Healthcare Services Group, Inc. (NASDAQ:HCSG) Q4 2023 Earnings Conference Call February 14, 2024 8:30 AM ET

Company Participants

Ted Wahl - President & CEO

Matt McKee - CCO

Conference Call Participants

Sean Dodge - RBC Capital Markets

Jack Senft - William Blair

Operator

Thanks for standing by, and welcome to the HCSG 2023 Fourth Quarter Earnings Call.

I would now like to welcome Ted Wahl, President and CEO to begin the call. Ted, over to you.

Ted Wahl

Thank you, and good morning, everyone. Matt McKee and I appreciate you joining us today. We released our fourth quarter results this morning and plan on filing our 10-K by the end of the week.

Today, in my opening remarks, I'll first discuss our Q4 financial highlights and key accomplishments. I'll then share our perspective on the latest industry trends and developments. And then lastly, I'll discuss our 2024 outlook. I'll then turn the call over to Matt to provide a more detailed discussion on the quarter.

So with that overview, I'd now like to discuss our Q4 financial highlights and key accomplishments. For the three months ended December 31, 2023, we reported revenue of $423.8 million and adjusted revenue of $425 million, which was in line with expectations.

Net income and diluted EPS of $22.6 million and $0.31 and adjusted net income and adjusted diluted EPS of $14.6 million and $0.20.

Adjusted EBITDA of $26.5 million, a 14.2% increase over Q4 2022, and cash flow from operations of $49.5 million, and adjusted cash flow from operations of $27.9 million, a 7.1% increase over Q4 2022.

Our team delivered strong fourth quarter results, building on our momentum throughout 2023. Against the backdrop of an ongoing industry recovery, we achieved 98% cash collections, managed adjusted cost of services under 86%, and exceeded cash flow projections for the quarter and second half of 2023. We also continued to grow our new business and manager and training pipelines and remain confident that we will deliver on our goal of year-over-year growth in 2024.

I'd now like to share our perspective on the latest industry trends and developments. Industry operating metrics continue to improve, highlighted by a stabilizing labor market with the sector adding over 60,000 jobs in 2023, bringing the total workforce to 1.45 million, 100,000 jobs higher than the April 2022 low, but still 140,000 jobs below pre-pandemic levels. A solid reimbursement environment with the October Medicare increase of 4%, and continued positive trends at the state level, and rising occupancy, which now sits at 79.2%, only 100 basis points below pre-pandemic levels.