Healthcare Services Group (HCSG) risk factors, FY2024 10-K

Risks Related to Macroeconomic Conditions

1. 01Pandemics, 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
2. 02War, 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
3. 03Changes 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

Risks Related to Customers and Distributors

1. 04We provide services to several customers which contribute significantly, on an individual as well as an aggregate basis, to our total revenues
2. 05The Company has substantial investment in the creditworthiness and financial condition of our customers
3. 06A 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
4. 07For 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

Risks Related to Operating Our Business

1. 08We have a Paid Loss Retrospective Insurance Plan for auto, general liability and workers’ compensation insurance
2. 09We 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
3. 10The Company’s business success depends on the management experience of our key personnel
4. 11Any perceived or real health risks related to the food industry could adversely affect our Dietary segment
5. 12If 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
6. 13Our business could be negatively affected as a result of actions of activist shareholders, and such activism could impact the trading value of our securities

Risks Related to Governmental and Regulatory Changes

1. 14Changes to federal healthcare legislation may adversely affect our operating costs and results of operations
2. 15States in which our customers are located could experience significant budget deficits and such deficits may result in reduction of reimbursements to nursing homes
3. 16Governmental regulations related to labor, employment, immigration and health and safety could adversely impact our business, results of operations, financial condition and cash flows
4. 17Federal, state and local tax rules can adversely impact our business, results of operations, financial position and cash flows
5. 18Our business and financial results could be adversely affected by unfavorable results of material litigation or governmental inquiries
6. 19Stakeholder 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

Risks Related to Technology, Cybersecurity and Data Privacy

1. 20We 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
2. 21We are evaluating use cases to implement generative artificial intelligence (“Gen AI”) technologies into our business processes, which may present additional risks to our business