Healthcare Services Group, Inc.

Thank you for standing by. My name is Jeannie, and I will be your conference operator today. At this time, I would like to welcome everyone to the HCSG 2024 Third Quarter Conference Call. The matters discussed on today's conference call include forward-looking statements about the business prospects of Healthcare Services Group, Inc. For Healthcare Services Group, Inc.' 's most recent forward-looking statement notice, please refer to the press release issued this morning which can be found on our website, www.hcsg.com. Actual results may differ materially from those expressed or implied as a result of various risks, uncertainties, and important factors, including those discussed in the risk factors, MD&A, and other sections of the annual report on Form 10-K, and Healthcare Services Group Inc.' 's other CES SEC filings, and as indicated in our most recent forward-looking statement. Additionally, management will be discussing certain non-GAAP financial measures. A reconciliation of these items to U.S. GAAP can be found in this morning's press release. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, Simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, press star one again. Thank you. I would now like to turn the conference over to Chad Wall. You may begin your conference.

Thank you and good morning, everyone. Matt McKee and I appreciate you joining us today. We released our third quarter results this morning and plan on filing our 10Q by the end of the week. We're very pleased with our third quarter results, which underscore the positive momentum we're carrying into the fourth quarter. Executing on our three strategic priorities of driving growth, managing costs, and optimizing collections is clearly paying off, resulting in sequential and year-over-year growth in revenue, earnings, and cash flow. For the three months ended September 30th, 2024, We reported revenue of 428.1 million in line with expectations, net income and diluted EPS of 14 million and 19 cents per share, and reported and adjusted cash flow from operations of 4.3 million and 19 million. I'd like to now share our perspective on the latest industry trends and developments. Industry fundamentals continue to trend positively, highlighted by rising occupancy, which now sits at 79.8%, just under the low 80s pre-pandemic levels, a continued increase in workforce availability, with the industry adding over 100,000 jobs since the beginning of 2023, and a stable reimbursement environment, which includes CMS's 4.2% increase in Medicare rates for the fiscal year 2025, which became effective October 1st, as well as continued positive reimbursement trends at the state level. On the regulatory front, we continue to believe that CMS's final minimum staffing rule will either undergo significant revision during the extended phase-in period or will not be implemented, especially given the pending litigation and the potential for legislation or administration change. As we head into the final months of the year, our strategic priorities remain unchanged. We are confident that our focus on these priorities, supported by our strong business fundamentals, will enable us to further accelerate growth, enhance profitability, and maximize cash flow through 2025 and beyond. So with those introductory comments, I'll turn the call over to Matt for a more detailed discussion on the quarter.

Thank you, Ted, and good morning, everyone. Revenue was reported at $428.1 million in line with the company's expectation of $425 to $435 million. Housekeeping and laundry revenue was $191.1 million, and the margin was 6.4%. Dining and nutrition revenue was $237 million, and the margin was 5.3%. The company's Q4 expected revenue range is $430 to $440 million. Cost of services was reported at $364.7 million, or 85.2%. And the company's goal is to continue to manage cost of services, excluding CECL, in the 86% range. SG&A was reported at $46.9 million. But after adjusting for the $2.4 million increase in deferred compensation, actual SG&A was $44.5 million, or 10.4%. The company's goal continues to be achieving SG&A in the 8.5% to 9.5% range. Other income was reported at $2.3 million, or 0.5%. And other income includes a $2.4 million, or 0.6% increase in deferred compensation. Net income and diluted earnings per share were reported at $14 million, and 19 cents, respectively. Adjusted EBITDA for the quarter was $24.8 million, or 5.8%. Cash flow and adjusted cash flow from operations was $4.3 million and $19 million, respectively. The company reaffirmed its 2024 adjusted cash flow from operations range of $40 to $55 million. And the company has repurchased over 350,000 shares or $4 million of its common stock so far in 2024, including over 90,000 shares or $1 million of its common stock during the third quarter. Since the February 2023 share repurchase authorization, we have repurchased 1.4 million shares or $15.2 million of our common stock. And we have 6.1 million shares remaining under our authorization. So with those opening remarks, we'd now like to open up the call for questions.