# EDGAR Filing Document

**Accession Number:** 0000731012
**File Stem:** 0000731012-23-000016
**Filing Date:** 2023-2
**Character Count:** 16832
**Document Hash:** 0e2f41d9cb99101f477701ef3bb5b32d
**Contains OCR:** False
**Source Format:** 

## Filing Content

## Filing Summary
**0000731012-23-000016.hdr.sgml**: 20230215

**ACCESSION NUMBER**: 0000731012-23-000016

**CONFORMED SUBMISSION TYPE**: 8-K

**PUBLIC DOCUMENT COUNT**: 13

**CONFORMED PERIOD OF REPORT**: 20230215

**ITEM INFORMATION**: Results of Operations and Financial Condition

**ITEM INFORMATION**: Other Events

**ITEM INFORMATION**: Financial Statements and Exhibits

**FILED AS OF DATE**: 20230215

**DATE AS OF CHANGE**: 20230215

**FILER**: 

**COMPANY DATA:**
- **COMPANY CONFORMED NAME:** HEALTHCARE SERVICES GROUP INC
- **CENTRAL INDEX KEY:** 0000731012
- **STANDARD INDUSTRIAL CLASSIFICATION:** SERVICES-NURSING & PERSONAL CARE FACILITIES [8050]
- **IRS NUMBER:** 232018365
- **STATE OF INCORPORATION:** PA
- **FISCAL YEAR END:** 1231

**FILING VALUES:**
- **FORM TYPE:** 8-K
- **SEC ACT:** 1934 Act
- **SEC FILE NUMBER:** 000-12015
- **FILM NUMBER:** 23633597

**BUSINESS ADDRESS:**
- **STREET 1:** 3220 TILLMAN DRIVE
- **STREET 2:** SUITE 300
- **CITY:** BENSALEM
- **STATE:** PA
- **ZIP:** 19020
- **BUSINESS PHONE:** 2159381661

**MAIL ADDRESS:**
- **STREET 1:** 3220 TILLMAN DRIVE
- **STREET 2:** SUITE 300
- **CITY:** BENSALEM
- **STATE:** PA
- **ZIP:** 19020

?xml version="1.0" ? hcsg-20230215

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

**FORM 8-K**

**CURRENT REPORT**

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 15, 2023

**<u>HEALTHCARE SERVICES GROUP, INC.</u>**

(Exact name of registrant as specified in its charter)

Commission File Number: 0-12015

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

<u>3220 Tillman Drive, Suite 300, Bensalem, Pennsylvania</u>

(Address of principal executive office)

<u>19020</u>

(Zip Code)

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

&nbsp;&nbsp;&nbsp;&nbsp;

<u>Not Applicable</u>

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

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

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

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

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

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

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

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

---

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

Emerging growth company ☐

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

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<u>Item 2.02</u> Results of Operations and Financial Condition.

On February 15, 2023, Healthcare Services Group, Inc. (the "Company") issued a press release (the "Press Release") announcing its earnings for the three months and year ended December 31, 2022. A copy of the Press Release is being furnished hereto as Exhibit 99.1 and is hereby incorporated by reference to this Current Report.

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

<u>Item 8.01</u> Other Events.

The Press Release also announced the Company's rebalancing of its capital allocation strategy by suspending its quarterly cash dividend. On February 14, 2023, the Company's Board of Directors authorized the Company to repurchase up to 7,500,000 shares of Company common stock and suspended the quarterly cash dividend on Company common stock.

<u>Item 9.01</u> Financial Statements and Exhibits.

(a)&nbsp;&nbsp;&nbsp;&nbsp;Not applicable

(b)&nbsp;&nbsp;&nbsp;&nbsp;Not applicable

(c)&nbsp;&nbsp;&nbsp;&nbsp;Not applicable

(d)&nbsp;&nbsp;&nbsp;&nbsp;Exhibits.

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| | |
|:---|:---|
| Exhibit Number | Description |
| 99.1 | <u>[Press Release and financial tables dated February](ex99-2022xq4xpressrelease.htm)[15](ex99-2022xq4xpressrelease.htm)[, 202](ex99-2022xq4xpressrelease.htm)[3](ex99-2022xq4xpressrelease.htm)[, issued by Healthcare Services Group, Inc.](ex99-2022xq4xpressrelease.htm)</u> |
| 104 | Cover page Interactive Data File (embedded within the Inline XBRL document) |

---

**SIGNATURES**

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

---

| | | |
|:---|:---|:---|
| | | <u>HEALTHCARE SERVICES GROUP, INC.</u> |
| Date: February 15, 2023 | By: | /s/ Andrew M. Brophy |
|  |  | Name: Andrew M. Brophy<br>Title: Vice President, Controller & Principal Accounting Officer |

---

## Ex-99

Exhibit 99.1

**Healthcare Services Group, Inc.** 

**Reports Q4 2022 Results**

*Achieves Direct Cost Target, Rebalances Capital Allocation Strategy*

BENSALEM, PA--(BUSINESS WIRE)-- Healthcare Services Group, Inc. (NASDAQ:HCSG) (the "Company") reported for the three months ended December 31, 2022 revenue of $424.0 million, net income of $16.2 million, or $0.22 per basic and diluted common share, and cash flow from operations of $22.9 million. The Company also announced that, as part of a comprehensive rebalancing of its capital allocation strategy, its Board of Directors has suspended the quarterly cash dividend on its common stock and authorized the repurchase of up to 7.5 million shares of its common stock.

<u>Q4 Results</u>

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Revenue for the quarter was reported at $424.0 million, with housekeeping & laundry and dining & nutrition segment revenues of $198.0 million and $226.0 million, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Housekeeping & laundry and dining & nutrition segment margins were 8.7% and 4.3%, respectively.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Direct cost of services was reported at $366.8 million, or 86.5%. Direct cost included a $9.8 million benefit related to favorable workers' compensation loss development trends offset, in part, by an $8.6 million increase in AR reserves.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Selling, general and administrative ("SG&A") was reported at $39.5 million; after adjusting for the $2.1 million increase in deferred compensation, actual SG&A was $37.4 million, or 8.8%.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• The effective tax rate was 19.4% for the fourth quarter and 23.2% for full year 2022. The Company expects a 2023 tax rate of 24% to 26%.

&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;&nbsp;• Cash flow from operations for the quarter was $22.9 million and was impacted by a $3.1 million decrease in accrued payroll, including the impact of the second half, or $24.4 million, of the deferred FICA payment. DSO for the quarter was 72 days.

Ted Wahl, Chief Executive Officer, stated, "I'm pleased with our fourth quarter results, which underscore the resilience of our business model and continued passion and perseverance of our people in a challenging operating environment. We achieved our 2022 goal of exiting the year with cost of services in line with our historical target of 86%, met our Q4 goal of 'collecting what we bill,' and have a growing pipeline of future client-partners as we head into 2023."

Mr. Wahl continued, "While the industry continues to face headwinds related to workforce availability, inflation and supply chain constraints, we are encouraged by the gradual but steadily improving facility census and labor market trends. We will continue to closely monitor industry dynamics, and we remain confident that the growth outlook for the Company remains strong given our market leadership, efficient operating model and the attractive demographics."

<u>Capital Allocation</u>

The Company, as part of its disciplined and balanced approach to managing capital, is rebalancing its capital allocation strategy to enhance financial flexibility, invest in organic and inorganic opportunities and accelerate value creation. As such, the Board of Directors has suspended the quarterly cash dividend on its common stock and authorized the repurchase of up to 7.5 million shares of its common stock.

Mr. Wahl stated, "The Board regularly reviews the Company's capital allocation strategy to ensure it supports our goal of creating value for shareholders by delivering on our near-term operational objectives and our growth outlook. As we look at the current opportunities, we believe that rebalancing our approach to allocating capital - especially given the prolonged industry recovery, ongoing macroeconomic challenges and our strong liquidity position - will result in more proactive, impactful and enduring value creation in the coming years."

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Exhibit 99.1

<u>Conference Call and Upcoming Events</u>

The Company will host a conference call on Wednesday, February 15, 2023, at 8:30 a.m. Eastern Time to discuss its results for the three months ended December 31, 2022. The call may be accessed via phone at 1 (888) 330-3451, Conference ID: 4431380. The call will be simultaneously webcast under the "Events & Presentations" section of the Investor Relations page on the Company's website, www.hcsg.com. A replay of the webcast will also be available on the website for one year following the date of the earnings call.

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Exhibit 99.1

**CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING STATEMENTS**

*This release and any schedules incorporated by reference into it may contain forward-looking statements within the meaning of federal securities laws, which are not historical facts but rather are based on current expectations, estimates and projections about our business and industry, and our beliefs and assumptions. Words such as "believes," "anticipates," "plans," "expects," "estimates," "will," "goal," and similar expressions are intended to identify forward-looking statements. The inclusion of forward-looking statements should not be regarded as a representation by us that any of our plans will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Such forward-looking information is also subject to various risks and uncertainties. Such risks and uncertainties include, but are not limited to, risks arising from our providing services to the healthcare industry and primarily providers of long-term care; the impact of and future effects of the COVID-19 pandemic or other potential pandemics; having a significant portion of our consolidated revenues contributed by one customer during the year ended December 31, 2022; credit and collection risks associated with the healthcare industry; our claims experience related to workers' compensation and general liability insurance (including any litigation claims, enforcement actions, regulatory actions and investigations arising from personal injury and loss of life related to COVID-19); the effects of changes in, or interpretations of laws and regulations governing the healthcare industry, our workforce and services provided, including state and local regulations pertaining to the taxability of our services and other labor-related matters such as minimum wage increases; the Company's expectations with respect to selling, general, and administrative expense; and the risk factors described in Part I of our Form 10-K for the fiscal year ended December 31, 2021 under "Government Regulation of Clients," "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 in bankruptcy, have resulted in, and could continue to result in, significant additional bad debts in the near future. Additionally, our operating results would be adversely affected by continued inflation particularly if increases in the costs of labor and labor-related costs, materials, supplies and equipment used in performing services (including the impact of potential tariffs and COVID-19) could not be passed on to our customers.*

*In addition, we believe that to improve our financial performance we must continue to obtain service agreements with new customers, retain and provide new services to existing customers, achieve modest price increases on current service agreements with existing customers and/or maintain internal cost reduction strategies at our various operational levels. Furthermore, we believe that our ability to sustain the internal development of managerial personnel is an important factor impacting future operating results and the successful execution of our projected growth strategies. There can be no assurance that we will be successful in that regard.*

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

---

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Exhibit 99.1

**HEALTHCARE SERVICES GROUP, INC.**

**CONSOLIDATED STATEMENTS OF INCOME**

**(Unaudited)**

**(in thousands, except per share data)**

---

| | | | | |
|:---|:---|:---|:---|:---|
| | **For the Three Months Ended** | **For the Three Months Ended** | **For the Year Ended** | **For the Year Ended** |
| | **December 31,** | **December 31,** | **December 31,** | **December 31,** |
| | **2022** | **2021** | **2022** | **2021** |
| Revenues | $424020 | $420447 | $1690176 | $1641959 |
| Operating costs and expenses: |  |  |  |  |
| &nbsp;&nbsp;Cost of services provided | 366810 | 377230 | 1496336 | 1415082 |
| &nbsp;&nbsp;Selling, general and administrative | 39524 | 44290 | 140344 | 173108 |
| Income from operations | 17686 | (1073) | 53496 | 53769 |
| Other income, net: |  |  |  |  |
| &nbsp;&nbsp;Investment and other income (expense), net | 2372 | 2760 | (8414) | 8054 |
| Income before income taxes | 20058 | 1687 | 45082 | 61823 |
| Income tax expense (benefit) | 3899 | (418) | 10452 | 15960 |
| Net income | $16159 | $2105 | $34630 | $45863 |
| Basic earnings per common share | $0.22 | $0.03 | $0.47 | $0.61 |
| Diluted earnings per common share | $0.22 | $0.03 | $0.47 | $0.61 |
| Basic weighted average number of common shares outstanding | 74342 | 74318 | 74336 | 74816 |
| Diluted weighted average number of common shares outstanding | 74367 | 74342 | 74351 | 74962 |

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Exhibit 99.1

**HEALTHCARE SERVICES GROUP, INC.**

**CONDENSED CONSOLIDATED BALANCE SHEETS**

**(Unaudited)**

**(in thousands)**

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| | | |
|:---|:---|:---|
| | **December 31, 2022** | **December 31, 2021** |
| Cash and cash equivalents | $26279 | $70794 |
| Marketable securities, at fair value | 95200 | 114396 |
| Accounts and notes receivable, net | 336777 | 293388 |
| Other current assets | 50376 | 67804 |
| &nbsp;&nbsp;Total current assets | 508632 | 546382 |
| Property and equipment, net | 22975 | 28102 |
| Notes receivable - long-term | 32609 | 29259 |
| Goodwill | 75529 | 74755 |
| Other intangible assets, net | 15946 | 20805 |
| Deferred compensation funding | 33493 | 46691 |
| Other assets | 29150 | 31535 |
| Total Assets | $718334 | $777529 |
| Accrued insurance claims - current | $23166 | $24310 |
| Other current liabilities | 155453 | 166815 |
| &nbsp;&nbsp;Total current liabilities | 178619 | 191125 |
| Accrued insurance claims - long-term | 65541 | 65084 |
| Deferred compensation liability | 33764 | 46888 |
| Other non-current liabilities | 14238 | 21755 |
| Stockholders' equity | 426172 | 452677 |
| Total Liabilities and Stockholders' Equity | $718334 | $777529 |

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