Healthcare Services Group Regains Profit as Revenue Growth Slows
Revenue reached a five-quarter high of $470.8 million despite continued growth deceleration.[1][7][9][11][13]
Healthcare Services Group (HCSG), a provider of housekeeping and dietary services to healthcare facilities, returned to a second-quarter profit as a year-earlier restructuring charge rolled off. Diluted earnings were $0.32 a share, compared with a loss of $0.44 a share a year earlier.
Revenue rose 2.7% from a year earlier, slowing from 3.4% growth in the first quarter and extending a deceleration that began after growth reached 8.5% in 2023's third quarter. The top line nevertheless increased 1.7% sequentially.
Net income was $22.7 million, down from $26.1 million in the first quarter, while adjusted earnings before interest, taxes, depreciation and amortization swung to $35.6 million from negative $36.3 million a year earlier.
Environmental Services led the revenue gains, increasing to $213.2 million from $205.8 million a year earlier. Dietary Services revenue rose more modestly to $257.6 million from $252.7 million.
Environmental Services margin expanded to 13.3% from 12.1% in the first quarter, while Dietary Services margin contracted sequentially to 7.5%. Both businesses remained well above their restructuring-affected year-earlier margins.
Cost of services increased to 84.1% of revenue from 83.6% sequentially, and adjusted selling, general and administrative expenses rose to $45.7 million. The cost ratio remained sharply below the year-earlier period, which included a $61.2 million Genesis restructuring charge.
Reported operating cash flow fell to $21.9 million, though cash flow excluding payroll-accrual timing increased to $27.9 million from $23.4 million in the first quarter. Healthcare Services Group reaffirmed its outlook for mid-single-digit revenue growth in 2024.
The company repurchased $20.9 million of shares during the quarter, bringing 2024 purchases to $44.9 million under its $75 million plan. Cash and marketable securities ended the quarter at $200.9 million, down sequentially but above the year-earlier balance.