Q1 2026 Healthcare Services Group Inc Earnings Call

April 22, 2026

James: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the HCSG 2026 Q1 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. The matters discussed on today's conference call include forward-looking statements about the business prospects of Healthcare Services Group, Inc. For Healthcare Services Group, Inc.'s most recent forward-looking statement notice, please refer to the press release issued this morning, which can be found on our website, hcsg.com.

Operator: Thank you for standing by. My name is Rebecca, and I will be your conference operator today. At this time, I would like to welcome everyone to the HCSG 2026 Q1 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. The matters discussed on today's conference call include forward-looking statements about the business prospects of Healthcare Services Group, Inc. For Healthcare Services Group, Inc.'s most recent forward-looking statement notice, please refer to the press release issued this morning, which can be found on our website, hcsg.com.

Speaker #1: This call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.

Speaker #1: If you would like to ask a question during this time , simply press star followed by the number one on your telephone keypad .

Speaker #1: If you would like to withdraw your question , press star one again . Thank you . The matters discussed on today's conference call include forward looking statements about the business prospects of healthcare services Group and incorporated for Healthcare Services Group Incorporated's .

Speaker #1: Most recent forward looking statement Notice . Please refer to the press release issued this morning , which can be found on our website .

Speaker #1: W w 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 MD and a and other sections of the Annual Report on Form 10-K and Healthcare Services Group .

Operator: Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties, and important factors, including those discussed in the risk factors, MD&A, and other sections of the annual report on Form 10-K and Healthcare Services Group, Inc.'s other SEC filings, and as indicated in our most recent forward-looking statements notice. Additionally, management will be discussing certain non-GAAP financial measures. A reconciliation of these items to US GAAP can be found in this morning's press release. I would now like to turn the call over to Ted Wahl, CEO. Please go ahead.

Speaker #1: Incorporated's . Other SEC filings . And as indicated in our most recent forward looking statements , notice Additionally , management will be discussing certain non-GAAP financial measures , a reconciliation of these items to US .

Speaker #1: GAAP can be found in this morning's press release . I would now like to turn the call over to Ted Wahl , CEO .

Speaker #1: Please go ahead

Speaker #2: Good morning , everyone , and welcome to Csgs first quarter 2020 earnings call . With me today are Matt McKee , our chief communications officer and Vikas Singh our chief financial officer Earlier this morning we released our fourth quarter results and plan on filing our 10-q .

Ted Wahl: Good morning, everyone, and welcome to HCSG's first quarter 2026 earnings call. With me today are Matt McKee, our Chief Communications Officer, and Vikas Singh, our Chief Financial Officer. Earlier this morning, we released our Q4 results and plan on filing our 10-Q by the end of the week. Today, in my opening remarks, I'll discuss our Q1 highlights, share our perspective on the general business environment, and discuss our strategic priorities for Q2. Matt will then provide a more detailed discussion on our Q1 results, and then Vikas will provide an update on our liquidity position and capital allocation progression. We will then open up the call for Q&A. With that overview, I'd like to now discuss our Q1 highlights. We delivered strong Q1 results across revenue, earnings, and cash flow, and we have carried that positive momentum into Q2.

Speaker #2: By the end of the week . Today , in my opening remarks , I'll discuss our Q1 highlights , share our perspective on the general business environment , and discuss our strategic priorities for Q2 .

Speaker #2: Matt will then provide a more detailed discussion on our Q1 results and then the costs will provide an update on our liquidity position and capital allocation progression .

Speaker #2: We will then open up the call for Q&A So with that overview , I'd like to now discuss our Q1 highlights . We delivered strong first quarter results across revenue , earnings , and cash flow , and we have carried that positive momentum into the second quarter .

Speaker #2: New client wins and high retention rates drove our year over year top line growth and our field based teams operational excellence led to quality service outcomes and consistent margins .

Ted Wahl: New client wins and high retention rates drove our year-over-year top-line growth, and our field-based teams' operational excellence led to quality service outcomes and consistent margins. We also returned $24 million of capital through our share repurchase program and ended the quarter with a strong balance sheet and ROIC profile, underscoring our focus on value-creating capital deployment. I'd like to now share our perspective on the general business environment. Industry fundamentals continue to gain strength, highlighted by the multi-decade demographic tailwind that is now beginning to work its way into the long-term and post-acute care system. In 2026, the first baby boomers will turn 80 years old, and by the year 2030, all 70 million-plus boomers will be over the age of 65, with the oldest being in their mid-80s, the primary age cohort for long-term and post-acute care utilization.

Speaker #2: We also returned $24 million of capital through our share repurchase program and ended the quarter with a strong balance sheet and ROIC profile, underscoring our focus on value-creating capital deployment.

Speaker #2: I'd like to now share our perspective on the general business environment. Industry fundamentals continue to gain strength, highlighted by the multi-decade demographic tailwind that is now beginning to work its way into the long-term and post-acute care system.

Speaker #2: In 2026 . The first baby boomers will turn 80 years old , and by the year 2030 , all 70 million plus boomers will be over the age of 65 .

Speaker #2: With the oldest being in their mid 80s . The primary age cohort for long term and post-acute care utilization . We expect that the demand and opportunities for service providers in this space , especially for those with compelling value propositions , durable business models and market leading positions to only increase in the months and years ahead .

Ted Wahl: We expect that the demand and opportunities for service providers in this space, especially for those with compelling value propositions, durable business models, and market-leading positions, to only increase in the months and years ahead. The most recent industry operating trends remain positive as well, highlighted by steady occupancy, increasing workforce availability, and a stable reimbursement environment. We remain optimistic that the administration will continue to prioritize the rationalization of regulations and policy to better align with the changing and expanding needs of our nation's most vulnerable and the provider communities we service. Beyond our core industry trends, we are closely monitoring the broader macro landscape, including the volatility in global energy and supply markets resulting from ongoing geopolitical conflicts. Our role as financial stewards for our clients remains a non-negotiable priority and serves as our North Star as we navigate this environment.

Speaker #2: The most recent industry operating trends remain positive as well, highlighted by steady occupancy, increasing workforce availability, and a stable reimbursement environment.

Speaker #2: We remain optimistic that the administration will continue to prioritize the rationalization of regulations and policy to better align with the changing and expanding needs of our nation's most vulnerable , and the provider communities we service beyond our core industry trends .

Speaker #2: We are closely monitoring the broader macro landscape , including the volatility in global energy and supply markets resulting from ongoing geopolitical conflicts Our role as financial stewards for our clients remains a non-negotiable priority and serves as our North Star as we navigate this environment .

Ted Wahl: To that end, while we have not observed direct on-invoice impact from these global events, our purchasing and procurement teams are actively monitoring the landscape and surveying our supply chain to stay ahead of any developing trends. Fundamental to these efforts is the depth of our longstanding vendor partnerships, which provide critical visibility and stability necessary to navigate market volatility with confidence. In the event that specific supplies or food items experience outsized inflationary or cost pressure, we are prepared to pivot our sourcing strategies to mitigate direct exposure. Ultimately, the rigorous work we have done to enhance our contractual frameworks allows us to pass through unavoidable cost increases, ensuring we preserve our margins while continuing to deliver market-leading service. Looking ahead to Q2, our top three strategic priorities remain: driving growth by developing management candidates, converting sales pipeline opportunities, and retaining our existing facility business.

Speaker #2: To that end, while we have not observed direct on-invoice impact from these global events, our purchasing and procurement teams are actively monitoring the landscape and surveying our supply chain to stay ahead of any developing trends.

Speaker #2: Fundamental to these efforts is the depth of our long standing vendor partnerships , which provide critical visibility and stability necessary to navigate market volatility with confidence .

Speaker #2: In the event that specific supplies or food items experience outsized inflationary or cost pressure , we are prepared to pivot our sourcing strategies to mitigate direct exposure Ultimately , the rigorous work we have done to enhance our contractual frameworks allows us to pass through unavoidable cost increases , ensuring we preserve our margins while continuing to deliver market leading service Looking ahead to Q2 , our top three strategic priorities remain driving growth .

Speaker #2: By developing management candidates , converting sales pipeline opportunities , and retaining our existing facility business , managing costs through field based operational execution and prudent spend management at the enterprise level and optimizing cash flow with increased customer payment frequency and enhanced contract terms and disciplined working capital management .

Ted Wahl: Managing cost through field-based operational execution and prudent spend management at the enterprise level, and optimizing cash flow with increased customer payment frequency, enhanced contract terms, and disciplined working capital management. We are confident that continuing to execute on our strategic priorities, supported by our robust business fundamentals, will enable us to drive growth while delivering sustainable, profitable results. With those introductory comments, I'll turn the call over to Matt.

Speaker #2: We are confident that continuing to execute on our strategic priorities , supported by our robust business fundamentals , will enable us to drive growth while delivering sustainable , profitable results So with those introductory comments , I'll turn the call over to Matt .

Matt McKee: Thanks, Ted, and good morning, everyone. Revenue was reported at $462.8 million, a 3.4% increase over the prior year. Segment revenues and margins for environmental services were reported at $208.3 million and 12.1%. Segment revenues and margins for dietary services were reported at $254.5 million and 9%. Our 2026 growth plans are oriented around mid-single-digit revenue growth, with Q2 revenue in the $465 to $475 million range, and sequential revenue growth in H2 compared to H1. Cost of services was reported at $386.9 million or 83.6%. Cost of services benefited from strong service execution, workers' comp, and general liability efficiencies, and lower bad debt expense. Our goal is to manage cost of services in the 86% range. SG&A was reported at $42 million. After adjusting for the $1.6 million decrease in deferred compensation, SG&A was $43.6 million or 9.4%.

Speaker #2: Thanks .

Speaker #3: Ted , and good morning , everyone Revenue was reported at $462.8 million , a 3.4% increase over the prior year Segment revenues and margins for environmental services were at $208.3 million and 12.1% .

Speaker #3: Segment revenues and margins for dietary services were reported at $254.5 million and 9% . Our 2026 growth plans are oriented around mid-single digit revenue growth , with Q2 revenue in the 465 to $475 million range and sequential revenue growth in the second half of the year compared to the first half of the year .

Speaker #3: Cost of services was reported at $386.9 million , or 83.6% . Cost of services benefited from strong service execution Worker's comp and general liability efficiencies and lower bad debt expense Our goal is to manage cost of services in the 80% range sG&A was reported at $42 million after adjusting for the $1.6 million decrease in deferred compensation , sG&A was $43.6 million , or 9.4% .

Matt McKee: Our goal is to manage SG&A in the 9.5% to 10.5% range based on investments that we've made and spoken about in previous quarters, with the longer-term goal of managing those costs into the 8.5% to 9.5% range. Our effective tax rate was reported at 24.6%. We expect our 2026 effective tax rate to be approximately 25%. Net income and diluted earnings per share were reported at $26.1 million and $0.37 per share. I'd now like to turn the call over to Vikas.

Speaker #3: Our goal is to manage SG&A in the 9.5% to 10.5% range, based on investments that we've made and spoken about in previous quarters.

Speaker #3: With the longer term goal of managing those costs into the eight and a half to 9.5% range . Our effective tax rate was reported at 24.6% .

Speaker #3: We expect our 2026 effective tax rate to be approximately 25% . Net income and diluted earnings per share were reported at $26.1 million and $0.37 per share I'd now like to turn the call over to Vikas

Vikas Singh: Thank you, Matt, and good morning, everyone. Starting with our liquidity and cash flows, our primary sources of liquidity are cash flow from operating activities, cash and cash equivalents, and our revolving credit facility. Cash flow from operations was reported at $43.7 million. After adjusting for the $20.3 million increase in the payroll accrual, cash flow from operations was $23.4 million. We wrapped up Q1 with cash and marketable securities of $214.6 million, and our current facility of $300 million was undrawn with utilization limited to LCs only. On 7 April, we amended our existing credit agreement to extend the maturity of our $300 million revolving credit facility to 2031. In tandem, the SOFR-based pricing grid has been favorably modified, and covenant flexibility has been enhanced. Our capital allocation plans remain unchanged from what we outlined last year, and we are on track to execute.

Speaker #4: Thank you , Matt , and good morning everyone Starting with our liquidity and cash flows , our primary sources of liquidity are cash flow from operating activities , cash and cash equivalents , and our revolving credit facility .

Speaker #4: Cash flow from operations was reported at $43.7 million. After adjusting for the $20.3 million increase in the payroll accrual, cash flow from operations was $23.4 million.

Speaker #4: We wrapped up the first quarter with cash and marketable securities of 214.6 million , and our credit facility of 300 million was undrawn with utilization limited to LCS only On April 7th , we amended our existing credit agreement to extend the maturity of our 300 million revolving credit facility to 2031 in tandem , the Sofr based pricing grid has been favorably modified and covenant flexibility has been enhanced Our capital allocation plans remain unchanged from what we outlined last year , and we are on track to execute our capital allocation across organic growth , M&A and share repurchases continues to be grounded in discipline and consistency Our enhanced liquidity provides us the flexibility to pursue all of these priorities without trade offs .

Ted Wahl: Our capital allocation across organic growth, M&A, and share repurchases continues to be grounded in discipline and consistency. Our enhanced liquidity provides us the flexibility to pursue all of these priorities without trade-offs. In February 2026, we announced plans to further accelerate the pace of our share buybacks and repurchase 75 million of our common stock over 12 months. In Q1, we repurchased 24 million of our common stock. We now have 9.2 million shares remaining under our current share repurchase authorization. With that, we will conclude our opening remarks and open up the call for Q&A.

Vikas Singh: Our capital allocation across organic growth, M&A, and share repurchases continues to be grounded in discipline and consistency. Our enhanced liquidity provides us the flexibility to pursue all of these priorities without trade-offs. In February 2026, we announced plans to further accelerate the pace of our share buybacks and repurchase 75 million of our common stock over 12 months. In Q1, we repurchased 24 million of our common stock. We now have 9.2 million shares remaining under our current share repurchase authorization. With that, we will conclude our opening remarks and open up the call for Q&A.

Speaker #4: In February 2026, we announced plans to further accelerate the pace of our share buybacks and repurchase $75 million of our common stock over 12 months.

Speaker #4: In the first quarter, we repurchased 24 million of our common stock. We now have 9.2 million shares remaining under our current share repurchase authorization.

Speaker #4: With that, we will conclude our opening remarks and open up the call for Q&A.

Operator: At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster. Your first question comes to the line of Ryan Daniels with William Blair. Your line is open.

Speaker #1: At this time , I would like to remind everyone in order to ask a question , press star . Then the number one on your telephone keypad .

Speaker #1: We'll pause for just a moment to compile the Q&A roster. And our first question comes from the line of Ryan Daniels with William Blair. Your line is open.

Matthew Mardula: Hello, this is Matthew Mardula on for Ryan. Thank you for taking the questions. In your prepared remarks, you touched on this, but I want to dive deeper into it. We saw strong results in cost of services as a percentage of revenue being at 83.6% this quarter, other than the guidance. Was there any one-time benefits this quarter? And what exactly drove that strong performance in the Q1? Also, as we look for the rest of the year with you reiterating the 86% cost of services as a percentage of revenue, how should we think about the rest of the quarters given the strong Q1 performance?

Speaker #5: Hello , this is Matthew Margiela on for Ryan . Thank you for taking the questions So in your prepared remarks , you touched up on this , but I want to dive deeper into it .

Speaker #5: So we saw strong results in cost of services as a percentage of revenue being at 83.6% this quarter , better than the guidance Was there any one time benefits this quarter ?

Speaker #5: And what exactly drove that strong performance in the first quarter? Also, as we look to the rest of the year, with you reiterating the 86% cost of services as a percentage of revenue, how should we think about the rest of the quarters given the strong Q1 performance?

Matt McKee: Yeah. Good morning, Matt. This is Matt McKee. As we've previously discussed, the primary driver of managing cost of services within that targeted range and overall margin consistency for us is really service execution. The recent positive service execution trends in customer experience, systems adherence, regulatory compliance, and budget discipline, all of which are near-term margin drivers carried over into Q1. The expectation is that carries forward throughout 2026 as well. That's why we remain confident in our ability to continue to manage costs in that 86% range. It's worth noting, Matt, that service execution is not something that happens on autopilot, right? There are no elements of it that are a given. Our field-based management teams are working very diligently to deliver on our expectations, and they deserve a lot of credit for that execution.

Speaker #3: Yeah . Good morning Matt . This is Matthew McKee You know , as we've previously discussed , the primary driver of managing cost of services within that targeted range and overall margin consistency for us is really service execution .

Speaker #3: And , you know , the recent positive service execution trends in customer experience systems adherence , regulatory compliance , and budget discipline , all of which are near-term margin drivers carried over into Q1 and the expectation is that that carries forward throughout 2026 as well .

Speaker #3: So that's why we remain confident in our ability to continue to manage costs in that 86% range . And it's worth noting , Matt , that , service execution is not something that happens on autopilot , right ?

Speaker #3: There are no elements of it that are a given . Our field based management teams are working very diligently to deliver on our expectations , and they deserve a lot of credit for that execution .

Matt McKee: There are always going to be some movement month to month, quarter to quarter, and the timing of certain items can have a positive impact. That was the case in Q1 results as well, in that work comp and general liability efficiencies continue to be driven by our focus and commitment to training and safety protocol that we've implemented in the facilities, and lower bad debt expense. That's been favorably impacted by our strong cash collection efforts and the scarcity of bankruptcies or reorgs during Q1.

Speaker #3: So, that said, there are always going to be some movement month to month, quarter to quarter. And the timing of certain items can have a positive impact.

Speaker #3: And that was the case in Q1 results as well. In that, work comp and general liability efficiencies continue to be driven by our focus and commitment to training and safety protocol that we've implemented in the facilities, and lower bad debt expense.

Speaker #3: You know , that's been favorably impacted by our strong cash collection efforts and the scarcity of bankruptcies or reorgs during Q1 .

Vikas Singh: Yeah. Matt, this is Vikas. If you want to unpack the outperformance in different buckets, what we would say is, look, we've outperformed the 86% by call it 2%. Out of that, 1% is coming from workers' comp and general liability. Those efficiencies contributed about $4.7 million to the favorable cost of sales outcome for the quarter. Now, while that reflects the ongoing efforts that Matt just talked about, what I would remind you is that this impact can be lumpy, and the fact that we got that number in one quarter may not necessarily lead to similar benefits in subsequent quarters because that benefit is based on the frequency and the size of claims. It's based on the insurance and actuarial model. While it's indicative of how we've been performing, it does not guarantee similar repeat performances in subsequent quarters.

Speaker #6: Yeah . And Matt , this is Vikas . If you want to unpack the outperformance in different buckets , what we would say is , look , we've outperformed the 86% by call it 2% out of that 1% is coming from worker's comp and general liability .

Speaker #6: Those efficiencies contributed about 4.7 million to the favorable cost of sales outcome for the quarter . Now , while that reflects the ongoing efforts that Matt just talked about , what I would remind you is that this impact can be lumpy .

Speaker #6: And the fact that we got that number in one quarter may not necessarily lead to similar benefits in subsequent quarters , because that benefit is based on , you know , the frequency and the size of claims .

Speaker #6: It's based on the insurance and actuarial model. And while, you know, it's indicative of how we've been performing, it does not guarantee similar repeat performances in subsequent quarters.

Vikas Singh: That's about 1% of that 2% outperformance. I would say the remaining outperformance this quarter, as Matt has already alluded to, came from bad debt and service execution. On the bad debt front, you'll see this number in the Q that we'll file later this week, but that number for the quarter is $3.8 million. That's less than 1% of revenue. If you look at where we've been in the recent past, we've been at 2% plus. If you look at a more normalized historical average, we are between 1% to 1.5%. It's really those two factors plus the operational excellence that's driving the number this quarter.

Speaker #6: So that's about 1% of that 2% outperformance . I would say the remaining outperformance this quarter , as Matt has already alluded to , came from bad debt .

Speaker #6: And service execution on the bad debt front , you know , you'll see this number in the Q that we'll file later this week .

Speaker #6: But that number for the quarter is 3.8 million . That's less than 1% of revenue . If you look at where we've been in the recent past , we've been at 2% plus .

Speaker #6: If you look at a more normalized historical average, we are between 1% to 1.5%. So it's really those two factors plus the operational excellence that's driving the number this quarter.

Vikas Singh: That said, we still feel that 86% is the right way to go because these events, while favorable, can be lumpy and are not guaranteed to be repeated in subsequent quarters. Although we'll try our best to do what we can. I think it takes us back to 86% being the goal and the target for us.

Speaker #6: But said , we still feel that 86% is the right way to go because these events , while favorable , can be lumpy and are not guaranteed to be repeated in subsequent quarters , although we'll try our best to do what we can .

Speaker #6: But I think it takes us back to 86% being the goal and the target for us.

Matthew Mardula: Great. That's extremely helpful. Thank you for that. Now, how has the development of managerial candidates trended recently? With the continued addition of new clients this quarter and with expectations of that continuing in the upcoming quarters, how are you planning to be able to keep pace with having enough managerial candidates? I know it probably varies by region, but any updates on growth and on ensuring you have enough managerial candidates would be great to hear about.

Speaker #5: Great . That's extremely helpful . Thank you for that . Now , how has the development of managerial candidates trended recently and with the continue addition of new clients this quarter and with expectations of that continuing in the upcoming quarters , how are you planning to be able to keep pace with having enough managerial candidates ?

Speaker #5: And I know it probably varies by region , but any updates on growth and on ensuring you have enough managerial candidates would be great to hear about

Matt McKee: Yeah, that's exactly right, Matt. The benefit that we have is that our expectations relative to management development are all grounded in the localized efforts, within not only our regions, but more specifically down to the district level, where we have our 12 facility districts, and the expectation is that each district will be executing their own management development efforts through their certified training facilities. The expectation is that the recruiting efforts, the hiring, the training, the development, ultimately the retention and placement of those management candidates is very much an exercise that's executed within that district structure. It's very much those bottoms-up, ground-up efforts that aggregate to total company top-line growth opportunities. It is that marriage of management development with business development, but again executed locally that when it's rolled up and executed properly, yields that mid-single-digit growth for the company.

Speaker #3: Yeah , that's exactly right , Matt . The benefit that we have is that our expectations relative to management development are all grounded in the localized efforts , you know , within not only our regions , but more specifically down to the district level where we have our 12 facility districts and the expectation is that each district will be executing their own management development efforts through their certified training facilities .

Speaker #3: So the expectation is that the , you know , the recruiting efforts , the hiring , the training , the development , ultimately the retention and placement of those management candidates is very much an exercise that's executed within that district structure .

Speaker #3: So it's very much those bottoms up . Ground up efforts that aggregate to total company top line growth opportunities . And it is that marriage of management development with business development .

Speaker #3: But again , executed locally , that when it's rolled up and executed properly , yields that mid-single digit growth for the company correctly noted as well , Matt , in the way that you asked the question is that , of course , there are regional variabilities , whether that's a market dynamic or it's simply a management issue .

Matt McKee: Correctly noted as well, Matt, in the way that you asked the question, is that, of course, there are regional variabilities, whether that's a market dynamic or it's simply a management issue. Some folks are further ahead of that curve, others will struggle because, of course, we don't compromise our standards relative to service execution and performance per our previous comments relative to cost of services. If there is a local team that's not executing on client satisfaction, delivering that customer experience, adhering to our operational systems, delivering regulatory compliance, and, of course, executing with budget discipline as financial stewards for our clients, we won't let them grow the business in their area. They have to demonstrate that they're capable of appropriately managing their business in their current portfolio before we'll allow them to grow.

Speaker #3: You know, some folks are further ahead of that curve. Others will struggle because, of course, we don't compromise our standards relative to service execution.

Speaker #3: And performance for our previous comments relative to cost of services , if there is a local team that's not executing on client satisfaction , delivering that customer experience , adhering to our operational systems , delivering regulatory compliance , and of course , executing with budget discipline as stewards , financial stewards for our clients .

Speaker #3: We won't let them grow the business in their area . They have to demonstrate that their capable of appropriately managing their business in their current portfolio before we'll allow them to grow .

Matt McKee: There will always be problem children, and that's the beauty of having invested in that middle management structure is that, number one, we can quickly identify areas of concern and some folks who may need extra attention and then quickly be able to insert those management resources, appropriately reskill, train, develop those managers such that they can get back on track and then reengage into that critical focus for us, which would be management development, very much tied to business development efforts. When you roll it all up, when we look at that landscape right now, Matt, we're very pleased with where we are, and we don't have any limitations or obstacles relative to achieving total company growth objectives in light of the strong environment relative to management development.

Speaker #3: So there will always be problem . Children . And that's the beauty of having invested in that middle management structure is that , number one , we can quickly identify areas of concern .

Speaker #3: And some folks who may need extra attention . And then quickly be able to insert those management resources appropriately , reskill , train , develop those managers such that they can get back on track and then re-engage into that critical focus for us , which would be management development , very much tied to business development efforts .

Speaker #3: But when you roll it all up, when we look at that landscape right now, Matt, we're very pleased with where we are, and we don't have any limitations or obstacles relative to achieving total company growth objectives in light of the strong environment, relative to management development.

Matthew Mardula: Great. Thank you so much for answering the questions. Really appreciate it.

Speaker #5: Great. Thank you so much for answering the questions. Really appreciate it.

Operator: Your next question comes from the line of A.J. Rice with UBS. Your line is open.

Speaker #1: Your next question comes from the line of A.J. rice with UBS . Your line is open .

James: Hi, this is James on for A.J. Rice. First of all, congrats on the strong start to the year. Could you potentially give us an update on how the campus segment did in terms of year-over-year growth? Then I think you've also expressed interest around potentially exploring more M&A opportunities, particularly potentially in campus, and maybe just an update on the capital deployment as it relates to M&A.

James Jack: Hi, this is James on for A.J. Rice. First of all, congrats on the strong start to the year. Could you potentially give us an update on how the campus segment did in terms of year-over-year growth? Then I think you've also expressed interest around potentially exploring more M&A opportunities, particularly potentially in campus, and maybe just an update on the capital deployment as it relates to M&A.

Speaker #7: Hi , this is James on for A.J. . I first of all , congrats on the strong start to the year . Could you give us an update on how the campus segment did in terms of year over year growth ?

Speaker #7: And then I think you've also expressed interest around potentially exploring more M&A opportunities , particularly potentially in campus and maybe just an update on the capital deployment as it relates to M&A .

Matt McKee: Yeah. Good morning, James. As we discussed last quarter, the campus business represents over $100 million of annualized revenue in 2025, and still relatively small base at less than 10% of total company revenues. We do see continued growth of that base. We're not going to report or call out specific growth in that segment at this point. We've mentioned the synergies that exist between the environmental offering or the brand that we're executing for environmental services and our dining brand and those offerings. As we sit here, if you think about the academic calendar, as many, if not most, of our campus clients right now are schools, we're in the selling season, right? As administrators begin to plot out their plans for the end of this academic year, the summer, and then thinking ahead to next year's academic year.

Speaker #3: Yeah . Good morning James . You know , as we discussed last quarter , the campus business represents over $100 million of annualized revenue in 2025 .

Speaker #3: And , you know , still relatively base at less than 10% of total company revenues . But , you know , we do see continued growth of that base .

Speaker #3: We're not going to , you know , report or call out specific growth in that segment at this point . But , you know , we've mentioned the synergies that exist between the environmental offering or the brand that we're executing for environmental services and our brand and those offerings .

Speaker #3: So , you know , as we sit here , if you think about the academic calendar , you know , as as many , if not most of our campus clients right now are schools .

Speaker #3: We're in the selling season , right ? As administrators begin to plot out their plans for the end of this academic year , the summer , and then thinking ahead to next year's academic year .

Matt McKee: From a business development and a pipeline development perspective, those folks are very much in the thick of orienting towards growth objectives from an organic perspective. Perhaps Vikas would make a comment or two just as far as how the inorganic opportunities could potentially supplement that in the campus opportunity.

Speaker #3: So from a , you know , a business development and a pipeline development perspective , those folks are very much in the thick of orienting towards growth objectives from an organic perspective .

Speaker #3: And, you know, perhaps Vikas would make a comment or two, just as far as how the inorganic opportunities could potentially supplement that in the campus opportunity.

Vikas Singh: Yeah. As we've talked about, we remain focused on building that M&A pipeline. We continue to evaluate incremental opportunities every quarter. As I said earlier, our approach will continue to be grounded in discipline and consistency. We are looking for deals that will be small, $20, $25, $30 million of purchase price, such that while they look and feel like inorganic growth on day one, they serve as an organic growth platform on day two. More of a land and expand. We are busy looking at opportunities and evaluating the right fit that we'll move forward with over the course of the year. That continues to be an ongoing focus area for us.

Speaker #6: Yeah. And as we've talked about, we remain focused on building that M&A pipeline. We continue to evaluate incremental opportunities every quarter.

Speaker #6: And as I said earlier , our approach will continue to be grounded in discipline and consistency . And we are looking for deals that will be small .

Speaker #6: You know , 20 , 25 , 30 million of purchase price such that while they look and feel like inorganic growth on day one , they serve as an organic growth platform on day two .

Speaker #6: So more of a land and expand . So we are busy looking at opportunities and evaluating the right fit that we will move forward with over the course of the year , but that continues to be an ongoing focus area for

James: Got it. Appreciate the color there. Maybe just one more on adjusted EBITDA. It was a really strong quarter at almost $39 million. I know you don't guide to that, and I appreciate some of the comments around the benefits you saw, the cost of services this quarter. But is there any directional color you can give us with the starting point of $39 million just on seasonality considerations or how to consider or view that from a quarter-to-quarter basis from here?

James Jack: Got it. Appreciate the color there. Maybe just one more on adjusted EBITDA. It was a really strong quarter at almost $39 million. I know you don't guide to that, and I appreciate some of the comments around the benefits you saw, the cost of services this quarter. But is there any directional color you can give us with the starting point of $39 million just on seasonality considerations or how to consider or view that from a quarter-to-quarter basis from here?

Speaker #7: John, I appreciate the color there. Maybe just one more on adjusted EBITDA—it was a really strong quarter at almost $39 million.

Speaker #7: I know you don't guide to that . And I appreciate some of the comments around the benefits you saw to the cost of services this quarter , but is there any directional color you can give us with the starting point of 39 million just on , you know , seasonality considerations or how to consider or view that from a quarter to quarter basis from here ?

Matt McKee: Yeah, you're right. Look, we've not been getting into projecting out EBITDA, but as we've mentioned in the past, the model remains very consistent and in some ways easy to understand, which is from our perspective, 86% cost of sales, SG&A short-term target of 9.5% to 10.5%, so call it 10% at the midpoint. We've got a 25% tax rate, right? That puts you in the ZIP code of 4% pre-tax income. Our stock-based compensation and D&A typically runs at about 1.5%. I think that's the best we can do in terms of providing you a sense of where it will be. Now, this quarter, EBITDA was strong, as we talked about. The results, cost of sales, came out more favorable than the 86%. SG&A came out more favorable than the 10%. That said, that's not what we are projecting as the overall year outcome.

Speaker #6: Yeah , you're right . Look , we've not been getting into projecting out EBITDA , but as we as we've mentioned in the past , the model remains very consistent .

Speaker #6: And in some ways easy to understand , which is from our perspective , 86% cost of sales . A short term target of nine and a half to 10.5% .

Speaker #6: So call it 10% at the midpoint . And we've got a 25% tax rate , right ? That puts you in the zip code of 4% pre-tax income are stock based compensation and DNA typically runs at about 1.5% .

Speaker #6: I think that's the best we can do in terms of providing you a sense of where it will be . Now , this quarter , EBITDA was strong as we talked about the results , cost of sales came out more favorable than the 86% S , G , and A came out more favorable than the 10% .

Speaker #6: That said , that's not what we are projecting as the overall year outcome . So I'll let you project out EBITDA within those metrics , and there will be quarters where we do better than those .

Ted Wahl: I'll let you project out EBITDA within those metrics, and there will be quarters where we do better than those and maybe not. I think if you look at how we look at the business on an annual or a 3-to-5-year growth trajectory basis, those are the metrics that we are holding ourselves accountable to.

Matt McKee: I'll let you project out EBITDA within those metrics, and there will be quarters where we do better than those and maybe not. I think if you look at how we look at the business on an annual or a 3-to-5-year growth trajectory basis, those are the metrics that we are holding ourselves accountable to.

Speaker #6: And maybe not, but I think if you look at how we look at the business on an annual or a three- to five-year growth trajectory basis, those are the metrics that we are holding ourselves accountable to.

James: Great. Thanks for taking my questions.

James Jack: Great. Thanks for taking my questions.

Speaker #7: Great . Thanks for taking my questions

Operator: Your next question comes to the line of Sean Dodge with BMO Capital Markets. Your line is open.

Speaker #1: Your next question comes from the line of Sean Dodge with BMO Capital Markets. Your line is open.

Sean Dodge: Yeah, thanks. All right, good morning. Maybe just going back to the cost of services. Vikas and Matt, you mentioned benefits in the quarter from workers' comp, general liability, bad debt. I know you've also been working on some initiatives aimed at improving engagement with employees at the hourly level and using that to improve retention and lower turnover. Maybe if you could just share some more on what specifically you're doing there, and then any impact you've seen from that yet on margins, and maybe how much runway is left from initiatives like that have a little bit more kind of durability over the long term.

Speaker #8: Yeah . Thanks . Hi . Good morning . Maybe just going back to the cost of services . Vikas Singh and Matt , you mentioned benefits in the quarter from worker's comp general liability , bad debt .

Speaker #8: I know you've also been working on some initiatives aimed at improving engagement with employees at the hourly level, and using that to improve retention and lower turnover.

Speaker #8: Maybe if you could just share some more on on what specifically you're doing there . And then any impact you've seen from that yet on margins and maybe , maybe how much runway is left from initiatives like that that have a little bit more kind of , you know , kind of durability over the long term ?

Matt McKee: Yeah. Good morning, Sean. I would say without a doubt, that continues to be an area of focus for us, engaging with our employees at every level within the organization, right? It's a newer area of focus for us to identify with and engage with our line staff employees who historically we would have thought associated more with the facility rather than with Healthcare Services Group. As we've formalized and really kind of adopted as a north star our company's purpose, our vision, and our values, in order for us to achieve all of those, we have to have high levels of buy-in and engagement with the employees throughout the continuum.

Speaker #3: Yeah . Good morning . Sean . I would say without a doubt , that continues to be an area of focus for us engaging with our employees at every level within the organization .

Speaker #3: Right? It's a newer area of focus for us—to identify with and engage with our line staff, employees who historically we would have thought associated more with the facility rather than with Healthcare Services Group.

Speaker #3: But as we've formalized and really kind of adopted as a North Star , our company's purpose , our vision , and our values in order for us to achieve all of those , we have to have high levels of buy in and engagement with the employees throughout continuum .

Matt McKee: As you can imagine, being a service-based, sort of, decentralized organization with the bulk of our employees executing those line staff level positions such as housekeepers, pot washers, dishwashers, and food service employees, it is rather challenging to communicate with them. They're not users of email, and we have limited opportunities to connect with them. We have really explored and identified creative ways to connect with them via company intranet, establishing a proprietary app technology through which we can communicate with folks, leveraging our time clocks to be able to push messages to our employees and to better understand where they are in their company experience and journey such that we can really connect with them and drive improved connectivity and outcomes. Qualitatively, without a doubt, we are seeing improved connectivity, higher levels of employee satisfaction.

Speaker #3: And as you can imagine , being a service based sort of , you know , decentralized organization with the bulk of our employees executing those line staff level positions , such as , you know , housekeepers and pot washers and dishwashers , food service employees .

Speaker #3: It is rather challenging to communicate with them. You know, they're not users of email. And we have limited opportunities to, to connect with them.

Speaker #3: So we have , you know , really explored and identified creative ways to connect with them via , you know , company intranet , you know , establishing a proprietary app technology through which we can communicate with folks , leveraging our time clocks to be able to push messages to our employees and to better understand where they are in their experience and journey such that we can really connect with them and drive improved connectivity and outcomes .

Speaker #3: So qualitatively , without a doubt , we are seeing improved connectivity , higher levels of employee satisfaction , and from a quantitative perspective , Sean harder to , to pinpoint it running through cost of services explicitly , but without a doubt , we are seeing improvement in employee retention as a result of those levels of engagement and ultimately satisfaction .

Matt McKee: From a quantitative perspective, Sean, harder to pinpoint it running through cost of services explicitly. Without a doubt, we are seeing improvement in employee retention as a result of those levels of engagement and ultimately satisfaction. Obviously that yields greater operational outcomes by way of the customer experience, having longer-term employees in the facility. It reduces the management's requirement to be out there conducting interviews and trying to hire and replace employees who are turning over. There's a cascade of benefits that come from that, some of which are qualitative, but without a doubt, quantitatively yielding improved employee retention data.

Speaker #3: So obviously , that yields greater operational outcomes by way of , you know , the customer experience having longer term employees in the facility .

Speaker #3: It reduces the management's requirement to be out conducting interviews and trying to hire and replace employees who are turning over . So there's a cascade of benefits that come from that , some of which are qualitative , but without a doubt , quantitatively yielding improved employee retention data

Sean Dodge: Okay. Great. On the revenue outlook, your guidance for H1 of the year implies kind of low single digit year-on-year growth. To get to the mid-singles for the full year means you got to do something like high singles year over year for H2. Just anything on what's driving that. Is it just simply implementing more facilities over the year and those kind of ramping up? Just any more color on how much is coming from new clients on the housekeeping side versus dining cross-sells?

Speaker #8: Okay , great . And then on the revenue outlook , your guidance for the first half of the year implies kind of low single digit year on year growth to get to the the mid singles for the full year means you got to do something kind of like high singles year over year for the back half , just anything .

Speaker #8: On what's driving that . Is it just simply implementing more facilities over the year and those kind of ramping up . And then just any more color on how much is coming from new clients on the housekeeping side versus dining Cross-sells .

Ted Wahl: Hey, thank you for the question, Sean. Look, I would start with the fact that the demand for our services is stronger than it's ever been. You look at our pipeline, it's robust, it's growing in terms of new business opportunities, each of which are at various stages of development. We have a highly managed and structured sales process from the beginning stages of cultivation all the way through closing. I think that bodes well for future, not just over the next 6 to 12 months, but beyond. We continue in the current year to successfully execute on the organic growth strategy by developing management candidates, as Matt highlighted, that fund new business opportunities, all while retaining our base business.

Speaker #3: Hey , thank you for the question , Sean . Look , I would start with the fact that the demand for our services is stronger than it's ever been .

Speaker #3: You know , you look at our pipeline , it's robust . It's growing in terms of new business opportunities , each of which are at various stages of development .

Speaker #3: But we have a highly managed sales , highly managed and structured sales process . From the beginning stages of cultivation all the way through closing .

Speaker #3: So I think that bodes well for future , not just over the next 6 to 12 months , but beyond . And we continue in the current year to successfully execute on the organic growth strategy by developing management candidates .

Speaker #3: As Matt highlighted that fund new business opportunities , all while retaining our base business to the to the question you asked , the key drivers for us in delivering mid-single digit growth at either the higher end of the range , like we saw in 2025 , or even the lower end of the range , like we saw this past quarter , is timing .

Ted Wahl: To the question you asked, the key drivers for us in delivering mid-single-digit growth at either the higher end of the range, like we saw in 2025, or even the lower end of the range, like we saw this past quarter, is timing. It's the timing of HCSG management capacity and the timing of client start date preference. I know we've talked about this before, but timing can be fluid quarter to quarter, knowing there's always going to be a subset of intra-quarter opportunities that may be pushed out or pulled forward, depending on those two key drivers.

Speaker #3: It's the timing of a CSG management capacity and the timing of client start date preference . And I know we've talked about this before , but timing can be fluid quarter to quarter , knowing there's always going to be a subset of intra quarter opportunities that may be pushed out or pulled forward , depending on those two key drivers .

Ted Wahl: To help put that dynamic in perspective or context, the difference between us starting a new opportunity on 1 April as opposed to 1 September is insignificant in the context of the three- to five-year growth outlook we've put forth, but could be impactful in a given quarter or even in a year, depending on the size and scale of the opportunity. Again, our 2026 growth outlook is a range that's based on annual growth expectations, whereas the quarter-to-quarter estimates are really intended to provide additional near-term visibility. In terms of the segment breakdown, our new business pipeline is split fairly evenly between EVS and dietary, although from a revenue contribution perspective, a dietary account is typically 2x or so of that of an EVS account on a same-store basis. As we're onboarding a comparable number of facilities, dietary and EVS revenue will increase proportionately.

Speaker #3: And to help put that dynamic in perspective or context , the difference between us starting a new opportunity on April 1st , as opposed to September 1st , is insignificant in the context of the 3 to 5 year growth outlook .

Speaker #3: We've put forth , but could be impactful in a given quarter or even in a year , depending on the size and scale of the opportunity .

Speaker #3: So again , our 2020 2026 growth outlook is a range that's based on annual growth expectations , whereas the quarter to quarter estimates are really intended to provide additional near-term visibility in terms segment breakdown , our new business pipeline is split fairly evenly between EVs and dietary , although from a revenue contribution perspective , a dietary account is typically two X or so of of that of an EVs account on a same store basis .

Speaker #3: So as we're onboarding comparable number of facilities , dietary and EVs revenue will increase proportionately . And just just as reminder for you and for the group , we're still 50% or so penetrated in dietary services .

Ted Wahl: Just as a reminder for you and for the group, we're still 50% or so penetrated in dietary services. You have the remainder of that to pursue relative to our EVS customer base. That cross-selling of dietary to our existing EVS customer base remains that ultimate low-hanging fruit.

Speaker #3: So you have the remainder of that to pursue relative to our EVs customer base . So that cross-selling of dietary to our existing EVs , customer base remains that ultimate low hanging fruit

Sean Dodge: Okay. Thanks, Ted. Just last on Genesis, any updates you can share there? Are you still providing services to them? Just any better visibility you have at this point into where those facilities end up from an operator standpoint?

Speaker #8: Okay . Thanks , Ted . And then just last on Genesis , any updates you can share there ? You still providing services to them ?

Speaker #8: And then just any better visibility you have at this point into where those facilities end up kind of from an operator standpoint ?

Ted Wahl: Yes, continuing to provide services to the Genesis facilities without operational or payment disruption. We continue to expect that to be the case throughout the duration of the post-petition period. In terms of updates, in January, the bankruptcy court did approve the sale of Genesis to 101 West State Street, which is a group of well-organized, well-known operators in the space who we have a relationship with. From a timing perspective, those revised bid procedures from the second auction called for a late April financing commitment letter, so that process is unfolding as we speak. An early summer close, although from a practical standpoint, I think there's a strong belief that that will likely be pushed out. I know there's an option at either the buyer or the seller, purchaser or the debtor, to exercise that option.

Speaker #3: Yes . Continuing to provide services to the Genesis facilities without operational or payment disruption . And we continue to expect that to be the case throughout the duration of the post-petition period .

Speaker #3: In terms of updates , in January , the bankruptcy court did approve the sale of Genesis to 101 West State Street , which is a group of well organized , well-known operators in this space who we have a relationship with from a timing perspective , those revised bid procedures from the second auction called for a late April financing commitment letter so that process is unfolding as we speak .

Speaker #3: And then in early summer , close , although from a practical standpoint , I think there's a strong belief that that will likely be pushed out .

Speaker #3: I know there's an option at either the buyer or the seller, purchaser or the debtor, to exercise that option. So we're likely looking at a closing date later in the summer, assuming 101 West State Street can provide that financing commitment.

Ted Wahl: We're likely looking at a closing date later in the summer, assuming 101 West State Street can provide that financing commitment. Again, in the meantime, our priority is providing the high-quality services to Genesis, and we don't expect any disruption in operations or payment between now and the sale date.

Speaker #3: But again , in the meantime , our priority is providing the high quality services to Genesis , and we don't expect any disruption in operations or payment between now and the sale date .

Sean Dodge: Okay, great. Thanks again, and congratulations on the quarter.

Speaker #8: Okay , great . Thanks again . And congratulations on the quarter .

Ted Wahl: Thanks so much, Sean.

Speaker #3: Thanks so much , Sean

Operator: Your next question comes from the line of Ryan Halsted with RBC Capital Markets. Your line is open.

Speaker #1: Your next question comes from the line of Ryan Halstead with RBC Capital Markets. Your line is open.

Ryan Halsted: Good morning, and thanks for taking my questions. I know you mentioned that the industry fundamentals remain strong. I was curious if you had seen any shift or any change in the occupancy trends with your SNF customers, especially those with the shorter stay Medicare residents starting in 2026. I think just the basis of my question is, one of the large managed care companies talked about increasing their clinical reviews on SNF admissions. Just wondering if you had any comments or visibility on those trends?

Speaker #9: Good morning , and thanks for taking my questions . I guess I know you mentioned that the industry fundamentals remain strong , but I was curious if you had seen , you know , any shift or any change in the occupancy trends with your customers , especially those with kind of the shorter stay Medicare residents starting in 2026 .

Speaker #9: And I think just the , the basis of my question is , you know , one of the large managed care companies talked about increasing their clinical reviews on sniff admissions .

Speaker #9: So just wondering if you had any comments or visibility on , on kind of those trends

Ted Wahl: Good morning to you, Ryan. Look, overall, and I mentioned it in my opening remarks, the industry fundamentals continue to gain strength, and that demographic tailwind really is beginning, at least the early stages of it, are working its way into the long-term and post-acute care system. That fundamentally is a huge positive for today and for the next few decades. It's really that continued interplay that we see at the local level between staffing availability and occupancy that remains the key for any facility's success. I think more than any other factor, labor availability is the key to occupancy growth, and occupancy growth is the key to consistent financial outcomes. The most recent occupancy data are positive. It continues to be in and around 80%.

Matt McKee: Good morning to you, Ryan. Look, overall, and I mentioned it in my opening remarks, the industry fundamentals continue to gain strength, and that demographic tailwind really is beginning, at least the early stages of it, are working its way into the long-term and post-acute care system. That fundamentally is a huge positive for today and for the next few decades. It's really that continued interplay that we see at the local level between staffing availability and occupancy that remains the key for any facility's success. I think more than any other factor, labor availability is the key to occupancy growth, and occupancy growth is the key to consistent financial outcomes. The most recent occupancy data are positive. It continues to be in and around 80%.

Speaker #3: Good morning to you , Ryan . Look , overall , and I mentioned it in my opening remarks , the industry fundamentals continue to gain strength and that demographic tailwind really is beginning at least the early stages of it are working its way into the long term .

Speaker #3: And post-acute care systems. So that fundamentally is a huge positive for today and for the next few decades. It's really that continued interplay that we see at the local level between staffing, availability, and occupancy.

Speaker #3: That remains the key for any facility's success. I think, more than any other factor, labor availability is the key to occupancy growth, and occupancy growth is the key to consistent financial outcomes.

Speaker #3: And , you know , the most recent occupancy data are positive . They continue to be it continues to be in and around 80% .

Ted Wahl: What we're seeing, to your question, is really steady across not just geographies, urban, suburban, rural, but also facility types and population, long-term, short stay, et cetera. From our perspective, we haven't, relative to occupancy, seen anything other than stability and, generally speaking, upward trend.

Matt McKee: What we're seeing, to your question, is really steady across not just geographies, urban, suburban, rural, but also facility types and population, long-term, short stay, et cetera. From our perspective, we haven't, relative to occupancy, seen anything other than stability and, generally speaking, upward trend.

Speaker #3: And we're seeing to your question is really steady across not just geographies , urban , suburban , rural , but also facility types and population , long term short stay , etc.

Speaker #3: . So from our perspective , we haven't relative to occupancy , seen anything other than stability . And , you know , a generally speaking , upward trend .

Ryan Halsted: Got it. That's helpful. Then, you've made comments about strong momentum carrying over into Q2. Looking at your guidance for the quarter, the midpoint to the low end are for low single-digit growth. Can you maybe just help to square those comments in terms of what is the momentum you're seeing and maybe how that could be swing factors into your guide?

Speaker #9: Got it . That's helpful . And then , you know , you made , you've made comments about strong momentum carrying over into Q2 and , you know , looking at your guidance for the quarter , you know , the midpoint to the low end are for , you know , low single digit growth .

Speaker #9: Can you maybe just help to square those comments in terms of , you know , what is the momentum you're seeing ? And , and maybe how that could be , you know , swing factors into your guide .

Ted Wahl: Yeah. Look, from a momentum perspective, the most significant indicator we look at is pipeline and then obviously assessing the various stages of development of that pipeline, and our pipeline continues to grow. It continues to be robust, meaning strength across all different segments and business lines, inclusive of the campus division. That's a real positive, and so we feel good about not just the next 6 months, but the next 3 to 5 years. From a variability perspective, quarter to quarter, I touched on this earlier, Ryan, but it's really the timing.

Matt McKee: Yeah. Look, from a momentum perspective, the most significant indicator we look at is pipeline and then obviously assessing the various stages of development of that pipeline, and our pipeline continues to grow. It continues to be robust, meaning strength across all different segments and business lines, inclusive of the campus division. That's a real positive, and so we feel good about not just the next 6 months, but the next 3 to 5 years. From a variability perspective, quarter to quarter, I touched on this earlier, Ryan, but it's really the timing.

Speaker #3: Yeah . And look from a momentum perspective , the most significant indicator indicator we look at is pipeline . And then obviously assessing the various stages of development of that pipeline .

Speaker #3: And our pipeline continues to grow . It continues to be robust . You know , meaning strength across all different segments and business lines , inclusive of , you know , the campus division .

Speaker #3: And , you know , that's a real positive . And so we feel good about not just the next six months , but the next , you know , 3 to 5 years from a , from a , you know , a variability perspective quarter to quarter .

Speaker #3: I touched on this earlier , Ryan , but it's really the timing and its difficult . You know , it's difficult to be able to pinpoint with precision what a specific quarter will look like , not because we don't have fantastic visibility into the pipeline and the stages of development , but because it's that timing of CSG management capacity and the timing of client start date , which can be fluid up until the up until a scheduled or originally scheduled start date .

Ted Wahl: It's difficult to be able to pinpoint with precision what a specific quarter will look like, not because we don't have fantastic visibility into the pipeline and the stages of development, but because it's that timing of HCSG management capacity and the timing of client start date, which can be fluid up until a scheduled or originally scheduled start date. That's always been the case. That's not a new dynamic for HCSG or the industry for that matter. We have an organization that's built to be highly nimble, to be able to react when we need to, be able to be proactive when we need to in those situations. It really does come down to timing in terms of what puts us at the higher end or the lower end of that mid-single digit range in any given quarter or in any given year.

Matt McKee: It's difficult to be able to pinpoint with precision what a specific quarter will look like, not because we don't have fantastic visibility into the pipeline and the stages of development, but because it's that timing of HCSG management capacity and the timing of client start date, which can be fluid up until a scheduled or originally scheduled start date. That's always been the case. That's not a new dynamic for HCSG or the industry for that matter. We have an organization that's built to be highly nimble, to be able to react when we need to, be able to be proactive when we need to in those situations. It really does come down to timing in terms of what puts us at the higher end or the lower end of that mid-single digit range in any given quarter or in any given year.

Speaker #3: So that is , that's , that's always been the case . That's not a new dynamic for CSG industry for that matter . But we have an organization that's built to be highly nimble , to be able to be , you know , react when we need to be able to be proactive , when we need to in those situations .

Speaker #3: So it really does come down to timing in terms of, you know, what puts us at the higher end or the lower end of that mid-single-digit range in any given quarter or in any given year.

Ryan Halsted: Got it. That's very clear. Maybe just last one for me on your capital allocation priorities. You've obviously put forth a strong share repurchase authorization, and have been aggressive with that so far. How should we think about how aggressive you expect to be on the repurchases, certainly as your shares further strengthen?

Speaker #9: Got it . That's very clear . Maybe just last one for me on your capital allocation priorities . You know , you've obviously put forth a strong share repurchase authorization , you know , and have been aggressive with that so far .

Speaker #9: You know , how should we think about how aggressive you know , you you expect to be on the repurchases certainly as as you know , your shares , you know , further strengthen .

Vikas Singh: Yeah. From our perspective, the approach would be to maintain a more uniform cadence. As you think about the $24 million number, not all of it this quarter falls under the program, right? If you think about the split of that $24 million, because we made the announcement of our $75 million program, in tandem with our Q4 earnings, that was middle of February, only $15.3 million of these repurchases were made after the new program was announced. From our perspective, we're trying to spread it out. We're not trying to front-load it. We're not trying to time the market or be selective. We want to be consistent, and I think that's the approach we'll take over the entire duration of the 12-month program.

Speaker #6: Yeah . So from our perspective , the approach would be to maintain a more uniform cadence . And as you think about the 24 million number , not all of it this quarter falls under the program , right ?

Speaker #6: If you think about the split of that 24 million , because we made the announcement of our 75 million program in tandem with our Q4 earnings , that was middle of February Only 15.3 million of these repurchases were made after the new program was announced .

Speaker #6: So from our perspective , we're trying to spread it out . We're not trying to front load it . We're not trying to time the market or be selective .

Speaker #6: We want to be consistent and I think that's the approach will take over the entire duration of the 12 month program .

Ryan Halsted: Got it. That's very helpful. Thank you.

Speaker #9: Got it. That's very helpful. Thank you.

Operator: Your last and final question comes from the line of Rohan Vasudeva with Baird. Please, your line is open.

Speaker #1: Your last and final question comes from the line of Rohan Vasudeva with Baird. Please, your line is open.

Rohan Vasudeva: Yeah. Hey, guys. Thanks for taking my question. I think most of my questions have been asked, so I'll keep this brief. Just wanted to confirm that there was no ERC benefit to cost of sales in this quarter, correct?

Speaker #10: Yeah . Hey , guys . Thanks for taking my question . I think most of my questions have been asked , so I'll keep this brief .

Speaker #10: But I just wanted to confirm that there was no IRC benefit to cost of sales in this quarter. Correct?

Vikas Singh: That is correct. There were no ERC receipts, and no ERC impact to our P&L and financial statements this quarter.

Speaker #6: That is correct. There were no IRC receipts and no IRC impact to our P&L and financial statements this quarter.

Rohan Vasudeva: Okay. Thank you. You briefly touched on it in the last question to keep a consistent cadence for repurchases. It looks like you'll run through your authorization or finish your authorization about two quarters. Can we expect that you'll re-up your authorization after that, or would you guys consider another way of returning capital to shareholders?

Speaker #10: Okay . Thank you . And then you briefly touched on it in the last question to keep a consistent cadence for repurchases . It looks like you'll run through your authorization or finish your authorization about two quarters .

Speaker #10: Can we expect that you'll re-up your authorization after that ? Or would you guys consider , you know , another way of returning capital to shareholders ?

Vikas Singh: Yeah. Rohan, what we were doing, again, just going back to that $24 million number. As I said, $15 million, and change. To be precise, $15.3 million of those repurchases were made after the announcement of the new program in middle of Feb. If you think about what we spent under the program, it's $15 million, you do an annualization of that, and it is under the $75 million number. The additional numbers within that $24 million were pertaining to the previous program, and our regular open market repurchases. Yes, the number of $24 million seems elevated in that context. It's elevated in the context of our total repurchases last year being $61 million, but we are not trying to rush through the program by any stretch. From our perspective, we want to keep it uniform and present over the course of the year.

Speaker #6: Yeah . So , Rowan , what we were doing again , just going back to that 24 million number , as I said , 15 million unchanged .

Speaker #6: So to be precise , 15.3 million of those repurchases were made after the announcement of the new program in middle of Feb . So if you think about what we've spent under the program , it's 15 .

Speaker #6: You an analysis of that and it is under the 75 number . The additional numbers within that 24 were pertaining to the previous program .

Speaker #6: And our regular open market repurchases . So yes , the number of 24 seems elevated in that context . It's elevated in the context of our total repurchases .

Speaker #6: Last year being 61 . But we are not trying to rush through the program by any stretch . From our perspective , we want to keep it uniform and present over the course of the year .

Vikas Singh: Now, if there are any reasons to accelerate down the road, we will be open to that, but that's not the intent and that's not how we've structured the program at this point of time. We would rather be consistent than lumpy.

Speaker #6: Now , if there are any reasons to accelerate down the road , we will be open to that . But that's not the intent and that's not how we were .

Speaker #6: We've structured the program at this point of time , so we would rather be consistent than than lumpy .

Rohan Vasudeva: Sounds good. Thank you, guys.

Speaker #10: Sounds good . Thank you guys

Operator: I will now turn the call back over to Ted Wahl for closing remarks.

Speaker #1: I will now turn the call back over to Ted Wahl for closing remarks.

Ted Wahl: Thank you. As we prepare for the remainder of 2026, our 50th anniversary, the company's underlying fundamentals are more robust than ever. Our leadership and management team, our enhanced value proposition, our business model and visibility we have into that business model, our training and learning platforms, our KPIs and key business trends, and our strong balance sheet and ROIC profile. With the industry at the beginning stages of a multi-decade demographic tailwind, we are incredibly well positioned to capitalize on the abundance of opportunities that lie ahead and deliver meaningful long-term shareholder value. On behalf of Matt, Vikas, and all of us at Healthcare Services Group, thank you, Rebecca, for hosting the call today, and thank you everyone for joining.

Speaker #3: Thank you . As we prepare for the remainder of 2026 , our 50th anniversary , the company's underlying fundamentals are more robust than ever .

Speaker #3: Our leadership and management team are enhanced value proposition . Our business model and visibility . We have into that business model . Our training and learning platforms , our KPIs and key business trends , and our strong balance sheet and ROIC profile .

Speaker #3: And with the industry at the beginning stages of a multi-decade demographic tailwind , we are incredibly well positioned to capitalize on the abundance of opportunities that lie ahead and deliver meaningful , long term shareholder value .

Speaker #3: So, on behalf of Matt, Vikas Singh, and all of us at Healthcare Services Group, thank you, Rebecca, for hosting the call today.

Speaker #3: And thank you , everyone , for joining

Operator: Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.

Q1 2026 Healthcare Services Group Inc Earnings Call

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