Healthcare Services Group, Inc. Q1 FY2026 earnings call

Ted started by discussing Q1 highlights: strong results across revenue, earnings, cash flow, positive momentum into Q2, new client wins, high retention rates, operational excellence, $24M capital return via share repurchase, strong balance sheet. Shared perspective on general business environment: industry fundamentals gaining strength from demographic tailwind, positive operating trends, monitoring broader macro landscape, purchasing teams monitoring supply chain. Q2 strategic priorities: driving growth by developing management candidates, converting sales pipeline, retaining facility business; managing cost through field - based execution and spend management; optimizing cash flow with customer payment frequency, contract terms, working capital management. Matt then discussed revenue, segment margins, cost of services, SG&A, tax rate, net income. Vikas talked about liquidity, cash flows, credit facility amendment, capital allocation plans, share repurchases.

Revenue was $462.8 million, a 3.4% increase over prior year. Environmental services segment revenues: $208.3M, margin 12.1%. Dietary services segment revenues: $254.5M, margin 9%. 2026 growth plans oriented around mid single digit revenue growth with Q2 revenue in 465 - 475M range, sequential growth in second half. Cost of services was $386.9 million, or 83.6%. SG&A was $42 million, after adjustment $43.6 million, or 9.4%. Net income and diluted earnings per share were $26.1 million and 37 cents per share.

2026 growth plans are mid single digit revenue growth. Q2 revenue in 465 - 475M range. Goal to manage cost of services in 86% range, SG&A in 9.5% - 10.5% range with long - term goal to manage into 8.5% - 9.5% range. Effective tax rate expected to be approximately 25%. Capital allocation plans unchanged, on track to execute. In February 2026, announced plan to repurchase 75M common stock over 12 months, repurchased 24M in first quarter, 9.2M shares remaining under authorization.

Monitoring broader macro landscape including global energy and supply markets volatility from geopolitical conflicts. Purchasing and procurement teams actively monitoring supply chain, but in event of outsized inflationary or cost pressure on supplies or food items, need to pivot sourcing strategies. Also, some local teams may struggle with service execution and performance which could impact business growth if not addressed.

Q: Any one - time benefits in cost of services this quarter?

A: Workers' comp and general liability efficiencies contributed about $4.7 million, bad debt and service execution also contributed.

Q: How has development of managerial candidates trended?

A: Grounded in localized efforts within districts, with 12 facility districts, bottom - up efforts, and ensuring local teams execute on client satisfaction etc. before allowing growth.

Q: Update on campus segment growth and M&A?

A: Campus business over $100M annualized revenue in 2025, relatively small base, seeing continued growth, evaluating M&A opportunities for small deals as land and expand.

Q: Directional color on adjusted EBITDA?

A: Model based on 86% cost of sales, 9.5% - 10.5% SG&A, 25% tax rate, EBITDA varies quarter to quarter but held accountable to those metrics.

Q: Initiatives for hourly employees?

A: Engaging with hourly employees via intranet, proprietary app, time clocks, seeing improved connectivity and retention.

Q: Revenue outlook drivers?

A: Pipeline growth, timing of management capacity and client start date, new business pipeline split evenly between EVS and dietary with dietary having higher revenue contribution, cross - selling dietary to existing EVS customer base.

Q: Genesis update?

A: Continuing to provide services, sale to 101 West state street in process, closing likely later summer.

Q: ERC benefit in quarter?

A: No ERC receipts or impact.

Q: Capital allocation for share repurchases?

A: Maintain uniform cadence, not front - loading, not timing market, want consistent approach over 12 - month program.