Q4 Revenue of $65.2 Million; Full Year Revenue $246.1 Million, up 17.6% over fiscal 2020; Debt Reduced to $46.8 Million
ATLANTA, Dec. 06, 2021 (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 fourth quarter ended September 30, 2021.
Highlights
Management Discussion
“The end of fiscal 2021 came with a few major developments that further accentuated an already standout year,” said DLH President and Chief Executive Officer Zach Parker. “We won contracts from the CDC and FEMA, which added over $120 million to our backlog as we posted annual revenue of $246.1 million and earnings of $0.75 per diluted share. We closed out fiscal 2021 with debt of $46.8 million, putting us in excellent shape – both from a balance sheet perspective as well as our book of business – for even stronger results going forward.
“DLH continued to perform with excellence in the midst of a global pandemic. As always, I would like to thank our talented team for their many accomplishments, hard work, and dedication to taking us to the next level in terms of size and performance. Given our professional, highly-credentialed staff, many recent awards, and ongoing demand for our technology-enabled suite of services, the future is bright for DLH.”
Results for the Three Months Ended September 30, 2021
Revenue for the fourth quarter of fiscal 2021 was $65.2 million versus $50.7 million in the prior-year period. The increase was due to the Company’s IBA acquisition, completed September 30, 2020, which added approximately $8.5 million in revenue, new business awards in the quarter and increased volume across legacy programs.
Income from operations was $4.0 million for the quarter versus $2.7 million in the prior-year period and, as a percent of revenue, the Company reported an operating margin of 6.2% in fiscal 2021 versus 5.3% 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. This more than offset an increase in depreciation and amortization as well as higher general and administrative costs, which rose due to incremental corporate development costs associated with a transaction that was pursued but not executed.
Interest expense was essentially flat at $0.8 million in the fiscal fourth quarter of both 2021 and 2020. Income before taxes was $3.2 million this year versus $1.9 million in fiscal 2020, representing 5.0% and 3.8% of revenue, respectively, for each period.
For the three months ended September 30, 2021 and 2020, respectively, DLH recorded a $0.3 million and $0.6 million provision for tax expense. The Company reported net income of approximately $2.9 million, or $0.21 per diluted share, for the fourth quarter of fiscal 2021 versus $1.4 million, or $0.10 per diluted share, for the fourth quarter of fiscal 2020. As a percent of revenue, net income was 4.4% for the fourth quarter of fiscal 2021 versus 2.7% for the prior year period.
On a non-GAAP basis, EBITDA for the three months ended September 30, 2021 was approximately $6.0 million versus $4.4 million in the prior-year period, or 9.3% and 8.6% of revenue, respectively.
Key Financial Indicators
Fiscal year to date, DLH generated $45.7 million in operating cash, inclusive of a $21.1 million advance payment related to the FEMA contract awarded in late September. The Company paid down $23.2 million of its secured loan facility and has satisfied mandatory principal amortization on the loan facility until December 31, 2023. The Company intends to continue using cash to make debt prepayments when possible.
As of September 30, 2021, the Company had cash and cash equivalents of $24.1 million and debt outstanding under its credit facility of $46.8 million, versus cash of $1.4 million and debt outstanding of $70.0 million as of September 30, 2020. The increase in cash was primarily due to an advance payment to fund deployment of emergency medical resources under the FEMA contract awarded in late September.
At September 30, 2021, total backlog was approximately $651.5 million, including funded backlog of approximately $191.0 million, and unfunded backlog of $460.5 million.
Conference Call and Webcast Details
DLH management will discuss fourth 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 today, December 6, 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 2,300 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 our recent or any future acquisition; 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 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, 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)
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| September 30, | September 30, | |||||||||||||||
| 2021 | 2020 | 2021 | 2020 | |||||||||||||
| Revenue | $ | 65,182 | $ | 50,691 | $ | 246,094 | $ | 209,185 | ||||||||
| Cost of Operations: | ||||||||||||||||
| Contract costs | 51,522 | 39,701 | 194,614 | 163,596 | ||||||||||||
| General and administrative costs | 6,532 | 5,698 | 25,054 | 24,195 | ||||||||||||
| Corporate development costs | 1,088 | 930 | 1,088 | 930 | ||||||||||||
| Depreciation and amortization | 2,010 | 1,664 | 8,115 | 7,003 | ||||||||||||
| Total operating costs | 61,152 | 47,993 | 228,871 | 195,724 | ||||||||||||
| Income from operations | 4,030 | 2,698 | 17,223 | 13,461 | ||||||||||||
| Interest expense, net | 808 | 781 | 3,784 | 3,441 | ||||||||||||
| Income before income taxes | 3,222 | 1,917 | 13,439 | 10,020 | ||||||||||||
| Income tax expense | 339 | 554 | 3,294 | 2,906 | ||||||||||||
| Net income | $ | 2,883 | $ | 1,363 | $ | 10,145 | $ | 7,114 | ||||||||
| Net income per share – basic | $ | 0.23 | $ | 0.11 | $ | 0.81 | $ | 0.58 | ||||||||
| Net income per share – diluted | $ | 0.21 | $ | 0.10 | $ | 0.75 | $ | 0.54 | ||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | 12,607 | 12,390 | 12,549 | 12,282 | ||||||||||||
| Diluted | 13,654 | 13,356 | 13,597 | 13,105 | ||||||||||||
DLH HOLDINGS CORP.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value of shares)
| September 30, 2021 |
September 30, 2020 |
|||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 24,051 | $ | 1,357 | ||||
| Accounts receivable | 33,447 | 32,541 | ||||||
| Other current assets | 4,265 | 3,499 | ||||||
| Total current assets | 61,763 | 37,397 | ||||||
| Equipment and improvements, net | 1,912 | 3,339 | ||||||
| Operating lease right-of-use-assets | 19,919 | 22,427 | ||||||
| Deferred taxes, net | — | 37 | ||||||
| Goodwill | 65,643 | 67,144 | ||||||
| Intangible assets, net | 47,469 | 52,612 | ||||||
| Other long-term assets | 464 | 606 | ||||||
| Total assets | $ | 197,170 | $ | 183,562 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Debt obligations – current, net of deferred financing costs | $ | — | $ | 6,727 | ||||
| Operating lease liabilities – current | 2,261 | 2,045 | ||||||
| Accrued payroll | 9,125 | 10,611 | ||||||
| Deferred revenue | 22,273 | — | ||||||
| Accounts payable, accrued expenses, and other current liabilities | 32,717 | 28,578 | ||||||
| Total current liabilities | 66,376 | 47,961 | ||||||
| Long-term liabilities: | ||||||||
| Deferred taxes, net | 1,176 | — | ||||||
| Operating lease liabilities – long-term | 19,374 | 21,620 | ||||||
| Debt obligations – long-term, net of deferred financing costs | 44,636 | 60,544 | ||||||
| Total long-term liabilities | 65,186 | 82,164 | ||||||
| Total liabilities | 131,562 | 130,125 | ||||||
| Shareholders’ equity: | ||||||||
| Common stock, $0.001 par value; authorized 40,000 shares; issued and outstanding 12,714 and 12,404 at September 30, 2021 and September 30, 2020, respectively | 13 | 12 | ||||||
| Additional paid-in capital | 87,893 | 85,868 | ||||||
| Accumulated deficit | (22,298 | ) | (32,443 | ) | ||||
| Total shareholders’ equity | 65,608 | 53,437 | ||||||
| Total liabilities and shareholders’ equity | $ | 197,170 | $ | 183,562 | ||||
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
| Twelve Months Ended | ||||||||
| September 30, | ||||||||
| 2021 | 2020 | |||||||
| Operating activities | ||||||||
| Net income | $ | 10,145 | $ | 7,114 | ||||
| Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
| Depreciation and amortization | 8,115 | 7,003 | ||||||
| Amortization of deferred financing costs charged to interest expense | 792 | 721 | ||||||
| Stock based compensation expense | 1,660 | 910 | ||||||
| Deferred taxes, net | 1,213 | 2,308 | ||||||
| Gain from lease modification | — | (121 | ) | |||||
| Changes in operating assets and liabilities | ||||||||
| Accounts receivable | (906 | ) | (5,408 | ) | ||||
| Other current assets | (766 | ) | (1,592 | ) | ||||
| Accrued payroll | (1,486 | ) | 489 | |||||
| Deferred revenue | 22,273 | — | ||||||
| Accounts payable, accrued expenses, and other current liabilities | 4,139 | 7,188 | ||||||
| Other long-term assets and liabilities | 486 | 839 | ||||||
| Net cash provided by operating activities | 45,665 | 19,451 | ||||||
| Investing activities | ||||||||
| Business acquisition, net of cash acquired | 59 | (32,678 | ) | |||||
| Purchase of equipment and improvements | (103 | ) | (152 | ) | ||||
| Net cash used in investing activities | (44 | ) | (32,830 | ) | ||||
| Financing activities | ||||||||
| Proceeds from debt obligations | — | 33,000 | ||||||
| Repayment of debt obligations | (23,250 | ) | (19,000 | ) | ||||
| Payment of deferred financing costs | (43 | ) | (898 | ) | ||||
| Repurchased shares of common stock | — | (211 | ) | |||||
| Proceeds from issuance of common stock upon exercise of options | 366 | 55 | ||||||
| Net cash (used in)/provided by financing activities | (22,927 | ) | 12,946 | |||||
| Net change in cash and cash equivalents | 22,694 | (433 | ) | |||||
| Cash and cash equivalents at beginning of year | 1,357 | 1,790 | ||||||
| Cash and cash equivalents at end of year | $ | 24,051 | $ | 1,357 | ||||
| Supplemental disclosures of cash flow information | ||||||||
| Cash paid during the period for interest | $ | 2,941 | $ | 2,806 | ||||
| Cash paid during the period for income taxes | $ | 936 | $ | 917 | ||||
| Supplemental disclosures of non-cash activity | ||||||||
| Non-cash cancellation of common stock | $ | 68 | $ | 211 | ||||
Revenue Metrics
| Twelve Months Ended | ||||||
| September 30, | September 30, | |||||
| 2021 | 2020 | |||||
| Market Mix: | ||||||
| Defense/VA | 57 | % | 49 | % | ||
| Human Services and Solutions | 15 | % | 20 | % | ||
| Public Health/Life Sciences | 28 | % | 31 | % | ||
| Contract Mix: | ||||||
| Time and Materials | 75 | % | 70 | % | ||
| Cost Reimbursable | 20 | % | 28 | % | ||
| Firm Fixed Price | 5 | % | 2 | % | ||
| Prime vs Sub: | ||||||
| Prime | 87 | % | 92 | % | ||
| Subcontractor | 13 | % | 8 | % | ||
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 uses GAAP net income adjusted for the effect of corporate development costs as a supplemental measure of Company results. We exclude corporate development costs from this measure because they were incurred as a result of specific events, do not reflect the costs of our operations, and can affect the period-over-period assessment of operating results.
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 | Twelve Months Ended | |||||||||||||||||
| September 30, | September 30, | |||||||||||||||||
| 2021 | 2020 | Change | 2021 | 2020 | Change | |||||||||||||
| Net income | $ | 2,883 | $ | 1,363 | $ | 1,520 | $ | 10,145 | $ | 7,114 | $ | 3,031 | ||||||
| (i) Interest expense, net | 808 | 781 | 27 | 3,784 | 3,441 | 343 | ||||||||||||
| (ii) Provision for taxes | 339 | 554 | (215) | 3,294 | 2,906 | 388 | ||||||||||||
| (iii) Depreciation and amortization | 2,010 | 1,664 | 346 | 8,115 | 7,003 | 1,112 | ||||||||||||
| EBITDA | $ | 6,040 | $ | 4,362 | $ | 1,678 | $ | 25,338 | $ | 20,464 | $ | 4,874 | ||||||
| Net income as a % of revenue | 4.4% | 2.7% | 1.7% | 4.1% | 3.4% | 0.7% | ||||||||||||
| EBITDA as a % of revenue | 9.3% | 8.6% | 0.7% | 10.3% | 9.8% | 0.5% | ||||||||||||
| Revenue | $ | 65,182 | $ | 50,691 | $ | 14,491 | $ | 246,094 | $ | 209,185 | $ | 36,909 | ||||||
Reconciliation of GAAP net income to net income adjusted for the effect of the corporate development costs, a non-GAAP measure (in thousands except for per share amounts):
| Year Ended | ||||||||||||
| September 30, | ||||||||||||
| 2021 | 2020 | Change | ||||||||||
| Net income | $ | 10,145 | $ | 7,114 | $ | 3,031 | ||||||
| Corporate development costs | 1,088 | 930 | 158 | |||||||||
| Tax effect of excluding corporate development costs | (267 | ) | (270 | ) | 3 | |||||||
| Net income adjusted for corporate development costs | $ | 10,966 | $ | 7,774 | $ | 3,192 | ||||||
| Net income per diluted share | $ | 0.75 | $ | 0.54 | $ | 0.21 | ||||||
| Impact of corporate development costs, net | 0.06 | 0.05 | 0.01 | |||||||||
| Net income per diluted share adjusted for corporate development costs | $ | 0.81 | $ | 0.59 | $ | 0.22 | ||||||
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