HCSG Reports Full Year and Fourth Quarter Results

Exceeds 2025 Expectations Announces New Share Repurchase Program Provides 2026 Growth Outlook Revenue: $1.84 billion for the year (+7.1%) and $466.7 million for the quarter (+6.6%). Net income and EPS: $59.1 million or $0.81 for the year and $31.2 million or $0.44 for the quarter. Cash flow from operations: $145.0 million for the year and $17.4 million for the quarter. Excluding change in payroll accrual, $164.1 million for the year and $36.4 million for the quarter. Share repurchase: Completes $50.0 million buyback and authorizes new $75.0 million, 12-month program. 2026 outlook: Expects mid-single-digit revenue growth. Healthcare Services Group, Inc. (NASDAQ:HCSG) today reported results for the three months ended December 31, 2025. Ted Wahl, Chief Executive Officer, stated, “I am extremely pleased with our fourth quarter performance, which capped a strong year for Healthcare Services Group. Against the backdrop of solid industry fundamentals, we exceeded our initial 2025 expectations for revenue, earnings, and cash flow, driven by disciplined execution of our strategic priorities.” Mr. Wahl continued, “Year over year revenue was up over 7%, with our Campus division reaching a significant milestone in its growth journey, achieving over $100 million in revenue. We successfully managed cost of services and SG&A within our targeted ranges, and we generated significant free cash flow. We also returned over $60 million of capital through our share repurchase program and ended the year with a strong balance sheet and ROIC profile, underscoring our focus on value creating capital deployment.” Mr. Wahl concluded, “Looking ahead to 2026, we are optimistic about our trajectory and expect mid-single-digit growth. We remain confident that continuing to execute on our strategic priorities, supported by our robust business fundamentals, will enable us to drive growth, while delivering sustainable, profitable results.” Fourth Quarter Results Revenue was reported at $466.7 million, a 6.6% increase over the prior year.Segment revenues and margins for Environmental and Dietary Services were reported at $210.8 million and 12.6% and $255.9 million and 7.2%, respectively.Cost of services was reported at $394.6 million or 84.6%.The Company’s 2026 goal is to manage the cost of services in the 86% range.SG&A was reported at $46.2 million. After adjusting for the $0.4 million increase in deferred compensation, SG&A was $45.8 million or 9.8%.The Company’s 2026 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 rates 1 for the quarter and year were reported as a 9.4% benefit and 13.0% expense, respectively.The Company expects its 2026 effective tax rate to be approximately 25%.Net income and diluted EPS were reported at $31.2 million and $0.44. Balance Sheet and Liquidity The Company’s primary sources of liquidity are cash flow from operating activities, cash and cash equivalents, and its revolving credit facility. Cash flow from operations was reported at $17.4 million. After adjusting for the $19.0 million decrease in the payroll accrual, cash flow from operations was $36.4 million. As of the end of the fourth quarter, the Company had cash and marketable securities of $203.9 million and an unutilized $300.0 million credit facility. Share Repurchases The Company announced the completion of its $50.0 million, 12-month share repurchase plan, five months ahead of schedule. Those share repurchases included $19.6 million of buybacks during the fourth quarter, which contributed to the Company’s $61.6 million of share repurchases in 2025. In February 2026, the Board of Directors authorized the repurchase of up to 10.0 million outstanding shares of common stock. In conjunction with that authorization, the Company announced that it plans to further accelerate the pace of its share buybacks, and over the next 12-months, intends to repurchase $75.0 million of its common stock. Mr. Wahl stated, “Over the past few years, we have continued to strengthen our balance sheet and expect strong cash flow generation over the next 12 months and beyond. We have demonstrated a prudent and balanced approach to capital allocation, including first and foremost investing in our growth initiatives. The current valuation of our shares, relative to our long-term growth potential, presents a compelling opportunity to return meaningful capital to shareholders through the buyback.” Conference Call and Upcoming Events The Company will host a conference call on Wednesday, February 11, 2026, at 8:30 a.m. Eastern Time to discuss its results for the three months ended December 31, 2025. The call may be accessed via phone at 1 (800) 715-9871, Conference ID: 9951274. 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. The Company will be participating in Non-Deal Roadshows hosted by William Blair in Minneapolis on February 18th and Milwaukee on February 19th, Oppenheimer in New York on February 24th and Boston on February 25th, and Baird in Chicago on March 12th. The Company will also be attending Oppenheimer’s 36th Annual Healthcare MedTech & Services (Virtual) Conference on March 18th. About Healthcare Services Group, Inc. Healthcare Services Group (NASDAQ: HCSG) is a leader in managing Environmental and Dietary services within the healthcare industry. With 50 years of experience, HCSG aims to provide improved operational, regulatory, and financial outcomes for our clients. __________________________________ 1 Effective tax rates include an $8.3 million, or $0.12 per share benefit related to the taxability of Employee Retention Credits. The Company, in consultation with third-party experts, has determined its tax position with respect to these receipts. 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,” “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 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 expenses; the impact of past or future cyber attacks or breaches; and the risk factors described in Part I of our Form 10-K for the fiscal year ended December 31, 2024 under “Government Regulation of Customers,” “Service Agreements and Collections,” and “Competition” and under Item IA. “Risk Factors” in such Form 10K. 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 is presenting adjusted cash flows from operations, 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 Year Ended December 31, December 31, 2025 2024 2025 2024 Revenue $ 466,682 $ 437,812 $ 1,837,173 $ 1,715,682 Operating costs and expenses: Cost of services 394,611 379,209 1,597,768 1,487,592 Selling, general and administrative 46,196 44,824 190,866 183,060 Income from operations 25,875 13,779 48,539 45,030 Other income, net 2,677 1,026 19,327 7,911 Income before income taxes 28,552 14,805 67,866 52,941 Income tax (benefit) provision (2,692 ) 2,885 8,807 13,470 Net income $ 31,244 $ 11,920 $ 59,059 $ 39,471 Basic earnings per common share $ 0.44 $ 0.16 $ 0.82 $ 0.54 Diluted earnings per common share $ 0.44 $ 0.16 $ 0.81 $ 0.53 Basic weighted average number of common shares outstanding 70,483 73,553 72,380 73,754 Diluted weighted average number of common shares outstanding 71,635 73,934 73,032 73,988 HEALTHCARE SERVICES GROUP, INC. CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) (in thousands) December 31, 2025 December 31, 2024 Cash and cash equivalents $ 125,189 $ 56,776 Restricted cash equivalents 5,577 3,355 Marketable securities, at fair value 42,774 50,535 Restricted marketable securities, at fair value 30,352 25,105 Accounts receivable, net 281,303 330,907 Notes receivable, net 31,243 51,429 Other current assets 59,977 38,545 Total current assets 576,415 556,652 Property and equipment, net 27,586 28,198 Notes receivable — long-term, net 25,209 41,054 Goodwill 79,797 75,529 Other intangible assets, net 6,964 9,442 Deferred compensation funding 55,909 49,639 Other assets 22,373 42,258 Total assets $ 794,253 $ 802,772 Accrued insurance claims — current $ 24,371 $ 25,148 Other current liabilities 146,004 167,399 Total current liabilities 170,375 192,547 Accrued insurance claims — long-term 46,142 51,869 Deferred compensation liability — long-term 56,276 50,011 Lease liability — long-term 9,659 8,033 Other long-term liabilities 1,591 385 Stockholders’ equity 510,210 499,927 Total liabilities and stockholders’ equity $ 794,253 $ 802,772 HEALTHCARE SERVICES GROUP, INC. RECONCILIATIONS OF NON-GAAP FINANCIAL MEASURES (Unaudited) Reconciliation of GAAP net income to EBITDA and adjusted EBITDA (in thousands) For the Three Months Ended For the Year Ended December 31, December 31, 2025 2024 2025 2024 GAAP net income $ 31,244 $ 11,920 $ 59,059 $ 39,471 Income tax (benefit) provision (2,692 ) 2,885 8,807 13,470 Interest, net (2,315 ) (555 ) (14,047 ) (424 ) Depreciation and amortization1 3,870 3,602 16,778 14,585 EBITDA $ 30,107 $ 17,852 $ 70,597 $ 67,102 Share-based compensation 3,124 2,337 12,005 9,165 Adjusted EBITDA $ 33,231 $ 20,189 $ 82,602 $ 76,267 Adjusted EBITDA as a percentage of revenue 7.1 % 4.6 % 4.5 % 4.4 % Reconciliation of GAAP cash flows from operations to adjusted cash flows from operations (in thousands) For the Three Months Ended For the Year Ended December 31, December 31, 2025 2024 2025 2024 GAAP cash flows from operations $ 17,387 $ 36,204 $ 144,968 $ 30,802 Accrued payroll2 19,028 (9,247 ) 19,162 3,573 Adjusted cash flows from operations $ 36,415 $ 26,957 $ 164,130 $ 34,375 Includes right-of-use asset depreciation of $2.0 million and $8.3 million for the three and twelve months ended December 31, 2025, respectively, and $2.0 million and $7.8 million for the three and twelve months ended December 31, 2024, respectively.The accrued payroll adjustment reflects changes in accrued payroll for the three and twelve months ended December 31, 2025 and 2024. 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. Source: Healthcare Services Group, Inc.