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DLH Reports Fiscal 2023 Third Quarter Results
来源: Nasdaq GlobeNewswire / 02 8月 2023 16:15:00 America/New_York
ATLANTA, Aug. 02, 2023 (GLOBE NEWSWIRE) -- DLH Holdings Corp. (NASDAQ: DLHC) (“DLH” or the “Company”), a leading provider of research and development, systems engineering and integration, and digital transformation solutions to federal agencies, today announced financial results for its fiscal third quarter ended June 30, 2023.
Highlights
- Third quarter revenue was $102.2 million in fiscal 2023 versus $66.4 million in fiscal 2022; the prior-year period included an adjustment of $(5.1) million related to the short-term FEMA task orders in Alaska, without which revenue was $71.6 million.
- Operating and net income for the third quarter were $7.1 million and $1.7 million, respectively, as compared to $7.1 million and $4.9 million in the prior-year period. Operating income for the fiscal 2022 quarter included $0.6 million from the FEMA task orders.
- Earnings before interest, taxes, depreciation and amortization ("EBITDA") was $11.4 million for the third quarter as compared to $9.0 million in fiscal 2022. The prior-year period included $0.6 million of EBITDA from the FEMA task orders.
- Total debt at the end of the third quarter was $195.8 million compared to $204.2 million as of March 31, 2023.
- Contract backlog was $817.8 million as of June 30, 2023 versus $940.6 million at the end of the fiscal second quarter.
Management Discussion
"Third quarter performance once again highlighted the Company's ability to produce strong underlying results," said Zach Parker, DLH President and Chief Executive Officer. "We passed the $100 million revenue run rate, improved margins sequentially from the second quarter, used cash flow to continue paying down debt and successfully accomplished several milestones in the GRSi integration. The contract award environment continues to experience some headwinds, reflecting certain contract protests and extensive procurement cycles. The Company remains in excellent position to capitalize on current market dynamics and execute on new business development initiatives, resulting in an active bid environment. Our expanded health IT suite of solutions — leveraging unique applications and our highly-credentialed staff — provides us access to penetrate new programs within the key government agencies we serve. At the same time, with our ability to generate healthy cash from operations, we remain on track to de-lever the balance sheet in the coming quarters, which we expect will result in increased returns to our shareholders."In addition, we recently announced that DLH had been awarded a contract to expand our role at the National Heart, Lung and Blood Institute within the National Institutes of Health. The multiple-award contract has a total ceiling value of up to $85 million over five years, and we'll be responsible for driving key digital transformation goals for the agency. Overall, we continue to see numerous opportunities to accelerate growth going forward, leveraging our expanded set of technology solutions, and are well prepared for further improved performance."
Results for the Three Months Ended June 30, 2023
Revenue for the third quarter of fiscal 2023 was $102.2 million versus $66.4 million in fiscal 2022, with the prior-year period including an adjustment of $(5.1) million related to the Company's short-term FEMA contracts in Alaska. Comparing this quarter's revenue performance to the same period in the prior fiscal year, excluding the impact from the FEMA contracts, revenue increased $30.6 million, including contributions of $34.4 million from GRSi.Income from operations was $7.1 million for the quarter versus $7.1 million in the prior-year period, which included $0.6 million from the FEMA task orders. Comparing this quarter's operating income performance to the same period in the prior fiscal year, excluding the impact from the FEMA contracts, operating income increased $0.6 million. As a percentage of revenue, the Company reported an operating margin of 7.0% in the fiscal 2023 third quarter versus 10.7% in fiscal 2022, with the year-over-year decline primarily due to higher non-cash amortization expense as a result of the GRSi acquisition.
Interest expense was $4.9 million in the fiscal third quarter of 2023 versus $0.5 million in the prior-year period, reflecting higher debt outstanding due to the acquisition of GRSi and increased interest rates. Income before income taxes was $2.2 million this year versus $6.6 million in fiscal 2022, representing 2.1% and 9.9% of revenue, respectively, for each period.
For the three months ended June 30, 2023 and 2022, respectively, DLH recorded a $0.5 million and $1.7 million of income tax expense. The Company reported net income of approximately $1.7 million, or $0.12 per diluted share, for the third quarter of fiscal 2023 versus $4.9 million or $0.34 per diluted share, for the third quarter of fiscal 2022. As a percentage of revenue, net income was 1.7% for the third quarter of fiscal 2023 versus 7.3% for the prior-year period.
On a non-GAAP basis, EBITDA for the three months ended June 30, 2023 was approximately $11.4 million versus $9.0 million in the prior-year period, or 11.1% and 13.5% of revenue, respectively. Adjusted EBITDA1 was $11.4 million versus $8.4 million for the prior-year period, or 11.1% and 11.7% of adjusted revenue, respectively.
Key Financial Indicators
For fiscal 2023, DLH has produced $15.0 million in operating cash. As of June 30, 2023, the Company had cash of $0.5 million and debt outstanding under its credit facilities of $195.8 million versus cash of $1.1 million and debt outstanding of $22.0 million as of September 30, 2022. The Company is on pace to reduce its total debt balance to between $185.0 million and $187.0 million by the end of this fiscal year.At June 30, 2023, total backlog was approximately $817.8 million, including funded backlog of approximately $147.3 million and unfunded backlog of $670.5 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, 2023. 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 5343381.
About DLH
DLH (NASDAQ:DLHC) enhances public health and national security readiness missions through science, technology, cyber, and engineering solutions and services. Our experts solve some of the most complex and critical missions faced by federal customers, leveraging digital transformation, artificial intelligence, advanced analytics, cloud-based applications, telehealth systems, and more. With over 3,200 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 innovative solutions 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 risk that we will not realize the anticipated benefits of our acquisition of GRSi or any other acquisitions (including anticipated future financial performance and results); the diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from our recent acquisition; the inability to retain employees and customers; contract awards in connection with re-competes for present business and/or competition for new business; our ability to manage our increased debt obligations; compliance with 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 GRSi or any future 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, 2022, 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, 2023 2022 2023 2022 Revenue $ 102,241 $ 66,440 $ 274,385 $ 327,940 Cost of Operations: Contract costs 80,919 49,668 216,779 271,184 General and administrative costs 9,935 7,535 27,670 22,178 Corporate development costs — 250 1,735 250 Depreciation and amortization 4,280 1,873 11,281 5,740 Total operating costs 95,134 59,326 257,465 299,352 Income from operations 7,107 7,114 16,920 28,588 Interest expense 4,917 512 11,512 1,739 Income before provision for income taxes 2,190 6,602 5,408 26,849 Income tax expense 452 1,738 1,318 7,003 Net income $ 1,738 $ 4,864 $ 4,090 $ 19,846 Net income per share - basic $ 0.13 $ 0.38 $ 0.30 $ 1.55 Net income per share - diluted $ 0.12 $ 0.34 $ 0.28 $ 1.40 Weighted average common shares outstanding Basic 13,854 12,812 13,638 12,779 Diluted 14,539 14,235 14,421 14,205 DLH HOLDINGS CORP. CONSOLIDATED BALANCE SHEETS (Amounts in thousands except par value of shares) June 30,
2023September 30,
2022(unaudited) ASSETS Current assets: Cash $ 530 $ 228 Accounts receivable 67,882 40,496 Other current assets 4,082 2,878 Total current assets 72,494 43,602 Equipment and improvements, net 1,690 1,704 Operating lease right-of-use assets 17,911 16,851 Goodwill 138,301 65,643 Intangible assets, net 128,891 40,884 Other long-term assets 88 328 Total assets $ 359,375 $ 169,012 LIABILITIES AND SHAREHOLDERS’ EQUITY Current liabilities: Operating lease liabilities - current $ 3,478 $ 2,235 Accrued payroll 17,545 9,444 Debt obligations - current, net of deferred financing costs 28,716 — Accounts payable and accrued liabilities 25,602 26,862 Total current liabilities 75,341 38,541 Long-term liabilities: Deferred taxes, net 1,203 1,534 Operating lease liabilities - long-term 16,485 16,461 Debt obligations - long-term, net of deferred financing costs 159,379 20,416 Other long-term liabilities 1,801 — Total long-term liabilities 178,868 38,411 Total liabilities 254,209 76,952 Shareholders' equity: Common stock, $0.001 par value; 40,000 shares authorized; 13,900 and 13,047 shares issued and outstanding at June 30, 2023 and September 30, 2022, respectively 14 13 Additional paid-in capital 100,072 91,057 Retained earnings 5,080 990 Total shareholders’ equity 105,166 92,060 Total liabilities and shareholders' equity $ 359,375 $ 169,012 DLH HOLDINGS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) (unaudited) Nine Months Ended June 30, 2023 2022 Operating activities Net income $ 4,090 $ 19,846 Adjustments to reconcile net income to net cash provided by (used in) operating activities: Depreciation and amortization 11,281 5,740 Amortization of deferred financing costs charged to interest expense 1,540 497 Stock-based compensation expense 2,020 1,952 Deferred taxes, net — (1 ) Changes in operating assets and liabilities: Accounts receivable (1,918 ) (16,890 ) Other current assets 130 (152 ) Accrued payroll 274 4,032 Deferred revenue — (22,273 ) Accounts payable and accrued liabilities (4,221 ) 2,380 Other long-term assets and liabilities 1,801 110 Net cash provided by (used in) operating activities 14,997 (4,759 ) Investing activities Business acquisition, net of cash acquired (180,711 ) — Purchase of equipment and improvements (580 ) (244 ) Net cash used in investing activities (181,291 ) (244 ) Financing activities Proceeds from revolving line of credit 144,697 — Repayment of revolving line of credit (128,204 ) — Proceeds from debt obligations 168,000 13,500 Repayments of debt obligations (10,688 ) (31,750 ) Payments of deferred financing costs (7,666 ) — Proceeds from issuance of common stock upon exercise of options and warrants 1,107 543 Payment of tax obligations resulting from net exercise of stock options (650 ) (281 ) Net cash provided by (used in) financing activities 166,596 (17,988 ) Net change in cash 302 (22,991 ) Cash - beginning of period 228 24,051 Cash - end of period $ 530 $ 1,060 Supplemental disclosure of cash flow information Cash paid during the period for interest $ 10,006 $ 1,195 Cash paid during the period for income taxes $ 4,055 $ 6,403 Supplemental disclosure of non-cash activity Common stock surrendered for the exercise of stock options $ 238 $ 256 Non-GAAP Financial Measures
The Company uses EBITDA and EBITDA Margin on 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 Margin on Revenue is EBITDA for the measurement period divided by revenue for the same period.The Company is presenting additional non-GAAP measures regarding its financial performance for the three and nine months ended June 30, 2023. The measures presented are Adjusted Revenue, Adjusted Operating Income, Adjusted EBITDA, and Adjusted EBITDA Margin on Adjusted Revenue. In calculating these measures, we have added the corporate development costs associated with completing the GRSi acquisition to our results for fiscal year 2023 and we have removed the contribution from the FEMA task orders from the results for fiscal year 2022. These resulting measures present the quarterly financial performance compared to results delivered in the prior year period. Definitions of these additional non-GAAP measures are set forth below.
We have prepared these additional non-GAAP measures to eliminate the impact of items that we do not consider indicative of ongoing operating performance due to their inherent unusual or extraordinary nature. 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.
These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies in our industry. Adjusted Revenue, Adjusted Operating Income, EBITDA, Adjusted EBITDA, EBITDA Margin on Revenue, and Adjusted EBITDA Margin on Adjusted Revenue are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance investors should (i) evaluate each adjustment in our reconciliation to the nearest GAAP financial measures and (ii) use the aforementioned non-GAAP measures in addition to, and not as an alternative to, revenue, operating income, net income or diluted EPS, as measures of operating results, each as defined under GAAP. We have defined these non-GAAP measures as follows:
“Adjusted Revenue” represents revenue less the contribution to revenue from the short-term FEMA task orders
“Adjusted Operating Income” represents operating income plus the corporate development costs associated with completing the GRSi acquisition incurred in fiscal 2023 less the contribution from the FEMA task orders, which occurred in fiscal 2022.
“Adjusted EBITDA” represents net income before income taxes, interest, depreciation and amortization and the corporate costs associated with completing the acquisition, less the contribution from FEMA task orders. “Adjusted EBITDA Margin on Adjusted Revenue” is calculated as Adjusted EBITDA divided by Adjusted Revenue.
Below is a reconciliation of Adjusted Revenue, Adjusted Operating Income, EBITDA, Adjusted EBITDA, EBITDA Margin on Revenue and Adjusted EBITDA Margin on Adjusted Revenue reported for the three and six months ended June 30, 2023 and 2022 compared to the most directly comparable financial measure calculated and presented in accordance with GAAP (in thousands except for per share amounts):
Three Months Ended Nine Months Ended June 30, June 30, 2023 2022 Change 2023 2022 Change Adjusted Revenue Revenue $ 102,241 $ 66,440 $ 35,801 $ 274,385 $ 327,940 $ (53,555 ) Less: FEMA task orders to support Alaska (a) — (5,116 ) 5,116 — 125,773 (125,773 ) Adjusted Revenue $ 102,241 $ 71,556 $ 30,685 $ 274,385 $ 202,167 $ 72,218 Adjusted Operating Income Operating Income $ 7,107 $ 7,114 $ (7 ) $ 16,920 $ 28,588 $ (11,668 ) Corporate development costs (b) — — — 1,735 — 1,735 Less: FEMA task orders to support Alaska (c) — 608 (608 ) — 12,479 (12,479 ) Adjusted Operating Income $ 7,107 $ 6,506 $ 601 $ 18,655 $ 16,109 $ 2,546 EBITDA, Adjusted EBITDA, EBITDA Margin on Revenue & Adjusted EBITDA Margin on Adjusted Revenue Net Income $ 1,738 $ 4,864 $ (3,126 ) $ 4,090 $ 19,846 $ (15,756 ) Depreciation and amortization 4,280 1,873 2,407 11,281 5,740 5,541 Interest expense 4,917 512 4,405 11,512 1,739 9,773 Income tax expense 452 1,738 (1,286 ) 1,319 7,003 (5,684 ) EBITDA $ 11,387 $ 8,987 $ 2,400 $ 28,202 $ 34,328 $ (6,126 ) Corporate development costs (b) $ — $ — $ — $ 1,735 $ — $ 1,735 Less: FEMA task order to support Alaska (c) — 608 (608 ) — 12,479 (12,479 ) Adjusted EBITDA $ 11,387 $ 8,379 $ 3,008 $ 29,937 $ 21,849 $ 8,088 Net income margin on Revenue 1.7 % 7.3 % 1.5 % 6.1 % EBITDA Margin on Revenue 11.1 % 13.5 % 10.3 % 10.5 % Adjusted EBITDA Margin on Adjusted Revenue 11.1 % 11.7 % 10.9 % 10.8 % (a): Represents revenue adjusted to exclude revenue from the short-term FEMA task orders during the three and nine months ended June 30, 2022.
(b): Represents corporate development costs we incurred to complete the GRSi transaction. These costs primarily include legal counsel, financial due diligence, customer market analysis and representation and warranty insurance premiums.
(c): Adjusted operating income represents the Company’s consolidated operating income, determined in accordance with GAAP, adjusted to add the corporate development costs associated with the GRSi acquisition for fiscal year 2023 and adjusted to exclude the operating income derived from the FEMA task orders. Operating income for the FEMA task orders is derived by subtracting contract costs of ($5.7) million from the revenue attributable to such task orders during the three months ended June 30, 2022 of ($5.1) 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.
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1 Adjusted Operating Income, EBITDA, Adjusted EBITDA, EBITDA Margin on Revenue, and Adjusted EBITDA Margin on Adjusted Revenue are non-GAAP financial measures. See “Non-GAAP Financial Measures” below for additional detail.
