DLH (DLHC) 2 May 242024 Q2 Earnings call transcript

Hello, and welcome to the DLH Holdings Corp. Fiscal 2024 Second Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

I would now like to hand the call over to Chris Witty, Investor Relations Adviser. Please go ahead.

morning, good and you, everyone. Thank

and with On the President Officer. Investor is available release Parker, page. today Chief the The our Executive under earnings Financial call and Chief Officer; Zach JohnBull, are me and website presentation PowerPoint company's on Kathryn

is presentation. now provide which would on Slide safe harbor a I shown brief X like statement, to also of the

risks statements. fiscal undertake are XX-K Please statements from may the relate to to and any any various for forward-looking include duty subject outlook contained statements These Commission. forward-looking the factors events that uncertainties, Form other company's our cause Exchange in with XXXX to call such could filings update the beyond. This company's and refer and which actual to and to in the Securities results materially statements. on not annual do report and risk differ We

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

President after we'll it and followed for speak will up which questions. open Kathryn CFO, CEO, Parker, by Zach JohnBull, next;

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

fiscal morning, second Welcome remain the XXXX performance Thank We you, Chris, and good conference year. quarter solid through everyone. midway call. to our on for track

led results, the bright for executing passion them of again once to quarter instilling stage and workforce for like and be we of customers, growing in operating the strong where support are our not I company would thank and setting remain everything without in do. excellence the great that We DLH. dedicated a serving that laser-focused way today another they for who a future are to they our on tremendous would to

the to cash of review of working X. translates million results. during enterprise million $X.X flow well $XXX reported cash underscore operating as in to of while which cash-generating quarter ability and $XX.X million will EBITDA serves an financial overview our to the as We period, sound provide moment. of a $XX revenue than our generating Turning Kathryn Slide the I'll more of capital management, second year-to-date. This of million as

paying We for to period of total in $X.X delever million strong continue had also cash outstanding. laying the a with growth company, forward. sound that ending quarter Overall, down million solid the financial debt, key the we results debt of showed foundation markets strategic generation, and $XXX.X going

our summarize like positioning I'd and to current outlook. of elements X. Turning Slide important to

ample from an the quarter, First, won provide we our past presence to National awards $XXX our increased that recompetes other of Health this including bolster our technology We to key $XX over this front backlog with up the and at sequentially X several and expand Institute end QX, million. of million opportunity customers.

research for into manage in extends the with for IT agency and National our the the of and sharing real a data at leading million, began first value award Drug The The a research a help and of advanced will informatics in Institute on adjacent first competency a we in expansion. and that provides services to is United balance $XX markets. expand which approximately use enabling we $XX drug potential contract, partnership recurring $XX contract of million federal system, government. resources the supporting our the services which look scientific the addiction, XXXX. problem approximately Through million that agency's is customer with States for on priority clinical time, This contract service growing Abuse, federal

research, Biomedical the services announced Center with and health to Institute, National largest for contract. for This of the award organization expand contract year training Health with won and cancer we addition, within we Institute the which the competed information the utilized contract Informatics principal the highly Cancer In Technology, our a Information multiple-award, last and dissemination. IT National agency government's a

skill data mission. example value, value much total services including analytics The in over to provisions as services be integrated services a the the integration, the computing We management a platform are This $XX strategies, exercised, our $XX broad periods great bring additional base more. research network if X.X but has agency's it company's configuration, support will from contract million. demand providing of all range approximately IT of an a of is and which, we'll engineering software $XXX connectivity, years, handling unique award for optional sets also for scientific fully has ongoing and million requirements option hardware to in million

and forward expect of for and of our with the reshape our variety look and to programs these to contract illustrative we to continuing portfolio other continue our We active invest come. similar respond to These wins second and activities business support momentum value brings of pipeline as opportunities. the customers, during years NIH of development to DLH a we fiscal half XXXX are

to on through process. the are VA procurement like legacy comment proceeding also our currently I'd which CMOP contracts,

were As VA pharmacy contractors that veteran-owned X set service-disabled, small aside and CMOP the logistics for bids, announced, for these issued previously and RFPs were for services medical the businesses. procurements prime

work partnered highly venture. we joint bid to qualified of business this part a a with as As small such,

contractor evaluated, are bids we all these continue locations. to operate as While for CMOP the prime

that venture. VA for late award the to an our unaffiliated February, made business the X one decision that with location, awarding contract informed joint had to a small initial Chelmsford were we the is of In

to However, VA's remains work. a that I venture completion and joint our the viable contender believe acquisition process, that remains that for of the subject award

of the continues XX we this July for remains the having a have potential at performance the tasking. with ceiling all VA VA contract locations. the evaluate been beyond CMOP X procurements, $XXX year continue with to This separate a ID/IQ of to initial value the sole-source awarded initial While dynamic, million the with orders a period operations additional through tasking

in array targeted which we wide large expect through a our across including core to some of see this define year. discussed we've on decisions contracts the to multiyear make past, orders we in the government opportunities some which of now task and of coming markets that later the quarters, specific Overall, starting ID/IQ are the

government the is now fully remainder serve. fiscal Given through and the a the that funded is bid healthy of across the we of time activity it year, high agencies

development workforce, are digital drive Our applications, with continued beyond. credentialed capabilities wide and highly growth relationships, of our and anticipated array and year strong along our agency and this research transformation to

of bright. the tremendously future with CMOP the uncertainty, DLH looks Even

pipeline, budget and federal development capabilities role expanded continued in and science, priorities activities. We and with research have transformation which new digital to build our readiness and business their cybersecurity, aligns enhancing and our in

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

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

business IT in prior by public from I'd We the of impact metrics $XXX to $XX.X our revenue ended high-level our overview national a quarter second XXXX. program the area. million portfolios, key certain enterprise Turning period. security of in year turnover like the We the saw aside management awards to provide set small within health offset for million partially expansion reported and months X Slide some X, of versus in financial March XX,

and $XX.X comparable compared XXXX. reflecting in $XX.X last of with This the million cash which fiscal generated We days reported in XX XXXX, XX operations sales second outstanding quarter improved fiscal period over year-to-date of EBITDA collections. from decrease in a the versus million $X.X for of million of $XX.X resulted year days, cash million represents days

procurement-related was quarter the for of positioning CMOP last even in million expenses. EBITDA Our $X given strategic year line costs legal and approximately in aggregate with

outstanding. $XXX.X Now of and our reduce strengthen off ending of lower Slide X, the total interest floating expense approximately interest if balance of you sheet million Approximately the provide arrangement to our an of of update interest expense. We amortization with quarterly turn deployment period the cash is during $X.X company's $X.X noncash the I'll rate million to quarter, financing fees. debt, million regarding higher debt debt paid

fiscal million result a and debt interest The as We in to end leverage reduce half million further providing between expense. year through remain below on cash expected ratio to expect $XXX we reduction to earnings to expansion the and X.Xx, reduced the year. payments fiscal the track of is savings debt at of in the debt $XXX second accelerate

my discussion concludes This the of financial statements.

With that, operator our the to questions. call like turn over I open would to for now to

[Operator question Instructions] first Capital. of will And our come Joe NOBLE from Gomes

the more of national small then way any, contracts on is if business, at that, a awarded to much So risk? that? security size any how that And were

Joe, question. Yes, great

in a recall, some there programs XXXX, part early XXXX, business the discuss were we the environment. completed the did As may opportunities, that you been it, end we previously had awarded of of with with GRSi, that during acquisition some small of

around thus far have for few seen we when that, so runoff accounts of a to still have a of couple those came recompetition. And that still And largely have for that some referred did those expect has or pending. what they Kathryn are to. you We which in

as look fiscal rate have decisions will that most this what of year, those we'll of degree expect and to We some certainty like. conversion

As you know, some generally recompete we those. would of these contracts,

XX% subcontractor of a values. recompete us those potentially position, We generally affords retention them will of which as contract

informed you so progress to how all downstream. keep as And we'll those

back see going And G&A. G&A, the to down were forward? of should you increase more continuing type in the G&A driving increase costs some Or some of legal run drop Okay. mentioned the on the you of historical Do that rate?

we lower at of level consumption. albeit it a see Well, do likely continuing,

notwithstanding our particularly out the that, However, of not was line. for even quarter G&A rate

favorable. a our the think little outlier was an perhaps QX bit I to of

percent acquisition company from it redirected of G&A fully, is our operating our not yet leverage expected function as If to really the costs the of the activities you growth. really post cost QX, integration of always model, the get having look getting the those position for a at GRSi we and to in was

and Really, Zach growth current the strategy more working capabilities would pursue of about that really parts independent and growth and continuing support Where as continuing pursuing of the for cross-selling before, well really customers we're of making company. in in company the as our talked not into really business. of the sure and that really emphasis talks now, really to portfolios rest viable the own call lines been to this the opportunities quarters. the their integrating he we've about will and their really, the any this opportunities for of their pulling But independent have it's grow parties go upcoming to to and up have we're and investing is positioning each

to continue that do leverage to backfill a outquarters, And savings a the that of in the some we of operating so is bit achieved. expect and we've

the through know this give October end fiscal process said, to a as on could Like I happened has them is thinking on in on and if insight the funded color Zach, for 'XX, once get congrats the which past, to any see just long gears contract, thinking have what But be just to you here. through decision is. potentially appreciated. little VA's just again. change these better so getting mean, year notice. greatly a the the any can I'm you of VA contracts. to time you seem can we moment's a this a then if They whole to Okay. understanding be drop to their make provide know, would we the and don't other extended I now at trying of And more seems of But

And Joe. question, the yes, again, for correct. you you're Thank Sure.

the cycle procurement take was this in the look with recall, really VA back in XXXX. for acquisition. fairness of And and a was started various new if November to course, to at approaches may the heightened due large VA each two associated community, of you has in recompetes strategies. VA of decisions and there commitment Kingdomware acquisition years, back the will, with a And you us forced And As that appropriate to of part acquisition over had protest. shops acquisition the versions, the this set degree

logistics phase another and combined pharmacies. it's in approach location, where again is currently the and yet is it medical where both so by And this it we're

of being set And they business And to the the exclusively must first works set-aside process arena, environment, determine them is a then evaluation way is their acquisition. it thorough first, the should best required it this the market best new a a that, then with do is of time interest around the in So kind in for value environment in aside. VA small they to a is in awarding government. make and set-aside not a that environment, determination which restart interest,

that. to from will that the then what look doing the to their first If that continue evolved small associated the in try that strategy unrestricted So business And awards. an it's suitable, formalized that best law with not, at with risk then it if part large to is get acquisition a environment. and driven reopen acquisition are take evaluate they're regulations by an opportunities,

their first new the in model bundling, yields is it this attempt So this how of and at future. see we'll

And associated of how if more with or the you contracts? are were X to of you lose get quickly one can that the those cost rid serving contracts,

question. Great Yes.

in We that. imagine, might the various look continued with strategy acquisition have, over year, you phase years, procurement taken model that strategies, course, the have last which to right? new align of as the at came out And scenarios we this a

step-down plans do we approaches have some So them. execute and to

award Every period, function, X a they can to process, not XX is Joe, how ranging in XX those days It's are many X manage from that would or of the which is so concurrently, right? to time in going of all they them awarded solicitations. given a indication phase-in be

that, So it, were basis. have we, efficiently quarter, EBITDA But able feel to scale-down a hit to within about a pretty of quick think associated range if we be to have models you regard they reduction to that comfortable a to operating our margin contracts. able full be will with the operate that we various do and if very with will

is, that our scale, the is a operation Yes. prescriptions, of the think deployment the of that I And the cost large the the of it that direct also, contract to components services course, response of our terms mean described to and contracts. cost as move deceptively running naturally, in of I scales. course, mean part as away, in complex majority distinct it business, the moves, by And operation. is, of and very If we've There's with it's as of to And demand. we course, cost that particular it. any cost before, of CMOP, the complex. fulfillment far workforce of is but of cost. it's variable of are a performing

so a as course, infrastructure is, of there way, scales. the supporting volume of And an particular is in scalable and business operation that unique that

of the costs running are, And business. course, there then overall of corporate the

corporate expect, the So Zach to well suggested infrastructure to changes. impact to of timing that I with be costs. revenue very the the then scaling, volume address aligned have And the we the

VA operation an their prepared this outcome are be said, Zach continue we And As something customer a key model to in we we've we is regularly, and even outcomes as for this and support improve. the invested to continue as that helping and strong.

update for Okay. the here lately. just how product going out haven't of being One more give an you Infinibyte us Zach, if is could wondering I'm and you guys on accepted. kind that me, talked about

I Joe, that. appreciate

commitment issued in There's execution cybersecurity We're to as stepping to to up across and with well regard more White highest Our strong the federal just the There's government really that year, cybersecurity its sound we're strong, with modernization is Met being House agencies. security from this all those Recently, activity to cloud programs. and leadership the formed. regulations those a cybersecurity last the federal implementing see guidelines. the in on as major regard. some in earlier for starting week commitment of agencies. government levels hearing principles of

of one offers that we solution still highly differentiating believe our secure, capability the we are since So companies. FedRAMP-certified a very, Infinibyte very certified

doing campaign. capabilities that in, remains, including cybersecurity that high for to Navy by doing of we a still assurance both and start we for complemented with strong have have driving area, it bolstered coming down to the the where some we as was doing we in It NIH engineering with work up opportunities community. architecture, we're security, So cybersecurity, information Joe, trust brought that research transitions mission that exacting an a and is and zero some the those It think, biomedical pipeline. the obviously we're in the differentiator work strong within their see we're

our really certainty And to us and some capability for excited little looking propositions these and complements that's value backlogs with a of uncork about bit gives we're some unique. both with that think customers. a breadth a that in finally new So we starting just these to are budget include Infinibyte we're somewhat bid how

Joe, about But we call example, what great that in cross-selling be about talked would this of a opportunities. earlier the

Yes.

nice forward strong half Great. Look quarter. A Okay. the seeing to unfolds. second how the year of

do, too. We

Parker [Operator Instructions] session. to over closing turn This Zach the remarks. concludes for I'd our question-and-answer back like call to any

all will for today. well on some contract at organic new and additional Thank as and upcoming pipelines growth as thank current and you opportunities over I conferences. some our color coming and attention Please you, providing business the Kathryn around stay quarter. your be Andrea, updates our tuned investor

all support, have you Thank Bye now. for and blessed your for a day.

now for now has concluded. conference presentation, today's and attending disconnect. you Thank you The may