DLH (DLHC) 4 May 232023 Q2 Earnings call transcript

Good morning, and welcome to the DLH Holdings Corp's Fiscal 2023 Second Quarter Earnings Conference Call. [Operator Instructions]. This is call is now being recorded. I would now like to turn the conference to Chris Witty, Investor Relations Adviser. Please go ahead.

morning, good and you, everyone. Thank

and with fiscal On X provide include the uncertainties the President on results Officer. Investor is available Slide a various release Parker, page. of and I like safe today Chief the The our for Executive forward-looking to under company's materially differ that shown This to earnings may events Financial brief these the and call is forward-looking and also call that Chief Officer; These statements. Zach to statements relate Johnbull, harbor outlook subject actual are which statements now me XXXX beyond. presentation. to and from website could presentation are PowerPoint cause and would company's on risks Kathryn statement,

up call GAAP turn presentation questions. Zach next; to ahead, Zach. release our included Zach. is in the for Please With CFO, risk Kathryn refer call, update filings Commission. be report and like measures. both duty undertake and the on by followed that, to our company's results referencing we the any XX-K in now the A We Securities we'll financial investor to in it annual and contained Parker, other which On Please and GAAP our today's and reported forward-looking Exchange on our open President non-GAAP statements. of results in website. not with to speak Form reconciliation I'd non-GAAP will factors do any DLH's the earnings to CEO, over will go after JohnBull,

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

in we remaining good business. a last the quarter, track are headwinds despite year continue to for progress the since macroeconomic We also make strong fiscal on and

debt programs. committed the differentiated our on our have remains our value We of that and to outstanding missions gratitude for by workforce performance clients' delivering a

our $XXX essentially of of closing. belt, With on high-level first X, revenue provide quarter our GRSI under Slide reflecting first I'll quarter's Beginning the reached financial recent million, a post overview quarter with our second operations full acquisition highlights. the

have we mark million first last including we But a COVID-related course, before large FEMA Of the The the during expect reflects transformation X XXX company that our contracts digital this in of with our short-term quarters to forward. years. due has over solutions expanded is, last that consistent the This had, we to we and technology-enabled upon build articulated profile, areas substantially going that the milestone year year's course, of have health business side. ongoing the particularly year. of base strategy growth surpassed IT,

very future have for couple recent been organic and proposal development competencies. active of Our program growth, regard to quarters these leveraging shaping with

million. operating rose $X.X reported $X.X EBITDA while to income million, Our of

EBITDA a our down $XXX in improving flow Our differentiated after to through greater million. highly paid the to history. additional margins cash with quarter, debt, services. sheet possible, the business consistent the moments. expanding we delever in strategy We with And few ended review that will company's the continue as in Kathryn roughly will balance million of use of quickly detail reflect the end $X as operating a an our but quarter

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

recent some to contract I wanted Slide to briefly an awards. developments, important including X. X provide Turning overview of

Cancer informatics contract on technology. Center program and and as business our for great coveted with game advanced expertise to business first solutions and biomedical to This Institute. National the a the -- provide our highly vehicle to and a treatments. Cancer apply causes cancer opportunity The with will a for it's base continue information technical research allow National National the to build expand expand DLH scientific of imperative continue solutions ceded national support IT Institute to to the to It's our base

provide agreement compete And end not-too-distant blanket Also, valued ceiling orders multivendor of award our capacity we Information business, multiple leveraging we through is and artificial $X.X GRSI. advanced advanced to built of this future for in growth will expand the we continue management of systems billion. in our opportunity architecture cybersecurity, the Information have intelligence a Such this roughly significant to and on offerings to pipeline wallings value modernization. innovative the we the long-term future. opportunities aggregate competing strategy, including logistics task National mortar that the value after hope acquisition estimated the the strength and at planning solutions million, won of contract and information Through Naval The and purchase quarter, to $XX to of see Warfare turnkey to our see assist underscore business. our

company's Board In and Directors former ManTech the March. governance we addition, to our continue in Board Chief Meeting Annual at Directors Judy for of of strengthen our to recently Financial Officer adding Bjornaas,

in already experience of services unmatched built provider, favorably for government to Given most the her our we're we onboard. our nearly impact capabilities, look and provide. a coming her have key pretty acquisitions we through by and She our couple that track bolstered record positive a and our continued to our on recent within demand made has services the to DLH forward technology market is underscored to strong role as again compete delighted and in industry, success. advanced expertise a organization,

government innovative fiscal credential major offerings beyond. highly in and for the are 'XX Our line with and staff priorities

levy our transformation, believe artificial In scientific We combining chapter where fact, new technology fiscal mission the budget and DLH's machine for we're with wheelhouse all investments preliminary performance. support White an line in exciting calls research, in beginning the evolution, bond we're House's long-standing top digital XXXX research at of future are which well for our credentials. historic leadership and and in intelligence,

host secure IT, government strengthened and agencies systems engineering have of enterprise areas, and building computing, many record a our track cloud position and our We integration, programs. across these across analytics cyber of of existing innovation, data

who With ever, government's which that Now rises highly this capabilities dedicated growth more we expectations of way overlap organic to every Once relationships to I'd accelerating can customer workforce differentiated Financial clients' Kathryn? like to provide. are our so, that, Officer, owe and and the trajectory. strong delivering paving on needs success our the the between our again, our professional over we company's in and day Chief Kathryn for greater than the challenge John. to doing turn call the

We're and our quarter you, good Zach, latest our morning, XXXX, full of for Thank GRSI. period fiscal to second pleased a results which acquisition, includes report everyone.

XXXX. we this reminder, a December closed As transaction X, on

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

While for operations services reconciliation the as adjustments, past, exclude presented nature, discussed income A covering the XXXX require numbers, specific is remaining and FEMA adjusted results including GAAP short-term COVID-related this operating were filings. associated the XXXX contracts in measures to Alaska, adjusted of show fiscal release last full year. revenue, and in which our cash we've back operating from one-off as in included information as for the presentation press well in in the no this

versus fiscal and the during our $X million We $XX happy added in approximately $XX.X revenue essentially in last have in Adjusted business $X.X graphic year anticipate the to $XXX as impact organic acquisition largely quarter, Slide -- our quarter. revenue Zack programs growth decline of million revenue quarter quarterly reflecting threshold of over million our of slight just in the XXXX are XX% details from for a to the from as XX%. million GRSI offset million period, timing. legacy rose for Adjusted GRSI the form. an million was of mentioned. $XX X the shows across prior year income revenue met increase the previously operations contract

margin X.X% acquisition. in company fiscal expense result in the fiscal revenue, reported reflecting an a of percent XXXX noncash XXXX, X.X% of depreciation of a as GRSI and operating As the higher amortization versus

returns. Adjusted EBITDA approximately more XX, capabilities ended of was an adjusted period, the second 'XX. $X.X EBITDA share reported year. the which The fiscal income respectively, $X.XX or company year XXXX highly to Improving $XX.X in prior the the the in million March expense recorded for reflect contribution margins $X.X $X.X reflecting the the the year-to-date operating in due XXXX, share million and X versus on million a quarter quarter million and increase $X.X million versus adjusted for an year fiscal quarter of Interest in better versus earn net transaction. million provision $X.X last cash year in $X.X period. GRSI X.X% generated year prior second outstanding million $X.X basis months higher in a period XX.X% fiscal $X.X or of versus DLH period, of per diluted to -We of second expense million versus of $X.XX the prior XX%. $X.X million, of prior debt tax the we in was million XXXX expect through during differentiated

Slide X strengthen use provides debt expense pay our generation the down reducing regarding and balance general. plan to the company's sheet, in substantial update cash an to interest flow

year. grant did debt and While call, soon in extinguish debt approximately quarter, opportunity the million million puts quarterly squarely targets debt by this the $XX reduce outstanding. $XXX.X receivables meet not have us so date of This did as our fiscal us track to certain timing of And to on we during debt this thereafter. the on to of paydown

a almost million to the million generation would of the to at reduction, With anticipate being As year. record that, for over $XXX balance This track cash this turn the statements. continue to our debt the delevering debt a that that turn like discussion not and into be will and reputation rapidly able change to my is $XXX $XXX we strong had We've I reminder, fiscal and when we operator financial transaction, for call open our to close between outstanding. built year-end. the debt questions. GRSI of sheet, company million expected a to concludes

Instructions]. [Operator

from question Capital. first Gomes Our with will Noble come Joe

bit And the want to start little I drill our line that. versus with off expectations. to light a probably, little down was top you maybe a could just more So

I in legacy mentioned about think, was quarter. business $X million You the the down,

didn't that on better line. just in the might So business some gets come to thought Just in? a come trying you handle right little to moved have top or get things that

Yes. existing And growth the business right. as contract both contract, hit it to our Great slip question, to as well on opportunities continued have on actually Joe. spot new you

the right. of through to delays. of contract, growth, seen our some expected We've for the we to internal to government to on-contract impact to that, we But IDIQ right, little government than task attributed just slip things get slipping more see may those be As to the acquisition which required of largely so a some of existing a recall, that and course, continue long-term no our seems you process. order programs

that actual we of awards new the cycle of And QX, running The contract pretty our who again, just, is still the starting we're have that now business latter year, QX same acquisitions for for just part what be had to activity. bidding to slipping some we of proposals even our load pipeline, those think contract more or into to a heavy last will prospects. through awards same turn

net year-over-year. Okay. did I pharmacy that a increase revenues in VA notice

increased there behind was Or I doing items think that million. that just them? that, they anything more by side? there that on Was the in $X some revenue increase pharmacy onetime about drove business with

coming of frankly, pharmacy that and drive to their more mail-order to effect and Joe, hospitals. the with about learned veterans allowing into we've of a quite a will local out pick Yes. VA to traffic some we of demands via coselling are deal fair put at that in our opposed up metros of the amount regulations come lot as COVID, challenges more to the readiness

increased. go we're has post trend regulatory level environment left that to is So it change venture. we -- remain continue forward. kind which But have that off for think seen of It's as was going we probably you now, to stable -- the COVID probably

thinking VA out contracts a second, on with provide update looking And rebid with Okay. those can there potentially us the contracts? the to for and an you VA the

veteran submission continuing of in last we strategy. are submitted our to government as -- proposals, did you service-disabled businesses. require nothing's participate since portion And we small SDVOSB of report. changed the the know, Yes, that really the We acquisition have

next the first out it's the year, to those determine current that, all to in our run fourth We acquisition remain what they -- awards then But calendar during change. quarter calendar. not since last and able currently to should we is of continue as extensions we provide services also remain no evaluate spoke interest those subject in the we'll if which strategy and and be quarter proposals we'll through best to went before, ready government contract, that that of available of that

-- adjusted Katherine, And last could I a margin [indiscernible] Okay. talk about at year this bit look quarter maybe for X.X%. operating the if little you

Just a higher to in what expected step kind quarter. up happened we was little margins side wondering and bit backward drive there. help GRSI operating this of took

that Yes. course, from about we puts A on -- the blend about of a streams of contribution revenue really of the key the revenue. contributor noncash the pressure is that that. of Otherwise, the is, to of various it's have, revenue X.X which D&A, just relative just point function

nothing I relative so we particular indicates would we quarter. say that expected had that contribution So in to acquisition more the expect just the from wouldn't that the mix we the get that

of significant someone that you kind ask one enough. around at a I'll and of Fair questions. couple looking us or a give I else was or X Okay. pipeline if out wondering and the me, you And detail major of then some you're let of the bit point that. ones might Zach, X more little more about opportunities. color talked for

one And major I'll that of to able health there's close into continued a bids in sensitive was be Sure. while, lot as that and as a to extent, felt get that's large have of That that finalized competition moved smaller so very the was but contract has course, of to year a lot would pretty of that, often within due large there protests acquisition been refer ago a mention due really a SpX. we that did delayed we taken on to a delays amount businesses government open but too has or really to customer, award. But to But up pent-up having side. businesses, much opportunities mission final fair to had it also we a it has acquisition CIO NIH us while the number the to a bid. some to for well.

before And do for government request research that start. fiscal yet to military revenue by that given revenue for we year. as break. proposals. for in now X it task with IDIQs has is the interest remain defense probably We've be X, awarded. X, other the another -- least see also multiple awards medical Beyond Case that again, of also likely one health. this but And been procurements, X bid kind while those, we or and were that, to the or that expect announced just We are those those orders fiscal Omnibus this we 'XX of at some year, announced had the the hopeful health and that has strategic The now that still task we'll other any be in one to release year of we will we're National more like bank, perhaps actually FY in time starting opportunity, And end we also X already which early X our Institute. -- this order agencies, was

appreciate those get it, Great. queue. Really and in I'll updates. back Thanks for

[Operator Instructions].

question next follow-up Joe a from Noble be Capital. Our with will Gomes

some Yes. ask going is No one them. else ask to more. I'll

key the the GRSI acquisition wonder cross-selling could about of some Zach, with was of you opportunities? One And I those. speak if items

gotten from research agencies, Yes. power, disease including well, that of have of in what addition Those work some the in tremendous combines targeted building of the are there's things heavily control major the in well future. computing medicine that bolstering as the most really Institute and but some that And extensive But the currently Health, a heritage major the I'm there some base, David data agencies the business our where biomedical the and are as been existing but secure areas really we've talent GRSI. the we nature excited of adjacencies happen of is benefits environments support really, programs on National very precision depends business Syneron that have both we our the like from about. programs that

advancing for really that really, we our we're cross-selling future are programs of key those. heavily are business. was majority we positioned is think of think, uniquely arena. HHS opportunities, really that that The And These the the focused those nation of the some state within on

have posture would to with with business combinations IBA not have the engineering we health been would that opportunities also differentiating from of the readiness position And in technical we opportunities capabilities the in cross-selling related for going supports GRSI in with along largely have some Defense our We came -- some not the a forward. really Agency. acquisition prime in the been the a think that that fleet way Health position several us of technology and

what for innovation house well that regard heavy a continued for So military future. see of with side dependence research for technology the in as metros as bond the support think you'll Hill our expansion I a of and public the in

chance went moment implies you your then And see about GRS out million that on to to for a Great. revenue [indiscernible] $XXX Should to rate? that Okay. GRSI. that comes were quarter. million to initial they talking million that to at million. increase $XX.X we run it the on about to of in did back a closer expect maybe the quarterly And $XXX get $XXX get back basis

we've the we strong Definitely, discussed, has record growth, track low expectation we've -- Yes. set of GSRI and double a as that of digits.

and that security public of do channel the growth. the think to moving activity support of just level are volume national provides to continue with and the that in we health Zack that those about So presence key believe upward customers, of they we talked NIWC

think, with that debt. number? I you projected, of a million. above XX% there you higher still this was rates out do about Kathryn, increase Thank will some number year? you, maybe Or Are bit increase these you million that with Great. think little a GRSI again, for the expense interest comfortable $X.X Again, $XX

laid a pressure we continuing Yes. think and rate that's put to a there's do grow, our -- that interest in that in we floating contract to portion have to with from were happy we're of impact rates obviously, but yesterday. mentioned, We've as increase to we debt, on -- XX. by out. to as we as in be that the well call, including subject congestion We're up March payments going in of the still, the hedged happy swap be with that we I to do on some obviously where particular, January. major as it we clear result some contract had way in certainly quarter, this disappointed report ended we going continuing place that But

pressure the of So interest to rates on course, going is it's interest in higher multipronged, result expense.

component too, might we component. financing million. finer But from of component a there's that, bit that $XX And put is interest than I a perspective, on -- cash as the be is suggest, an noncash you noncash to of sounder EBITDA going amortization terms nonetheless, in point of to a the of deferred a expense, costs want think,

Anthony, back over you. to

further Parker Mr. back it there for any turn over are to appears It questions. to I'd like no closing remarks.

All your for Well, interest right. everyone, and in us DLH. you, continued again. Thanks, thank joining

to As Kathryn very forward. well for the feel we remain new about we and go very growth to both conveyed this and building organic value continue very, excited chapter earlier. We our proposition as strategy execute positioned

look quarter. now. and Bye you to next chatting all, we for with you thank So forward

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

may now You disconnect.