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 second quarter ended
March 31, 2021.
Highlights
- Second quarter revenue increased to
$61.5 million in fiscal 2021 from $54.8 million in fiscal 2020,
reflecting the acquisition of Irving Burton Associates (“IBA”)
- Operating margins rose to 7.5% in
the current year second quarter from 7.0% in the prior-year
period
- Earnings were $2.6 million, or
$0.19 per diluted share, for the fiscal 2021 second quarter versus
$2.1 million, or $0.16 per diluted share, for the second quarter of
fiscal 2020
- After the end of the quarter, in
April 2021, the Company announced it had won the Consolidated Mail
Outpatient Pharmacy ("CMOP") logistics recompete with U.S.
Department of Veterans Affairs ("VA"), worth approximately $202
million over five years
- Contract backlog was $608.7 million as of March 31, 2021,
excluding the subsequent CMOP logistics award of approximately $202
million.
Management Discussion“We
continued to see positive trends this quarter impacting all aspects
of our performance, supporting our confidence for the year ahead,”
said DLH President and Chief Executive Officer Zach Parker.
“Revenue rose 12% versus the comparable period in 2020, and we
reported improved operating margins of 7.5% along with earnings of
$0.19 per share. We remain focused on de-levering the Company
further as the year progresses and affirm our prior estimate of a
debt balance of $50 to $52 million at fiscal year end. We’re
actively bidding on numerous other opportunities within our core
markets, underscoring our positive outlook for the remainder of
fiscal 2021.
"In April, we announced that the VA had awarded
us a follow-on contract to provide medical logistics for its CMOP
program, which we’ve now managed for over two decades. The VA’s
confidence in our ability to continue providing this invaluable
service – made even more important by the pandemic – speaks volumes
to the capabilities of our staff and demonstrates our commitment to
this agency. We are honored by the award of this contract, which
includes a base period of one year and four one-year options,
providing enhanced revenue visibility and stability."
Results for the Three Months Ended
March 31, 2021Revenue for the second quarter of
fiscal 2021 was $61.5 million versus $54.8 million in the
prior-year period. The increase was due principally to the
Company’s IBA acquisition, completed September 30, 2020, which
added approximately $7.4 million in revenue; partially offset by
reductions in travel-related program revenue compared to the
prior-year period. The reduction in travel-related program revenue
was primarily due to the COVID-19 pandemic.
Income from operations was $4.6 million for the quarter versus
$3.8 million in the prior-year period and, as a percent of revenue,
the Company reported an operating margin of 7.5% in fiscal 2021
versus 7.0% 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, and lower general and administrative ("G&A")
expenses, partially offset by higher depreciation and amortization.
Interest expense in the quarter increased to $1.0 million, versus
$0.9 million for the three months ended March 31, 2020, due to
higher outstanding debt levels, reflecting the acquisition of IBA.
Income before taxes was $3.6 million for the quarter versus $2.9
million in fiscal 2020, representing 5.9% and 5.3% of revenue,
respectively, for each period.
For the three months ended March 31, 2021
and 2020, respectively, DLH recorded a $1.0 million and $0.9
million provision for tax expense. The Company reported net income
of approximately $2.6 million, or $0.19 per diluted share, for the
second quarter of fiscal 2021 versus $2.1 million, or $0.16 per
diluted share, for the second quarter of fiscal 2020. As a percent
of revenue, net income was 4.2% for the second quarter of fiscal
2021 versus 3.7% for the prior year period.
On a non-GAAP basis, EBITDA for the three months
ended March 31, 2021 was approximately $6.6 million versus
$5.6 million in the prior-year period, or 10.8% and 10.2% of
revenue, respectively.
Key Financial IndicatorsFiscal
year to date, DLH has generated $6.1 million in operating cash, and
has paid down $7.2 million of its secured loan facility. The
Company anticipates strong operating cash flow for the remainder of
the fiscal year and intends to continue using cash to make debt
prepayments when possible.
As of March 31, 2021, the Company had cash
and cash equivalents of $0.4 million and debt outstanding under its
credit facility of $62.8 million, versus cash of $1.4 million and
debt outstanding of $70.0 million as of September 30, 2020.
At March 31, 2021, total backlog was approximately $608.7
million, including funded backlog of approximately $84.6 million,
and unfunded backlog of $524.1 million. The backlog excluded the
April CMOP logistics contract award of approximately $202
million.
Conference Call and Webcast
DetailsDLH management will discuss second 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 Thursday, May 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 10155504.
About DLHDLH 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 2,200
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
resulting from our recent 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 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, 2020, 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 FOLLOWDLH HOLDINGS
CORP.CONSOLIDATED STATEMENTS OF
INCOME(Amounts in thousands except per share amounts)
|
|
(unaudited) |
|
|
|
|
|
|
Three Months Ended |
|
Six Months Ended |
|
|
March 31, |
|
March 31, |
|
|
2021 |
|
2020 |
|
2021 |
|
2020 |
Revenue |
|
$ |
61,506 |
|
|
$ |
54,798 |
|
|
$ |
119,358 |
|
|
$ |
107,036 |
|
Cost of Operations: |
|
|
|
|
|
|
|
|
Contract costs |
|
48,722 |
|
|
42,941 |
|
|
94,727 |
|
|
84,281 |
|
General and administrative costs |
|
6,135 |
|
|
6,260 |
|
|
12,285 |
|
|
12,174 |
|
Depreciation and amortization |
|
2,029 |
|
|
1,760 |
|
|
4,091 |
|
|
3,619 |
|
Total operating costs |
|
56,886 |
|
|
50,961 |
|
|
111,103 |
|
|
100,074 |
|
Income from operations |
|
4,620 |
|
|
3,837 |
|
|
8,255 |
|
|
6,962 |
|
Interest expense, net |
|
1,004 |
|
|
906 |
|
|
2,084 |
|
|
1,846 |
|
Income before income taxes |
|
3,616 |
|
|
2,931 |
|
|
6,171 |
|
|
5,116 |
|
Income tax expense |
|
1,049 |
|
|
855 |
|
|
1,790 |
|
|
1,488 |
|
Net income |
|
$ |
2,567 |
|
|
$ |
2,076 |
|
|
$ |
4,381 |
|
|
$ |
3,628 |
|
|
|
|
|
|
|
|
|
|
Net income per share -
basic |
|
$ |
0.20 |
|
|
$ |
0.17 |
|
|
$ |
0.35 |
|
|
$ |
0.30 |
|
Net income per share -
diluted |
|
$ |
0.19 |
|
|
$ |
0.16 |
|
|
$ |
0.32 |
|
|
$ |
0.28 |
|
Weighted average common shares
outstanding |
|
|
|
|
|
|
|
|
Basic |
|
12,544 |
|
|
12,299 |
|
|
12,521 |
|
|
12,193 |
|
Diluted |
|
13,570 |
|
|
13,003 |
|
|
13,568 |
|
|
12,886 |
|
DLH HOLDINGS
CORP.CONSOLIDATED BALANCE SHEETS(Amounts
in thousands except par value of shares)
|
|
March 31,2021 |
|
September 30,2020 |
|
|
(unaudited) |
|
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
420 |
|
|
$ |
1,357 |
|
Accounts receivable |
|
41,675 |
|
|
32,541 |
|
Other current assets |
|
3,469 |
|
|
3,499 |
|
Total current assets |
|
45,564 |
|
|
37,397 |
|
Equipment and improvements,
net |
|
2,593 |
|
|
3,339 |
|
Operating lease right-of-use
assets |
|
21,055 |
|
|
22,427 |
|
Deferred taxes, net |
|
— |
|
|
37 |
|
Goodwill |
|
65,643 |
|
|
67,144 |
|
Intangible assets, net |
|
50,762 |
|
|
52,612 |
|
Other long-term assets |
|
539 |
|
|
606 |
|
Total
assets |
|
$ |
186,156 |
|
|
$ |
183,562 |
|
|
|
|
|
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Debt obligations - current, net of deferred financing costs |
|
$ |
3,124 |
|
|
$ |
6,727 |
|
Operating lease liabilities - current |
|
2,130 |
|
|
2,045 |
|
Accrued payroll |
|
12,012 |
|
|
10,611 |
|
Accounts payable, accrued expenses, and other current
liabilities |
|
30,824 |
|
|
28,578 |
|
Total current liabilities |
|
48,090 |
|
|
47,961 |
|
Long-term liabilities: |
|
|
|
|
Deferred taxes, net |
|
1,475 |
|
|
— |
|
Debt obligations - long term, net of deferred financing costs |
|
57,199 |
|
|
60,544 |
|
Operating lease liabilities - long-term |
|
20,499 |
|
|
21,620 |
|
Total long-term
liabilities |
|
79,173 |
|
|
82,164 |
|
Total
liabilities |
|
127,263 |
|
|
130,125 |
|
Shareholders' equity: |
|
|
|
|
Common stock, $0.001 par
value; authorized 40,000 shares; issued and outstanding 12,545 and
12,404 at March 31, 2021 and September 30, 2020,
respectively |
|
13 |
|
|
12 |
|
Additional paid-in capital |
|
86,942 |
|
|
85,868 |
|
Accumulated deficit |
|
(28,062 |
) |
|
(32,443 |
) |
Total shareholders’
equity |
|
58,893 |
|
|
53,437 |
|
Total liabilities and
shareholders' equity |
|
$ |
186,156 |
|
|
$ |
183,562 |
|
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in
thousands)
|
|
Six Months Ended |
|
|
March 31, |
|
|
2021 |
|
2020 |
|
|
(unaudited) |
|
|
Operating
activities |
|
|
|
|
Net income |
|
$ |
4,381 |
|
|
$ |
3,628 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization expense |
|
4,091 |
|
|
3,619 |
|
Amortization of deferred financing costs |
|
413 |
|
|
374 |
|
Stock based compensation expense |
|
844 |
|
|
384 |
|
Deferred taxes, net |
|
1,512 |
|
|
1,258 |
|
Gain from lease modification |
|
— |
|
|
(121 |
) |
Changes in operating assets and liabilities |
|
|
|
|
Accounts receivable |
|
(9,134 |
) |
|
(11,722 |
) |
Other current assets |
|
30 |
|
|
(1,211 |
) |
Accrued payroll |
|
1,401 |
|
|
1,913 |
|
Accounts payable, accrued expenses, and other current
liabilities |
|
2,245 |
|
|
2,280 |
|
Other long-term assets/liabilities |
|
336 |
|
|
260 |
|
Net cash provided by operating activities |
|
6,119 |
|
|
662 |
|
|
|
|
|
|
Investing
activities |
|
|
|
|
Business acquisition adjustment, net of cash acquired |
|
59 |
|
|
— |
|
Purchase of equipment and improvements |
|
(53 |
) |
|
(141 |
) |
Net cash provided by (used in) investing
activities |
|
6 |
|
|
(141 |
) |
Financing
activities |
|
|
|
|
Borrowing on revolving line of credit, net |
|
— |
|
|
2,000 |
|
Repayment of senior debt |
|
(7,250 |
) |
|
(3,000 |
) |
Payment of deferred financing costs |
|
(43 |
) |
|
(3 |
) |
Repurchased shares of common stock |
|
— |
|
|
(211 |
) |
Proceeds from issuance of common stock upon exercise of
options |
|
231 |
|
|
27 |
|
Net cash used in financing activities |
|
(7,062 |
) |
|
(1,187 |
) |
|
|
|
|
|
Net change in cash and cash
equivalents |
|
(938 |
) |
|
(666 |
) |
Cash and cash equivalents at
beginning of year |
|
1,357 |
|
|
1,790 |
|
Cash and cash
equivalents at end of year |
|
$ |
420 |
|
|
$ |
1,124 |
|
|
|
|
|
|
Supplemental
disclosures of cash flow information |
|
|
|
|
Cash paid during the period for interest |
|
$ |
1,639 |
|
|
$ |
1583 |
|
Cash paid during the period for income taxes |
|
$ |
184 |
|
|
$ |
409 |
|
Supplemental
disclosures of non-cash activity |
|
|
|
|
Non-cash cancellation of common stock |
|
$ |
— |
|
|
$ |
211 |
|
Revenue Metrics
|
|
Six Months Ended |
|
|
March 31, |
|
March 31, |
|
|
2021 |
|
2020 |
Market
Mix: |
|
|
|
|
Defense/VA |
|
59 |
% |
|
47 |
% |
Human Services and
Solutions |
|
14 |
% |
|
21 |
% |
Public Health/Life
Sciences |
|
27 |
% |
|
32 |
% |
|
|
|
|
|
Contract
Mix: |
|
|
|
|
Time and materials |
|
76 |
% |
|
70 |
% |
Cost reimbursable |
|
20 |
% |
|
28 |
% |
Firm fixed price |
|
4 |
% |
|
2 |
% |
|
|
|
|
|
Prime vs
Sub: |
|
|
|
|
Prime |
|
89 |
% |
|
93 |
% |
Subcontractor |
|
11 |
% |
|
7 |
% |
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.
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 |
|
Six Months Ended |
|
|
March 31, |
|
March 31, |
|
|
2021 |
|
2020 |
|
Change |
|
2021 |
|
2020 |
|
Change |
Net income |
|
$ |
2,567 |
|
|
$ |
2,076 |
|
|
$ |
491 |
|
|
$ |
4,381 |
|
|
$ |
3,628 |
|
|
$ |
753 |
|
(i) Interest expense, net |
|
|
1,004 |
|
|
|
906 |
|
|
|
98 |
|
|
|
2,084 |
|
|
1,846 |
|
|
238 |
|
(ii) Provision for taxes |
|
|
1,049 |
|
|
|
855 |
|
|
|
194 |
|
|
|
1,790 |
|
|
1,488 |
|
|
302 |
|
(iii) Depreciation and
amortization |
|
|
2,029 |
|
|
|
1,760 |
|
|
|
269 |
|
|
|
4,091 |
|
|
3,619 |
|
|
472 |
|
EBITDA |
|
$ |
6,649 |
|
|
$ |
5,597 |
|
|
$ |
1,052 |
|
|
$ |
12,346 |
|
|
$ |
10,581 |
|
|
$ |
1,765 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income as a % of
revenue |
|
|
4.2 |
% |
|
|
3.7 |
% |
|
|
0.5 |
% |
|
|
3.7 |
% |
|
3.4 |
% |
|
0.3 |
% |
EBITDA as a % of revenue |
|
|
10.8 |
% |
|
|
10.2 |
% |
|
|
0.6 |
% |
|
|
10.3 |
% |
|
9.9 |
% |
|
0.4 |
% |
Revenue |
|
$ |
61,506 |
|
|
$ |
54,798 |
|
|
$ |
6,708 |
|
|
$ |
119,358 |
|
|
$ |
107,036 |
|
|
$ |
12,322 |
|
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