ATLANTA, Aug. 6, 2018 /PRNewswire/ -- DLH Holdings
Corp. (NASDAQ: DLHC) ("DLH" or the "Company"), a
leading provider of innovative healthcare services and solutions to
federal agencies, today announced financial results for its fiscal
third quarter and the nine months ended June
30, 2018.
Highlights
- Fiscal third quarter revenue of $36.1
million, up 23.5% over the third quarter of fiscal 2017
- Income from operations of $2.6
million for the quarter versus $1.8
million in 2017
- Diluted earnings per share of $0.13 for the quarter versus $0.08 per share in the prior-year period
- Generated operating cash flow of $4.0
million for the quarter
- Reduced senior debt to $14.0
million at quarter end; cash balance at $6.6 million
Management Discussion
"We are pleased to report very
strong growth in the fiscal third quarter, along with solid
financial results," stated DLH President and Chief Executive
Officer Zach Parker. "Revenue rose
nearly 24% year-over-year, driven by a final surge in the FY18
review schedule on a key program as well as significant expansion
in other core focus areas. Gross profit increased to
$8.3 million, up almost 31% over the
prior-year period, and we generated $4.0
million of cash from operations, while continuing to utilize
legacy net operating loss carryforwards to offset the majority of
the Company's tax payments.
"While there have been some delays in new award activity and
changes in certain recompete parameters, we are actively bidding on
a sizable array of opportunities across the agencies we serve. At
the same time, we continue to drive internal performance
enhancements and invest in long-term strategic initiatives to
bolster our capabilities in telehealth systems and data
analytics."
Results for the Three Months Ended June 30, 2018
Revenue for the third
quarter of fiscal 2018 was $36.1
million, up $6.9 million, or
23.5%, over the prior-year third quarter, reflecting high activity
levels on key programs and expansion of services on existing
contract vehicles.
Gross profit was $8.3 million for
the quarter, an increase of $2.0
million, or 30.6%, over the third quarter of fiscal
2017. As a percent of revenue, the Company's gross margin was
23.1% versus 21.8% in the prior-year period. General and
Administrative ("G&A") expenses were $5.1 million for the quarter, reflecting higher
business development activity, versus $4.1
million in fiscal 2017. As a percent of revenue, G&A
expenses were 14.2% in the current fiscal third quarter versus
14.1% last year. Depreciation and amortization was
$0.6 million in fiscal 2018 and
$0.5 million last year.
Income from operations was $2.6
million for the quarter versus $1.8
million in the prior-year period. This increase reflects
gross profit improvement of $2.0
million, partially offset by the higher G&A expenses
noted above. Income before taxes was $2.4
million for the quarter, up approximately $0.9 million over the prior-year period.
For the three months ended June 30,
2018 DLH recorded a $0.7
million provision for tax expense versus $0.5 million in fiscal 2017. The effective tax
rates were 33.3% and 37.4% for the fiscal third quarters of 2018
and 2017, respectively, reflecting the prorated impact of the tax
rate reduction from the Tax Cuts and Jobs Act enacted in
December 2017.
The Company reported net income for the fiscal third quarter of
approximately $1.6 million, or
$0.13 per diluted share, versus
$0.9 million, or $0.08 per diluted share, in the prior-year
period. On a non-GAAP basis, Earnings Before Interest Tax
Depreciation and Amortization ("EBITDA") for the three months ended
June 30, 2018 was approximately
$3.2 million versus $2.3 million in the prior-year period. Growth was
attributable to increased revenue and gross profit, partially
offset by additional G&A expenses as described above.
Balance Sheet and Cash Flow
Cash as of June 30, 2018 was $6.6
million, and the Company's senior debt was $14.0 million, versus cash of $4.9 million and senior debt of $19.7 million as of September 30,
2017. Regarding cash flow, for the fiscal third quarter DLH
generated approximately $4.0 million
in cash from operations, reflecting its financial results and
working capital management.
Conference Call and Webcast Details
DLH management
will discuss third quarter results and provide a general business
update, including current competitive conditions and strategies,
during a conference call beginning at 11:00
AM Eastern Time today, August 6,
2018. Interested parties may listen to the conference call
by dialing 888-347-5290 or 412-317-5256. Presentation
materials will also be posted on the Investor Relations section of
the DLH website prior to the commencement of the conference
call.
A digital recording of the conference call will be available for
replay two hours after the completion of the call and can be
accessed on the DLH Investor Relations website or by dialing
877-344-7529 and entering the conference ID
10122346.
About DLH
DLH (NASDAQ:DLHC) serves federal government
clients throughout the United
States and abroad delivering technology enabled solutions in
key health and human services programs. The Company's core
competencies and consulting services include assessment and
compliance monitoring, program management, health IT systems
integration, data analytics and medical logistics, and pharmacy
solutions. DLH has over 1,400 employees serving numerous government
agencies. For more information, visit the corporate website at
www.dlhcorp.com.
Safe Harbor Statement under the Private Securities
Litigation Reform Act of 1995:
This press release may
contain forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. These statements
relate to future events or DLH`s future financial performance. Any
statements that are not statements of historical fact (including
without limitation statements to the effect that the Company or its
management "believes", "expects", "anticipates", "plans", "intends"
and similar expressions) should be considered forward looking
statements that involve risks and uncertainties which could cause
actual events or DLH's actual results to differ materially from
those indicated by the forward-looking statements. Those
risks and uncertainties include, but are not limited to, the
following: failure to achieve contract awards in connection with
re-competes for present business and/or competition for new
business; the risks and uncertainties associated with client
interest in and purchases of new services; changes in client
budgetary priorities; government contract procurement (such as bid
protest, small business set asides, loss of work due to
organizational conflicts of interest, etc.) and termination risks;
the ability to successfully integrate the operations of our recent
and any future acquisitions; and other risks described in our SEC
filings. For a discussion of such risks and uncertainties
which could cause actual results to differ from those contained in
the forward-looking statements, see "Risk Factors" in the Company's
periodic reports filed with the SEC, including our Annual Report on
Form 10-K for the fiscal year ended September 30, 2017, as
well as interim quarterly filings thereafter. The forward-looking
statements contained herein are made as of the date hereof and may
become outdated over time. The Company does not assume any
responsibility for updating forward-looking statements.
CONTACTS:
COMMUNICATIONS
|
|
INVESTOR
RELATIONS
|
Contact:
Tiffany McCall
|
|
Contact: Chris
Witty
|
Phone:
404-334-6000
|
|
Phone:
646-438-9385
|
Email:
tiffany.mccall@dlhcorp.com
|
|
Email:
cwitty@darrowir.com
|
TABLES TO FOLLOW
DLH HOLDINGS
CORP. CONSOLIDATED STATEMENTS OF INCOME (Amounts
in thousands except per share amounts)
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Revenue
|
|
$
|
36,131
|
|
|
$
|
29,256
|
|
|
$
|
100,747
|
|
|
$
|
85,272
|
|
Direct
expenses
|
|
27,793
|
|
|
22,871
|
|
|
78,429
|
|
|
66,805
|
|
Gross
margin
|
|
8,338
|
|
|
6,385
|
|
|
22,318
|
|
|
18,467
|
|
General and
administrative expenses
|
|
5,136
|
|
|
4,122
|
|
|
14,700
|
|
|
12,722
|
|
Depreciation and
amortization
|
|
588
|
|
|
510
|
|
|
1,654
|
|
|
1,264
|
|
Income from
operations
|
|
2,614
|
|
|
1,753
|
|
|
5,964
|
|
|
4,481
|
|
Interest expense,
net
|
|
262
|
|
|
269
|
|
|
801
|
|
|
888
|
|
Income before income
taxes
|
|
2,352
|
|
|
1,484
|
|
|
5,163
|
|
|
3,593
|
|
Income tax expense,
net
|
|
738
|
|
|
539
|
|
|
5,084
|
|
|
1,345
|
|
Net income
|
|
$
|
1,614
|
|
|
$
|
945
|
|
|
$
|
79
|
|
|
$
|
2,248
|
|
Net income per share
– basic
|
|
$
|
0.14
|
|
|
$
|
0.08
|
|
|
$
|
0.01
|
|
|
$
|
0.20
|
|
Net income per share
– diluted
|
|
$
|
0.13
|
|
|
$
|
0.08
|
|
|
$
|
0.01
|
|
|
$
|
0.18
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
|
11,899
|
|
|
11,299
|
|
|
11,875
|
|
|
11,250
|
|
Diluted
|
|
12,884
|
|
|
12,445
|
|
|
12,872
|
|
|
12,417
|
|
DLH HOLDINGS
CORP. CONSOLIDATED BALANCE SHEETS (Amounts in
thousands except par value of shares)
|
|
|
|
June 30,
2018
|
|
September 30,
2017
|
|
|
(unaudited)
|
|
|
ASSETS
|
|
|
|
|
Current
assets:
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
6,590
|
|
|
$
|
4,930
|
|
Accounts
receivable
|
|
12,420
|
|
|
11,911
|
|
Other current
assets
|
|
856
|
|
|
598
|
|
Total current
assets
|
|
19,866
|
|
|
17,439
|
|
Equipment and
improvements, net
|
|
1,630
|
|
|
1,391
|
|
Deferred taxes,
net
|
|
4,875
|
|
|
9,639
|
|
Goodwill,
net
|
|
25,989
|
|
|
25,989
|
|
Intangible assets,
net
|
|
13,805
|
|
|
15,127
|
|
Other long-term
assets
|
|
139
|
|
|
139
|
|
Total
assets
|
|
$
|
66,304
|
|
|
$
|
69,724
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS' EQUITY
|
|
|
|
|
Current
liabilities:
|
|
|
|
|
Debt obligations –
current
|
|
$
|
3,633
|
|
|
$
|
6,518
|
|
Derivative financial
instruments, at fair value
|
|
—
|
|
|
306
|
|
Accrued
payroll
|
|
5,034
|
|
|
3,723
|
|
Accounts payable,
accrued expenses, and other current liabilities
|
|
10,475
|
|
|
10,895
|
|
Total current
liabilities
|
|
19,142
|
|
|
21,442
|
|
Total long term
liabilities
|
|
9,707
|
|
|
12,427
|
|
Total
liabilities
|
|
28,849
|
|
|
33,869
|
|
Commitments and
contingencies
|
|
|
|
|
Shareholders'
equity:
|
|
|
|
|
Common stock, $.001
par value; authorized 40,000 shares; issued and outstanding 11,899
at June 30, 2018 and 11,767 at September 30, 2017
|
|
12
|
|
|
12
|
|
Additional paid-in
capital
|
|
84,079
|
|
|
82,687
|
|
Accumulated
deficit
|
|
(46,636)
|
|
|
(46,844)
|
|
Total shareholders'
equity
|
|
37,455
|
|
|
35,855
|
|
Total liabilities
and shareholders' equity
|
|
$
|
66,304
|
|
|
$
|
69,724
|
|
DLH HOLDINGS
CORP. CONSOLIDATED STATEMENTS OF CASH
FLOWS (Amounts in thousands)
|
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Operating
activities
|
|
|
|
|
|
|
|
|
Net income
|
|
$
|
1,614
|
|
|
$
|
945
|
|
|
$
|
79
|
|
|
$
|
2,248
|
|
Adjustments to
reconcile net income to net cash (used in) provided by operating
activities:
|
|
|
|
|
|
|
|
|
Depreciation and
amortization expense
|
|
588
|
|
|
509
|
|
|
1,654
|
|
|
1,264
|
|
Amortization of debt
financing costs as interest expense
|
|
70
|
|
|
67
|
|
|
202
|
|
|
194
|
|
Change in fair value
of derivative financial instruments
|
|
|
|
(3)
|
|
|
—
|
|
|
49
|
|
Stock based
compensation expense
|
|
241
|
|
|
64
|
|
|
1,169
|
|
|
613
|
|
Deferred taxes,
net
|
|
598
|
|
|
362
|
|
|
4,764
|
|
|
1,004
|
|
Changes in operating
assets and liabilities
|
|
|
|
|
|
|
|
|
Accounts
receivable
|
|
(81)
|
|
|
247
|
|
|
(508)
|
|
|
(1,987)
|
|
Other current
assets
|
|
88
|
|
|
137
|
|
|
(259)
|
|
|
(78)
|
|
Accounts payable,
accrued payroll, accrued expenses and other current
liabilities
|
|
928
|
|
|
133
|
|
|
897
|
|
|
1,519
|
|
Other long term
assets/liabilities
|
|
(49)
|
|
|
21
|
|
|
(5)
|
|
|
145
|
|
Net cash provided
by operating activities
|
|
3,997
|
|
|
2,482
|
|
|
7,993
|
|
|
4,971
|
|
|
|
|
|
|
|
|
|
|
Investing
activities
|
|
|
|
|
|
|
|
|
Acquisition, net of
cash acquired
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(250)
|
|
Purchase of equipment
and improvements
|
|
17
|
|
|
(111)
|
|
|
(571)
|
|
|
(785)
|
|
Net cash used in
investing activities
|
|
17
|
|
|
(111)
|
|
|
(571)
|
|
|
(1,035)
|
|
|
|
|
|
|
|
|
|
|
Financing
activities
|
|
|
|
|
|
|
|
|
Repayments on senior
debt
|
|
(937)
|
|
|
(938)
|
|
|
(5,730)
|
|
|
(2,813)
|
|
Deferred debt
financing costs
|
|
(70)
|
|
|
—
|
|
|
(70)
|
|
|
—
|
|
Repayments of capital
lease obligations
|
|
(3)
|
|
|
(22)
|
|
|
(8)
|
|
|
(62)
|
|
Proceeds from
issuance of stock upon exercise of options
|
|
—
|
|
|
99
|
|
|
46
|
|
|
113
|
|
Net cash used in
financing activities
|
|
(1,010)
|
|
|
(861)
|
|
|
(5,762)
|
|
|
(2,762)
|
|
|
|
|
|
|
|
|
|
|
Net change in cash
and cash equivalents
|
|
3,004
|
|
|
1,510
|
|
|
1,660
|
|
|
1,174
|
|
Cash and cash
equivalents at beginning of period
|
|
3,586
|
|
|
3,091
|
|
|
4,930
|
|
|
3,427
|
|
Cash and cash
equivalents at end of period
|
|
$
|
6,590
|
|
|
$
|
4,601
|
|
|
$
|
6,590
|
|
|
$
|
4,601
|
|
|
|
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information
|
|
|
|
|
|
|
|
|
Cash paid during the
period for interest
|
|
$
|
192
|
|
|
$
|
228
|
|
|
$
|
619
|
|
|
$
|
662
|
|
Cash paid during the
period for income taxes
|
|
$
|
52
|
|
|
$
|
90
|
|
|
$
|
630
|
|
|
$
|
390
|
|
Derivative warrant
liability reclassified as equity
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(306)
|
|
|
$
|
—
|
|
Noncash issuance of
stock upon exercise of options
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
25
|
|
|
$
|
—
|
|
Revenue
Metrics
|
|
|
|
|
|
|
|
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
|
|
|
June 30,
2018
|
|
|
|
June 30, 2018
|
|
|
Market
Mix:
|
|
|
|
|
|
|
|
|
|
|
Defense/VA
|
|
|
|
62%
|
|
|
|
65%
|
|
|
Human Services and
Solutions
|
|
|
|
34%
|
|
|
|
32%
|
|
|
Public Health/Life
Sciences
|
|
|
|
4%
|
|
|
|
3%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Contract
Mix:
|
|
|
|
|
|
|
|
|
|
|
Time and
Materials
|
|
|
|
95%
|
|
|
|
97%
|
|
|
Cost Plus Fixed
Fee
|
|
|
|
4%
|
|
|
|
2%
|
|
|
Firm Fixed Price
|
|
|
|
1%
|
|
|
|
1%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Prime vs
Sub:
|
|
|
|
|
|
|
|
|
|
|
Prime
|
|
|
|
99%
|
|
|
|
99%
|
|
|
Sub
|
|
|
|
1%
|
|
|
|
1%
|
|
|
Non-GAAP Financial Measures
The Company uses Earnings Before Interest Tax Depreciation and
Amortization ("EBITDA") as a supplemental non-GAAP measure of our
performance. DLH defines EBITDA as net income excluding (i)
interest expense, (ii) provision for or benefit from income taxes
and (iii) depreciation and amortization.
Beginning with the first quarter of fiscal year 2018, the
Company commenced reporting EBITDA, rather than adjusted EBITDA, as
a key non-GAAP financial measure of our business. The Company
believes that due to the growth and maturation of its business,
this change will improve the transparency of its business
performance and increase the comparability of its results with
peers. Non-GAAP measures for prior periods have been recast to
conform to this change in the Company's reporting. It is important
to note that GAAP results and the presentation of GAAP metrics do
not change, and the reporting of EBITDA has no effect on the
Company's business nor how the business is managed.
In addition, we are also reporting our net income excluding the
impact of the Tax Cut and Jobs Act of 2017 on the valuation of our
deferred tax assets. On December 22,
2017, the Tax Cut and Jobs Act was enacted, which, among
other things, reduced corporate tax rates and revised rules
regarding the usability of net operating losses. These changes have
resulted in a tax provision of $3.4 million associated
with revaluing the benefit of our net operating losses.
These non-GAAP measures of performance are used by management to
conduct and evaluate its business during its regular review of
operating results for the periods presented. Management and the
Company's Board utilize these non-GAAP measures to make decisions
about the use of the Company's resources, analyze performance
between periods, develop internal projections and measure
management performance. DLH believes that these non-GAAP measures
are useful to investors in evaluating the Company's ongoing
operating and financial results and understanding how such results
compare with the Company's historical performance. By providing
this non-GAAP measure as a supplement to GAAP information, DLH
believes this enhances investors' understanding of its business and
results of operations.
Reconciliation of GAAP net income to EBITDA, a non-GAAP
measure:
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
Net income
(loss)
|
|
$
|
1,614
|
|
|
$
|
945
|
|
|
$
|
669
|
|
|
$
|
79
|
|
|
$
|
2,248
|
|
|
$
|
(2,169)
|
|
(i) Interest
expense
|
|
262
|
|
|
269
|
|
|
(7)
|
|
|
801
|
|
|
888
|
|
|
(87)
|
|
(ii) Provision for
taxes
|
|
738
|
|
|
539
|
|
|
199
|
|
|
5,084
|
|
|
1,345
|
|
|
3,739
|
|
(iii) Depreciation,
amortization
|
|
588
|
|
|
510
|
|
|
78
|
|
|
1,654
|
|
|
1,265
|
|
|
389
|
|
EBITDA
|
|
$
|
3,202
|
|
|
$
|
2,263
|
|
|
$
|
939
|
|
|
$
|
7,618
|
|
|
$
|
5,746
|
|
|
$
|
1,872
|
|
Reconciliation of GAAP net income to net income excluding the
effect of the 2017 Tax Act, a non-GAAP measure:
|
|
Three Months
Ended
|
|
Nine Months
Ended
|
|
|
June
30,
|
|
June
30,
|
|
|
2018
|
|
2017
|
|
Change
|
|
2018
|
|
2017
|
|
Change
|
Net income
|
|
$
|
1,614
|
|
|
$
|
945
|
|
|
$
|
669
|
|
|
$
|
79
|
|
|
$
|
2,248
|
|
|
$
|
(2,169)
|
Write-down of
deferred tax assets
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
3,365
|
|
|
$
|
—
|
|
|
$
|
3,365
|
Pro-forma impact of
tax rate change
|
|
$
|
—
|
|
|
$
|
145
|
|
|
$
|
(145)
|
|
|
$
|
—
|
|
|
$
|
350
|
|
|
$
|
(350)
|
Net income, excluding
effect of the 2017 Tax Act
|
|
$
|
1,614
|
|
|
$
|
1,090
|
|
|
$
|
524
|
|
|
$
|
3,444
|
|
|
$
|
2,598
|
|
|
$
|
846
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per
fully-diluted share
|
|
$
|
0.13
|
|
|
$
|
0.08
|
|
|
$
|
0.05
|
|
|
$
|
0.01
|
|
|
$
|
0.18
|
|
|
$
|
(0.17)
|
Impact of write-down
of deferred tax asset
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
0.26
|
|
|
$
|
—
|
|
|
$
|
0.26
|
Pro-forma impact of
tax rate change
|
|
$
|
—
|
|
|
$
|
0.01
|
|
|
$
|
(0.01)
|
|
|
$
|
—
|
|
|
$
|
0.03
|
|
|
$
|
(0.03)
|
Net income per
fully-diluted share, excluding effect of the 2017 Tax
Act
|
|
$
|
0.13
|
|
|
$
|
0.09
|
|
|
$
|
0.04
|
|
|
$
|
0.27
|
|
|
$
|
0.21
|
|
|
$
|
0.06
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
View original
content:http://www.prnewswire.com/news-releases/dlh-reports-third-quarter-fiscal-year-2018-results-300692166.html
SOURCE DLH Holdings Corp.