Earnings call transcript Q1 2023

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Operator

Hello and welcome to the DLH Holdings Fiscal 2023 First Quarter Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Chris Witty, Investor Relations Advisor. Chris, 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

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

and referencing by earnings release questions. speak our On reported after CEO, website. our and is in today’s the to call, included for A we’ll GAAP followed up JohnBull, GAAP will results be we Zach it President results both and next; of non-GAAP non-GAAP measures. Parker, CFO, will presentation our Kathryn DLH’s on investor reconciliation which in financial open

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

Zach Parker

this an I’m morning, truly and update you this those Chris, workforce leadership good really And during Welcome excited conference talented everyone. how on excited and of all about to quarter. to first well call. delivered you, aspects has Thank our XXXX around session. team the quarter give I’m our

December developments our provide I will a held approximately quarter’s of level GRSi X the privately of acquisition course, of with last on adding including XXX the accomplishments, year, high Beginning X, and overview of already first slide significantly has expertise, nationally incorporated technically and digital cyber some strengthening into to highly transformation project analytically both researchers, technologists managers. of and our analysts, and talented tremendously credentialed and professionals recognized DLH team capabilities. DLH major

resources to our DLH, drive leadership of our employees stakeholders, combination ever And critical differentiated is What we for this in more look to to the powerful which before. company’s excited trajectory. greater value market stage new in mission powerful even our than our and about This bring forward customers team, and now we history. positions shareholders. Truly include our this talented the shareholders, the growth

QX our FEMA enterprise, to year more year XXXX. revenue of are financial Given a acquisition, which which this unique portion we which was results quarter the discuss in integrating large a GRSi, this even moment. lower I’ll was contracts, date short way our the on to term Alaska of in include the during last completed for XX.X we million, well fiscal due than

numbers and Kathryn million will X.X was of all at for income We our X.X adjusted forma and EBITDA provide results operating million. momentarily. pro reported reported

at outstanding. approximately Following of the grew of the indebtedness debt had of GRSi we quarter, and the XXX acquisition end our million

using the of However, operating quickly delever balance as record a the company’s strong sheet transactions, as possible. have flow and we a cash plan prior track to as

us ‘XX reported and million the Our XXX of at at the share. per backlog our for Bolstered quarter, stood the of fiscal was by rest the EPS acquisition $X.XX putting end great diluted beyond. in shape

transaction. briefly to an provide most of slide to Turning X, recent overview our I want

a our past decisions terms important strengthen digital believe I’d for complementary pursue our growth position together listeners of clients, December, encourage a website. reminder, culture, transformation over said, specifically a we businesses That detailed they made so strategically if already. IT And to decade in this a and we’ve call brought equity the As capabilities, the modernization. most presentation have in conference our decision and referenced hosted this and and which in I not the has GRSi tremendous acquisition leader for of one on done organic is capabilities

The been time, portfolio of have is within acquisition the strategic also expands providing us particularly Corps, our has a the which Defense, Health, of opportunities some and Navy for for offered target diversified very, of this programs the very Marine and National at Institutes all Department been access with the is us also our which to warfare to mission acquisition critical areas to The technical targeted positions expected information significantly line accelerate helps transformation. growth. enterprises. community broadens and bottom that cyber digital associated elevate The our really things capabilities, greater

aware time. are our into space investors moving the been I digital most transformation think that we have some of for

has where Combining the highly critical solutions new is tanomo. from a our GRSi diversifying attractive further and cybersecurity along record. scientific in host unique an nationally our opened business. our new proven of providing expertise, track business our also experience, research up role this GRSi as technical R&D and expertise strong capabilities, operational our remains enhanced has derived markets research differentiated brought well acquisition, our to The And the capabilities, book with initiatives and with offerings, recognized development of competencies IBA capabilities as

company annualized At closing, billion backlog X a had of million. the and adjusted EBITDA around approximately of combined XX just

research particularly upgrades, services, at in new be demand to continues for at whole the about to in solutions still government, level commitment and the And up going growth say, we are to enabled the where as optimistic in coming acquisition size federal a innovative on customers opportunity, terms a expand opportunities side near in that term. a our major Given opportunities and of our the DLH remain throughout development core overall enhance are the cost this infrastructure strong such opportunities pipeline business But effective engaged with in and instance, we we for actively market adjacent CIO-SPX innovative business, There solid the technology markets. we’re forward. computing provide scope. and spirit the scientific of horizon transformational to new to the technology cloud it entrepreneurial have same Suffice modernization, cybersecurity. a we’re looking and and the

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

Kathryn JohnBull

you, Thank morning, good Zach everyone. and

report We’re first XXXX, for quarter includes GRSi. of pleased fiscal acquisition our which the to

As X December closed on of mentioned XXXX. this Zach

costs We’ve Turning and GRSi other to GAAP discussed the excluding the which legal last complete the quarter and X, financial items. past. short FEMA the adjusted a we’re XXXX slide term transaction reported costs fiscal the adjusted Alaska we’ve in to quarter, in development acquisition the to among corporate such for the expenses, in as numbers diligence its first due incurred results also from duration providing GRSi both bridge given short year’s contracts

a our reconciliation full of is the as continues apples GAAP prepared DLH comparison to But in release on associated filings. results basis on takeaway the report from non-GAAP solid an that as basis in performance apples included to the These available underlying a legacy and high level well and press website are presentation on our to back the is business.

form. well million debt prior reflects the revenue in demand outstanding acquisition. was the the as operating Slide year-over-year this be Adjusted X.X reflecting GRSi positively mix. impacted higher expense key going in of of programs. anticipate our Net forward, versus X.X million period. the to The higher year generally business, X% adjusted X.X higher information X for for XXXX shows fiscal X.X reflecting prior period, interest graphic year income margins We to in quarter our growth in million from GRSi’s due quarter value as was base growing the relatively first revenue versus operations

subject provision of X.X term notional fixed swap adjusted of in the of the matures amount fiscal believe credit year with per versus for additional We X.X swap rate the floating the in to and per additional will mitigate respectively. the revenue recorded Following covered diluted income million the Adjusted of share and under three a million quarter, during XXX rate outstanding rates. fixed The last XX% to December debt to expense prior we million debt the the risk. adjusted of XXXX months swap. January interest quarter earnings remaining XXXX. floating and XXXX interest the X.X% tax or spread swap reported share million of for substantially of first first close The and respectively. approximately X.X ended X.X of diluted implemented period in versus balance X.X swaps increased million is net plus of DLH or interest XX.X% $X.XX million million applicable year. an approximately XX, rate the or approximately was XX.X% quarter or the X.X the $X.XX EBITDA for XXXX We

after quarter Moving to slide substantial represent end We of The IBA. time the down few completed de-levering pay bars historical which debt during transactions for rapidly cash strong ability The using of our to perspective flow. balance and the debt each provide at the has company’s of track are we some acquisitions past the sheet undertaken. the SX levels operating regarding a years, record X. company

confident are tradition. this that periods we in different. time is And this anticipate no continue future to We

million. had Following of the of the debt to quarter, XXX the slide XXX to as the we prior of acquisition approximately subsequently, on balance closed, And GRSi reduce XX. transaction million under shown outstanding. When just we that end

we generation our our this continue in our tradition. have to while under based our debt, if proceed be in the regard years. the to that anticipate balance ratio trust be between that. investors track case, expect doing guidance, and fiscal specific in We we operating forward cash confidence and them to and will XXX come look believe record paying modeling strengthening debt we’re sheet coming year times on over excellence providing down just in our flow our providing our thereafter and million experience expectations, not XXX our to will four We the ability However, that’s cash operational leverage this

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

Operator

very you much. Thank

ahead. comes and begin Noble [Operator Instructions] now from with first will Joe We Capital. Today’s the go Gomes question answer Please question session.

Joe Gomes

you. Thank

you’re talk So, how I there mentioned going first GRSi a going. to it going and about Zach, the one, integration out for bit been little you to am that’s lay

lead give can you that to bit if just expense little a integration seeing and in selling might you’re us factored So even maybe seeing side expense maybe you opportunities savings. the some zero opportunity the are I more on on savings? the you and transaction you cross detail And believe anything model kind expense for when of

Zach Parker

tell myself Great, a phase, lead think compatibilities, regard great Yes, the did quotes we between lot thank to as post as some of fit. you and we closings integration tremendously fit that the diligence both And that has go, as would to tremendously and we factors. featured in to great during of questions. And always with I certainly success no. directions, important cultural got that well. critical as well ourselves, to the with company that’s regard, you for regard component extremely David in the that our a the it and going I Joe, been see

consists up representatives integration new in resources. an office, have our of management IMO stood We that company and from and is heritage the

They’ve got their lanes, very, very swim very, it’s well. going and

teams a areas scientific started that addition, I Absolutely. researchers, as otherwise We one collaboratively of of with I’m not see XXX most been very, with set first recognized excited synergies, selling. the supporting about our of we when proposition nationally very working come wins. and gate inside about in some collaboratively to a would of cross value With are we that really that thrilled have working NIH, integration, some like We a these technologists feel talked some that the days of room and that want room previous out together. of probably to the that. has on to customers kind we’re And we with our some GRSi really regard. about So it’s IDIQ refreshing see able our all the excited solution I’m working diligence really some during regard phase. of come that of to that for in our it’s great

power of our opportunities some not started pipeline And that that in so reflect new not of enhancements to the work, individually. we them two only developing but companies, existing see any of the just do do we a

there. really great really, So

actually We have implement expense some some show up in another started savings to synergies, quarter. already

this of pretty has And and on Nothing cadence course, the So those belt. lot wins really we of have for the of a lot we quick already beyond schedule course fiscal. to of the infrastructure over be taken year. we taken of out a redundancies and good have us IMO But a a see. the a under our end plan

So it’s going well, Joe.

Joe Gomes

one follow and Great, up.

So through scanning queue. the

were of do revenues pharmacy maybe at base really Headstart the kinds types something what of think that had almost performance up that? XX% And You driving will revenues at year-over-year. year? can those wondering, rest growth a continuing? moderate strong VA was Or that is just that you were XX% rates over up I headstart touch you see over you the to is as of the year-over-year.

Kathryn JohnBull

the a mirror. way with you’ll respect really that headstart, that more the this to returning year rearview the long in I’m ago, significant remember, was caused and who a those COVID case to last it boy, it of if been with Well, put among hasn’t of specifically, it’s to time specifically, that schedule. norm, But dealing has happy Omicron program realignment just be

moved and And have so our would into some in happened things that QX traditionally QX three.

the to this is much So performing norm. year more

significantly COVID kind rethink of to long grow which at that of reach pretty the pretty to that center program again of programmatically their using that think locations. on kind consistent year-on-year. over kind have we business program the be changes to the continue as some, I through is had So nice to largely there, volume do some of going year, while our distribution have opportunities really contrast, of and as in. the probably took in roll operational held It’s make grew quarters their efficiency some the a ‘XX, program program matter just and remember to and previously work In VA that of successive VA probably work redirect the gains as both out steering really pharmacy were some model besides quarter you excuse the it’ll an that automated they overdue, course

QX And throughout so year. last are came on largely those

volume so of But of the in QX of year. And year, kind this going norm they’re up kind compared QX represents QX programs that think to catching last as that we forward.

Joe Gomes

that on. and stick Great, Thanks, two for to Zach, and I’ll pass questions thanks insight. Kathryn. it

Kathryn JohnBull

revenue on Grate for the man and being you talking synergies. thanks Joe, to a straight

extremely As can you we’re tell, that. about excited

Operator

Global The go next comes question from Capitals. Please with Brian Alliance ahead. Kinstlinger

Unidentified Analyst

is this personnel we of to LHC IP Jerome piggybacking good Hi, more quarter should BPO whereas question, the just there, on on focus RFPs opportunities? GRSi will Can the the you person Brian, ultimate integration guys. focus for expect on

Kathryn JohnBull

going Well, to way. operate we’re that not

our those you icing driving a both take use, really scenario, we but expect that should continue each are the the capabilities. it’s We convergence we brings homerun the really, to to and about. strength on the cake, is on thing each terms think Really, or described that to while has terms each cliche bring together want and leverage drive expertise that in I that of opportunity Zach really models, capabilities, us us as customer in real and we its for expertise it. of convergence bring those strengths to in pursuits. whatever of in driving in business know will synergies from on of the where us our expertise the of And those group talked revenue we us that both perspective,

Zach Parker

neither just able one value or really positioning that us that’s our to spaces believe having say before before. be and of really these aligned to you the opportunities indicated, and great to be it I to plus would that to able of has this two three. creation going isn’t a vision in our some equals Yes, we And with in we’re one with have make as this in some channels, of deal, know priority there’s case, But now. Kathryn separate as come kinds been been this was deals. particular really I’d it from see starting has that really hear a often one of lot drive

to one, development. innovation about more fiscal a a on are comes infusing abilities drive to where wants we hope continue an our as in VA some and we later But IDIQ, some supporting we’ll that that. of strong a into some instance, task we and those that much for systems you us more innovation, year. light opportunities, of their existing team really the that have the for this talent bid with going do more adds orders competitive GRSi the in to If to start competencies, partnership strong mix, in the see position think had to And

that really be able been customers, but to only now current is alignment had into driving we past. adjacencies to those more not technology going And of than so much the innovations do in hitting harder

Unidentified Analyst

Great, thank plan you can you. submitted in Is there way GRsi’s XXXX? any quantify and/or proposals in submission XXXX

Zach Parker

I understand. Which didn’t proposal?

Kathryn JohnBull

Yes.

give more we Yes. of addressable pipeline. the on as the visibility really Sherman treatment that markets. a Just on fuller forthcoming

We’re beyond going a as talking about already to we’ve standalone. GRSi moved well

laid the is place, addressable this, are what’s the away probably where ideal the visibility talk from we best meeting the of this into of GRSi out annual what’s we’ll first markets place you’ll intentionally in DLH. strokes shareholders upcoming each versus when we some in But capabilities about really So GRSi for leveraging see pipeline the broad enterprise, have the for the the moving both It’s and pipeline pipeline. company. the

that’ll there, drive can that pipeline, broader of more of we see and you’ll So really think meaningful capability. definition how broader that we because access markets the

Zach Parker

And me add to let that. Yes.

that opposed pipeline full very that to So to probably as that’s around were of we’ve of really two not as Kathryn entities. a bring this again, to we’re pipelines. important in opportunities go And viewing or has really addition some we indicated, really, standalone market. which close, either singing month got did an that strong DLH have us entities major for respective three diligent as our of DLH one operating before to some And capabilities least approach, at

right pursuit, market we our will one single You’ll be regard, deals structurally and is leads the go from year partners, and a of to next collaboration, the obviously there most over address of these us etc, course some a approach, on evolving strategy pipeline, market literally a now. but now see DLH that in

But that driving, just selling, earlier, driving I’m that Joe’s is excited his reason is the excited cross about and we’re pipeline. earlier I’m observation so that, question our

upon going So depend selling. this cross And about is that’s exciting to it. part the

more our annual a upcoming around you’ll meeting As that in Kathryn what indicated, month. color get looks like little next

Operator

[Operator Instructions] ahead. The go comes next with question Capital. Street Bronchick Cove from Jeff Please

Jeff Bronchick

morning, the treated, the maybe looks of out And look or question just know, up does Coast seam pea ways process about a do, and right. of West the different approached in capabilities maybe today. is how you like from, contract feel you’re how what you. the own and want My your you ways everybody. they’ve never and what thinking that different past, frame this Hey sort Good it relevant and indignity how, is then to to

puts Just timeline, takes best rolls like guess luck. out through? maybe this frame and what’s and of how then Good the some lastly, your and

Zach Parker

I’ll start and around sure some everyone. with again, setting color VAs process. the level Timeline the then give me wise, timeline let acquisition piece we’re make

since bridges came you We to major It’s operating we’re if on source second XXXX are when XX is is administrative long, be were But fruition. will. XXXX, contracts amazingly in lead continue the XXXX. to of time, of currently timeframe so that awarded Paul, and where the procurement November actually

the won Now, in actually they with did did they regard which to the out XXXX. same for somewhat which way in they’ve the to ended way contracts as that come out, we the that similar they’ve in come

site all was, that competition contracts individual course, as awarded contracts, unsolicited on So the we’re today, bids. arena, were performing in those of XXXX-’XX as the

more XX% the maybe or on government set. those one were VA companies VA, XX%, two. procured a and as would other set of standalone But some share by So we the they little one and be had seven of

more. be could Some

incumbent, as where of did seven. or of them bid we four We had all course, three an we

And we’ve sweep solicited in we and all a like to of individually the the they clean and managed they government pharma manage the work that those and of remains treatment logistics was to were each had work it years, agreed in So having and normally collaboratively then induced appropriately small particularly gave be cases, had then, last of a happened in And has now are course, where though But to the as as case. veteran seven versions way the contract by won preferential disabled that site. contract. they owned VA businesses. over our the that business small kingdom course, so service small various as arena strongly we’ve business of the the changes, acquisition community, would committed few and just

into the We few place partnerships last over have put that we’ve years.

benefit of that’s continues of for and part part our an to to an that been integral approaches strategy today, our leverage have is remain integral strategy And even SPOSB. would

aside again, difference service when part last each the in set state, small here encouraging that is the you’ve The standalone SPOSB current a is currently so position like a businesses, teammates, disabled standalone back as than to be businesses mode, the the it for as solicitations, prime other as has of in sites. time rather So of we these. were they won seen, are

strategy we’re have this providing how And continuing to serving work to way we them. which an to customer we to our would Awards we’ll come committed come. support a either evaluate, to the acquisition conclusion pretty net out of remain the process. on evolution JD So high a ratings, as basis. But We’ll acquisition a including up as fully Power extensive capabilities the on in differentiating out satisfaction veterans way,

veterans, embrace small committed the with in with to partnership our well. and our business So our continue we we’ll remain as investment

Jeff Bronchick

efficient given next initial how face highly particularly submission the and of final roughly would you timeline then government -- speaking? in works, whining, review subsequent the just into awards a way today, envision a of just So the which and complaints

Zach Parker

year to allow submitted I we fiscal that proposals thus our this Well, those in through tell I of in to has have them this That of to year. bridge an thinking indication currently end the fiscal sites the characterizes end far. each having think proposals of of for have can’t protest. of to potential they go VA’s any with coverage been that adjudication the through filing be the coverage, through up you regard about talked

proposals competitive to load will of So review landscape they idea an the be. and what their of have

to disruption in to tracking jury’s them. is part fiscal won’t terms a table the take the But indication is any with as during VA previously, are this we that We And do feel as see the what as that. of we indicated And going year. every that had execute well. that is out time we of

Jeff Bronchick

the a some just right the side of okay. and so calendar also sort possible, a fair frame middle of but of curve say just middle maybe all they’re not to both statement way And other you at clear, they’re curve that and you And XXXX of a the that think change be the so or steps that side expectation? likely that? just, unlikely curve, the conceptual be on fair if Would winning seven of is out? in there all be you’ll to it would customary and the look is is that is you losing things reasonable normal a Would be on on somewhere

Zach Parker

No. I’m on No but Jeff, now, Mahomes, rooting wouldn’t you betting Philly. be look, I Patrick for

and of optimistic business. things to are sorts we continue very one those of protecting lean where it’s So, into our

for that modeling not suggest clients do will we’re these of agency. that that so we critical mission And work we scenarios and subordinate. this critical Any

Our way. is team that aligned leadership

going really case, way. Our may relationship the or in that to committed we’re to but we’ve that going parties look and deliver, think optimistic history able offer And has at that they partners we what obviously, prevail. are can but demonstrated our are happen, take a to aligned third some been solutions offer that any

Jeff Bronchick

question. last My

a, the your only win, than program different of as fair fair or to is ergo, two, that of whole if So be inferior would competitors it attractiveness economics. running it win for a go advantage provide less of show part whole that interesting economic the infinitely to economically there are expect a say you’re that you there’s will to a Is is words, going maybe to In this part other winning or now. would have, running the statement?

Zach Parker

if don’t government proprietary question be think is the synergies to maybe your a would for And And reason to make there’s But that’s that question. if we case. operating the expect there’s some fair a across all see you Well might are domains. say reason I sense does I it think good outside good to obviously you’re question there’s, looking Yes, discuss to relative from to fair strategies. bidding the

Jeff Bronchick

thank Excellent Eagles presence Don’t mention in intuitive. the again, you. and my ever

Operator

The Please comes go ahead. next Business question from [Indiscernible] Consulting.

Unidentified Analyst

say good questions. I Zach. any Thanks. I’m big thank to just good. And a morning, Hey, Kathryn wanted you. I have don’t

You And much it of the it, out banging knocking appreciated. guys court, keep quarter-after-quarter-after-quarter. it’s

again, hope have and thanks weekend. So all great you a

Kathryn JohnBull

We appreciate your support. see laid we gratifying years It’s we And strategy many that excited. to out are come fruition. the into ago very

Unidentified Analyst

clockwork. like Just

Zach Parker

Yes. more obviously, in to be than debt And market, little you we more to little Bert, we a And put comfortable knows on used our chat as know, be a we’ll you history. history. about too that. think but able Certainly the hopefully

we York talk You’ll some see that Kathryn has bit New in next can we And you taken if you steps more about already. see And a little can see that month. trajectory.

Unidentified Analyst

up. the thing, get the in It sheet it’ll can it’s because and a get over. we beat think will load then I balance up up, stock for more, clean great clean and over happens all will

Zach Parker

There you go.

right are things predictable Some Bert.

Operator

queue. are At callers in additional this there time, no

back Mr. for remarks. closing turn to I’ll any So Parker

Zach Parker

And, for Thank support of DLH to and Kathryn a you, as all for you special again, MJ. your thanks your continued indicated. interest

of the has want meeting our disclosure to the next annual and of We now new call are implementing us greater really DLH. We invite into ways, pleased that get to phase for many DLH. our phase us what probably exciting join third at strategy a our most month in you the strategy for empowered to we

that, Bye thank and productive Have So a with day. for you. blessed a now.

Operator

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

disconnect. now may You

DLH (DLHC) 9 Feb 232023 Q1 Earnings call transcript