DLHC - Earnings call transcript Q2 2020

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Operator

Good day, and welcome to the DLH Holdings Corp. Fiscal 2020 Second Quarter Earnings Call. [Operator Instructions] Please note, today's event is being recorded.

I would now like to hand the conference over to Chris Witty, DLH Investor Relations Adviser. Please proceed, sir.

Chris Witty

morning, good and you everyone. Thank

and with On the President Officer. Investor is available release Parker, Relations page. today Chief the The our Executive under earnings Financial call and Chief Officer; Zach JohnBull, are me and website presentation PowerPoint company's on Kathryn

could and I would relate may call XXXX brief various are for include to statements that provide to factors do the statements with and safe is company's which fiscal Exchange statements. contained This duty these undertake results forward-looking in statement, now that on the These cause risk on company's the Please shown Securities presentation. like to subject statements. outlook any the and also risks Slide and actual a filings forward-looking harbor report beyond. X annual and of differ forward-looking materially not to uncertainties to other We in the Commission. update Form events refer any to XX-K from our

be is On results measures. presentation website. results GAAP today's reported the call, we and earnings to our in our referencing both reconciliation release DLH's of A investor and in non-GAAP our financial included on non-GAAP GAAP will

Kathryn speak for Zach JohnBull. CEO, by it President and After open next; questions. followed we'll Parker, will which, CFO, up

With Please that, call go the I'd Zach. now like over ahead, to to turn Zach.

Zach Parker

Thank you, Chris, and everyone. good morning,

Welcome our conference quarter to call. second

quite we the XXXX, began changed since but posted drastically has these of face in world challenging solid has the results course, economic Of DLH times.

company. the for our 'XX contribution the reflecting restructuring, the X, a some fiscal - around overview record the our and of you of well let organic company color - begin new of revenue XXXX. high-level as a quarter, for The the outlook financial acquisition our turn me across 'XX of as If million to growth by Slide positive posted providing the performance $XX.X rest SX since

additional year's our by performance services, from the second environment. order prescriptions and this other perspective, program top a an was demand strong While for often helped reflecting line COVID-XX quarter mail current is

the EBITDA $X.X and million to and, We a debt our $X cash flow million, rose in posted moment. generated quarter, and more paid second also million in we cash position noted, January. income of previously operating down $X.X quarter Operating in the of in senior Kathryn will million as a new other $X.X record. our of debt discuss

I'm to Affairs proposal the also umbrella for that organization during the canceled services our announce contract. pharmacy previously issued the pleased quarter, Veteran under CMOP request its for

that prime As a you from may requirement the recall, a prime be which have contractor would service-disabled, perform additional veteran-owned would small continuing this an business, contractor. us RFP included to as precluded

analysis, restart and consideration it After many later the would the date. of a months change determined solicitation and that the at process government requirement

when process. proceed, how to to This be the know the work in forward or do does future and participating for its we While contracts current exactly DLH extended. procurement us, remains look valued to yet will process we expect not revised these services highly

doing those economic our can I'll everything session. employees and filings. As to also on X-K be investors the in or Q&A to our the the COVID-XX, our our any address are possible conditions of from to repercussions more this our information about website find of happy during topic specifically we and and onset adjust safeguard we current of health various the customers, the

many and help country. see leverage our relief care health to our solutions technology-enabled to bring We opportunities

and helping challenges the suited the to portfolio lives If that challenge the U.S. are COVID-XX we you serve, look of the improve our show Through mission-critical at national, that of Slide the attack various well we and time. our and operations agencies X, the millions. markets solutions of we're

strategies help - the proud see can care I'm this emergency and the and of and that doing for the are a information proud vaccines. in of arena particular, as their as commitment potential in we health programs agencies very are care well involved DLH and we're serve. on plethora medications work assess doing this communicate we our slide, you for their As volatile to hard time nation's in work that of and that people during we history. in And veterans, our

Institute Turning place very mentioned. which just contracts of X. a of medications primarily across to assess is I the some efficacy. light potential few various many and examples work compile to Slide agencies, want has on in I on shed to DLH including specific the National data drug Health,

and related mobilization search this pivoted potential have to our we COVID-XX, pandemic. activities As for infectious disease prioritize vaccines part rapid to the cures of to

sure hydroxychloroquine and advanced strong have by Infectious remdesivir, Allergy network for has and clinical clinical news. COVID-XX. accelerate team, are National preliminary our our ongoing does in-house which Diseases, is that many that for with analysis, you Leveraging read of the already recovery sponsored other the our of trials Institute the remdesivir trials patients the that I'm shown medications and in synthetic about

We will portfolio. will evidence help services think millions analyses would kind us between of to provide the efficacy that that in this of be obviously may that for life or important death that that demonstrate provide the ability difference in our our work these of literally Americans clear mean to these continue is These therapies really future.

results in impact of While end not make a the the to how of will future these are and - our the in difference work. studies for clients are the how in clearly we nation place our future right COVID-XX, sure these we

In across across CDC Agency, and see data seen interest VA opportunities DHA, growth solutions we've growing board the at the in Defense health-driven NIH. We Health HHS, for the expertise and our incremental technology-enabled addition, and analytics. well-known

with Institute on Infectious many current array well we have long-standing are an again, the work NIH and relationships we assist As customer from COVID-XX, Fauci's And seen Diseases. positioned organization Allergy our Dr. of National to agencies, including across of initiatives.

decision-making telehealth some solutions, including these of management program big we applications, are that the our activities that several pandemic. data on also tied expect leadership contracts this company's bidding in analytics We're leverage the and to on rapid arena, and

need research, never now. has The testing accurate and reliable and been for than analysis greater

vaccines alike to health medical develop this to industry and treatments public our government urgent race and catastrophe. As battle

Now government InfiniByte portal to shareholders, Cloud DLH's turning available the like the central cloud that now the the Risk on and for Slide civilian X, as of it Defense. Program, offerings. FedRAMP, as solution assessment is meets the requirements - remind customers enhanced and the our agencies to marketplace, federal capabilities security stands of indicates Authorization again, I'd Management also the FedRAMP Federal that which that well a and has by security Department undergone need DLH for

need and confidentiality, the a very the secure the to reliable fast of allows data Cloud, health We're business secure us now provide bolster options manner. marketplace market. able security access and to in data expansion and to provide do the ensure our InfiniByte secure our in the believe tools they environment in to will with analytical platform, integrity their new agencies work. that data storage a this cloud-based platform-as-a-service that We analytics

call these I Before once that again just to by to during turning strong volatile want a stable of stating up wrap DLH company to times. very and kind Kathryn, the over be has proven

diverse our mission-critical provide industry many and agencies, This somewhat consistent government a a steady, services with to our to the continue strategy, well-funded of is clear. value and this We predictable more never outlook in variety seem translates our very while been and technology-enabled struggle. of platforms has to to

cash margins has senior and flow, with sheet DLH debt now repayments strong strengthening we're paying faster required by required Again, and until down balance strong our than our no XXXX.

the to capacity low requirements sustain tax business as liquidity provide substantial CapEx benefits Our forward. and and we look borrowing

model, operating need. a We during that take program industry somewhat pandemic and make very times of of the seriously. COVID-XX our expertise also provider critical our services But portfolio unique know us these

we work diligently core tragic to tomorrow. with get While safeguarding of Americans brighter customers and this and turn many to lead our a the through to employees, events way continue

is DLH There of these way is lives improve the of a Americans. millions always proud to forward, and

FDR limit of "The to As our our today. of will realization tomorrow doubts said, be only

and well. forward be be So and us active strong Let a move strong faith." with

Financial to JohnBull. call to that, I'd like Chief With now our Kathryn the Kathryn? turn Officer, over

Kathryn JohnBull

joining morning, good Thank you, us. for Thanks everyone. Zach, and

to second We're quarter. report another pleased solid

Turning year for the versus $XX.X months to of posted We in million Slide revenue quarter. prior million X XX, the XXXX, ended second March X. $XX.X

the reflects from that June, our as strong $XX.X transaction, well growth coming as last of SX million our across variance approximately of revenue The acquisition other impact operations.

VA Our more second our quarter offset from minor higher some programs, travel. results reductions COVID-related order mail which demand benefited from requiring than programs for

reflecting XXXX and of Income revenue SX operating X. from operating from operations increased acquired the Slide X% margins rose income to in even year, transaction. last quarter the Turning million $X.X of the The higher intangibles for stronger $X.X of reflected with margins face greater million amortization respectively. X.X%, from to second fiscal

year, revenue last due $X.X to to decline in from from development second $XX.X XXXX. a rose but of as the million some the was greater million million revenue percent and million a as in declined $X.X percent timing activity. leverage of business of operating $XX.X quarter The to G&A

difficult pin quarters be business will X. higher it's in and frame, expenses While development to do expect the exact down always time we that X

tax of We million $X.X recorded also million - million $X.X income. And in or fiscal versus $X.X versus $X.XX expense The fiscal a net second provision year. higher approximately XXXX diluted $X.X versus reported company share with last interest year. million million $X.XX $X.X net income a last reflecting $X.X share pretax per million or this 'XX quarter was in

expense interest higher was of outstanding in the debt in due recognition year-over-year to The SX increase balances transaction.

continue as as review a I'll further as down in possible, pay We to expeditiously debt moment.

year the million improved SX X. ended Turning versus $X.X months leverage. XXXX, EBITDA was acquisition X the to prior reflecting in March period, for and $X.X million Slide operating the XX,

year. earnings EBITDA this percent back versus a and in to quarter reconciliation is last presentation. this XX.X% of EBITDA to in income sales, of GAAP A the our As net rose of statement X.X%

debt, quarter's XXXX. the are once We've our reducing operating to since of practice we've using the end XX $X of today, in of pay the And made at in paid of quarter cash additional again the debt progress in $XX SX transaction since debt down position in acquisition of our XXXX. million senior $XX continued Reflected senior an million total down Slide we've debt. since illustrates June and end. the the the senior presentations million as

which second QX since is Our complete, and has early our that's the but flow by the standpoint. April financial generation in cash May, cash collections start receivable outstanding of decreased from strong a with systems, to impacted a great quarter integration backlog was

million Looking debt fiscal course, our our and only of not our interest line anticipate of year-end. balance it financial position, company's the results. $XX improving forward, a strengthens between bottom at we million expense, Prepaying debt $XX reduces

required Zach previously, mentioned today, debt - - we of repayments are until September further no As XXXX. in are as we well of

questions. I statements. my our for to like that, discussion financial turn operator to would With the of to This open over call now the concludes call

Operator

will Canaccord. today question first come from Our with Instructions] Ken [Operator Herbert

Ken Herbert

I hope we the the into quarter? to in gross how mix everybody historically, the step-up nice is margins second half half wanted of in the well SX, should third seen a margins fiscal I challenging first these just times. think you've - different now in to from and ask, with with about the wondering Kathryn, I'm year. gross fourth first

Kathryn JohnBull

Yes.

with I better. be pretty think we maybe second consistent and slightly the will quarter

course, lower going We are, as as gross program VA absolute of gross parts mentioned, it rate grows, has you business. volume the as the that see to there, one is the the from margin of of which - while increased margin stronger our contribution

in the hand, contracts that on acquired business we the will comments. the that to grow as other discussed continue the do we contributions think Zach expand from his On

- So a the around And XX% that year. planning remaining continuing of I XX% to XX.X% towards the around We for think plan quarters I'm quarter. we similar purposes, delivered or this are for at margin. something XX% year to looking to for the gross to

Ken Herbert

and in That's Okay. two questions the Yes, around the Is helpful. and great that. CMOP it there contract structure. on news - change

recompete a of sort formal process structure? under sort First, when the revised you expect do a of

you But I debate And follow about imagine, a your as CMOP streams, from think there's other backed set-aside? changes contract expect then would to don't know the of been structure. they've would that, now do the other second, - VA you I expect in any proposed streams work, away risk you as other some whether a the as

Zach Parker

Yes. Sure.

believe where the are on your let's really start - which with very we actively We've is subject focused it we're to We in a set-aside pipeline. not second where for where course, in is on on us additional been couple not - set-aside. going opportunities, certain projects with to capabilities. to work, what's which There - sense of that question bolt to of regard lean they are makes strategically

set-aside see new is DLH. some an too, business part opportunity, that will continue too. strong really our of we be pipeline. again, for So it the for Every future to prime indication in work, a And also opportunities

looking revised still There some the their difficult schedule organization. really And solicitation support at frankly, new regard shops, of like It's - deck the to course, hands what much associated to solicitation, our or With the pretty Quite tell. they're all the things have some solicitation. many to veterans. tell. early of they're COVID-XX new on do their of been other with to on in to some with too acquisition it's changes, for

So probably right a that slide the we going bit. in with pandemic, what's will suspect things the on to it

So say amount would the of remainder course next through year we're impact And through estimates, no fair of this we'd well. a probably the seeing best year. of fiscal fiscal as we continue

Ken Herbert

got of just with I firm business well-positioned everything bid of or quote Can - many in SX. without there's could. clearly But comment you different And pipeline know But appreciate I In a how around That's directions. on about addition on this COVID-XX, with and seeing can the seeing any anything the in you're maybe light evolve? it's great. are very metrics activity I finally, if levels maybe. And going you still opportunity activity of a now opportunities that can pandemic? you've light thinking the in portfolio just lot response you early obviously provide just and

Zach Parker

Sure.

a couple been in So engaged. ways there's we've which of

areas like in to they whenever on our right? resources ourselves something work time-sensitive, substantial amount have First tasking we currently. from the this require resources A been our vein, and existing there's quite foremost, devote done of the pivot has to that's companies often, that

really labs of our epidemiologists some nature. how So the others we'll of things reallocate have direction and folks and Chief trials and under and of purpose our our we Scientist that clinical

through first acquisition the that part right, cycle. don't an have been they wait that's it, So so of to

we've These had same be - And coming NIH. Center about and a the dozen also are right? as At some largely from Control turnkey for we've might right? as time, order may some want that of support turnkey be entertaining the to are imagine, say turns, you relatively some And that won quick for small bids, other countries opportunities. Disease I - But in looking the a of already. are bids at there'll we're There these well. for couple

type outreach get things And can that we mature, then be IIIs. a vaccines our what's now to handle start the of type to and at going and government approach additional and a to move and what's look going data start into therapeutics trials be IIs as from and to may those of stabilize that's to to start the take studies, around our approach Phase the and information to to and when then start gather

and to as we've and later. then items some epidemics will for will evolve it continue, level-set it more short-term, quick-turn activities sustainable So seen, previous continue pandemics, into with

with what turns little and we'll, to this more regard more over looks a the course the So next to like. course, bit be then able of quarter talk about of know we'll future the quick

certain is that's This to away this for to know, kind our of as work be legacy have others, as on you diseases, work as in the and goes, soon. this is vulnerable. our veterans presentation, We've going impacts then virus most other clearly described as on continued go viruses, populations, clearly as chronic well completely as those including, anytime - we protection a and HIV they that and such doing

vulnerable. there's around think going some the to studies be continue most I to

and not of the it's in areas seniors underserved country, community. only in the this particularly, in those And minority in our course, for case, but

that we through think, get phase, spin-ons initial there And we once positioned pretty a be will be we'll this going further. number support well to of, so

Operator

Instructions] will of [Operator Capital. Our NOBLE next Chris question come Bliska from

Christian Bliska

revenues, Congratulations great I the you VA granularity increase, up year-over-year. on quarter. a that what Can that questions. on please? have little sustainability give XX.X% a of drove two and

Zach Parker

things VA of organic there One a been the and There's sustainable. standpoint. standard pharmaceutical is it from demand think a just support increases in play We right now. couple has in is for

little Kathryn to is the challenging in well. bit, addition, alluded see impact as we late March, started a in It quarter, environment. to relative as COVID-XX a some to In work

volatility across make to time think it's come, we indicative do our some some demands. can for next going to what's sure But see workforce there's we sustainable So to the those certainly over of quarters. several be

you get But as we mode a it's again, to in by just year. where the well. idea piece We'll in to have see growth expect to plateau get idea, So that got clearly think, we it expansion of I add quarters Kathryn, of a to see the in about We'll but an fiscal continued QX, we upcoming is. end the anything time that? this better overall. do a

Kathryn JohnBull

- exactly COVID things the that think effect There right. I some pervasive. are are of that's obviously,

of they're distance that one treatment And that so of the effects and is military to within hospitals. treatment medical knock-on VA facilities their obviously for trying socially the

there they they're have route CMOP. And inside hospitals the that having through steering so otherwise fulfilled work would it

So there's over I soon. see earlier, to over facility practices a CMOP fulfill to trying of minimize as facilities those of natural to gauge the very - the anytime those work traffic in mentioned VA curtailing VA. don't on through And to we of behalf transition

very sustainable, of expect to that which I it's to not business. we to cost-effective managing be the a So mention way think

it steered think is I way, will we So sustain. traffic expect that once that

Christian Bliska

of think you I to said an some SX, see just touched question. impact COVID. And that on revenue had then response to the from previously think specific in you'd $X.X I increase you thought you earlier - But this million,

work new to to million the relative - So is specific virus? it is of any $X.X increase the

Kathryn JohnBull

of - that we had already the COVID transaction. of some play occurrence studies really timing really No. to related before in the particular the No. It's that's

very of very, contracts - very mentioned it's on priority focus not that, really current is on really It's now, resources right support. work. - as basis to and traditional it's very So pivot COVID Zach triage COVID expected the current and a a on support

kind of COVID right projects we're bit and from those completed, naturally, The pinpoint impact of long-term to the the of incremental have other XX in COVID this of a XX away on months analysis longitudinal probably now. little the sort activities the triage in balance come that prioritizing because, be year, studies, efforts small to customers diseases sustainable from that government response will of are our chronic but would fiscal long-term that

Operator

question from Walterstein]. Heffernan Our come will of next [Gary

Unidentified Analyst

Zach, admirable. all the Kathryn, you your very done the and employees here. work performance has thank much have you been for that And hard

Zach Parker

Very well. Thank you.

Kathryn JohnBull

for Thanks your support.

Unidentified Analyst

also right on guess in I cash at the - bank providing - your and when debt this cash. the that towards rate is understand you I'm management as as Kathryn. next hand the build to position, than comforting. the best have principal some debt cushion and a yourself perhaps, then payments now paying towards early your opposed sheet philosophy to many down making with where rapid their better I guess, the interested debt because due the payment to cash question Certainly are is promise. cash there's is balance at allowing But possible teams if to

of statement just the the your $XX year-end it at and accumulating a per that $XX down to balance can thoughts versus leaving sheet give projected to differential? that cash you expecting how million you're level to balance your million, on So approaching the balance us as debt here million $XX of -

Kathryn JohnBull

sustain I did to borrowing for revolver. we flow, forward. I operating my I a of a We I've gross million so to dip do Sure. all, to - can the in question, have strong available operating cash to don't I expect have going It's $XX a really to Thanks Gary. generate that cash, that needs be expect need us net revolver got But into. access required if a for mode. first

I the financial think needed of it I've maybe our through gone consolidation as Xx system. and we've transition

balance. at currently it's And sitting X a

borrowing, that a group got of I've lending for a there got the with lot I've borrowing under a capacity formula and for committed agreement provides that. credit So

to but - is cash whatever cash compelled I operating accumulate because rate. have think needed fund So reason because particularly if feel I growth sufficient to to operations cash, I ready not for flow don't of access the

that on those do talk people to cash are things I I revolver. borrowing - have down and and heard us. drawing view. borrow lines of definitely available I heard strategies So hoarding - credit even as my All have about whole

services we debt have the responsibly we and into we given visibility requirements, customer through as this think supporting to operations feel are able continue have - reduction demand and we manage a I of the the our time. revenue even But challenging our durability now I the for

Zach Parker

now, would peer requirements additional cons really, I several peer at actually the Gary, federal in I struggling. companies given our peer of looking are observation of having my companies, peer echo companies deal of - the Particularly where my under are are issued to unique environment And protections pros your, to our during certainly our to XXXX with lot - at try environment. that periods to think, lot really of the this just has right provide government many a and today's a leaders, looking

companies to Our really don't struggling, ability provide are where they continue the have the client. to to peer services still really,

everyone an are areas essential considered these and under We does. not organization

with We a we place course and the cash strategically. And minimum now continuing things think next conditions of this, have taken stat already with our we've hedges great of right, got But to in like those for to for look have there's the a kind conditions designs position. good been - risk for a you've or described, at as anticipating year in on relative associated couple cash different position. acquisitively larger this creating us Kathryn would that. a have balance it companies do So indicated, right organically cash, to position, very like of over as X

Unidentified Analyst

is on the is? established and it the us could In on give a which date you banks that X million $XX just maturity has draw that regards through to revolver, an what idea revolver currently, what of

Kathryn JohnBull

First banking that our with supported credit linked Bank actually led by my It's SX the acquisition. term consortium National through Yes.

in we to So securing that they maturity of a and of financing, date new as revolver part term that, debt as well June complement a 'XX. have as some to committed both

Operator

have conference We now would more remarks. to back any this closing our this and questions session. over queue like conclude turn to Mr. I for no question-and-answer time, in at will the Parker

Zach Parker

to call, just we company. on And again, everyone support, the all the you. really, appreciate and in continued your Thank support of interest

As aware, you think time had chatted, introduced be last couple block. we around conferences of may that the right I we were investor a

with company a As to experience, we across country. are course, guidance and is in consistent our we employees are distancing to of moving to telecommuting all operating social our respect highly encouraging mode of from - the continue very the

X and one X conferences canceled, of investor those such, As other is have deferred. been the or canceled

we'll too very see term. a be to in you town on outside stand color going the today well we road maturity year, posted fiscal hall, for we're you go a the it relative give look then up what they're depth show to to - questions looks opportunity on give to up do additional in and of If you've and to around ourselves this those. the - really the So add kind may We keep deferred pipeline of like to around some of updates do outside just near much kind of going that conference had the - stand the continue an you business. of color

tuned. stay So

you now. blessed Bye thank be safe, talk your and for Stay for we'll support. soon. we again, And

Operator

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

may You now disconnect.

DLH (DLHC) 12 May 202020 Q2 Earnings call transcript