EX-99.1 2 ex9918kearnrel-fy21q4.htm EX-99.1 Document

DLH Reports Fiscal 2021 Fourth Quarter Results
Q4 Revenue of $65.2 Million; Full Year Revenue $246.1 Million, up 17.6% over fiscal 2020
Debt Reduced to $46.8 Million
Atlanta, Georgia – December 6, 2021 - 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 fourth quarter ended September 30, 2021.

Fourth quarter revenue increased to $65.2 million in fiscal 2021 from $50.7 million in fiscal 2020, reflecting the acquisition of Irving Burton Associates (“IBA”), new contract awards, and increased volume on existing contracts
For the full fiscal year, revenue rose to $246.1 million from $209.2 million
Earnings were $2.9 million, or $0.21 per diluted share, for the fiscal 2021 fourth quarter versus $1.4 million, or $0.10 per diluted share, for the fourth quarter of fiscal 2020
Earnings for the full year were $10.1 million, or $0.75 per diluted share, for fiscal 2021 versus $7.1 million or $0.54 per diluted share, for fiscal 2020
Term loan reduced from $70.0 million to $46.8 million during the fiscal year
During the fiscal fourth quarter, DLH announced several awards with an aggregate value of over $120 million to support the Center for Disease Control and Prevention ("CDC") and FEMA
Contract backlog was $651.5 million as of September 30, 2021

Management Discussion
“The end of fiscal 2021 came with a few major developments that further accentuated an already standout year,” said DLH President and Chief Executive Officer Zach Parker. “We won contracts from the CDC and FEMA, which added over $120 million to our backlog as we posted annual revenue of $246.1 million and earnings of $0.75 per diluted share. We closed out fiscal 2021 with debt of $46.8 million, putting us in excellent shape – both from a balance sheet perspective as well as our book of business – for even stronger results going forward.

“DLH continued to perform with excellence in the midst of a global pandemic. As always, I would like to thank our talented team for their many accomplishments, hard work, and dedication to taking us to the next level in terms of size and performance. Given our professional, highly-credentialed staff, many recent awards, and ongoing demand for our technology-enabled suite of services, the future is bright for DLH."

Results for the Three Months Ended September 30, 2021
Revenue for the fourth quarter of fiscal 2021 was $65.2 million versus $50.7 million in the prior-year period. The increase was due to the Company’s IBA acquisition, completed September 30, 2020, which added approximately $8.5 million in revenue, new business awards in the quarter and increased volume across legacy programs.

Income from operations was $4.0 million for the quarter versus $2.7 million in the prior-year period and, as a percent of revenue, the Company reported an operating margin of 6.2% in fiscal 2021 versus 5.3% in fiscal 2020. The current year performance reflects increased revenue contribution from time and materials programs, which generally yield stronger returns than cost reimbursable contracts. This more than offset an increase in depreciation and amortization as well as higher general and administrative costs, which rose due to incremental corporate development costs associated with a transaction that was pursued but not executed.

Interest expense was essentially flat at $0.8 million in the fiscal fourth quarter of both 2021 and 2020. Income before taxes was $3.2 million this year versus $1.9 million in fiscal 2020, representing 5.0% and 3.8% of revenue, respectively, for each period.

For the three months ended September 30, 2021 and 2020, respectively, DLH recorded a $0.3 million and $0.6 million provision for tax expense. The Company reported net income of approximately $2.9 million, or $0.21 per diluted share, for the fourth quarter of fiscal 2021 versus $1.4 million, or $0.10 per diluted share, for the fourth quarter of fiscal 2020. As a percent of revenue, net income was 4.4% for the fourth quarter of fiscal 2021 versus 2.7% for the prior year period.

On a non-GAAP basis, EBITDA for the three months ended September 30, 2021 was approximately $6.0 million versus $4.4 million in the prior-year period, or 9.3% and 8.6% of revenue, respectively.
Key Financial Indicators
Fiscal year to date, DLH generated $45.7 million in operating cash, inclusive of a $21.1 million advance payment related to the FEMA contract awarded in late September. The Company paid down $23.2 million of its secured loan facility and has satisfied mandatory principal amortization on the loan facility until December 31, 2023. The Company intends to continue using cash to make debt prepayments when possible.

As of September 30, 2021, the Company had cash and cash equivalents of $24.1 million and debt outstanding under its credit facility of $46.8 million, versus cash of $1.4 million and debt outstanding of $70.0 million as of September 30, 2020. The increase in cash was primarily due to an advance payment to fund deployment of emergency medical resources under the FEMA contract awarded in late September.

At September 30, 2021, total backlog was approximately $651.5 million, including funded backlog of approximately $191.0 million, and unfunded backlog of $460.5 million.
Conference Call and Webcast Details
DLH management will discuss fourth quarter results and provide a general business update, including current competitive conditions and strategies, during a conference call beginning at 10:00 AM Eastern Time today, December 6, 2021. Interested parties may listen to the conference call by dialing 888-347-5290 or 412-317-5256. 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 entering the conference ID 10149431.

About DLH
DLH delivers improved health and readiness solutions for federal programs through research, development, and innovative care processes. The Company’s experts in public health, performance evaluation, and health operations solve the complex problems faced by civilian and military customers alike, leveraging digital transformation, artificial intelligence, advanced analytics, cloud-based applications, telehealth systems, and more. With over 2,300 employees dedicated to the idea that “Your Mission is Our Passion,” DLH brings a unique combination of government sector experience, proven methodology, and unwavering commitment to public health to improve the lives of millions. For more information, visit 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 refer to expectations, projections or other characterizations of future events or circumstances or 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. Forward-looking statements in this release include, among others, statements regarding estimates of future revenues, operating income, earnings and cash flow. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Our actual results may differ materially from such forward-looking statements made in this release due to a variety of factors, including: the outbreak of the novel coronavirus (“COVID-19”), including the measures to reduce its spread, and its impact on the economy and demand for our services, are uncertain, cannot be predicted, and may precipitate or exacerbate other risks and uncertainties; the risk that we will not realize the anticipated benefits of our recent or any future acquisition; the challenges of managing larger and more widespread operations; contract awards in connection with re-competes for present business and/or competition for new business; compliance with new bank financial and other covenants; changes in client budgetary priorities; government contract procurement (such as bid and award protests, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; the ability to successfully integrate the operations our recent acquisition and of any future acquisitions; and other risks described in our SEC filings. 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, 2021, as well as subsequent reports filed thereafter. The forward-looking statements contained herein are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry and business. Such forward-looking statements 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, except as may be required by law.

Contact: Chris Witty
Phone: 646-438-9385
Email: cwitty@darrowir.com

(Amounts in thousands except per share amounts)
Three Months EndedTwelve Months Ended
September 30,September 30,
Revenue$65,182 $50,691 $246,094 $209,185 
Cost of Operations:
Contract costs51,522 39,701 194,614 163,596 
General and administrative costs6,532 5,698 25,054 24,195 
Corporate development costs1,088 930 1,088 930 
Depreciation and amortization2,010 1,664 8,115 7,003 
Total operating costs61,152 47,993 228,871 195,724 
Income from operations4,030 2,698 17,223 13,461 
Interest expense, net808 781 3,784 3,441 
Income before income taxes3,222 1,917 13,439 10,020 
Income tax expense339 554 3,294 2,906 
Net income$2,883 $1,363 $10,145 $7,114 
Net income per share - basic$0.23 $0.11 $0.81 $0.58 
Net income per share - diluted$0.21 $0.10 $0.75 $0.54 
Weighted average common shares outstanding
Basic12,607 12,390 12,549 12,282 
Diluted13,654 13,356 13,597 13,105 

(Amounts in thousands except par value of shares)
September 30,
September 30,
Current assets:  
Cash and cash equivalents$24,051 $1,357 
Accounts receivable33,447 32,541 
Other current assets4,265 3,499 
Total current assets61,763 37,397 
Equipment and improvements, net1,912 3,339 
Operating lease right-of-use-assets19,919 22,427 
Deferred taxes, net— 37 
Goodwill65,643 67,144 
Intangible assets, net47,469 52,612 
Other long-term assets464 606 
Total assets$197,170 $183,562 
Current liabilities:  
Debt obligations - current, net of deferred financing costs$— $6,727 
Operating lease liabilities - current2,261 2,045 
Accrued payroll9,125 10,611 
Deferred revenue22,273 — 
Accounts payable, accrued expenses, and other current liabilities32,717 28,578 
Total current liabilities66,376 47,961 
Long-term liabilities:
Deferred taxes, net 1,176 — 
Operating lease liabilities - long-term19,374 21,620 
Debt obligations - long-term, net of deferred financing costs44,636 60,544 
Total long-term liabilities65,186 82,164 
Total liabilities131,562 130,125 
Shareholders' equity:
Common stock, $0.001 par value; authorized 40,000 shares; issued and outstanding 12,714 and 12,404 at September 30, 2021 and September 30, 2020, respectively
13 12 
Additional paid-in capital87,893 85,868 
Accumulated deficit(22,298)(32,443)
Total shareholders’ equity65,608 53,437 
Total liabilities and shareholders' equity$197,170 $183,562 

(Amounts in thousands)
Twelve Months Ended
 September 30,
Operating activities
Net income$10,145 $7,114 
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization8,115 7,003 
Amortization of deferred financing costs charged to interest expense792 721 
Stock based compensation expense1,660 910 
Deferred taxes, net1,213 2,308 
Gain from lease modification— (121)
Changes in operating assets and liabilities
Accounts receivable (906)(5,408)
Other current assets(766)(1,592)
Accrued payroll(1,486)489 
Deferred revenue22,273 — 
Accounts payable, accrued expenses, and other current liabilities4,139 7,188 
Other long-term assets and liabilities486 839 
Net cash provided by operating activities45,665 19,451 
Investing activities
Business acquisition, net of cash acquired59 (32,678)
Purchase of equipment and improvements(103)(152)
Net cash used in investing activities(44)(32,830)
Financing activities
Proceeds from debt obligations— 33,000 
Repayment of debt obligations(23,250)(19,000)
Payment of deferred financing costs(43)(898)
Repurchased shares of common stock— (211)
Proceeds from issuance of common stock upon exercise of options366 55 
Net cash (used in)/provided by financing activities(22,927)12,946 
Net change in cash and cash equivalents22,694 (433)
Cash and cash equivalents at beginning of year1,357 1,790 
Cash and cash equivalents at end of year$24,051 $1,357 
Supplemental disclosures of cash flow information
Cash paid during the period for interest$2,941 $2,806 
Cash paid during the period for income taxes$936 $917 
Supplemental disclosures of non-cash activity
Non-cash cancellation of common stock$68 $211 

Revenue Metrics
Twelve Months Ended
September 30,September 30,
Market Mix:
Defense/VA57 %49 %
Human Services and Solutions15 %20 %
Public Health/Life Sciences28 %31 %
Contract Mix:
Time and Materials75 %70 %
Cost Reimbursable20 %28 %
Firm Fixed Price%%
Prime vs Sub:
Prime87 %92 %
Subcontractor13 %%

Non-GAAP Financial Measures
The Company uses EBITDA and EBITDA as a percent of revenue as supplemental non-GAAP measures of performance. We define EBITDA as net income excluding (i) interest expense, (ii) provision for or benefit from income taxes and (iii) depreciation and amortization. EBITDA as a percent of revenue is EBITDA for the measurement period divided by revenue for the same period.

The Company uses GAAP net income adjusted for the effect of corporate development costs as a supplemental measure of Company results. We exclude corporate development costs from this measure because they were incurred as a result of specific events, do not reflect the costs of our operations, and can affect the period-over-period assessment of operating results.

These non-GAAP measures of performance are used by management to conduct and evaluate its business during its 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. We believe 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.

Reconciliation of GAAP net income to EBITDA, a non-GAAP measure (in thousands):
Three Months EndedTwelve Months Ended
September 30,September 30,
Net income$2,883$1,363$1,520$10,145$7,114$3,031
(i) Interest expense, net808781273,7843,441343
(ii) Provision for taxes339554(215)3,2942,906388
(iii) Depreciation and amortization2,0101,6643468,1157,0031,112
Net income as a % of revenue4.4 %2.7 %1.7 %4.1 %3.4%0.7%
EBITDA as a % of revenue9.3 %8.6 %0.7 %10.3 %9.8%0.5%
Revenue $65,182$50,691$14,491$246,094$209,185$36,909

Reconciliation of GAAP net income to net income adjusted for the effect of the corporate development costs, a non-GAAP measure (in thousands except for per share amounts):
Year Ended
September 30,
Net income$10,145 $7,114 $3,031 
Corporate development costs1,088 930 158 
Tax effect of excluding corporate development costs(267)(270)
Net income adjusted for corporate development costs$10,966 $7,774 $3,192 
Net income per diluted share$0.75 $0.54 $0.21 
Impact of corporate development costs, net0.06 0.05 0.01 
Net income per diluted share adjusted for corporate development costs$0.81 $0.59 $0.22