HEALTHCARE SERVICES GROUP INC Management’s Discussion and Analysis of Financial Condition and Results of Operations (Form 10-Q)

Operating results

The following discussion is intended to provide the reader with information that will be useful in understanding our financial statements, including changes in certain key items when comparing the financial statements from period to period. We also intend to provide the main factors explaining these changes, as well as a summary of how certain accounting principles affect our financial statements. In addition, we provide information on the financial results of our two operating segments to better understand how these segments and their results affect our consolidated results of operations. This analysis should be read in conjunction with our financial statements at September 30, 2022 and December 31, 2021 and the notes accompanying these financial statements.

Considerations for COVID-19

Although the clinical crisis caused by the COVID-19 pandemic has started to show signs of easing (e.g. new case rates are decreasing, the death rate remains low and the CDC eases masking requirements in healthcare facilities), our customers, who have been at the epicenter of the COVID-19 pandemic since its inception, must continue to dedicate significant financial and other resources to protect their residents, employees and visitors. Additionally, we, our customers, suppliers and business partners continue to face the lingering effects of the COVID-19 pandemic and the resulting global economic crisis. Significant supply chain disruptions, inflation, labor shortages and unprecedented wage growth remain, and nursing home occupancy levels, although increasing from compared to 2020 levels, are still well below the national average target to support a robust recovery. Meanwhile, participation in the nursing home workforce is at its lowest level in decades and is the slowest segment of the health care sector to begin to recover towards pre-existing levels. the pandemic.

Therefore, our ability to operate without significant adverse operational impact from the COVID-19 pandemic and such continued economic pressures remains dependent on our ability to protect our employees and our supply chain, attract and hire new talented members. and containing existing wage pressures. To this end, we will continue to seek innovation in the management of our affairs, coordinating with nursing services to do our part in the infection prevention and control continuum and remain flexible in our responses to our client-partners. However, the continued uncertainty resulting from the COVID-19 pandemic and its ongoing economic pressures could lead to unforeseen disruption to our workforce and supply chain, which could negatively impact our operations or the availability of our employees.

For more information on risk factors related to the pandemic or other risks that may affect our results, please refer to the “Risk Factors” section of Part I, point 1A of the report. annual report on Form 10-K for the fiscal year ended December 31, 2021 (the “Form 10-K”) and the “Risk Factors” in Part II, Item 1A of this Form 10-Q.

Insight

We provide management, administrative and operational expertise and services to the housekeeping, laundry, linen, facilities maintenance and dietary services departments of healthcare facilities, including nursing homes nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout United States. We believe we are the largest provider of housekeeping and laundry management services to the long term care industry in United Statesrendering such services to approximately 3,000 facilities across the continent United States of the September 30, 2022.

We provide services primarily under full service agreements with our customers. Under these agreements, we are responsible for the day-to-day management of employees located at our customers’ facilities, as well as the provision of certain supplies. We also provide services on the basis of management agreements only for a limited number of clients. Under a management-only agreement, we provide management and supervisory services while the client facility retains payroll responsibility for non-supervisory staff. Our customer agreements generally provide for a renewable one-year term of service, terminable by either party on 30-90 days notice after an initial 60-120 day term.

We are organized into two reportable segments: Housekeeping, Laundry, Linen and Other Services (“Housekeeping”) and Dietary Services (“Dietary”).

Housekeeping consists of managing the housekeeping services of our customers, who are primarily responsible for cleaning, disinfecting and sanitizing resident rooms and common areas of customer facilities, as well as washing and the treatment of resident linens, uniforms, personal clothing, and other assorted linens used in client facilities. Upon commencement of service with a customer facility, we generally hire and train employees previously employed by that facility and assign a manager on-site to supervise and train front-line staff and coordinate housekeeping services.

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with other installation support functions according to customers’ requests. These management personnel also oversee the execution of various cost and quality control procedures, including ongoing training and employee evaluation.

Dietetics is the management of our clients’ dietary departments, which are primarily responsible for food purchasing, meal preparation, and registered dietitian services, which include developing menus to meet the dietary needs of residents. On-site management is responsible for all day-to-day dietary service activities, with regular support provided by a district director specializing in dietary services. We also offer clinical counseling services to our dietetic clients, which can be provided as a stand-alone service or bundled with other services in the dietetics department. Upon commencement of service at a client facility, we generally hire and train employees previously employed by that facility and assign a manager on-site to supervise and train front-line staff and coordinate dietitian services with other support functions of establishment in accordance with customer requests. . These management personnel also oversee the execution of various cost and quality control procedures, including ongoing training and employee evaluation.

To September 30, 2022Housekeeping services were provided at virtually all of our customers’ facilities, generating approximately 47.2% or $597.7 million of our total revenue for the nine months ended September 30, 2022. Dietary services were provided to more than 1,700 client establishments in September 30, 2022 and contributed approximately 52.8% or $668.4 million of our total revenue for the nine months ended September 30, 2022.

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