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,
2021.
Highlights
- Third quarter revenue increased to
$61.6 million in fiscal 2021 from $51.5 million in fiscal 2020,
reflecting the acquisition of Irving Burton Associates (“IBA”) and
organic program growth
- Operating margins rose to 8.0% in
the current year third quarter from 7.4% in the prior-year
period
- Earnings were $2.9 million, or
$0.21 per diluted share, for the fiscal 2021 third quarter versus
$2.1 million, or $0.16 per diluted share, for the third quarter of
fiscal 2020
- The Company generated $15.4 million
in operating cash through June 30, 2021, including $9.3
million in the fiscal third quarter, versus $10.7 million in the
comparable prior-year nine-month period
- The April 2021 contract award of
the Consolidated Mail Outpatient Pharmacy ("CMOP") logistics
recompete with U.S. Department of Veterans Affairs ("VA") was
protested, and subsequently cancelled, in accordance with
applicable requirements to address elements of the procurement
process. As the review continues, the Company's existing contract
was extended through November 2021 and may be extended further
- Contract backlog was $566.2 million as of June 30,
2021
Management Discussion“Fiscal
2021 continues to be one of achievement for DLH, as we once again
grew the top line, increased margins, and improved overall
operating performance in the third quarter,” said DLH President and
Chief Executive Officer Zach Parker. “Revenue rose to $61.6 million
and operating margins expanded to 8.0%, reflecting strong demand
for our technology-enabled solutions across the core federal
agencies we serve. At the same time, we generated $9.3 million of
cash from operations in the quarter, allowing us to further pay
down debt and de-lever the balance sheet. Our backlog remains
robust, even as we await resolution on the previously-announced
CMOP logistics recompete, for which we expect a favorable outcome.
Overall, we anticipate ending fiscal 2021 with strong results
against all key metrics, positioning us well for fiscal 2022
against a backdrop of increased healthcare spending, a focus on
digitization and cloud computing, and enduring support for Veterans
Affairs."
Results for the Three Months Ended
June 30, 2021Revenue for the third quarter of fiscal
2021 was $61.6 million versus $51.5 million in the prior-year
period. The increase was due principally to the Company’s IBA
acquisition, completed September 30, 2020, which added
approximately $7.3 million in revenue, and increased work across
other DLH programs.
Income from operations was $4.9 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
8.0% in fiscal 2021 versus 7.4% 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
$0.9 million, versus $0.8 million for the three months ended
June 30, 2020, due to higher outstanding debt levels,
reflecting the acquisition of IBA. Income before taxes was $4.0
million for the quarter versus $3.0 million in fiscal 2020,
representing 6.5% and 5.8% of revenue, respectively, for each
period.
For the three months ended June 30, 2021
and 2020, respectively, DLH recorded a $1.2 million and $0.9
million provision for tax expense. The Company reported net income
of approximately $2.9 million, or $0.21 per diluted share, for the
third quarter of fiscal 2021 versus $2.1 million, or $0.16 per
diluted share, for the third quarter of fiscal 2020. As a percent
of revenue, net income was 4.7% for the third quarter of fiscal
2021 versus 4.1% for the prior year period.
On a non-GAAP basis, EBITDA for the three months
ended June 30, 2021 was approximately $7.0 million versus $5.5
million in the prior-year period, or 11.3% and 10.7% of revenue,
respectively.
Key Financial IndicatorsFiscal
year to date, DLH has generated $15.4 million in operating cash,
and has paid down $16.2 million of its secured loan facility. We
have satisfied mandatory principal amortization on the loan
facility until March 31, 2023. 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 June 30, 2021, the Company had cash
and cash equivalents of $0.7 million and debt outstanding under its
credit facility of $53.8 million, versus cash of $1.4 million and
debt outstanding of $70.0 million as of September 30, 2020.
At June 30, 2021, total backlog was
approximately $566.2 million, including funded backlog of
approximately $76.4 million, and unfunded backlog of $489.8
million.
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 Thursday, August 5, 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 2,200 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 |
DLH HOLDINGS
CORP.CONSOLIDATED STATEMENTS OF
INCOME(Amounts in thousands except per share amounts)
| |
|
(unaudited) |
|
|
|
|
| |
|
Three Months Ended |
|
Nine Months Ended |
| |
|
June 30, |
|
June 30, |
| |
|
2021 |
|
2020 |
|
2021 |
|
2020 |
|
Revenue |
|
$ |
61,555 |
|
|
$ |
51,459 |
|
|
$ |
180,913 |
|
|
$ |
158,495 |
|
| Cost of Operations: |
|
|
|
|
|
|
|
|
|
Contract costs |
|
48,365 |
|
|
39,615 |
|
|
143,092 |
|
|
123,895 |
|
|
General and administrative costs |
|
6,237 |
|
|
6,323 |
|
|
18,522 |
|
|
18,497 |
|
|
Depreciation and amortization |
|
2,014 |
|
|
1,721 |
|
|
6,105 |
|
|
5,340 |
|
|
Total operating costs |
|
56,616 |
|
|
47,659 |
|
|
167,719 |
|
|
147,732 |
|
|
Income from operations |
|
4,939 |
|
|
3,800 |
|
|
13,194 |
|
|
10,763 |
|
| Interest expense, net |
|
893 |
|
|
813 |
|
|
2,977 |
|
|
2,659 |
|
|
Income before income taxes |
|
4,046 |
|
|
2,987 |
|
|
10,217 |
|
|
8,104 |
|
| Income tax expense |
|
1,166 |
|
|
863 |
|
|
2,956 |
|
|
2,352 |
|
|
Net income |
|
$ |
2,880 |
|
|
$ |
2,124 |
|
|
$ |
7,261 |
|
|
$ |
5,752 |
|
| |
|
|
|
|
|
|
|
|
| Net income per share -
basic |
|
$ |
0.23 |
|
|
$ |
0.17 |
|
|
$ |
0.58 |
|
|
$ |
0.47 |
|
| Net income per share -
diluted |
|
$ |
0.21 |
|
|
$ |
0.16 |
|
|
$ |
0.54 |
|
|
$ |
0.44 |
|
| Weighted average common shares
outstanding |
|
|
|
|
|
|
|
|
|
Basic |
|
12,545 |
|
|
12,354 |
|
|
12,529 |
|
|
12,246 |
|
|
Diluted |
|
13,655 |
|
|
13,228 |
|
|
13,568 |
|
|
13,050 |
|
| |
|
|
|
|
|
|
|
|
DLH HOLDINGS
CORP.CONSOLIDATED BALANCE SHEETS(Amounts
in thousands except par value of shares)
| |
|
June 30,2021 |
|
September 30,2020 |
| |
|
(unaudited) |
|
|
| ASSETS |
|
|
|
|
| Current assets: |
|
|
|
|
|
Cash and cash equivalents |
|
$ |
739 |
|
|
$ |
1,357 |
|
|
Accounts receivable |
|
36,409 |
|
|
32,541 |
|
|
Other current assets |
|
3,632 |
|
|
3,499 |
|
| Total current assets |
|
40,780 |
|
|
37,397 |
|
| Equipment and improvements,
net |
|
2,226 |
|
|
3,339 |
|
| Operating lease right-of-use
assets |
|
20,481 |
|
|
22,427 |
|
| Deferred taxes, net |
|
— |
|
|
37 |
|
| Goodwill |
|
65,643 |
|
|
67,144 |
|
| Intangible assets, net |
|
49,115 |
|
|
52,612 |
|
| Other long-term assets |
|
506 |
|
|
606 |
|
| Total
assets |
|
$ |
178,751 |
|
|
$ |
183,562 |
|
| |
|
|
|
|
| LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
| Current liabilities: |
|
|
|
|
|
Debt obligations - current, net of deferred financing costs |
|
$ |
— |
|
|
$ |
6,727 |
|
|
Operating lease liabilities - current |
|
2,186 |
|
|
2,045 |
|
|
Accrued payroll |
|
10,208 |
|
|
10,611 |
|
|
Accounts payable, accrued expenses, and other current
liabilities |
|
32,630 |
|
|
28,578 |
|
| Total current liabilities |
|
45,024 |
|
|
47,961 |
|
| Long-term liabilities: |
|
|
|
|
|
Debt obligations - long term, net of deferred financing costs |
|
51,537 |
|
|
60,544 |
|
|
Operating lease liabilities - long-term |
|
19,944 |
|
|
21,620 |
|
| Total long-term
liabilities |
|
71,481 |
|
|
82,164 |
|
| Total
liabilities |
|
116,505 |
|
|
130,125 |
|
| Shareholders' equity: |
|
|
|
|
| Common stock, $0.001 par
value; authorized 40,000 shares; issued and outstanding 12,545 and
12,404 at June 30, 2021 and September 30, 2020,
respectively |
|
13 |
|
|
12 |
|
|
Additional paid-in capital |
|
87,415 |
|
|
85,868 |
|
|
Accumulated deficit |
|
(25,182 |
) |
|
(32,443 |
) |
| Total shareholders’
equity |
|
62,246 |
|
|
53,437 |
|
| Total liabilities and
shareholders' equity |
|
$ |
178,751 |
|
|
$ |
183,562 |
|
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in
thousands)
| |
|
Nine Months Ended |
| |
|
June 30, |
| |
|
2021 |
|
2020 |
| |
|
(unaudited) |
|
|
| Operating
activities |
|
|
|
|
|
Net income |
|
$ |
7,261 |
|
|
$ |
5,752 |
|
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
|
Depreciation and amortization |
|
6,105 |
|
|
5,340 |
|
|
Amortization of deferred financing costs |
|
610 |
|
|
551 |
|
|
Stock based compensation expense |
|
1,317 |
|
|
566 |
|
|
Deferred taxes, net |
|
2,177 |
|
|
1,987 |
|
|
Gain from lease modification |
|
— |
|
|
(121 |
) |
|
Changes in operating assets and liabilities |
|
|
|
|
|
Accounts receivable |
|
(3,868 |
) |
|
(6,409 |
) |
|
Other current assets |
|
(133 |
) |
|
(1,941 |
) |
|
Accrued payroll |
|
(403 |
) |
|
636 |
|
|
Accounts payable, accrued expenses, and other current
liabilities |
|
1,912 |
|
|
3,620 |
|
|
Other long-term assets/liabilities |
|
410 |
|
|
726 |
|
|
Net cash provided by operating
activities |
|
15,388 |
|
|
10,707 |
|
| |
|
|
|
|
| Investing
activities |
|
|
|
|
|
Business acquisition adjustment, net of cash acquired |
|
59 |
|
|
— |
|
|
Purchase of equipment and improvements |
|
(53 |
) |
|
(152 |
) |
|
Net cash provided by (used in) investing
activities |
|
6 |
|
|
(152 |
) |
| Financing
activities |
|
|
|
|
|
Repayment of secured term loan |
|
(16,200 |
) |
|
(11,500 |
) |
|
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 |
|
(16,012 |
) |
|
(11,687 |
) |
| |
|
|
|
|
| Net change in cash and cash
equivalents |
|
(618 |
) |
|
(1,132 |
) |
| Cash and cash equivalents at
beginning of year |
|
1,357 |
|
|
1,790 |
|
| Cash and cash
equivalents at end of year |
|
$ |
739 |
|
|
$ |
658 |
|
| |
|
|
|
|
| Supplemental
disclosures of cash flow information |
|
|
|
|
|
Cash paid during the period for interest |
|
$ |
2,321 |
|
|
$ |
2207 |
|
|
Cash paid during the period for income taxes |
|
$ |
396 |
|
|
$ |
432 |
|
| Supplemental
disclosures of non-cash activity |
|
|
|
|
|
Non-cash cancellation of common stock |
|
$ |
— |
|
|
$ |
211 |
|
Revenue Metrics
| |
|
Nine Months Ended |
| |
|
June 30, |
|
June 30, |
| |
|
2021 |
|
2020 |
| Market
Mix: |
|
|
|
|
|
Defense/VA |
|
58 |
% |
|
48 |
% |
| Human Services and
Solutions |
|
15 |
% |
|
20 |
% |
| 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 |
|
88 |
% |
|
93 |
% |
| Subcontractor |
|
12 |
% |
|
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:
| |
|
Three Months Ended |
|
Nine Months Ended |
| |
|
June 30, |
|
June 30, |
| (Amounts in
Thousands) |
|
2021 |
|
2020 |
|
Change |
|
2021 |
|
2020 |
|
Change |
|
Net income |
|
$ |
2,880 |
|
$ |
2,124 |
|
$ |
756 |
|
$ |
7,261 |
|
$ |
5,752 |
|
|
$ |
1,509 |
|
| (i) Interest expense, net |
|
893 |
|
813 |
|
80 |
|
2,977 |
|
2,659 |
|
|
318 |
|
| (ii) Provision for taxes |
|
1,166 |
|
863 |
|
303 |
|
2,956 |
|
2,352 |
|
|
604 |
|
| (iii) Depreciation and
amortization |
|
2,014 |
|
1,721 |
|
293 |
|
6,105 |
|
5,340 |
|
|
765 |
|
| EBITDA |
|
$ |
6,953 |
|
$ |
5,521 |
|
$ |
1,432 |
|
$ |
19,299 |
|
$ |
16,103 |
|
|
$ |
3,196 |
|
| Net income as a % of
revenue |
|
|
4.7 |
% |
|
3.7 |
% |
|
1.0 |
% |
|
4.0 |
% |
|
3.6 |
% |
|
0.4 |
% |
| EBITDA as a % of revenue |
|
11.3 |
% |
|
10.7 |
% |
|
0.6 |
% |
|
10.7 |
% |
|
10.2 |
% |
|
0.5 |
% |
|
Revenue |
|
$ |
61,555 |
|
|
$ |
51,459 |
|
|
$ |
10,096 |
|
|
$ |
180,913 |
|
|
$ |
158,495 |
|
|
$ |
22,418 |
|
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