Financial Analysis

Note 17 Other Contingencies Line of Credit At December 31, 2025, the Company had a $300.0 million bank line of credit on which to draw for general corporate purposes. Amounts drawn under the line of credit generally bear interest at a floating rate, based on the Companys leverage ratio, and starting at the Term Secured Overnight Financing Rate (SOFR) plus 165 basis points. The Company did not have any borrowings under the line of credit as of December 31, 2025 and December 31, 2024. The line of credit requires the Company to satisfy two financial covenants, with which the Company is in compliance as of December 31, 2025. The line of credit expires on November 22, 2027. The Companys line of credit was amended on November 22, 2022 to, among other things, provide for a five-year unsecured revolving loan facility in the aggregate amount of $300.0 million with, at the Companys option, the ability to increase the revolving loan commitments to an aggregate amount not to exceed $500.0 million. At December 31, 2025, the Company had outstanding $47.7 million in irrevocable standby letters of credit, which relate to payment obligations under the Companys insurance programs. In connection with the issuance of the letters of credit, the amount available under the line of credit was reduced by $47.7 million to $252.3 million at December 31, 2025. On January 8, 2025, October 6, 2025, and January 20, 2026, the letters of credit were renewed, and they all expire in the first quarter of 2027. …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

Note 18 Other Employee Benefit Plans Retirement Savings Plan The Company has a retirement savings plan for eligible employees (the RSP) under Section 401(k) of the Internal Revenue Code. The RSP allows eligible employees to contribute up to 15% of their eligible compensation on a pre-tax basis. …

CompensationAndEmployeeBenefitPlansTextBlock · excerpt; the full note is in the filing

Note 11 Share-Based Compensation The components of the Companys share-based compensation expense for the years ended December 31, 2025, 2024 and 2023 are as follows: Year Ended December 31, 2025 2024 2023 (in thousands) Stock options $ 2,673 $ 708 $ 969 Restricted stock units and deferred stock units 7,080 6,870 6,657 Performance stock units 1,442 1,341 1,210 Employee Stock Purchase Plan 810 246 149 Total pre-tax share-based compensation expense charged against income $ 12,005 $ 9,165 $ 8,985 Total recognized tax deficiency related to share-based compensation $ (729) $ (607) $ (773) At December 31, 2025 and 2024, the unrecognized compensation cost related to unvested stock options and awards was $19.3 million and $16.2 million, respectively. The weighted average period over which these awards will vest was approximately 2.6 years as of December 31, 2025 and 2.8 years as of both December 31, 2024 and December 31, 2023. The following table summarizes the components of share-based compensation expense included within the Consolidated Statements of Comprehensive Income for the years ended December 31, 2025, 2024 and 2023: Year Ended December 31, 2025 2024 2023 (in thousands) Selling, general and administrative expenses $ 11,790 $ 9,086 $ 8,942 Costs of services provided 215 79 43 Total share-based compensation expense $ 12,005 $ 9,165 $ 8,985 Amended 2020 Omnibus Incentive Plan On May 26, 2020, the Company adopted the 2020 Omnibus Incentive Plan (the 2020 Plan). On May 30, 2023, …

DisclosureOfCompensationRelatedCostsShareBasedPaymentsTextBlock · excerpt; the full note is in the filing

Note 12 Income Taxes The table below provides a reconciliation between the tax expense computed by applying the statutory federal income tax rate to income before income taxes and the provision for income taxes: Year Ended December 31, 2025 2024 2023 Amount % Amount % Amount % (in thousands, except for percentages) U.S. Federal Statutory Tax Rate $ 14,252 21.0 % $ 11,118 21.0 % $ 11,182 21.0 % State and Local Income Taxes, Net of Federal Income Tax Effect 1 2,386 3.5 % 2,641 5.0 % 4,153 7.8 % Tax Credits Federal Jobs Credits (3,019) (4.5) % (1,914) (3.6) % (2,014) (3.8) % Changes in Valuation Allowance % % % Nontaxable or Nondeductible Items Employee Retention Credit 2 (6,840) (10.1) % % % Share-based compensation 1,834 2.7 % 1,722 3.3 % 1,610 3.0 % Other 154 0.2 % 108 0.2 % 57 0.1 % Other Adjustments 40 0.1 % (205) (0.4) % (318) (0.6) % Effective Tax Rate $ 8,807 12.9 % $ 13,470 25.5 % $ 14,670 27.5 % 1. For 2025, states that comprise the majority (>50%) of the state tax effect are California, Kentucky, Maryland, Massachusetts, Pennsylvania, Texas, and Virginia. For 2024, states that comprise the majority (>50%) of the state tax effect are Maryland, California, Massachusetts, New Jersey, Florida, Texas, Virginia, Connecticut and Pennsylvania. For 2023, states that comprise the majority (>50%) of the state tax effect are New Jersey, California, Maryland, Massachusetts, Texas, Florida, Connecticut, Virginia, and Kentucky. 2. Amount received in ERC credits during 20 …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Note 8 Leases The Company recognizes ROU Assets and lease liabilities for automobiles, office buildings, IT equipment and small storage units for the temporary storage of operational equipment. The Companys leases have remaining lease terms ranging from less than 1 year to 10 years. The Company recognizes extension options as part of the initial lease term for ROU Assets and lease liabilities when it is reasonably certain that the Company will exercise the extension option upon the completion of the initial lease term. Most leases include the option to terminate the lease within 1 year. The Company uses practical expedients offered under the ASC 842 - Leases (ASC 842) to combine lease and non-lease components within leasing arrangements and to recognize the payments associated with short-term leases in earnings on a straight-line basis over the lease term, with the cost associated with variable lease payments recognized when incurred. These accounting policy elections impact the value of the Companys ROU Assets and lease liabilities. The value of the Companys ROU Assets is determined as the carrying value of its leasing arrangements and is recorded in Property and equipment, net on the Companys Consolidated Balance Sheets. The value of the Companys lease liabilities is the present value of fixed lease payments not yet paid, which is discounted using either the rate implicit in the lease contract if that rate can be determined or the Companys incremental borrowing rate (IBR). …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740): Improvements to Income Tax Disclosures , which enhances effective tax rate reconciliation disclosure requirements and provides clarity to the disclosures of income taxes paid, income before taxes and provision for income taxes. The amendments are effective for fiscal years beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis. Retrospective application is permitted. The Company adopted ASU 2023-09 for the year ended December 31, 2025 and applied the standard retrospectively. Refer to Note 12 Income Taxes herein for further information. In November 2024, the FASB issued ASU 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, which amends the codification to enhance disclosures about a public business entitys expenses and address requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions. The amendments are effective for fiscal years beginning after December 15, 2026, and interim periods within fiscal years beginning after December 15, 2027. Early adoption is permitted for …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

Note 19 Related Party Transactions During the years ended December 31, 2025 and 2024, the Company invested $0.1 million and $2.8 million, respectively, in Align+Engage LLC (Align+Engage), a healthcare technology company which specializes in the long-term and acute care markets which was accounted for as an equity method investment. The Companys total investment represents a 25% ownership share of Align+Engage. During the years ended December 31, 2025 and 2024 Company recorded expenses of $0.8 million and $0.6 million, respectively, in connection with services provided by Align+Engage, including the use of an application by Company personnel. …

RelatedPartyTransactionsDisclosureTextBlock · excerpt; the full note is in the filing

Note 3 Revenue The Company presents its consolidated revenues disaggregated by reportable segment as management evaluates the nature, amount, timing and uncertainty of the Companys revenues by segment. Refer to Note 13 Segment Information herein as well as the information below regarding the Companys reportable segments. Environmental Services Environmental Services accounted for $824.7 million, $765.4 million and $766.7 million of the Companys consolidated revenues for the years ended December 31, 2025, 2024 and 2023, respectively. Environmental Services consist of managing customers housekeeping departments, which are principally responsible for the cleaning, disinfecting and sanitizing of resident rooms and common areas of the customers facilities, as well as the laundering and processing of the bed linens, uniforms, resident personal clothing and other assorted linen items utilized at the customers facilities. Upon beginning service with a customer facility, the Company will typically hire and train the employees previously employed by such facility and assign an on-site manager to supervise and train 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. Dietary Dietary services accounted for $1,012.5 million, $950.3 million and $904.7 m …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

Note 13 Segment Information The Company manages and evaluates its operations in two reportable segments: Environmental Services (housekeeping, laundry, linen and other services) and Dietary (dietary department services). Although both segments serve a similar customer base and share many operational similarities, they are managed separately due to distinct differences in the type of services provided, as well as the specialized expertise required of the professional management personnel responsible for delivering each segments services. Such services are rendered pursuant to discrete contracts, specific to each reportable segment. The Chief Operating Decision Maker (CODM) for both segments for each of the years ended December 31, 2025, 2024, and 2023 was Theodore Wahl, the Company s President and Chief Executive Officer. The Company s CODM does not review assets by segment to assess segment performance or allocate resources, nor is such information provided to the CODM. Accordingly, the Company does not present assets by segment. The Companys Significant Segment Expenses for each segment include direct labor costs and segment-based management expenses (collectively, l abor and labor-related ), food, chemicals and supplies, bad debt expense, and depreciation & amortization, as these are specific costs regularly provided to the CODM and used to evaluate segment performance. Other segment items include expenses recorded within costs of services provided which are not regular …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

Note 1 Description of Business and Significant Accounting Policies Nature of Operations Healthcare Services Group, Inc. (the Company) provides management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of the healthcare industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. Although the Company does not directly participate in any government reimbursement programs, the Companys customers receive government reimbursements related to Medicare and Medicaid. Therefore, they are directly affected by any legislation relating to Medicare and Medicaid reimbursement programs. The Company provides services primarily pursuant to full service agreements with its customers. In such agreements, the Company is responsible for the day-to-day management of employees located at the customers facilities, as well as for the provision of certain supplies. The Company also provides services on the basis of management-only agreements for a limited number of customers. In a management-only agreement, the Company provides management and supervisory services while the customer facility retains payroll responsibility for the non-supervisory staff. The 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. The Company is …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

Note 22 Subsequent Events The Company evaluated all subsequent events through the filing date of this Annual Report on Form 10-K. On February 10, 2026, the Companys Board of Directors authorized the repurchase of up to 10.0 million outstanding shares of common stock (the 2026 Repurchase Plan). Except as noted above, the Company concluded that no events or transactions occurred during the subsequent reporting period that require recognition or additional disclosure in these financial statements. …

SubsequentEventsTextBlock · excerpt; the full note is in the filing

Note 17Other Contingencies Line of Credit We maintain a bank line of credit (the Credit Agreement) with PNC Bank, National Association, as administrative agent 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 June 30, 2026, the total line of credit available under the Credit Agreement was $300 million. Amounts drawn under the Credit Agreement generally bear interest at a floating rate, based on the Companys leverage ratio, and starting at the Term Secured Overnight Financing Rate (SOFR) plus 165 basis points. The Company did not have any borrowings under the Credit Agreement as of June 30, 2026 and December 31, 2025. The Credit Agreement requires the Company to satisfy two financial covenants, with which the Company is in compliance as of June 30, 2026. The Credit Agreement provides for a five year unsecured revolving loan facility in the aggregate amount of $300 million and provides, at the Companys option, the ability to increase the revolving loan commitments to an aggregate amount not to exceed $500 million. At June …

CommitmentsAndContingenciesDisclosureTextBlock · excerpt; the full note is in the filing

Note 11Share-Based Compensation The components of the Companys share-based compensation expense for the six months ended June 30, 2026 and 2025 are as follows: Six Months Ended June 30, 2026 2025 (in thousands) Stock options $ 599 $ 1,934 Restricted stock units and deferred stock units 3,757 3,548 Performance stock units 1,050 713 Employee Stock Purchase Plan 179 84 Total share-based compensation expense $ 5,585 $ 6,279 At June 30, 2026, the unrecognized compensation cost related to unvested stock options and awards was $25.9 million. The weighted average period over which these awards will vest was approximately 2.8 years. The following table summarizes the components of share-based compensation expense included within the Consolidated Statements of Comprehensive Income/(Loss) for the six months ended June 30, 2026 and 2025: Six Months Ended June 30, 2026 2025 (in thousands) Selling, general and administrative $ 5,540 $ 6,257 Costs of services provided 45 22 Total share-based compensation expense $ 5,585 $ 6,279 Amended 2020 Omnibus Incentive Plan On May 26, 2020, the Company adopted the 2020 Omnibus Incentive Plan (the 2020 Plan). On May 30, 2023, the Company increased the authorized shares under the 2020 Omnibus Incentive Plan (as amended, the Amended 2020 Plan) by 2.5 million shares. On May 26, 2026, the Company adopted a further amendment to the 2020 Omnibus Incentive Plan (as amended, the Amended Plan), pursuant to which the shares of the Companys common stock, par valu …

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Note 12Income Taxes The Companys annual effective tax rate is impacted by the tax effects of option exercises, the vesting of awards and deductibility limitations on deferred executive compensation, which are all treated as discrete items in the reporting period in which they occur and therefore cannot be considered in the calculation of the estimated annual effective tax rate. During the three months ended June 30, 2026 and 2025, discrete items increased the income tax provision by $0.3 million in both periods. During the six months ended June 30, 2026, discrete items decreased the income tax provision by less than $0.1 million, while during the six months ended June 30, 2025, discrete items increased the income tax provision by $1.1 million. Differences between the effective tax rate and the applicable U.S. federal statutory rate arise primarily from the effect of state and local income taxes, share-based compensation and tax credits available to the Company. The actual 2026 effective tax rate will likely vary from the estimate depending on the actual operating income earned with availability of tax credits, the exercising of stock options and vesting of share-based awards. The Company regularly evaluates the tax positions taken or expected to be taken resulting from financial statement recognition of certain items. Based on the evaluation, there are no significant uncertain tax positions requiring recognition in the Companys financial statements. The evaluation was perform …

IncomeTaxDisclosureTextBlock · excerpt; the full note is in the filing

Note 8Leases The Company recognizes ROU Assets and lease liabilities for automobiles, office buildings, IT equipment and small storage units for the temporary storage of operational equipment. The Companys leases have remaining lease terms ranging from less than 1 year to 5 years. The Company recognizes extension options as part of the initial lease term for ROU Assets and lease liabilities when it is reasonably certain that the Company will exercise the extension option upon the completion of the initial lease term. Most leases include the option to terminate the lease within 1 year. The Company uses practical expedients offered under the ASC 842 - Leases to combine lease and non-lease components within leasing arrangements and to recognize the payments associated with short-term leases in earnings on a straight-line basis over the lease term, with the cost associated with variable lease payments recognized when incurred. These accounting policy elections impact the value of the Companys ROU Assets and lease liabilities. The value of the Companys ROU Assets is determined as the carrying value of its leasing arrangements and is recorded in Property and equipment, net on the Companys Consolidated Balance Sheets. The value of the Companys lease liabilities is the present value of fixed lease payments not yet paid, which is discounted using either the rate implicit in the lease contract if that rate can be determined or the Companys incremental borrowing rate (IBR). The Companys …

LesseeOperatingLeasesTextBlock · excerpt; the full note is in the filing

In November 2024, the Financial Accounting Standards Board (FASB), which establishes U.S. GAAP, issued Accounting Standards Update (ASU) 2024-03, Income Statement Reporting Comprehensive Income Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses , which amends the codification to enhance disclosures about a public business entitys expenses and addresses requests from investors for more detailed information about the types of expenses (including purchases of inventory, employee compensation, depreciation, amortization, and depletion) in commonly presented expense captions. The amendments are effective for fiscal years beginning after December 15, 2026. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. The amendments in this update should be applied on a prospective basis. Retrospective application is permitted. The Company is currently evaluating this ASU to determine its impact on the Companys disclosures. In September 2025, the FASB issued ASU 2025-06, IntangiblesGoodwill and OtherInternal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which amends and improves the existing rules for internal-use software, including clarifying when capitalization of software development costs should begin, providing more operable criteria that better align with modern development practices (such as agile and iterative method …

NewAccountingPronouncementsPolicyPolicyTextBlock · excerpt; the full note is in the filing

Note 18Equity Method Investments During the six months ended June 30, 2026 and 2025, the Company invested $4.6 million and $0.1 million, respectively, in investments accounted for under the equity method. During the three and six months ended June 30, 2026, the Company recorded expenses of less than $0.1 million within selling, general & administrative expenses in connection with services provided by Align+Engage LLC, an equity method investee, including the use of an application by Company personnel. During the three and six months ended June 30, 2025, the Company recorded expenses of $0.3 million and $0.6 million, respectively, in connection with services provided by Align+Engage LLC. …

RelatedPartyTransactionsDisclosureTextBlock · excerpt; the full note is in the filing

Note 3Revenue The Company presents its consolidated revenues disaggregated by reportable segment, as management evaluates the nature, amount, timing and uncertainty of the Companys revenues by segment. Refer to Note 13Segment Information herein as well as the information below regarding the Companys reportable segments. Environmental Services Environmental Services accounted for $213.2 million and $205.7 million of the Companys consolidated revenues for the three months ended June 30, 2026 and 2025, respectively, which represented approximately 45.3% and 44.9% of the Companys revenues in each respective period. Environmental Services accounted for $421.5 million and $402.1 million of the Companys consolidated revenues for the six months ended June 30, 2026 and 2025, respectively, which represents approximately 45.1% and 44.4% of the Companys revenues in each respective period. Environmental Services consist of managing customers housekeeping departments, which are principally responsible for the cleaning, disinfecting and sanitizing of resident rooms and common areas of the customers facilities, as well as the laundering and processing of the bed linens, uniforms, resident personal clothing and other assorted linen items utilized at the customers facilities. Upon beginning service with a customer facility, the Company will typically hire and train the employees previously employed by such facility and assign an on-site manager to supervise and train the front-line personnel a …

RevenueFromContractWithCustomerTextBlock · excerpt; the full note is in the filing

Note 13Segment Information The Company manages and evaluates its operations in two reportable segments: Environmental Services (housekeeping, laundry, linen and other services) and Dietary (dietary department services). Although both segments serve a similar customer base and share many operational similarities, they are managed separately due to distinct differences in the type of services provided, as well as the specialized expertise required of the professional management personnel responsible for delivering each segments services. Such services are rendered pursuant to discrete contracts, specific to each reportable segment. The Chief Operating Decision Maker (CODM) for both segments for each of the three and six months ended June 30, 2026 and 2025 was Theodore Wahl, the Companys President and Chief Executive Officer. The Company s CODM does not review assets by segment to assess segment performance or allocate resources, nor is such information provided to the CODM. Accordingly, the Company does not present assets by segment. The Companys significant segment expenses for each segment include direct labor costs and segment-based management expenses (collectively, labor and labor-related), food, chemicals and supplies, bad debt expense, and depreciation & amortization, as these are specific costs regularly provided to the CODM and used to evaluate segment performance. Other segment items include expenses recorded within costs of services provided which are not regular …

SegmentReportingDisclosureTextBlock · excerpt; the full note is in the filing

Note 1Description of Business and Significant Accounting Policies Nature of Operations Healthcare Services Group, Inc. (the Company) provides management, administrative and operating expertise and services to housekeeping, laundry, linen, facility maintenance and dietary service departments primarily in the healthcare industry, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. Although the Company does not directly participate in any government reimbursement programs, the Companys customers receive government reimbursements related to Medicare and Medicaid. Therefore, they are directly affected by any legislation relating to Medicare and Medicaid reimbursement programs. The Company provides services primarily pursuant to full service agreements with its customers. In such agreements, the Company is responsible for the day-to-day management of employees located at the customers facilities, as well as for the provision of certain supplies. The Company also provides services on the basis of management-only agreements for a limited number of customers. In a management-only agreement, the Company provides management and supervisory services while the customer facility retains payroll responsibility for the non-supervisory staff. In certain management-only agreements, the Company also maintains responsibility for purchasing supplies. The agreements with customers typically provide for a renewable one year servi …

SignificantAccountingPoliciesTextBlock · excerpt; the full note is in the filing

Note 19Subsequent Events The Company evaluated all subsequent events through the filing date of this Form 10-Q. There were no events or transactions occurring during this subsequent reporting period which require recognition or additional disclosure in these financial statements. …

SubsequentEventsTextBlock · excerpt; the full note is in the filing