected to post quarterly earnings of $0.50 per share in its upcoming report, which represents a year-over-year change of -18%. The consensus EPS estimate for the quarter has remained unchanged over the last 30 days. Bowman Consulting's revenues are expected to be $159.75 million, up 26.8% from the year-ago quarter. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Healthcare Services Group, Inc. (HCSG) : Free Stock Analysis Report Bowman Consulting Group Ltd. (BWMN) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. - Achieved the ninth sequential revenue increase over ten quarters, driven by high client retention and a robust new business pipeline. - Expanded service capabilities and market footprint through the acquisition of NEXDINE Hospitality, targeting the senior living and hospitality-driven sectors. - Secured a $6.1 million pre-petition claim recovery following the Genesis restructuring, which management views as providing balance sheet clarity and opening future expansion opportunities with a healthier client partner. - Leveraged enhanced contractual frameworks to pass through unavoidable cost increases in energy and supply markets, preserving margins despite macro volatility. - Attributed margin performance to field-based operational excellence, specifically citing systems adherence and regulatory compliance as primary drivers of budgetary discipline. - Positioned the company to capitalize on the 'baby boomer' demographic tailwind, with the first cohort turning 80 in 2026, increasing demand for specialized health and hospitality services. - Raised 2027 revenue growth outlook from mid-single digits to low double digits, reflecting organic momentum and the NEXDINE acquisition. - Projected Q4 2026 revenue between $535 million and $545 million, incorporating a $150 million annual revenue contribution from NEXDINE. - Anticipates a 2026 effective tax rate of approximately 25% and aims to manage long-term SG&A into the 8.5% to 9.5% range through scale and discipline. - Expects the NEXDINE acquisition to be immediately accretive to earnings, even after accounting for the loss of interest income on the $90 million+ cash purchase price. - Maintains a target cost of services in the 86% range, acknowledging that while current performance is better, bad debt and workers' comp remain inherently lumpy variables. - Recorded a $6.1 million bad debt offset in Q3 related to the Genesis bankruptcy, reducing the total write-off to slightly above 90% of exposure. - Acknowledged potential for additional Genesis recoveries subject to contingencies, though management noted 100% recovery is not expected. - Executed $11.7 million in share repurchases during Q3, totaling $56.6 million year-to-date toward a $75 million 12-month target. - Reported a temporary spike in SG&A professional fees due to M&A activity and legal expenses, which may recur as the company evaluates further inorganic growth. - Management stated the low double-digit 2027 target includes mid-single-digit organic growth plus NEXDINE contributions. - Growth is currently gated by management capacity and client start-date preferences, though the pipeline remains strong. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. - Management attributed the current outperformance to exceptional service execution and lower-than-average bad debt (0.5% of revenue excluding Genesis). - They maintained the 86% target to account for unpredictable spikes in workers' compensation claims and potential client financial challenges. - NEXDINE's contracts are confirmed to have pass-through protections that allow them to pass along any price increases they encounter, similar to HCSG's upgraded contracts. as HCSG's upgraded frameworks. - The acquisition is viewed as a 'double-digit growth opportunity' that will operate with its own brand identity while sharing best practices across the platform. - SG&A is roughly 50% fixed and 50% variable; management expects natural leverage as the top line grows. - Future SG&A may be pressured by intentional investments in technology and people, as well as ongoing advisory fees for M&A. - Management provided specific 2027 payroll accrual shifts: Q1 will see a $19 million positive effect, while Q4 will see an $18 million negative impact. - These projections were updated to reflect the higher revenue run rate following the NEXDINE acquisition.

Healthcare Services Group, Inc. HCSG is scheduled to release third-quarter 2026 results on Oct. 21, before market open. The company exits the September-end quarter amid execution risks associated with the timing of new business starts, inflationary pressures and variability in insurance-related benefits. Although demand for its services remains healthy, these factors are likely to have limited profitability and the pace of revenue growth during the soon-to-be-reported quarter. The Zacks Consensus Estimate for third-quarter 2026 earnings is pegged at 22 cents per share, indicating a 3.64% year-over-year increase. The measure has been revised 10% upward over the past 60 days. The same for revenues is pegged at $479.93 million, indicating a 3.36% increase from the third-quarter 2025 actuals. For 2026, the Zacks Consensus Estimate for earnings is pegged at $1.14 per share, indicating a 3.64% year-over-year increase. The same for revenues is pegged at $1.91 billion, indicating a 3.71% increase from 2025 actuals. HCSG has an impressive earnings surprise history, surpassing the Zacks Consensus Estimate in each of the trailing four quarters. The average beat is 57.25%. Healthcare Services Group, Inc. price-eps-surprise | Healthcare Services Group, Inc. Quote Timing of New Business Starts: The timing of management capacity and client start dates are expected to have constrained HCSG's third-quarter growth. Management noted that these factors can shift opportunities between quarters, with some business potentially being pushed out or pulled forward. The company expected third-quarter revenues of $475-$485 million, implying a more measured growth pace before an anticipated acceleration later in the year. Inflationary Cost Pressure: Food and labor inflation remain factors to watch. Management noted an increase in food-at-home inflation and continued to monitor wage trends. Although HCSG's contractual framework generally permits the company to pass through food and wage inflation, timing differences or outsized increases are likely to have created near-term cost pressure. Lower Insurance-Related Benefits: Insurance reserve adjustments are likely to have provided less support to third-quarter profitability. Management indicated that benefits related to workers' compensation and general liability reserves are expected to gradually trend toward zero and can fluctuate significantly from quarter to quarter. A lower benefit may therefore have weighed on earnings comparisons. Credit and Collection Risks: Customer payment delays and restructuring activity remain additional risks. HCSG's 10-Q notes that delays in customer payments and customers undergoing restructurings could lead to additional bad-debt expenses, while inflation in labor, materials and supplies could hurt results if costs cannot be fully passed through. Our proven model does not conclusively predict an earnings beat for Healthcare Services Group this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the odds of an earnings beat. But that is not the case here. HCSG has an Earnings ESP of 0.00% and a Zacks Rank #3 (Hold) at present. You can uncover the best stocks to buy or sell before they're reported with our Earnings ESP Filter. Here are a few stocks from the broader Zacks Business Services sector that investors may consider, as our model shows that they have the right combination of elements to beat on earnings this reporting cycle. Booz Allen Hamilton BAH has an Earnings ESP of +5.31% and a Zacks Rank #2 at present. You can see the complete list of today's Zacks #1 Rank stocks here. BAH is scheduled to report third-quarter 2026 earnings on Oct. 23. The Zacks Consensus Estimate for 2026 earnings has been revised upward by 0.16% over the past 60 days. BAH's earnings beat the Zacks Consensus Estimate in three of the preceding four quarters and met once in the remaining quarter, with the average beat being 24.2%. Veralto Corporation VLTO has an Earnings ESP of +1.21% and a Zacks Rank #2 at present. VLTO is scheduled to report third-quarter 2026 earnings on Oct. 29. The Zacks Consensus Estimate for 2026 earnings has been revised upward by 1.38% to $4.41 per share over the past 60 days. VLTO's earnings beat the Zacks Consensus Estimate in each of the preceding four quarters. The average beat is 6.56%. Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Healthcare Services Group, Inc. (HCSG) : Free Stock Analysis Report Booz Allen Hamilton Holding Corporation (BAH) : Free Stock Analysis Report Veralto Corporation (VLTO) : Free Stock Analysis Report This article originally published on Zacks Investment Research (zacks.com). Zacks Investment Research

Our analysts just identified a stock with the potential to be the next Nvidia. Tell us how you invest and we'll show you why it's our #1 pick. Tap here. Management attributes the positive business environment to a multi-decade demographic tailwind, noting that the first baby boomers turn 80 in 2026, which is the primary age cohort for long-term care utilization. Revenue performance was supported by steady occupancy and a growing industry workforce that has recovered to pre-pandemic baselines, alongside a stable reimbursement environment. Operational outperformance in the quarter was driven by strong service execution and lower bad debt expense, which remained below the historical average of 1%-1.5% of revenue. Strategic positioning is focused on a 'financial stewardship' model, utilizing longstanding vendor partnerships to provide visibility and stability amidst global energy and supply market volatility. The company is utilizing contractual frameworks to pass through unavoidable food and wage inflationary costs, effectively preserving margins despite macro pressures. Growth is being fueled by a structured sales process and the development of internal management candidates to fund new business opportunities while maintaining a retention rate above 90%. Management reaffirmed its 2026 mid-single-digit revenue growth outlook, with expectations for a significant growth ramp in the second half of the year based on current pipeline visibility. Third quarter revenue is projected to be in the $475 million to $485 million range, assuming continued conversion of sales pipeline opportunities and management capacity timing. The company aims to manage cost of services in the 86% range and SG&A in the 9.5%-10.5% range, with a long-term goal of reducing SG&A to 8.5%-9.5%. Strategic priorities for the remainder of the year include optimizing cash flow through increased customer payment frequency and enhanced contract terms. The 2026 effective tax rate is expected to be approximately 25%, while capital allocation remains focused on organic growth, M&A, and a $75 million share repurchase target. The company reported a $1.3 million benefit from an actuarial review of self-insurance reserves, though management expects this benefit to trend toward zero as reserves reach a steady state. Management is monitoring the Genesis bankruptcy, expecting the sale to close in late Q3 or early Q4 2026 without disruption to current operations or payments. A small strategic acquisition was completed in the campus business during Q2 to enhance footprint and capabilities, though its immediate revenue contribution is considered insignificant. Geopolitical conflicts and volatility in global energy markets are noted as ongoing risks, though sourcing pivots are prepared to mitigate direct exposure. One stock. Nvidia-level potential. 30M+ investors trust Moby to find it first. Get the pick. Tap here. Management explained that the confidence in a Q4 ramp is grounded in a mix of signed contracts awaiting start dates and high-probability opportunities in the pipeline. The timing of growth is influenced by HCSG management capacity and client start date preferences rather than a lack of demand. CPI food-at-home inflation increased to 1% in Q2 after three quarters of declines, but HCSG acts as a steward to mitigate these costs or pass them through contractually. Wage inflation showed a seasonal uptick in Q1 to 1.1%, but the labor market is stabilizing, improving the company's ability to hire and retain staff. Bad debt expense was $4.3 million (less than 1% of revenue), benefiting from collection initiatives and enhanced contract terms. The insurance benefit is a non-cash actuarial true-up; management warned this number is lumpy and difficult to predict, ranging from $1.5 million to $4.5 million historically. Dietary services remain only 50% penetrated within the existing Environmental Services customer base, representing significant 'low-hanging fruit' for organic growth. A dietary account typically provides twice the revenue contribution of an environmental services account on a same-store basis.