# Healthcare Services Group Inc: Form 10-Q for the period ended Sep 30, 2025

- Company: [Healthcare Services Group Inc](/companies/hcsg.md) (CIK 731012)
- Form: 10-Q
- Filed: 2025-10-24
- Accepted by EDGAR: Oct 24, 2025, 16:02 ET
- Period: 2025-09-30
- Accession: 0000731012-25-000108
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/731012/000073101225000108/hcsg-20250930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/731012/000073101225000108/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2025-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2025-07-01 to 2025-09-30 | $464.3m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2025-01-01 to 2025-09-30 | $1.37bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2025-07-01 to 2025-09-30 | $367.9m | us-gaap:CostOfGoodsAndServicesSold |
| Cost of revenue | 9 months, 2025-01-01 to 2025-09-30 | $1.20bn | us-gaap:CostOfGoodsAndServicesSold |
| Selling, general and administrative | 3 months, 2025-07-01 to 2025-09-30 | $50.5m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2025-01-01 to 2025-09-30 | $144.7m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Income tax | 3 months, 2025-07-01 to 2025-09-30 | $14.4m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2025-01-01 to 2025-09-30 | $11.5m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2025-07-01 to 2025-09-30 | $43.0m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2025-01-01 to 2025-09-30 | $27.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2025-07-01 to 2025-09-30 | $0.59 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2025-01-01 to 2025-09-30 | $0.38 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2025-07-01 to 2025-09-30 | $0.59 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2025-01-01 to 2025-09-30 | $0.38 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2025-07-01 to 2025-09-30 | 72,966,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2025-01-01 to 2025-09-30 | 73,505,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2025-01-01 to 2025-09-30 | $127.6m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2025-01-01 to 2025-09-30 | $4.4m | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Share repurchases | 9 months, 2025-01-01 to 2025-09-30 | $42.0m | us-gaap:PaymentsForRepurchaseOfCommonStock |
| Cash and equivalents | at 2025-09-30 | $124.4m | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2025-09-30 | $580.6m | us-gaap:AssetsCurrent |
| Total assets | at 2025-09-30 | $804.3m | us-gaap:Assets |
| Current liabilities | at 2025-09-30 | $195.6m | us-gaap:LiabilitiesCurrent |
| Shareholders' equity | at 2025-09-30 | $496.0m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 37,672 characters.

### Results of Operations

The following discussion is intended to provide the reader with information that will be helpful in understanding our financial statements, including the changes in certain key items when comparing financial statements period to period. We also intend to provide the primary factors that accounted for those changes as well as a summary of how certain accounting principles affect our financial statements. In addition, we are providing information about the financial results of our two operating segments to further assist in understanding how these segments and their results affect our consolidated results of operations. This discussion should be read in conjunction with our financial statements as of September 30, 2025 and December 31, 2024 and the notes accompanying those financial statements.

### Overview

We provide management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of healthcare facilities, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. We provide such services to approximately 2,800 facilities throughout the continental United States as of September 30, 2025. We believe we are the largest provider of housekeeping, laundry and dietary management services to the long-term care industry in the United States.

We provide services primarily pursuant to full-service agreements with our customers. Under such agreements, we are responsible for the day-to-day management of the employees located at our customers’ facilities, as well as for the provision of certain supplies. We also provide services on the basis of management-only agreements for a limited number of customers. Under a management-only agreement, we provide management and supervisory services while the customer facility retains payroll responsibility for the non-supervisory staff. In certain management-only agreements, the Company maintains responsibility for purchasing supplies. Our agreements with customers typically provide for a renewable service term cancellable by either party upon 30 to 90 days’ notice after an initial period of 60 to 120 days.

We are organized into two reportable segments: housekeeping, laundry, linen and other services (“Housekeeping”) and dietary department services (“Dietary”).

Housekeeping services consist of managing our customers’ housekeeping departments, which are principally responsible for the cleaning, disinfecting and sanitizing of resident rooms and common areas of the customers’ facilities, as well as the laundering and processing of the bed linens, uniforms, resident personal clothing and other assorted linen items utilized at the customers’ facilities. Upon beginning service with a customer facility, we typically hire and train the employees previously employed by such facility and assign an on-site manager to supervise the front-line personnel and coordinate housekeeping services with other facility support functions in accordance with customer requests. Such management personnel also oversee the execution of various cost and quality control procedures including continuous training and employee evaluation. On-site management is responsible for all daily customer housekeeping department activities with regular support provided by a District Manager specializing in such services.

Dietary services consist of managing our customers’ dietary departments, which are principally responsible for food purchasing, meal preparation and professional dietitian services, which include the development of menus that meet the dietary needs of residents. On-site management is responsible for all daily dietary department activities with regular support provided by a District Manager specializing in dietary services. We also offer clinical consulting services to our dietary customers which may be provided as a standalone service or be bundled with other dietary department services. Upon beginning service with a customer facility, we typically hire and train the employees previously employed by such facility and assign an on-site manager to supervise the front-line personnel and coordinate dietitian services with other facility support functions in accordance with customer requests. Such management personnel also oversee the execution of various cost and quality control procedures including continuous training and employee evaluation.

Housekeeping services were provided to approximately 2,300 customer facilities at September 30, 2025 and contributed approximately 44.8% or $613.9 million of our consolidated revenues for the nine months ended September 30, 2025. Dietary services were provided at approximately 1,600 customer facilities at September 30, 2025, generating approximately 55.2% or $756.6 million of our total revenues for the nine months ended September 30, 2025.

In 2024, we adopted ASU 2023-07, which updates reportable segment disclosure requirements primarily through enhanced disclosures about significant segment expenses. As part of our adoption of ASU 2023-07 and the Chief Operating Decision Maker’s evaluation of segment performance for the nine months ended September 30, 2025 and 2024, we updated certain segment information for the three and nine months ended September 30, 2024 in order to conform with our current period segment presentation.

### Three Months Ended September 30, 2025 and 2024

The following table summarizes the income statement key components that we use to evaluate our financial performance on a consolidated and reportable segment basis for the three months ended September 30, 2025 and 2024.

|  | Three Months Ended September 30, |  |  |
| --- | ---: | ---: | ---: |
|  | **2025** | **20241** | **% Change** |
|  | **(in thousands)** |  |  |
| **Revenues** |  |  |  |
| Housekeeping | $211,788 | $191,101 | 10.8% |
| Dietary | 252,550 | 237,048 | 6.5% |
| Consolidated | $464,338 | $428,149 | 8.5% |
| **Costs of services provided** |  |  |  |
| Housekeeping | $177,122 | $160,434 | 10.4% |
| Dietary | 225,050 | 204,296 | 10.2% |
| ERC refunds2 | (34,239) | — | NR5 |
| Consolidated | $367,933 | $364,730 | 0.9% |
| **Selling, general and administrative expense** |  |  |  |
| Housekeeping | $11,850 | $11,476 | 3.3% |
| Dietary | 14,607 | 15,125 | (3.4)% |
| Corporate3 | 20,367 | 17,868 | 14.0% |
| Gain on deferred compensation plan investments | 3,717 | 2,419 | 53.7% |
| Consolidated | $50,541 | $46,888 | 7.8% |
| Other income (expense)4 |  |  |  |
| Investment and other income, net | $11,837 | $3,825 | 209.5% |
| Interest expense | (393) | (1,548) | (74.6)% |
| **Income before taxes** | $57,308 | $18,808 | 204.7% |
| Income tax expense4 | 14,355 | 4,778 | 200.4% |
| **Net income** | $42,953 | $14,030 | 206.2% |

1\. Represents a recast of prior period numbers to conform with current period presentation.

2\. Segment costs of services provided excludes the impact of Employee Retention Credits (“ERC”) received by the Company and recorded within income during the three months ended September 30, 2025 as the credits relate to payroll tax credits related to 2020 and 2021 payroll.

3\. Represents selling, general and administrative expense less amounts allocated to segments for labor and labor-related and other segment items.

4\. These line items represent corporate costs not allocated to segments.

5\. Not relevant.

Housekeeping and Dietary revenues represented approximately 45.6% and 54.4% of consolidated revenues for the three months ended September 30, 2025, respectively.

The following table sets forth the ratio of certain items to consolidated revenues:

|  | Three Months Ended September 30, 2025 | 2024 |
| --- | ---: | ---: |
| Revenues | 100.0% | 100.0% |
| Operating costs and expenses: |  |  |
| Costs of services provided | 79.2% | 85.2% |
| Selling, general and administrative expense | 10.9% | 11.0% |
| Other income (expense): |  |  |
| Investment and other income, net | 2.5% | 0.9% |
| Interest expense | (0.1)% | (0.4)% |
| Income before income taxes | 12.3% | 4.3% |
| Income tax expense | 3.1% | 1.1% |
| Net income | 9.2% | 3.2% |

#### Revenues

#### Consolidated

Consolidated revenues increased 8.5% to $464.3 million during the three months ended September 30, 2025 compared to $428.1 million for the corresponding period in 2024 as a result of the factors discussed below under Reportable Segments.

#### Reportable Segments

Housekeeping revenues increased 10.8% and Dietary revenues increased 6.5% during the three months ended September 30, 2025 compared to the corresponding period in 2024. The increase in Housekeeping revenues was driven by an increase in facility count and contractual price increases. The increase in Dietary revenues was driven by organic growth in expanding services performed for existing customers and increased pass-through costs to customers.

#### Costs of Services Provided

#### Consolidated

During the three months ended September 30, 2025, we recognized $34.2 million of income, recorded as a reduction to costs of services provided, related to the receipt of ERC refunds for periods from the second quarter of 2020 through the second quarter of 2021. Excluding the impact of the ERC refunds, consolidated costs of services provided increased by 0.9% to $367.9 million for the three months ended September 30, 2025 compared to $364.7 million for the corresponding period in 2024 as a result of the factors discussed below under Reportable Segments. Costs of services provided, as a percentage of revenues, was 79.2% for the three months ended September 30, 2025 compared to 85.2% for the same period in 2024. Our goal is to manage consolidated costs of services provided as a percentage of revenues in the 86% range for the full year, although there can be no assurance thereof.

Effective in the three months ended September 30, 2025, we perform quarterly independent actuarial evaluations to update loss estimates for our self-insurance reserves for workers' compensation and general liability. The update to our loss estimates did not have a material impact on our consolidated financial statements for the three months ended September 30, 2025.

#### Reportable Segments

We include certain expenses classified as selling, general and administrative expenses within segment expenses. Segment expenses for Housekeeping, as a percentage of Housekeeping revenues, decreased to 89.2% for the three months ended September 30, 2025 from 90.0% in the corresponding period in 2024. Segment expenses for Dietary, as a percentage of Dietary revenues, increased to 94.9% for the three months ended September 30, 2025 from 92.6% in the corresponding period in 2024, with the increases from the comparable period driven by the bad debt expense noted above.

The following tables provide a comparison of the key indicators we consider when managing segment expenses as a percentage of the respective segment’s revenues:

| Key Indicators as a % of Segment Revenue - Housekeeping | Three Months Ended September 30, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: |
| Labor and other labor-related costs1 | 78.5% | 80.0% | (1.5)% |
| Supplies | 7.5% | 7.6% | (0.1)% |
| Bad debt expense | 0.9% | 0.0% | 0.9% |
| Depreciation and amortization | 0.5% | 0.5% | —% |
| Other costs1 | 1.8% | 1.9% | (0.1)% |
| Total segment expenses | 89.2% | 90.0% | (0.8)% |

1\. Inclusive of certain expenses reported within selling, general and administrative expense that are segment-specific.

| Key Indicators as a % of Segment Revenue - Dietary | Three Months Ended September 30, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: |
| Labor and other labor-related costs1 | 59.6% | 57.1% | 2.5% |
| Supplies | 31.3% | 32.8% | (1.5)% |
| Bad debt expense | 1.5% | 0.1% | 1.4% |
| Depreciation and amortization | 0.3% | 0.3% | —% |
| Other costs1 | 2.2% | 2.3% | (0.1)% |
| Total segment expenses | 94.9% | 92.6% | 2.3% |

1\. Inclusive of certain expenses reported within selling, general and administrative expense that are segment-specific.

Variations within these key indicators relate to the provision of services at new facilities, changes in the mix of customers for whom we provide supplies or do not provide supplies, changes in the services provided to certain customers, and changes in bad debt expense. Management focuses on building efficiencies and managing labor and other costs at the facility level, as well as managing supply chain costs, for new and existing facilities, and has also evaluated the impact of recent tariff and trade policy changes, which to date have not had a material impact on our operations or financial results as such costs are generally passed through to customers.

#### Consolidated Selling, General and Administrative Expense

Selling, general and administrative expense incurred at a segment-level is discussed in the Reportable Segments section above. Also included in consolidated selling, general and administrative expense are corporate expenses and gains and losses associated with changes in the value of investments in the deferred compensation plan. These investments represent the amounts held on behalf of the participating employees as changes in the value of these investments affect the amount of our deferred compensation liability. Gains on the plan investments during the three months ended September 30, 2025 and 2024 increased our total selling, general and administrative expense.

Excluding the change in the deferred compensation plan described above, consolidated selling, general and administrative expense increased $2.4 million or 5.3% for the three months ended September 30, 2025 compared to the corresponding period in 2024, driven by a $2.1 million increase to selling, general and administrative expense for professional fees incurred related to the ERC refunds.

The table below summarizes the changes in these components of selling, general and administrative expense:

*(dollar amounts in thousands)*

|  | Three Months Ended September 30, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Selling, general and administrative expense excluding change in deferred compensation liability | $46,824 | $44,469 | $2,355 | 5.3% |
| Gain on deferred compensation plan investments | 3,717 | 2,419 | 1,298 | 53.7% |
| Selling, general and administrative expense | $50,541 | $46,888 | $3,653 | 7.8% |

39

#### Consolidated Investment and Other Income, net

Investment and other income, net was a gain of $11.8 million for the three months ended September 30, 2025, compared to a gain of $3.8 million in the corresponding 2024 period. Included in investment and other income, net in 2025 was $5.3 million of interest income recognized on ERC refunds received during the three months ended September 30, 2025. Excluding the impact of the ERC refund, investment and other income, net increased due to favorable market fluctuations in the value of our trading security investments representing the funding for our deferred compensation plan.

The table below summarizes the changes in these components of investment and other income, net:

*(dollar amounts in thousands)*

|  | Three Months Ended September 30, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Investment and other income, net excluding change in deferred compensation plan assets | $8,106 | $1,405 | $6,701 | 476.9% |
| Gain on deferred compensation plan investments | 3,731 | 2,420 | 1,311 | 54.2% |
| Investment and other income, net | $11,837 | $3,825 | $8,012 | 209.5% |

#### Consolidated Interest Expense

Consolidated interest expense decreased to $0.4 million for the three months ended September 30, 2025 compared to $1.5 million for the same period in 2024 as we incurred lower average borrowings on our line of credit during the three months ended September 30, 2025 compared to 2024.

#### Consolidated Income Taxes

During the three months ended September 30, 2025, we recognized a provision for income taxes of $14.4 million, or 25.0% effective tax rate, versus a provision for income taxes of $4.8 million, or 25.4% effective tax rate, for the same period in 2024. The effective tax rate change is based on the impact of discrete items in each quarter combined with the impact of our full year income estimate on the tax provision.

The actual annual effective tax rate will be impacted by the tax effects of option exercises or vested awards, which are treated as discrete items in the reporting period in which they occur and may vary based on our common stock price at exercise and the volume of such exercises; therefore, these cannot be considered in the calculation of the estimated annual effective tax rate. The impact on our income tax provision for the three months ended September 30, 2025 and 2024 for such discrete items was an expense of $10.4 million (driven by the impact of income recognition from the ERC refunds) and $0.3 million, respectively.

### Nine Months Ended September 30, 2025 and 2024

The following table summarizes the income statement key components that we use to evaluate our financial performance on a consolidated and reportable segment basis for the nine months ended September 30, 2025 and 2024.

|  | Nine Months Ended September 30, |  |  |
| --- | ---: | ---: | ---: |
|  | **2025** | **20241** | **% Change** |
|  | **(in thousands)** |  |  |
| **Revenues** |  |  |  |
| Housekeeping | $613,869 | $572,666 | 7.2% |
| Dietary | 756,622 | 705,204 | 7.3% |
| Consolidated | $1,370,491 | $1,277,870 | 7.2% |
| **Costs of services provided** |  |  |  |
| Housekeeping | $532,081 | $481,925 | 10.4% |
| Dietary | 705,315 | 626,458 | 12.6% |
| ERC Credits2 | (34,239) | — | NR5 |
| Consolidated | $1,203,157 | $1,108,383 | 8.6% |
| **Selling, general and administrative expense** |  |  |  |
| Housekeeping | $36,122 | $35,554 | 1.6% |
| Dietary | 44,791 | 44,711 | 0.2% |
| Corporate3 | 56,858 | 50,202 | 13.3% |
| Gain on deferred compensation plan investments | 6,899 | 7,769 | (11.2)% |
| Consolidated | $144,670 | $138,236 | 4.7% |
| Other income (expense)4 |  |  |  |
| Investment and other income, net | $17,856 | $12,145 | 47.0% |
| Interest expense | (1,206) | (5,260) | (77.1)% |
| **Income before taxes** | $39,314 | $38,136 | 3.1% |
| Income tax provision4 | 11,499 | 10,585 | 8.6% |
| **Net income** | $27,815 | $27,551 | 1.0% |

1\. Represents a recast of prior period numbers to conform with current period presentation.

2\. Consolidated costs of services provided excludes the impact of ERC refunds received by the Company and recorded within income during the nine months ended September 30, 2025 as the credits relate to payroll tax credits related to 2020 and 2021 payroll.

3\. Represents selling, general and administrative expense less amounts allocated to segments for labor and labor-related and other segment items.

4\. These line items represent corporate costs not allocated to segments.

5\. Not relevant.

The following table sets forth the ratio of certain items to consolidated revenues:

|  | Nine Months Ended September 30, 2025 | 2024 |
| --- | ---: | ---: |
| Revenues | 100.0% | 100.0% |
| Operating costs and expenses: |  |  |
| Costs of services provided | 87.8% | 86.7% |
| Selling, general and administrative expense | 10.6% | 10.8% |
| Other (expense) income: |  |  |
| Investment and other income, net | 1.3% |  |
| Interest expense | (0.1)% | (0.4)% |
| Income before income taxes | 2.8% | 3.1% |
| Income tax provision | 0.8% | 0.8% |
| Net income | 2.0% | 2.3% |

#### Revenues

#### Consolidated

Consolidated revenues increased 7.2% to $1,370.5 million for the nine months ended September 30, 2025 compared to $1,277.9 million for the corresponding period in 2024 as a result of the factors discussed below under Reportable Segments.

#### Reportable Segments

Housekeeping revenues increased 7.2% during the nine months ended September 30, 2025 compared to the 2024 comparable period, while Dietary revenues increased 7.3% over the same period. The increase in Housekeeping revenues was driven by an increase in facility count and contractual price increases. The increase in Dietary revenues was driven by increased pass-through costs to customers and organic growth in expanding services performed for customers.

#### Costs of services provided

#### Consolidated

During the nine months ended September 30, 2025, we recognized $34.2 million of income, recorded as a reduction to costs of services provided, related to the receipt of ERC refunds for periods from the second quarter of 2020 through the second quarter of 2021. Excluding the impact of the ERC refunds, consolidated costs of services increased by 8.6% to $1,203.2 million for the nine months ended September 30, 2025 compared to $1,108.4 million for the nine months ended September 30, 2024 as a result of bad debt expense and the factors discussed below under Reportable Segments. Effective in the third quarter of 2025, we perform quarterly independent actuarial evaluations to update loss estimates for our self-insurance reserves for workers' compensation and general liability. The update to our loss estimates did not have a material impact on our consolidated financial statements for the quarter ended September 30, 2025.

During the nine months ended September 30, 2025 and 2024, we recognized $63.9 million and $17.6 million, respectively, of bad debt expense related to large customer bankruptcies, which were recorded within costs of services provided. Excluding the impact of these bankruptcies, costs of services provided increased $48.5 million, or 4.4%, in line with our revenue growth.

#### Reportable Segments

Costs of services provided for Housekeeping, as a percentage of Housekeeping revenues, was 92.6% and 90.4% for the nine months ended September 30, 2025 and 2024. Costs of services provided for Dietary, as a percentage of Dietary revenues, increased to 99.1% for the nine months ended September 30, 2025 from 95.2% in the corresponding period in 2024, with the increases from the comparable period driven by the bad debt expense noted above.

The following table provides a comparison of the key indicators we consider when managing costs of services provided at the segment level, as a percentage of the respective segment’s revenues:

| Key Indicators as a % of Segment Revenue - Housekeeping | Nine Months Ended September 30, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: |
| Labor and other labor-related costs1 | 78.6% | 78.8% | (0.2)% |
| Supplies | 7.1% | 7.4% | (0.3)% |
| Bad debt expense | 4.4% | 1.9% | 2.5% |
| Depreciation and amortization | 0.5% | 0.5% | 0.1% |
| Other costs1 | 1.8% | 1.8% | —% |
| Total segment expenses | 92.6% | 90.4% | 2.2% |

1\. Inclusive of certain expenses reported within selling, general and administrative expense that are segment-specific.

| Key Indicators as a % of Segment Revenue - Dietary | Nine Months Ended September 30, 2025 | 2024 | Change |
| --- | ---: | ---: | ---: |
| Labor and other labor-related costs1 | 58.9% | 56.6% | 2.3% |
| Supplies | 30.7% | 32.4% | (1.7)% |
| Bad debt expense | 6.8% | 3.7% | 3.1% |
| Depreciation and amortization | 0.4% | 0.3% | 0.1% |
| Other costs1 | 2.3% | 2.2% | 0.1% |
| Total segment expenses | 99.1% | 95.2% | 3.9% |

1\. Inclusive of certain expenses reported within selling, general and administrative expense that are segment-specific.

Variations within these key indicators relate to the provision of services at new facilities, changes in the mix of customers for whom we provide supplies or do not provide supplies, changes in the services provided to certain customers, and changes in bad debt expense. Management focuses on building efficiencies and managing labor and other costs at the facility level, as well as managing supply chain costs, for new and existing facilities.

#### Consolidated Selling, General and Administrative Expense

Included in selling, general and administrative expense are gains and losses associated with changes in the value of investments under the deferred compensation plan. These investments represent the amounts held on behalf of the participating employees and changes in the value of these investments affect the amount of our deferred compensation liability. Gains on the plan investments during the nine months ended September 30, 2025 and 2024 increased our total selling, general and administrative expense.

Excluding the change in the deferred compensation plan described above, consolidated selling, general and administrative expense increased $7.3 million or 5.6% for the nine months ended September 30, 2025 compared to the corresponding period in 2024. The change was driven in part by a $2.1 million increase to selling, general and administrative expense for professional fees incurred related to the ERC refunds, along with increases in payroll and payroll-related expenses.

The table below summarizes the changes in these components of selling, general and administrative expense:

*(dollar amounts in thousands)*

|  | Nine Months Ended September 30, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Selling, general and administrative expense excluding change in deferred compensation plan liability | $137,771 | $130,467 | $7,304 | 5.6% |
| Gain on deferred compensation plan investments | 6,899 | 7,769 | (870) | (11.2)% |
| Selling, general and administrative expense | $144,670 | $138,236 | $6,434 | 4.7% |

43

#### Consolidated Investment and Other Income, net

Investment and other income, net was a $17.9 million gain for the nine months ended September 30, 2025, compared to a $12.1 million gain during the corresponding 2024 period. Included in investment and other income, net in the nine months ended September 30, 2025 was $5.3 million of interest income recognized on ERC refunds received.

The table below summarizes the changes in these components of investment and other income, net:

*(dollar amounts in thousands)*

|  | Nine Months Ended September 30, 2025 | 2024 | $ Change | % Change |
| --- | ---: | ---: | ---: | ---: |
| Investment and other income, net excluding change in deferred compensation plan assets | $10,930 | $4,336 | $6,594 | 152.1% |
| Gain on deferred compensation plan investments | 6,926 | 7,809 | (883) | (11.3)% |
| Investment and other income, net | $17,856 | $12,145 | $5,711 | 47.0% |

#### Consolidated Interest Expense

Consolidated interest expense decreased to $1.2 million for the nine months ended September 30, 2025 compared to $5.3 million in the same period in 2024 as we incurred lower average borrowings on our line of credit during the nine months ended September 30, 2025 compared to the same period in 2024.

#### Consolidated Income Taxes

During the nine months ended September 30, 2025 and 2024, we recognized a provision for income taxes of $11.5 million, or a 29.2% effective tax rate, and $10.6 million, or a 27.8% effective tax rate, respectively. The actual annual effective tax rate will be impacted by the tax effects of option exercises or vested awards, which are treated as discrete items in the reporting period in which they occur and may vary based upon our common stock price at exercise and the volume of such exercises; therefore, these cannot be considered in the calculation of the estimated annual effective tax rate. The impact on our income tax provision for the nine months ended September 30, 2025 and 2024 for such discrete items was an expense of approximately $11.6 million (driven by the impact of income recognition from the ERC refunds) and $1.5 million, respectively.

### Liquidity and Capital Resources

Our primary sources of liquidity are available cash and cash equivalents, available lines of credit under our revolving credit facility and cash flows from operating activities. At September 30, 2025, we had cash, cash equivalents and marketable securities of $177.5 million, restricted cash equivalents of less than $0.1 million, restricted marketable securities of $30.0 million and working capital of $385.0 million, compared to cash, cash equivalents and marketable securities of $107.3 million, restricted cash equivalents of $3.4 million, restricted marketable securities of $25.1 million and working capital of $364.1 million at December 31, 2024. Our current ratio was 3.0 to 1.0 at September 30, 2025, and 2.9 to 1.0 at December 31, 2024. Marketable securities and restricted marketable securities represent fixed income investments that are highly liquid and can be readily purchased or sold through established markets. Such securities are held by the Company’s captive insurance company to satisfy capital requirements of the state regulator of our captive insurance company.

For the nine months ended September 30, 2025 and 2024, our cash flows were as follows:

*(in thousands)*

|  | Nine Months Ended September 30, 2025 | 2024 |
| --- | ---: | ---: |
| Net cash provided by (used in) operating activities | $127,581 | $(5,402) |
| Net cash used in investing activities | $(19,566) | $(15,751) |
| Net cash used in financing activities | $(43,726) | $(5,038) |

### Operating Activities

Our primary sources of cash from operating activities are the revenues generated from our Housekeeping and Dietary services. Our primary uses of cash from operating activities are the funding of our payroll and other personnel-related costs as well as the costs of supplies used in providing our services. For the nine months ended September 30, 2025, cash flow from operations included $27.8 million in net income, non-cash add-backs to net income of $112.4 million, and a $12.7 million increase in cash flows from changes in operating assets and liabilities, all inclusive of $51.8 million of ERC refunds received. Such activities are the primary drivers of the period-over-period changes in net cash provided by operating activities.

### Investing Activities

Our principal uses of cash for investing activities are acquisitions and other strategic investments, capital expenditures such as housekeeping and food service equipment, computer software and equipment, furniture and fixtures (see “Capital Expenditures” below for additional information) and purchases of marketable securities and restricted marketable securities. Such uses of cash are offset by proceeds from sales of marketable securities.

Our investments in marketable securities and restricted marketable securities are primarily comprised of municipal bonds, treasury notes, corporate bonds and other government bonds and are intended to achieve our goal of preserving principal, maintaining adequate liquidity and maximizing returns subject to our investment guidelines. Our investment policy limits investment to certain types of instruments issued by institutions primarily with investment-grade ratings and places restrictions on concentration by type and issuer.

### Financing Activities

The primary uses of cash for financing activities are repurchases of common stock. On February 14, 2023, our Board of Directors authorized the repurchase of up to 7.5 million outstanding shares (the “Repurchase Plan”). During the three months ended September 30, 2025 and 2024, we repurchased 1.7 million and 0.1 million shares of our common stock for $27.3 million and $1.0 million, respectively, including commissions and taxes. During the nine months ended September 30, 2025 and 2024, we repurchased 2.9 million and 0.4 million shares of our common stock for $42.1 million and $4.0 million, respectively, including commissions and excise taxes. We remain authorized to repurchase up to 3.1 million shares of our common Stock pursuant to the Repurchase Plan.

For the nine months ended September 30, 2025 and the year ended December 31, 2024, our quarterly repurchases of common stock were as follows:

*(in thousands)*

*(in thousands)*

*(in thousands)*

| Three Months Ended | Total number of shares of Common Stock repurchased | Average price paid per share of Common Stock (in dollars per share) | Aggregate purchase price of Common Stock repurchases | Number of remaining shares authorized for repurchase |
| --- | ---: | ---: | ---: | ---: |
| September 30, 2025 | 1,743 | $15.46 | $26,969 | 3,111 |
| June 30, 2025 | 523 | $14.38 | $7,706 | 4,854 |
| March 31, 2025 | 653 | $10.63 | $7,036 | 5,377 |
| December 31, 2024 | 90 | $11.10 | $997 | 6,030 |
| September 30, 2024 | 94 | $10.65 | $996 | 6,120 |
| June 30, 2024 | 263 | $11.33 | $2,981 | 6,214 |
| March 31, 2024 | — | $— | $— | 6,477 |

### Line of Credit

At September 30, 2025, we had a $300 million bank line of credit on which to draw for general corporate purposes. Amounts drawn under the line of credit are payable upon demand and generally bear interest at a floating rate, based on our leverage ratio, and starting at the Term Secured Overnight Financing Rate (“SOFR”) rate plus 165 basis points. Our line of credit also provides, at our discretion, the ability to increase the revolving loan commitments to an aggregate amount not to exceed $500 million. At September 30, 2025, we had no borrowings under the line of credit.

The line of credit requires us to satisfy two financial covenants. The covenants and their respective status at September 30, 2025 were as follows:

| Covenant Descriptions and Requirements | As of September 30, 2025 |
| --- | ---: |
| Funded debt1 to EBITDA2 ratio: less than 3.50 to 1.00 | 0.18 |
| EBITDA to Interest Expense ratio: not less than 3.00 to 1.00 | 33.67 |

1\. All indebtedness for borrowed money including, but not limited to, capitalized lease obligations, reimbursement obligations in respect of letters of credit and guarantees of any such indebtedness.

2\. EBITDA is defined as net income plus interest expense, income tax expense, depreciation, amortization, share-based compensation expense, costs incurred to maintain the line of credit facility and certain third-party charges associated with the line of credit agreement or permitted acquisition-related activity, subject to limitations outlined in the credit agreement, incurred over a trailing twelve-month period.

As noted above, we were in compliance with our financial covenants at September 30, 2025 and we expect to remain in compliance. The line of credit expires on November 22, 2027. We believe that our existing capacity under the line of credit and our history of favorable operating cash flows provides adequate liquidity to fund our operations for the next twelve months following the date of this report.

At September 30, 2025, we had outstanding $48.0 million in irrevocable standby letters of credit, which relate to payment obligations under our insurance programs.

### Capital Expenditures

The level of capital expenditures is generally dependent on the number of new customers obtained. Such capital expenditures primarily consist of housekeeping and food service equipment purchases, laundry and linen equipment installations, computer hardware and software, furniture and fixtures. Although we have no specific material commitments for capital expenditures through the end of calendar year 2025, we estimate that for 2025 we will have capital expenditures of approximately $5.0 million to $7.0 million, of which we have made $4.4 million through September 30, 2025.

Although there can be no assurance, we believe that our cash from operations, existing cash and cash equivalents balance and credit line will be adequate for the foreseeable future to satisfy the needs of our operations and to fund our anticipated growth. However, should these sources not be sufficient, we would seek to obtain necessary capital from such sources as long-term debt or equity financing. In addition, there can be no assurance of the terms thereof and any subsequent equity financing sought may have dilutive effects on our current shareholders.

### Material Off-Balance Sheet Arrangements

We have no material off-balance sheet arrangements other than our irrevocable standby letter of credit previously discussed.

### Critical Accounting Policies and Estimates

Our significant accounting policies are described in the notes to the consolidated financial statements included in the Form 10-K for the period ended December 31, 2024. As described in such notes, we recognize revenue in the period in which the performance obligation is satisfied. Refer to our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in the Form 10-K.

In preparing our financial statements, management is required to make estimates and assumptions that, among other things, affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and assumptions are most significant when they involve levels of subjectivity and judgment necessary to account for highly uncertain matters or matters susceptible to change and where they can have a material impact on our financial condition and operating performance. If actual results were to differ materially from the estimates made, the reported results could be materially affected.

Critical accounting estimates and the related assumptions are evaluated periodically as conditions warrant, and changes to such estimates are recorded as new information or changed conditions require.

Effective in the third quarter of 2025, we perform quarterly independent actuarial evaluations to update loss estimates for our self-insurance reserves for workers' compensation and general liability. The update to our loss estimates did have a material impact on our consolidated financial statements for the quarter ended September 30, 2025.

## Market risk

As filed, 1,111 characters.

At September 30, 2025, we had $207.5 million in cash and cash equivalents, restricted cash equivalents, marketable securities and restricted marketable securities. The fair value of all of our cash equivalents and marketable securities are determined based on “Level 1” or “Level 2” inputs, which are based upon quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market. We place our cash investments in instruments that meet credit quality standards, as specified in our investment policy guidelines.

Investments in both fixed-rate and floating-rate investments carry a degree of interest rate risk. The market value of fixed rate securities may be adversely impacted by an increase in interest rates, while floating rate securities may produce less income than expected if interest rates fall. Due in part to these factors, our future investment income may fall short of expectations due to changes in interest rates or if there is a decline in the fair value of our investments.

## Controls and procedures

As filed, 1,758 characters.

### Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are intended to ensure that information required to be disclosed in our reports under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), such as this Form 10-Q, is reported in accordance with Securities and Exchange Commission rules. Disclosure controls are also intended to ensure that such information is accumulated and communicated to Management, including the Principal Executive Officer (President and Chief Executive Officer) and the Principal Financial Officer (Chief Financial Officer) as appropriate, to allow timely decisions regarding required disclosure. Based on their evaluation as of September 30, 2025, pursuant to the Exchange Act Rule 13a-15(b), our Management, including our Principal Executive Officer and Principal Financial Officer, concluded that our internal control over financial reporting was effective.

### Changes in Internal Control over Financial Reporting

There were no changes in the Company’s internal controls over financial reporting that occurred during the three months ended September 30, 2025 that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting. The Company continues to review its disclosure controls and procedures, including its internal control over financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that the Company’s systems evolve with its business.

### Certifications

Certifications of the Principal Executive Officer and Principal Financial Officer regarding, among other items, disclosure controls and procedures are included as exhibits to this Form 10-Q.

## Risk factors

As filed, 198 characters.

As of September 30, 2025, there have been no material changes to the Risk Factors disclosed in “Part I. Item 1A. Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2024.

Filed Oct 24, 2025.
Source: SEC EDGAR, the filing index for accession 0000731012-25-000108. Last ingested by Listed: Oct 30, 2026, 13:40 ET. No prices; not investment advice.