Q4 2020 Healthcare Services Group Inc Earnings Call
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The matters discussed on today's conference call include forward looking statements about the business prospects of healthcare Services Group Inc.
And the meaning of the private Securities Litigation Reform Act of 1995.
Forward looking statements of off the proceeded by words, such as believes expects anticipates plans will goal may intends assumes or similar expressions.
Forward looking statements reflect management's current expectations as of the date of this conference call and involve certain risks and uncertainties.
The forward looking statements are based on assumptions that we have made in light of the our industry experience and our perceptions of historical trends current conditions.
The future developments and other factors that we believe are appropriate under the circumstances.
As with any projection or forecast they are inherently susceptible to uncertainty and changes and circumstances.
Care Services Group, Inc. Actual results could differ materially from those anticipated and these forward looking statements as a result of various factors and the forward looking statements are not guarantees of performance.
Some of the factors that could cause the future results to materially differ from recent results or those projected in forward. Looking statements are included in our earnings press release issued prior to this call and in our filings with the Securities and Exchange Commission, including the SEC's ongoing investigation.
There can be no assurance that the SEC or any regulatory body will make.
Therefore, the regulatory inquiries or price or.
Further action that could result in significant costs and expenses, including potential sanctions or penalties as well as distraction to management and the ongoing SEC investigation and or any related litigation could adversely affect our calls the variability and our financial results.
We are of note under no obligation and expressly disclaim any obligation to update or alter the forward looking statements whether as a result of such changes new information subsequent events or otherwise.
Ladies and gentlemen, and thank you for standing by and welcome to the Healthcare Services Group, Inc, 2024th quarter earnings call.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session to ask the question. During the session you will need to press star one on your telephone.
Please be advised that today's conference is being recorded.
You require any further assistance please press star zero.
I'd now like to hand, the conference over to your Speaker today, Mr. Ted Wahl, President and CEO. Thank you. Please go ahead Sir.
Okay. Thank you Miss the and good morning, everyone, Matt Mckee and I appreciate you joining us today.
And when I look back over the past year I'm, so grateful for how industry leaders clients and frontline health care workers, especially our Acs. The heroes have led and served through one of the most trying periods for our industry and country.
And special recognition of ATSG is frontline leaders for their extraordinary leadership courage and grit over the past year. We were beyond excited to award $1000 leadership recognition bonuses to our great account managers and dietitians and district managers.
The special recognition was so well deserved and again, thank you team for going beyond.
I'd also like to thank you fellow shareholders for your ongoing support and trust and confidence and the Acs team during these unprecedented times.
Our strong fourth quarter results are a testament to the passion and perseverance of our team members and our ability to execute and even the most challenging environment as we continue to control the elements of our business that are within our control exceedingly well.
We will remain laser focused on our operational imperative of customer satisfaction systems adherence and regulatory compliance and budget discipline as the pathway to delivering strong operational and financial results and the year ahead.
With the vaccine rollout currently underway, we are hopeful that the worst of the clinical nightmare and the industry is behind us.
That said, we know 2021 will still have its share of pandemic related challenges as the industry gradually shifts from crisis mode to a state of recovery.
And while Covid remains the near term headwind on revenue.
Our commitment to internal investment and returning capital to shareholders underscores our positive longer term growth outlook and creates value for all stakeholders.
Before we move on to the discussion on the Q4 results I would like to briefly touch on the SEC update we provided in this morning's release.
As we highlighted the.
The company and the SEC have recently commenced discussions regarding a potential resolution to the investigation.
We're pleased that this matter has moved into this phase and hope to continue to work with the SEC to reach a final resolution.
As I'm sure you can all depreciation and beyond what we previously disclosed and and this morning, including this morning's release.
While we continue to be limited and what we can say about this matter of especially while the resolution discussions are ongoing.
So with those introductory comments I'll turn the call over to Matt for a more detailed discussion on the quarter.
Thanks, Ted and good morning, everybody.
Revenue for the quarter was $423 $2 million with housekeeping and laundry and dining and nutrition segment revenues of $219 9 million and $203 $3 million respectively.
Revenue included $5 $1 million of Covid related supplemental billings, primarily related to employee paid premiums, which were initiated by and pass through to our customers.
Net income for the quarter came in at $27 7 million and earnings was <unk> 37 per share.
Direct cost of services was $352 2 million or <unk> 83, 2% and direct cost included a $14 million benefit related to favorable workers' compensation loss development trends as the company continues to successfully execute on its strategy of managing claim frequency and scope and severity.
Direct costs also included $7 million of leadership recognition bonuses.
Ted had mentioned in his remarks, and the company's goal remains to manage direct costs at or below 86%.
Housekeeping and laundry and dining and nutrition segment margins were nine 9% and seven 7% respectively.
SG&A was reported at $42 million of nine 9%, but after adjusting for the $5 $2 million increase and deferred compensation and actual SG&A was $36 7 million or eight 7%.
And the company expect near term SG&A around eight 5%, excluding any COVID-19 or SEC related costs with the primary leverage existing and top line growth and longer term of the Companys target remains seven 5% for SG&A.
Investment and other income for the quarter was reported at $5 $8 million, but after adjusting for the $5 $2 million change and deferred compensation actual investment income was around $600000.
We reported and effective tax rate of 24% for the fourth quarter and 23, 6% for the full year 2020, we expect the 'twenty, one 2021 tax rate of 24% to 26%, including the worker opportunity tax credit.
Cash flow from operations was $75 $7 million. This includes a $45 $2 million increase and accrued payroll and.
And included and that number is $14 $3 million increase and the deferred payroll taxes that we received under the cares Act and.
And because we called out the timing of the payroll and the impact of the payroll accrual last year, we would point out that the 2021 payroll accruals should have a similar cadence to what we saw last year.
Q1 will have the lowest payroll accrual of four days Q2 will be 11 days Q3, five days and Q4 dollars 13 days in Q4 will also be impacted by half or $24 million or so of that cares act deferred payroll tax repayment half of which will be due at the end of 2021, the other half of which will.
We do at the end of 2022, and those accruals compared to the 310, four and 12 days that we had in 2020 during the current corresponding quarterly periods, but of course, the payroll accrual only relates to the timing and the impact ultimately washes out throughout the full year.
DSO for the quarter was 55 days down three days from the previous quarter.
And we're pleased with the ongoing strength of our balance sheet and the ability to support the business, while continuing to return capital to our shareholders, We announced that the board of directors approved and increase in the dividend of 26 to <unk> <unk> per share payable on March 26th of this year cash.
Cash flows and cash balances supported and with the dividend tax rate in place for the foreseeable future. The cash dividend program continues to be the most tax efficient way to get free cash flow and ultimately maximize return to our shareholders.
This will mark the 70 <unk> consecutive cash dividend payment since the program was the instituted in 2003 and the 17th consecutive quarterly increase now of <unk> 18 year period. That's included four three for two stock splits we.
And we recognize the dividend is important to our shareholders and we've increased it in line with our performance track record.
Additionally, the company remains authorized the purchase one 7 million shares of our common stock pursuant to the previous board of directors authorization and expect to repurchase up to 1 million shares over the next 12 months. So with those opening remarks, we'd now like to open up the call for questions.
At this time, if you would like to ask a question press star one on your telephone keypad again that of star and the number one.
And your first question comes from a J rice with credit Suisse.
Hi, everybody.
Maybe just.
First get you to comment a little further on what you see it and your growth.
So I know the industry was hit with occupancy pressures and.
In the summer and the.
Fallout from the pandemic have you seen that.
Rebound much and your customer base or are we still is that still in front of the industry.
Sort of an assessment of where your underlying customer base stands at this point.
Yeah, a J and certainly during Q4, we saw I think the industry at large.
Fell another five points or so depending on what study or analysis.
Latch onto but we've seen that and our customer base as well and there continues to be geographical dispersion and.
And variability in terms of what states what areas are impacted most of the northeast New York in particular.
Has the <unk> on a relative basis to the rest of the country as of the strongest occupancy and think that was reported still under 80%, but and the high Seventy's and then yes of other states like Texas that are and the mid to high 50. So.
The federal support is going to be critical as we've talked about before on this call to be able to bridge the gap between where the industry is today, and then recovery, which recovery will happen, but it's not going to be.
Going to be.
Ah.
Rapid recovery, we think of it is happening over the next 612 18 months incrementally and during 2022, I think we will will be and a good spot of much better spot as an industry, but federal support as well as ongoing state support is going to be critical the bridge that gap.
Okay. Thanks.
And the workers comp accrual and the quarter I think you got about $14 million of benefit you're calling out there.
The growth profit line, how should we think about that and going forward into 'twenty one is that of a.
A year and review that resulted in that.
What are the sort of the implications of that group.
21 and will there be.
As the state improve accrual of workers comp throughout the year and 21.
Yes hard to sort of predict the go forward impact if you recall a J, we conduct and annual actuarial review, which serves two purposes and reduce the development of ongoing prior year claims to monitor the appropriateness of our current reserves and then based on how our claims of developing and also establishes the go forward reserve.
Right and we do reserve make our reserves as a percentage of payroll. So obviously based on positive developments that we've seen and closing out prior year claims the actuarial assessment revealed that we had about $14 million more.
Reserve than what we will ultimately likely need so that's an adjustment that we make every year and the fourth quarter. So the actual effect hits the fourth quarter results, but the adjustment is actually the result of developments for claims and previous periods and typically previous years due to the long tail of some of the work comp claims that we see so our goal of course and the <unk>.
<unk> goal is to refine the percentage of revenue that we're reserving every year, so that youre as close as accurate as possible, but work comp claims obviously have lifecycle of their own and develop and different pathways and of course, we've made significant investments and improving our work comp experience as it relates to the <unk>.
<unk> scope and severity of all of those claims that hard work that continues to yield results and benefit the company.
So we will make adjustments based on net actuarial review to the percentage of payroll that we reserve going forward. The hope is of course to nail that as accurately as possible but.
Only with next year's actuarial review and hindsight will we be able to ascertain.
We have the dessert reserved appropriately or if there is insufficient funds or if there would be excess as we've seen over the past three years.
Okay, and maybe one last question.
And the.
The second half of last year, we talked about the fact that obviously customers we're dealing with the.
And the Covid issues, and a sense of hit and so forth and Werent really ready and make decisions to take on the.
The new outsourcing such as what you offer and then you also had indicated that you were sort of the staffing the customers and how they were going to come out of the other end of it and we're also being a little circumspect from taken all of the business can you just sort of update it.
And there.
The.
And he moved to add the customers as we progressed through 'twenty, one what's the thinking about that.
As we progressed through 2021, yes and <unk>.
We are starting to gain especially with the vaccine rollout well underway some incremental visibility into that which is a positive.
Cautiously optimistic that Q4 occupancy was the bottom or at least close to the bottom.
Think that is.
A prevailing view within the industry and.
And when you think about it just to unpack even your question a little bit I guess in the context of occupancy as it relates to us and this unprecedented environment revenue is really a lagging indicator in that as the significant census declines have occurred we have been very collaborative with.
Our customers, reducing our costs and then passing on those savings that were identified.
Through building reductions, which is part of the partnership and how we think about the relationships with our customers. So in light of that with sector occupancy rates falling as I alluded to earlier, a day and another five points or so when we think of Q4 and without getting into new business at the moment.
Net.
And we think about our Q1 revenues to be in that 400 of $405 million range, maybe flattish heading into Q2 book.
Before we start to see then timing of the vaccine rollout and the incentives recovery.
Potentially modest rebounds, and that back half of the year, both with the existing business, which would be incentive driven and then getting to the heart of your question prospective new business currently we're still being disciplined and cautious in terms of our kind of organic growth Greenfield opportunity.
Ads, but even with that there is still a facility access challenges right I mean, even operators, who are interested and highly desired highly desire to have and outsourcing partner like us are reluctant to make changes in this environment, but thats how were thinking certainly about the first half of the year second half of the year.
And I think when we're together in April and obviously throughout the quarter, we're going and we're going to continue to gain incremental visibility and I think be able to speak more definitively as to how we're thinking about the rest of the year.
Okay. Thanks, a lot.
Thank you a J.
And your next question is from Sean Dodge with RBC capital markets.
Thanks, Doug good morning.
And maybe going back to my worker's comp benefit.
As you pointed out.
Third year and the role of <unk> been able to drive some pretty meaningful and frequency of losses, there and I know you've been very proactive developing programs that focus on workers' safety.
And hopefully understand what else Youre doing.
Drive the kind of business lower trend and maybe how much runway do you think you'd like to continue that.
Can you.
Drive value items net.
Okay.
Yes, it's really it's been a mindset shift that was initiated she's going on eight years ago, now, which was really and attempt to actively manage and mitigate our risk management programs, which had historically simply very desired within the walls of the client facility and left into the hands of the client's risk management program. So we've actively.
Managed and implemented risk safety measures.
Things that may sound silly to sort of say out loud, but things like slip resistant shoes that we're giving to our employees of course and a business like ours a lot of the injuries that we see our slip and fall or soft tissue type of injury, so and a slip resistant shoes back prices, where appropriate and employees and just implementing safety measures of.
Centered with onsite training. So that we are sure that our employees are trained appropriately to complete the tasks at the facility level. So thats happening out in the field on the back and we've obviously engaged a third party administrator. In addition to our nurse case management organization with the goal being to really.
Actively manage the return to work program.
And the shift that we've experienced in moving a larger portion of our claims from indemnity claims to medical only has had a significant impact and the benefit that we see and the active return to work program of course done so under the careful guidance of medical professionals and done so within what's appropriate from a.
Safety perspective has been significantly beneficial to the organization. So the output that we talk about this $14 million benefit is strictly the actuarial sort of scorecard and that really grades and the benefits that we've seen three of those programmatic enhancements that we've worked so hard to develop and ultimately implement and execute so.
There is obviously the goal of remains <unk>.
100% safety for our employees and will continue to work with both our clients and our managers and employees at the line staff level to educate to support and to provide the appropriate training and materials to help them do their job and the safest possible manner and then on the back and from an administrative and programmatic perspective manage those claim.
And get our folks back to work as safely and as soon as it is possible and so I'd say, Shawn it's going to be.
A year to year ongoing assessment, but given the relative infancy of these programs.
We would expect that on the go forward basis.
The adjustments ideally get smaller and smaller as there's a longer tail of actuarial record based on those improvements that we've implemented now having said all of that you insert a year like 2020, where obviously the the frequency the scope of the severity of our claims that we experienced got completely turned upside down.
And right of course, we had.
A number of Covid related claims that we had never experienced previously interestingly, we saw a significant decline in our non COVID-19 work comp claims.
So the good thing is that from a developmental perspective, the claims that we did incur in 2020 resolved the much much quicker than our typical claims, but I guess I raise that point just that on the go forward basis, obviously 2020 experience and certainly expectation that there'll be some ongoing drag.
Of similar experience into 2021 will be incorporated into those actuarial formulas and assessments. So we will keep you apprised of that but as to the foundation and fundamentals of our work the comp and really worker safety programs.
We do strive for ongoing improvement that's for sure.
Okay interesting and thank you and then on revenue and housekeeping is pretty flat sequentially dining was down a little can you give us the sense of where you exited the quarter on a run rate basis are there any meaningful utility adjustments reductions or anything that took place later in the quarter, we should be.
Accounting for.
Yes, I mean that the revenue number for the quarter had about $5 million or so of Covid related.
Related hero pay for our associate level line staff employees as well just to point out.
Point that out, but very modest ads very.
Good retention rates and the quarter. So when you think about heading into Q heading into Q1 and really the first half of the year I had mentioned it and my discussion with a J earlier, but thinking for 400, the $405 million.
As the as the Q1.
Our revenue expectations, Sean and Thats.
Again driven by.
Largely the occupancy related adjustments.
That we're making.
Inc. That we made in Q4 that would fall into Q1 that would account for the difference between primarily between what we've reported and Q4 and what we're expecting in Q1 and.
And then expecting that to be flattish quarter to quarter between one and two based on the visibility we have now, but we'll provide more updates when we're together and April because we are starting to gain every week that goes by especially with the vaccine rollout, we're gaining incremental visibility which is a good thing in terms of our growth.
Not just are the occupancy and the impact that that has on revenue but also.
Most importantly, as we think about it.
<unk> growth.
Of which we are still deeply committed to and excited.
To get Rolling again, so that's how we're thinking about certainly the first half of the year and then the second half of the year I think we'll be able to speak more definitively too and the coming months again as we gain that additional visibility.
Okay, Alright, great. Thanks again.
Thank you.
And your next question is from Ryan Daniels with William Blair.
Hey, guys mixed and we got it and for Ryan Thanks for taking my question.
So I guess this quarter again, it looks like foodservice margin.
We remain a little bit elevated I know last quarter you said.
One quarter doesn't make a trend, but we've seen kind of a of couple of quarters in a row now.
And with those of the elevate I was just wondering if you can provide.
The more color on that and kind of what are the puts and takes the right.
How you see that going into 2021.
Yes.
Say, Nick we certainly called out our laser focus on the customer service and customer experience and.
Part of that focus includes managing the services as efficiently as possible, especially in light of the census pressure that many of our clients continue to face as we've talked about and a number of times already on this call. The simplest way to think about it is first and foremost it's a powerful testament to our operations teams and really the unwavering commitment to that operational and.
<unk> that Ted alluded to in his opening comments and that relates to customer satisfaction systems adherence regulatory compliance and budget to actual performance and I've described it this way before and I recognize that it's somewhat and <unk>, but it's really a focus on managing our services based on bodies in beds right and really.
Having a firm focus to flex our cost according to the scope of services needed at a particular facility, it's critical and and dining there is more of a direct correlation clearly in the number of folks in the facility directly relates to the the number of meals that youll be providing so I would say that it is.
It is.
It's been kind of out of necessity that our management folks at the field level have been forced to manage their dining purchasing and production. According to the number of bodies in beds at a particular moment and given the wild swings that we've seen and census of hyper focus and execution. So we.
And you hate to think that it took.
The pandemic to really kind of force of our folks to recalibrate their mindset to that level of focus and execution, but it's been beneficial and we're certainly looking to retain that mindset on a go forward basis. So as census begins to build back and our facilities, we don't want kind of and automatic reversion to our purchasing and production.
Back in the old day, when we had a full house and we want to make sure that we continue to carry that mindset of managing the business based on bodies and beds and have that carry through and all of our purchasing and production decisions as well so.
We're looking to maintain those margins, but undoubtedly there will be fits and starts and our census builds back up and then likewise as we get back into growth mode and unique are certainly familiar with this element of our business that as we onboard new business and inherit the inefficiencies of the operation that we are.
Onboarding.
Theres typically margin pressure right so that'll.
That'll be another kind of.
The factor that will have to consider that as we ramp back to growth mode, and both housekeeping and dining there will likely be some margin pressure and that will at least from our perspective that it would be a good problem to have.
Perfect. Thanks, that's really helpful.
And then I guess regarding.
The CFO of temporary leave if could you provide a little bit more color on any of the reason there is that kind of part of <unk>.
And the settlement and involved with that or the completely separate type of thing.
Yes, and I appreciate the question, but as I alluded to in my opening remarks, we're really limited and what we can share and really out of respect for the process.
I'm not going to comment any further again, especially as these resolution discussions are ongoing.
What I can tell you the Nic is.
We continue to cooperate we had throughout the process.
And we are pleased that has moved into this phase and we're hopeful we're going to reach a.
Final resolution.
Okay Cool that's fair thanks, that's it from the.
The next question is from Bill Sutherland with benchmark company.
Hey, Thanks, good morning, guys.
And I was curious on the backdrop.
And for your clients.
And it's about the occupancy.
Which fits with where everything I've been saying.
And any shifts and their payer mix over this past year because of <unk>.
And of what's going on.
Yes, and again theres so much of variability.
Bill and your question to be able to give a kind of a.
One size fits all answer, but yes generally speaking.
Operators have seen increases in Medicare because of some of the administrative action that's been taken by CMS.
Along the way so that shift has occurred.
And you think about the three day, the three day hope that hold waiver and things like that that have been in place.
<unk>.
Has had it has had some.
The impact as well.
Certainly on Medicare rates positive impacts, although from a cost standpoint the.
The operators haven't been able to fully.
Realize the benefits of some of the cost efficiencies because group and concurrent therapy clearly is not us.
Our income and as it would otherwise be so there has been some shifts but again you do have tremendous variability not just area to area, but operator to operator, depending on their model.
And Brian here too alright.
Alright.
And I guess theres been the shift obviously from skilled beds.
The two more and long term care beds right.
Yes, I mean thats another piece of it just and again depends on the provider and and.
Their focus.
Mhm.
Okay.
And yes, that's all I have at this point.
I appreciate the great great job given the circumstances.
Okay.
And your next question is from.
From Brian <unk> with Jefferies.
Hey, good morning, guys.
The mind.
And it's giving us a and.
And an update on the change last quarter that we thought and bad debt accruals I mean, given Genesis and obviously still out there vocal about the need for government funding to sustain their operations.
Or are we thinking about that.
Yeah.
<unk>.
So the C.
<unk> methodology was implemented at the beginning at the beginning of last year. So obviously, that's really driving the vast majority of the of.
The accrual of the expense, but if you compare it to last quarter I think it was right around $3 million this quarter compared to 800000 or so last quarter.
It's going to continue that there's going to be some quarters that its probably similar to this quarter other quarters, where it's at the lower and it really depends on.
What we're collecting and are we collecting what we bill who are we collecting on or some accounts, even if we collect what we bill are we collect more than what we bill if accounts age that may trigger of higher expense.
Pretty mechanical.
So that's that's the results for the quarter, though as it relates to bad debt expense.
Okay, and then Matt and you were talking about workers' comp earlier, one of the questions. So yes.
Yes.
Volumes to recover your client facilities.
I think that <unk>.
Workers comp could tick back up as well.
Tricky question to answer Brian I mean, it's certainly as.
Sensus flexes back up and and as much as that results in us needing to add staff to any particular facility. The math would suggest that there is and increased incidence or likelihood of.
Injuries or work comp claims rate, but.
There's been maybe a little bit of a mindset shift and the industry and how long lasting that is I would say certainly remains to be seen but it is interesting that we've seen such a market decline and our typical work comp claims outside of Covid and 2020 now of cynic might say that.
And please appreciate having a job and maybe no funny business going on.
But but there is certainly an element that you alluded to and that as we flex down our staffing as a result of census declines.
Just the math would clearly suggest that there is a lower incidence or likelihood of work comp and the injury claims so.
Little bit of uncertainty there but.
Your logic, certainly holds and as much as I alluded to our ongoing efforts to educate and provide a safe environment and to.
Reduce those claims and then ultimately manage those claims once they are submitted.
There is certainly some some degree of uncertainty as to what the the workspace and the work environment and within the nursing home will look like on a go forward basis is leased and the nearest of near term and the only the only other kind of wildcard I would introduce to the entire it's not specific to workers' comp, but it.
It's more of a general statement with the company and kind of our belief system and what the journey that we've undertaken over the past four years.
Darting with purpose vision and values as we are all of in on employee engagement and recognition and again I don't have data to suggest and tie that.
US going all in on that piece and believing in that as an organization and shifting the mindset of the organization around that not that we werent before but formalizing, it and really having structure and commitment to it.
And the universal type of way ties to reduced workers' comp claims.
But again, what I can tell you is that our workforce our leaders are more engaged than they've ever been before and my.
The <unk> with the company and it fills me with price to be able to say.
That we have a team that is truly aligned on what we believe our value system and division of the company. So again, how that translates into workers' comp and questions about if somebody is going to be more likely to.
And maybe maybe be committed to what theyre doing and apps, whether it relates to absenteeism and or other aspects of their of their.
Focus, but that is something I, just I wanted to make sure I shared because something's happening within the company that truly positive and it doesn't always show up and the results are even if it does it's not something we we carve out and highlight.
And I appreciate that and then I guess kind of my last question for you. Obviously, there is a big discussion on raising minimum wages I know you of pass through arrangements with your clients, but how are you thinking about any residual potential impact from that is there anything that might get stuck with you guys or do you think that you can pass through all of that is the $15 of.
And it always happens.
No that pass through is fairly.
Iron clad in our contractual agreements, Brian So thats not of concern per se the concern for us if you if you'd even what I would characterize it has the concern would be just for the general financial health and wellbeing of our clients right because while it's true that very few employees and a nursing home and bond and our paid minimum wage.
That's the frame of reference right. So there is typically of premium paid to minimum wage to motivate people to come in two of nursing home and perform duties that are obviously not the most attractive are appealing relative to other job opportunities that are out there so that becomes the question right.
Of particular, operator always had to pay.
<unk> percent premium to minimum wage to get people through the door well geez, if theres a $15 per hour minimum wage do they still need to pay at 12% premium or is it something less than that right. So how do they titrate that premium relative to minimum wage and the other element is.
The the employee piece.
And with the seniority relative to a new employee walked me and the door. You may have the 20 year employee who is making $18 an hour well if the new guy who walks in is going to be hired at $15. An hour. My 18 doesn't seem that great anymore. So I'm going to want to pay boost right. So it's really those type of conversations and that level of analysis and <unk>.
Adjustments that our clients will have to make ideally there's a rock solid plan in place to supplement that with a corresponding increases and reimbursement, but that's where the challenges really exist within the industry is not as much establishing that floor, but it's that titration of the premium relative to that new floor.
Alright I appreciate it thank you guys.
Thanks, Brian.
And your next question comes from the line of mature and the Paul instead of the and company.
Yes, hi, good morning, Thanks for taking the questions first just on the revenue guidance for the first half of the year.
Looks like that's all really due to just the lower occupancy and not and maybe additional exiting of facilities of adjustment of contracts that we saw maybe a year and a half ago.
Yes, I mean, theres always modification and we're in a constant state of negotiation.
365 case of year right.
Everybody is looking.
We're always looking to improve what we're doing and the customer.
And as is.
As the saying goes right Youre only as you are only as good as your last performance. So we.
We live that each and every day, so we're always evaluating.
The current state and projecting out future state, but no nothing significant nothing notable that would be reflected and the numbers. Similarly, we didn't have.
Significant or notable adds it's been a been pretty flat in terms of.
That dynamic and the business so.
Again occupancy in this environment as it relates to revenue really again underscores that revenue for us is a lagging indicator.
Okay. No that's great. Thanks, and then quickly just on Dsos the improvement Youre seeing is that really more a reflection of the initiatives on the accelerated payment model or anything else maybe in terms of funding that your clients are seeing.
Yes look collections this quarter exceeded billings, yet again and seven of the past eight quarters.
Been able to do that.
<unk> cash position.
The payment initiatives continue to be.
Success continued to be successful over 60% of our customers are paying us of the frequency of greater than monthly.
So certainly that's been I believe the primary driver of it and then I think over the past few quarters strategically and collaboratively working with our customers for for groups that we've maybe kind of accommodated at different points in the past as <unk> had some of the cares act money come in and we've been able to.
True up some of the Arrearages that were being carried but great credit to really our entire team our financial services leaders here in the office, but I can tell you. The the field based leaders are intimately involved and this as well. So it certainly has been a team effort like everything else and the company.
And I think <unk>, it's worth noting that I think even if it's on a subconscious level of there is an additive effect of really the ongoing enhancement relevance and importance of our value prop from and operational perspective, right. If you think about being in the midst of of pandemic were brought to the fore as never before is and.
Infection prevention and infection control.
Working right alongside the nursing Department, what is of more impactful way to mitigate infection prevention and ultimately enhanced infection control and then through their housekeeping services right. So if you're a customer in this current environment and even if you were struggling financially as a result of occupancy pressure.
Are you really going to play games with your housekeeping provider is probably not the right time to do that right. So I would say that and as much as there are decisions being made about the allocation of money relative to and operators list of vendors.
And we werent in the top three before we're certainly there now.
Okay, No that's great. Thanks for taking the questions.
Thanks Mitra.
There are no further questions at this time I will now turn the call back over to Mr. Ted Wahl for closing remarks.
Great. Thank you Misty looking ahead, we're going to continue to innovate and managing our business and remain flexible and responding to our client partners evolving service level staffing and supply chain needs.
Overall, we remain committed to making decisions that best position the company to deliver shareholder value over the long term.
And so on behalf of Matt and really all of US at healthcare services group I wanted to again, thank you Miss the for hosting the call and thank you to everyone for participating.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating you may now disconnect.
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