ATLANTA, Aug. 08, 2017 (GLOBE NEWSWIRE) -- 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 third quarter ended June 30, 2017.
Recent Highlights
- Revenue: $29.3 million – up 17% over the third quarter of 2016, including 6% organic growth
- Gross margin: 21.8%
- Diluted earnings per share: $0.08
- Strong cash flow from operations of $2.5 million
- Addition of industry veteran Jim Allen to board of directors
Management Discussion
“Our fiscal third quarter was marked by solid financial results, including top line growth and strong gross margins, even as higher-than-usual bid and proposal activity translated into increased G&A expense,” stated DLH President and Chief Executive Officer Zach Parker. “Such business development initiatives leverage our combined capabilities as we focus on larger and more complex opportunities – ones which may ultimately accelerate our overall growth outlook – and so the added investment this quarter was both appropriate and necessary.
“We were also selected as an innovation award winner by FedHealthIT for our Aligned Monitoring System modernization program within the U.S. Department of Health and Human Services’ Administration for Children and Families. This award illustrates the type of high-value technology applications that will take DLH to the next level across the federal agencies we serve. At the same time, the appointment of Jim Allen to our board brings added stature to the company, and his counsel will be invaluable as we look to further improve our long-term financial performance. We’re earning greater recognition from our peers and customers alike – and are positioned well for 2018 and beyond.”
Results for the Three Months Ended June 30, 2017
Revenue for the third quarter of fiscal 2017 was $29.3 million, up $4.3 million, or 17%, over the prior-year third quarter. This top line growth was primarily due to the business acquired in May 2016 and the expansion of services on existing contract vehicles.
Gross profit was $6.4 million for the quarter, an increase of $0.9 million, or 17%, over the third quarter of fiscal 2016. As a percent of revenue, the Company's gross margin was 21.8%, equivalent to the prior-year period. General and Administrative ("G&A") expenses were $4.1 million for the quarter, an increase of $0.7 million versus the fiscal 2016 third quarter. The year-over-year increase reflects incremental program and operational resources required to manage and grow DLH’s business. As a percent of revenue, G&A expenses were 14.1% versus 13.5% in fiscal 2016, reflecting higher investment in business development activities.
Income from operations was $1.8 million for the quarter versus $1.7 million in the prior-year period. This increase reflects gross profit improvement of $0.9 million, partially offset by the higher expenses as described above.
Income before taxes was $1.5 million for the quarter, an improvement of approximately $0.2 million over the prior-year period. DLH recorded a $0.5 million provision for tax expense during the quarter, in line with fiscal 2016.
Net income for the third quarter of 2017 was approximately $0.9 million, or $0.08 per diluted share, versus $0.8 million, or $0.07 per diluted share in the prior-year period.
On a non-GAAP basis, Earnings Before Interest Tax Depreciation and Amortization (“EBITDA”) adjusted for other items (“Adjusted EBITDA”) for the three months ended June 30, 2017 was approximately $2.3 million versus $2.1 million in the prior-year period.
Balance Sheet
Cash as of June 30, 2017 was $4.6 million, and the Company’s senior debt was $20.6 million. Regarding cash flow, for the fiscal third quarter DLH generated $2.5 million in cash from operations and $4.9 million year-to-date.
Non-GAAP Financial Measures
During the 2016 fiscal year, DLH acquired Danya International, LLC. The Company believes that it is helpful for investors to be able to evaluate the revenue performance of DLH's underlying business excluding the impact of acquisitions. Therefore, the Company provides organic revenue growth as a non-GAAP measure to support this objective. To calculate organic revenue growth, the Company compares current year revenue, less revenue from acquisitions, to prior year revenue.
Furthermore, the Company believes that providing Income from Operations per share will be useful to investors in comparing year over year operating results for 2017 compared to 2016. Income from Operations per share excludes the impact of other income (expense) and income tax benefits, independent of operating results. By providing this non-GAAP measure, we believe that an investor can more easily compare year over year performance.
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||
| ($ in thousands, except per share amounts) | 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||||
| Income from operations | $ | 1,753 | $ | 1,668 | $ | 85 | $ | 4,481 | $ | 2,739 | $ | 1,742 | ||||||||||||
| Other income (expense), net | (269 | ) | (374 | ) | 105 | (888 | ) | (1,076 | ) | 188 | ||||||||||||||
| Income before income taxes | 1,484 | 1,294 | 190 | 3,593 | 1,663 | 1,930 | ||||||||||||||||||
| Income tax expense (benefit), net | 539 | 518 | 21 | 1,345 | 666 | 679 | ||||||||||||||||||
| Net income | $ | 945 | $ | 776 | $ | 169 | $ | 2,248 | $ | 997 | $ | 1,251 | ||||||||||||
| Net income per fully diluted share | $ | 0.08 | $ | 0.07 | $ | 0.01 | $ | 0.18 | $ | 0.09 | $ | 0.09 | ||||||||||||
| Income tax expense (benefit), net | 0.04 | 0.05 | (0.01 | ) | 0.10 | 0.06 | 0.04 | |||||||||||||||||
| Income before taxes | 0.12 | 0.12 | 0.00 | 0.28 | 0.15 | 0.13 | ||||||||||||||||||
| Other income (expense), net | 0.02 | 0.03 | (0.01 | ) | 0.07 | 0.10 | (0.03 | ) | ||||||||||||||||
| Income from operations per fully diluted share | $ | 0.14 | $ | 0.15 | $ | (0.01 | ) | $ | 0.35 | $ | 0.25 | $ | 0.10 | |||||||||||
The Company uses Earnings Before Interest Tax Depreciation and Amortization (“EBITDA”) adjusted for other items (“Adjusted EBITDA”) as a supplemental non-GAAP measure of our performance. DLH defines Adjusted EBITDA as net income adjusted to exclude (i) interest and other expenses, including acquisition expenses, net, (ii) provision for or benefit from income taxes, if any, (iii) depreciation and amortization, and (iv) G&A expenses - equity grants.
This non-GAAP measure of our performance is 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 adjusted EBITDA, a non-GAAP measure:
| Three Months Ended | Nine Months Ended | |||||||||||||||||||||||
| June 30, | June 30, | |||||||||||||||||||||||
| ($ in thousands, except per share amounts) | 2017 | 2016 | Change | 2017 | 2016 | Change | ||||||||||||||||||
| Net income | $ | 945 | $ | 776 | $ | 169 | $ | 2,248 | $ | 997 | $ | 1,251 | ||||||||||||
| (i) Interest and other (income) expense (net): | ||||||||||||||||||||||||
| (i)(a) Interest and other expense | 269 | 281 | (12 | ) | 888 | 281 | 607 | |||||||||||||||||
| (i)(b) Acquisition expenses | — | 93 | (93 | ) | — | 795 | (795 | ) | ||||||||||||||||
| (ii) Provision for taxes | 539 | 518 | 21 | 1,345 | 666 | 679 | ||||||||||||||||||
| (iii) Depreciation and amortization | 510 | 414 | 96 | 1,264 | 456 | 808 | ||||||||||||||||||
| (iv) G&A expenses - equity grants | 63 | 42 | 21 | 613 | 384 | 229 | ||||||||||||||||||
| Adjusted EBITDA | $ | 2,326 | $ | 2,124 | $ | 202 | $ | 6,358 | $ | 3,579 | $ | 2,779 | ||||||||||||
Conference Call and Webcast Details
DLH management will discuss third quarter results in a conference call beginning at 11:00 AM Eastern Time on Tuesday, August 8, 2017. Interested parties may listen to the conference call by dialing (844) 389-8659 and providing the operator with the conference ID 52075191. 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 (855) 859-2056 and entering the conference ID 52075191.
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, 2016. 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.
TABLES TO FOLLOW
| DLH HOLDINGS CORP. CONSOLIDATED STATEMENTS OF INCOME (Amounts in thousands except per share amounts) | ||||||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30, | June 30, | |||||||||||||||
| 2017 | 2016 | 2017 | 2016 | |||||||||||||
| Revenue | $ | 29,256 | $ | 24,989 | $ | 85,272 | $ | 58,482 | ||||||||
| Direct expenses | 22,871 | 19,533 | 66,805 | 46,885 | ||||||||||||
| Gross margin | 6,385 | 5,456 | 18,467 | 11,597 | ||||||||||||
| General and administrative expenses | 4,122 | 3,374 | 12,722 | 8,402 | ||||||||||||
| Depreciation and amortization | 510 | 414 | 1,264 | 456 | ||||||||||||
| Income from operations | 1,753 | 1,668 | 4,481 | 2,739 | ||||||||||||
| Other income (expense), net | (269 | ) | (374 | ) | (888 | ) | (1,076 | ) | ||||||||
| Income before income taxes | 1,484 | 1,294 | 3,593 | 1,663 | ||||||||||||
| Income tax expense (benefit), net | 539 | 518 | 1,345 | 666 | ||||||||||||
| Net income | $ | 945 | $ | 776 | $ | 2,248 | $ | 997 | ||||||||
| Net income per share - basic | $ | 0.08 | $ | 0.08 | $ | 0.20 | $ | 0.10 | ||||||||
| Net income per share - diluted | $ | 0.08 | $ | 0.07 | $ | 0.18 | $ | 0.09 | ||||||||
| Weighted average common shares outstanding | ||||||||||||||||
| Basic | 11,299 | 10,154 | 11,250 | 9,812 | ||||||||||||
| Diluted | 12,445 | 11,311 | 12,417 | 10,855 | ||||||||||||
| DLH HOLDINGS CORP. CONSOLIDATED BALANCE SHEETS (Amounts in thousands except par value of shares) | ||||||||
| June 30, 2017 | September 30, 2016 | |||||||
| (unaudited) | ||||||||
| ASSETS | ||||||||
| Current assets: | ||||||||
| Cash and cash equivalents | $ | 4,601 | $ | 3,427 | ||||
| Accounts receivable, net | 8,624 | 6,637 | ||||||
| Other current assets | 620 | 542 | ||||||
| Total current assets | 13,845 | 10,606 | ||||||
| Equipment and improvements, net | 1,163 | 644 | ||||||
| Deferred taxes, net | 10,411 | 11,415 | ||||||
| Goodwill and other intangible assets, net | 41,557 | 42,304 | ||||||
| Other long-term assets | 105 | 105 | ||||||
| Total assets | $ | 67,081 | $ | 65,074 | ||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||||
| Current liabilities: | ||||||||
| Debt obligations - current | $ | 3,590 | $ | 3,560 | ||||
| Derivative financial instruments, at fair value | 253 | 204 | ||||||
| Accrued payroll | 3,445 | 3,616 | ||||||
| Accounts payable, accrued expenses, and other current liabilities | 8,826 | 7,136 | ||||||
| Total current liabilities | 16,114 | 14,516 | ||||||
| Total long term liabilities | 16,215 | 18,782 | ||||||
| Total liabilities | 32,329 | 33,298 | ||||||
| Commitments | ||||||||
| Shareholders' equity: | ||||||||
| Preferred stock, $.10 par value; authorized 5,000 shares, none issued and outstanding | — | — | ||||||
| Common stock, $.001 par value; authorized 40,008 shares; issued and outstanding 11,590 at June 30, 2017 and 11,148 at September 30, 2016 | 12 | 11 | ||||||
| Additional paid-in capital | 82,624 | 81,897 | ||||||
| Accumulated deficit | (47,884 | ) | (50,132 | ) | ||||
| Total shareholders’ equity | 34,752 | 31,776 | ||||||
| Total liabilities and shareholders' equity | $ | 67,081 | $ | 65,074 | ||||