Q1 2024 Healthcare Services Group Inc Earnings Call
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Operator: Hello, and welcome to Healthcare Services Group's 2024 First Quarter Earnings Conference Call. The matters discussed on today's conference call include forward-looking statements about the business prospects of Healthcare Services Group Incorporated. For Healthcare Services Group's most recent forward-looking statement notice, please refer to the press release issued this morning, which can be found on our website, www.hcsg.com. Actual results may differ materially from those expressed or implied as a result of various risk uncertainties and important factors, including those discussed in the risk factors MDMA and other sections of the annual report on Form 10-K and Healthcare Services Group Incorporated's other SEC filings.
Speaker Change: Hello, Welcome to healthcare services Group 2024 first quarter earnings Conference call. The matters discussed on today's conference call includes forward looking statements about the business prospects of healthcare services incorporated where health care services incorporated.
Speaker Change: Most recent forward looking statement notice please refer to the press release issued this morning, which can be found on our website.
Speaker Change: W. W. Dot H E S and G dot com actual results may differ materially from those expressed or implied as a result of various risks and straightening teeth and important factors, including those discussed in the risk factors and <unk> and <unk> and other sections of the Angola.
Speaker Change: On Form 10-K, and healthcare services group incorporated other U S specie filings and as indicated in our most recent forward looking statement notice. Additionally management will be discussing certain non G. A a P financial measures a reconciliation of these.
Operator: And as indicated in our most recent forward-looking statement notice, additionally, management will be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in this morning's press. I'd now like to hand over the conference to the President and CEO, Ted Wo, and Chief Communication Officer, Matt McKee. Please go ahead.
Speaker Change: The U S. G. A a P can be found in this morning's press release I'd now like to hand over at the conference to the President and CEO, Ted well and Chief Communication Officer, Matt Mckee. Please go ahead.
Theodore Wahl: Thank you and good morning, everyone. Matt McKee and I appreciate you joining us today. We released our first quarter results this morning and plan on filing our 10-Q by the end of the week. Today, in my opening remarks, I'll first discuss our Q1 Financial Highlights and Key Accomplishments, including the recent healthcare disruption and the temporary impact it had on our customers, cash collections, and cash flow. I'll then share our perspective on the latest industry trends and developments.
Ted: Thank you and good morning, everyone, Matt Mckee and I. Appreciate you joining us today, we released our first quarter results. This morning and plan on filing our 10-Q by the end of the week.
Ted: Today in my opening remarks, I'll first discuss our Q1 financial highlights and key accomplishments, including the change healthcare disruption and the temporary impact it had on our customers' cash collections and cash flow.
Ted: I'll then share our perspective on the latest industry trends and developments and then lastly, I'll provide an update on our Q2 priorities and outlook for the rest of the year.
Theodore Wahl: And then lastly, I'll provide an update on our Q2 priorities and outlook for the rest of the year. I'll then turn the call over to Matt for a more detailed discussion on the. So with that overview, I'd like to now discuss our Q1 Financial Highlights and Key Accomplishments. Our team delivered strong first-quarter results, building on our positive momentum in 2023. For the three months ended March 31, 2024, we reported revenue of $423.4 million, in line with expectations. Net income and diluted EPS of $15.3 million and 21 cents.
Ted: I'll, then turn the call over to Matt for a more detailed discussion on the quarter.
Matthew J. McKee: So with that overview I'd like to now discuss our Q1 financial highlights and key accomplishments.
Matthew J. McKee: Our team delivered strong first quarter results building on our positive momentum in 2023 for the three months ended March 31, 2024, we reported revenue of $423 4 million in line with expectations net income and diluted EPS of $15 3 million in two.
Matthew J. McKee: 21 cents.
Theodore Wahl: Adjusted Net Income and Adjusted Diluted EPS of $16.5 million and 22 cents, and adjusted EBITDA of $28.9 million, a 10.7% increase over Q1 of 2023. During the quarter, we managed our adjusted cost of services under 86% and continued to grow our new business and manager pipeline. We remain confident that we will deliver on our goal of year-over-year growth in 2024, with the majority of those new business ads expected in the second half of the year.
Matthew J. McKee: <unk> net income and adjusted diluted EPS of $16 5 million and 22 cents and adjusted EBITDA of $28 9 million or 10, 7% increase over Q1 of 2023.
Matthew J. McKee: During the quarter, we manage the adjusted cost of services under 86% and continue to grow our new business and manager and training pipelines. We remain confident that we will deliver on our goal of year over year growth in 2024 with the majority of those new business adds expected in the second half of the year.
Theodore Wahl: On the cash collections front, Q1 has historically been our most challenging quarter, especially on the heels of Q4, which typically sees our strongest collections. The first quarter seasonality is anticipated and accounted for in our cash flow forecast. However, what was unanticipated was the February healthcare cyber attack.
Matthew J. McKee: On the cash collections front Q1 has historically been our most challenging quarter, especially on the heels of Q4, which typically sees our strongest collections the first quarter seasonality as anticipated and accounted for in our cash flow forecasting. However, what was unanticipated was the February change.
Matthew J. McKee: Healthcare cyber attack, the resulting CIT had a far reaching impact across the health care landscape and affected the claims submissions and billing activities of long term and post acute care providers, many of whom are <unk> customers.
Theodore Wahl: The resulting disruption had a far-reaching impact across the healthcare landscape and affected the claim submissions and billing activities of long-term and post-acute care providers, many of whom are HCSG customers. In spite of these first quarter headwinds, anticipated or otherwise, we achieved 95% cash collections and would have met our first quarter cash flow estimates if not for the change healthcare issue. While this event was disruptive during the quarter, we are confident that the impact on our customers is temporary.
Matthew J. McKee: In spite of these first quarter headwinds anticipated or otherwise, we achieved 95% cash collections and would have met our first quarter cash flow estimates if not for the change health care ratio.
Matthew J. McKee: While this event was disruptive during the quarter, we are confident that the impact on our customers is temporary we expect to make up for any cash collection delays in the months ahead, which is why we're reiterating our previously shared 2024 cash flow range of 40 to 55 million.
Theodore Wahl: We expect to make up for any cash collection delays in the months ahead, which is why we're reiterating our previously shared 2024 cash flow range of $40 to $55 million. I'd like now to share our perspective on the latest industry trends and developments. Industry fundamentals continue to trend positively, highlighted by a slow but steady increase in workforce availability, with the industry adding nearly 100,000 jobs since the beginning of 2023. At the current pace, the sector's workforce will match the 1.6 million pre-pandemic employee levels by the end of 2025, rising occupancy, which now sits at 79%, 12 points higher than the January 2021 low, and just 1% under pre-pandemic levels, and a stable reimbursement environment, which includes CMS's recently proposed 4.1% increase in Medicare rates for fiscal year 2025, as well as continued positive reimbursement trends at the state level
Matthew J. McKee: I'd like to now share our perspective on the latest industry trends and developments industry fundamentals continue to trend positively highlighted by a slow but steady increase in workforce availability with the industry, adding nearly 100000 jobs since the beginning of 2023 at.
Matthew J. McKee: At the current pace the sector workforce will match, the $1 6 million pre pandemic employee levels by the end of 2025.
Matthew J. McKee: Rising occupancy, which now sits at 79%.
Matthew J. McKee: Points higher than the January 2021, low and just 1% under pre pandemic levels.
Matthew J. McKee: And the stable reimbursement environment, which includes CNS has recently proposed four 1% increase in Medicare rates for fiscal year 2025, as well as continued positive reimbursement trends at the state level we.
Theodore Wahl: Reimbursement rates are especially important at this stage of the recovery in helping to offset the increased cost of doing business driven by persistent inflation and the higher cost of capital. On the regulatory front, CMS published its final minimum staffing rule earlier this week. There is a growing list of stakeholders opposed to the rule, including healthcare industry leaders, trade associations like ACCA, MEDPAC members, and a bipartisan group of legislators, including nearly every R and a growing number of Ds.
Matthew J. McKee: Reimbursement rates are especially important at this stage of the recovery and helping to offset the increased cost of doing business driven by persistent inflation and the higher cost of capital.
Matthew J. McKee: On the regulatory front CMS published its final minimum staffing rule earlier this week.
Matthew J. McKee: There is a growing list of stakeholder as opposed to the rule, including health care industry leaders trade associations like Orca Med pack members and a bipartisan group of legislators, including nearly every R and a growing number of these.
Theodore Wahl: The reasons for their opposition include the unfunded nature of the mandate, the one-size-fits-all approach, the apparent disregard for the realities of present and future nursing availability, and the near certainty that, if implemented, the rule would lead to facility closures and ultimately reduce access to care, especially in rural areas.
Matthew J. McKee: The reason for their opposition include the unfunded nature of the mandate. The one size fits all approach the apparent disregard for the realities of present and future nursing availability and the near certainty that it's implemented the rule would lead to facility closures and ultimately reduced access to care, especially in rural.
Matthew J. McKee: All areas.
Theodore Wahl: We believe it's highly likely the rule will not be implemented or will undergo significant revision during the extended phase-in period, especially given the inevitability of litigation and the potential for legislation or administration. As far as our outlook for Q2 and the second half of 2024, our top three priorities continue to be as follows. The first is managing the adjusted cost of services in line with our target of 86%. We do not take operational execution for granted but have full faith in the ability of our operators to deliver the services on budget.
Matthew J. McKee: We believe it's highly likely the rule will not be implemented or will undergo significant revision during the extended phase in period, especially given the inevitability of litigation and potential for legislation or administration change.
Matthew J. McKee: As far as our outlook for Q2, and the second half of 2024, our top three priorities continue to be as follows.
Matthew J. McKee: First is managing adjusted cost of services in line with our target of 86%.
Matthew J. McKee: We do not take operational execution for granted but have full faith in the ability of our operators to deliver the services on budget.
Theodore Wahl: It took a considerable amount of work in 2022 to modify our contracts to better capture wage inflation and cost increases in our pricing on a closer to real-time basis. Those contract enhancements, along with recent positive trends in customer experience, systems adherence, regulatory compliance, and budget discipline, provide strong operating momentum heading into the second quarter. We expect Q2 adjusted cost of services to be at or below $86,000. Our second priority is delivering year-over-year growth by executing on our organic growth strategy through hiring, training, and developing future management candidates, converting opportunities from our sales pipeline into new business ads, and retaining our existing facility business.
Matthew J. McKee: A considerable amount of work in 2022 to modify our contracts to better capture wage inflation and cost increases in our pricing on a closer to real time basis those contract enhancements along with recent positive trends in customer experience systems adherence regulatory compliance and buzz.
Matthew J. McKee: Thats our plan provides strong operating momentum heading into the second quarter.
Matthew J. McKee: We expect Q2 adjusted cost of services to be at or below 86%.
Matthew J. McKee: Our second priority is delivering year over year growth by executing on our organic growth strategy through hiring training and developing future management candidates.
Matthew J. McKee: Converting opportunities from our sales pipeline into new business adds and retaining our existing facility business.
Theodore Wahl: We estimate a Q2 adjusted revenue range of $420 million to $430 million and remain confident that we will deliver on our goal of year-over-year growth in 2024, with the majority of those new business ads expected in the second half of the year. The third priority is collecting what we build.
Matthew J. McKee: We estimate our Q2 adjusted revenue range of $428 million to $430 million and remain confident that we will deliver on our goal of year over year growth in 2024 with the majority of those do business adds expected in the second half of the year.
Matthew J. McKee: The third priority is collecting what we bill.
Theodore Wahl: We view cash collections as a lagging indicator of industry recovery. While our recent trends have improved compared to 2022 and the first half of 2023, and if not for the changed healthcare disruption, we would have met our Q1 cash flow estimates. This remains an area of opportunity for the company in 2024. We continue to expect some choppiness throughout the year ahead but anticipate our cash collections gaining strength throughout 2024 and further still into 2025.
Matthew J. McKee: We view cash collections as a lagging indicator of industry recovery.
Matthew J. McKee: While our recent trends have improved compared to 2022 and the first half of 2023.
Matthew J. McKee: And if not for the change healthcare disruption, we would have met our Q1 cash flow estimates. This remains an area of opportunity for the company in 2024.
Matthew J. McKee: We continue to expect some choppiness throughout the year ahead, but anticipate our cash collections gaining strength throughout 2024 and further still into 2025.
Theodore Wahl: We estimate a Q2 adjusted cash flow range of $5-$15 million and reiterate our previously shared 2024 adjusted cash flow range of $40-$55 million. As we round the turn of what has been a prolonged recovery for the industry, the company's underlying fundamentals are stronger than ever.
Matthew J. McKee: We estimate our Q2 adjusted cash flow range of $5 million to $15 million and reiterate our previously shared 2024 adjusted cash flow range of $40 million to $55 million.
Matthew J. McKee: As we round the turn of what has been a prolonged recovery for the industry. The company's underlying fundamentals are stronger than ever and we remain focused on executing on our strategic priorities to drive growth and deliver meaningful shareholder value in the year ahead.
Theodore Wahl: And we remain focused on executing on our strategic priorities to drive growth and deliver meaningful shareholder value in the year ahead. So with those introductory comments, I'll turn the call over to Matt for a more detailed discussion of the quarter. Thanks, Ted, and good morning, everyone.
Matthew J. McKee: So with those introductory comments I'll turn the call over to Matt for a more detailed discussion on the quarter.
Matthew J. McKee: Thanks, Pat and good morning, everyone.
Matthew J. McKee: Revenue was $423.4 million, in line with the company's expectations of $420 to $430 million. The company estimates Q2 revenue in the range of $420 to $430 million. Housekeeping and Laundry and Dining and Nutrition Segment revenues were $190.5 million and $232.9 million, respectively. Housekeeping and Laundry and Dining and Nutrition segment margins were 9.7% and 7.6%, respectively.
Matthew J. McKee: Revenue was $423 4 million in line with the company's expectations of $420 million to $430 million. The company estimates Q2 revenue in the range of $420 million to $430 million.
Matthew J. McKee: Housekeeping and laundry and dining and nutrition segment revenues were $195 million and $232 $9 million respectively.
Matthew J. McKee: Housekeeping and laundry and dining <unk> nutrition segment margins were nine 7% and seven 6% respectively.
Matthew J. McKee: The cost of services was $358.9 million. Adjusted cost of services was $357.3 million, or 84.4%. The company's goal is to continue to manage adjusted cost of services in the 86% range.
Matthew J. McKee: Cost of services was $358 $9 million adjusted cost of services was $357 3 million or <unk> 84, 4%.
The company's goal is to continue to manage adjusted cost of services in the 86% range.
Matthew J. McKee: SG&A was $46.9 million, Adjusted SG&A was $42.8 million, or 10.1%, and the company's goal continues to be achieving Adjusted SG&A in the 8.5% to 9.5% range. Net income and diluted earnings per share were $15.3 million and $0.21, respectively. Adjusted net income and adjusted diluted earnings per share were $16.5 million and $0.22, respectively. Adjusted EBITDA was $28.9 million, or 6.8%. This is a 10.7% increase over Q1 of 2020. Q1 Cash Flow and Adjusted Cash Flow used in operations were $26 million and $9.2 million, respectively.
SG&A was $46 $9 million adjusted SG&A was $42 8 million or 10, 1% and the company's goal continues to be achieving adjusted SG&A in the eight 5% to 95% range.
Matthew J. McKee: Net income and diluted earnings per share were $15 $3 million and 21, respectively.
Matthew J. McKee: Adjusted net income and adjusted diluted earnings per share were $16 $5 million and 22, respectively.
Adjusted EBITDA was $28 9 million or six 8% this.
Matthew J. McKee: This is a 10, 7% increase over Q1 of 2023.
Matthew J. McKee: Q1 cash flow and adjusted cash flow used in operations were $26 million and $9 2 million respectively.
Matthew J. McKee: DSO for the quarter was 88 days. Also, as part of our adjusted results, we adjust for the impact of the change in the payroll accrual, but since it will still be included in our reported cash flow from operations, we would point out that the Q2 payroll accrual is 15 days. That compares to the 8 days in the first quarter of 2024 and the 13 days that we had in Q2 of 2023. But again, payroll accrual only relates to quarter-to-quarter time.
Matthew J. McKee: DSO for the quarter was 88 days.
Speaker Change: Also as part of our adjusted results, we adjust for the impact of the change in the payroll accrual, but since it will still be included in our reported cash flow from operations, we would point out that the Q2 payroll accrual is 15 days.
Speaker Change: That compares to the eight days in the first quarter of 2024, and the 13 days that we had in Q2 of 2023, but again, the payroll accrual only relates to quarter to quarter timing.
Operator: So with those opening remarks, we'd now like to open up the call for questions.
Speaker Change: So with those opening remarks, we'd now like to open up the call for questions.
Speaker Change: Yes.
Operator: We are now opening the floor to questions and answers. If you'd like to ask a question, please press star and number one on your telephone keypad. That's star and number one on your telephone keypad. Our first question comes from William Sutherland from the Benchmark Company. Your line is now open.
Speaker Change: We are now opening the floor for question and answers session. If you'd like to ask a question. Please press star one on your telephone keypad Nexstar and number one finally telephone.
Speaker Change: Our first question comes from Damon.
Damon: And then from the benchmark company. Your line is now open.
William Sutherland: Hey, good morning, guys. Nice print. Ted, can you comment on client retention in the quarter? Just curious about if you had to offset the exits and, maybe, in that light, what the new ads were in the quarter.
Damon: Thank you Hey, good morning, guys nice print.
Damon: Ted can you comment on client retention in the quarter just curious if you had to.
Damon: Offsetting the exits and maybe.
Damon: <unk>.
Speaker Change: In that light, but the new ads were in the quarter.
Theodore Wahl: From a retention perspective, Bill, our retention rate was greater than 90%, which is, as you know, our expectation. We're always aiming for something greater than that, but we were at those levels and expect that to continue to trend along those lines. And from an advertising perspective, again, modest ads, which offset some of the exits we had, but by and large, again, looking ahead, we expect to have additional facility ads and really begin to ramp up our new business additions in the second half of the year.
Ted: From a retention perspective, bill our retention was greater than 90%, which is as you know our expectation, we're always aspiring for something greater than that but we were in those levels and expect that to continue to trend along those lines and from an AD perspective, again modest adds which offset some of that.
Ted: Exits, we had but by and large again looking ahead, we expect to have additional facility adds it really begin to ramp up our new business additions in the second half of the year.
Ted: And so the cadence.
Theodore Wahl: So the cadence, I would expect, would kind of build in the back half of the year as far as new ads go.
Ted: Wood.
Ted: We expect with kind of built in the back half of the year as far as new ads, Yes, we would expect the top line look and feel similar to what it has been what it was in Q1 into Q2, and then again expect some step ups in the back half of the year, which will be able to share in more detail.
Theodore Wahl: Yeah, we would expect the top line to look and feel similar to what it has been, what it was in Q1 into Q2, and then again expect some step-ups in the back half of the year, which we'll be able to share in more detail on our next call.
Speaker Change: On our next call.
Theodore Wahl: And the adjusted SG&A, at 10.1%, it's outside the range. Is there anything in particular there?
Speaker Change: Yes.
Speaker Change: And the adjusted SG&A at 10, 1%, it's outside the range.
Speaker Change: In particular there.
Theodore Wahl: Well, you know, when we made our, when we balanced our capital allocation strategy, we talked about making new and sustained investments along the lines that are organic growth drivers and certainly highlighted that as part of our shift in strategy. I think specifically in Q1, and these have been in process now for well over a year, but we continue to have investments in employee engagement and experience. We're in the midst of a company-wide initiative to drive retention and satisfaction among our employees.
Speaker Change: Well when we made our when we create balanced our capital allocation strategy, we talked about making new and sustained investments.
Speaker Change: Along the lines that are organic growth drivers and certainly highlighted that as part of our shift in strategy I think specifically in Q1 and these have been in process now for well over a year, but we continue to have investments and employee engagement and experience, which we're in the midst of a companywide initiative to drive retention.
Speaker Change: And satisfaction among our employees, so we've increased marketing and branding positioning investments, which we view critical for the future for both external as well as internal stakeholders and our goal is to move this from a neutral to our strength and then ongoing tech investments I think most recently this past quarter, we had facility level inverse.
Theodore Wahl: So we've increased marketing and branding, positioning investments, which we view critical for the future for both external as well as internal stakeholders, and our goal is to move this from a neutral to a strength, and then ongoing tech investments. I think most recently, this past quarter, we had facility-level investments in Chromebooks and tablets, specifically in our dining department. We're going to continue to make those investments. Again, they're central to our organic growth strategy, as well as our retention and customer satisfaction, and employee retention drivers.
Speaker Change: <unk> to chromebooks and tablets, specifically in our dining departments. So we're.
Speaker Change: We're going to continue to make those investments again, they're central to our organic growth strategy as well as our retention and customer satisfaction and employee employee retention drivers and then.
Theodore Wahl: And then we've also seen some increases in T&E expense, like a lot of businesses, just with overall activity and inflation. But longer term, as we lever that top line bill, we expect to see SG&A as a percentage of growth, or as a percentage of revenue, rather, come back in line with our target. So we're committed to maintaining our target. It's just more of a timing issue than anything else. I got it.
We've also seen some increases in <unk> expense like a lot of businesses, just with overall activity and inflation, but longer term as we lever that topline bill we expect to see the SG&A as a percentage of growth as a percentage of revenue rather come back in line with our target. So we're committed to maintaining our target. It's just more of a timing.
Speaker Change: Issue than anything else.
Theodore Wahl: Got it. Okay. Thanks.
Speaker Change: Got it okay.
Speaker Change: Thanks.
Operator: The next question comes from Sean Dodge from RDC Capital Markets. Your line is now open.
Speaker Change: Next question comes from Sean Dodge from <unk>.
Sean Wilfred Dodge: Capital markets. Your line is now open.
Sean Wilfred Dodge: Thanks. Good morning.
Sean Wilfred Dodge: Yes, thanks, good morning.
Theodore Wahl: Ted, you said cash collections in Q1, typically seasonally weak, but certainly impacted by the change outage. How much of a drag do you think change was in the quarter? Are there any bookends you can give us around some quantification there?
Sean Wilfred Dodge: Because you said cash questions in Q1, typically seasonally weak, but certainly impacted by the change outage.
Sean Wilfred Dodge: How much of a drag do you think change was in the quarter are there any bookends you can give us around.
Speaker Change: Some quantification there.
Theodore Wahl: Yeah, the change disruption, Sean, affected about half of our customers in some form or fashion. And then obviously, depending on the scale of the relationship that our client had with change, as well as, you know, their claims and billing volumes and even alternative capabilities with certain of those customers, some were affected more than others. You know, some of the larger groups, especially those that were equipped with greater back office support, were able to offset, at least in part, the impact by processing manual claims.
Speaker Change: The change in disruption Sean affected about half of our customers in some form or fashion and then obviously depending on the scale of the relationship that our client had with change as well as their claims and billing volumes and even alternative capabilities with certain of those customers some were affected more than others.
Speaker Change: Some that were the larger groups, especially that we're equipped with greater back office support we're able to offset at least in part the impact by processing manual claims many of our customers actually the majority of the affected customers data apply for CMS has accelerated and advanced payments program, but we're not expecting that.
Theodore Wahl: You know, many of our customers, actually, the majority of the affected customers did apply for CMS's Accelerated and Advanced Payments Program, but we're not expecting that supplemental funding to really hit in the main until late April or early May. I think overall, when you think about, you know, the difference from forecasted cash flow to adjusted cash flow, we estimate, you know, anywhere from 12 to 15 million dollars being directly related to the change impact. And we were able to get different levels of granularity and validation from some customers, more so than others, but that's what we estimate that impact to be.
Speaker Change: Supplemental funding to really hit in the main until late April early may.
I think overall when you think about the difference from forecasted cash flow to adjusted cash flow, we estimate anywhere from $12 million to $15 million being directly related to the change impact and we were able to get different levels of granularity and validation from some customers more so than others, but that's that's what we.
Speaker Change: Estimate that impact to be.
Theodore Wahl: Okay. And then you said it should only be temporary, and some of the supplemental help impact encounters are hitting later in April. Are you seeing any signs of collections elsewhere, I guess, so far to date in April?
Speaker Change: Okay, and then you said should only be temporary in some of the supplemental health impacting kind of are hitting later in April are you seeing any signs of collections elsewhere.
Speaker Change: So far to date in in April in April we are pacing right on with what our forecast was for the month. So we're again confident that the impact as you mentioned as we touched on in our opening remarks as temporary and expect to make up for any delays in the months ahead, which again is why we reiterated that 2000 and for adjusted <unk>.
Theodore Wahl: In April, we're pacing right on with what our forecast was for the month. So we're, again, confident that the impact, as you mentioned, as we touched on in our opening remarks, is temporary, and we expect to make up for any delays in the months ahead. Which, again, is why we reiterated that 24 adjusted cash flow range of $40 to $55 million.
Speaker Change: Cash flow range of 40% to $55 million.
Theodore Wahl: Okay, great. And then on cost of sales, so adjusted, it was $84.4, so you continue to manage that very well. Is there anything else to call out there that's one time or more transient that's helping right now, or do you think you can kind of continue to operate, you know, well within this 86% range?
Speaker Change: Okay, Great and then.
Speaker Change: On cost of sales. So adjusted was 84, four so you're continuing to manage that very well.
Is there anything else to call out there.
Speaker Change: One time are more transient than helping right now or do you think you can kind of continue to operate well within this 86% range.
Theodore Wahl: Yeah, I know I touched on it in my opening remarks, but the contract enhancements from 2022 certainly are a key factor in providing the durability and, as we see it, the sustainability of our cost of services line. But most importantly, really, Sean, it's the positive trends we see in customer experience, system adherence, regulatory compliance, and budget discipline, for which all the credit goes to our teammates that are leading the business in the field and their relationships with our customers and the impact they're able to have within the communities they're serving.
Speaker Change: Yes, I know I touched on it in my opening remarks, but the contract enhancements from 2022, certainly are a key factor in providing the durability and as we see it the sustainability of our cost of services line, but most importantly, really Sean it's the positive trends, we see in customer experience.
Speaker Change: <unk> adherence regulatory compliance and budget discipline in which all the credit goes to our teammates that are leading the business in the field and their relationships with our customers and the impact they are able to have within the communities. They are servicing and thats really more than anything central to driving consistency of cost of services and ultimately.
Theodore Wahl: And that's really more than anything central to driving consistency of cost of services and ultimately margins. So yes, we are very confident in our ability to continue to manage adjusted cost of services at or below 86%. As you've seen before, Sean, there's always going to be some month-to-month and quarter-to-quarter movement depending on the timing of new business ads or even, you know, exits occasionally. Management development investments can impact that, even the business mix, but by and large, it's about execution and the consistency of that execution.
Speaker Change: Margins. So yes, we are very confident in our ability to ability to continue to manage adjusted cost of services at or below 86%.
Speaker Change: <unk> seen before Sean Theres always going to be some month to month and quarter to quarter movement, depending on the timing of new business adds or even.
Speaker Change: Exits occasionally management development investments can impact that even the business mix, but by and large it's about execution and that consistency of that execution.
Theodore Wahl: Okay, great. Thank you again.
Speaker Change: Okay, great. Thank you again.
Speaker Change: Yes.
Operator: Our next question comes from Andy Wittmann from Baird. Your line is now open.
Speaker Change: Our next question comes from Andy Wittmann from Baird. Your line is now open.
Andrew John Wittmann: Yeah, great. Good morning, and thank you for taking my questions. Lots of questions on the SG&A. I'm going to add another one to it just for a little bit of clarification.
Andrew John Wittmann: Okay, great good morning, and thank.
Andrew John Wittmann: Thank you for taking my questions.
Andrew John Wittmann: Two questions on the SG&A I'm going to add another one to it just for a little bit of a clarification you talked.
Theodore Wahl: Ted, you talked about near-term you're making these investments, and those make sense. You talked about getting back to your targeted level in some period of time, but you didn't talk about how that happens. Does that require offsets in the cost structure to get there, or do you think that it's just going to be leveraged from the revenue growth that you're expecting in the second half and beyond?
Andrew John Wittmann: <unk> talked about.
Andrew John Wittmann: Near term, we're making these investments.
This makes sense when you talked about getting back to your targeted level in some period of time you didn't you didn't talk about how that happens does that require.
Andrew John Wittmann: Offsets and the cost structure to get there.
Andrew John Wittmann: Or do you think that it's just going to be leverage from the revenue growth that youre expecting in the second half and beyond.
Theodore Wahl: Leveraging the fixed portion of our SG&A budget more than anything else, Sean, and I would also be remiss if I didn't point out that it's not a coincidence that we're seeing our cost of services performance improve while our SG&A perhaps offsets a portion of that, but we're still, you know, benefiting from the improvement in our cost of services, and one does directly relate to the other.
Andrew John Wittmann: Leveraging the fixed portion of our SG&A more than anything else, Sean and I would also be remiss if I did point out that it's not a coincidence that we're seeing.
Andrew John Wittmann: Our cost of services performance improve while our SG&A, perhaps offsets a portion of that but we're still benefiting from the improvement in our cost of services in one does directly relate to the other.
Theodore Wahl: Okay, that makes sense. And then, again, as it relates to that expected second half ramp in organic growth. I was hoping maybe you could just give us a little bit more detail. I'd be curious, actually, if there's one of your particular segments that's expected to see more growth than the other, and really just the visibility that you have into this. Are these contracts that are basically signed already and then just waiting for the transition to happen? Anything that you can give in terms of confidence as to why you feel like the second half is going to show that ramp, I think would be helpful.
Speaker Change: Okay that makes sense and then just excuse me again.
Speaker Change: As it relates to that.
Speaker Change: The expected second half ramp in organic growth I was hoping maybe.
Speaker Change: Could you just give us a little bit more detail.
Speaker Change: I'd be curious actually if there's one of your particular segment thats expected to see more growth on the other and really just the visibility that you have into this.
Speaker Change: Are these contracts that are basically signed already and then just waiting for the transition to happen.
Speaker Change: Anything that you can give in terms of confidence as to why you feel like the second half is going to show that Ralph I think it would be helpful for us.
Matthew J. McKee: Yeah, Andy, this is Matt. I'll take this one.
Speaker Change: Yes, Andy this is Matt I'll take this one and we described last quarter. The fact that our ramp back to growth will likely not be a clean linear sequential step up but directionally, we expect ongoing revenue uptick and certainly year over year revenue growth and realistically, we expect to onboard more new business in the back half as we mentioned previously is.
Matthew J. McKee: And, you know, we described last quarter the fact that our ramp back to growth will, you know, likely not be a clean linear sequential step up. But, directionally, we expect ongoing revenue upticks and certainly year over year revenue growth. And realistically, we expect to onboard more new business in the back half, as we mentioned previously, as compared to the first half. So, you know, that's sort of how we're thinking about it, having offered the revenue range expectation in Q2 of that 420 to 430, you know, certainly suggests a first half, you know, compared to the second half, you know, step up in the back half of the year.
Speaker Change: Compared to the first half so that's sort of how we're thinking about it having offered the revenue range expectation in Q2 of that $4 1 million to $4 30.
Speaker Change: Certainly suggest a first half.
Speaker Change: Compared to second half step up in the back half of the year, we did onboard as Ted mentioned, a modest amount of new business in Q1, but more importantly, we are in the midst of prospect discussions that will amount to more meaningful ads in the back half.
Matthew J. McKee: You know, we did onboard, as Ted mentioned, a modest amount of new business in Q1. But more importantly, we're in the midst of prospect discussions that will amount to more meaningful ads in the back half. And the coming quarter is even beyond that.
Speaker Change: In the coming quarters, if it even beyond that so.
Matthew J. McKee: So, you know, while we have improving visibility into the pipeline business that will likely convert this year, the timing of those ads obviously has an impact on our quarterly top time for top line projections. So, in as much as we lock in start dates and have a sense for increasing top line targets, we'll share those. But as it relates to the top line, and Bill Sutherland asked about this, we'd be remiss if we didn't remind everyone that a component of top line growth is retaining our existing business. And as we sit here, you know, we don't foresee any significant exits on the horizon.
Speaker Change: While we are improving visibility into the pipeline business that will convert likely this year. The timing of those adds obviously has an impact on our quarterly top type topline projections, so and as much as we lock in start dates and have a sense for increasing topline targets, we will share those.
Speaker Change: But as it relates to the top line and Bill Sutherland asked about this we'd be remiss. If we didn't remind everyone that a component of topline growth is retaining our existing business and as we sit here, we don't foresee any significant exits on the horizon, but it's worth reiterating that we are still in the final stages of an ongoing industry recovery due to changes in facility.
Matthew J. McKee: But it's worth reiterating that we're still in the final stages of an ongoing industry recovery. You know, changes in facility operations or ownership can alter our view of a piece of business. And, you know, we have to remain nimble if we believe that it's in our best interest both in the near term and the long term to exit a client group about whom we might have concerns.
Speaker Change: Operations are ownership can alter our view on a piece of business and we have to remain nimble. If we believe that it's in our best interest both in the near term and long term to exit decline group about whom we might have concerns, but overall Andy net net we definitely have confidence in our ability to grow the top line year over year.
Matthew J. McKee: But overall, Andy, you know, net net, we definitely have confidence in our ability to grow the top line year over year. The expectation would be that that growth comes from not only Greenfield housekeeping opportunities with new customers but also the ongoing cross-selling of dining into the existing dining business. And we've been very clear, you know, with our customer base; we talked last quarter about the benefits of that cross-sell in the sense that, you know, we've had an opportunity to really understand the intricacies from an operational perspective as to the dining operation within an existing piece of business and existing facility with whom we partner on the environmental services side.
Expectations would be that that growth comes from not only greenfield housekeeping opportunities with new customers, but also the ongoing cross sell of dining into the existing customer base, we talked last quarter about the benefits of that cross sell in the sense that we have had an opportunity to really understand the integral.
Speaker Change: From an operational perspective as to the dining operation within an existing piece of business with an existing facility with whom we partner on the environmental services side and we've established that track record of payment, which obviously in this environment is more critical than ever Joe we do.
Matthew J. McKee: And we've established that track record of payment, which obviously in this environment is more critical than ever. So we do expect that the primary driver of growth will be organic growth within the long term and post-acute care segment, our primary segment, but now we remain committed to the education space as well. And we're sort of in the tail end of what would be described as the selling season in the education space. So we'll probably have, you know, greater visibility into growth opportunities in that segment in the coming months here as well.
Speaker Change: The primary driver of growth will be organic growth within the long term and post acute care segment. Our primary segment, but we remain committed to the education space as well and we're sort of in the tail end of what would be described as the selling season in the education space. So, we'll probably have greater visibility into growth.
Opportunities in that segment in the coming months here as well.
Speaker Change: Okay.
Theodore Wahl: I appreciate the detail in that answer. Thanks, Matt. And then just my last question here has to be, we have to talk about the minimum staffing requirement and the way this is going to play out, I guess. Ted, obviously, this isn't news. This has been something that's been proposed and talked about for a long time ad nauseum, obviously now finalized, and I heard your comments about, you know, challenges, administration change, all that, that makes what are, when you're talking to your customers, I mean, they have to do a degree of planning, assuming that this is going to get phased in, and I recognize it's three or five years and taking But what are they telling you about how this can affect the way they interact with you or the propensity to stay on with you or sign up with you?
Speaker Change: I appreciate the detail on that answer thanks, Matt and then.
Speaker Change: Just my last question here has to be we have to talk about the muni minimum staffing requirements.
Speaker Change: Given that.
Speaker Change: <unk>.
Speaker Change: Okay.
Speaker Change: The way this is going to play out so I guess.
Speaker Change: Ted.
Speaker Change: Obviously this isn't news this has been something thats been proposed and talked about for long time and it Nauseum, obviously now finalized and heard your comments about challenges administration change all of that that makes sense, what or when youre talking to your customers.
Speaker Change: Yes.
I mean, they have to do a degree of planning assuming that this is going to get phased in I recognize it's three years or five years, we've taken some time, but.
Speaker Change: What are they telling you about how this can affect the way they interact with you or the propensity to stay on with you or sign up with you.
Theodore Wahl: It's a great question, Andy, and I think broadly, not just this, but any sort of uncertainty that's introduced into the industry or the sector creates a demand for our services if not for no other reason than because we provide certainty. Certainty is a central part of our value proposition, peace of mind, cost certainty, operational certainty, and being able to be that partner that allows the operator to focus on the lifeblood of their business, which is really patient care and patient mix.
Speaker Change: Yes, it's a great question, Andy and I think.
Speaker Change: Hardly not just this but any any sort of uncertainty that is introduced into the industry or the sector.
Speaker Change: Creates a demand for our services if for no. Other reason because we provide certainty certainty is a central part of our value proposition peace of mind cost certainty operational certainty and being at being able to be that partner that allows the operator to focus on the lifeblood of their business.
Speaker Change: Which is really patient care and patient mix. So from that perspective, that's how we believe a quarter would impact if at least the demand for our services, but more poignantly before you even talk about the theoretical or hypothetical whenever being implemented.
Theodore Wahl: So from that perspective, that's how we believe it could or would impact, at least the demand for our services. But more poignantly, you know, before you even talk about the theoretical or the hypothetical of it ever being implemented. We do believe that the rule will not be implemented or, at a minimum, will undergo substantial revision during the phase-in period. I mentioned in the opening remarks the inevitability of litigation and the growing number of political will for legislation and the possibility of administration change.
Speaker Change: We do believe that the rule will not be implemented or at a minimum will undergo substantial revision during the phase in period.
Speaker Change: And I've mentioned in the opening remarks, the inevitability of litigation and the growing number of political will for legislation and the possibility for administration change.
Theodore Wahl: The reality is the provider community and most industry stakeholders, and you can include us as part of that stakeholder group, do not view this as a serious or sincere policy. The provider community has seen serious policies in the past, and this is so far outside the realm of what's possible. And the fact that it's unworkable and dated. I think Mark Parkinson has publicly referred to this, who's the Mark Parkinson, the president of AHCA, has referred to this as a 20th century solution to a 21st century problem.
Speaker Change: The reality is the provider community and most industry stakeholders and you can include us as part of that stakeholder group do not view this as a serious or a sincere policy.
Speaker Change: The provider community has seen serious policy in the past and this is so far outside the realm of what's possible and the fact that it's on workable and David I think Mark Parkinson has publicly referred to this as the Mark Parkinson the president of HCA has referred to this as a 20th century solution to a 21.
Speaker Change: <unk> century problem no. One is left with no choice, but to really view the rule cynically through an election years is as an attempt to cater to a specific constituency.
Theodore Wahl: One is left with no choice but to really view the rule cynically through an election year's eyes as an attempt to cater to a specific constituency. You know, there's no funding, the required staff are simply not available, and there's no plan or pipeline that's being built to produce the number of RNs that's needed. So, again, we're confident the rule will not be implemented, or if it does, it'll undergo significant change. So, you know, I appreciate the question.
Speaker Change: No funding the required staff are simply not available and there is no plan or our pipeline that's being built to.
Speaker Change: To produce the number of R&D that's needed. So again, we're confident the rule will not be implemented or if it does at all undergo significant change so.
Speaker Change: I appreciate the question, it's interesting to even speculate on it but at this stage. It's just so theres. So many hurdles for this to overcome.
Theodore Wahl: It's interesting to even speculate on it, but at this stage, there are so many hurdles for this to overcome. You know, it's, there has to be, to your point, at least a degree of thought put forth, but the realities of it ever becoming a rule are still, we believe, very slim.
Speaker Change: There has to be to your point at least a degree of thought put forth, but the realities of it ever becoming a rule are still.
Speaker Change: We believe very slim.
Theodore Wahl: Okay, thank you for your thoughts on that. Have a good day, guys.
Speaker Change: Great. Thank you for your thoughts on that have a good day guys.
Speaker Change: Okay.
Operator: Our next question comes from Ryan Daniels from William Blair. Your line is now open.
Speaker Change: Our next question comes from Ryan Daniels from William Blair. Your line is now open.
Jack A. Senft: Hey, guys. This is Jack Senft. I'm on behalf of Ryan Daniels.
Speaker Change: Hey, guys. This is Jack on for Ryan Daniels most of my questions have been asked already but first just back on the cash flow expectation I appreciate that you're reaffirming the 40% to $55 million cash flow range and I think you said second quarter cash flow is expected between June $15 million. So I guess, how should we think about this for the remainder of the year, though is it.
Jack A. Senft: Most of my questions have already been asked, but first, just back on the cash flow expectations, I appreciate that you're reaffirming the $40 to $55 million cash flow range. And I think you said second quarter cash flow is expected between $0 and $15 million. So, I guess, how should we think about this for the remainder of the year, though? Is the change in healthcare makeup kind of included in the second quarter guidance?
Speaker Change: <unk> Health care makeup kind of included in the second quarter guidance.
Jack A. Senft: I guess I'm just trying to see if you expect to make up a good portion of the change healthcare impact in the second quarter. Maybe it sounds like it'll trickle into the third quarter, too. Hoping I'm on the right track there. Thanks.
Speaker Change: I guess I'm just trying to see if you expect to make up a good portion of the change healthcare impact in the second quarter, maybe it sounds like it will trickle into third quarter to hope.
Speaker Change: Hoping them on the right track there.
Theodore Wahl: Yeah, five to fifteen million was what we mentioned for Q2, and then the second half of the year would be forty to fifty million, from a range perspective. So trickle is one way to describe it.
Speaker Change: We have $5 million to $15 million was what we mentioned for Q2, and then second half of the year would be 40% to $50 million.
Speaker Change: From a range perspective, so trickle is one way to describe it we're working we're actively working on plans and.
Theodore Wahl: We're actively working on plans and outlining expectations with customers on making up the shortfall from Q1. That'll be iterative. That'll be over not just Q2, but over the course of the rest of the year in a TBD type of way. But again, that's why we reiterated the expectation that we're gonna deliver on our range of 40 to 55.
Speaker Change: Outlining expectations with customers on making up the shortfall from Q1 that will that will be iterative that'll be over not just Q2, but over the course of the rest of the year and a TBD type of way, but again, that's why we reiterated the expectation that we're going to deliver on our range of 40% to 55.
Jack A. Senft: Okay, I understand. Thanks.
Speaker Change: Okay understood. Thanks, and then just a quick follow up to.
Jack A. Senft: And then just a quick follow-up to I think it's been a few quarters since you discussed the education segment. Just kind of curious if this is an opportunity for the second half of 2024 and into 2025. Can you just kind of talk about your expectations here? And then there are any recent updates on the education front? Thanks. Yeah, I would say, you know, we would certainly reiterate
Speaker Change: I think it's been a few quarters since you discussed the education segment, just kind of curious if this is an opportunity for a second half of 2024 and into 2025 can you just kind of talk about your expectations here and then theres any recent updates on the education front. Thanks.
Speaker Change: Yes, I would say.
Speaker Change: Certainly reiterate our commitment to the opportunity that exists in the education space.
Matthew J. McKee: Yeah, I would say, you know, we would certainly reiterate our commitment to the opportunity that exists in the education space. You know, there is a bit of seasonality in that market with respect to selling and then obviously the operations, which largely coincide with the academic year.
Speaker Change: A bit of seasonality to that market with respect to selling and then obviously the operations, which largely coincide with the academic year.
Matthew J. McKee: So, you know, there'll be less of a, you know, first half dynamic in the education space the way that we're speaking about the growth opportunity that exists in our core market, long-term and post-acute care, at least in 2024. So we would view that as more of a, you know, longer-term linear growth opportunity. It still represents less than 5% of total company revenue. So, you know, with our firm commitment to the growth opportunity there, and with the compelling nature of the value proposition that we're able to offer in that space, relative to the competitive environment, we do still feel very bullish about the opportunity that exists in the education space.
So there'll be less of a first half dynamic in the education space in the way that we're speaking about the growth opportunity that exists in our core market. The long term and post acute care at least in 2024.
Speaker Change: We would view that as more of the longer term linear growth opportunity still represents less than 5% of total company revenue so with our firm commitment to the growth opportunity there.
Speaker Change: The compelling nature of the value proposition that we're able to offer in that space relative to the competitive environment. We do still feel very bullish about the opportunity that exists in the education space. So as that grows to be a more meaningful component of total company revenue, we would certainly begin to speak about that more.
Matthew J. McKee: So as that grows to be a more meaningful component of, you know, total company revenue, we would certainly begin to speak about that more specifically. But, generally speaking, a firm commitment and still very much a compelling opportunity.
Speaker Change: Pacific Li, but generally speaking firm commitment and still.
Speaker Change: Much of compelling opportunity.
Operator: Our next question comes from AJ Rice from UBS. Your line is now open.
Speaker Change: Great. Thank you.
Speaker Change: Our next question comes from AJ Rice from UBS. Your line is now.
Enja: Hi, good morning. This is Enja on behalf of AJ.
AJ Rice: Hi, Good morning. This is <unk> on for a J.
Enja: I would like to ask about whether there seems to be an industry expectation that there's going to be higher ownership turnover, at least in the SNF industry, year over year. Does that pose a significant risk to any of the retention of your businesses? And how would a company think about quantifying that?
AJ Rice: I would now like to ask about whether there seems to be an industry expectation.
AJ Rice: There's going to be higher ownership turnover at least in the sniff industry.
AJ Rice: Year over year, and 24 does that pose a significant risk to any of the retention of your businesses and how would the company think about quantifying that thank you.
Matthew J. McKee: Thank you.
Matthew J. McKee: Yeah, but we've not yet seen, you know, sort of a significant step up in transactions within the space. You know, operator changes and ownership changes are, you know, certainly a normal course and expected component of our business. You know, we deal with those very well, while theoretically, you're exactly right in the supposition that ownership changes would potentially put us at risk if there is, you know, an acquiring company that's coming into a facility that we currently operate, and they either are, you know, philosophically opposed to outsourcing, or they choose not to specifically partner with Healthcare Services Group, or, from our perspective, we choose not to partner with them. So, you know, that is definitely where we're most at risk.
Speaker Change: Yes, we've not yet seen.
Speaker Change: Sort of a significant step up in transactions within the space.
Speaker Change: Operator changes ownership changes are certainly a normal course and expected component of our business, we deal with those very well, while theoretically youre exactly right in the supposition that ownership changes would potentially put us at risk if there is.
Speaker Change: An acquiring company that's coming into a facility that we currently operate and they either are philosophically opposed to outsourcing or they choose not to specifically partner with health care services group or from our perspective, we choose not to partner with them. So that is definitely where we're most at risk Ted.
Matthew J. McKee: You know, Ted reiterated our expectation that 90% client retention year-over-year remains the target that's inclusive of any ownership or operator changes. I would point really to the flip side in the sense that, typically, when there are those owner or operator changes, we're the beneficiary of those acquisitions, right? I mean, we would like to think, relative to the end market, we're partnering with most of the strongest operators, so those tend to be the folks who are expanding their holdings, expanding their portfolios, and acquiring facilities.
Speaker Change: Reiterated our expectation that 90% client retention year over year remains the target that's inclusive of any ownership, where operator changes I would point really to the flip side in the sense that typically when there are those owner or operator changes. We're the beneficiary of those acquisitions right I mean, we would like to thank relative to.
Speaker Change: The end market, we're partnering with most of the strongest operators. So those tend to be the folks who are expanding their holdings expanding their portfolios and acquiring facilities. So.
Matthew J. McKee: So, you know, assuming we've demonstrated the benefit of our partnership, you know, as they go along and increase their holdings, generally speaking, there are no guarantees or assurances, but we're along for the ride, right? They recognize the benefits of our partnership when they're acquiring a facility, especially if it's a turnaround opportunity. The last thing they want to prioritize is, you know, remedying the environmental service departments or right-sizing the dining departments and getting their food spend under control, all of those issues which they can very easily off-shift to healthcare services groups.
Speaker Change: Assuming we've demonstrated the benefit of our partnership as they go along and increase their holdings generally speaking there is no guarantees or assurances, but we're along for the ride right. They recognize the benefits of our partnership when they are acquiring a facility, especially if it's a turnaround opportunity the last thing they want to prioritize.
Speaker Change: Remedying.
The environmental service departments are right sizing the dining departments and getting their food spend under control all of those issues, which they can very easily off shift to health care services group. So we would view any increase or uptick in a transactional.
Matthew J. McKee: So, we would view any increase or uptick in a transactional... environment to be beneficial for the company, but you're correct that we have to work hard, and we have to maintain the business that we currently have through the possibility of ownership or operator transition.
Speaker Change: The environment to be beneficial for the company, but you are correct that we have to work hard and we have to maintain the business that we currently have through the possibility of ownership or operator transitions.
Matthew J. McKee: Great, thank you. Maybe just one follow-up.
Speaker Change: Great. Thank you maybe just one follow up.
Matthew J. McKee: I know that you negotiated a lot of your contracts back in 22 to give them an annual inflation that's more tied to wage increases. Do you have a sense of what the underlying rate increases on the contract they're running? Maybe 3 to 5% if that's the right way to think about it. Yeah, not as much of an
Speaker Change: I know that.
Speaker Change: Negotiated longer contracts back in 2000 to two <unk>.
Speaker Change: Dividend annual inflation thats more tied to wage increases.
Speaker Change:
Speaker Change: Do you have a sense of what the underlying rate increases on the contracts are running I assume it will be around maybe 3% to 5% is that the right way to think about it.
Speaker Change: Yes, but not as much of an annual increase but the goal was to be able to capture it.
Matthew J. McKee: Yeah, not as much of an annual increase, but the goal was to be able to capture inflationary increases in both food, the supply, and wages in something closer to real time. So we really went out of our way to sort of mirror and mimic the parameters that were put in place in the dining agreements relative to food inflation, whereby those are generally captured and passed through on a quarterly basis, typically tied to CPI food at home.
Speaker Change: Inflationary increases on both the food the supply and the wages and something closer to real time. So we really went out of our way to sort of mirror and mimic the parameters that were put in place in the dining agreements relative to food inflation, whereby those are generally captured in pass through on a quarterly basis.
Speaker Change: Typically tied to CPI food at home so.
Matthew J. McKee: So you see that food at home for Q4 was 50 basis points. I'm sorry; it was 50 basis points in Q4. We saw a little bit of a downward movement to 40 basis points in Q1. So that is the dynamic that's in play on food. We did attempt to mirror that with respect to wage inflation, so that was down from 1.5% in Q3 to 0.8% in Q4. So there's a little bit of a lag in the availability of these data.
Speaker Change: Food at home.
Speaker Change: For Q4.
Speaker Change: Was 50 basis points.
Speaker Change: I'm sorry, it was 50 basis points in Q4, we saw a little bit of a downward movement 40 basis points in Q1. So.
Speaker Change: That is the dynamic that's in play on the food, we did an attempt to mirror that with respect to wage inflation. So that was down from.
Speaker Change: One 5% in Q3, two 8% in Q4, so there is a little bit of a lag in the availability of those data, but that's generally where we're at we continue to see.
Matthew J. McKee: You know, a slowdown in inflation, a disinflation, if you will, and, you know, the goal is, of course, related to all of the above inflationary increases to pass those through in as close to real time as possible.
Speaker Change: A slowdown in the inflation of Disinflation, if you will and the goal is of course related to all of the above inflationary increases to pass those through and as close to real time as possible.
Speaker Change: Yeah.
Speaker Change: Thank you.
Speaker Change: Okay.
Speaker Change: Yes.
Operator: As of right now, we don't have any pending questions. I'd now like to hand over to the President and CEO, Ted Wahl. Thank you.
Speaker Change: As you think now we don't have any pending questions I'd now like to hand back over to Pat.
Pat: Okay, well thank you.
Theodore Wahl: Thank you, Ellie. It's an incredibly exciting time for the company as we round the corner on what has been a prolonged recovery for the industry. The challenges we have navigated the past few years have further solidified our value proposition, the durability of our business model, and our market-leading position. The company's underlying fundamentals are stronger than ever, and with the industry at the beginning of a multi-decade demographic tailwind, we are very favorably positioned to capitalize on the opportunities ahead and deliver meaningful long-term shareholder value. So, on behalf of Matt and all of us at HCSG, I wanted to thank Ellie for hosting the call today, and thank you again to everyone for joining.
Pat: Okay. Thank you Ali it's an incredibly exciting time for the company as we're rounding the turn of what has been a prolonged recovery for the industry. The challenges we navigated the past few years have further solidified our value proposition the durability of our business model and our market leading position.
Pat: The company's underlying fundamentals are stronger than ever and with the industry at the beginning of a multi decade demographic tailwind. We are very favorably positioned to capitalize on the opportunities ahead and deliver meaningful long term shareholder value. So.
Speaker Change: So on behalf of Matt and all of US at HCS G. I wanted to thank Kelly for hosting the call today and thank you again to everyone for joining.
Operator: We'd like to thank everyone for attending today's call. We hope you have a wonderful day. Stay safe. You may now disconnect.
Speaker Change: We'd like to thank everyone for attending today's call. We hope you have a wonderful day.
Speaker Change: You may now disconnect with your question.