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Jun 30, 2022
HCSG Q2 2022 Earnings Report
Achieved revenue of $424.9 million and earnings per share of $0.09, impacted by facility exits and increased AR reserves.
Key Takeaways
Healthcare Services Group reported Q2 2022 results, with revenue of $424.9 million and earnings per share of $0.09. The quarter was affected by facility exits and a $7 million increase in AR reserves. The company is focused on modifying service agreements to address inflation and aims to exit the year with cost of services at 86%.
Q2 revenue was $424.9 million, with housekeeping & laundry and dining & nutrition segment revenues of $199.1 million and $225.8 million, respectively.
Direct cost of services was $379.4 million, or 89.3% of revenue, impacted by a $7 million increase in AR reserves.
Net income for the quarter was $6.8 million, with earnings of $0.09 per share, reduced by approximately $0.07 per share due to the increase in AR reserves.
The Board of Directors approved an increase in the dividend to $0.21375 per share payable on September 23, 2022.
Forward Guidance
The company expects Q3 revenue to be affected by an estimated $10 million related to facility exits and anticipates a one-time reduction of $17 million in revenue and $9 million in operating income related to the expected restructuring of a note receivable. Q3 reported revenue base of $395 million, $400 million, and then a Q4 revenue base of $412 million to $417 million.
Positive Outlook
- Negotiations to modify the service agreements have come with certain puts and takes, but we believe will position us much more favorably in the long term.
- We expect to make up a portion of these amounts in addition to collecting what we bill.
- As we continue to engage with our clients to capture both recent and future inflation on a more real-time basis, several components of our partnership may be considered in the negotiations.
- After considering the estimated impact from the facility exits and one-time reduction related to the anticipated note restructuring, we estimate Q3 reported revenue base of $395 million, $400 million, and then a Q4 revenue base of $412 million to $417 million, absent any new business additions or facility assets.
- The company is on track to meet its goal of exiting the year with cost of services in line with its historical target of 86%.
Challenges Ahead
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