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 ended June 30,
2020.
Highlights
- Revenue was $51.5 million for the third quarter versus $38.7
million for the prior-year period
- Operating income was $3.8 million for the third quarter versus
$1.7 million for the prior-year period
- Earnings were $2.1 million, or $0.16 per diluted share, for the
third quarter of fiscal 2020 versus $0.8 million, or $0.06 per
diluted share, for the prior-year period; earnings before interest,
tax, depreciation and amortization ("EBITDA") was $5.5 million for
the third quarter of fiscal 2020 versus $2.6 million for the
prior-year period
- DLH generated $10.0 million of cash from operations during the
quarter and reduced the Company's debt to $44.5 million from $55.0
million at March 31, 2020
- The Company also recently announced awards of more than $15
million for trials and studies related to COVID-19
Management Discussion“I’m very
pleased to report that, in the midst of a global pandemic, DLH has
continued to generate solid financial results and strengthen its
outlook,” stated DLH President and Chief Executive Officer Zach
Parker. “We posted operating margins of 7.4%, generated $10.0
million of cash from operations, and again paid down debt –
reducing it by nearly 20% from second quarter levels. We also
brought on Jeanine Christian as President of our S3 operating unit
and Jackie Everett as Chief Growth Officer; both Jeanine and Jackie
bring seasoned leadership experience, broad customer relationships,
and analytical skills honed within the scientific community. We are
confident they will be instrumental to our continued success going
forward.
“In addition, we recently received contracts to
assist the National Institutes of Health in their fight against
infectious diseases – in this case, COVID-19. With recent awards
expected to generate approximately $15 million in calendar 2020, we
will evaluate multiple therapeutic products and manage a consortium
of partners to conduct trials in a rapid and efficient manner. Wins
like this not only underscore the value of our expertise and
relationships with key government agencies, they bolster the
outlook for our Company at a time when the U.S. – and world – are
seeking leadership in identifying and producing treatments to
battle the continuing pandemic. I’m proud of DLH’s role in this
fight and the assistance we’re providing towards getting a cure to
market as soon as possible.”
Results for the Three Months Ended
June 30, 2020Revenue for the third quarter of fiscal
2020 was $51.5 million versus $38.7 million in the prior-year
period. The significant increase was due primarily to the inclusion
of revenue from the Social & Scientific Systems operating unit
("S3") for the full quarter, versus inclusion for three weeks in
the prior-year period following the June 2019 acquisition.
Income from operations was $3.8 million for the
quarter versus $1.7 million in the prior-year period and, as a
percent of revenue, the Company reported an operating margin of
7.4% in fiscal 2020 versus 4.4% in fiscal 2019, reflecting stronger
operating results, partly offset by increased amortization from
acquired intangibles. Interest expense in the quarter was
$0.8 million, versus $0.6 million for the three months ended
June 30, 2019, due to the borrowing required to finance the S3
acquisition. Income before taxes was $3.0 million for the quarter
versus $1.1 million in fiscal 2019, representing 5.8% and 2.9% of
revenue, respectively, for each quarter.
For the three months ended June 30, 2020, DLH
recorded a $0.9 million provision for tax expense versus $0.3
million in the prior-year period. The Company reported net income
of approximately $2.1 million, or $0.16 per diluted share, for the
third quarter of fiscal 2020 versus $0.8 million, or $0.06 per
diluted share, for the third quarter of fiscal 2019. As a percent
of revenue, net income was 4.1% for the third quarter of fiscal
2020 versus 2.1% for the prior-year period.
On a non-GAAP basis, EBITDA for the three months
ended June 30, 2020 was approximately $5.5 million versus $2.6
million in the prior-year period, resulting in 10.7% and 6.7% as a
percentage of revenue for each respective year. The year-over-year
increase was primarily due to the impact of the S3 acquisition,
including the improved operating leverage achieved through the
expansion of the Company's business base, as well as growth across
the Company’s legacy operations.
Balance Sheet and Cash FlowDLH
generated $10.0 million in operating cash during the third
quarter of fiscal 2020, largely reflecting improved profitability
and a reduction in accounts receivable. The Company anticipates
continued strong operating cash flow for the remainder of fiscal
2020, and projects a debt balance of $40 to $42 million at fiscal
year-end.
As of June 30, 2020, the Company had cash and
cash equivalents of $0.7 million and debt outstanding of $44.5
million, versus cash of $1.8 million and debt outstanding of $56.0
million as of September 30, 2019. The next required principal
payment is not due until September 2023, although the Company
intends to continue using free cash flow to make prepayments when
possible.
Conference Call and Webcast
DetailsDLH 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 tomorrow, August 6, 2020.
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 10146068.
About DLHDLH (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 seven core competencies include
secure data analytics, clinical trials and laboratory services,
case management, performance evaluation, system modernization,
operational logistics and readiness, and strategic digital
communications. DLH has over 2,000 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 refer to expectations,
projections or other characterizations of future events or
circumstances or 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.
Forward-looking statements in this release include, among others,
statements regarding estimates of future revenues, operating
income, earnings and cash flow. These statements reflect our belief
and assumptions as to future events that may not prove to be
accurate. Our actual results may differ materially from such
forward-looking statements made in this release due to a variety of
factors, including: the outbreak of the novel coronavirus
(“COVID-19”), including the measures to reduce its spread, and its
impact on the economy and demand for our services, are uncertain,
cannot be predicted, and may precipitate or exacerbate other risks
and uncertainties; the risk that we will not realize the
anticipated benefits of an acquisition; the challenges of managing
larger and more widespread operations resulting from the
acquisition; contract awards in connection with re-competes for
present business and/or competition for new business; compliance
with new bank financial and other covenants; 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 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, 2019, as well as subsequent
reports filed thereafter. The forward-looking statements contained
herein are not historical facts, but rather are based on current
expectations, estimates, assumptions and projections about our
industry and business. Such forward-looking statements 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, except as may be required by law.
CONTACTS:
INVESTOR RELATIONS |
Contact: Chris Witty |
Phone: 646-438-9385 |
Email: cwitty@darrowir.com |
TABLES TO FOLLOW
DLH HOLDINGS
CORP.CONSOLIDATED STATEMENTS OF
INCOME(Amounts in thousands except per share amounts)
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2020 |
|
2019 |
|
2020 |
|
2019 |
Revenue |
|
$ |
51,459 |
|
|
$ |
38,700 |
|
|
$ |
158,495 |
|
|
$ |
106,208 |
|
Cost of Operations: |
|
|
|
|
|
|
|
|
Contract costs |
|
39,615 |
|
|
30,038 |
|
|
123,895 |
|
|
82,744 |
|
General and administrative costs |
|
6,323 |
|
|
4,811 |
|
|
18,497 |
|
|
13,462 |
|
Acquisition costs |
|
— |
|
|
1,247 |
|
|
— |
|
|
1,391 |
|
Depreciation and amortization |
|
1,721 |
|
|
914 |
|
|
5,340 |
|
|
2,037 |
|
Total operating costs |
|
47,659 |
|
|
37,010 |
|
|
147,732 |
|
|
99,634 |
|
Income from operations |
|
3,800 |
|
|
1,690 |
|
|
10,763 |
|
|
6,574 |
|
Interest expense, net |
|
813 |
|
|
562 |
|
|
2,659 |
|
|
1,284 |
|
Income before income taxes |
|
2,987 |
|
|
1,128 |
|
|
8,104 |
|
|
5,290 |
|
Income tax expense |
|
863 |
|
|
325 |
|
|
2,352 |
|
|
1,207 |
|
Net income |
|
$ |
2,124 |
|
|
$ |
803 |
|
|
$ |
5,752 |
|
|
$ |
3,758 |
|
|
|
|
|
|
|
|
|
|
Net income per share - basic |
|
$ |
0.17 |
|
|
$ |
0.07 |
|
|
$ |
0.47 |
|
|
$ |
0.31 |
|
Net income per share - diluted |
|
$ |
0.16 |
|
|
$ |
0.06 |
|
|
$ |
0.44 |
|
|
$ |
0.29 |
|
Weighted average common shares outstanding |
|
|
|
|
|
|
|
|
Basic |
|
12,354 |
|
|
12,036 |
|
|
12,246 |
|
|
12,011 |
|
Diluted |
|
13,228 |
|
|
13,077 |
|
|
13,050 |
|
|
13,048 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DLH HOLDINGS
CORP.CONSOLIDATED BALANCE SHEETS(Amounts
in thousands except par value of shares)
|
|
June 30, 2020 |
|
September 30, 2019 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
658 |
|
|
|
$ |
1,790 |
|
|
Accounts receivable |
|
29,635 |
|
|
|
23,226 |
|
|
Other current assets |
|
3,772 |
|
|
|
1,831 |
|
|
Total current assets |
|
34,065 |
|
|
|
26,847 |
|
|
Equipment and improvements,
net |
|
3,769 |
|
|
|
5,343 |
|
|
Operating lease right-of-use
assets |
|
22,276 |
|
|
|
— |
|
|
Deferred taxes, net |
|
358 |
|
|
|
2,345 |
|
|
Goodwill |
|
52,758 |
|
|
|
52,758 |
|
|
Intangible assets, net |
|
37,594 |
|
|
|
41,208 |
|
|
Other long-term assets |
|
620 |
|
|
|
757 |
|
|
Total
assets |
|
$ |
151,440 |
|
|
|
$ |
129,258 |
|
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Operating lease liabilities - current |
|
$ |
1,768 |
|
|
|
$ |
— |
|
|
Accrued payroll |
|
9,488 |
|
|
|
8,852 |
|
|
Accounts payable, accrued expenses, and other current
liabilities |
|
24,253 |
|
|
|
20,633 |
|
|
Total current liabilities |
|
35,509 |
|
|
|
29,485 |
|
|
Long-term liabilities: |
|
|
|
|
Debt obligations - long term, net of deferred financing costs |
|
42,542 |
|
|
|
53,629 |
|
|
Operating lease liabilities - long-term |
|
21,686 |
|
|
|
— |
|
|
Other long-term liabilities |
|
— |
|
|
|
573 |
|
|
Total long-term
liabilities |
|
64,228 |
|
|
|
54,202 |
|
|
Total
liabilities |
|
99,737 |
|
|
|
83,687 |
|
|
Shareholders' equity: |
|
|
|
|
Common stock, $0.001 par value; authorized 40,000 shares; issued
and outstanding 12,354 and 12,036 at June 30, 2020 and September
30, 2019, respectively |
|
12 |
|
|
|
12 |
|
|
Additional paid-in capital |
|
85,496 |
|
|
|
85,114 |
|
|
Accumulated deficit |
|
(33,805 |
) |
|
|
(39,555 |
) |
|
Total shareholders’
equity |
|
51,703 |
|
|
|
45,571 |
|
|
Total liabilities and
shareholders' equity |
|
$ |
151,440 |
|
|
|
$ |
129,258 |
|
|
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in
thousands)
|
|
Nine Months Ended |
|
|
June 30, |
|
|
2020 |
|
2019 |
Operating
activities |
|
|
|
|
Net income |
|
$ |
5,752 |
|
|
|
$ |
3,758 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization expense |
|
5,340 |
|
|
|
2,037 |
|
|
Amortization of deferred financing costs |
|
551 |
|
|
|
799 |
|
|
Stock based compensation expense |
|
566 |
|
|
|
591 |
|
|
Deferred taxes, net |
|
1,987 |
|
|
|
1,253 |
|
|
Non-cash gain from lease modification |
|
(121 |
) |
|
|
— |
|
|
Changes in operating assets and liabilities |
|
|
|
|
Accounts receivable |
|
(6,409 |
) |
|
|
(925 |
) |
|
Other current assets |
|
(1,941 |
) |
|
|
(376 |
) |
|
Accrued payroll |
|
636 |
|
|
|
(68 |
) |
|
Accounts payable, accrued expenses, and other current
liabilities |
|
3,620 |
|
|
|
4,107 |
|
|
Other long-term assets/liabilities |
|
726 |
|
|
|
(23 |
) |
|
Net cash provided by operating activities |
|
10,707 |
|
|
|
11,153 |
|
|
|
|
|
|
|
Investing
activities |
|
|
|
|
Business acquisition, net of cash acquired |
|
— |
|
|
|
(66,520 |
) |
|
Purchase of equipment and improvements |
|
(152 |
) |
|
|
(29 |
) |
|
Net cash used in investing activities |
|
(152 |
) |
|
|
(66,549 |
) |
|
Financing
activities |
|
|
|
|
Borrowing on senior debt |
|
— |
|
|
|
70,000 |
|
|
Repayments of senior debt |
|
(11,500 |
) |
|
|
(11,646 |
) |
|
Payment of debt financing costs |
|
(3 |
) |
|
|
(3,347 |
) |
|
Repurchase of common stock |
|
(211 |
) |
|
|
— |
|
|
Proceeds from issuance of common stock upon exercise of
options |
|
27 |
|
|
|
39 |
|
|
Net cash (used in) provided by financing
activities |
|
(11,687 |
) |
|
|
55,046 |
|
|
|
|
|
|
|
Net change in cash and cash
equivalents |
|
(1,132 |
) |
|
|
(350 |
) |
|
Cash and cash equivalents at
beginning of year |
|
1,790 |
|
|
|
6,355 |
|
|
Cash and cash
equivalents at end of year |
|
$ |
658 |
|
|
|
$ |
6,005 |
|
|
|
|
|
|
|
Supplemental
disclosures of cash flow information |
|
|
|
|
Cash paid during the period for interest |
|
$ |
2,207 |
|
|
|
$ |
645 |
|
|
Cash paid during the period for income taxes |
|
$ |
432 |
|
|
|
$ |
675 |
|
|
Revenue Metrics
|
|
Nine Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2020 |
|
2019 |
Market
Mix: |
|
|
|
|
Defense/VA |
|
48 |
% |
|
66 |
% |
Human Services and
Solutions |
|
20 |
% |
|
28 |
% |
Public Health/Life
Sciences |
|
32 |
% |
|
6 |
% |
|
|
|
|
|
Contract
Mix: |
|
|
|
|
Time and materials |
|
70 |
% |
|
93 |
% |
Cost reimbursable |
|
28 |
% |
|
5 |
% |
Firm fixed price |
|
2 |
% |
|
1 |
% |
|
|
|
|
|
Prime vs
Sub: |
|
|
|
|
Prime |
|
93 |
% |
|
98 |
% |
Subcontractor |
|
7 |
% |
|
2 |
% |
Non-GAAP Financial MeasuresThe
Company uses EBITDA and EBITDA as a percent of revenue as
supplemental non-GAAP measures of our performance. We define EBITDA
as net income excluding (i) interest expense, (ii) provision for or
benefit from income taxes and (iii) depreciation and amortization.
EBITDA as a percent of revenue is EBITDA for the measurement period
divided by revenue for the same period.
These non-GAAP measures of performance are used
by management to conduct and evaluate its business during its
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. We believe 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.
Reconciliation of GAAP net income to EBITDA, a non-GAAP
measure:
(amounts in thousands) |
|
Three Months Ended |
|
Nine Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2020 |
|
2019 |
|
Change |
|
2020 |
|
2019 |
|
Change |
Net income |
|
$ |
2,124 |
|
|
$ |
803 |
|
|
$ |
1,321 |
|
|
$ |
5,752 |
|
|
$ |
3,758 |
|
|
$ |
1,994 |
|
(i) Interest expense, net |
|
813 |
|
|
562 |
|
|
251 |
|
|
2,659 |
|
|
1,284 |
|
|
1,375 |
|
(ii) Provision for taxes |
|
863 |
|
|
325 |
|
|
538 |
|
|
2,352 |
|
|
1,532 |
|
|
820 |
|
(iii) Depreciation and
amortization |
|
1,721 |
|
|
914 |
|
|
807 |
|
|
5,340 |
|
|
2,037 |
|
|
3,303 |
|
EBITDA |
|
$ |
5,521 |
|
|
$ |
2,604 |
|
|
$ |
2,917 |
|
|
$ |
16,103 |
|
|
$ |
8,611 |
|
|
$ |
7,492 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EBITDA as a % of revenue |
|
10.7 |
% |
|
6.7 |
% |
|
4.0 |
% |
|
10.2 |
% |
|
8.1 |
% |
|
2.1 |
% |
Revenue |
|
$ |
51,459 |
|
|
$ |
38,700 |
|
|
$ |
12,759 |
|
|
$ |
158,495 |
|
|
$ |
106,208 |
|
|
$ |
52,287 |
|
In fiscal 2019, the Company incurred $1.4
million of acquisition-related expenses during the nine months
ended June 30, 2019 for the acquisition of S3. The Company is
excluding acquisition-related expenses from this measure because
they were incurred as a result of a specific event, do not reflect
the costs of our operations, and can affect the period-over-period
assessment of operating results. In addition, we are including net
income adjusted for the acquisition of S3, in total and on a per
share basis, presented on a tax-effected basis. We are reporting
this non-GAAP metric to demonstrate the impact of these events.
Reconciliation of GAAP net income to net
income adjusted for the effect of the acquisition costs, a non-GAAP
measure:
|
|
Three Months Ended |
|
Nine Months Ended |
|
|
June 30, |
|
June 30, |
|
|
2020 |
|
2019 |
|
Change |
|
2020 |
|
2019 |
|
Change |
Net income |
|
$ |
2,124 |
|
|
$ |
803 |
|
|
|
$ |
1,321 |
|
|
|
$ |
5,752 |
|
|
$ |
3,758 |
|
|
|
$ |
1,994 |
|
|
Acquisition costs |
|
— |
|
|
1,247 |
|
|
|
(1,247 |
) |
|
|
— |
|
|
1,391 |
|
|
|
(1,391 |
) |
|
Tax effect of excluding
acquisition costs |
|
— |
|
|
(362 |
) |
|
|
362 |
|
|
|
— |
|
|
(403 |
) |
|
|
403 |
|
|
Net income adjusted
for the acquisition costs |
|
$ |
2,124 |
|
|
$ |
1,688 |
|
|
|
$ |
436 |
|
|
|
$ |
5,752 |
|
|
$ |
4,746 |
|
|
|
$ |
1,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income per diluted
share |
|
$ |
0.16 |
|
|
$ |
0.06 |
|
|
|
$ |
0.10 |
|
|
|
$ |
0.44 |
|
|
$ |
0.29 |
|
|
|
$ |
0.15 |
|
|
Impact of acquisition |
|
— |
|
|
0.07 |
|
|
|
(0.07 |
) |
|
|
— |
|
|
0.08 |
|
|
|
(0.08 |
) |
|
Net income adjusted
for the acquisition costs |
|
$ |
0.16 |
|
|
$ |
0.13 |
|
|
|
$ |
0.03 |
|
|
|
$ |
0.44 |
|
|
$ |
0.37 |
|
|
|
$ |
0.07 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DLH (NASDAQ:DLHC)
Historical Stock Chart
From Jun 2024 to Jul 2024
DLH (NASDAQ:DLHC)
Historical Stock Chart
From Jul 2023 to Jul 2024