Healthcare Services Group (NASDAQ:HCSG) saw its shares soar 8.63% in premarket trading on Wednesday after delivering third-quarter results that came in well ahead of expectations, boosted by robust revenue growth and a sizable tax credit.
Adjusted earnings for the quarter reached $0.59 per share, handily beating the analyst consensus of $0.21. Revenue totaled $464.3 million, topping forecasts of $460.36 million and rising 8.5% year over year. A $0.361 per share benefit tied primarily to the Employee Retention Credit (ERC) contributed to the upside.
“We delivered strong third quarter results – marked by year-over-year and sequential increases in revenue, earnings, and cash flow – and we have carried that positive momentum into the fourth quarter,” said Ted Wahl, Chief Executive Officer. “New client wins and high retention rates drove our topline growth, and our field-based teams’ operational excellence led to quality service outcomes and consistent margins.”
The company’s core operations benefited from both new customer wins and solid client retention. Cash flow from operations totaled $71.3 million, including a $31.8 million boost from the ERC.
Environmental Services generated $211.8 million in revenue with a segment margin of 10.7%, while Dietary Services contributed $252.5 million with a 5.1% margin. Cost of services stood at 79.2% of revenue, well below the firm’s 86% target range.
During the quarter, Healthcare Services Group repurchased $27.3 million in common stock under its $50 million buyback program, bringing total year-to-date repurchases to $42 million.
The company closed the quarter with $207.5 million in cash and marketable securities, along with access to a $500 million credit facility, giving it flexibility to support growth initiatives and shareholder returns.