Healthcare Services Group, Inc. Q4 FY2025 earnings call

2025 Highlights: Exceeded initial 2025 expectations for revenue, earnings, and cash flow. Year-over-year revenue up over 7%, campus division reached over $100 million in revenue. Managed cost of services and SG&A within targeted ranges, generated significant free cash flow, and returned over $60 million through share repurchase. ### Industry Environment: Industry fundamentals strengthening with demographic tailwind (baby boomers aging into long-term care needs). Positive operating trends like steady occupancy, increasing workforce, stable reimbursement. ### Strategic Priorities 2026: Drive growth by developing management candidates, converting sales pipeline, retaining facility business; manage cost via field-based operations and spend management; optimize cash flow with increased payment frequency, enhanced contracts, and working capital management. ### Share Repurchase: Completed $50 million 12-month share repurchase plan 5 months ahead of schedule; announced $75 million share repurchase plan for 2026.

Revenue was $466.7 million, a 6.6% increase over the prior year. Environmental Services segment had revenue of $210.8 million with a 12.6% margin. Dietary Services segment had revenue of $255.9 million with a 7.2% margin. Cost of services was $394.6 million (84.6%). SG&A was $45.8 million (9.8% after adjusting for $0.4 million increase in deferred compensation).

Revenue: Expect mid-single-digit revenue growth in 2026. ### Cost of Services: Goal to manage in the 86% range. ### SG&A: Goal to manage in the 9.5% to 10.5% range with long-term goal of 8.5% to 9.5%. ### Effective Tax Rate: Expected to be approximately 25%. ### Share Repurchase: Intend to repurchase $75 million of common stock over the next 12 months.

Actual results may differ materially from forward-looking statements due to 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 other SEC filings.

Q: How are you thinking about revenue upside opportunity?

A: Growth is execution-based, limited by ability to hire, develop, and retain management candidates. Pipeline is robust.

Q: Split of campus Services revenue between Environmental Services and Meriwether Godsey?

A: Split pretty evenly between CSG brand and Meriwether Godsey brand; organic growth and strategic M&A will fuel future growth.

Q: Thoughts on margins in 2026?

A: Margins driven by service execution, customer experience, systems adherence, etc.; confident in managing cost of services in 86% range.

Q: Trajectory of cash from operations for 2026?

A: Net income is expected to be the best proxy for cash flow from operations excluding change in payroll accrual.

Q: Balance between share buyback and M&A?

A: Comfortable with liquidity position; balance sheet is primed for organic growth, M&A, and share buyback without compromising each other.

Q: New business adds for 2026?

A: Organic growth is execution-based, driven by management development strategy; pipeline is robust with retention trends in 90% plus range.

Q: Performance of services in different facility types?

A: Strong performance across all service segments and customer types remained consistent in 2025 and expected to continue in 2026.