Healthcare Services Group Inc.

10/23/2026 | Press release | Distributed by Public on 10/23/2026 14:05

Quarterly Report for Quarter Ending September 30, 2026 (Form 10-Q)

Management's Discussion and Analysis of Financial Condition and Results of Operations
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, 2026 and December 31, 2025 and the notes accompanying those financial statements.
Overview
We are a premier health and hospitality services platform offering comprehensive solutions across healthcare, senior living, and campus environments. We provide management, administrative and operating expertise and services to housekeeping, laundry, linen, facility maintenance and dietary service departments within nursing homes, retirement complexes, rehabilitation centers, hospitals and campuses located throughout the United States. We provide such services to more than 2,700 facilities throughout the continental United States as of September 30, 2026. 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 ("Environmental Services" or "EVS") and dietary department services ("Dietary").
Environmental Services consists of managing the customers' housekeeping departments, which are principally responsible for the cleaning, disinfecting and sanitizing of resident rooms and common areas of a customer's facility, as well as the laundering and processing of the bed linens, uniforms, resident personal clothing and other assorted linen items utilized at a customer facility. 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.
EVS services were provided to approximately 2,700 customer facilities at September 30, 2026 and contributed approximately 45.2% or $638.7 million of our consolidated revenues for the nine months ended September 30, 2026. Dietary services were provided at approximately 1,600 customer facilities at September 30, 2026, generating approximately 54.8% or $774.5 million of our total revenues for the nine months ended September 30, 2026.
Three Months Ended September 30, 2026 and 2025
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, 2026 and 2025.
Three Months Ended September 30,
2026 2025 % Change
(in thousands)
Revenues
EVS $ 217,203 $ 211,788 2.6 %
Dietary 262,401 252,550 3.9 %
Consolidated $ 479,604 $ 464,338 3.3 %
Costs of services provided
EVS $ 174,824 $ 177,122 (1.3) %
Dietary 224,391 225,050 (0.3) %
ERC refunds1
- (34,239)
NR4
Consolidated $ 399,215 $ 367,933 8.5 %
Selling, general and administrative
EVS $ 13,470 $ 11,850 13.7 %
Dietary 15,222 14,607 4.2 %
Corporate2
20,434 20,367 0.3 %
(Loss) gain on deferred compensation plan investments (674) 3,717 (118.1) %
Consolidated $ 48,452 $ 50,541 (4.1) %
Other income (expense)3
Investment and other income, net $ 2,109 $ 11,837 (82.2) %
Interest expense (318) (393) (19.1) %
Income before taxes $ 33,728 $ 57,308 (41.1) %
Income tax expense 8,851 14,355 (38.3) %
Net income $ 24,877 $ 42,953 (42.1) %
1.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.
2.Represents selling, general and administrative expense less amounts allocated to segments for labor and labor-related and other segment items.
3.These line items represent corporate costs not allocated to segments.
4.Not relevant
EVS and Dietary revenues represented approximately 45.3% and 54.7% of consolidated revenues for the three months ended September 30, 2026, respectively.
The following table sets forth the ratio of certain items to consolidated revenues:
Three Months Ended September 30,
2026 2025
Revenues 100.0 % 100.0 %
Operating costs and expenses:
Costs of services provided 83.2 % 79.2 %
Selling, general and administrative 10.1 % 10.9 %
Other income (expense):
Investment and other income, net 0.4 % 2.5 %
Interest expense (0.1) % (0.1) %
Income before income taxes 7.0 % 12.3 %
Income tax provision 1.8 % 3.1 %
Net income 5.2 % 9.2 %
Revenues
Consolidated
Consolidated revenues increased 3.3% to $479.6 million during the three months ended September 30, 2026 compared to $464.3 million for the corresponding period in 2025 as a result of the factors discussed below under Reportable Segments.
Reportable Segments
EVS revenues increased 2.6% and Dietary revenues increased 3.9% during the three months ended September 30, 2026 compared to the corresponding period in 2025. The increase in revenues was driven by client wins and retention, contractual price increases and pass-through costs to customers.
Costs of Services Provided
Consolidated
Consolidated costs of services provided increased by 8.5% to $399.2 million for the three months ended September 30, 2026 compared to $367.9 million for the corresponding period in 2025. During the three months ended September 30, 2026, we recognized a $6.1 million benefit in bad debt expense related to the reassessment of the current expected credit loss from the 2025 Genesis bankruptcy. During the three months ended September 30, 2025, we recognized a $34.2 million benefit within costs of services provided in conjunction with cash received from the IRS for ERC refunds. Excluding the impact of the Genesis collectability update and the ERC, costs of services provided increased 0.8% as a result of the factors discussed below under Reportable Segments. Costs of services provided, as a percentage of revenues, was 83.2% for the three months ended September 30, 2026 compared to 79.2% for the same period in 2025. During the three months ended September 30, 2026 and 2025, updates to our loss estimates for workers' compensation and general liability reduced costs of services provided by $1.8 million and $3.1 million, respectively.
Reportable Segments
We include certain expenses classified as selling, general and administrative within segment expenses. We exclude the impact of ERC refunds received from segment expenses. Segment expenses for EVS, as a percentage of EVS revenues, decreased to 86.7% for the three months ended September 30, 2026 from 89.2% in the corresponding period in 2025. Segment expenses for Dietary, as a percentage of Dietary revenues, decreased to 91.3% for the three months ended September 30, 2026 from 94.9% in the corresponding period in 2025.
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:
Three Months Ended September 30,
Key Indicators as a % of Segment Revenue - EVS 2026 2025 Change
Labor and labor-related costs1
78.6% 78.5% 0.1%
Supplies 7.0% 7.5% (0.5)%
Bad debt expense (1.3)% 0.9% (2.2)%
Depreciation and amortization 0.6% 0.5% 0.1%
Other costs1
1.8% 1.8% -%
Total segment expenses 86.7% 89.2% (2.5)%
1.Inclusive of certain expenses reported within selling, general and administrative expense that are segment-specific.
Three Months Ended September 30,
Key Indicators as a % of Segment Revenue - Dietary 2026 2025 Change
Labor and labor-related costs1
59.1% 59.6% (0.5)%
Supplies 30.1% 31.3% (1.2)%
Bad debt expense (0.3)% 1.5% (1.8)%
Depreciation and amortization 0.3% 0.3% -%
Other costs1
2.1% 2.2% (0.1)%
Total segment expenses 91.3% 94.9% (3.6)%
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. Losses on the plan investments during the three months ended September 30, 2026 decreased our total selling, general and administrative expense, while gains on the plan investments during the three months ended September 30, 2025 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 $2.3 million or 4.9% for the three months ended September 30, 2026 compared to the corresponding period in 2025, driven primarily by increased professional fees primarily associated with our merger and acquisition activity.
The table below summarizes the changes in these components of selling, general and administrative expense:
Three Months Ended September 30,
2026 2025 $ Change % Change
(dollar amounts in thousands)
Selling, general and administrative expense excluding change in deferred compensation liability $ 49,126 $ 46,824 $ 2,302 4.9 %
(Loss) gain on deferred compensation plan investments (674) 3,717 (4,391)
NR1
Selling, general and administrative expense $ 48,452 $ 50,541 $ (2,089) (4.1) %
1. Not relevant
Consolidated Investment and Other Income, net
Investment and other income, net was $2.1 million for the three months ended September 30, 2026 compared to $11.8 million for the three months ended September 30, 2025. During the three months ended September 30, 2025, we recognized $5.3 million in interest income on ERC refunds received. Excluding the impact of the ERC refund, investment and other income, net decreased due to unfavorable 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:
Three Months Ended September 30,
2026 2025 $ Change % Change
(dollar amounts in thousands)
Investment and other income, net excluding change in deferred compensation plan assets $ 2,743 $ 8,106 $ (5,363) (66.2) %
(Loss) gain on deferred compensation plan investments (634) 3,731 (4,365) (117.0) %
Investment and other income, net $ 2,109 $ 11,837 $ (9,728) (82.2) %
Consolidated Interest Expense
Consolidated interest expense was $0.3 million and $0.4 million for the three months ended September 30, 2026 and 2025, respectively.
Consolidated Income Taxes
During the three months ended September 30, 2026, we recognized a provision for income taxes of $8.9 million, or 26.2% effective tax rate, versus a provision for income taxes of $14.4 million, or 25.0% effective tax rate, for the same period in 2025. 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 and 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 are not 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, 2026 and 2025 for such discrete items was an expense of $0.1 million and $10.4 million (driven by the impact of income recognition from the ERC refunds), respectively.
Nine Months Ended September 30, 2026 and 2025
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, 2026 and 2025.
Nine Months Ended September 30,
2026 2025 % Change
(in thousands)
Revenues
EVS $ 638,660 $ 613,869 4.0 %
Dietary 774,518 756,622 2.4 %
Consolidated $ 1,413,178 $ 1,370,491 3.1 %
Costs of services provided
EVS $ 517,555 $ 532,081 (2.7) %
Dietary 664,606 705,315 (5.8) %
ERC Credits1
- (34,239)
NR4
Consolidated $ 1,182,161 $ 1,203,157 (1.7) %
Selling, general and administrative
EVS $ 38,654 $ 36,122 7.0 %
Dietary 44,783 44,791 - %
Corporate2
54,949 56,858 (3.4) %
Gain on deferred compensation plan investments 4,648 6,899 (32.6) %
Consolidated $ 143,034 $ 144,670 (1.1) %
Other income (expense)3
Investment and other income, net $ 12,591 $ 17,856 (29.5) %
Interest expense (1,302) (1,206) 8.0 %
Income before taxes $ 99,272 $ 39,314 152.5 %
Income tax expense 25,639 11,499 123.0 %
Net income $ 73,633 $ 27,815 164.7 %
1.Segment costs of services provided excludes the impact of ERC refunds 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.
2.Represents selling, general and administrative expense less amounts allocated to segments for labor and labor-related and other segment items.
3.These line items represent corporate costs not allocated to segments.
4.Not relevant.
EVS and Dietary revenues represented approximately 45.2% and 54.8% of consolidated revenues for the nine months ended September 30, 2026, respectively.
The following table sets forth the ratio of certain items to consolidated revenues:
Nine Months Ended September 30,
2026 2025
Revenues 100.0 % 100.0 %
Operating costs and expenses:
Costs of services provided 83.7 % 87.8 %
Selling, general and administrative 9.8 % 10.1 %
Other income (expense):
Investment and other income, net 0.9 % 1.3 %
Interest expense (0.1) % (0.1) %
Income before income taxes 7.0 % 2.8 %
Income tax provision 1.8 % 0.8 %
Net income 5.2 % 2.0 %
Revenues
Consolidated
Consolidated revenues increased 3.1% to $1.413 billion for the nine months ended September 30, 2026 compared to $1.370 billion for the corresponding period in 2025 as a result of the factors discussed below under Reportable Segments.
Reportable Segments
EVS revenues increased 4.0% during the nine months ended September 30, 2026 compared to the 2025 comparable period, while Dietary revenues increased 2.4% over the same period. The increase in revenues was driven by client wins and retention, contractual price increases and pass-through costs to customers.
Costs of Services Provided
Consolidated
Consolidated costs of services provided decreased by 1.7% to $1.182 billion for the nine months ended September 30, 2026 compared to $1.203 billion for the corresponding period in 2025. During the nine months ended September 30, 2026, we recognized a $6.1 million benefit in bad debt expense related to the reassessment of the current expected credit loss from the 2025 Genesis bankruptcy. During the nine months ended September 30, 2025, we recognized a $34.2 million benefit within costs of services provided related to ERC refunds received. Additionally, during the nine months ended September 30, 2025, we recognized $63.9 million of bad debt expense within costs of services provided related to the Genesis Healthcare bankruptcy. Excluding these items, costs of services provided increased 0.7% as a result of the factors discussed below under Reportable Segments. Costs of services provided, as a percentage of revenues, was 83.7% for the nine months ended September 30, 2026 compared to 87.8% for the same period in 2025. During the nine months ended September 30, 2026 and 2025, updates to our loss estimates for workers' compensation and general liability reduced costs of services provided by $7.8 million and $5.1 million, respectively.
Reportable Segments
We include certain expenses classified as selling, general and administrative within segment expenses. Segment expenses for EVS, as a percentage of EVS revenues, decreased to 87.1% for the nine months ended September 30, 2026 from 92.6% for the corresponding period in 2025. Segment expenses for Dietary, as a percentage of Dietary revenues, decreased to 91.6% for the nine months ended September 30, 2026 from 99.1% in the corresponding period in 2025.
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:
Nine Months Ended September 30,
Key Indicators as a % of Segment Revenue - EVS 2026 2025 Change
Labor and labor-related costs1
77.4% 78.6% (1.2)%
Supplies 7.2% 7.1% 0.1%
Bad debt expense 0.3% 4.4% (4.1)%
Depreciation and amortization 0.6% 0.5% 0.1%
Other costs1
1.7% 1.8% (0.2)%
Total segment expenses 87.1% 92.6% (5.5)%
1.Inclusive of certain expenses reported within selling, general and administrative expense that are segment-specific.
Nine Months Ended September 30,
Key Indicators as a % of Segment Revenue - Dietary 2026 2025 Change
Labor and labor-related costs1
58.5% 58.9% (0.4)%
Supplies 30.4% 30.7% (0.3)%
Bad debt expense 0.3% 6.8% (6.5)%
Depreciation and amortization 0.3% 0.4% (0.1)%
Other costs1
2.1% 2.3% (0.2)%
Total segment expenses 91.6% 99.1% (7.5)%
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 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, 2026 and 2025 increased our total selling, general and administrative expense for each period.
Excluding the change in the deferred compensation plan described above, consolidated selling, general and administrative expense increased $0.6 million or 0.4% for the nine months ended September 30, 2026 compared to the corresponding period in 2025. Decreases in baseline selling, general and administrative spend were by discipline in execution and leveraging our topline growth to gain efficiencies, offset by increased professional fees associated with merger and acquisition-related activity.
The table below summarizes the changes in these components of selling, general and administrative expense:
Nine Months Ended September 30,
2026 2025 $ Change % Change
(dollar amounts in thousands)
Selling, general and administrative expense excluding change in deferred compensation plan liability $ 138,386 $ 137,771 $ 615 0.4 %
Gain on deferred compensation plan investments 4,648 6,899 (2,251) (32.6) %
Selling, general and administrative expense $ 143,034 $ 144,670 $ (1,636) (1.1) %
Consolidated Investment and Other Income, net
Investment and other income, net was $12.6 million for the nine months ended September 30, 2026 compared to $17.9 million for the nine months ended September 30, 2025. During the nine months ended September 30, 2025, we recognized $5.3 million in interest income on ERC refunds received. Increases in interest-bearing cash and marketable securities balances during the year increased interest income, which were offset by a reduced gain recognized on deferred compensation plan investments.
The table below summarizes the changes in these components of investment and other income, net:
Nine Months Ended September 30,
2026 2025 $ Change % Change
(dollar amounts in thousands)
Investment and other income, net excluding change in deferred compensation plan assets $ 7,802 $ 10,930 $ (3,128) (28.6) %
Gain on deferred compensation plan investments 4,789 6,926 (2,137) (30.9) %
Investment and other income, net $ 12,591 $ 17,856 $ (5,265) (29.5) %
Consolidated Interest Expense
Consolidated interest expense was $1.3 million and $1.2 million for the nine months ended September 30, 2026 and 2025, respectively. During the nine months ended September 30, 2026, we recognized $0.3 million in interest expense related to the amendment of our line of credit.
Consolidated Income Taxes
During the nine months ended September 30, 2026 and 2025, we recognized a provision for income taxes of $25.6 million, or 25.8% effective tax rate, and $11.5 million, or 29.2% effective tax rate, respectively. 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 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, 2026 and 2025 for such discrete items was an expense of less than $0.1 million and $11.6 million, respectively. The discrete items in 2025 were driven primarily by the recognition of ERC refunds.
Liquidity and Capital Resources
Our primary sources of liquidity are available cash and cash equivalents, available lines of credit under our bank line of credit (the "Credit Agreement") and cash flows from operating activities. The following table includes the balances of our primary sources of liquidity at September 30, 2026 and December 31, 2025:
September 30, 2026 December 31, 2025
(in thousands)
Cash and cash equivalents $ 134,598 $ 125,189
Restricted cash equivalents 115 5,577
Marketable securities, at fair value 34,223 42,774
Restricted marketable securities, at fair value 35,367 30,352
Total $ 204,303 $ 203,892
Working capital $ 376,339 $ 406,040
Our current ratio was 2.8 to 1.0 at September 30, 2026, and 3.4 to 1.0 at December 31, 2025. On October 6, 2026, we used approximately $93.5 million of cash on hand to fund the acquisition of NEXDINE Hospitality, subject to customary purchase price adjustments, which will reduce the working capital and cash available following the acquisition. See Note 19-Subsequent Events to the condensed consolidated financial statements for additional information.
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, 2026 and 2025, our cash flows were as follows:
Nine Months Ended September 30,
2026 2025
(in thousands)
Net cash from operating activities $ 95,770 $ 127,581
Net cash from investing activities $ (32,523) $ (19,566)
Net cash from financing activities $ (59,300) $ (43,726)
Operating Activities
Our primary sources of cash from operating activities are the revenues generated from our Environmental 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, 2026, cash flow from operations included $73.6 million in net income, non-cash add-backs to net income of $21.4 million, and a $0.8 million increase in cash flows from changes in operating assets and liabilities.
Investing Activities
Our principal uses of cash for investing activities are acquisitions and other strategic investments, capital expenditures such as EVS 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 and disposals of equipment.
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 10, 2026, our Board of Directors authorized the repurchase of up to 10.0 million outstanding shares (the "2026 Repurchase Plan"). This replaced a previous authorization from our Board of Directors on February 14, 2023, which had authorized the repurchase of up to 7.5 million outstanding shares (the "2023 Repurchase Plan", together with the 2026 Repurchase Plan, the "Repurchase Plans") and of which 5.9 million had been repurchased.
During the three months ended September 30, 2026 and 2025, under the Repurchase Plans we repurchased 0.6 million and 1.7 million shares of our common stock for $12.7 million and $27.3 million, respectively, including commissions and taxes. During the nine months ended September 30, 2026 and 2025, we repurchased 2.7 million and 2.9 million shares of our common stock for $57.0 million and $42.1 million, respectively, including commissions and taxes. We remain authorized to repurchase up to 7.7 million shares of our common Stock pursuant to the 2026 Repurchase Plan.
For the nine months ended September 30, 2026 and the year ended December 31, 2025, our quarterly repurchases of common stock were as follows:
Three Months Ended Total number of shares of Common Stock repurchased Average price paid per share of Common Stock Aggregate purchase price of Common Stock repurchases, excluding taxes
Number of remaining shares authorized for repurchase1
(in thousands, except for per share data)
September 30, 2026 554 $ 22.68 $ 12,567 7,702
June 30, 2026 964 $ 20.62 $ 19,885 8,256
March 31, 2026 1,206 $ 19.85 $ 23,928 9,220
December 31, 2025 1,078 $ 18.19 $ 19,604 2,033
September 30, 2025 1,743 $ 15.64 $ 27,271 3,111
June 30, 2025 523 $ 14.73 $ 7,706 4,854
March 31, 2025 653 $ 10.77 $ 7,036 5,377
1.On February 10, 2026, our Board of Directors authorized the repurchase of up to 10.0 million outstanding shares of common stock (under the "2026 Repurchase Plan"). We remain authorized to purchase 7.7 million shares of common stock under the 2026 Repurchase Plan. The 2026 Repurchase Plan replaced a previous authorization from our Board of Directors, dated February 14, 2023, where our Board of Directors authorized the repurchase of up to 7.5 million outstanding shares.
Line of Credit
We maintain the Credit Agreement on which to draw for general corporate purposes. On April 7, 2026, we entered into a Second Amendment to the Credit Agreement (the "Second Amendment"). The Second Amendment, among other things, extended the maturity date of the Credit Agreement from November 22, 2027 to April 7, 2031, amended the definition of Consolidated EBITDA and added a daily SOFR rate option to the Credit Agreement. Except as expressly amended by the Second Amendment, the terms of the Credit Agreement remain in full force and effect.
At September 30, 2026, the total line of credit available under the Credit Agreement was $300 million. 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 Term Secured Overnight Financing Rate ("SOFR") plus 165 basis points. The Credit Agreement 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, 2026, we had no borrowings under the Credit Agreement.
The Credit Agreement requires us to satisfy two financial covenants. The covenants and their respective status at September 30, 2026 were as follows:
Covenant Descriptions and Requirements As of September 30, 2026
Funded debt1 to EBITDA2 ratio: less than 3.50 to 1.00
N/A3
EBITDA to Interest Expense ratio: not less than 3.00 to 1.00 90.63
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.
3.As of September 30, 2026, we do not have any funded debt, as defined in the Credit Agreement.
We were in compliance with our financial covenants as of September 30, 2026 and expect to remain in compliance. We believe that our existing capacity under the Credit Agreement 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, 2026, we had outstanding $32.0 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 EVS 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 2026, we estimate that for 2026 we will have capital expenditures of approximately $5.0 million to $7.0 million, of which we have made $5.1 million through September 30, 2026.
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 letters 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, 2025. 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.
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