Healthcare Services Group, Inc.

Hello, and thank you for standing by. My name is Regina, and I will be your conference operator today. At this time, I would like to welcome everyone to the Healthcare Services Group, Inc. first quarter 2025 earnings call. 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, then the number one on your telephone keypad. To withdraw your question, press star one again. 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, MDNA, and other sections of the annual report on Form 10-K and Healthcare Services Group Inc's other SEC filings, and as indicated in our most recent forward-looking statements notice. 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. I would now like to turn the conference over to Ted Wall, President and CEO. Please go ahead.

Good morning, everyone, and welcome to HCSG's first quarter 2025 earnings call. With me today are Matt McKee, our chief communications officer, and Vikas Singh, our chief financial officer. Earlier this morning, we released our first quarter results and plan on filing our 10Q by the end of the week. Today, in my opening remarks, I'll discuss our Q1 highlights, share our perspective on the overall business environment, and discuss our strategic priorities for Q2 and the rest of the year. Matt will then provide a more detailed discussion on our Q1 results, and then Vikas will provide an update on our balance sheet and capital allocation progression. We will then open up the call for Q&A. So with that overview, I'd like to now discuss our Q1 highlights. First quarter revenue and cash flows were our best results in five years, and we have carried that positive momentum into the second quarter. New client wins drove organic growth, collections exceeded revenue, and we continue to strengthen our balance sheet. These favorable dynamics have positioned us to execute on our growth plans while delivering sustainable, profitable results in the year ahead. For the three months ended March 31st, we reported revenue of $447.7 million, an increase of 5.7% over the prior year, net income and diluted EPS of $17.2 million and 23 cents, and cash flow from operations excluding the change in payroll accrual of $32.1 million, an increase of $41.3 million over the prior year. I'd like to now share our perspective on the overall business environment. Industry fundamentals continue to gain strength, highlighted by the multi-decade demographic tailwind that is now beginning to work its way into the long-term and post-acute care system. The most recent operating trends remain positive as well. Workforce availability and occupancy continue to grow. The reimbursement environment is stable. And on the regulatory front, in early April, a Texas federal court struck down the key provisions of CMS's final minimum staffing rule, and the outcome applies nationwide. Regarding the recent change in administration, while it's still too early to know exactly what, if any, reimbursement or regulatory changes could be implemented, the Trump administration was incredibly supportive of the industry during its first term, and overall industry sentiment on the new administration remains positive. Looking ahead to Q2 and the rest of the year, our top three strategic priorities remain. Driving growth by developing management candidates, converting sales pipeline opportunities, and retaining our existing facility business. Managing cost through field-based operational execution and prudent spend management at the enterprise level. and optimizing cash flow with increased customer payment frequency, enhanced contract terms, and disciplined working capital management. We are confident that continuing to execute on our strategic priorities supported by our strong business fundamentals will position us to accelerate growth, enhance profitability, and maximize cash flow throughout 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 $447.7 million, an increase of 5.7% over the prior year's corresponding quarter. Environmental services revenue and margin were $196.3 million and 10.8%. Dietary services revenue and margin were $251.3 million and 7.6%. We estimate Q2 revenue in the range of $445 to $455 million and expect second half of the year revenue to grow sequentially compared to the first half of the year revenue. Cost of services was reported at $379.7 million or 84.8%. Our 2025 goal is to manage cost of services in the 86% range. Reported SG&A was $45 million. After adjusting for the $1.4 million decrease in deferred compensation, actual SG&A was $46.4 million, or 10.4%. The company expects to manage SG&A in the 9.5% to 10.5% range in the near term based on investments that we've made and spoken about in previous quarters, with the longer-term goal of managing those costs into the 8.5% to 9.5% range. Net income and diluted earnings per share were reported at $17.2 million and 23 cents per share. Cash flow from operations was reported at $27.5 million. After adjusting for the $4.6 million decrease in the payroll accrual, actual cash flow from operations was $32.1 million. These numbers include a $12.2 million benefit from the receipt of CARES Act-related Employee Retention Credits, or ERC. At the present time, there is no income statement impact from ERC, as these credits are being recorded on our balance sheet. We raised our 2025 cash flow from operations expectations, excluding the change in payroll accrual from a range of $45 to $60 million to a range of $60 to $75 million. I'd now like to turn the call over to Vikas for a discussion on our balance sheet and capital allocation progression.