What Healthcare Services Group, Inc. told the SEC could break it.

Healthcare Services Group's customers are concentrated in the healthcare industry — primarily long-term and post-acute care (skilled nursing) facilities — whose revenues are generally highly reliant on Medicare, Medicaid and third-party reimbursement. Adverse changes in reimbursement rates, census declines, or long-term-care-industry trends have affected and could adversely affect its customers' cash flows and their ability to pay HCSG on agreed terms. HCSG carries substantial credit exposure to these customers: its largest current asset is the accounts-and-notes-receivable balance, and it extends credit to substantially all customers — so customer restructurings/bankruptcies (a recurring feature of the SNF sector) cause bad-debt and collection risk. A distinctive sector/reimbursement-dependence customer concentration with embedded credit risk.

“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”

HCSG relies on a limited number of vendors for a substantial portion of the EVS (housekeeping/laundry) and Dietary (food) supplies it consumes in delivering services. A disruption, price increase, or loss of a key vendor — compounded by inflation and potential future tariffs on consumed products — could raise its cost of services and pressure margins (it can pass through some costs but supplies/food are ~31% of Dietary revenue and EVS/Dietary supplies are commodity products). It sometimes contracts for extended periods on certain supplies to mitigate price swings. Vendors unnamed, so a supplier-concentration/sole-source risk.

“we rely on a certain limited number of vendors for a substantial portion of EVS and Dietary supplies.”

HCSG's input costs are exposed to commodity-price swings: EVS and Dietary supplies are principally commodity products affected by product-specific market conditions, and food-related supplies for Dietary services were approximately 30.9% of Dietary segment revenue in 2025. Fluctuations are largely outside its control and unpredictable, and are compounded by inflation and potential tariffs on imported products. Sustained food/cleaning-commodity inflation that it cannot fully pass through to customers (especially fixed-fee contracts) would pressure margins. A specific commodity (food/supplies) cost dependence.

“EVS and Dietary supplies are principally commodity products and are affected by market conditions specific to the respective products.”