DLH Investor Relations

DLH Reports Second Quarter Fiscal Year 2018 Results
15% Revenue Growth and Solid Cash Flow as Strong Outlook Continues

ATLANTA, May 15, 2018 /PRNewswire/ -- DLH Holdings Corp. (NASDAQ: DLHC) ("DLH" or the "Company"), a leading provider of innovative healthcare services and solutions to federal agencies, today announced financial results for its fiscal second quarter and the six months ended March 31, 2018. 

Highlights

  • Second quarter revenue of $34.4 million, up 15.0% over the second quarter of fiscal 2017
  • Income from operations of $2.2 million for the quarter versus $1.8 million in 2017
  • Diluted earnings per share of $0.10 for the quarter versus $0.08 per share in the prior-year period
  • Generated operating cash flow of $4.4 million for the quarter
  • Reduced senior debt to $14.9 million at quarter end

Management Discussion
"We're pleased to announce that the second quarter delivered significantly improved financial results," stated DLH President and Chief Executive Officer Zach Parker. "Revenue for the period was up 15% year-over-year, as we executed at peak activity levels on key programs – driving sales to over $34 million for the first time since our corporate transformation. Income from operations rose 20%, and operating cash flow of $4.4 million demonstrated the strong underlying performance of our business, leveraging legacy net operating losses to offset the majority of the Company's tax expense.  

"Recent budget decisions in Washington underscore the government's commitment to key agencies that oversee healthcare, our veterans, and military personnel, including the programs where we participate as well as areas targeted for growth. We believe these budget priorities support our strategies for both organic and acquisitive expansion across the important segments we serve. We continue to broaden and strengthen our capabilities, and we believe that our dedication to excellence in service delivery – combined with our enduring, long-term customer relationships – will allow us to achieve our growth goals."

Results for the Three Months Ended March 31, 2018
Revenue for the second quarter of fiscal 2018 was $34.4 million, up $4.5 million, or 15.0%, over the prior-year second quarter, reflecting the expansion of services on existing contract vehicles and contribution from new contract awards.

Gross profit was $7.4 million for the quarter, an increase of $1.0 million, or 16.4%, over the second quarter of fiscal 2017.  As a percent of revenue, the Company's gross margin was 21.7% versus 21.4% in the prior-year period. General and Administrative ("G&A") expenses were $4.7 million for the quarter versus $4.0 million in fiscal 2017.  As a percent of revenue, G&A expenses were 13.6% in the current fiscal first quarter versus 13.4% last year.  Depreciation and amortization was $0.6 million in both fiscal year second quarters.

Income from operations was $2.2 million for the quarter versus $1.8 million in the prior-year period. This increase reflects gross profit improvement of $1.0 million, partially offset by the higher G&A expenses noted above. Income before taxes was $1.9 million for the quarter, up approximately $0.4 million over the prior-year period.

For both the three months ended March 31, 2018 and 2017, DLH recorded a $0.6 million provision for tax expense. The effective tax rates were 31.6% and 38.2% for the fiscal second quarters of 2018 and 2017, respectively, reflecting the prorated impact of the tax rate reduction from the Tax Cuts and Jobs Act enacted in December 2017.

The Company reported net income for the second quarter of approximately $1.3 million, or $0.10 per diluted share, versus $1.0 million, or $0.08 per diluted share, in the prior-year period. On a non-GAAP basis, Earnings Before Interest Tax Depreciation and Amortization ("EBITDA") for the three months ended March 31, 2018 was approximately $2.8 million versus $2.4 million in the prior-year period. Growth was attributable to increased revenue and gross profit, partially offset by additional G&A expenses as described above.

Balance Sheet and Cash Flow

Cash as of March 31, 2018 was $3.6 million, and the Company's senior debt was $14.9 million, versus cash of $4.9 million and senior debt of $19.7 million as of September 30, 2017.  Regarding cash flow, for the fiscal second quarter DLH generated approximately $4.4 million in cash from operations, based primarily on effective collections of accounts receivable.

Non-GAAP Financial Measures

The Company uses Earnings Before Interest Tax Depreciation and Amortization ("EBITDA") as a supplemental non-GAAP measure of our performance. DLH defines EBITDA as net income excluding (i) interest expense, (ii) provision for or benefit from income taxes and (iii) depreciation and amortization.

Beginning with the first quarter of fiscal year 2018, the Company commenced reporting EBITDA, rather than adjusted EBITDA, as a key non-GAAP financial measure of our business. The Company believes that due to the growth and maturation of its business, this change will improve the transparency of its business performance and increase the comparability of its results with peers. Non-GAAP measures for prior periods have been recast to conform to this change in the Company's reporting. It is important to note that GAAP results and the presentation of GAAP metrics do not change, and the reporting of EBITDA has no effect on the Company's business nor how the business is managed.

These non-GAAP measures of performance are used by management to conduct and evaluate its business during its regular review of operating results for the periods presented. Management and the Company's Board utilize these non-GAAP measures to make decisions about the use of the Company's resources, analyze performance between periods, develop internal projections and measure management performance. DLH believes that these non-GAAP measures are useful to investors in evaluating the Company's ongoing operating and financial results and understanding how such results compare with the Company's historical performance. By providing this non-GAAP measure as a supplement to GAAP information, DLH believes this enhances investors' understanding of its business and results of operations.

 

Reconciliation of GAAP net income to EBITDA, a non-GAAP measure:








Three Months Ended


Six Months Ended



March 31,


March 31,



2018


2017


Change


2018


2017


Change

Net income (loss)


$

1,316



$

979



$

337



$

(1,535)



$

1,303



$

(2,838)


(i) Interest expense


261



255



6



539



619



(80)


(ii) Provision for taxes


627



605



22



4,346



806



3,540


(iii) Depreciation and amortization


560



554



6



1,066



755



311


EBITDA


$

2,764



$

2,393



$

371



$

4,416



$

3,483



$

933


 

Conference Call and Webcast Details
DLH management will discuss second quarter results during a conference call beginning at 11:00 AM Eastern Time tomorrow, May 16, 2018. Interested parties may listen to the conference call by dialing 877-870-4263 or 412-317-0790.  Presentation materials will also be posted on the Investor Relations section of the DLH website prior to the commencement of the conference call.

A digital recording of the conference call will be available for replay two hours after the completion of the call and can be accessed on the DLH Investor Relations website or by dialing 877-344-7529 and using conference code #10119759.

About DLH
DLH (NASDAQ:DLHC) serves federal government clients throughout the United States and abroad delivering technology enabled solutions in key health and human services programs. The Company's core competencies and consulting services include assessment and compliance monitoring, program management, health IT systems integration, data analytics and medical logistics, and pharmacy solutions. DLH has over 1,400 employees serving numerous government agencies. For more information, visit the corporate website at www.dlhcorp.com.

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995:

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or DLH`s future financial performance. Any statements that are not statements of historical fact (including without limitation statements to the effect that the Company or its management "believes", "expects", "anticipates", "plans", "intends" and similar expressions) should be considered forward looking statements that involve risks and uncertainties which could cause actual events or DLH`s actual results to differ materially from those indicated by the forward-looking statements. For a discussion of such risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's periodic reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, as well as interim quarterly filings thereafter. The forward-looking statements contained in this press release are made as of the date hereof and may become outdated over time. The Company does not assume any responsibility for updating forward-looking statements.

CONTACTS:




COMMUNICATIONS


INVESTOR RELATIONS

Contact:  Tiffany McCall


Contact: Chris Witty

Phone: 404-334-6000


Phone:  646-438-9385

Email:  tiffany.mccall@dlhcorp.com


Email:  cwitty@darrowir.com

 

TABLES TO FOLLOW

 

 

DLH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF INCOME

(Amounts in thousands except per share amounts)








(unaudited)


(unaudited)



Three Months Ended


Six Months Ended



March 31,


March 31,



2018


2017


2018


2017

Revenue


$

34,401



$

29,905



$

64,616



$

56,016


Direct expenses


26,953



23,504



50,636



43,804


Gross margin


7,448



6,401



13,980



12,212


General and administrative expenses


4,684



4,008



9,564



8,729


Depreciation and amortization


560



554



1,066



755


       Income from operations


2,204



1,839



3,350



2,728


Interest expense, net


261



255



539



619


Income before income taxes


1,943



1,584



2,811



2,109


Income tax expense, net


627



605



4,346



806


    Net income (loss)


$

1,316



$

979



$

(1,535)



$

1,303











Net income (loss) per share - basic


$

0.11



$

0.09



$

(0.13)



$

0.12


Net income (loss) per share-diluted


$

0.10



$

0.08



$

(0.13)



$

0.10











Weighted average common shares outstanding









Basic


11,889



11,249



11,863



11,225


Diluted


12,886



12,745



11,863



12,713


 

 

DLH HOLDINGS CORP.

CONSOLIDATED BALANCE SHEETS

(Amounts in thousands except par value of shares)








March 31,
 2018


September 30,
 2017



(unaudited)

 



ASSETS





Current assets:





 Cash and cash equivalents


$

3,586



$

4,930


 Accounts receivable


12,338



11,911


 Other current assets


945



598


Total current assets


16,869



17,439


Equipment and improvements, net


1,795



1,391


Deferred taxes, net


5,473



9,639


Goodwill, net


25,989



25,989


Intangible assets, net


14,246



15,127


Other long-term assets


89



139


Total assets


$

64,461



$

69,724







LIABILITIES AND SHAREHOLDERS' EQUITY





Current liabilities:





 Debt obligations - current


$

3,622



$

6,518


 Derivative financial instruments, at fair value




306


 Accrued payroll


4,645



3,723


 Accounts payable, accrued expenses, and other current liabilities


9,936



10,895


Total current liabilities


18,203



21,442


Total long term liabilities


10,658



12,427


Total liabilities


28,861



33,869


Commitments and contingencies





Shareholders' equity:





 Common stock, $.001 par value; authorized 40,000 shares; issued and outstanding
 11,899 at March 31, 2018 and 11,767 at September 30, 2017


12



12


 Additional paid-in capital


83,838



82,687


 Accumulated deficit


(48,250)



(46,844)


Total shareholders' equity


35,600



35,855


Total liabilities and shareholders' equity


$

64,461



$

69,724


 

 

DLH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Amounts in thousands)






(unaudited)



Six Months Ended



March 31,



2018


2017

Operating activities





Net income (loss)


$

(1,535)



$

1,303


Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:





Depreciation and amortization expense


1,066



755


Amortization of debt financing costs as interest expense


132



127


Change in fair value of derivative financial instruments




52


Stock based compensation expense


928



549


Deferred taxes, net


4,166



642


Changes in operating assets and liabilities





Accounts receivable


(427)



(2,234)


Other current assets


(347)



(215)


Accounts payable, accrued payroll, accrued expenses and other current liabilities


(31)



1,386


Other long term assets/liabilities


44



124


Net cash provided by operating activities


3,996



2,489







Investing activities





Acquisition, net of cash acquired




(250)


Purchase of equipment and improvements


(588)



(674)


Net cash used in investing activities


(588)



(924)







Financing activities





Repayments on senior debt


(4,793)



(1,875)


Repayments of capital lease obligations


(5)



(40)


Proceeds from issuance of stock upon exercise of options


46



14


Net cash used in financing activities


(4,752)



(1,901)







Net change in cash and cash equivalents


(1,344)



(336)


Cash and cash equivalents at beginning of period


4,930



3,427


Cash and cash equivalents at end of period


$

3,586



$

3,091







Supplemental disclosures of cash flow information





Cash paid during the period for interest


$

427



$

434


Cash paid during the period for income taxes


$

578



$

300


Derivative warrant liability reclassified as equity


$

(306)



$


Noncash issuance of stock upon exercise of options


$

25



$


 

SOURCE DLH Holdings Corp.