Healthcare Services Group, Inc.

Hello, everyone. Thank you for joining us and welcome to the Healthcare Services Group 2026 second quarter earnings call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. 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.hcsgcorp.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 groups, 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 will now hand the conference over to Ted Wahl, Chief Executive Officer. Please go ahead.

Good morning, everyone, and welcome to HCSG's second quarter 2026 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 general business environment, and discuss our strategic priorities for Q3. Matt will then provide a more detailed discussion on our Q2 results, and then Vikas will provide an update on our liquidity position 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 Q2 highlights. I am pleased with our second quarter results, which underscore the strength of our business model and the continued disciplined execution across our operations. For the three months ended June 30th, we reported revenue of $470.8 million, net income and diluted EPS of $22.7 million and $0.32, and cash flow from operations of $21.9 million, and cash flow from operations excluding the change in payroll accrual of $27.9 million. I'd like to now share our perspective on the general 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. In 2026, the first of the baby boomers are turning 80 years old. And by the year 2030, all 70 million plus boomers will be over the age of 65, with the oldest being in their mid-80s, the primary age cohort for long-term and post-acute care utilization. We expect that the demand and opportunity for service providers in this space, especially for those with compelling value propositions, durable business models, and market-leading positions to only increase in the months and years ahead. The most recent industry operating trends remain positive as well, highlighted by steady occupancy, a growing industry workforce that has now recovered to its pre pandemic baseline and a stable reimbursement environment. We are also very encouraged by the administration's ongoing efforts to rationalize regulations and policy, highlighted by recent announcements on deregulation, payment rules and survey processes, which better align with the changing and expanding needs of our nation's most vulnerable and the provider communities we service. Beyond our core industry trends, we are closely monitoring the broader macro landscape, including sustained volatility in global energy and supply markets resulting from the ongoing geopolitical conflicts. Our role as financial stewards for our clients remains a non-negotiable priority and serves as our North Star as we navigate this environment. To that end, our purchasing and procurement teams are actively monitoring the landscape and surveying our supply chain to stay ahead of any developing trends. Fundamental to these efforts is the depth of our longstanding vendor partnerships, which provide the critical visibility and stability necessary to navigate market volatility with confidence. In the event that specific supplies or food items experience outsized inflationary or cost pressure, we are prepared to pivot our sourcing strategies to mitigate direct exposure. Ultimately, the rigorous work we have done to enhance our contractual frameworks allow us to pass through unavoidable cost increases, ensuring we preserve our margins while continuing to deliver market-leading service. Looking ahead to Q3, our top three strategic priorities remain driving growth by developing management candidates, converting sales pipeline opportunities, and retaining our existing facility business alongside the continued cultivation of strategic acquisition and investment opportunities. 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 reaffirming our 2026 mid-single-digit growth outlook with a focus on realizing the substantial growth opportunities in the second half of the year and beyond. So with those introductory comments, I'll turn the call over to Matt.

Thanks, Ted, and good morning, everyone. Revenue was reported at $470.8 million. Segment revenues and margins for environmental services were reported at $213.2 million and 13.3%. Segment revenues and margins for dietary services were reported at $257.6 million and 7.5%. Our 2026 growth plans continue to be oriented around mid-single-digit revenue growth, with third-quarter revenue expectations in the $475 to $485 million range. Cost of services was reported at $396 million, or 84.1%. Cost of services benefited from strong service execution and lower bad debt expense. Our goal is to manage cost of services in the 86% range. SG&A was reported at $52.6 million. After adjusting for the $6.9 million increase in deferred compensation, SG&A was $45.7 million, or 9.7%. Our goal is to manage SG&A in the 9.5% to 10.5% range, with the longer-term goal of managing those costs into the 8.5% to 9.5% range. Other income was reported at $8.8 million. After adjusting for the $6.9 million increase in deferred compensation, other income was $1.9 million. Our effective tax rate was reported at 26.8%, and we expect our 2026 effective tax rate to be approximately 25%. Net income and diluted earnings per share were reported at $22.7 million and 32 cents per share. I'd now like to turn the call over to Vikas.