BENSALEM, PA--(BUSINESS WIRE)--Healthcare Services Group, Inc. (NASDAQ:HCSG) reported for the three months ended September 30, 2020 revenue of $435.9 million, net income of $27.6 million, or $0.37 per basic and diluted common share, and cash flow from operations of $49.2 million. Additionally, the Company’s Board of Directors declared a quarterly cash dividend of $0.205 per common share, the 69th consecutive increase since the initiation of dividend payments in 2003.
Ted Wahl, Chief Executive Officer, stated, “During the quarter, our customers and their caregivers continued to meet the challenges of the pandemic with innovation, resolve and compassion. Our HCSG heroes have been right there with them on the frontlines since the beginning, tirelessly supporting our customers and helping to ensure the well-being of America’s most vulnerable. The health and safety of our employees and the communities we serve will remain our highest priority.”
Mr. Wahl continued, “Our strong financial results underscore our ability to thrive in even the most challenging environments. We were particularly pleased with our service execution during the quarter, as our relentless focus on customer satisfaction, systems adherence and regulatory compliance delivered extraordinary operational outcomes.”
Third Quarter Results
Revenue for the quarter was $435.9 million, with housekeeping & laundry and dining & nutrition segment revenues of $223.4 million and $212.5 million, respectively. Revenue included $9.1 million of COVID-19 supplemental billings, primarily related to employee pay premiums passed through to customers.
Direct cost of services was reported at $365.4 million, or 83.8%. Overall, the Company’s near-term goal remains to manage direct cost at or below 86.0%.
Housekeeping & laundry and dining & nutrition segment margins were 11.1% and 9.2%, respectively.
Selling, general and administrative (“SG&A”) was reported at $37.3 million, or 8.6%; after adjusting for the $3.2 million increase in deferred compensation, actual SG&A was $34.1 million, or 7.8%. The Company continues to target SG&A of 7.5%.
The Company reported an effective tax rate of 25.6% and expects a 2020 tax rate of 24% to 26%.
Cash flow from operations for the quarter was $49.2 million. This includes an $18.7 million decrease in accrued payroll offset by a $17.0 million increase in deferred payroll taxes under the CARES Act.
Mr. Wahl continued, “While the pandemic continues to create uncertainty around near-term occupancy and costs trends, the industry is much better prepared with enhanced operating protocols. Additionally, we continue to be encouraged by the government’s ongoing financial support of the industry, which we view as a necessary bridge from the short-term challenges to a more stable operating environment and, ultimately, a vaccine.”
Mr. Wahl concluded, “As the industry continues to adjust to the new normal, we maintain our sharp focus on delivering strong operational and financial results in Q4. While the current environment necessitates a cautious view on growth, longer term, our growth outlook remains positive as our value proposition is more compelling than ever before. Above all, we remain committed to making decisions that best position us to deliver shareholder value.”
Dividend
The Company’s Board of Directors declared a quarterly cash dividend of $0.205 per common share, payable on December 24, 2020 to shareholders of record at the close of business on November 20, 2020. This represents the 70th consecutive quarterly cash dividend payment, as well as the 69th consecutive increase since the initiation of quarterly cash dividend payments in 2003.
Healthcare Services Group, Inc. is the largest national provider of professional housekeeping, laundry and dietary services to long-term care and related health care facilities.
