Risk Factors - HCSG

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$HCSG Risk Factor changes from 00/02/17/23/2023 to 00/02/14/25/2025

Item 1A. Risk Factors.”These factors, in addition to delays in payments from customers and/or customers undergoing restructurings, have resulted in, and could continue to result in, significant additional bad debts in the near future.”These factors, in addition to delays in payments from customers and/or customers in bankruptcy, have resulted in, and could continue to result in, significant additional bad debts in the near future. Additionally, our operating results have been in the past and could in the future be adversely affected by continued inflation particularly if increases in the costs of labor and labor-related costs, materials, supplies and equipment used in performing services (including the impact of potential tariffs) cannot be passed on to our customers. Additionally, our operating results would be adversely affected by continued inflation particularly if increases in the costs of labor and labor-related costs, materials, supplies and equipment used in performing services (including the impact of potential tariffs and COVID-19) could not be passed on to our customers. In addition, we believe that to improve our financial performance we must continue to obtain service agreements with new customers, retain and provide new services to existing customers, achieve modest price increases on current service agreements with existing customers and/or maintain internal cost reduction strategies at our various operational levels. Furthermore, we believe that our ability to sustain the internal development of managerial personnel is an important factor impacting future operating results and the successful execution of our projected growth strategies. There can be no assurance that we will be successful in that regard.

Table of ContentsPART IIn this Annual Report on Form 10-K for the year ended December 31, 2024, Healthcare Services Group, Inc. (together with its wholly-owned subsidiaries listed in Exhibit 21, which has been filed as part of this Report) is referred to using terms such as the “Company,” “we,” “us” or “our.”Item I. Business.General Healthcare Services Group, Inc. is a Pennsylvania corporation, incorporated on November 22, 1976. We provide management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of primarily healthcare facilities, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. We provide management, administrative and operating expertise and services to the housekeeping, laundry, linen, facility maintenance and dietary service departments of healthcare facilities, including nursing homes, retirement complexes, rehabilitation centers and hospitals located throughout the United States. We provide such services to approximately 2,600 facilities throughout the continental United States as of December 31, 2024. We believe we are the largest provider of housekeeping, laundry and dietary management services to the long-term care industry in the United States.

Segment InformationThe information called for herein is discussed below in Description of Services, and within Item 8 of this Annual Report on Form 10-K under Note 12 — Segment Information in the Notes to Consolidated Financial Statements for the years ended December 31, 2024, 2023 and 2022.Segment InformationThe information called for herein is discussed below in Description of Services, and within Item 8 of this Annual Report on Form 10-K under Note 14 — Segment Information in the Notes to Consolidated Financial Statements for the years ended December 31, 2022, 2021 and 2020. Description of ServicesWe are organized into two reportable segments: housekeeping, laundry, linen and other services (“Housekeeping”) and dietary department services (“Dietary”). Our corporate headquarters provides centralized financial management and support, legal services, human resources management and other administrative services to the Housekeeping and Dietary business segments.We provide Housekeeping services to approximately 2,200 customer facilities and provide Dietary services to approximately 1,600 facilities.We provide Housekeeping services to substantially all of our customer facilities and provide Dietary services to approximately 1,700 facilities. Although we do not directly participate in any government reimbursement programs, our customers receive government reimbursements related to Medicare and Medicaid and are directly affected by any legislation and regulations relating to those programs.We provide services primarily pursuant to full-service agreements with our customers.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 our 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. In certain management-only arrangements, 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. Our agreements with customers typically provide for a renewable one year service term, cancellable by either party upon 30 to 90 days’ notice after an initial period of 60 to 120 days. HousekeepingHousekeeping accounted for approximately 44.6%, or $765.1%, or $795. 4 million, of our consolidated revenues in 2024. Housekeeping services consist of managing our 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. The services provided under this segment include managing our 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, 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. Such management personnel also oversee the execution of various cost and quality control procedures including continuous training and employee evaluation, and on-site testing for infection control, with regular support provided by a District Manager specializing in such services. On-site management is responsible for all daily customer housekeeping department activities with regular support provided by a District Manager specializing in such services. On-site management is responsible for all daily dietary department activities, with regular support provided by a District Manager specializing in dietary services. 1Table of ContentsHousekeeping’s operating performance is significantly impacted by our management of labor costs.Housekeeping’s operating performance is significantly impacted by our management of labor costs. In order to normalize and evaluate such costs in the context of the Company’s financial performance, management reviews labor costs as a percentage of Housekeeping segment revenues. Housekeeping labor costs represented approximately 78.4% of Housekeeping revenues for 2024. Changes in employee compensation resulting from legislative or other governmental actions, market factors, adjustments to staffing levels and the composition of our labor force may adversely impact these costs. Similarly, an increase in the costs of supplies consumed in performing Housekeeping services may impact the segment’s operating performance. In 2024, the cost of Housekeeping supplies as a percentage of Housekeeping revenues was 7.4%. Generally, the cost of such supplies is dictated by specific product market conditions, which are subject to price fluctuations influenced by factors outside of our control. Generally, the cost of such supplies is dictated by specific product market conditions, subject to price fluctuations influenced by factors outside of our control. Where possible, we negotiate fixed pricing from vendors for an extended period of time on certain supplies to mitigate such price fluctuations. DietaryDietary services represented approximately 55.4%, or $950.1%, or $795. 3 million, of our consolidated revenues in 2024. 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. We also offer clinical consulting services to our dietary customers, which may be provided as a stand-alone service, or 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. Such management personnel also oversee the execution of various cost and quality control procedures including continuous training and employee evaluation, and on-site testing for infection control, with regular support provided by a District Manager specializing in such services. Dietary operating performance is impacted by price fluctuations in labor and supply costs resulting from similar factors discussed above for Housekeeping. In 2024, the costs of labor- and food-related supplies represented approximately 56.6% and 32.5% and 32. 5% of Dietary segment revenues, respectively.Significant CustomersFor the years ended December 31, 2024, 2023 and 2022, both the Housekeeping and Dietary segments earned revenue from several significant customers, including Genesis Healthcare, Inc.2Table of ContentsSignificant CustomersFor the years ended December 31, 2022, 2021 and 2020, both the Housekeeping and Dietary segments earned revenue from several significant customers, including Genesis Healthcare, Inc. (“Genesis”). For the years ended December 31, 2024, 2023 and 2022, Genesis accounted for $148. For the years ended December 31, 2022, 2021 and 2020, Genesis accounted for $169. 9 million or 8.1 million or 10. 7%, $181.4 million or 10.9% and $169.8% and 14. 1 million or 10.0% of the Company’s consolidated revenues, respectively. Revenues generated from Genesis were included in both operating segments mentioned above. Any extended discontinuance of revenues, or significant reduction of revenues, from this customer could, if not replaced, have a material impact on our operations. No other single customer or customer group represented 10% or more of consolidated revenues for the years ended December 31, 2024, 2023 and 2022. No other single customer or customer group represented more than 10% of consolidated revenues for the years ended December 31, 2022, 2021 and 2020. Operational Management StructureBy applying our professional management techniques, we offer our customers the ability to manage certain housekeeping, laundry, linen, facility maintenance and dietary services and costs. We manage and provide our services through a network of management personnel, as illustrated below.Facilities are managed by an on-site Facility Manager, and if necessary, additional supervisory personnel. Such facility-level management personnel are responsible for the management of staff, scheduling, procurement, customer-service, quality control and overall day-to-day management of the Housekeeping or Dietary function. 2Table of ContentsDistrict Managers oversee the operations of the facilities within their districts. District Managers oversee the operations of the facilities within their districts. Their responsibilities include oversight of Facility Managers and management of personnel, operational performance, quality control and customer satisfaction while ensuring adherence to the Company’s systems and budgets. Directors of Operations oversee District Managers and provide management support, training and personnel management while ensuring operational performance is consistent with the Company’s systems and budgets. Vice Presidents of Operations are ultimately responsible for all aspects of the operations, including the compliance and financial performance of the Directors of Operations they oversee. We believe our organizational structure facilitates our ability to best serve and expand our service offerings to existing customers while also securing new business.MarketThe market for our services consists of a large number of facilities involved in various aspects of the healthcare industry, including long-term and post-acute care facilities (e.g., skilled nursing facilities, residential care and assisted living facilities) and hospitals (e.g., acute care, critical access and psychiatric)., acute care, critical access, psychiatric). Such facilities may be specialized or general, privately owned or public, for-profit or not-for-profit, urban or rural, and may serve residents on a long-term or short-term basis. Such facilities may be specialized or general, privately owned or public, for-profit or not-for-profit, and may serve residents on a long-term or short-term basis. We market our services to facilities after consideration of a variety of factors including facility type, size, location and service opportunities (Housekeeping or Dietary). Although there can be no assurance, the market for our services, particularly in long-term and post-acute care, is expected to continue to grow as the population of the United States ages and as government reimbursement policies require increased cost control or containment by the constituents that comprise our target market.Marketing and SalesOur services are primarily marketed and sold by our marketing and sales teams.3Table of ContentsMarketing and SalesOur services are primarily marketed and sold by our marketing and sales teams. These marketing and sales efforts are supported by all levels of our corporate and operational management team. We provide incentive compensation to our sales and operational personnel based on achieving financial and non-financial goals and objectives which are aligned with the key elements we believe are necessary for us to achieve overall improvement in our results, along with continued business development. We provide incentive compensation to our sales and operational personnel based on achieving financial and non-financial goals and objectives, which are aligned with the key elements we believe are necessary for us to achieve overall improvement in our results, along with continued business development. Our services are marketed and sold primarily through referrals and solicitation of target facilities. We also participate in industry trade shows as well as federal and state healthcare advocacy associations and related events. Such programs are typically attended by facility owners, administrators and supervisory personnel, thus presenting marketing opportunities for us. Indications of interest in our services arising from initial marketing efforts are followed up with a presentation regarding our services and an assessment of the service requirements of the facility. Thereafter, a formal proposal, including operational recommendations and proposed costs, is submitted to the prospective customer. Once the prospective customer accepts the proposal and executes our service agreement, we are structured to timely and efficiently establish our operations and systems at the customer facilities.Government Regulation of CustomersWe do not directly participate in any government reimbursement programs and our contractual relationships with our customers determine their payment obligations to us. However, our customers are subject to government regulation and laws which directly affect how they are paid for certain services they provide. Therefore, because our customers’ revenues are generally highly reliant on Medicare and Medicaid reimbursement funding rates, the overall effect of laws and trends in the long-term care industry have affected and could adversely affect our customers’ cash flows and their ability to make payments to us in accordance with agreed upon payment terms (see “Liquidity and Capital Resources” included in our “Management’s Discussion and Analysis of Financial Condition and Results of Operations”).The prospects for legislative action, both on the federal and state level, regarding funding for nursing homes and the long-term care industry are uncertain. We are unable to predict or to estimate the ultimate impact of any further changes in reimbursement programs affecting our customers’ future results of operations and/or their impact on our cash flows and operations.3Table of ContentsEnvironmental RegulationOur operations are subject to various federal, state and/or local laws concerning discharges into waterways and the generation, handling and disposal of waste and hazardous substances.Environmental RegulationOur operations are subject to various federal, state and/or local laws concerning emissions into the air, discharges into waterways and the generation, handling and disposal of waste and hazardous substances. Our past expenditures relating to environmental compliance have not had a material effect on our results of operations and are included in normal operating expenses. These laws and regulations are constantly evolving, and it is impossible to predict accurately the effect they may have upon the capital expenditures, earnings and our competitive position in the future. Based upon information currently available, we believe that expenditures relating to environmental compliance will not have a material impact on the financial position of the Company.Service Agreements and CollectionsWe have historically had a favorable customer retention rate and, although there can be no assurance, we expect to continue to maintain satisfactory relationships with our customers despite many of our service agreements being cancellable on short notice.4Table of ContentsService Agreements and CollectionsWe have historically had a favorable customer retention rate and, although there can be no assurance, we expect to continue to maintain satisfactory relationships with our customers, despite many of our service agreements being cancellable on short notice. We have had varying collections experiences with respect to our accounts and notes receivable. We have sometimes extended the period of payment for certain customers beyond contractual terms. Such customers include those who have terminated service agreements and slow payers experiencing financial difficulties. In order to provide for such collection issues and the general risk associated with the granting of credit terms, we have recorded bad debt provisions (in an Allowance for Doubtful Accounts) of $46.8 million, $35.0 million, $10. 6 million and $32.2 million and $20. 0 million in the years ended December 31, 2024, 2023 and 2022, respectively (see Schedule II - Valuation and Qualifying Accounts and Reserves for year-end balances).6 million in the years ended December 31, 2022, 2021 and 2020, respectively (see Schedule II - Valuation and Qualifying Accounts and Reserves for year-end balances). As a percentage of total revenues, these provisions represented approximately 2.7%, 2.1% and 1.8% and 14. 9% for the years ended December 31, 2024, 2023 and 2022, respectively.5% for the years ended December 31, 2022, 2021 and 2020, respectively. In making credit evaluations, in addition to analyzing and anticipating, where possible, the specific cases described above, we consider the general collection risk associated with trends in the long-term care industry. We establish credit limits through our payment terms, perform ongoing credit evaluations and monitor accounts to minimize the risk of credit loss. Despite our efforts to minimize credit risk exposure, customers could be adversely affected if future industry trends change in such a manner as to negatively impact their cash flows. If our customers experience a negative impact on their cash flows, it could have a material adverse effect on our results of operations and financial condition.CompetitionWe compete primarily with the in-house service departments of our potential customers. In addition, a number of firms compete with us in the regional and national markets in which we conduct business.Human Capital ResourcesEnsuring a positive social impact is inherent in our mission to deliver exceptional services to an ever-changing healthcare industry. In delivering upon this goal, we strive for operational excellence while creating a safe working environment, promoting environmental and employee health and safety awareness and seeking to continuously create professional and career development opportunities for our employees in order to continue to deliver on our strategic focus and Company Vision - To Be THE Choice For Our Customers. In delivering upon this goal, we strive for operational excellence while creating a safe working environment, promoting environmental and employee health and safety awareness, and seeking to continuously create professional and career development opportunities for our employees. We believe that attracting and retaining talent in the markets that we service is critical to the retention of and growth in relationships through good customer service, expansion of our services, effective execution in all that we do and cost management. To facilitate talent attraction and retention, we strive to make Healthcare Services Group, Inc. an inclusive, safe and healthy workplace, with opportunities for our employees to grow and develop in their careers, supported by competitive compensation, benefits and health and welfare programs.4Table of ContentsSupporting our diverse team of individuals drives us to continuously improve and provide developmental opportunities for our team members, encouraging all of our employees to reach their full potential.Supporting our diverse team of individuals drives us to continuously improve and provide developmental opportunities for our team members, encouraging all of our employees to reach their full potential. To support this we have launched a formal Employee Engagement and Recognition Program. We devise career development and promotional pathways for our employees, and our Manager-In-Training Program is accessible to all qualified and motivated employees, regardless of formal education level achieved. We devise career development and promotional pathways for our employees, with staunch commitment to promotion from within, and our Manager-In-Training Program is accessible to all qualified and motivated employees, regardless of formal education level achieved. When appropriate, we advertise all on-demand opportunities to our employees in an effort to cultivate talent throughout the Company. We advertise all on-demand opportunities to our employees in an effort to cultivate talent throughout the Company. We also focus on understanding our diversity and inclusion strengths and opportunities. We continue to focus on building a pipeline for talent to create more opportunities for workplace diversity and to support greater representation within the Company. Highlights include the following:•Documented annual and ongoing training for employees at all levels on diversity and inclusion;•Celebrating and creating diversity among our teams;•Our workforce consists of 69% women and 62% Black, Indigenous or people of color (“BIPOC”);•Among field-based management positions, 61% are women and 50% are BIPOC; and•Among our top quartile of compensation for employees, 64% are women and 53% are BIPOC. Some highlights:•Documented annual and ongoing training for employees at all levels on diversity and inclusion;•Celebrating and creating diversity among our teams;•Our workforce consists of 70% women and 63% BIPOC;•Among field-based management positions, 65% are women and 44% are BIPOC; and•Among our top quartile of compensation for employees, 63% are women and 51% are BIPOC. Employee ProfileAt December 31, 2024, we employed approximately 35,300 people, of whom approximately 4,000 were corporate and field management personnel.5Table of ContentsEmployee ProfileAt December 31, 2022, we employed approximately 35,700 people, of whom approximately 4,400 were corporate and field management personnel. The Company’s employment of some of its employees is subject to collective bargaining agreements that are negotiated by individual customer facilities and are assented by us, so as to bind us as an “employer” under the agreements. In other limited cases, we are direct parties to the agreements. In other cases, we are direct parties to the agreements. We may be adversely affected by relations between our customer facilities and their employee unions, or between us and such unions. We consider our relationship with our employees to be good.Health and SafetyOur ability to meet the day-to-day needs and expectations of our customers and to fulfill our common goal to ensure the well-being of America’s most vulnerable is organically connected to the well-being of our people. As such, we are committed to the health, safety and wellness of our employees. We provide our employees and their families access to a variety of flexible and convenient health and welfare programs, including benefits that support their physical and mental health by providing tools and resources to help them improve or maintain their health status and that offer choices where possible so they can customize their benefits to meet their needs and the needs of their families. All employees receive documented, annual training on our Environmental, Health and Safety Policy and are responsible for upholding and operating within the guidelines of this policy to ensure our business complies with all environmental and health and safety laws and regulations applicable to our operations.Available InformationHealthcare Services Group, Inc. is a reporting company under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and files reports, proxy statements and other information with the Securities and Exchange Commission (the “Commission” or “SEC”). Reports and other information we file with the Commission may be accessed at the Commission’s internet site: www.sec.gov. This site contains reports, proxies and information statements and other information regarding issuers that file electronically with the Commission.Website AccessOur website address is www.hcsg.com. Our filings with the Commission, as well as other pertinent financial and Company information, are available at no cost on our website as soon as reasonably practicable after the filing of such reports with the Commission.5Table of ContentsItem 1A.

Risk FactorsYou should carefully consider the risk factors we have described below, as well as other related information contained within this annual report on Form 10-K as these factors could materially and adversely affect our business, results of operations, financial condition and cash flows. We believe that the risks described below are our most significant risk factors but there may be risks and uncertainties that are not currently known to us or that we currently deem to be immaterial.Risks Related to Macroeconomic ConditionsWe have been, and may continue to be, adversely affected by inflationary and market fluctuations, including the impact of potential future tariffs, impacting the cost of products consumed in providing our services and our cost of labor. Additionally, we rely on a certain limited number of vendors for a substantial portion of Housekeeping and Dietary supplies. Additionally, we rely on certain vendors for a substantial portion of housekeeping, laundry and dietary supplies. The prices we pay for the principal items we consume in performing our services are dependent primarily on current market prices. We have consolidated certain supply purchases with national vendors through agreements containing negotiated prospective pricing. In the event such vendors are not able to comply with their obligations under the agreements and we are required to seek alternative suppliers, we may incur increased costs of supplies. Dietary supplies, to a much greater extent than Housekeeping supplies, are impacted by commodity pricing factors, including the impact of tariffs and diseases in livestock, which in many cases are unpredictable and outside of our control. Dietary supplies, to a much greater extent than Housekeeping supplies, are impacted by commodity pricing factors, including the impact of tariffs, which in many cases are unpredictable and outside of our control. We seek to pass on to customers such increased costs but sometimes we are unable to do so. Even when we are able to pass on such costs to our customers, from time to time, sporadic unanticipated increases in the costs of certain supply items due to market or economic conditions may result in a timing delay in passing on such increases to our customers. This type of spike and unanticipated increase in Dietary supplies costs could adversely affect Dietary’s operating performance, and the adverse effect could be greater if we are delayed in passing on such additional costs to our customers (e.g., where we may not be able to pass such increase on to our customers until the time of our next scheduled service billing review). We seek to mitigate the impact of an unanticipated increase in such supplies’ costs through consolidation of vendors, which increases our ability to obtain more favorable pricing.A substantial number of our employees are hourly employees whose wage rates are affected by increases in the federal or state minimum wage rates, wage inflation or local job market adjustments. A substantial number of our employees are hourly employees whose wage rates are affected by increases in the federal or state minimum wage rates, wage inflation or local job market adjustments. Also, our cost of labor may be influenced by changes in the respective collective bargaining agreements to which we are a party. As collective bargaining agreements are renegotiated, we may need to increase the wages paid to bargaining unit employees covered by such collective bargaining agreements. Although we have contractual rights to pass union and minimum wage increases through to our customers, we do not have a contractual right to automatically pass through all wage rate increases resulting from wage rate inflation or local job market adjustments, and we may be delayed in doing so. Our delay in passing or inability to pass such wage increases through to our customers could have a material adverse effect on our financial condition, results of operations and cash flows. Our delay in, or inability to pass such wage increases through to our customers could have a material adverse effect on our financial condition, results of operations, and cash flows. Pandemics, epidemics or outbreaks of a contagious illness have in the past and may in the future adversely affect our business, results of operations, financial condition, or cash flows.Pandemics, epidemics or outbreaks of a contagious illness, and similar events, have caused and may in the future cause harm to us, our employees, customers, vendors, supply chain partners and financial institutions, which could have a material adverse effect on our business, results of operations, financial condition or cash flows.COVID-19, the further spread of COVID-19, additional coronavirus outbreaks, or other pandemics, epidemics, or outbreaks of a contagious illness, and similar events, may cause harm to us, our employees, customers, vendors, supply chain partners, and financial institutions, which could have a material adverse effect on our results of operations, financial condition and cash flows. The impacts may include, but would not be limited to:•Decreased availability and/or increased cost of supplies due to increased demand around essential cleaning supplies including disinfecting agents, personal protective equipment (“PPE”) and food and food-related products due to increased global demand and disruptions along the global supply chains of these manufactures and distributors;•Disruption to operations due to the unavailability of employees due to illness, quarantines, risk of illness, travel restrictions, vaccination mandates, or other factors that limit the availability of our existing or potential workforce;•Limitations to the availability of our key personnel due to travel restrictions and access restrictions to our customers’ facilities;•Our ability to meet more stringent, medically-required procedures, and infection control requirements at customer facilities;•Elevated employee turnover which may impact our facility level performance and/or increase payroll expense and recruiting-related expenses;6Table of Contents•New or additional measures required by national, state or local governments may impact the availability of our employees and/or increase operating costs. The impacts may include, but would not be limited to:•Decreased availability and/or increased cost of supplies due to increased demand around essential cleaning supplies including disinfecting agents, personal protective equipment (“PPE”), and food and food-related products due to increased global demand and disruptions along the global supply chains of these manufactures and distributors;•Disruption to operations due to the unavailability of employees due to illness, quarantines, risk of illness, travel restrictions, vaccination mandates, or other factors that limit the availability of our existing or potential workforce;•Limitations to the availability of our key personnel due to travel restrictions and access restrictions to our customers’ facilities;•Our ability to meet more stringent, medically-required procedures, and infection control requirements at customer facilities;•Elevated employee turnover which may impact our facility level performance and/or increase payroll expense and recruiting-related expenses;•New or additional measures required by national, state or local governments to combat COVID-19, such as a COVID-19 vaccine mandate, may impact the availability of our employees and/or increase operating costs. •Decreased census in the nursing home and long-term care industry, which could impact the financial health of our customers and thereby increase our associated credit risk with customers and increase pressures to modify our contractual terms; and•Significant disruption of global financial markets, which could negatively impact our ability or our customers’ ability to access capital in the future.War, terrorism, other acts of violence or natural or man-made disasters may affect the markets in which the Company operates, the Company’s customers, and could have a material adverse impact on our business, results of operations, financial condition or cash flows.Risks Related to Macroeconomic ConditionsWar, terrorism, other acts of violence or natural or man-made disasters may affect the markets in which the Company operates, the Company’s customers, and could have a material adverse impact on our business, results of operations, or financial condition. The Company’s business may be adversely affected by instability, disruption or destruction in a geographic region in which it operates, regardless of cause, including war, terrorism, riot, civil insurrection or social unrest, and natural or man-made disasters, including famine, flood, fire, earthquake, storm, pandemics or spread of disease. Such events may cause customers to suspend their decisions on using the Company’s services, make it impossible for us to render our services, cause restrictions and give rise to sudden significant changes in regional and global economic conditions and cycles. These events also pose significant risks to the Company’s personnel and to physical facilities and operations which could materially adversely affect the Company’s financial results.Further, current international conflicts have created extreme volatility in the global financial markets and are expected to have further global economic consequences, including disruptions of the global supply chain and energy markets and heightened volatility of commodity food prices.Further, the current Russia-Ukraine conflict has created extreme volatility in the global financial markets and is expected to have further global economic consequences, including disruptions of the global supply chain and energy markets and heightened volatility of commodity food prices. Any such volatility or disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Our business, results of operations, financial condition, and/or cash flows may be materially and adversely affected by any negative impact on the global economy, capital markets or commodity food prices resulting from these conflicts or any other geopolitical tensions. Our business, financial condition and results of operations may be materially and adversely affected by any negative impact on the global economy, capital markets or commodity food prices resulting from the conflict in Ukraine or any other geopolitical tensions. Changes in interest rates and financial market conditions have resulted in and may continue to result in fluctuating and even negative returns in our investments and could increase the cost of the borrowings under our borrowing agreements.8Table of ContentsChanges in interest rates and changes in financial market conditions may result in fluctuating and even negative returns in our investments, and could increase the cost of the borrowings under our borrowing agreements. Although management believes we have a prudent investment policy, we are exposed to fluctuations in interest rates and in the market value of our investment portfolio which could adversely impact our financial condition and results of operations. Our marketable securities and restricted marketable securities consist of municipal bonds, treasury bonds, corporate bonds and other investments. Although there can be no assurance, we believe that our investment criteria requirements, which include investing in a diverse set of bonds, monitoring credit ratings and monitoring of our investments’ duration periods, reduce our exposure to investment losses. Although there can be no assurance, we believe that our investment criteria requirements, which include diversification among issuers of bonds, regarding credit ratings and monitoring of our investments’ duration periods, reduce our exposure to investment losses. Increases in market interest rates could adversely affect our payment obligations with respect to our variable-rate line of credit and adversely affect our liquidity and earnings. In addition, the Company relies on its portfolio of marketable securities and restricted marketable securities for balance sheet support, and the value of the portfolio can be materially affected by declines in market prices. In addition, the Company relies on its portfolio of marketable securities for balance sheet support, and the value of the portfolio can be materially affected by declines in market prices. The historical performance of our common stock, $0.01 par value (the “Common Stock”), reflects market expectations for our future operating results. Our business strategy focuses on growth and improving profitability through obtaining service agreements with new customers, providing new services to existing customers, obtaining modest price increases on service agreements with customers, maintaining internal cost reduction strategies at our various operational levels and executing targeted acquisitions and investments. Our business strategy focuses on growth and improving profitability through obtaining service agreements with new customers, providing new services to existing customers, obtaining modest price increases on service agreements with customers and maintaining internal cost reduction strategies at our various operational levels. If we are unable to continue either historical customer revenue and profitability growth rates or projected improvement, our operating performance may be adversely affected and the expectations for our market performance may not be met. Any failure to meet the market’s expectations for our revenue and operating results may have an adverse effect on the market price of our Common Stock.7Table of ContentsRisks Related to Customers and DistributorsWe provide services to several customers which contribute significantly, on an individual as well as an aggregate basis, to our total revenues.Risks Related to Customers and DistributorsWe provide services to several customers which contribute significantly, on an individual as well as an aggregate basis, to our total revenues. Genesis contributed 8.7%, 10.0%, 10. 9% and 10.6% and 0. 0% of our total consolidated revenues for the years ended December 31, 2024, 2023 and 2022, respectively. As of December 31, 2024, the Genesis outstanding accounts receivable and notes receivable were $46. As of December 31, 2022, the Company had outstanding accounts receivable and notes receivable of $36. 1 million and $21.2 million and $20. 9 million, respectively.4 million, respectively, from Genesis. Although we expect to continue the relationship with Genesis, there can be no assurance thereof. Revenues generated from Genesis were included in both operating segments. Any extended discontinuance, or significant reduction, of revenues from this customer could, if not replaced, have a material impact on our operations. In addition, if Genesis fails to abide by current payment terms it could increase our accounts receivable balance and have a material adverse effect on our financial condition, results of operations, and cash flows. No other single customer or customer group represented more than 10% of consolidated revenues for the years ended December 31, 2024, 2023, and 2022.Our customers are concentrated in the healthcare industry, which is subject to changes in government regulation. Many of our customers rely on reimbursement from Medicare, Medicaid and other third-party payers. Rates from such payers may be altered or reduced, thus affecting our customers’ results of operations and cash flows.We provide our services primarily to providers of long-term and post-acute care. We cannot predict what efforts, and to what extent, legislation and proposals to contain healthcare costs will ultimately impact our customers’ revenues through reimbursement rate modifications. Congress has enacted a number of laws during the past decade that have significantly altered, and may continue to alter, overall government reimbursement for nursing home services and the long-term care industry. Because many of our customers’ revenues are highly reliant on Medicare, Medicaid and other third-party payers’ reimbursement funding rates and mechanisms, the overall effect of these laws and trends in the long-term care industry have affected and could adversely affect our customers’ cash flows, and their ability to make payments to us on agreed upon payment terms. These factors, in addition to delays in payments from customers have resulted in, and could continue to result in, significant additional bad debts.The Company has substantial investment in the creditworthiness and financial condition of our customers.9Table of ContentsThe Company has substantial investment in the creditworthiness and financial condition of our customers. The largest current asset on our balance sheet is the accounts and notes receivable balance from our customers. We grant credit to substantially all of our customers. Deterioration in the financial condition of a significant component of our customer base could hinder our ability to collect amounts due from our customers. Potential causes of such declines include national or local economic downturns, reduced census, increased operating costs, customers’ dependence on continued Medicare and Medicaid funding and the impact of additional regulatory actions and/or insufficient funding. Potential causes of such declines include national or local economic downturns, COVID-19's impact on census and operating costs, customers’ dependence on continued Medicare and Medicaid funding and the impact of additional regulatory actions and/or insufficient funding. We have sometimes extended the period of payment for certain customers beyond contractual terms. Such customers include those who have terminated service agreements and slow payers experiencing financial difficulties. In order to provide for such collection issues and the general risk associated with the granting of credit terms, we have recorded bad debt provisions (in an Allowance for Doubtful Accounts) of $46.8 million for the year ended December 31, 2024 as compared to $35.6 million and $32.2 million and $20. 0 million for the years ended December 31, 2023 and 2022, respectively. In making our credit evaluations, in addition to analyzing and anticipating, where possible, the specific cases described above, we consider the general collection risk associated with trends in the long-term care industry. We establish credit limits through our payment terms, perform ongoing credit evaluations and monitor accounts to minimize the risk of credit loss. Despite our efforts to minimize credit risk exposure, customers could be adversely affected if future industry trends change in such a manner as to negatively impact their cash flows. If our customers experience a negative impact on their cash flows, it could have a material adverse effect on our financial condition, results of operations and cash flows.A significant majority of our customer base are multi-facility management groups and independent facility operators who lease the buildings in which they operate and may experience risks relating to their leases including termination, escalators, extensions and special charges.The creditworthiness of our existing customers, and potential customers, is impacted by their ability to maintain positive relationships with their respective landlords. Any loss or deterioration in the relationship between our customers and their respective landlords may adversely affect their financial condition and ability to make payments on their service agreement with us on agreed upon terms. Any failure by our customers to make rent payments or comply with the provisions of their lease terms could result in the termination of such lease agreements. In such cases, our customers may lose their ability to continue conducting operations and as a result terminate their service agreements with us.8Table of ContentsFor the year ended December 31, 2024, one distributor distributed more than 50% of our food and non-food dining supplies, and if our relationship, or its business, were to be disrupted, we could experience disruptions to our operations and cost structure.For the year ended December 31, 2022, one distributor distributed more than 50% of our food and non-food dining supplies, and if our relationship or their business were to be disrupted, we could experience disruptions to our operations and cost structure. Although we negotiate the pricing and other terms for the majority of our purchases of food and dining supplies directly with national manufacturers, we procure these products and other items through Sysco Corporation (“Sysco”). Sysco is responsible for tracking our orders and delivering products to our specific locations. If our relationship with, or the business of, Sysco were to be disrupted, we would have to arrange alternative distributors and our operations and cost structure could be adversely affected.Risks Related to Operating Our BusinessWe have a Paid Loss Retrospective Insurance Plan for auto, general liability and workers’ compensation insurance.Risks Related to Operating Our BusinessWe have a Paid Loss Retrospective Insurance Plan for general liability and workers’ compensation insurance. We carry a high deductible auto, general liability and workers’ compensation program and therefore retain a substantial portion of the risk associated with the possible losses under such programs.We carry a high deductible general liability and workers’ compensation program and therefore retain a substantial portion of the risk associated with the possible losses under such programs. Under our insurance plans for general liability and workers’ compensation, predetermined loss limits are arranged with our insurance company to limit both our per occurrence cash outlay and annual insurance plan cost. We regularly evaluate our claims payout experience and other factors related to the nature of specific claims in arriving at the basis for our accrued insurance claims estimate. Our evaluation is based primarily on current information derived from reviewing our claims experience and industry trends. In the event that our known claims experience and/or industry trends result in an unfavorable change in initial estimates of costs to settle such claims resulting from, among other factors, the severity levels of reported claims and medical cost inflation, it would have an adverse effect on our consolidated results of operations, financial condition and cash flows. Although we engage third-party experts to assist us in estimating appropriate reserves, the determination of the required reserves is dependent upon significant actuarial judgments. Changes in our insurance reserves as a result of our periodic evaluation of the related liabilities may cause significant fluctuations in our consolidated results of operations.We primarily provide our services pursuant to agreements cancellable by either party upon 30 to 90 days’ notice after an initial 60 to 120 day service agreement period. Our agreements with customers typically provide for a renewable one year service term, cancellable by either party upon 30 to 90 days’ notice after an initial period of 60 to 120 days. 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. Our agreements with customers typically provide for a renewable one year service term, cancellable by either party upon 30 to 90 days’ notice after an initial period of 60 to 120 days. Consequently, our customers can often unilaterally decrease the amount of services we provide or terminate all services pursuant to the terms of our service agreements. Although we have historically had a favorable customer retention rate and expect to continue to maintain satisfactory relationships with our customers, in the event the Company were to lose a significant number of customers, such loss could in the aggregate materially adversely affect our consolidated results of operations and financial position.The Company’s business success depends on the management experience of our key personnel.We manage and provide our services through a network of management personnel, from on-site facility managers to our executive officers. Therefore, we believe that our ability to recruit and sustain the internal development of managerial personnel is an important factor impacting future operating results and our ability to successfully execute projected growth strategies. Our professional management personnel are the key personnel in maintaining current and selling additional services to existing customers and obtaining new customers.9Table of ContentsAny perceived or real health risks related to the food industry could adversely affect our Dietary segment.Any perceived or real health risks related to the food industry could adversely affect our Dietary segment. We are subject to risks affecting the food industry generally including food spoilage and food contamination. Products we purchase and utilize in production are susceptible to contamination by disease-producing organisms, or pathogens, such as listeria monocytogenes, salmonella, campylobacter, hepatitis A, trichinosis and generic E. coli. Because these pathogens are generally found in the environment, there is a risk that these pathogens could be introduced to our products as a result of improper handling at the manufacturing, processing or food service level. Our suppliers’ manufacturing facilities and products are subject to extensive laws and regulations relating to health, food preparation, sanitation and safety standards. Difficulties or failures by these companies in obtaining any required licenses or approvals or otherwise complying with such laws and regulations could disrupt their operations which could adversely affect our operations. Furthermore, there can be no assurance that compliance with governmental regulations by our suppliers will eliminate the risks related to food safety. An outbreak of food related illness in any of our customer facilities could materially harm our business, consolidated results of operations and financial condition. To the extent there is an outbreak of food related illness in any of our customer facilities, it could materially harm our business, results of operations and financial condition. Additionally, the Company may be subject to liability if the consumption of our food products causes injury, illness or death. Even if a product liability claim is unsuccessful or is not fully pursued, the negative publicity surrounding any assertion that our products caused injury or illness could adversely affect our reputation.If we fail to develop and maintain an effective system of disclosure controls and internal control over financial reporting, our ability to produce timely and accurate financial statements or comply with applicable laws and regulations could be impaired.During 2023, we identified a material weakness related to the design and operation of internal controls over financial reporting related to accrued payroll liabilities from employee vested vacation. Our controls over accrued payroll liabilities were not sufficiently designed to consider all accounting and disclosure ramifications of such accrued payroll liabilities. To address our material weakness, we have made changes to our controls as previously described in our periodic reports with the SEC. Although that material weakness was subsequently remediated, there is a possibility that there will be material weaknesses in the future and that material misstatements to the Company’s future annual or interim financial statements will not be prevented or detected in a timely basis.Failure to maintain appropriate and effective internal controls over our financial reporting could potentially subject us to sanctions or investigations by the SEC or other regulatory authorities and could cause us to delay the filing of required reports with the SEC and our reporting of financial results.Failure to maintain appropriate and effective internal controls over our financial reporting could result in misstatements in our financial statements and potentially subject us to sanctions or investigations by the SEC or other regulatory authorities, and could cause us to delay the filing of required reports with the SEC and our reporting of financial results. Any of these events could result in a decline in the market price of our Common Stock. Although we have taken steps to maintain our internal control structure as required, including remediating our material weakness, we cannot guarantee that a control deficiency will not result in a misstatement in the future. Although we have taken steps to maintain our internal control structure as required, we cannot guarantee that a control deficiency will not result in a misstatement in the future. Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities.11Table of ContentsOur business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities. Shareholders may, from time to time, engage in proxy solicitations or advance shareholder proposals or otherwise attempt to effect changes and assert influence on our Board of Directors and senior management. Activist campaigns that contest or conflict with our strategic direction or seek changes in the composition of our Board of Directors or senior management could have an adverse effect on our operating results and financial condition. Activist campaigns that contest or conflict with our strategic direction or seek changes in the composition of our Board of Directors could have an adverse effect on our operating results and financial condition. A proxy contest would require us to incur significant legal and advisory fees, proxy solicitation expenses and administrative and associated costs and require significant time and attention by our Board of Directors and senior management, diverting their attention from the pursuit of our business strategy. Any perceived uncertainties as to our future direction and control, our ability to execute on our strategy, or changes to the composition of our Board of Directors or senior management arising from a proxy contest could lead to the perception of a change in the direction of our business or instability which may result in the loss of potential business opportunities, make it more difficult to pursue our strategic initiatives, or limit our ability to attract and retain qualified personnel and business partners, any of which could adversely affect our business, financial condition, and results of operations. Any perceived uncertainties as to our future direction and control, our ability to execute on our strategy, or changes to the composition of our Board of Directors or senior management team arising from a proxy contest could lead to the perception of a change in the direction of our business or instability which may result in the loss of potential business opportunities, make it more difficult to pursue our strategic initiatives, or limit our ability to attract and retain qualified personnel and business partners, any of which could adversely affect our business and operating results. If individuals are ultimately elected to our Board of Directors with a specific agenda, it may adversely affect our ability to effectively implement our business strategy and create additional value for our shareholders. We may choose to initiate, or may become subject to, litigation as a result of a proxy contest or matters arising from a proxy contest, which would serve as a further distraction to our Board of Directors and senior management and would require us to incur significant additional costs. In addition, actions such as those described above could cause significant fluctuations in our stock price based upon temporary or speculative market perceptions or other factors that do not necessarily reflect the underlying fundamentals and prospects of our business.10Table of ContentsRisks Related to Governmental and Regulatory ChangesChanges to federal healthcare legislation may adversely affect our operating costs and results of operations.Risks Related to Governmental and Regulatory ChangesChanges to federal healthcare legislation may adversely affect our operating costs and results of operations. Continued changes to the health insurance industry and its obligations on employers could impact our operating costs. Any requirements to provide additional benefits to our employees, or the payment of penalties if such benefits are not provided, would increase our expenses. Any requirements to provide additional benefits to our employees or the payment of penalties if such benefits are not provided, would increase our expenses. If we are unable to pass-through these charges to our customers to cover these expenses, such increases could adversely impact our operating costs and our consolidated results of operations.In addition, often new regulations result in additional reporting requirements for businesses. These and other requirements could result in increased costs, expanded liability exposure and other changes in the way we provide healthcare insurance and other benefits to our employees.States in which our customers are located could experience significant budget deficits and such deficits may result in reduction of reimbursements to nursing homes.States in which our customers are located could have budget deficits as a result of lower than projected revenue collections and increased demand for the funding of entitlements. As a result of these and other adverse economic factors, state Medicaid programs have and may revise reimbursement structures for nursing home services. Any disruption or delay in the distribution of Medicaid and related payments to our customers will adversely affect their cash flows and impact their ability to pay us as agreed upon for the services provided.Governmental regulations related to labor, employment, immigration and health and safety could adversely impact our business, results of operations, financial condition and cash flows.Governmental regulations related to labor, employment, immigration and health and safety could adversely impact our results of operations and financial condition. Our business is subject to various federal, state and local laws and regulations in areas such as labor, employment, immigration and health and safety.Our business is subject to various federal, state, and local laws and regulations in areas such as labor, employment, immigration, and health and safety. These laws frequently evolve through case law, legislative changes and changes in regulatory interpretation, implementation and enforcement. The change in administration following the 2024 U.S. presidential election has led and will lead to leadership changes at U.S. federal regulatory agencies with oversight responsibility over the Company and our customers, including, but not limited to, the Centers for Medicare and Medicaid Services and the Health and Human Services Department.Our policies and procedures and compliance programs are subject to adjustments in response to these changing regulatory and enforcement environments, which could increase our costs of services provided. Our policies and procedures and compliance programs are subject to adjustments in response to these changing regulatory and enforcement environments, which could increase our cost of services provided. Although we have contractual rights to pass through cost increases we incur to our customers due to regulatory changes, our delay in, or inability to pass such costs through to our customers, could have a material adverse effect on our business, financial condition, results of operations and cash flows.In addition, if we fail to comply with applicable laws, we may be subject to lawsuits, investigations, criminal sanctions or civil remedies, including fines, penalties, damages, reimbursements or injunctions.12Table of ContentsIn addition, if we fail to comply with applicable laws, we may be subject to lawsuits, investigations, criminal sanctions or civil remedies, including fines, penalties, damages, reimbursements, or injunctions. Also, our customers’ facilities are subject to periodic inspection by federal, state and local authorities for compliance with state and local department of health requirements. Expenses resulting from failed inspections of the departments that we service could result in our customers being fined and seeking recovery from us, which could also adversely impact our business, financial condition, results of operations and cash flows.11Table of ContentsFederal, state and local tax rules can adversely impact our business, results of operations, financial position and cash flows.We are subject to federal, state and local taxes in the United States. Significant judgment is required in determining the provision for income taxes. We believe our income tax estimates are reasonable, but such estimates assume no changes in current tax rates. In addition, if the Internal Revenue Service or other taxing authority disagrees on a tax position we have taken and upon final adjudication we are required to change such position, we could incur additional tax liability, including interest and penalties. Such costs and expenses could have a material adverse impact on our financial condition, consolidated results of operations and cash flows. Such costs and expenses could have a material adverse impact on our financial condition, results of operations, and cash flows. Additionally, the taxability of our services is subject to various interpretations within the taxing jurisdictions in which we operate. Consequently, in the ordinary course of business, a jurisdiction may contest our reporting positions with respect to the application of its tax code to our services. A conflicting position taken by a state or local taxation authority on the taxability of our services could result in additional tax liabilities and could negatively impact our competitive position in that jurisdiction. If we fail to comply with applicable tax laws and regulations, we could suffer civil or criminal penalties in addition to the delinquent tax assessment. In the taxing jurisdictions where our services have been determined to be subject to tax, the jurisdiction may increase the tax rate assessed on such services. We seek to pass through to our customers such tax increases. We seek to pass-through to our customers such tax increases. In the event we are not able to pass through any portion of the tax increase, our financial condition, consolidated results of operations and cash flows could be adversely impacted. In the event we are not able to pass-through any portion of the tax increase, our results of operations, financial condition and cash flows could be adversely impacted. Our business and financial results could be adversely affected by unfavorable results of material litigation or governmental inquiries.We are currently involved in pending civil litigation and government inquiries which arise in the ordinary course of business. These matters relate to, among other things, general liability, payroll or employee-related matters. Legal actions could result in substantial monetary damages and expenses and may adversely affect our reputation and business status with our customers, whether or not we are ultimately determined to be liable. The outcome of litigation, particularly class action and collective action lawsuits and regulatory actions, is difficult to assess or quantify. The plaintiffs in these types of actions may seek recovery of very large or indeterminate amounts, and estimates may remain unknown for substantial periods of time.While the Company is vigorously defending against all litigation claims asserted, litigation could result in substantial costs to the Company and a diversion of the Company’s management’s attention and resources, which could harm its business. In addition, the uncertainty of pending lawsuits or potential filing of additional lawsuits could lead to more volatility and a reduction in the Company’s stock price.We assess contingencies to determine the degree of probability and range of possible loss for potential accrual in our financial statements. We accrue estimated loss contingencies in our financial statements when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. We would accrue an estimated loss contingency in our financial statements if it were probable that a liability had been incurred and the amount of the loss could be reasonably estimated. Due to the unpredictable nature of litigation, assessing contingencies is highly subjective and requires judgments about future events. The amount of actual losses may differ from our current assessment. As a result of the costs and expenses of defending ourselves against lawsuits or claims, and risks and consequences of legal actions, regardless of merit, our business, results of operations, financial position and cash flows could be adversely affected or cause variability in our results compared to expectations. As a result of the costs and expenses of defending ourselves against lawsuits or claims, and risks and consequences of legal actions, regardless of merit, our results of operations and financial position could be adversely affected or cause variability in our results compared to expectations. Stakeholder expectations for and compliance with federal and state environmental, social and governance (“ESG”) requirements can adversely impact our business, results of operations, financial position and cash flows.We are subject to certain federal and state rules covering ESG initiatives including mandated annual reporting and compliance with commonly accepted ESG frameworks. Laws and regulations in these areas continue to emerge and evolve, which may require us to undertake costly initiatives or operational changes in order to achieve compliance. Non-compliance with these emerging rules or standards or a failure to address regulator expectations may result in potential cost increases, litigation, fines, penalties, or otherwise adversely impact our business, results of operations, financial position and cash flows. 12Table of ContentsRisks Related to Technology, Cybersecurity and Data PrivacyWe have experienced a cyber-attack and breach, and may in the future experience cyber-attacks, breaches or other events which could cause operational disruptions, fraud or theft of sensitive information.Aspects of our operations are reliant upon internet-based activities, such as ordering supplies and back-office functions such as accounting and transaction processing, making and accepting payments, processing payroll and other administrative functions. Aspects of our operations are reliant upon internet-based activities, such as ordering supplies and back-office functions such as accounting and transaction processing, making and accepting payments, processing payroll and other administrative functions. A significant disruption or failure of our information technology systems may have a significant impact on our operations, potentially resulting in service interruptions, security violations, regulatory compliance failures and other operational difficulties. In addition, any attack perpetrated against our information systems including through a system failure, security breach or disruption by malware or other damage, could similarly impact our operations and result in loss or misuse of information, litigation and potential liability. Further, like other companies, we have been subject to, and will continue to be subject to, cyber attacks and breaches and other vulnerabilities to data security incidents. On October 9, 2024, we identified a cybersecurity incident, which involved unauthorized activity within some of our systems. The incident has not caused, and is not expected to cause, disruption of our business operations, although there can be no assurance thereof.Although we have taken steps intended to mitigate the risks presented by potential cyber incidents, it is not possible to protect against every potential power loss, telecommunications failure, cybersecurity attack, data breach or similar event that may arise. Although we have taken steps intended to mitigate the risks presented by potential cyber incidents, it is not possible to protect against every potential power loss, telecommunications failure, cybersecurity attack or similar event that may arise. Moreover, the safeguards we use are subject to human implementation and maintenance, technology evolutions and other uncertainties. Moreover, the safeguards we use are subject to human implementation and maintenance and to other uncertainties. Any of these cyber incidents may result in a violation of applicable laws or regulations (including privacy and other laws), damage our reputation, cause a loss of customers and give rise to monetary fines and other penalties, each of which could have an adverse effect on our financial condition, results of operations and liquidity.While we maintain insurance coverage that may, subject to policy terms and conditions including deductibles, cover specific aspects of cyber risks, such insurance coverage may be insufficient to cover all losses. Third parties to whom we outsource certain of our functions are also subject to the risks outlined above. We review and assess the cybersecurity controls of our third-party service providers and vendors, as appropriate, and make changes to our business processes to manage these risks. Data breaches of such third parties could have an adverse effect on our financial condition, results of operations and liquidity.We are evaluating use cases to implement generative artificial intelligence (“Gen AI”) technologies into our business processes, which may present additional risks to our business.We are currently evaluating the potential use of Gen AI technology across departments within our business. Failure to properly manage Gen AI technology could impact services provided, which could adversely impact our business, financial condition, results of operations and cash flows. Implementing Gen AI solutions could also lead to unauthorized access to sensitive information and could adversely impact our business. At the same time, if we fail to keep pace with the rapid evolution of Gen AI technologies, such delays could adversely impact our business. In addition, the evolving regulatory landscape for Gen AI technologies requires continuous monitoring and adaptation to ensure compliance and to mitigate potential legal risks.Item 1B. Unresolved Staff Comments.None.13Table of ContentsItem 1C.6Table of ContentsItem 1A. Cybersecurity.Cybersecurity Risk Management and StrategyThe Company adopted an Information Security Policy which governs the Company’s management of information technology (“IT”) systems, network, information, data and assets. HCSG’s Information Security Policy is periodically reviewed based on the National Institute of Standards and Technology Cybersecurity Framework. The Company regularly monitors and measures the performance of the IT Systems and Assets and the Information Security Policy. HCSG has procedures to ensure that any of its vendors and suppliers that create, utilize or process our data take a similar, risk-based approach to information security. Management maintains the cybersecurity risk prevention program which includes ongoing employee education and procedures for cybersecurity incident prevention, detection and response. The Company retains third parties, including IT professionals and legal counsel, specializing in cybersecurity risk management to assist in implementing cybersecurity controls. The Company oversees and identifies material risks from cybersecurity threats associated with its use of third-party service providers by reviewing SOC 1 or SOC 2 reports (whichever is more applicable) for key outsourced systems, including all systems which house protected health information or personally identifiable information. The cybersecurity risk prevention program is part of the Company's overall risk management program. Please refer to the risk factor titled “We have experienced cyber attacks and breaches, and may in the future experience cyber attacks and breaches which could cause operational disruptions, fraud or theft of sensitive information.

” in “Risk Factors” in Part I, Item 1A of this Form 10-K for more information on risks posed by cybersecurity threats to the Company. As previously disclosed in a Form 8-K filed on October 16, 2024, on October 9, 2024 we identified a cybersecurity incident, which involved unauthorized activity within some of our systems. We immediately activated the Company’s Cyber Incident Response Plan (“IRP”) to investigate such activity with the assistance of leading third-party cybersecurity experts. We also notified law enforcement authorities. We continue to monitor the situation and take appropriate actions consistent with our response protocols. As of the date of this filing, the incident has not caused, and is not expected to cause, disruption of the Company’s business operations. And although there can be no assurance, we do not believe the identified cybersecurity incident will have a material effect on our business, financial condition, results of operations or cash flows. In addition, if Genesis fails to abide by current payment terms it could increase our accounts receivable balance and have a material adverse effect on our financial condition, results of operations, and cash flows. Management’s Role in Assessing and Managing Material Risks from Cybersecurity ThreatsThe Company’s day-to-day risk management is under the direction of Jason J. Bundick, the Company’s Executive Vice President, Chief Compliance Officer, General Counsel and Secretary. Jason Osbeck, the Company’s Senior Vice President of Information and Technology, is responsible for day-to-day cybersecurity risk management under the direction of Mr. Bundick. Mr. Osbeck has served in this role at the Company since 2012.The Company has an IRP which details the Company’s policies and procedures in the event of a cyber incident. The Company’s IT department, led by Mr. Osbeck, logs all potential cybersecurity incidents reported which are then reviewed by an Incident Response Team (“IRT”), a cross-functional internal team including IT, risk management, legal and other departmental representation as necessary to identify the potential impact of the cybersecurity incident. As needed, the IRT will consult with third party legal counsel and IT advisory firms to appropriately respond to existing cyber threats. In the event a material incident is identified, the Company will report such incidents in compliance with applicable law. Material cyber events, if any, are reported to the Board of Directors as they occur. Additionally, Mr. Bundick provides quarterly updates to the Audit Committee on all cybersecurity matters during the quarter. Board of Directors’ Oversight of Cybersecurity RisksOur Board is responsible for overseeing the Company’s risk management process. The Board focuses on the Company’s general risk management strategy, including the most significant risks facing the Company, and ensures that appropriate risk mitigation strategies are implemented by management. The Audit Committee oversees the Company’s cybersecurity risk mitigation efforts. The Audit Committee reports to the full Board as appropriate, including when a matter rises to the level of a material risk.14Table of Contents.6Table of ContentsItem 1A.