Healthcare Services Group, Inc.

Thank you for standing by and welcome to the Healthcare Services Group, Inc. second quarter 2025 earnings 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 and DNA. and other sections of the annual report on form 10 K of healthcare services group and other SEC filings and as indicated in our most recent forward looking statements notice. Additionally, management will be discussing certain non gap financial measures. A reconciliation of these items to US GAAP can be found in this morning's press release. 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. I'd now like to turn the call over to Ted Wall, President and CEO. You may begin.

Good morning, everyone, and welcome to HCSG's second 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 second quarter results and plan on filing our 10Q by the end of the week. Today, in my opening remarks, I'll discuss our Q2 highlights, share our perspective on the overall business environment, discuss our strategic priorities, and provide details on our $50 million share repurchase plan. Matt will then provide a more detailed discussion on our Q2 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. But first, I'd like to comment on the previously announced Genesis Healthcare restructuring. Genesis filed for Chapter 11 bankruptcy on July 9th. Following the petition date, we have continued our contractual relationship with the Genesis facilities without disruption in services or payments. And while we're disappointed in the impact that this event had on our second quarter results, we believe its root causes are specific to Genesis and its past circumstances and decisions, and is not a reflection on the current state of the industry. There's been a great deal of external attention paid to Genesis through the years and rightfully so. They are an important customer of ours and we've had a long standing partnership. That said, we believe this event will result in stronger, healthier client facilities, provide balance sheet clarity for our stakeholders and remove an overhang that has weighed on our stock for years. And now, I'd like to move on to discuss results that are more indicative of our underlying business fundamentals and the exciting opportunities that lie ahead. Second quarter growth exceeded our expectations. Q2 was our fifth consecutive sequential revenue increase and our highest rate of growth since Q1 2018. New client wins and high retention drove our organic growth and we have carried that positive momentum into the back half of the year. Despite the Genesis news and the resulting impact on our Q2 reported results, our 2025 growth plans and cashflow outlook remain strong. We are reiterating our 2025 mid single digit growth expectations and raising our 2025 cashflow from operations forecast, excluding the change in payroll accrual from 60 to 75 million to 70 to 85 million. I'd now like to 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 industry operating trends remain positive as well, highlighted by steady occupancy, increasing workforce availability, and a stable reimbursement environment. The One Big Beautiful Bill Act has generated intense political debate and speculation as interest groups on all sides seek to control the narrative. We view this as a predictable response to such significant legislation and anticipate the level of commentary will remain elevated through the midterms. On balance, and specifically as it relates to the industry, we hold a constructive view of the ABBA. Beneficial provisions include the 10-year moratorium on the minimum staffing mandate in addition to the already successful legal actions, the industry exemption from provider tax reductions, and the $50 billion investment in rural markets. In the near term, these measures promote even further strength and stability in the industry. And in our view, more than offset any potential longer-term questions about other Medicaid provisions, which may or may not be phased in at some point in the future over several years. And even if phased in are unlikely to directly or meaningfully impact long-term and post-acute care facilities. Looking ahead, we are optimistic that the administration and Congress will continue to prioritize the changing and expanding needs of our nation's most vulnerable and the providers who care for them each and every day. As we enter Q3 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 costs 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 through the second half of 2025 and beyond. Finally, in conjunction with our earnings release, we announced plans to further accelerate the pace of our share buybacks and over the next 12 months intend to repurchase $50 million of common stock under our February 2023 share repurchase authorization. Over the course of the last several years, we have continuously strengthened our balance sheet and expect strong cashflow generation over the next 12 months and beyond. We have demonstrated a prudent and balanced approach to capital allocation, including first and foremost, investing in our growth initiatives. The current valuation of our stock relative to our long-term growth potential offers a unique opportunity with the buyback to return significant capital to shareholders. So with those introductory comments, I'll turn the call over to Matt for a more detailed discussion on the quarter.

Thanks, Ted, and good morning, everyone. Revenue was reported at $458.5 million, an increase of 7.6% over the prior year. Segment revenues for environmental and dietary services were reported at $205.8 million and $252.7 million, respectively. We estimate Q3 revenue in the range of $455 to $465 million, and reiterate our 2025 mid-single-digit growth expectations. Cost of services was reported at $455.5 million, or 99.4%. and includes the impact of the $61.2 million or 13.4% non-cash charge related to the previously announced Genesis restructuring. Our goal is to manage the second half of 2025 cost of services in the 86% range. Reported SG&A was $49.2 million, but after adjusting for the $4.7 million decrease in deferred compensation, actual SG&A was $44.5 million, or 9.7%. 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. Segment margins for environmental services were reported at 0.8%. and include the impact of a $20.3 million or 9.9% non-cash charge related to the previously announced Genesis restructuring. Segment margins for dietary services were reported at negative 10.1% and include the impact of a $40.9 million or 16.2% non-cash charge related to the previously announced Genesis restructuring. Net loss and diluted loss per share were reported at $32.4 million and $0.44 per share. This includes the impact of a $0.65 non-cash charge or $61.2 million pretax tax affected at 22.7% related to the previously announced Genesis restructuring. As previously announced, we estimate a third quarter $0.04 per share non-cash charge related to the Genesis restructuring. Cashflow from operations was reported at $28.8 million. After adjusting for the $20.3 million increase in the payroll accrual, cashflow from operations was $8.5 million. We're raising our 2025 cashflow from operations forecast, excluding the change in payroll accrual from 60 to $75 million to 70 to $85 million. I'd now like to turn the call over to Vikas for a discussion on our liquidity balance sheet, and capital allocation progression.