ATLANTA, Aug. 05, 2020 (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, 2020.
- Revenue was $51.5 million for the third quarter versus $38.7 million for the prior-year period
- Operating income was $3.8 million for the third quarter versus $1.7 million for the prior-year period
- Earnings were $2.1 million, or $0.16 per diluted share, for the third quarter of fiscal 2020 versus $0.8 million, or $0.06 per diluted share, for the prior-year period; earnings before interest, tax, depreciation and amortization ("EBITDA") was $5.5 million for the third quarter of fiscal 2020 versus $2.6 million for the prior-year period
- DLH generated $10.0 million of cash from operations during the quarter and reduced the Company's debt to $44.5 million from $55.0 million at March 31, 2020
- The Company also recently announced awards of more than $15 million for trials and studies related to COVID-19
“I’m very pleased to report that, in the midst of a global pandemic, DLH has continued to generate solid financial results and strengthen its outlook,” stated DLH President and Chief Executive Officer Zach Parker. “We posted operating margins of 7.4%, generated $10.0 million of cash from operations, and again paid down debt – reducing it by nearly 20% from second quarter levels. We also brought on Jeanine Christian as President of our S3 operating unit and Jackie Everett as Chief Growth Officer; both Jeanine and Jackie bring seasoned leadership experience, broad customer relationships, and analytical skills honed within the scientific community. We are confident they will be instrumental to our continued success going forward.
“In addition, we recently received contracts to assist the National Institutes of Health in their fight against infectious diseases – in this case, COVID-19. With recent awards expected to generate approximately $15 million in calendar 2020, we will evaluate multiple therapeutic products and manage a consortium of partners to conduct trials in a rapid and efficient manner. Wins like this not only underscore the value of our expertise and relationships with key government agencies, they bolster the outlook for our Company at a time when the U.S. – and world – are seeking leadership in identifying and producing treatments to battle the continuing pandemic. I’m proud of DLH’s role in this fight and the assistance we’re providing towards getting a cure to market as soon as possible.”
Results for the Three Months Ended June 30, 2020
Revenue for the third quarter of fiscal 2020 was $51.5 million versus $38.7 million in the prior-year period. The significant increase was due primarily to the inclusion of revenue from the Social & Scientific Systems operating unit ("S3") for the full quarter, versus inclusion for three weeks in the prior-year period following the June 2019 acquisition.
Income from operations was $3.8 million for the quarter versus $1.7 million in the prior-year period and, as a percent of revenue, the Company reported an operating margin of 7.4% in fiscal 2020 versus 4.4% in fiscal 2019, reflecting stronger operating results, partly offset by increased amortization from acquired intangibles. Interest expense in the quarter was $0.8 million, versus $0.6 million for the three months ended June 30, 2019, due to the borrowing required to finance the S3 acquisition. Income before taxes was $3.0 million for the quarter versus $1.1 million in fiscal 2019, representing 5.8% and 2.9% of revenue, respectively, for each quarter.
For the three months ended June 30, 2020, DLH recorded a $0.9 million provision for tax expense versus $0.3 million in the prior-year period. The Company reported net income of approximately $2.1 million, or $0.16 per diluted share, for the third quarter of fiscal 2020 versus $0.8 million, or $0.06 per diluted share, for the third quarter of fiscal 2019. As a percent of revenue, net income was 4.1% for the third quarter of fiscal 2020 versus 2.1% for the prior-year period.
On a non-GAAP basis, EBITDA for the three months ended June 30, 2020 was approximately $5.5 million versus $2.6 million in the prior-year period, resulting in 10.7% and 6.7% as a percentage of revenue for each respective year. The year-over-year increase was primarily due to the impact of the S3 acquisition, including the improved operating leverage achieved through the expansion of the Company's business base, as well as growth across the Company’s legacy operations.
Balance Sheet and Cash Flow
DLH generated $10.0 million in operating cash during the third quarter of fiscal 2020, largely reflecting improved profitability and a reduction in accounts receivable. The Company anticipates continued strong operating cash flow for the remainder of fiscal 2020, and projects a debt balance of $40 to $42 million at fiscal year-end.
As of June 30, 2020, the Company had cash and cash equivalents of $0.7 million and debt outstanding of $44.5 million, versus cash of $1.8 million and debt outstanding of $56.0 million as of September 30, 2019. The next required principal payment is not due until September 2023, although the Company intends to continue using free cash flow to make prepayments when possible.
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 11:00 AM Eastern Time tomorrow, August 6, 2020. 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 10146068.
DLH (NASDAQ:DLHC) serves federal government clients throughout the United States and abroad delivering technology enabled solutions in key health and human services programs. The Company's seven core competencies include secure data analytics, clinical trials and laboratory services, case management, performance evaluation, system modernization, operational logistics and readiness, and strategic digital communications. DLH has over 2,000 employees serving numerous government agencies. For more information, visit the corporate website at
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 an acquisition; the challenges of managing larger and more widespread operations resulting from the 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 protest, 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 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, 2019, 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.
|Contact: Chris Witty|
TABLES TO FOLLOW
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands except per share amounts)
|Three Months Ended||Nine Months Ended|
|June 30,||June 30,|
|Cost of Operations:|
|General and administrative costs||6,323||4,811||18,497||13,462|
|Depreciation and amortization||1,721||914||5,340||2,037|
|Total operating costs||47,659||37,010||147,732||99,634|
|Income from operations||3,800||1,690||10,763||6,574|
|Interest expense, net||813||562||2,659||1,284|
|Income before income taxes||2,987||1,128||8,104||5,290|
|Income tax expense||863||325||2,352||1,207|
|Net income per share - basic||$||0.17||$||0.07||$||0.47||$||0.31|
|Net income per share - diluted||$||0.16||$||0.06||$||0.44||$||0.29|
|Weighted average common shares outstanding|
DLH HOLDINGS CORP.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value of shares)
|Cash and cash equivalents||$||658||$||1,790|
|Other current assets||3,772||1,831|
|Total current assets||34,065||26,847|
|Equipment and improvements, net||3,769||5,343|
|Operating lease right-of-use assets||22,276||—|
|Deferred taxes, net||358||2,345|
|Intangible assets, net||37,594||41,208|
|Other long-term assets||620||757|
|LIABILITIES AND SHAREHOLDERS’ EQUITY|
|Operating lease liabilities - current||$||1,768||$||—|
|Accounts payable, accrued expenses, and other current liabilities||24,253||20,633|
|Total current liabilities||35,509||29,485|
|Debt obligations - long term, net of deferred financing costs||42,542||53,629|
|Operating lease liabilities - long-term||21,686||—|
|Other long-term liabilities||—||573|
|Total long-term liabilities||64,228||54,202|
|Common stock, $0.001 par value; authorized 40,000 shares; issued and outstanding 12,354 and 12,036 at June 30, 2020 and September 30, 2019, respectively||12||12|
|Additional paid-in capital||85,496||85,114|
|Total shareholders’ equity||51,703||45,571|
|Total liabilities and shareholders' equity||$||151,440||$||129,258|
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
|Nine Months Ended|
|Adjustments to reconcile net income to net cash provided by operating activities:|
|Depreciation and amortization expense||5,340||2,037|
|Amortization of deferred financing costs||551||799|
|Stock based compensation expense||566||591|
|Deferred taxes, net||1,987||1,253|
|Non-cash gain from lease modification||(121||)||—|
|Changes in operating assets and liabilities|
|Other current assets||(1,941||)||(376||)|
|Accounts payable, accrued expenses, and other current liabilities||3,620||4,107|
|Other long-term assets/liabilities||726||(23||)|
|Net cash provided by operating activities||10,707||11,153|
|Business acquisition, net of cash acquired||—||(66,520||)|
|Purchase of equipment and improvements||(152||)||(29||)|
|Net cash used in investing activities||(152||)||(66,549||)|
|Borrowing on senior debt||—||70,000|
|Repayments of senior debt||(11,500||)||(11,646||)|
|Payment of debt financing costs||(3||)||(3,347||)|
|Repurchase of common stock||(211||)||—|
|Proceeds from issuance of common stock upon exercise of options||27||39|
|Net cash (used in) provided by financing activities||(11,687||)||55,046|
|Net change in cash and cash equivalents||(1,132||)||(350||)|
|Cash and cash equivalents at beginning of year||1,790||6,355|
|Cash and cash equivalents at end of year||$||658||$||6,005|
|Supplemental disclosures of cash flow information|
|Cash paid during the period for interest||$||2,207||$||645|
|Cash paid during the period for income taxes||$||432||$||675|
|Nine Months Ended|
|June 30,||June 30,|
|Human Services and Solutions||20||%||28||%|
|Public Health/Life Sciences||32||%||6||%|
|Time and materials||70||%||93||%|
|Firm fixed price||2||%||1||%|
|Prime vs Sub:|
Non-GAAP Financial Measures
The Company uses EBITDA and EBITDA as a percent of revenue as supplemental non-GAAP measures of our 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||Nine Months Ended|
|June 30,||June 30,|
|(i) Interest expense, net||813||562||251||2,659||1,284||1,375|
|(ii) Provision for taxes||863||325||538||2,352||1,532||820|
|(iii) Depreciation and amortization||1,721||914||807||5,340||2,037||3,303|
|EBITDA as a % of revenue||10.7||%||6.7||%||4.0||%||10.2||%||8.1||%||2.1||%|
In fiscal 2019, the Company incurred $1.4 million of acquisition-related expenses during the nine months ended June 30, 2019 for the acquisition of S3. The Company is excluding acquisition-related expenses from this measure because they were incurred as a result of a specific event, do not reflect the costs of our operations, and can affect the period-over-period assessment of operating results. In addition, we are including net income adjusted for the acquisition of S3, in total and on a per share basis, presented on a tax-effected basis. We are reporting this non-GAAP metric to demonstrate the impact of these events.
Reconciliation of GAAP net income to net income adjusted for the effect of the acquisition costs, a non-GAAP measure:
|Three Months Ended||Nine Months Ended|
|June 30,||June 30,|
|Tax effect of excluding acquisition costs||—||(362||)||362||—||(403||)||403|
|Net income adjusted for the acquisition costs||$||2,124||$||1,688||$||436||$||5,752||$||4,746||$||1,006|
|Net income per diluted share||$||0.16||$||0.06||$||0.10||$||0.44||$||0.29||$||0.15|
|Impact of acquisition||—||0.07||(0.07||)||—||0.08||(0.08||)|
|Net income adjusted for the acquisition costs||$||0.16||$||0.13||$||0.03||$||0.44||$||0.37||$||0.07|