DLHC - Earnings call transcript Q2 2019

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Operator

Good day, and welcome to the DLH 2019 Fiscal Q2 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would like to now turn the conference over to Chris Witty, Investor Relations Adviser. Please go ahead.

Chris Witty

Thank you, and good morning, everyone.

me and Zach Officer. Kathryn with Chief President call Officer Executive JohnBull, the today Parker, is and On Chief Financial company's page. PowerPoint website and earnings available The our on presentation under are Investor the release statement, I would provide the also to now of on X which safe Slide a shown presentation. is brief like harbor fiscal may beyond. include relate This and statements call to the XXXX that forward-looking company's outlook for from that these are subject to to could uncertainties cause statements and events actual forward-looking These differ risks materially statements. and results various to other refer contained Exchange the the Please risk the in XX-K and company's factors Form on and annual Commission. Securities filings report in our with We do update forward-looking not statements. to any any undertake duty both On and measures. non-GAAP today's financial we call, be referencing GAAP will is presentation our the A and in DLH's included on release reconciliation our GAAP in results of earnings investor non-GAAP to website. our results reported Zach President will for Kathryn followed JohnBull, it by which next CFO, speak up we'll open questions. and after CEO, Parker, like that, to turn now over call the With I'd to Zach. go Please Zach. ahead,

Zach Parker

Slide highest Thank Last report us robust able and we commitment partners good It quarter our integrity performance of deliver employees and DLH Chris, these year X. our through along with their QX to flow, cash sheet. results. the talented is that with reflecting balance results and night, excellence Starting driven for second to our you standards morning, as you, XXXX posted profitability, fiscal to discuss by we Thank were everyone. unwavering joining earnings strong enhanced an well.

million, some second reflecting seasonality high-level for $XX.X down key XXXX. million work and variations color outlook some by our was fiscal from whilst Let demands performance and XXXX, $XX.X a the on for providing overview in programs. and of slightly me financial of our in begin Revenue the quarter

$X.X versus last underlying the same per our income nature deploy during gross generated as last were period, year We a in for senior $X.X year, profit bolstering million the was share, $X.X for quarter cash such With second the XX.X% business. a able of as XX.X% diluted to net sheet, of the gross margin cash $X.XX to rose million million us operating debt XXXX to strategic we XXXX. payoff growth. in leaving from our strong fiscal Our posted of balance strong completely position very our to capital significant achievement that the quarter, with speaks flow, and

Turning Slide X. to

an macro Let provide update me on our environment.

for shutdown reminder, next for any year's the currently funded outlook agencies XXXX that the by were about a As budget. being and we government key impacted serve fully we're without optimistic

seems Health that The enjoy the that often markets to broad serve; areas dysfunctional, support. Washington we Public core While and Military Care, bipartisan continue Veterans, are

we strong to that We we well are Budget the confident today and our we as increased core as that that request to believe areas looking fully vast leverage at our those are for the in reflect future. organic and that to targeted commitment remain see acquisitive growth to government be continues as well pleased positioned XXXX the serve a the programs have programs very Forces well strong to behavioral there readiness, growth for space, and serving three forward. opportunities focus are Veterans the Armed that emphasis Defense And areas; the funded as going capabilities. we due experience market on health our our Accordingly,

and in remainder trends impact solicitation to several timely of accurately service Services market, see on the also used care of million moving during in positive and analytics retirees data the DLH addition, amounts benefit bidding Within is programs come. for In and where Data Big the expected more period cloud with computing XXXX. use need. time, greater XX mail-order Administration improve those fiscal to the provide the Solutions is during to its At DLH Veterans continues of same many order this can our and Human we to prolonged quarters and towards unabated be no pharmacy that responsiveness current should

example, to in area analytics recompete of care it Services CDC Health see half nation. in as make greater well strong our previously expand believe was market which sector, in a eradicated the XXXX of that which expand, XXX%; and balance nearly measles sub-agencies capabilities. research such more for and opioid For role for which the our monitoring strategically and the rate, of strong administration the crisis offers with rate new future. resurgence fueling three and growth; we of companies recent win during win recently associated like we diseases business family for likely Sciences part bright business as organic healthy as to funding Human reporting a areas. within look DLH Public Security sheet. organization, we with contract Homeland This have members will an also and HHS The new based health the combined tackle opportunities current forward to Life portion a second is of an the the opportunities course, and growth given short, evaluation each early in of will our focused expand our challenges indicators pipeline and and crisis for company our been these And quality other looking families, of of In due XXXX. the servicing we expanded the Health children DLH Department awarded under and

unchanged. programs identifying remains of attractive agencies strategy our target Our across

work IT, our leverage we us better of steadfastly more technology added and and ensure As margins, attractive analytics, research connecting highly while clients. that care both our our applies posture. and to the complex space. acquisitive within after health This We're value web-enabled capabilities our services data health and credentialed staffs applications organic growth with to look solutions in strengthen going human

cultural like drive over good long to we be of the selective horizon, over value point, ahead present acquisition and to midyear fit the haul. to about forward on remainder Financial the call that this we'll Officer, I'd that, opportunities us. to to a In opportunities turn strategic Kathryn? and we at and continue caliber upbeat We with are that our the of impressed JohnBull. already prospects remain XXXX With are looking ensure Kathryn closing, Chief ensure a enhanced of to the

Kathryn JohnBull

everyone. and We're to Zach, financial good quarter you, Thank another report morning, pleased of solid results.

year-over-year Turning second to months year X. for ended But performance quarter Zach revenue the The million XX, variation reflects expectations is some timing which contract the $XX.X XXXX. for posted due of the strong consistent revenue our remains three indicated in spending was lumpiness normal Slide in of We as overall, versus in fiscal patterns. contract million XXXX unusually service with prior $XX.X delivery, year, of to certain second obligations. Last earlier, quarter. quarter-to-quarter variance March performance

profit to X.X% on with total margin company gross approximately increase to posted moving $X.X profit Slide The expansion. of the gross $X.X due million X. Now last year million versus

sales, of last was a XX.X% gross versus XXXX percentage As quarter XX.X% improved program in second margin mix. year, reflecting

Income per G&A offset from $X.X increase X. fiscal million Slide the by from slightly or $X.X reported rose $X.XX for diluted XXXX just $X.X profit the of quarter to in approximately million an to net expenses. income last I stemming We second mentioned second operations $X.X of for loan. higher $X.X reflecting Turning share million gross income The second our for $X.X versus XXXX. the from XXXX for early Net recorded by the a non-cash provision million charge term million reduced of this was both quarter in fiscal the a company fiscals. second quarter million tax quarter retirement of fiscal fiscal year, of

our revenue versus the of term $X.X of for the percent sheet of of fiscal in our versus Turning credit at March this income million months approximately of was in to hand improved XX, period. ended cash in at prior remaining earnings in $X.X the year shows nothing our to end year. a at quarter, mentioned. summary Slide balance during presentation. loan XXXX, billion paid had $X.X discussed beginning EBITDA to We EBITDA on million versus three is of We of the XXXX $X.X Zach EBITDA facility our the of $X.X quarter, statement borrowed Slide off $X.X was largely the gross and our the in end fiscal the million X. and net had and reflecting the of as on A balance revolving back factors was million profit. a reconciliation quarter. GAAP X% million the XXXX, I linked the as X

discussion balance of With call in call operations the is like great company's my generated open statements. cash cash quarter. to Our to operator in We flow. sheet the shape, solid financial million approximately would for reflecting to concludes turn over This our the the now questions. I that, during the from $X.X

Operator

Capital. comes [Operator from Instructions] Joe go Please question NOBLE ahead. The with first Gomes

Joe Gomes

revenue and the is was looking year-over-year. it's are it that and And saying down the in $X was there? guys queue timing, anything like over million about on all due just As HHS looks to going seasonality else you everything, is there I

Zach Parker

No, business, is some that of in seasonal. function it actually the variability mostly a have we just

Some so the effort in of part at level all. disproportionate or the quarter early - of the was that, EBITDA latter part however, no quarter was - from it the contractual of not changes some quarter-to-quarter versus of no of real

Kathryn JohnBull

clustered scheduling board, of we some normal visits into QX more remember do things fiscal have on last that than Joe, the would QX the some XXXX discussing site came planned. you think in service monitoring issues would our the that expected slid I I events, year, have after but program year of we and last or -

those our caught up In this of spread program was much and service our events year, even was normalized. QX and light more the has been So delivery. really the QX on

perspective, of distributed. delivering operating just our program from quality the the the so cadence little And but evenly a more same same it's same and service, at

Joe Gomes

Okay.

was And you a do that increased discussed you to give on a are? corporate be And rate? G&A, those rest bit you a costs come That on it if due wondering will development I more that see back than the what Okay. was think down us to and elevated year, corporate it of color sense. to little guys more was development normal going level cost. it And some the higher able forward through makes run might you normal do little

Zach Parker

deal that degrees a really that flow do with though that, of year. as on earlier over and that the pace half side. it for the Joe, themselves. is think the the of a of in and cessation the varies bit opportunities function little course, that things response a us it's function Well, it's of probably see Certainly, a operating of reaction I nothing as certain of interest present standard to And, that second we'll that acquisition I us. described

seen calendar which indicated, that some which at, interest. some look stronger seen a we've we've targets I took some this As maintained year, some really we've of of and we've we passed

a of think it to would but target, sustain bit a add? expect moving to Kathryn, So we the be than it we will over is long-term. higher do anything

Kathryn JohnBull

in do appropriate, that's of of course targets potential on we and fixed Zach work a initial are think the internally of continuously and review set as I with resources. opportunities mode we mentioned,

a incremental insert think and expertise So so when something that's advisory or little what some some to we additional appropriate additional support, external incur that's that we costs represents. get on

Joe Gomes

Okay. new about the guys business you talked And pipeline.

the think What's some that come it's opportunity. I fruition? to at roughly to for looking guys these qualified you of are $XXX of opportunities million timing

Zach Parker

a slide thing, same to right. Basically the

our anticipated qualified portions that quarter VA for Street. the with would opportunities during have request had extended QX government had have We have for more those The like last probably proposal some actually on left. proposals work at we the of in has request substantive delays Opportunities much a

the that have see And encouraged very out. is those is those likely of two related house the well. be and we acquisitions XXXX amount to they out. think, some some that to revenue We out we QX the will late a certainly but government to we we finished, rule those XXXX, break as encouraged fiscal We for we or will year. materialize this before during in side this the freeze, evidence things to government fair obviously, of contracting is get one see obviously, stream indication drive the that sending quarter impacted the some of coming might are reason see of will expect see that the obviously, And

Joe Gomes

stumbling seen to one for about on That just or you haven't to detail What's will haven't some to block, mean, while I I more get have to color know you I that the fruition the why seems are because my guys pulled a M&A can increased or anything guys what and to from have for yet? valuation opportunities yet increase, talked seeing, of be other And just you you guess, valuations last trying know continually any we companies fit? I that appropriate be the haven't continue seemed seen it I me. cover, if the come trigger just great. provide as

Zach Parker

who deal. We I it development tell I pass Kathryn, corporate over you to the it's Well, can us But of initiatives. the for heads that will remain of course, selective. attractiveness our

pretty to look said finding We that add that, We the And obviously, that still can that got by under of to a package are can we very probably really her - delever attention, quality scale nature. that. and Kathryn? when think got to very, have we're not find team can of together so scale what cultural we move Kathryn that our sweet the put the seem looking locked or really out from We've interest, can we be passed capital support spot got things good and that on valuations fit a community, take once loaded still the reflective we Having strong strong care are fit. sake us. make right seven to hood. things deals our get of our sure did make deals there. addressable sure strategic we we've or And have and for been make sure are the ready of but we're good within to not the and very we and just six

Kathryn JohnBull

little work to companies feel how think Danya the - don't way. the as we've evaluating just left it to continue another done of we the not ourselves if on about position think want We I a Joe, we to from a a and We, integrate we've readiness the bit, perspective from and process, the to that post think you transaction. to Right. absorb did maybe again, talked earlier necessary well, work of both out expect but we calls, don't but here think be - transaction, some offer predating to acquisition position we and to of a matter to $XXX that competitive. right regard. investment business would point we of with a a number Zach that now the in manage what finding of really targets like target. is you seen ready is it's And you million on we're suggested, feel preparing as - million the we worth we're to absorbing book compete the which that we've $XXX in And trade-off out can there but where trade-off, are with valuation, be anyone have so figure to capital

process, that elected that So now the right when been because leave we're have interested are strong certainly a think in. across we we've We to decision. valuation it's made areas the

something value important in market able to but So up strengthen up new pick some think we'd to significant to the pick to the be run, shares long open company. less up love expensively, it's more something that's and we shareholder going add and

the best will that we're that. for particular with continue ready to effort of we valuation and So in target identify, that we terms

Joe Gomes

nice lot quarter. great. Thanks a Okay, and

Operator

The Canaccord. Ken go from with Please comes next ahead. question [Operator Herbert Instructions]

Austin Moldow

for This on is Ken. Austin

questions So just a here. couple of

So margins you we think is down? year should there margins gross and any about gross quarter. the specific posted reason they the for good that in very might How back step full

Kathryn JohnBull

high-teens the Sure. somewhere gross in traditionally It's margins XX% we've our of roughly XX, at margin ranges a the of low XX%. about and between as think past, end gross talked the And best range. to to very

continue of going for the factors revenues - expectation. in that and you to months, impact. was One looking go of there be, course, of measures you are a are We, improve XX have particular several kind our If particular that is time. where of back that's course, we mix to to always that

lot of maybe compressed a if a tend to So on it's you service the volume add delivery markups that's that top to requires have you high a generous. less travel, the be but since the that bit of going get to margins line,

to margins. particular on you helped risk driver contractors, on management some continue called as of if as out have we the taking your work hand, and improving the is arrangements, have some favorable of so things you build other to gross And to capabilities, if able towards improve of benefits employee that's going of reliance and one that's internal out margin. trends some less the of benefit On are therefore, to improving our

now necessarily reasonable XX - this a my of in care that's over So middle somewhere in of delivered XX% carry XX% on tends I if so outlook for gross quarter that wouldn't we to margins range, average the under say, be I just can to up And the, would XX% down, the probably a expectation say, but range. that period I went and out forecast, in the we time. it's would

Austin Moldow

it. look process have And Okay. contracts the that timing on That you and logistics or how be? update order of VA the any might you guys do Got makes think sense. potential the then might contract what

Zach Parker

that contract you Which was again? say again,

Austin Moldow

VA The contract. logistics and

Zach Parker

is logistics in The least will one. a be pharmaceutical indicated that Yes. done the will - contract done historically with in it VA be at series

the So place every the of to will to the sole is again, accordingly. always issue completed done will getting will be historically on that the its indicates they like And indication, the to subject have pharma the much And, last vibes both through XX-day process. able start be acquisition it source probably one change, course, then us they continue X.X and pharmacy that years period. it's we're but to transition bridges in until client over

we before early wouldn't perhaps. The XXXX anything So XXXX late or on expect to Street see

fixed that is reimbursable around in of Danya. of Let We question. do small portion with in have also large gross add the book little arena. We business a enjoy currently cost your and which came T&M margin price business a me our color a

opportunities it the pipeline, we're in at these that them contracts probably see reimbursable that offers of larger tend for have while that margin some that forecast capabilities, throb that we've we of year. our growth for and certainly bidding we've some strong will really to and to As us reduces continued look and of of little portion risk bit current certainly cost a this

expectations. manage we'll So

and characterize anticipated I think could their the organic margin larger be be of acquisition that so modeled. gross important sure hit our that as make side types do on we'll on wins contract some we it impact and the to will percentage even

Austin Moldow

an color on Great expand Okay. and guys Start you to question. opportunities one Great. provide in on Head are program continuing the how And you update Can that. just last guys the seeing contract?

Zach Parker

really and I you tell are really excited has drive closely are tremendous to have The really, job great there. transitioned about and leadership constituency reacquisition the to at to into and Helene to We new expect with that Sure. do this work core [indiscernible] some and benefits they look a year, their start doing for been leadership. the Program very the some can The team. their our place new of Director will program their that and our on government historic working sometime that the Manager that really we're that. team putting within team

We have a expect technology very, very, compete added well. program and value very increased of been lot really to really that driving to solutions

the committees But about excited we've upcoming it the our seeing appropriate about are it story value deliver bit more hill really a As really just welcome of that we Congress really for go how forward, are very course, into great the it. investor will program on and, heading, at well conferences where We and client. folks because some really a the may really, we're little laying is tell exciting tell. we we got

Austin Moldow

you Thank guys so great. Okay, much.

Operator

would closing conference Parker This like question-and-answer over now Zach our to to Instructions] [Operator the back any remarks. turn for I concludes session.

Zach Parker

again very roadshow I participation commitment to for key metrics and DLH. in and events, investor company industry and around We addressed to be and conference Well, thank, today. of months. with additional a color Kathryn want tuned conference that reputable just appreciate will coming events, your I ask interest we'll you some on in provide really stay everyone, strong we've the the your that couple

all you So thank now. have you, again, blessed Bye day. for a and

Operator

concluded. has conference presentation. The for now Thank attending today's you

may You now disconnect.

DLH (DLHC) 12 May 192019 Q2 Earnings call transcript