Healthcare Services Group, Inc.

(HCSG) BIGGEST CONCERN CASE STUDY

Industry: Diversified Support Company Metrics (3/12/18): Biggest Concern Metrics:
Services
Ticker: HCSG Added: 3/12/18
Region: North America
Exchange: NASDAQ Removed: 5/10/18

CFRA’s Concerns: Market Cap: $3.4b Days on: 59

52 Week Hi / Low: $56.20 / $41.05 Performance / Benchmark: (17.26%) / (1.80%)

• A spike in HCSG’s DSOs
coupled with an apparent Average Daily $44.9m Excess Return: (22.37%)
deterioration in credit quality Volume: Performance / Trough: (22.38%)
and a decline in the
allowance for bad debt raised
concerns at 12/17. What Happened:
• It appeared the HCSG had a significant margin and
earnings benefit in Q4’17 from a reversal of its insurance • HCSG took a significant bad debt charge in Q1’18 which
reserve. resulted in disappointing earnings and revenues missed
• The concern was that (a)bad debt expense and insurance expectations in Q1’18.
expense would need to increase in 2018 and (b)revenues • The stock stepped down in two stages on a
may disappoint if customers go out of business or need preannouncement and then actual results.
lower rates.