Healthcare Services Group, Inc.

Good morning and welcome to the Healthcare Services Group 2022 Annual Earnings Call. At this time, all lines are in the listen-only mode. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question, simply press star followed by the number one on your telephone keypad. The matters discussed on today's conference call include forward-looking statements about the business prospects of Healthcare Services Group, Inc. Forward-looking statements are often preceded by words such as believes, expects, anticipates, plans, will, goal, may, intends, assumes or similar expressions. Forward-looking statements reflect management's current expectations as of the date of this conference call and involve certain risks and uncertainties. The forward-looking statements are based on assumptions that we have made in light of our industry experience and our perceptions of historical trends, current conditions, expected future developments and other factors that we believe are appropriate under the circumstances. As with any projection or forecast, they are inherently susceptible to uncertainty and changes in circumstances. Healthcare Services Group, Inc.'s actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors, and the forward-looking statements are not guarantees of performances. Some of the factors that could cause future results to materially differ from the recent results or those projected in forward-looking statements are included in our earnings press release issued prior to this call and in our filings with the Securities and Exchange Commission. We are under no obligation and expressly disclaim any obligation to update or alter the forward-looking statements, whether as a result of such changes, new information, subsequent events or otherwise. Now I would like to turn the call over to Ted Wahl, President and CEO.

Thank you and good morning everyone. Matt McKee and I appreciate you joining us today. We released our fourth quarter results this morning and plan on filing our 10K by the end of the week. We reported for the three months ended December 31, 2022, revenue of $424 million. and many more. We also announced as part of our disciplined and balanced approach to managing capital, a rebalancing of our capital allocation strategy to enhance financial flexibility, invest in organic and inorganic opportunities, and accelerate and the quarterly cash dividend, and authorized the repurchase of up to 7.5 million shares of our common stock. Today, in our opening remarks, I will discuss our Q4 accomplishments, our rebalanced capital allocation strategy, and our 2023 outlook. I'll then turn the call over to Matt for a more detailed discussion on our Q4 results, after which time will be available for Q&A. with our Q4 results, which underscored the resilience of our business model and continued passion and perseverance of our people in a challenging operating environment. We achieved our 2022 goal of exiting the year with cost of services in line with our historical target of 86%, met our Q4 goal of collecting what we build, and had a growing pipeline of future client partners as we headed to 2023. Although each of these achievements relate to different aspects of our business, together they underscore our business resilience, the strength of our client relationships, and our enhanced value proposition, which is why I'd like to highlight and take stock in each of these accomplishments. The first accomplishment I'd like to highlight is the completion of our 2022 Service Agreement Modification Initiative. The outcome of which is foundational to the scalability of our business model and durability of our client partnerships. As many of you would recall, the purpose of this initiative was to adjust for the extraordinary labor inflation experienced during the second half of 2021, as well as contractually account for the future inflation on labor on a more real time basis. This was the very definition of an all hands on deck, Thank you. Thank you. that we met our two-four goal of collecting what we fill in what was our strongest cash collection quarter of the year. And although one quarter does not attend me, this was a significant accomplishment in further validating our overall collection strategy in the face of what continues to be a challenging industry landscape, as well as providing a strong foundation and positive momentum heading into 2021. Thank you very much. Thank you. Thank you. Thank you. and others have meaningfully diminished, and we once again have a growing pipeline of qualified opportunities heading into 2023. And although the timing of new business ads remains dynamic, the ongoing replenishment of our pipeline is highly encouraging. Now, I'd like to move on to a discussion on our comprehensive rebalance capital allocation strategy. The board regularly reviews the company's capital allocation strategy to ensure it supports our goal of creating value for shareholders by delivering on our near-term operational objectives and on our growth outlook. The dividend has been an important part of our capital allocation strategy for many years, and the board recognizes the dividend's positive impact on total shareholder returns over that time period. It was clear, especially given the prolonged industry recovery, ongoing macroeconomic challenges, and our strong liquidity position that there are more proactive, impactful, and lasting ways to maximize shareholder value in the coming years. Our rebalanced capital allocation strategy is designed to enhance financial flexibility, support future growth opportunities, and accelerate value creation. The new framework suspends the quarterly cash dividend and prioritizes investments in organic growth drivers, inorganic growth opportunities, and opportunistic share repurchases. I'd like to describe in more detail each of these capital allocation priorities. First and foremost, internal investment and organic growth will continue to be of the highest priority in terms of capital allocation. are central to our business and will be further enhanced in the future. Secondly, our rebalanced capital allocation framework prioritizes investment in high-quality, inorganic growth opportunities to increase earnings capacity and accelerate growth. and more recently, in further exploration of the education sector, a market extension acquisition of a premium dining brand to complement our organically developed PBS brand. These early returns of our work in the education space over the past 18 months continue to be positive as our value proposition is resonating in a market with similar products Thank you. Thank you. and the Board of Directors suspended the dividend and authorized the repurchase of up to 7.5 million shares of our common stock as an opportunistic and tax-efficient way to return capital to shareholders. Opportunism will depend upon, among other considerations, our liquidity position, share price and alternative use of hours. I want to turn the call over to Matt. I'd like to make a few remarks on our outlook for 2023. While the industry continues to face headwinds related to workforce availability, inflation, and supply chain constraints, we are encouraged by the gradual but steadily improving facility census and labor market trends. We will continue to closely monitor industry dynamics, and we are confident that the industry remains on a clear path towards recovery I'll be in a prolonged one. We enter the new year with positive momentum and a strong foundation for which to move the business forward, as our underlying fundamentals remain as strong as ever. Our leadership and management team, our business model and the visibility we have into our business execution, our KPIs and trends related to customer experience, systems adherence, regulatory compliance, and budget discipline, and the growth opportunity that lies ahead. So in closing, for 2023, we are confident in our ability to control the controllables, realistic about the ongoing challenges that remain within our industry and broader economy, and optimistic about creating meaningful shareholder value in the year ahead. So with those introductory comments, I'll turn the call over to Matt for a more detailed discussion on our Q4 results. Good morning, everyone. Thanks, Ted. Revenue for the quarter was reported at $424 million in housekeeping and laundry and dining and nutrition. Second revenue is $198 million and $226 million, respectively. on keeping a laundry and dining and nutrition segment urgent. Thank you for joining us today. and many more. We also want to point out that the Q1 payroll is six days. That compares to the 14 days

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. We will pause for just a moment to get the roster. Your first question comes from the line of Sean Dodge. with RBC Capital Market.