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DLH Reports Fiscal 2022 Third Quarter Results
ソース: Nasdaq GlobeNewswire / 02 8 2022 16:15:01 America/New_York
ATLANTA, Aug. 02, 2022 (GLOBE NEWSWIRE) -- 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, 2022.
Highlights
- Third quarter revenue increased to $66.4 million in fiscal 2022 from $61.6 million in fiscal 2021, reflecting growth of 8% year-over-year
- Earnings were $4.9 million, or $0.34 per diluted share, for the fiscal 2022 third quarter versus $2.9 million, or $0.21 per diluted share, for the third quarter of fiscal 2021
- The Company's term loan was reduced to $28.5 million during the quarter versus $37.5 million at March 31, 2022
- Contract backlog was $509.7 million as of June 30, 2022 versus $554.7 million at the end of the second quarter
Management Discussion
“I'm very pleased to announce that DLH continued to post strong performance derived from organic growth, margin expansion, and solid bottom line results," said DLH President and Chief Executive Officer Zach Parker. “Revenue increased 8% year-over-year, while operating margins increased from 8.0% to 10.7%. We also paid down an additional $9 million of debt during the period, strengthening our capacity to pursue strategic acquisitions.“During the quarter the Company won two key IDIQ contracts, with task orders not yet in our backlog, that position us well for fiscal 2023 and beyond. This includes a contract to provide health-related R&D and support services to the US Department of Defense and an award to assist the NIH's National Cancer Institute with clinical research and program management expertise, helping in the ongoing fight against cancer. Even with these already in hand, we're actively bidding on numerous opportunities prior to the end of the government's fiscal year and remain positive about our growth outlook."
Results for the Three Months Ended June 30, 2022
Revenue for the third quarter of fiscal 2022 was $66.4 million versus $61.6 million in the prior-year period. The 8% increase year-over-year was due to expanded work across the Company’s existing contracts, which continue to benefit from robust demand for the services provided.Income from operations was $7.1 million for the quarter versus $4.9 million in the prior-year period and, as a percent of revenue, the Company reported an operating margin of 10.7% in fiscal 2022 versus 8.0% in fiscal 2021. Income from operations increased due to higher revenue, improved program mix and effective management of fringe benefit costs.
Interest expense was $0.5 million in the fiscal third quarter of 2022 versus $0.9 million in the prior-year period, reflecting lower debt outstanding. Income before taxes was $6.6 million this year versus $4.0 million in fiscal 2021, representing 9.9% and 6.5% of revenue, respectively, for each period.
For the three months ended June 30, 2022 and 2021, respectively, DLH recorded a $1.7 million and $1.2 million provision for tax expense. The Company reported net income of approximately $4.9 million, or $0.34 per diluted share, for the third quarter of fiscal 2022 versus $2.9 million, or $0.21 per diluted share, for the third quarter of fiscal 2021. As a percent of revenue, net income was 7.3% for the third quarter of fiscal 2022 versus 4.7% for the prior year period.
The third quarter results include final closeout activities related to the short-term FEMA COVID support contracts and the related agreements between DLH and its subcontractors. Reconciliation of estimated pass-through travel and accommodation expenses to the final reimbursable expenses resulted in a reduction to expenses previously accrued and pending payment and a corresponding reduction to revenue. This reduction reflected the value of in-kind expenses furnished by the State in support of the contract.
On a non-GAAP basis, EBITDA for the three months ended June 30, 2022 was approximately $9.0 million versus $7.0 million in the prior-year period, or 13.5% and 11.3% of revenue, respectively. 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 Indicators
Fiscal year to date, DLH used $4.8 million in operating cash, reflecting performance of the $22.3 million deferred revenue on the aforementioned FEMA contracts, for which there were advance payments in the fourth quarter of fiscal 2021. Excluding the impact of the FEMA contracts DLH would have generated positive operating cash flow fiscal year-to-date. The overall increase in accounts receivable versus the prior-year period reflects normal fluctuations in the timing of customer payments and growth in the overall business volume.As of June 30, 2022, the Company had cash of $1.1 million and debt outstanding under its credit facility of $28.5 million, versus cash of $24.1 million and debt outstanding of $46.8 million as of September 30, 2021. The Company has satisfied all mandatory principal amortization until maturity and intends to continue to pay down the remaining balance of the term loan.
At June 30, 2022, total backlog was approximately $509.7 million, including funded backlog of approximately $87.4 million, and unfunded backlog of $422.3 million.
Conference Call and Webcast Details
DLH management will discuss third 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, August 3, 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 2605060.
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 2,400 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; the impact of inflation and higher interest rates; 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)(unaudited) (unaudited) Three Months Ended Nine Months Ended June 30, June 30, 2022 2021 2022 2021 Revenue $ 66,440 $ 61,555 $ 327,940 $ 180,913 Cost of Operations: Contract costs 49,668 48,365 271,184 143,092 General and administrative costs 7,535 6,237 22,178 18,522 Corporate development costs 250 — 250 — Depreciation and amortization 1,873 2,014 5,740 6,105 Total operating costs 59,326 56,616 299,352 167,719 Income from operations 7,114 4,939 28,588 13,194 Interest expense, net 512 893 1,739 2,977 Income before income taxes 6,602 4,046 26,849 10,217 Income tax expense 1,738 1,166 7,003 2,956 Net income $ 4,864 $ 2,880 $ 19,846 $ 7,261 Net income per share - basic $ 0.38 $ 0.23 $ 1.55 $ 0.58 Net income per share - diluted $ 0.34 $ 0.21 $ 1.40 $ 0.54 Weighted average common shares outstanding Basic 12,812 12,545 12,779 12,529 Diluted 14,235 13,655 14,205 13,694 DLH HOLDINGS CORP.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value of shares)June 30,
2022September 30,
2021(unaudited) ASSETS Current assets: Cash $ 1,060 $ 24,051 Accounts receivable 50,337 33,447 Other current assets 4,417 4,265 Total current assets 55,814 61,763 Equipment and improvements, net 1,355 1,912 Operating lease right-of-use assets 17,429 19,919 Goodwill 65,643 65,643 Intangible assets, net 42,530 47,469 Other long-term assets 365 464 Total assets $ 183,136 $ 197,170 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Operating lease liabilities - current $ 2,227 $ 2,261 Accrued payroll 13,157 9,125 Deferred revenue — 22,273 Accounts payable, accrued expenses, and other current liabilities 35,098 32,717 Total current liabilities 50,482 66,376 Long-term liabilities: Deferred taxes, net 1,175 1,176 Operating lease liabilities - long-term 17,028 19,374 Debt obligations - long-term, net of deferred financing costs 26,783 44,636 Total long-term liabilities 44,986 65,186 Total liabilities 95,468 131,562 Shareholders' equity: Common stock, $0.001 par value; authorized 40,000 shares; issued and outstanding 12,961 and 12,714 at June 30, 2022 and September 30, 2021, respectively 13 13 Additional paid-in capital 90,107 87,893 Accumulated deficit (2,452 ) (22,298 ) Total shareholders’ equity 87,668 65,608 Total liabilities and shareholders' equity $ 183,136 $ 197,170 DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)(unaudited) Nine Months Ended June 30, 2022 2021 Operating activities Net income $ 19,846 $ 7,261 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 5,740 6,105 Amortization of deferred financing costs charged to interest expense 497 610 Stock based compensation expense 1,952 1,317 Deferred taxes, net (1 ) 2,177 Changes in operating assets and liabilities Accounts receivable (16,890 ) (3,868 ) Other current assets (152 ) (133 ) Accrued payroll 4,032 (403 ) Deferred revenue (22,273 ) — Accounts payable, accrued expenses, and other current liabilities 2,380 1,912 Other long-term assets and liabilities 110 410 Net cash provided by (used in) operating activities (4,759 ) 15,388 Investing activities Business acquisition adjustment, net of cash acquired — 59 Purchase of equipment and improvements (244 ) (53 ) Net cash provided by (used in) investing activities (244 ) 6 Financing activities Proceeds from debt obligations 13,500 23,950 Repayments of debt obligations (31,750 ) (40,150 ) Payments of deferred financing costs — (43 ) Proceeds from issuance of common stock upon exercise of options and warrants 543 231 Common stock surrendered for the exercise of stock options - tax obligations (281 ) — Net cash used in financing activities (17,988 ) (16,012 ) Net change in cash (22,991 ) (618 ) Cash at beginning of period 24,051 1,357 Cash at end of period $ 1,060 $ 739 Supplemental disclosure of cash flow information Cash paid during the period for interest $ 1,195 $ 2,321 Cash paid during the period for income taxes $ 6,403 $ 396 Supplemental disclosure of non-cash activity Common stock surrendered for the exercise of stock options $ 256 $ — Revenue Metrics
Nine Months Ended June 30, June 30, 2022 2021 Market Mix: Defense/VA 36 % 57 % Human Services and Solutions 48 % 17 % Public Health/Life Sciences 17 % 26 % Contract Mix: Time and Materials 80 % 76 % Cost Reimbursable 11 % 20 % Firm Fixed Price 9 % 4 % Prime vs Sub: Prime 93 % 88 % Subcontractor 7 % 12 % Non-GAAP Financial Measures
The 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 and nine months periods ended June 30, 2022. The measures presented are revenue, operating income, net income, diluted earnings per share, and EBITDA for our 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:
Three Months Ended Nine Months Ended June 30, June 30, (in thousands) 2022 2021 Change 2022 2021 Change Net income $ 4,864 $ 2,880 $ 1,984 $ 19,846 $ 7,261 $ 12,585 (i) Interest expense, net 512 893 (381 ) 1,739 2,977 (1,238 ) (ii) Provision for taxes 1,738 1,166 572 7,003 2,956 4,047 (iii) Depreciation and amortization 1,873 2,014 (141 ) 5,740 6,105 (365 ) EBITDA $ 8,987 $ 6,953 $ 2,034 $ 34,328 $ 19,299 $ 15,029 Net income as a % of revenue 7.3 % 4.7 % 2.6 % 6.1 % 4.0 % 2.1 % EBITDA as a % of revenue 13.5 % 11.3 % 2.2 % 10.5 % 10.7 % (0.2 )% Revenue $ 66,440 $ 61,555 $ 4,885 $ 327,940 $ 180,913 $ 147,027 Reconciliation of GAAP revenue, operating income, net income, diluted earnings per share, and non-GAAP EBITDA reported for the three and nine months ended to the same metrics for our contract portfolio less the FEMA task orders:
Three Months Ended Nine Months Ended June 30, June 30, (in thousands) Ref 2022 2021 Change 2022 2021 Change Revenue Total enterprise $ 66,440 $ 61,555 $ 4,885 $ 327,940 $ 180,913 $ 147,027 Less: FEMA task orders to support Alaska (a) (5,116 ) — (5,116 ) 125,773 — 125,773 Remaining contract portfolio (a) $ 71,556 61,555 10,001 $ 202,167 $ 180,913 $ 21,254 Operating income Total enterprise $ 7,114 $ 4,939 $ 2,175 $ 28,588 $ 13,194 $ 15,394 Less: FEMA task orders to support Alaska (b) 608 $ — $ 608 12,479 — 12,479 Remaining contract portfolio (b) $ 6,506 $ 4,939 $ 1,567 $ 16,109 $ 13,194 $ 2,915 Net income Total enterprise $ 4,864 $ 2,880 $ 1,984 $ 19,846 $ 7,261 $ 12,585 Less: FEMA task orders to support Alaska (c) 450 — 450 9,235 — 9,235 Remaining contract portfolio (c) $ 4,414 $ 2,880 $ 1,534 $ 10,611 $ 7,261 $ 3,350 Diluted earnings per share Total enterprise $ 0.34 $ 0.21 $ 0.13 $ 1.40 $ 0.54 $ 0.86 Less: FEMA task orders to support Alaska (d) 0.03 — 0.03 0.64 — 0.64 Remaining contract portfolio (d) $ 0.31 $ 0.21 $ 0.10 $ 0.76 $ 0.54 $ 0.22 EBITDA Total enterprise $ 8,987 $ 6,953 $ 2,034 $ 34,328 $ 19,299 $ 15,029 Less: FEMA task orders to support Alaska (e) 608 — 608 12,479 — 12,479 Remaining contract portfolio (e) $ 8,379 $ 6,953 $ 1,426 $ 21,849 $ 19,299 $ 2,550 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. The results for the three and nine months ended June 30, 2022 include final closeout activities related to the short-term FEMA COVID support contracts and the related agreements between DLH and its subcontractors. Reconciliation of estimated pass-through travel and accommodation expenses to the final reimbursable expenses resulted in a reduction to expenses, and a corresponding reduction to revenue, previously accrued and pending payment. This reduction reflected the value of in-kind expenses furnished by the State in support of the contract.
Ref (b): Operating income attributable to the remaining contract portfolio less the FEMA task orders represents the Company’s consolidated operating income, determined in accordance with GAAP, less the operating income derived from the FEMA task orders. Operating income for the FEMA task orders is derived by subtracting from the revenue attributable to such task orders during the three months ended June 30, 2022 of ($5.1) million the contract costs of ($5.7) million. Similarly, for the nine months ended June 30, 2022 operating income for the FEMA task orders is derived by subtracting from the revenue attributable to the tasks orders of $125.8 million the following amounts associated with such task orders: contract costs $112.1 million and general & administrative costs of $1.2 million. Operating income for the remaining contract portfolio for the three and nine months ended June 30, 2022 represents the Company’s consolidated operating income for such period less the operating income attributable to the FEMA task orders for such period.
Ref (c): 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 June 30, 2022 of ($5.1) million the following amounts associated with such task orders: contract costs of ($5.7) million and income tax expense of $0.2 million. Similarly, for the nine months ended June 30, 2022 net income for the FEMA task orders is derived by subtracting from the revenue attributable to the tasks orders of $125.8 million the following amounts associated with such task orders: contract costs of $112.1 million, general & administrative costs of $1.2 million, and tax expense of $3.2 million. Net income for the remaining contract portfolio for the three and nine months ended June 30, 2022 represents the Company’s consolidated net income for such period less the net income attributable to the FEMA task orders for such period.
Ref (d): 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 (e): EBITDA attributable to the FEMA task orders of $0.6 million and $12.5 million for the three and nine months ended June 30, 2022, respectively, is arrived at through the same calculation as operating income as there are not any depreciation and amortization costs attributable to the FEMA task orders. EBITDA for the remaining contract portfolio is calculated by subtracting the EBITDA attributable to the FEMA task orders from the Company’s total EBITDA.
