DLH Reports Second Quarter Fiscal Year 2018 Results

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.

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.

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SOURCE DLH Holdings Corp.

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http://www.dlhcorp.com