BENSALEM, PA — Healthcare Services Group, Inc. (NASDAQ: HCSG) delivered stronger-than-anticipated growth in the second quarter of 2025, fueled by new client acquisitions and improved retention, even as the company absorbed a major non-cash restructuring charge related to Genesis HealthCare.
Total revenue for the quarter came in at $458.5 million, with Environmental Services contributing $205.8 million and Dietary Services generating $252.7 million. The company reaffirmed its guidance for mid-single-digit revenue growth in 2025.
Despite headline losses, the results reflect underlying operational strength. A $61.2 million non-cash charge tied to the previously announced Genesis restructuring drove reported net income down to a loss of $32.4 million, or $0.44 per diluted share. Excluding that impact, performance metrics show forward momentum, particularly in core business areas.
“Second quarter growth exceeded our expectations,” said CEO Ted Wahl. “New client wins and higher retention drove our organic growth, and we have carried that positive momentum into the back half of the year. Despite the previously announced Genesis news and resulting impact on our Q2 reported results, our 2025 growth plans and cash flow outlook remain strong.”
Cost of services was reported at $455.5 million, including the Genesis restructuring charge, resulting in an unusually high cost ratio of 99.4%. The company aims to manage that figure back to the 86% range for the second half of the year.
Selling, general and administrative (SG&A) expenses totaled $49.2 million, though the adjusted figure—excluding a $4.7 million deferred compensation increase—was $44.5 million or 9.7% of revenue. HCSG is targeting a near-term SG&A range of 9.5% to 10.5%, with a longer-term objective of reducing it further to between 8.5% and 9.5%.
Segment margins took a hit due to the restructuring. Environmental Services reported a margin of 0.8%, reflecting a $20.3 million charge, while Dietary Services came in at -10.1%, impacted by a $40.9 million charge.
Cash flow from operations reached $28.8 million. After adjusting for a $20.3 million increase in payroll accrual, operating cash flow stood at $8.5 million. Encouraged by its performance, the company raised its full-year forecast for operating cash flow—excluding payroll accrual adjustments—from a previous range of $60 million to $75 million, to a new range of $70 million to $85 million.
Looking ahead, HCSG expects a further $0.04 per share non-cash charge in the third quarter as it finalizes the Genesis restructuring.
On the balance sheet, the company reported $164.1 million in cash and marketable securities and access to a $500 million credit facility, which includes a $200 million accordion feature and matures in November 2027.
Healthcare Services Group also announced plans to step up its share repurchase activity. The company intends to buy back $50 million in stock over the next 12 months under its February 2023 authorization. During the second quarter, it repurchased $7.6 million worth of shares, bringing year-to-date buybacks to $14.6 million.
“Over the course of the last several years, we have continuously strengthened our balance sheet and expect strong cash flow generation over the next 12 months and beyond,” said Wahl. “The current valuation of our stock relative to our long-term growth potential offers a unique opportunity with the buyback to return significant capital to shareholders.”
Despite the temporary headwinds, HCSG appears well-positioned to deliver on its strategic priorities while maintaining financial flexibility and enhancing shareholder value.
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