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 first quarter ended
December 31, 2021.
Highlights
- First quarter revenue increased to
$152.8 million in fiscal 2022 from $57.9 million in fiscal 2021,
reflecting the previously-announced award of two FEMA contracts to
support Alaska, which accounted for approximately $91.1 million of
revenue; these programs are expected to contribute substantially
less revenue in the fiscal second quarter as performance nears
completion
- Excluding these short-term
contracts, first quarter revenue rose to $61.7 million in fiscal
2022, an increase of 7% over the prior-year period
- Earnings were $7.8 million, or
$0.55 per diluted share, for the fiscal 2022 first quarter versus
$1.8 million, or $0.13 per diluted share, for the first quarter of
fiscal 2021
- Excluding contributions from the
aforementioned short-term FEMA contracts, earnings on a non-GAAP
basis for the fiscal 2022 first quarter were $3.1 million, or $0.22
per diluted share
- The Company's term loan was reduced
to $42.9 million from $46.8 million during the first quarter
- Contract backlog was $633.6 million as of December 31,
2021 of which approximately $30.0 million related to the task order
under a FEMA contract providing medical staffing support to Alaska,
which is expected to be completed in the second quarter.
Management Discussion“We
delivered another solid quarter of growth at the start of fiscal
2022, resulting in outstanding performance that reflects the
contribution of two short-term contracts, awarded by the DHS’ FEMA
organization, for COVID-19 countermeasures and contingency
assistance in Alaska,” said DLH President and Chief Executive
Officer Zach Parker. “Excluding these programs, revenue rose almost
$4.0 million year-over-year or approximately 7%. While timing for
the federal budget remains uncertain – and another continuing
resolution is certainly possible – we feel confident that our array
of offerings, and recent wins, position us well for fiscal
2022.”
“The second quarter is expected to reflect the
wind-down of our COVID-19 support activities in Alaska, but we
remain on track for another year of standout results. M&A
remains a key aspect of our expansion strategy as we examine
opportunities to further strengthen our innovation and technology
credentials and service offerings. In addition, we will continue to
de-lever the balance sheet while enhancing our capital deployment
plans, positioning the company for further growth; we believe the
best is yet to come for DLH.”
Results for the Three Months Ended
December 31, 2021Revenue for the first quarter of
fiscal 2022 was $152.8 million versus $57.9 million in the
prior-year period. The increase was primarily due to the Company’s
work for FEMA in Alaska – which added approximately $91.1 million
in revenue – along with other new business wins and generally
higher volume across a number of legacy programs.
Income from operations was $11.2 million for the
quarter versus $3.6 million in the prior-year period and, as a
percent of revenue, the Company reported an operating margin of
7.3% in fiscal 2022 versus 6.3% in fiscal 2021.
Interest expense was $0.7 million in the fiscal
first quarter of 2022 versus $1.1 million in the prior-year period,
reflecting lower debt outstanding. Income before taxes was $10.5
million this year versus $2.6 million in fiscal 2021, representing
6.9% and 4.4% of revenue, respectively, for each period.
For the three months ended December 31,
2021 and 2020, respectively, DLH recorded a $2.7 million and $0.7
million provision for tax expense. The Company reported net income
of approximately $7.8 million, or $0.55 per diluted share, for the
first quarter of fiscal 2022 versus $1.8 million, or $0.13 per
diluted share, for the first quarter of fiscal 2021. As a percent
of revenue, net income was 5.1% for the first quarter of fiscal
2022 versus 3.1% for the prior year period.
On a non-GAAP basis, EBITDA for the three months
ended December 31, 2021 was approximately $13.2 million versus
$5.7 million in the prior-year period, or 8.6% and 9.8% of revenue,
respectively. EBITDA performance reflects the impact from the FEMA
task orders – specifically, the pass-through nature of the revenue.
A reconciliation of the Company's performance for the quarter less
the contribution of the FEMA task orders compared to the prior-year
period, is included at the back of this document.
Key Financial IndicatorsFiscal
year to date, DLH used $16.2 million in operating cash, reflecting
performance obligations for the deferred revenue on the
aforementioned FEMA contracts, for which there were advance
payments in the fourth quarter of fiscal 2021. The Company paid
down $3.9 million of its secured loan facility and has satisfied
mandatory principal amortization on the loan facility until March
31, 2024. The Company intends to continue using cash to make debt
prepayments when possible.
As of December 31, 2021, the Company had
cash and cash equivalents of $4.2 million and debt outstanding
under its credit facility of $42.9 million, versus cash of $24.1
million and debt outstanding of $46.8 million as of September 30,
2021.
At December 31, 2021, total backlog was approximately
$633.6 million, including funded backlog of approximately $132.4
million, and unfunded backlog of $501.2 million.
Conference Call and Webcast
DetailsDLH management will discuss first 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 tomorrow, February 1, 2022.
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 8200479.
About DLH
DLH (NASDAQ:DLHC) 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 acquisitions; 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 of 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 |
DLH HOLDINGS
CORP.CONSOLIDATED STATEMENTS OF
INCOME(Amounts in thousands except per share amounts)
|
|
(unaudited) |
|
|
Three Months Ended |
|
|
December 31, |
|
|
|
2021 |
|
|
2020 |
Revenue |
|
$ |
152,801 |
|
$ |
57,852 |
Cost of Operations: |
|
|
|
|
Contract costs |
|
|
132,686 |
|
|
46,005 |
General and administrative costs |
|
|
6,911 |
|
|
6,150 |
Depreciation and amortization |
|
|
1,985 |
|
|
2,062 |
Total operating costs |
|
|
141,582 |
|
|
54,217 |
Income from operations |
|
|
11,219 |
|
|
3,635 |
Interest expense, net |
|
|
672 |
|
|
1,080 |
Income before income taxes |
|
|
10,547 |
|
|
2,555 |
Income tax expense |
|
|
2,743 |
|
|
741 |
Net income |
|
$ |
7,804 |
|
$ |
1,814 |
|
|
|
|
|
Net income per share -
basic |
|
$ |
0.61 |
|
$ |
0.15 |
Net income per share -
diluted |
|
$ |
0.55 |
|
$ |
0.13 |
Weighted average common shares
outstanding |
|
|
|
|
Basic |
|
|
12,749 |
|
|
12,498 |
Diluted |
|
|
14,295 |
|
|
13,445 |
DLH HOLDINGS
CORP.CONSOLIDATED BALANCE SHEETS(Amounts
in thousands except par value of shares)
|
|
December 31,2021 |
|
September 30,2021 |
|
|
(unaudited) |
|
|
ASSETS |
|
|
|
|
Current assets: |
|
|
|
|
Cash and cash equivalents |
|
$ |
4,221 |
|
|
$ |
24,051 |
|
Accounts receivable |
|
|
46,843 |
|
|
|
33,447 |
|
Other current assets |
|
|
4,897 |
|
|
|
4,265 |
|
Total current assets |
|
|
55,961 |
|
|
|
61,763 |
|
Equipment and improvements,
net |
|
|
1,573 |
|
|
|
1,912 |
|
Operating lease
right-of-use-assets |
|
|
18,562 |
|
|
|
19,919 |
|
Goodwill |
|
|
65,643 |
|
|
|
65,643 |
|
Intangible assets, net |
|
|
45,823 |
|
|
|
47,469 |
|
Other long-term assets |
|
|
431 |
|
|
|
464 |
|
Total
assets |
|
$ |
187,993 |
|
|
$ |
197,170 |
|
LIABILITIES AND
SHAREHOLDERS’ EQUITY |
|
|
|
|
Current liabilities: |
|
|
|
|
Operating lease liabilities - current |
|
$ |
2,192 |
|
|
$ |
2,261 |
|
Accrued payroll |
|
|
10,976 |
|
|
|
9,125 |
|
Deferred revenue |
|
|
10,148 |
|
|
|
22,273 |
|
Accounts payable, accrued expenses, and other current
liabilities |
|
|
30,383 |
|
|
|
32,717 |
|
Total current liabilities |
|
|
53,699 |
|
|
|
66,376 |
|
Long-term liabilities: |
|
|
|
|
Deferred taxes, net |
|
|
1,176 |
|
|
|
1,176 |
|
Operating lease liabilities - long-term |
|
|
18,127 |
|
|
|
19,374 |
|
Debt obligations - long-term, net of deferred financing costs |
|
|
40,879 |
|
|
|
44,636 |
|
Total long-term
liabilities |
|
|
60,182 |
|
|
|
65,186 |
|
Total
liabilities |
|
|
113,881 |
|
|
|
131,562 |
|
Shareholders' equity: |
|
|
|
|
Common stock, $0.001 par
value; authorized 40,000 shares; issued and outstanding 12,768 and
12,714 at December 31, 2021 and September 30, 2021,
respectively |
|
|
13 |
|
|
|
13 |
|
Additional paid-in capital |
|
|
88,593 |
|
|
|
87,893 |
|
Accumulated deficit |
|
|
(14,494 |
) |
|
|
(22,298 |
) |
Total shareholders’
equity |
|
|
74,112 |
|
|
|
65,608 |
|
Total liabilities and
shareholders' equity |
|
$ |
187,993 |
|
|
$ |
197,170 |
|
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS(Amounts in
thousands)
|
|
(unaudited) |
|
|
Three Months Ended |
|
|
December 31, |
|
|
|
2021 |
|
|
|
2020 |
|
Operating
activities |
|
|
|
|
Net income |
|
$ |
7,804 |
|
|
$ |
1,814 |
|
Adjustments to reconcile net income to net cash provided by
operating activities: |
|
|
|
|
Depreciation and amortization |
|
|
1,985 |
|
|
|
2,062 |
|
Amortization of deferred financing costs charged to interest
expense |
|
|
151 |
|
|
|
210 |
|
Stock based compensation expense |
|
|
500 |
|
|
|
458 |
|
Deferred taxes, net |
|
|
— |
|
|
|
626 |
|
Changes in operating assets and liabilities |
|
|
|
|
Accounts receivable |
|
|
(13,396 |
) |
|
|
(12,344 |
) |
Other current assets |
|
|
(632 |
) |
|
|
284 |
|
Accrued payroll |
|
|
1,851 |
|
|
|
(538 |
) |
Deferred revenue |
|
|
(12,125 |
) |
|
|
— |
|
Accounts payable, accrued expenses, and other current
liabilities |
|
|
(2,335 |
) |
|
|
(1,185 |
) |
Other long-term assets and liabilities |
|
|
42 |
|
|
|
95 |
|
Net cash used in operating
activities |
|
|
(16,155 |
) |
|
|
(8,518 |
) |
|
|
|
|
|
Investing
activities |
|
|
|
|
Purchase of equipment and improvements |
|
|
— |
|
|
|
(53 |
) |
Net cash used in investing
activities |
|
|
— |
|
|
|
(53 |
) |
Financing
activities |
|
|
|
|
Proceeds from debt obligations |
|
|
6,000 |
|
|
|
9,150 |
|
Repayment of debt obligations |
|
|
(9,875 |
) |
|
|
(1,750 |
) |
Payment of deferred financing costs |
|
|
— |
|
|
|
(41 |
) |
Proceeds from issuance of common stock upon exercise of options and
warrants |
|
|
200 |
|
|
|
225 |
|
Net cash provided by (used in)
financing activities |
|
|
(3,675 |
) |
|
|
7,584 |
|
|
|
|
|
|
Net change in cash and cash
equivalents |
|
|
(19,830 |
) |
|
|
(987 |
) |
Cash and cash equivalents at
beginning of year |
|
|
24,051 |
|
|
|
1,357 |
|
Cash and cash
equivalents at end of year |
|
$ |
4,221 |
|
|
$ |
370 |
|
|
|
|
|
|
Supplemental
disclosure of cash flow information |
|
|
|
|
Cash paid during the period for interest |
|
$ |
513 |
|
|
$ |
852 |
|
Revenue Metrics
|
|
Three Months Ended |
|
|
December 31, |
|
December 31, |
|
|
2021 |
|
|
2020 |
|
Market
Mix: |
|
|
|
|
Defense/VA |
|
24 |
% |
|
60 |
% |
Human Services and
Solutions |
|
65 |
% |
|
13 |
% |
Public Health/Life
Sciences |
|
11 |
% |
|
27 |
% |
|
|
|
|
|
Contract
Mix: |
|
|
|
|
Time and Materials |
|
87 |
% |
|
77 |
% |
Cost Reimbursable |
|
7 |
% |
|
20 |
% |
Firm Fixed Price |
|
6 |
% |
|
3 |
% |
|
|
|
|
|
Prime vs
Sub: |
|
|
|
|
Prime |
|
96 |
% |
|
89 |
% |
Subcontractor |
|
4 |
% |
|
11 |
% |
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 is presenting additional non-GAAP
measures to describe the impact from two short-term FEMA task
orders' on its financial performance for the three months ended
December 31, 2021. The measures presented are revenue, net income,
diluted earnings per share, and EBITDA for the enterprise contract
portfolio less the respective performance on the FEMA task orders.
These resulting measures present the remaining contract portfolio's
quarterly financial performance compared to results delivered in
the prior-year period. Definitions of these additional non-GAAP
measures are set forth in the footnotes to the reconciliation table
below.
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 |
|
|
December 31, |
|
|
|
2021 |
|
|
|
2020 |
|
|
Change |
Net income |
|
$ |
7,804 |
|
|
$ |
1,814 |
|
|
$ |
5,990 |
|
(i) Interest expense, net |
|
|
672 |
|
|
|
1,080 |
|
|
|
(408 |
) |
(ii) Provision for taxes |
|
|
2,743 |
|
|
|
741 |
|
|
|
2,002 |
|
(iii) Depreciation and
amortization |
|
|
1,985 |
|
|
|
2,062 |
|
|
|
(77 |
) |
EBITDA |
|
$ |
13,204 |
|
|
$ |
5,697 |
|
|
$ |
7,507 |
|
|
|
|
|
|
|
|
Net income as a % of
revenue |
|
|
5.1 |
% |
|
|
3.1 |
% |
|
|
2.0 |
% |
EBITDA as a % of revenue |
|
|
8.6 |
% |
|
|
9.8 |
% |
|
|
(1.2 |
)% |
Revenue |
|
$ |
152,801 |
|
|
$ |
57,852 |
|
|
$ |
94,949 |
|
Reconciliation of GAAP revenue, net income, diluted
earnings per share and non-GAAP EBITDA reported for the fiscal
quarter to the same metrics for our contract portfolio less the
FEMA task orders:
|
|
|
Three Months Ended |
(amounts in
thousands) |
|
|
December 31, |
|
Ref |
|
|
2021 |
|
|
2020 |
|
Change |
Revenue |
|
|
|
|
|
|
|
Total enterprise |
|
|
$ |
152,801 |
|
$ |
57,852 |
|
$ |
94,949 |
Less: FEMA task orders to
support Alaska |
(a) |
|
|
91,125 |
|
|
— |
|
|
91,125 |
Remaining contract
portfolio |
(a) |
|
$ |
61,676 |
|
$ |
57,852 |
|
$ |
3,824 |
|
|
|
|
|
|
|
|
Net
income |
|
|
|
|
|
|
|
Total enterprise |
|
|
$ |
7,804 |
|
$ |
1,814 |
|
$ |
5,990 |
Less: FEMA task orders to
support Alaska |
(b) |
|
|
4,696 |
|
|
— |
|
|
4,696 |
Remaining contract
portfolio |
(b) |
|
$ |
3,108 |
|
$ |
1,814 |
|
$ |
1,294 |
|
|
|
|
|
|
|
|
Diluted earnings per
share |
|
|
|
|
|
|
|
Total enterprise |
|
|
$ |
0.55 |
|
$ |
0.13 |
|
$ |
0.42 |
Less: FEMA task orders to
support Alaska |
(c) |
|
|
0.33 |
|
|
— |
|
|
0.33 |
Remaining contract
portfolio |
(c) |
|
$ |
0.22 |
|
$ |
0.13 |
|
$ |
0.09 |
|
|
|
|
|
|
|
|
EBITDA |
|
|
|
|
|
|
|
Total enterprise |
|
|
$ |
13,204 |
|
$ |
5,697 |
|
$ |
7,507 |
Less: FEMA task orders to
support Alaska |
(d) |
|
|
6,346 |
|
|
— |
|
|
6,346 |
Remaining contract
portfolio |
(d) |
|
$ |
6,858 |
|
$ |
5,697 |
|
$ |
1,161 |
Ref (a): Revenue for
the Company’s remaining contract portfolio less the FEMA task
orders represents our consolidated revenues less the revenues
generated from the FEMA task orders.
Ref (b): Net income
attributable to the remaining contract portfolio less the FEMA task
orders represents the Company’s consolidated net income, determined
in accordance with GAAP, less the net income derived from the FEMA
task orders. Net income for the FEMA task orders is derived by
subtracting from the revenue attributable to such task orders
during the three months ended December 31, 2021 of $91.1 million
the following amounts: contract costs of $84.2 million, general
& administrative costs of $0.6 million, and income tax expense
of $1.6 million. Net income for the remaining contract portfolio
for the three months ended December 31, 2021 represents the
Company’s consolidated net income for such period less the net
income attributable to the FEMA task orders for such period.
Ref (c):
Diluted earnings per share (diluted EPS) for the FEMA task orders
is calculated using the net income attributable to such task orders
as opposed to GAAP net income. Diluted EPS for the remaining
contract portfolio (total contract portfolio excluding the FEMA
task orders) is calculated by subtracting the diluted EPS for the
FEMA task orders from the Company's total diluted EPS.
Ref (d): EBITDA
attributable to the FEMA tasks orders of $6.3 million is derived by
adding income tax expense attributable to those task orders of $1.6
million to the net income attributable to those task orders of $4.7
million. EBITDA for the remaining contract portfolio is calculated
by subtracting the EBITDA attributable to the FEMA task orders from
the Company’s total EBITDA.
DLH (NASDAQ:DLHC)
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