DLHC - Earnings call transcript Q3 2024

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Operator

Good day, and welcome to the DLH Holdings Corp.'s Fiscal 2024 Third 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 Adviser. Please go ahead.

Chris Witty

Thank you, and good morning, everyone.

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

Zachary C. Parker

Thank good morning, track to as year conference fiscal Welcome you, last months Chris, quarter as of we on solid a X for XXXX. and enter our call the remained third we everyone.

workforce take our me let our dedication for incredible moment to to and commitment First, ongoing their thank success. a

where and what if weren't continue and employees, you are Our behalf we services stand be for and We today appreciate array of missions. if sophisticated, solutions as weren't what company day. -- our highly broad we for do staff you a these to not each we would on credential a offer of high-technology it every customers' and outstanding vital

during at of and cash period. year-to-date. reported quarter Slide That flow ability to $XX.X while EBITDA X. million revenue company's surprises for no stands cash company million future, was investing will I of $XX.X activities this which translated the business to to with down the operating continue overview review deleveraging moment. Overall, our results. and illustrates we pay financial We cash $XXX.X generate future. further the million balance cash major million. to third in -- as debt, new $X.X generating once development the now in our Now quarter of the of This sheet million, of and to it $XXX.X solid again flow will for provide turning position a an Kathryn a

to Slide outlook our update as an of like approach end I'd give the to near-term Turning X. we fiscal 'XX. on

award We are environment. current quite upbeat about the

near translate for wins from government the program We have hopefully That core markets should several the potential trajectory new proposals. anticipate bolster we business that into topline our our XXXX. We come. to quarters potentially should anticipated and/or decisions across award future is in new opportunities growth high, request which under for early evaluation in the in the believe and in term

management third the of IT agency strong with While We're such continue our in transition impact for programs, services support digital negatively quarter business fact of many that will grew trends overwhelming company's relationships enterprise optimistic markets health, wide the given combined capabilities. solutions our nicely majority such the as public programs, our for range transformation and year-over-year. of bipartisan that advanced of some small had transition see QX the was business in set-aside of the affected work, strong key we we our demand our by markets. The revenue new offset small core sales on several continued

White House. will solutions to in continue As support abroad the or of the in the past, partisan come, quarters to we and expect changes Congress services hold in our the regardless

awarded is to CMOP transition one soon. already now set While

critical research be contract the across XX. that a work. In expected workforces' have changes to through our to remains we thought DLH a tackling is last the thought the presented lengthy still our to challenges. Overall, but the expects to other presence company's new again, in strategy. some The with we our pressing anticipate public technical comes of process close. X government's the and new upbeat to about opportunities most quarter, leaders globe's markets the of the participation at leadership other services, the reset doorstep timing highly will government as have of X the a process October award remain businesses. activity credentialed our extended contracts continue other veteran-owned terms enter to by least in complex do funding on of to and readiness raising leaders we health, our growth our given the and leading bidders innovative these the quarter been uncertain, alone, the at consider due restarted in small year-end The solicitation approaches hold the bidding the be services disadvantaged well, nature practice, of award past current a however, during published the which These these element of allows and in remain bid solicitations, field the And contract experts essentially, to company's for and demonstrating short, the awards. In roles represented of procurements. Enhancing new as the competitive significant environment. the communities to value profiles contributions we

our processes Kathryn? and solutions capabilities, systems that, serve. With bring Kathryn Financial our and Together, than nature more performance, of to credentialed to more and we to our We and advanced our depth capabilities company's Officer, breadth people, now proud like ever turn the our advanced offerings, expanded highly expanded the JohnBull. past are our the now call over -- unmatched I'd and of new agencies the are the and of workforce. Chief the combined

Kathryn M. Johnbull

Zach, third We're our quarter for and XXXX. good to everyone. fiscal report results morning, Thank pleased you,

several like of XX, set-aside financial XXXX. to third across growth provide I'd versus the the to quarter high-level markets, year contracts. period, in small $XXX.X overview X, June conversion Slide to some business offset the priority X key reported some million by Turning for of the programs months in of revenue $XXX.X prior We reflecting million ended a metrics

see opportunities current the We within of public and the last continue bidding are the million Zach cash IT year, year-to-date. of generated $XX.X has environment, enterprise million the company $XX.X quarter our as management EBITDA within health and and businesses million presented $XX expansion level discussed. We operating for third reported excited by to versus of

EBITDA margins. was Our largely inherently pass-through lower than lower from contribution year, nonlabor to revenue, carries a higher-than-normal last due which

the end strengthen QX, deployment debt the lower off updated changes, our rate sheet fiscal Now regarding if XXXX provide approximately ratio now you slightly interest total balance reduce debt of of of $X.X and between leverage higher of ending I'll with floating capital $XXX.X $XXX than to working million with prior the during $XXX expense. the and still below update We turn leading to X.Xx. at our cash anticipate million an of to be outstanding. Due Slide but X, debt interest reduced forecast company's million debt, and to our to period paid that we debt the projections, higher us a will on start million track quarter,

forward. continue to utilizing the favorable tax of minimize going will compensation with tax We attributes payments plans income along our cash acquisitions, stock

that, to will turn for open would my down In accelerate addition, rates debt our With call I to year. This come questions. over discussion cash now financial excess concludes statements. to if as next utilize anticipated, like our we that operator the the reduction of interest to

Operator

Joe with Our Gomes [Operator Capital NOBLE comes question Markets. from first Instructions]

Joshua Zoepfel

Joe. filling It's Josh for in

how think than expected. impact it recompete we is of than we business of had question It in bit that Can subcontractor my is provide on should runoff? color lower So for process it kind guys just soft of I a kind that you little first revenue a of larger kind just And as seems award looking much of more expected. came kind we a How kind more those? expect? of

Zachary C. Parker

Yes. great added that we're provide and question, Josh, No, color. to happy

I down and of have think very it's quarter the this see seen the what we've to pipeline. coming we important what context

really, of And with work rate our we strong our strong. remain business, still to in capabilities standpoint, so we competitive right? competing remain ability to First we're our where our still win from terms -- existing all, of retain for a really

this. driving what's not that's So

of those a amount the set our to recall, least the of -- to that us came our companies at terms some to contracts, do contracts acquisition came for us now. acquisitions. of seaside that may those business look off be you roll business business part previously is that and to awarded business have in aside, a years starting was retained we've we our for and better through small in X.X have value as As extend business for in And small continued we a book fair of in pay still them that no while of

it still again bid sands an CMOP. to that cannot that in we us so would there's addition aside. commentary a we -- we we not some and coming our set are as a come And work obviously, bid And is had Those quarters. gave And end, and well. separate the small business there it of they've the expect some as

said we'll legacy certainly varying those having be asides, some contracts, advised. have business some on do that the we'll that, to Now small set still government's commitment we keeping of anticipate impact and you

capabilities contracts committed we'll maintain where aside. with what strong going environment, or call those working that X a continue see do our cleanup, to posted and on are our has of to of unrestricted to set we a keep We probably we government small some try in that. But our capabilities business meaningful to customers quarter the you reset contracts,

some Some to where retain not percent. XX and But be off of those a a were we're run just of or because able subcontractor allowing partner, we partner up they to those were to might bid strategic. be to so going

well So to several between on into as of we'll anticipate that a to trickle sizing. QX color do, add maybe and some there? out Kathryn, those of you run term But terms again, give QX. QX, anything we near added in

Kathryn M. Johnbull

Yes.

time on the is it's term I has via as in wouldn't the of a business of some as we the talked be roughly were strategic quarter, XX% XX%-ish to us rolls is, and/or And think contract. the understand times, then at -- business indicated the just to business of in that the not One And and the about indicated some the prime. on current got Zack number forward is the eligible small comments, knew unexpected. we this company part recurring do it some be built we the business of a that business through -- comes recompete his we've as that as the had. to not acquired is acquisitions that deal business that Zack

going So surprises nothing some why we're at around $XXX of approximately us. and have period-to-period. million, to that variability That's about that bubble we

time wraps work up. goes the Additionally, in there's and nature from as work do and it's that turnkey to special we projects time some comes

of variability the we're about was there about part real trajectory in is But your talk contract like such nothing about to also CMOP, I a So event when more had event that award, change at and/or which Josh. bit in us. and quarter-to-quarter. The be -- will delivering call to we And detail. disruptive surprise happy major that this on big mark a which $XXX little going share going frequently, a be is happens as a you cover transition think we to of of question, more million

Joshua Zoepfel

Yes.

as kind kind a CMOP any you because really to segue in well. like, of the contracts? -- of Kind guys what's your for? is really mentioned, they more do how the you guys as just like with And these Can confidence moving color, you have good bit recompeting so me that's want recompete for give that so kind guys' the a along obviously, little CMOP of contracts of contract -- you indication well level of

Zachary C. Parker

Yes.

again to early year revising most wanted awarded have of then. or were color state, having I maybe bids, that And May kept the over them submitted and what part is VA the some And the and competition about date. We of the abreast And 'XX. strategy one, question time. which -- the every VA just then, great the June of get it a to in acquisition And of having smaller competition bids community we with strategy contracts in frame, we're We've to X the bidders XXXX, time for [ veteran lease think has of morphed extension or ended the awarded of with the again. give modification businesses. up try to X other new at any spill that, only [indiscernible], X you XXXX. they the revising I into even disabled in submitted as recap, the attempts did been competing is some since came said been reopen to ] owned with that it all our And small to of where current been November current since again. course, shared them those has and

I Where part for of proposals performance that just small small standards and involve been partner, we those it's metrics And a So performance, with of those was that maybe competitors The XXXX, you productivity, a a SDVOSB. Sigma Lean looking quarter. and contracts [indiscernible]. Those the year's quality do last they except solicitations says submitted those maintain us we a the discussions as as best on as et worth standards restart you've contract. terms of none is in their every yet. of that engaged built any signaling work good years, awards seen Power involve and of like this what is August, the regard even all [indiscernible] their still And what of modifications tremendous first by for win. But analytics end in years. It in they're JD organically of executing received the which to staffing. estimate the to up -- can't have and performance was they of most excellence all giving of in of And a company, want with when limiting well VA. In X both the those work their to tools, solicitation of XX to proposals had clearly the contracts September, for business continue have kind by for government's moved for of involved it we and XX have those the have the X-year -- case, to pivoted the not we with government the cetera, for invested as we recent clear will temporary prior stop Six as where have our for that's including have pivoted modifications approach. the to the equivalent with of and to, back their right, -- VA the exacting They winning invest degree focus signal they are call moving to business which bridges, the modifications well have lot in service right, do the a consecutive our be solutions probability we of nature to staffing the proposals.

to kind for appetite share that current to just When is versions same, So environment, almost you right? It with that low-cost you the the our I'll it not doesn't differentiate. of a becomes allow move you shootout.

And won't of at years sensitive. last still the a transition it competition is type at folks the the different into I in any because made, contracting new that go makes this details VA acquisition. of so couple have But

and So those. about and that locations, that. strong we we'll excited sites particular leaning we're at leave areas, obviously, qualifications in we're do have it But we not differentiate us in that, think particular but into

Joshua Zoepfel

your I'm margin the statement, kind of that. down of points XXX kind is -- basis And seeing points Can kind last really was kind what's for XXX from on driving just at describe we're thank of of sequentially. looking about your just what kind kind you income of year just really that basis guys gross color decrease? of Yes, and about

Kathryn M. Johnbull

more particular this than we period. of really prior of in in significant that's was margin Josh, quarter, a as Yes, cost mentioned, lower function contribution the pass-through the was it

inherently therefore, So gross aggregate types going deliver it's those lower tighter margins, costs of generate to an and margin.

Operator

Global. Brian from comes question with next Our Alliance Kinstlinger Instructions] [Operator

Brian Kinstlinger

contract? how revenue you When $XXX reported, related at quantify quarterly is small the that you to much of look revenue businesses can just in you million

Zachary C. Parker

the to you probably for The to We'll give you specific need come reported back to a revenue number. quarter.

Kathryn M. Johnbull

anticipated a It's of is part Yes. point, completely, of $XXX we those would Not items portion not material -- convert largely. most total To the that behind us. largely the million. but that

Zachary C. Parker

Excluding CMOP.

Kathryn M. Johnbull

Okay.

Excluding CMOP.

Zachary C. Parker

Right, Yes. right.

Kathryn M. Johnbull

this labor but No, a business. small is

Zachary C. Parker

Right.

Kathryn M. Johnbull

acquired be company already it's outgrown had the the up pent business. work. to that we, that way, that for status the a recompete won that ineligible acquisition acquisition. as was to caused not prior by the small it They And inherently to flavor an The small previously business them

then So like That's there's, of business course, layer. kind layer. presently things different that to vehicle. Zach not And CMOP that as said, small of that are there's are a moving that

Zachary C. Parker

of would added in on X in prior, quarters getting we to deal, I much some Josh, to to works were And have pretty earlier to when that other award this would favor seemed be the to color like several that But we some just slow -- were regards. kind probably decisions we in of tell cases, in government they award Things you these some did right? Those the CMOP seems started slated that one these that decided the is have past and are decisions. on customer, XXXX, anticipated diligence for growing business been our some small these as -- of the that be hit X actually quarter. of

good bad that So I news, news, guess, regard. in

Brian Kinstlinger

you clear. than what When revenue. be is even To significant, Kathryn, you're That's think less small contracts? X% say business seeing of smaller is I insignificant, actually

Kathryn M. Johnbull

it. think That's way to fair a about

Brian Kinstlinger

CMOP? how million I move The would second to of full today, that to question, business, they're $XXX of small part contracts revenue where and of open be the expect you guess, or even much including

Zachary C. Parker

that one there's all and right, of things think I of I'd House book two across right, a to. -- in through IDIQ OMB year, book, risk businesses. book setting industry, agencies the in couple a business, contracts right, still of some attributed seeing. our consider and for referring Well, things. there are a folks Number is aside White these that are in of process accelerate issued of say small some multiple-award those January our go of "Rule" to to X work you're is for number of largely that business, current of still directive to all this federal the the areas, In

that the while Now enabling regulations. been are no have introduced issued regulations federal into by there and

exclusion that guidance, since did it agency use. Some provide usual agencies language OMB officers take the particularly as not contracting can

of So X our we're of competitors last seeing -- over we've months. to happen that seen some the some

got yet, some with as been considering not close so sometime work our the seeing have of us by customers they're a that news the in some clearly good our that that little hit quantified. XXXX. that it, of we're we're transition. these right? And And to in that been have have discussions going way for that in of do We've of some bit framed that trying we We out we erosion is -- risk course, some be so is government of organically of RFPs grow we can still indications releasing to but

As solicited customers some very good to seeing that and coming have we awarded but win at for. probabilities in those be we like we least been by now to help small erosion. have from things indicated, behavior should offset that a business high -- good will still hearing we're those by at now, time things us have We'd the

Brian Kinstlinger

a is to transition great that So my next question.

for You've you this but not could believe total that outstanding think I some it's to pending would highlighted are helpful investors something you it quantify provide, typically drive growth. help I pending return adjudications adjudication. that large if proposals you be could know

Zachary C. Parker

around do that. Yes. metrics We our some and provide pipeline periodically

of dozen I X shortly. make to to that CMOP organic erosion, we position with and the it you growth mid-FY exit tell we us have anticipated help get opportunities we probability, north by anticipate. will materially can In business affect 'XX. should 'XX including small relative could that the that erosion, we just though, you, good So short, outstanding that And win strong sure

bit, some is of as those, I course, either one an depending up the contracts on a Kathryn first. That dilution and work those our that, coming of cybersecurity mix margins and, mix lot ultimately expansion and a is our quite typically or upon which basis. say I that diligence effect have that Some EBITDA. higher work our They'll there's an of our that in in digital logistics. systems engineering transformation, is a will gross arena margin impacting of have That effect of in will

And line that that million closely still those building some capable as So larger pretty much we're high-tech over very lower with north come out monitoring because margin $XXX are of similar but contracts of calls. the X see we'd like and just the strategic. years work, of to we're time now

some higher we'll you posted transformation regard which give said, like and an you of DTC on keep that to color idea and soon health is the a to arena. with pretty add give that, that. we'll again, pipeline. But research and kind So numbers of more technology We'll just you than of color digital try our those, our in I

Brian Kinstlinger

Last given your roll-offs Can important question It's talk you the question seems edging up submission you're than making progress the I've quarter. about asked the increasing following it ever, on you're got. proposal by I obviously, more last experiencing?

Zachary C. Parker

walked year Yes, we our has that's probably some our improvements have most wind we're tell shareholder it, excited a shareholders community, our so and think both ability factors to is to major be go substantially, major or so contracts there. I ability -- and briefed on we think, that elevated about large call. value -- solutions which kind after key changes, my of propositions making high certainly, probability. There process, about friend, ago But elevating into you, I technology drive we I'm to the this were the through, needed. have several with to which winning do

full we're to recall, now. capabilities $XX the expanding now got with it million, have business As were that approach And accordingly, development, with at you as million smaller $XX deals. But hand. the augmented them in entities we generally may were range to revamped operating million, looking operating an generally the we in We've our that we've $XX unit.

sort any we around the more of customer, of on exist capability, execute the analytics, that releases had that to brought data really strongly And acquisitions. cybersecurity, we expertise now with and some didn't these complements are the the bench. that with the with of in seeing strategic It regard assets while probably some tools have had performance we're we've caliber You're it data we ML, fusion, press shaping didn't able long. that to AI,

number in a have have type the capabilities. our for And we our substantial before have process of intimacy bids of real, these didn't seen positioning to a real strong So building needed of win value strategic the advisory improvement and rate.

really from we're organizations those as organizations. if that. that about just good So optimistic most as, better, come not teams most our the We've of got because than of we've in are industry

So we're really excited about the elevation that after. of both things going the after aperture in terms our of now we're going not were teams

So size and positioning value as well. the but we've elevate more our got win great, a to think we committed our is there probabilities our propositions, lot

growth excited about organic what's front. So the come to really on

Operator

are for turn It in like any remarks. to to the question-and-answer appears session. concludes would queue. our over conference This there further closing the questions I Parker Mr. back no

Zachary C. Parker

think we like expectations important you quality at it's want the conversation. the tremendously small to into optimistic the of to about impacts of our ability is I'd we're the continued that interest We're sure new perspective. and -- coming looking set really aside becoming all business differentiating. a thank pipeline your make set to see less from at our Well, really to business lean forecasting longer excited that the work that again despite the really it. I really trajectory prosecute some very time, we We're same and quarters the the around really, to probative participation in for what we in and your And

much of stronger as we period go So this out upcoming forward. come we'll

keep So thank we'll you to again, you and posted. continue

the QX more think QX. course, get period, of that time we election next we'll or around as at approach color I around the time together, and a we'll and little we be give

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

Operator

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

You may now disconnect.

DLH (DLHC) 1 Aug 242024 Q3 Earnings call transcript