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 fourth quarter ended
September 30, 2021.
Highlights
- Fourth quarter revenue increased to
$65.2 million in fiscal 2021 from $50.7 million in fiscal 2020,
reflecting the acquisition of Irving Burton Associates (“IBA”), new
contract awards, and increased volume on existing contracts
- For the full fiscal year, revenue
rose to $246.1 million from $209.2 million
- Earnings were $2.9 million, or
$0.21 per diluted share, for the fiscal 2021 fourth quarter versus
$1.4 million, or $0.10 per diluted share, for the fourth quarter of
fiscal 2020
- Earnings for the full year were
$10.1 million, or $0.75 per diluted share, for fiscal 2021 versus
$7.1 million or $0.54 per diluted share, for fiscal 2020
- Term loan reduced from $70.0
million to $46.8 million during the fiscal year
- During the fiscal fourth quarter,
DLH announced several awards with an aggregate value of over $120
million to support the Center for Disease Control and Prevention
(“CDC”) and FEMA
- Contract backlog was $651.5 million as of September 30,
2021
Management Discussion“The end
of fiscal 2021 came with a few major developments that further
accentuated an already standout year,” said DLH President and Chief
Executive Officer Zach Parker. “We won contracts from the CDC and
FEMA, which added over $120 million to our backlog as we posted
annual revenue of $246.1 million and earnings of $0.75 per diluted
share. We closed out fiscal 2021 with debt of $46.8 million,
putting us in excellent shape – both from a balance sheet
perspective as well as our book of business – for even stronger
results going forward.
“DLH continued to perform with excellence in the
midst of a global pandemic. As always, I would like to thank our
talented team for their many accomplishments, hard work, and
dedication to taking us to the next level in terms of size and
performance. Given our professional, highly-credentialed staff,
many recent awards, and ongoing demand for our technology-enabled
suite of services, the future is bright for DLH.”
Results for the Three Months Ended
September 30, 2021Revenue for the fourth quarter of
fiscal 2021 was $65.2 million versus $50.7 million in the
prior-year period. The increase was due to the Company’s IBA
acquisition, completed September 30, 2020, which added
approximately $8.5 million in revenue, new business awards in the
quarter and increased volume across legacy programs.
Income from operations was $4.0 million for the
quarter versus $2.7 million in the prior-year period and, as a
percent of revenue, the Company reported an operating margin of
6.2% in fiscal 2021 versus 5.3% in fiscal 2020. The current year
performance reflects increased revenue contribution from time and
materials programs, which generally yield stronger returns than
cost reimbursable contracts. This more than offset an increase in
depreciation and amortization as well as higher general and
administrative costs, which rose due to incremental corporate
development costs associated with a transaction that was pursued
but not executed.
Interest expense was essentially flat at $0.8
million in the fiscal fourth quarter of both 2021 and 2020. Income
before taxes was $3.2 million this year versus $1.9 million in
fiscal 2020, representing 5.0% and 3.8% of revenue, respectively,
for each period.
For the three months ended September 30,
2021 and 2020, respectively, DLH recorded a $0.3 million and $0.6
million provision for tax expense. The Company reported net income
of approximately $2.9 million, or $0.21 per diluted share, for the
fourth quarter of fiscal 2021 versus $1.4 million, or $0.10 per
diluted share, for the fourth quarter of fiscal 2020. As a percent
of revenue, net income was 4.4% for the fourth quarter of fiscal
2021 versus 2.7% for the prior year period.
On a non-GAAP basis, EBITDA for the three months
ended September 30, 2021 was approximately $6.0 million versus
$4.4 million in the prior-year period, or 9.3% and 8.6% of revenue,
respectively.
Key Financial IndicatorsFiscal
year to date, DLH generated $45.7 million in operating cash,
inclusive of a $21.1 million advance payment related to the FEMA
contract awarded in late September. The Company paid down $23.2
million of its secured loan facility and has satisfied mandatory
principal amortization on the loan facility until December 31,
2023. The Company intends to continue using cash to make debt
prepayments when possible.
As of September 30, 2021, the Company had
cash and cash equivalents of $24.1 million and debt outstanding
under its credit facility of $46.8 million, versus cash of $1.4
million and debt outstanding of $70.0 million as of September 30,
2020. The increase in cash was primarily due to an advance payment
to fund deployment of emergency medical resources under the FEMA
contract awarded in late September.
At September 30, 2021, total backlog was
approximately $651.5 million, including funded backlog of
approximately $191.0 million, and unfunded backlog of $460.5
million.
Conference Call and Webcast
DetailsDLH management will discuss fourth quarter results
and provide a general business update, including current
competitive conditions and strategies, during a conference call
beginning at 10:00 AM Eastern Time today, December 6, 2021.
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 10149431.
About DLH
DLH delivers improved health and readiness
solutions for federal programs through research, development, and
innovative care processes. The Company’s experts in public health,
performance evaluation, and health operations solve the complex
problems faced by civilian and military customers alike, leveraging
digital transformation, artificial intelligence, advanced
analytics, cloud-based applications, telehealth systems, and more.
With over 2,300 employees dedicated to the idea that “Your Mission
is Our Passion,” DLH brings a unique combination of government
sector experience, proven methodology, and unwavering commitment to
public health to improve the lives of millions. For more
information, visit 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 our recent or any future acquisition; the
challenges of managing larger and more widespread operations;
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 and award
protests, small business set asides, loss of work due to
organizational conflicts of interest, etc.) and termination risks;
the ability to successfully integrate the operations our recent
acquisition and of 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,
2021, 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 |
|
Twelve Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenue |
|
$ |
65,182 |
|
|
$ |
50,691 |
|
|
$ |
246,094 |
|
|
$ |
209,185 |
|
Cost of Operations: |
|
|
|
|
|
|
|
|
Contract costs |
|
51,522 |
|
|
39,701 |
|
|
194,614 |
|
|
163,596 |
|
General and administrative costs |
|
6,532 |
|
|
5,698 |
|
|
25,054 |
|
|
24,195 |
|
Corporate development costs |
|
1,088 |
|
|
930 |
|
|
1,088 |
|
|
930 |
|
Depreciation and amortization |
|
2,010 |
|
|
1,664 |
|
|
8,115 |
|
|
7,003 |
|
Total operating costs |
|
61,152 |
|
|
47,993 |
|
|
228,871 |
|
|
195,724 |
|
Income from operations |
|
4,030 |
|
|
2,698 |
|
|
17,223 |
|
|
13,461 |
|
Interest expense, net |
|
808 |
|
|
781 |
|
|
3,784 |
|
|
3,441 |
|
Income before income taxes |
|
3,222 |
|
|
1,917 |
|
|
13,439 |
|
|
10,020 |
|
Income tax expense |
|
339 |
|
|
554 |
|
|
3,294 |
|
|
2,906 |
|
Net income |
|
$ |
2,883 |
|
|
$ |
1,363 |
|
|
$ |
10,145 |
|
|
$ |
7,114 |
|
|
|
|
|
|
|
|
|
|
Net income per share -
basic |
|
$ |
0.23 |
|
|
$ |
0.11 |
|
|
$ |
0.81 |
|
|
$ |
0.58 |
|
Net income per share -
diluted |
|
$ |
0.21 |
|
|
$ |
0.10 |
|
|
$ |
0.75 |
|
|
$ |
0.54 |
|
Weighted average common shares
outstanding |
|
|
|
|
|
|
|
|
Basic |
|
12,607 |
|
|
12,390 |
|
|
12,549 |
|
|
12,282 |
|
Diluted |
|
13,654 |
|
|
13,356 |
|
|
13,597 |
|
|
13,105 |
|
DLH HOLDINGS
CORP.CONSOLIDATED BALANCE SHEETS(Amounts
in thousands except par value of shares)
|
|
September 30,2021 |
|
September 30,2020 |
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
24,051 |
|
|
$ |
1,357 |
|
Accounts receivable |
|
33,447 |
|
|
32,541 |
|
Other current assets |
|
4,265 |
|
|
3,499 |
|
Total current assets |
|
61,763 |
|
|
37,397 |
|
Equipment and improvements,
net |
|
1,912 |
|
|
3,339 |
|
Operating lease
right-of-use-assets |
|
19,919 |
|
|
22,427 |
|
Deferred taxes, net |
|
— |
|
|
37 |
|
Goodwill |
|
65,643 |
|
|
67,144 |
|
Intangible assets, net |
|
47,469 |
|
|
52,612 |
|
Other long-term assets |
|
464 |
|
|
606 |
|
Total
assets |
|
$ |
197,170 |
|
|
$ |
183,562 |
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Debt obligations - current, net of deferred financing costs |
|
$ |
— |
|
|
$ |
6,727 |
|
Operating lease liabilities - current |
|
2,261 |
|
|
2,045 |
|
Accrued payroll |
|
9,125 |
|
|
10,611 |
|
Deferred revenue |
|
22,273 |
|
|
— |
|
Accounts payable, accrued expenses, and other current
liabilities |
|
32,717 |
|
|
28,578 |
|
Total current liabilities |
|
66,376 |
|
|
47,961 |
|
Long-term liabilities: |
|
|
|
|
Deferred taxes, net |
|
1,176 |
|
|
— |
|
Operating lease liabilities - long-term |
|
19,374 |
|
|
21,620 |
|
Debt obligations - long-term, net of deferred financing costs |
|
44,636 |
|
|
60,544 |
|
Total long-term
liabilities |
|
65,186 |
|
|
82,164 |
|
Total
liabilities |
|
131,562 |
|
|
130,125 |
|
Shareholders’ equity: |
|
|
|
|
Common stock, $0.001 par
value; authorized 40,000 shares; issued and outstanding 12,714 and
12,404 at September 30, 2021 and September 30, 2020,
respectively |
|
13 |
|
|
12 |
|
Additional paid-in capital |
|
87,893 |
|
|
85,868 |
|
Accumulated deficit |
|
(22,298 |
) |
|
(32,443 |
) |
Total shareholders’
equity |
|
65,608 |
|
|
53,437 |
|
Total liabilities and
shareholders’ equity |
|
$ |
197,170 |
|
|
$ |
183,562 |
|
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in
thousands)
|
|
Twelve Months Ended |
|
|
September 30, |
|
|
2021 |
|
2020 |
Operating
activities |
|
|
|
|
Net income |
|
$ |
10,145 |
|
|
$ |
7,114 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
8,115 |
|
|
7,003 |
|
Amortization of deferred financing costs charged to interest
expense |
|
792 |
|
|
721 |
|
Stock based compensation expense |
|
1,660 |
|
|
910 |
|
Deferred taxes, net |
|
1,213 |
|
|
2,308 |
|
Gain from lease modification |
|
— |
|
|
(121 |
) |
Changes in operating assets and liabilities |
|
|
|
|
Accounts receivable |
|
(906 |
) |
|
(5,408 |
) |
Other current assets |
|
(766 |
) |
|
(1,592 |
) |
Accrued payroll |
|
(1,486 |
) |
|
489 |
|
Deferred revenue |
|
22,273 |
|
|
— |
|
Accounts payable, accrued expenses, and other current
liabilities |
|
4,139 |
|
|
7,188 |
|
Other long-term assets and liabilities |
|
486 |
|
|
839 |
|
Net cash provided by operating activities |
|
45,665 |
|
|
19,451 |
|
|
|
|
|
|
Investing
activities |
|
|
|
|
Business acquisition, net of cash acquired |
|
59 |
|
|
(32,678 |
) |
Purchase of equipment and improvements |
|
(103 |
) |
|
(152 |
) |
Net cash used in investing activities |
|
(44 |
) |
|
(32,830 |
) |
Financing
activities |
|
|
|
|
Proceeds from debt obligations |
|
— |
|
|
33,000 |
|
Repayment of debt obligations |
|
(23,250 |
) |
|
(19,000 |
) |
Payment of deferred financing costs |
|
(43 |
) |
|
(898 |
) |
Repurchased shares of common stock |
|
— |
|
|
(211 |
) |
Proceeds from issuance of common stock upon exercise of
options |
|
366 |
|
|
55 |
|
Net cash (used in)/provided by financing
activities |
|
(22,927 |
) |
|
12,946 |
|
|
|
|
|
|
Net change in cash and cash
equivalents |
|
22,694 |
|
|
(433 |
) |
Cash and cash equivalents at
beginning of year |
|
1,357 |
|
|
1,790 |
|
Cash and cash
equivalents at end of year |
|
$ |
24,051 |
|
|
$ |
1,357 |
|
|
|
|
|
|
Supplemental
disclosures of cash flow information |
|
|
|
|
Cash paid during the period for interest |
|
$ |
2,941 |
|
|
$ |
2,806 |
|
Cash paid during the period for income taxes |
|
$ |
936 |
|
|
$ |
917 |
|
Supplemental
disclosures of non-cash activity |
|
|
|
|
Non-cash cancellation of common stock |
|
$ |
68 |
|
|
$ |
211 |
|
Revenue Metrics
|
|
Twelve Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2021 |
|
2020 |
Market
Mix: |
|
|
|
|
Defense/VA |
|
57 |
% |
|
49 |
% |
Human Services and
Solutions |
|
15 |
% |
|
20 |
% |
Public Health/Life
Sciences |
|
28 |
% |
|
31 |
% |
|
|
|
|
|
Contract
Mix: |
|
|
|
|
Time and Materials |
|
75 |
% |
|
70 |
% |
Cost Reimbursable |
|
20 |
% |
|
28 |
% |
Firm Fixed Price |
|
5 |
% |
|
2 |
% |
|
|
|
|
|
Prime vs
Sub: |
|
|
|
|
Prime |
|
87 |
% |
|
92 |
% |
Subcontractor |
|
13 |
% |
|
8 |
% |
Non-GAAP Financial MeasuresThe
Company uses EBITDA and EBITDA as a percent of revenue as
supplemental non-GAAP measures of 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.
The Company uses GAAP net income adjusted for
the effect of corporate development costs as a supplemental measure
of Company results. We exclude corporate development costs from
this measure because they were incurred as a result of specific
events, do not reflect the costs of our operations, and can affect
the period-over-period assessment of operating results.
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 (in thousands):
|
|
Three Months Ended |
|
Twelve Months Ended |
|
|
September 30, |
|
September 30, |
|
|
2021 |
|
2020 |
|
Change |
|
2021 |
|
2020 |
|
Change |
Net income |
|
$ |
2,883 |
|
$ |
1,363 |
|
$ |
1,520 |
|
$ |
10,145 |
|
$ |
7,114 |
|
$ |
3,031 |
(i) Interest expense, net |
|
808 |
|
781 |
|
27 |
|
3,784 |
|
3,441 |
|
343 |
(ii) Provision for taxes |
|
339 |
|
554 |
|
(215) |
|
3,294 |
|
2,906 |
|
388 |
(iii) Depreciation and
amortization |
|
2,010 |
|
1,664 |
|
346 |
|
8,115 |
|
7,003 |
|
1,112 |
EBITDA |
|
$ |
6,040 |
|
$ |
4,362 |
|
$ |
1,678 |
|
$ |
25,338 |
|
$ |
20,464 |
|
$ |
4,874 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income as a % of
revenue |
|
4.4% |
|
2.7% |
|
1.7% |
|
4.1% |
|
3.4% |
|
0.7% |
EBITDA as a % of revenue |
|
9.3% |
|
8.6% |
|
0.7% |
|
10.3% |
|
9.8% |
|
0.5% |
Revenue |
|
$ |
65,182 |
|
$ |
50,691 |
|
$ |
14,491 |
|
$ |
246,094 |
|
$ |
209,185 |
|
$ |
36,909 |
Reconciliation of GAAP net income to net
income adjusted for the effect of the corporate development costs,
a non-GAAP measure (in thousands except for per share
amounts):
|
|
Year Ended |
|
|
September 30, |
|
|
2021 |
|
2020 |
|
Change |
Net income |
|
$ |
10,145 |
|
|
$ |
7,114 |
|
|
$ |
3,031 |
|
Corporate development
costs |
|
1,088 |
|
|
930 |
|
|
158 |
|
Tax effect of excluding
corporate development costs |
|
(267 |
) |
|
(270 |
) |
|
3 |
|
Net income adjusted
for corporate development costs |
|
$ |
10,966 |
|
|
$ |
7,774 |
|
|
$ |
3,192 |
|
|
|
|
|
|
|
|
Net income per diluted
share |
|
$ |
0.75 |
|
|
$ |
0.54 |
|
|
$ |
0.21 |
|
Impact of corporate
development costs, net |
|
0.06 |
|
|
0.05 |
|
|
0.01 |
|
Net income per diluted
share adjusted for corporate development costs |
|
$ |
0.81 |
|
|
$ |
0.59 |
|
|
$ |
0.22 |
|
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