Earnings call transcript Q3 2023

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Operator

Good morning and welcome to the DLH Holdings Fiscal 2023 Third Quarter Earnings Conference Call. [Operator Instructions] Please also note that this event is being recorded today. I would now like to turn the conference over to Chris Witty, the Investor Relations Advisor. Please go ahead, sir.

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

it CEO, that, the after next Kathryn speak President which to Parker, Zach. questions. over I’d call Zach. for followed CFO, we’ll ahead, by Zach and now will like turn open up With JohnBull, to go Please

Zach Parker

Welcome XXXX quarter third our morning to Thank you, and everyone. good Chris conference call.

have on services storm clients. strong and deliver track to accomplished and and to to a base. of to commitment remain pandemic continue and high-caliber XXXX. progress employee are for talent and distinguished the to These attributed great our We solutions They the make good continue fiscal end accomplishments weathered our

better and to reflects overview setting first our Slide $XXX that ongoing that into being mark financial our the testimony of million operations well technology-enabled anticipate acquiring our announce programs and strength, going company’s I extensive of pleased the growing a and key the serve. is or agencies this am growth, capabilities that a of of rate reflects as our organizations run government. broader importance strong high-level for of – a We integrating, new upon organic at array as of Let’s on built X. quarter than third solutions demand surpassed success, for new growth phase quarter’s of next financial highlights. revenue the phase dive I’ll the which highlights we provide by forward, federal milestone the

million. reported During income was $XX.X million this to $X.X our EBITDA quarter, operating rose and

X, over end to million our by We sheet cash efficiently. balance the also managed of since strong $X flow debt delever reduce quarter utilizing to our the

share per million. EPS reported diluted was quarter end and was Our approximately backlog at $X.XX $XXX.X our

a of contracts in winning the the environment quarters, new very supporting growth accelerated and and coming active fair our operating are anticipate attractive We share forward. our bid going in

Heart, Turning for Transformation, been Cybersecurity to We for key to NHLBI. and on Systems contract for the Slide compete X. had a company outlook. National awarded DLH Blood developments I want some Services Lung its announced that Expanded to give recently and an the Engineering Digital and update Institute,

an and continue heart, in this education contract award in global a and well. training million lung as $XX delivery term. and solutions a and research to program, of quantity and to this definite multiple-award will contract customer services ceiling X-year part This of As technology we leader indefinite contract, provide blood support advanced as has

across Information our Human announcement. Planning, since the complete greater ERP track, Our operational anticipated deal’s Systems enterprise to is continuing is The integration anticipate Resource DLH and achieve, the – GRSi Enterprise on also efficiencies to Systems to leading of key Resource Human board. our of transition such Resource results we and as business are the Information systems, GRSi

teams the together as of Our pull expanded DLH customers. demonstrate capabilities is the and our the to range full strategy enterprise evolving go-to-market

in enacted next defense as was fiscal may includes increased the providing of initial year. targets XXXX. This Act ceiling budget non-defense the you lastly, funding Responsibility XXXX Fiscal recall, And the and agencies This for to for allowed alike. debt negotiations early begin and

Of we’ll support. another strong demand a But always remain there’s with programs any continuing that year course, begin a resolution. in that high possibility in capabilities our case, with face and bipartisan

positive underlying our outlook to continue top believe and is We fiscal opportunities company’s grow to improve line results. XXXX the and numerous for the

fiscal would access called artificial As also House to digital transformation IDIQ on allow to a growth performance. investments which Also, machine boost work and us preliminary areas the intelligence ever many trajectory value-added before. and bottom billion-dollar has contract historic compete budget for our vehicles than plus reminder, more research, learning XXXX DLH White that agency in line and

Our forward bring. highly broad XXXX to shop a fiscal us one-stop area technology what look and – differentiated broad the of suite will array and goals government’s diversified a tomorrow, of capabilities, make solutions we contracts of advancing for

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

Kathryn JohnBull

everyone. Thank you, morning good Zach and

We are pleased fiscal results quarter to report our for third XXXX.

once showing I about X. the wanted results I’ll by Slide to again today. to begin speaking adjusted Turning be

included discussed presentation filings. no current data full the are reconciliation in short-term back in this as providing the financial well While information require the release as our without adjustments, the for contracts of Alaska FEMA with and in and is in we that press of past. metrics fiscal also year XXXX we’ve A associated

year. XX% just from the shows million graphic $XXX quarter Adjusted rose this to details last X million over Slide in $XX.X revenue form.

operations the prior the We’re crossed FEMA-related income million $XXX first versus of obviously X%. million quarter year in the very threshold from our revenue Adjusted for prior the $X.X officially have excluding $X.X for increase period, an million pleased quarterly was to work. time,

reported an GRSi margin percent a XX.X% reflecting result amortization operating of versus and the expense in X% fiscal a depreciation the company of ‘XX non-cash As higher revenue, fiscal of acquisition. ‘XX, in as

The in tax higher third the year was rate outstanding paid to was in provision of quarter GRSi. million, – XXXX quarters fiscal $X.X of ‘XX debt reflecting XXXX effective the of Interest recorded a the due million fiscal interest versus period, million interest of $X.X in during cash respectively, transaction the expense million expense the DLH third quarter third and $X.X acquisition ‘XX. of $X.X and X.XX%. for for prior

net $X.XX million EBITDA versus period, increase million X the income ended $X.X XX, per diluted third in reported prior approximately June XX%. $X.XX of $X.X the was We for Adjusted approximately million or year share an share of year. the million or $X.X $XX.X in quarter versus a last months XXXX,

earn reflecting time. a differentiated expect XX.X% versus EBITDA contribution returns of was XX.X% year the sales, As capabilities better broadly of over adjusted prior percentage which we period to the more margin in through

$XX versus the adjusted million in prior year-to-date cash million generated on company operating period. The an year $X.X basis in

flow strong earnings our produce to will we Slide As providing we growth discuss the company shareholders. believe from interest our allow ability our will operations XX, to reduce and debt, meaningful thereby on to cash expense reducing

key although an gives offset to and for non-cash in X terms from of progress impact the depreciation has acquisition of earnings a overview our The top Slide that and metrics EBITDA company line improvement. intangibles perspective. some acquired GAAP year-over-year amortization GRSi related of of performance, the bolstered of largely

underlying showed improvement company we on for and going from remain progress the quarter, Importantly, additional the second track sequentially forward.

working to high, continue we non-cash the reduce be While are balance and delever amortization depreciation to hard expense in and interest sheet will tandem. expense

carrying our and repayments, strategy. paydown rate the – debt. fixed debt interest near-term mandatory fixed both arrangement and through the is managing rates, reduced are XX% actively be voluntary figures. we of With all being are approximately interest approximately a rate of non-cash our quarterly financing to interest a will expense higher of $X.X amortization payments applied floating Note million that Interest interest

an meet the paid GRSi. provides three, update the off ending mentioned. $XXX.X approximately acquisition debt of the rate year reduced squarely our reducing approximately fiscal floating following by generation ongoing with down us to cash on puts outstanding. of sheet, expense, almost as interest quarterly company’s and million targets debt pay $X.X million of This strengthen We in $XX fiscal million and the from the quarter $XXX million XX to pay-down period our Slide level this track flow deployment regarding I debt of balance

our payments. needs the our actively tax of with plans stock are favorable comp and capital We acquisitions, along to tax income working managing utilizing attributes minimize

strategy pay $XXX and and fiscal million anticipate leave million expect $XXX of at that We delevering down year-end, even between will to amounts fiscal greater to continue us we with debt ‘XX. our in

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

Operator

NOBLE you. Thank take Joe question, Instructions] ahead. we go our will Please which [Operator Capital. come At first will with Gomes this from time,

Joe Gomes

morning. Congrats on Good the earnings.

Kathryn JohnBull

morning, Joe. Good

Zach Parker

you. morning, Thank Joe. Good

Joe Gomes

the difficult Zach, the your you IDIQs about wanted mentioned recently guys prepared looks release, – just you you I in it So some have start as about talked of to earnings won in some of off, and remarks environment. the

to are of see to to bigger new of When really they bid trying you some awards? you those for better a Just putting idea start get going on IDIQs? out opportunities how

Zach Parker

Joe. question, will are particular, in Those that most ability pretty lines, as to I’m always very the NHLBI our you to most know. – opportunities workforce, with competitive material growth, by drive track a contractors, we’ve encouraged our position – real organic the leveraging Great actually of record which in one strong really that the we’re for it’s environment. that bringing within customer, had particularly new particular new but a in recent

community. strong have exhibited a a a win X contract, to multiple award in years, we this have higher the it is over rate While last real X, real, ability

that So enterprise we’re continue. our with valued will hoping that that, capabilities

have disappointed work as previous to the We as until slowdown been IDIQs. issuing relatively up recently it on know, our with relates you government’s new all

time IDIQ we’ve some And for still with getting to yet case, slower of and – I are we has first been to ones on announced to but are X you standby proactive prepared they NIH. think been within that issue few a prepared, on that a time. Agency, and still quite on other Similarly, I our for some starting Health have we’ve before, team our than they’re just to to some issue strong anticipated had we That of last hear our to real work closer the continues mentioned a hear starting Omnibus those. to the we’re be that, Defense proposal. government very – than closer request

is as strategic resolve for largest of conducted, be lastly, research and one the services IDIQs, technology would the many has DLH. us the government biomedical their on know, very anxiously industry, for work human you looking process be that CIO-SPX, to then agency the is health to largely where the is been And across for it we’re

gets eyes some has And largely heritage that of on to recurring is like over It of the in the GRSi of has Control protests, We’re XXX ability our before had fortunate by upside that any and we with some think will the we’ve do But for those – a of of greater contract, some prime and opportunities some the once that CIO-SPX to our that that give the has getting Budget think, slipped resolved. said, partners. better the work work. presence approval, for us unrestricted to issue the should agency’s by I any business some part of year. and that, expand our but Act the delayed the small budget been pursue, opportunities beyond the clarity I

Joe Gomes

VA, then Great. we’ve the Okay. on the Thanks past. in about And talked this for that update. obviously,

contracts. continuing think, in work on the the contracts, bridge November one of there, on other You’re the October through I on on

Just process of the VA any, on kind update, wondering if an there?

Zach Parker

since since factors, XXXX bridge actions contracts Still – two the acquisition of that acquisition reevaluate the and have relative know, you of definitive upon we continued the based date able, and to businesses. year, since they the have through for been have effectively beginning have of audience, market strategy. other in Yes. the and benefit the services – on – they Proposals approach they been to have November applied strategies XXXX. to veteran small no And will for as largely conditions

again those We to we’re way and unrestricted there in very as participate a in well that to a they on environment. elect meaningful are to reissue standby should revisit as continuing once strategy acquisition

for by, customer satisfaction the to a indicators represented way, continuing of a committed we high a our support a have degree of degree course, very are satisfaction. Power now high of decade over Awards as we of delivering in veterans J.D. to and customer So other distinguished

Joe, the as to to yet, we there news optimistic being forward. we’re impress opportunity go new no going to an but were – that have agency continue and we So

Joe Gomes

will back for I Thanks that. in Great. queue.

Zach Parker

Thank bet. Joe. you, You

Operator

Please Partners. Our from Instructions] question [Operator go Kinstlinger Global will come Brian next Alliance ahead. with

Brian Kinstlinger

Great. Thanks. question. one Only

year? side short-term, talked at government you last from the maybe commissions activity or of equation, talk and the a With in the you I about big more them as about the perspective as Thanks. quantitative don’t bid-and-proposal lot awards the Just delays. challenges, other are Are work? bidding qualitative least with in you on many perspective? know proposal and Can on the a you call if talk

Zach Parker

targeted, Brian. of question, number come described Yes, forward. pretty we the of IDIQs, Great to outside as bid-and-proposal a Yes. backlog. those have healthy have we’ve before, A really started

earlier the describe subsequent some in associated in frame bit we’ve the course, end year, But several to Of you of that, re-compete up and January, couple a activity VA work. of major bids. seen time the with the on us December months regard really pick as heard our the last quite a to – with

stages we during activity, the G&A will you which QX really BMP – be move the year. certainly, that we final So fiscal our finding will and as will be seeing heavy pretty be of start we’ll into

this our add within to to in some we’re the in deployed. uncommon services. of particularly to a the areas more due trend these to rest the A going have number the year. They of where end for contracts many again they course feel pickup to is a restrained year. that the was there? be be So It fiscal Very right? cases, issuing would Fiscal do that arena been human yes, in and restrained see of the being at hopeful funding, non-IDIQ to of Act starting prior of of uncertainty this and pressure lot Kathryn, over anything which not the fiscal very have health of we’re agencies

Kathryn JohnBull

right. that’s the recent to trends. year, start Yes, think fiscal slow encouraging I but No,

Brian Kinstlinger

so much. Thanks Great.

Operator

from And our follow-up a ahead. of next will Please go question Gomes NOBLE Joe be Capital.

Joe Gomes

Thanks.

the Head on Just Start HSS program. or HHS

it ebb quarters, there and the with below Is I’m running did on – you going that numbers You is to anything And it had year. year or been looks a the flow? of great you’ve you couple year-over-year. start the normal if in the when correctly look program prior what specific last just

Kathryn JohnBull

this If being its year pretty of I to news would that in and grantees from school of fiscal school QX program more inside sponsored good a think us year of the the trying the cadence returned indicative. are as QX perspective has front-loaded the normal who align and certainly if aligns cycle. because not system of affiliated by to are, our to many around

way and we So backloaded were our still ‘XX through working fiscal QX of Omicron definitely remember, in all extremely our was because QX ‘XX.

year-on-year pretty what got start look normal this head the as end year, performance. And year from of to QX a so makes last year some for because this things revenue this as contract layout little lift opposed year comparison the me, this we backloaded. back opposed organic of That’s pardon the to lumpy got year to returning of of – the

Joe Gomes

Okay, thanks, Appreciate Kathryn. it.

Zach Parker

You are welcome.

Operator

questions in time, this At are there further the no queue.

back over for Parker hand Mr. remarks. closing it I’ll So to Zach any

Zach Parker

for Well, your DLH. thank in all and you continued interest support

heard, pretty become. the we’re we have about you probably As really have company that excited

human all more closing day. you type now. and really, FY of you really are certainly over you enter looking engaging assets I time. our that conferences and we part we color have Bye out with the I shared blessed and a entering months. business forward look additional Have around coming of Thank your we a look We can in you so with and if in forward capital that to investor – with and expectations and the for attending the to productive ‘XX near-term the I closing are as year. some strong provide before. forward website for latter to going our add the at of QX attending, you investor also really might that to look the assure we be As trends couple can we

Kathryn JohnBull

you. Thank

Operator

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

You may lines. now disconnect your

DLH (DLHC) 3 Aug 232023 Q3 Earnings call transcript