BENSALEM, PA — Healthcare Services Group, Inc. (NASDAQ: HCSG) announced its financial results for the second quarter ending June 30, 2024, highlighting solid service execution and improved cash collections.
CEO Ted Wahl stated, “Our field-based team delivered strong service execution leading to another successful quarter of managing cost of services.” He added that the company achieved over 96% cash collections during the quarter, showing improvement from the previous quarters and keeping the firm on track for its 2024 cash flow objectives.
Wahl also addressed the impact of LaVie Care Centers’ Chapter 11 filing on the company’s Q2 results. He emphasized that recent restructuring activities are due to conditions from past years and not reflective of the sector’s current state. He believes these restructuring efforts will strengthen the financial health of Healthcare Services Group’s customer base.
Revenue for the quarter was reported at $426.3 million, matching the company’s expectations. The housekeeping and laundry segment brought in $191.0 million with a margin of 8.9%, while the dining and nutrition segment generated $235.3 million at a 6.3% margin.
For Q3 and Q4, the company has raised its revenue estimates to $425.0 million to $435.0 million and $430.0 million to $440.0 million, respectively. Wahl noted, “Our strong business fundamentals and strategic priorities position us to boost profitability, growth, and cash flow in the second half of the year.”
Cost of services for Q2 stood at $384.7 million, or 90.3% of revenue, which includes $31.7 million in bad debt expenses. This figure is primarily attributed to client restructuring activities and other aging-related expenses. The company also benefitted from favorable trends in workers’ compensation and general liability loss development.
SG&A expenses were reported at $44.4 million, or 10.4% of revenue. The company aims to reduce SG&A to fall within the 8.5% to 9.5% range.
Cash flow from operations was reported at $16.3 million, including an $18.7 million increase in the payroll accrual. The company reaffirmed its 2024 adjusted cash flow from operations forecast of $40.0 million to $55.0 million.
Healthcare Services Group maintains a strong liquidity position with a current ratio of 2.7 to 1, cash and marketable securities amounting to $130.7 million, and a $500.0 million credit facility expiring in November 2027. During Q2, the company repurchased 263,500 shares, or $3.0 million, of its common stock and has 6.2 million shares remaining under its repurchase authorization.
As the company heads into the second half of the year, Wahl reiterated their three strategic priorities: managing the cost of services within the 86% range, driving growth, and improving cash collections. These priorities, he believes, will enable Healthcare Services Group to deliver long-term shareholder value.
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