HEALTHCARE SERVICES GROUP INC

Previous wording

We provide management, administrative and operating expertise and services to housekeeping, laundry, linen, facility maintenance and dietary service departments primarily in healthcare facilities, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. We provide such services to more than 3,000 facilities throughout the continental United States as of June 30, 2026. We believe we are the largest provider of housekeeping, laundry and dietary management services to the long-term care industry in the United States.

Current wording

We are a premier health and hospitality services platform offering comprehensive solutions across healthcare, senior living, and campus environments. We provide management, administrative and operating expertise and services to housekeeping, laundry, linen, facility maintenance and dietary service departments within nursing homes, retirement complexes, rehabilitation centers, hospitals and campuses located throughout the United States. We provide such services to more than 2,700 facilities throughout the continental United States as of September 30, 2026. We believe we are the largest provider of housekeeping, laundry and dietary management services to the long-term care industry in the United States.

Previous wording

EVS services were provided to approximately 2,300 customer facilities at June 30, 2026 and contributed approximately 45.1% or $421.5 million of our consolidated revenues for the six months ended June 30, 2026. Dietary services were provided at approximately 1,600 customer facilities at June 30, 2026, generating approximately 54.9% or $512.1 million of our total revenues for the six months ended June 30, 2026.

Current wording

EVS services were provided to approximately 2,700 customer facilities at September 30, 2026 and contributed approximately 45.2% or $638.7 million of our consolidated revenues for the nine months ended September 30, 2026. Dietary services were provided at approximately 1,600 customer facilities at September 30, 2026, generating approximately 54.8% or $774.5 million of our total revenues for the nine months ended September 30, 2026.

Previous wording

Consolidated revenues increased 2.7% to $470.8 million during the three months ended June 30, 2026 compared to $458.5 million for the corresponding period in 2025 as a result of the factors discussed below under Reportable Segments.

Current wording

Consolidated revenues increased 3.3% to $479.6 million during the three months ended September 30, 2026 compared to $464.3 million for the corresponding period in 2025 as a result of the factors discussed below under Reportable Segments.

Previous wording

EVS revenues increased 3.6% and Dietary revenues increased 1.9% during the three months ended June 30, 2026 compared to the corresponding period in 2025. The increase in revenues was driven by client wins and retention, driven by consistent service execution across our customer facilities, contractual price increases and increased pass-through costs to customers.

Current wording

EVS revenues increased 2.6% and Dietary revenues increased 3.9% during the three months ended September 30, 2026 compared to the corresponding period in 2025. The increase in revenues was driven by client wins and retention, contractual price increases and pass-through costs to customers.

Previous wording

Consolidated costs of services provided decreased by 13.1% to $396.0 million for the three months ended June 30, 2026 compared to $455.5 million for the corresponding period in 2025 as a result of the factors discussed below under Reportable Segments and due to the timing of customer restructurings and adjustments to our actuarial liabilities during each period. Costs of services provided, as a percentage of revenues, was 84.1% for the three months ended June 30, 2026 compared to 99.4% for the same period in 2025. During the three months ended June 30, 2025, we recognized $61.2 million of bad debt expense within costs of services provided due to large customer bankruptcies. During the three months ended June 30, 2026 and 2025, updates to our loss estimates for workers’ compensation and general liability reduced costs of services provided by $1.3 million and $6.2 million, respectively.

Current wording

Consolidated costs of services provided increased by 8.5% to $399.2 million for the three months ended September 30, 2026 compared to $367.9 million for the corresponding period in 2025. During the three months ended September 30, 2026, we recognized a $6.1 million benefit in bad debt expense related to the reassessment of the current expected credit loss from the 2025 Genesis bankruptcy. During the three months ended September 30, 2025, we recognized a $34.2 million benefit within costs of services provided in conjunction with cash received from the IRS for ERC refunds. Excluding the impact of the Genesis collectability update and the ERC, costs of services provided increased 0.8% as a result of the factors discussed below under Reportable Segments. Costs of services provided, as a percentage of revenues, was 83.2% for the three months ended September 30, 2026 compared to 79.2% for the same period in 2025. During the three months ended September 30, 2026 and 2025, updates to our loss estimates for workers’ compensation and general liability reduced costs of services provided by $1.8 million and $3.1 million, respectively.

Previous wording

We include certain expenses classified as selling, general and administrative expenses within segment expenses. Segment expenses for EVS, as a percentage of EVS revenues, decreased to 86.7% for the three months ended June 30, 2026 from 99.2% in the corresponding period in 2025. Segment expenses for Dietary, as a percentage of Dietary revenues, decreased to 92.5% for the three months ended June 30, 2026 from 110.1% in the corresponding period in 2025.

Current wording

We include certain expenses classified as selling, general and administrative within segment expenses. We exclude the impact of ERC refunds received from segment expenses. Segment expenses for EVS, as a percentage of EVS revenues, decreased to 86.7% for the three months ended September 30, 2026 from 89.2% in the corresponding period in 2025. Segment expenses for Dietary, as a percentage of Dietary revenues, decreased to 91.3% for the three months ended September 30, 2026 from 94.9% in the corresponding period in 2025.

Previous wording

Selling, general and administrative expense incurred at a segment-level is discussed in the Reportable Segments section above. Also included in consolidated selling, general and administrative expense are corporate expenses and gains and losses associated with changes in the value of investments in the deferred compensation plan. These investments represent the amounts held on behalf of the participating employees as changes in the value of these investments affect the amount of our deferred compensation liability. Gains on the plan investments during the three months ended June 30, 2026 and 2025 increased our total selling, general and administrative expense for each period.

Current wording

Selling, general and administrative expense incurred at a segment-level is discussed in the Reportable Segments section above. Also included in consolidated selling, general and administrative expense are corporate expenses and gains and losses associated with changes in the value of investments in the deferred compensation plan. These investments represent the amounts held on behalf of the participating employees as changes in the value of these investments affect the amount of our deferred compensation liability. Losses on the plan investments during the three months ended September 30, 2026 decreased our total selling, general and administrative expense, while gains on the plan investments during the three months ended September 30, 2025 increased our total selling, general and administrative expense.

Previous wording

Excluding the change in the deferred compensation plan described above, consolidated selling, general and administrative expense increased $1.2 million or 2.6% for the three months ended June 30, 2026 compared to the corresponding period in 2025.

Current wording

Excluding the change in the deferred compensation plan described above, consolidated selling, general and administrative expense increased $2.3 million or 4.9% for the three months ended September 30, 2026 compared to the corresponding period in 2025, driven primarily by increased professional fees primarily associated with our merger and acquisition activity.

Previous wording

Consolidated interest expense was $0.6 million and $0.4 million for the three months ended June 30, 2026 and 2025, respectively. During the three months ended June 30, 2026, we recognized $0.3 million in interest expense related to accelerated amortization of financing costs associated with the amendment of our line of credit.

Current wording

Consolidated interest expense was $0.3 million and $0.4 million for the three months ended September 30, 2026 and 2025, respectively.

Previous wording

During the three months ended June 30, 2026, we recognized a provision for income taxes of $8.3 million, or 26.8% effective tax rate, versus a benefit for income taxes of $9.5 million, or 22.7% effective tax rate, for the same period in 2025. The effective tax rate change is based on the impact of discrete items in each quarter combined with the impact of our full year income estimate on the tax provision.

Current wording

During the three months ended September 30, 2026, we recognized a provision for income taxes of $8.9 million, or 26.2% effective tax rate, versus a provision for income taxes of $14.4 million, or 25.0% effective tax rate, for the same period in 2025. The effective tax rate change is based on the impact of discrete items in each quarter combined with the impact of our full year income estimate on the tax provision.

Previous wording

The actual annual effective tax rate will be impacted by the tax effects of option exercises and vested awards, which are treated as discrete items in the reporting period in which they occur and may vary based upon our common stock price at exercise and the volume of such exercises; therefore, these are not considered in the calculation of the estimated annual effective tax rate. The impact on our income tax provision for the six months ended June 30, 2026 and 2025 for such discrete items was an expense of $0.1 million and $1.1 million, respectively.

Current wording

The actual annual effective tax rate will be impacted by the tax effects of option exercises and vested awards, which are treated as discrete items in the reporting period in which they occur and may vary based on our common stock price at exercise and the volume of such exercises; therefore, these are not considered in the calculation of the estimated annual effective tax rate. The impact on our income tax provision for the three months ended September 30, 2026 and 2025 for such discrete items was an expense of $0.1 million and $10.4 million (driven by the impact of income recognition from the ERC refunds), respectively.

Previous wording

The following table summarizes the income statement key components that we use to evaluate our financial performance on a consolidated and reportable segment basis for the six months ended June 30, 2026 and 2025.

Current wording

The following table summarizes the income statement key components that we use to evaluate our financial performance on a consolidated and reportable segment basis for the nine months ended September 30, 2026 and 2025.

Previous wording

EVS and Dietary revenues represented approximately 45.1% and 54.9% of consolidated revenues for the six months ended June 30, 2026, respectively.

Current wording

EVS and Dietary revenues represented approximately 45.2% and 54.8% of consolidated revenues for the nine months ended September 30, 2026, respectively.

Previous wording

EVS revenues increased 4.8% during the six months ended June 30, 2026 compared to the 2025 comparable period, while Dietary revenues increased 1.6% over the same period. The increase in revenues was driven by client wins and retention, driven by consistent service execution across our customer facilities, contractual price increases and increased pass-through costs to customers.

Current wording

EVS revenues increased 4.0% during the nine months ended September 30, 2026 compared to the 2025 comparable period, while Dietary revenues increased 2.4% over the same period. The increase in revenues was driven by client wins and retention, contractual price increases and pass-through costs to customers.

Previous wording

Consolidated costs of services provided decreased by 6.3% to $782.9 million for the six months ended June 30, 2026 compared to $835.2 million for the corresponding period in 2025 as a result of the factors discussed below under Reportable Segments and due to the timing of customer restructurings. Costs of services provided, as a percentage of revenues, was 83.9% for the six months ended June 30, 2026 compared to 92.2% for the same period in 2025. During the six months ended June 30, 2025, we recognized $61.2 million of bad debt expense due to large customer bankruptcies. During the six months ended June 30, 2026 and 2025, updates to our loss estimates for workers’ compensation and general liability reduced costs of services provided by $6.0 million and $6.2 million, respectively.

Current wording

Consolidated costs of services provided decreased by 1.7% to $1.182 billion for the nine months ended September 30, 2026 compared to $1.203 billion for the corresponding period in 2025. During the nine months ended September 30, 2026, we recognized a $6.1 million benefit in bad debt expense related to the reassessment of the current expected credit loss from the 2025 Genesis bankruptcy. During the nine months ended September 30, 2025, we recognized a $34.2 million benefit within costs of services provided related to ERC refunds received. Additionally, during the nine months ended September 30, 2025, we recognized $63.9 million of bad debt expense within costs of services provided related to the Genesis Healthcare bankruptcy. Excluding these items, costs of services provided increased 0.7% as a result of the factors discussed below under Reportable Segments. Costs of services provided, as a percentage of revenues, was 83.7% for the nine months ended September 30, 2026 compared to 87.8% for the same period in 2025. During the nine months ended September 30, 2026 and 2025, updates to our loss estimates for workers’ compensation and general liability reduced costs of services provided by $7.8 million and $5.1 million, respectively.

Previous wording

We include certain expenses classified as selling, general and administrative expenses within segment expenses. Segment expenses for EVS, as a percentage of EVS revenues, decreased to 87.3% for the six months ended June 30, 2026 from 94.3% for the corresponding period in 2025. Segment expenses for Dietary, as a percentage of Dietary revenues, decreased to 91.7% for the six months ended June 30, 2026 from 101.3% in the corresponding period in 2025.

Current wording

We include certain expenses classified as selling, general and administrative within segment expenses. Segment expenses for EVS, as a percentage of EVS revenues, decreased to 87.1% for the nine months ended September 30, 2026 from 92.6% for the corresponding period in 2025. Segment expenses for Dietary, as a percentage of Dietary revenues, decreased to 91.6% for the nine months ended September 30, 2026 from 99.1% in the corresponding period in 2025.

Previous wording

Selling, general and administrative expense incurred at a segment-level is discussed in the Reportable Segments section above. Also included in consolidated selling, general and administrative expense are corporate expenses and gains and losses associated with changes in the value of investments in the deferred compensation plan. These investments represent the amounts held on behalf of the participating employees and changes in the value of these investments affect the amount of our deferred compensation liability. Gains on the plan investments during the six months ended June 30, 2026 and 2025 increased our total selling, general and administrative expense for each period.

Current wording

Selling, general and administrative expense incurred at a segment-level is discussed in the Reportable Segments section above. Also included in consolidated selling, general and administrative expense are corporate expenses and gains and losses associated with changes in the value of investments in the deferred compensation plan. These investments represent the amounts held on behalf of the participating employees and changes in the value of these investments affect the amount of our deferred compensation liability. Gains on the plan investments during the nine months ended September 30, 2026 and 2025 increased our total selling, general and administrative expense for each period.

Previous wording

Excluding the change in the deferred compensation plan described above, consolidated selling, general and administrative expense decreased $1.7 million or 1.9% for the six months ended June 30, 2026 compared to the corresponding period in 2025. Decreases were driven by discipline in execution and leveraging our topline growth to gain efficiencies.

Current wording

Excluding the change in the deferred compensation plan described above, consolidated selling, general and administrative expense increased $0.6 million or 0.4% for the nine months ended September 30, 2026 compared to the corresponding period in 2025. Decreases in baseline selling, general and administrative spend were by discipline in execution and leveraging our topline growth to gain efficiencies, offset by increased professional fees associated with merger and acquisition-related activity.

Previous wording

Consolidated interest expense was $1.0 million and $0.8 million for the six months ended June 30, 2026 and 2025, respectively. During the six months ended June 30, 2026, we recognized $0.3 million in interest expense related to the amendment of our line of credit.

Current wording

Consolidated interest expense was $1.3 million and $1.2 million for the nine months ended September 30, 2026 and 2025, respectively. During the nine months ended September 30, 2026, we recognized $0.3 million in interest expense related to the amendment of our line of credit.

Previous wording

During the six months ended June 30, 2026 and 2025, we recognized a provision for income taxes of $16.8 million, or 25.6% effective tax rate, and $2.9 million, or 15.9% effective tax rate, respectively. The effective tax rate change is based on the impact of discrete items in each quarter combined with the impact of our full year income estimate on the tax provision.

Current wording

During the nine months ended September 30, 2026 and 2025, we recognized a provision for income taxes of $25.6 million, or 25.8% effective tax rate, and $11.5 million, or 29.2% effective tax rate, respectively. The effective tax rate change is based on the impact of discrete items in each quarter combined with the impact of our full year income estimate on the tax provision.

Previous wording

The actual annual effective tax rate will be impacted by the tax effects of option exercises and vested awards, which are treated as discrete items in the reporting period in which they occur and may vary based on our common stock price at exercise and the volume of such exercises; therefore, these are not considered in the calculation of the estimated annual effective tax rate. The impact on our income tax provision for each of the three months ended June 30, 2026 and 2025 for such discrete items was an expense of $0.3 million.

Current wording

The actual annual effective tax rate will be impacted by the tax effects of option exercises or vested awards, which are treated as discrete items in the reporting period in which they occur and may vary based upon our common stock price at exercise and the volume of such exercises; therefore, these cannot be considered in the calculation of the estimated annual effective tax rate. The impact on our income tax provision for the nine months ended September 30, 2026 and 2025 for such discrete items was an expense of less than $0.1 million and $11.6 million, respectively. The discrete items in 2025 were driven primarily by the recognition of ERC refunds.

Previous wording

Our current ratio was 3.0 to 1.0 at June 30, 2026, and 3.4 to 1.0 at December 31, 2025. Marketable securities and restricted marketable securities represent fixed income investments that are highly liquid and can be readily purchased or sold through established markets. Such securities are held by the Company’s captive insurance company to satisfy capital requirements of the state regulator of our captive insurance company.

Current wording

Marketable securities and restricted marketable securities represent fixed income investments that are highly liquid and can be readily purchased or sold through established markets. Such securities are held by the Company’s captive insurance company to satisfy capital requirements of the state regulator of our captive insurance company.

Previous wording

For the six months ended June 30, 2026 and 2025, our cash flows were as follows:

Current wording

For the nine months ended September 30, 2026 and 2025, our cash flows were as follows:

Previous wording

Our primary sources of cash from operating activities are the revenues generated from our Environmental and Dietary services. Our primary uses of cash from operating activities are the funding of our payroll and other personnel-related costs as well as the costs of supplies used in providing our services. For the six months ended June 30, 2026, cash flow from operations included $48.8 million in net income, non-cash add-backs to net income of $14.4 million, and a $2.4 million increase in cash flows from changes in operating assets and liabilities.

Current wording

Our primary sources of cash from operating activities are the revenues generated from our Environmental and Dietary services. Our primary uses of cash from operating activities are the funding of our payroll and other personnel-related costs as well as the costs of supplies used in providing our services. For the nine months ended September 30, 2026, cash flow from operations included $73.6 million in net income, non-cash add-backs to net income of $21.4 million, and a $0.8 million increase in cash flows from changes in operating assets and liabilities.

Previous wording

During the three months ended June 30, 2026 and 2025, under the Repurchase Plans we repurchased 1.0 million and 0.5 million shares of our common stock for $20.1 million and $7.6 million, respectively, including commissions and taxes. During the six months ended June 30, 2026 and 2025, we repurchased 2.2 million and 1.2 million shares of our common stock for $44.3 million and $14.6 million, respectively, including commissions and taxes. We remain authorized to repurchase up to 8.3 million shares of our common Stock pursuant to the 2026 Repurchase Plan.

Current wording

During the three months ended September 30, 2026 and 2025, under the Repurchase Plans we repurchased 0.6 million and 1.7 million shares of our common stock for $12.7 million and $27.3 million, respectively, including commissions and taxes. During the nine months ended September 30, 2026 and 2025, we repurchased 2.7 million and 2.9 million shares of our common stock for $57.0 million and $42.1 million, respectively, including commissions and taxes. We remain authorized to repurchase up to 7.7 million shares of our common Stock pursuant to the 2026 Repurchase Plan.

Previous wording

For the six months ended June 30, 2026 and the year ended December 31, 2025, our quarterly repurchases of common stock were as follows:

Current wording

For the nine months ended September 30, 2026 and the year ended December 31, 2025, our quarterly repurchases of common stock were as follows:

Previous wording

The level of capital expenditures is generally dependent on the number of new customers obtained. Such capital expenditures primarily consist of EVS and food service equipment purchases, laundry and linen equipment installations, computer hardware and software, furniture and fixtures. Although we have no specific material commitments for capital expenditures through the end of calendar year 2026, we estimate that for 2026 we will have capital expenditures of approximately $5.0 million to $7.0 million, of which we have made $3.0 million through June 30, 2026.

Current wording

The level of capital expenditures is generally dependent on the number of new customers obtained. Such capital expenditures primarily consist of EVS and food service equipment purchases, laundry and linen equipment installations, computer hardware and software, furniture and fixtures. Although we have no specific material commitments for capital expenditures through the end of calendar year 2026, we estimate that for 2026 we will have capital expenditures of approximately $5.0 million to $7.0 million, of which we have made $5.1 million through September 30, 2026.