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Oct 17, 2017

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

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

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

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

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

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

Cautionary Statement Regarding Forward-Looking Statements

This release and any schedules incorporated by reference into it may contain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are not historical facts but rather are based on current expectations, estimates and projections about our business and industry, and our beliefs and assumptions. Words such as "believes," "anticipates," "plans," "expects," "will," "goal," and similar expressions are intended to identify forward-looking statements. The inclusion of forward-looking statements should not be regarded as a representation by us that any of our plans will be achieved. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. Such forward-looking information is also subject to various risks and uncertainties. Such risks and uncertainties include, but are not limited to, risks arising from our providing services exclusively to the health care industry, primarily providers of long-term care; having one client which accounted for approximately 16% and another client which accounted for approximately 9% of our total consolidated revenues for the nine months ended September 30, 2017; credit and collection risks associated with this industry; our claims experience related to workers' compensation and general liability insurance; the effects of changes in, or interpretations of laws and regulations governing the industry, our workforce and services provided, including state and local regulations pertaining to the taxability of our services and other labor related matters such as minimum wage increases; continued realization of tax benefits arising from our corporate reorganization and self-funded health insurance program; risks associated with the reorganization of our corporate structure; and the risk factors described in Part I of our Form 10-K for the fiscal year ended December 31, 2016 under "Government Regulation of Clients," "Competition'' and "Service Agreements and Collections," and under Item IA "Risk Factors" in such  Form 10-K.

These factors, in addition to delays in payments from clients and/or clients in bankruptcy or clients with which we are in litigation to collect payment, have resulted in, and could continue to result in, significant additional bad debts in the near future. Additionally, our operating results would be adversely affected if unexpected  increases in the costs of labor and labor-related costs, materials, supplies and equipment used in performing services could not be passed on to our clients.

In addition, we believe that to improve our financial performance we must continue to obtain service agreements with new clients, retain and provide new services to existing clients, achieve modest price increases on current service agreements with existing clients and maintain internal cost reduction strategies at our various operational levels. Furthermore, we believe that our ability to sustain the internal development of managerial personnel is an important factor impacting future operating results and the successful execution of our projected growth strategies.          

Healthcare Services Group, Inc. is the largest national provider of professional housekeeping, laundry and dietary services to long-term care and related health care facilities.

Company Contacts:    
Theodore Wahl Matthew J. McKee  
President and Chief Executive Officer Senior Vice President of Strategy  

(in thousands, except per share data)
 For the Three Months Ended For the Nine Months Ended
 September 30, September 30,
 2017 2016 2017 2016
Revenues$491,355  $392,734  $1,366,721   $1,164,097 
Operating costs and expenses:       
Cost of services provided426,924  336,340  1,179,816  998,595 
Selling, general and administrative32,940  27,182  93,141  78,192 
Income from operations 31,491  29,212  93,764  87,310 
Other income:       
Investment and interest1,439  1,359  4,523  2,548 
Income before income taxes32,930  30,571  98,287  89,858 
Income taxes9,458  10,860  30,247  32,761 
Net income$23,472  $19,711  $68,040  $57,097 
Basic earnings per common share$0.32  $0.27  $0.93  $0.79 
Diluted earnings per common share$0.31  $0.27  $0.92  $0.78 
Cash dividends declared per common share$0.19000  $0.18500   $0.56625  $0.55125 
Basic weighted average number of common shares outstanding73,461  72,839  73,272  72,718 
Diluted weighted average number of common shares outstanding74,538  73,592  74,252  73,435 

(in thousands)
 September 30, 2017 December 31, 2016
Cash and cash equivalents$11,005  $23,853 
Marketable securities, at fair value70,384  67,730 
Accounts and notes receivable, net367,009  271,276 
Other current assets67,144  51,765 
Total current assets515,542  414,624 
Property and equipment, net13,499  13,455 
Notes receivable - long term11,495  7,531 
Goodwill51,084  44,438 
Other intangible assets, net32,075  14,409 
Deferred compensation funding27,387  24,119 
Other assets10,460  9,870 
Total Assets$661,542  $528,446 
Accrued insurance claims - current$24,827  $23,573 
Other current liabilities150,555  77,298 
Total current liabilities175,382  100,871 
Accrued insurance claims - long term67,818  64,080 
Deferred compensation liability27,886  24,653 
Stockholders' equity390,456  338,842  
Total Liabilities and Stockholders' Equity$661,542  $528,446 


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Source: Healthcare Services Group, Inc.

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