Fourth Quarter Highlights
- Fourth quarter revenue was
$101.5 million in fiscal 2023 versus$67.2 million in fiscal 2022, primarily reflecting the impact from the Company'sDecember 2022 acquisition as well as net organic growth in the business. - Reflecting the previously announced non-cash impairment charge of
$7.7 million , earnings were$(2.6) million , or$(0.18) per diluted share, for the fiscal 2023 fourth quarter versus$3.4 million , or$0.24 per diluted share, for the fourth quarter of fiscal 2022. Adjusted Net Income and Adjusted Diluted Earnings Per Share ("EPS") were$2.3 million , or$0.16 per diluted share, versus$3.7 million , or$0.26 per diluted share, respectively, for the fiscal 2023 fourth quarter and the prior-year period. - Earnings before interest, taxes, depreciation and amortization ("EBITDA") were
$4.4 million for the fiscal 2023 fourth quarter as compared to$6.6 million in the fiscal 2022 fourth quarter. Adjusted EBITDA for the same periods were$12.1 million and$7.0 million , respectively.
Full Year Highlights
- Fiscal year 2023 revenue was
$375.9 million compared to revenue of$395.2 million in fiscal year 2022, which included$125.8 million of revenue from the previously announced short termFEMA contracts to supportAlaska . Excluding revenue attributable to the short-termFEMA contracts, revenue grew from$269.4 million in fiscal 2022 to$375.9 million in fiscal 2023, reflecting the impact of the Company’sDecember 2022 acquisition as well as net organic growth in the business. - Reflecting the previously announced non-cash impairment charge of
$7.7 million , earnings for the full year were$1.5 million , or$0.10 per diluted share for fiscal 2023 as compared to earnings of$23.3 million , or$1.64 per diluted share, in fiscal 2022. Adjusted Net Income and Adjusted Diluted EPS were$7.9 million , or$0.55 per diluted share, versus$14.4 million , or$1.01 per diluted share, respectively, in fiscal 2023 and the prior-year period. - EBITDA was
$32.7 million for fiscal 2023 as compared to$40.9 million in fiscal 2022. Adjusted EBITDA for the same periods were$42.1 million and$29.1 million , respectively.
Other Highlights
- Total debt at the end of the fourth quarter was
$179.4 million compared to$207 .6 million following the Company'sDecember 2022 acquisition. The Company reduced debt by$28.2 million in the post-acquisition period, comprised of$14.3 million of mandatory payments and$13.9 million of voluntary prepayments. - Contract backlog was
$704 .8 million as ofSeptember 30, 2023 versus$482.5 million at the end of the prior fiscal year.
Management Discussion
"With a year under our belt since our transformative technology acquisition, we are pleased with the evolution of DLH into a unique provider of digital transformation and cyber security, science research and development, and systems engineering services across a broad array of health, human services, and military clients," said
"We believe that our strong suite of services and current contract portfolio, which we expect will continue to deliver revenue volume averaging over
Results for the Three Months Ended
Revenue for the fourth quarter of fiscal 2023 was
Income from operations was
Interest expense was
For the three months ended
On a non-GAAP basis, EBITDA for the three months ended
Key Financial Indicators
During fiscal 2023, DLH generated
As of
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
1 Adjusted Net Income, Adjusted Operating Income, Adjusted Diluted Earnings Per Share, EBITDA, Adjusted EBITDA, EBITDA Margin on Revenue, and Adjusted EBITDA Margin on Adjusted Revenue are non-GAAP financial measures. See “Non-GAAP Financial Measures” below for additional detail.
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 4720443.
About DLH
DLH (NASDAQ: DLHC) enhances technology, public health, and cyber security readiness missions through science, technology, cyber, and engineering solutions and services. Our experts solve some of the most complex and critical missions faced by federal customers, leveraging digital transformation, artificial intelligence, advanced analytics, cloud-based applications, telehealth systems, and more. With over 3,200 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 innovative solutions 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 risk that we will not realize the anticipated benefits of our acquisition of GRSi or any other acquisitions (including anticipated future financial performance and results); the diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations resulting from our recent acquisition; the inability to retain employees and customers; contract awards in connection with re-competes for present business and/or competition for new business; our ability to manage our increased debt obligations; compliance with 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 of GRSi or any future acquisitions; the impact of inflation and higher interest rates; and other risks described in our
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.
CONTACTS:
INVESTOR RELATIONS |
Contact: |
Phone: 646-438-9385 |
Email: cwitty@darrowir.com |
TABLES TO FOLLOW
CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands except per share amounts) | ||||||||||||||
Three Months Ended | Twelve Months Ended | |||||||||||||
2023 | 2022 | 2023 | 2022 | |||||||||||
Revenue | $ | 101,476 | $ | 67,233 | $ | 375,872 | $ | 395,173 | ||||||
Cost of Operations | ||||||||||||||
Contract costs | 79,238 | 51,701 | 296,016 | 322,886 | ||||||||||
General and administrative costs | 10,172 | 8,551 | 37,795 | 30,730 | ||||||||||
Impairment loss of long-lived asset | 7,673 | — | 7,673 | — | ||||||||||
Corporate development costs | — | 364 | 1,735 | 614 | ||||||||||
Depreciation and amortization | 4,281 | 1,926 | 15,562 | 7,665 | ||||||||||
Total operating costs | 101,364 | 62,542 | 358,781 | 361,895 | ||||||||||
Income from operations | 112 | 4,691 | 17,091 | 33,278 | ||||||||||
Interest expense | 4,760 | 477 | 16,271 | 2,215 | ||||||||||
Income before provision for income taxes | (4,648 | ) | 4,214 | 820 | 31,063 | |||||||||
Provision for income taxes | (2,018 | ) | 772 | (641 | ) | 7,775 | ||||||||
Net income | $ | (2,630 | ) | $ | 3,442 | $ | 1,461 | $ | 23,288 | |||||
Net income per share - basic | $ | (0.19 | ) | $ | 0.27 | $ | 0.11 | $ | 1.82 | |||||
Net income per share - diluted | $ | (0.18 | ) | $ | 0.24 | $ | 0.10 | $ | 1.64 | |||||
Weighted average common shares outstanding | ||||||||||||||
Basic | 13,901 | 12,980 | 13,704 | 12,830 | ||||||||||
Diluted | 14,579 | 14,307 | 14,431 | 14,179 |
CONSOLIDATED BALANCE SHEETS (Amounts in thousands except par value of shares) | ||||||
2023 | 2022 | |||||
ASSETS | ||||||
Current assets: | ||||||
Cash | $ | 215 | $ | 228 | ||
Accounts receivable | 59,119 | 40,496 | ||||
Other current assets | 3,067 | 2,878 | ||||
Total current assets | 62,401 | 43,602 | ||||
138,161 | 65,643 | |||||
Intangible assets, net | 124,777 | 40,884 | ||||
Operating lease right-of-use assets | 9,656 | 16,851 | ||||
Deferred taxes, net | 3,070 | — | ||||
Equipment and improvements, net | 1,590 | 1,704 | ||||
Other long-term assets | 186 | 328 | ||||
Total assets | $ | 339,841 | $ | 169,012 | ||
LIABILITIES AND SHAREHOLDERS’ EQUITY | ||||||
Current liabilities: | ||||||
Accounts payable and accrued liabilities | $ | 29,704 | $ | 26,862 | ||
Debt obligations - current, net of deferred financing costs | 17,188 | — | ||||
Accrued payroll | 13,794 | 9,444 | ||||
Operating lease liabilities - current | 3,463 | 2,235 | ||||
Other current liabilities | 638 | — | ||||
Total current liabilities | 64,787 | 38,541 | ||||
Long-term liabilities: | ||||||
Debt obligations - long-term, net of deferred financing costs | 155,147 | 20,416 | ||||
Operating lease liabilities - long-term | 15,908 | 16,461 | ||||
Deferred taxes, net | — | 1,534 | ||||
Other long-term liabilities | 1,560 | — | ||||
Total long-term liabilities | 172,615 | 38,411 | ||||
Total liabilities | 237,402 | 76,952 | ||||
Shareholders' equity: | ||||||
Common stock, | 14 | 13 | ||||
Additional paid-in capital | 99,974 | 91,057 | ||||
Retained earnings | 2,451 | 990 | ||||
Total shareholders’ equity | 102,439 | 92,060 | ||||
Total liabilities and shareholders' equity | $ | 339,841 | $ | 169,012 |
CONSOLIDATED STATEMENTS OF CASH FLOWS (Amounts in thousands) | ||||||||
Twelve Months Ended | ||||||||
2023 | 2022 | |||||||
Operating activities | ||||||||
Net income | $ | 1,461 | $ | 23,288 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization | 15,562 | 7,665 | ||||||
Amortization of deferred financing costs charged to interest expense | 2,182 | 664 | ||||||
Stock-based compensation expense | 1,922 | 2,608 | ||||||
Deferred taxes, net | (4,604 | ) | 358 | |||||
Impairment loss of long-lived asset | 7,673 | — | ||||||
Changes in operating assets and liabilities | ||||||||
Accounts receivable | 6,845 | (7,049 | ) | |||||
Other assets | 1,757 | 1,387 | ||||||
Accrued payroll | (3,477 | ) | 319 | |||||
Deferred revenue | — | (22,273 | ) | |||||
Accounts payable and accrued liabilities | (75 | ) | (5,855 | ) | ||||
Other liabilities | 1,787 | 131 | ||||||
Net cash provided by operating activities | 31,033 | 1,243 | ||||||
Investing activities | ||||||||
Business acquisition, net of cash acquired | (180,572 | ) | — | |||||
Purchase of equipment and improvements | (625 | ) | (872 | ) | ||||
Net cash used in investing activities | (181,197 | ) | (872 | ) | ||||
Financing activities | ||||||||
Proceeds from revolving line of credit | 205,268 | — | ||||||
Repayment of revolving line of credit | (195,721 | ) | — | |||||
Proceeds from debt obligations | 168,000 | 17,000 | ||||||
Repayments of debt obligations | (20,188 | ) | (41,750 | ) | ||||
Payments of deferred financing costs | (7,666 | ) | — | |||||
Proceeds from issuance of common stock upon exercise of options and warrants | 1,108 | 837 | ||||||
Payment of tax obligations resulting from net exercise of stock options | (650 | ) | (281 | ) | ||||
Net cash provided by (used in) financing activities | 150,151 | (24,194 | ) | |||||
Net change in cash | (13 | ) | (23,823 | ) | ||||
Cash - beginning of year | 228 | 24,051 | ||||||
Cash - end of year | $ | 215 | $ | 228 | ||||
Supplemental disclosures of cash flow information | ||||||||
Cash paid during the year for interest | $ | 14,153 | $ | 1,528 | ||||
Cash paid during the year for income taxes | $ | 5,604 | $ | 9,282 | ||||
Supplemental disclosures of non-cash activity | ||||||||
Common stock surrendered for the exercise of stock options | $ | 238 | $ | 256 |
Non-GAAP Financial Measures
The Company is presenting additional non-GAAP measures regarding its financial performance for the fiscal years ended
We have prepared these additional non-GAAP measures to eliminate the impact of items that we do not consider indicative of ongoing operating performance due to their inherently unusual or extraordinary nature. 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.
These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies in our industry. Adjusted Revenue, Adjusted Operating Income, Adjusted Net Income, Adjusted Diluted EPS, EBITDA, Adjusted EBITDA, EBITDA Margin on Revenue, and Adjusted EBITDA Margin on Adjusted Revenue are not recognized measurements under accounting principles generally accepted in
“Adjusted Revenue” represents revenue less the contribution to revenue from the short-term
“Adjusted Operating Income” represents operating income plus the corporate development costs associated with completing the GRSi acquisition in fiscal 2023 and 2022 and the impairment loss on the right of use asset incurred only in fiscal 2023, less the contribution from the
“Adjusted Net Income” represents net income including the corporate development costs associated with completing the acquisition, the impairment loss on the right of use asset, as well as the
“Adjusted Diluted EPS” represents diluted EPS calculated using Adjusted Net Income as opposed to net income.
"EBITDA" represents net income before income taxes, interest, depreciation and amortization.
“Adjusted EBITDA” represents net income before income taxes, interest, depreciation and amortization and the corporate costs associated with completing the acquisition, the impairment loss on the right of use asset less the contribution from
“Adjusted EBITDA Margin on Adjusted Revenue” is calculated as Adjusted EBITDA divided by Adjusted Revenue.
Below is a reconciliation of Adjusted Revenue, Adjusted Operating Income, Adjusted Net Income, Adjusted Diluted EPS, EBITDA, Adjusted EBITDA, EBITDA Margin on Revenue and Adjusted EBITDA Margin on Adjusted Revenue reported for the three months and fiscal years ended
Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
2023 | 2022 | Change | 2023 | 2022 | Change | |||||||||||||||||||
Adjusted Revenue | ||||||||||||||||||||||||
Revenue | $ | 101,476 | $ | 67,233 | $ | 34,243 | $ | 375,872 | $ | 395,173 | $ | (19,301 | ) | |||||||||||
Less: | — | — | — | — | 125,773 | (125,773 | ) | |||||||||||||||||
Adjusted Revenue | $ | 101,476 | $ | 67,233 | $ | 34,243 | $ | 375,872 | $ | 269,400 | $ | 106,472 | ||||||||||||
Adjusted Operating Income | ||||||||||||||||||||||||
Operating Income | $ | 112 | $ | 4,691 | $ | (4,579 | ) | $ | 17,091 | $ | 33,278 | $ | (16,187 | ) | ||||||||||
Impairment loss of long-lived asset (c) | 7,673 | — | 7,673 | 7,673 | — | 7,673 | ||||||||||||||||||
Corporate development costs (b) | — | 364 | (364 | ) | 1,735 | 614 | 1,121 | |||||||||||||||||
Less: | — | — | — | — | 12,479 | (12,479 | ) | |||||||||||||||||
Adjusted Operating Income | $ | 7,785 | $ | 5,055 | $ | 2,730 | $ | 26,499 | $ | 21,413 | $ | 5,086 | ||||||||||||
Adjusted Net income (e) | ||||||||||||||||||||||||
Net Income | $ | (2,630 | ) | 3,442 | $ | (6,072 | ) | $ | 1,461 | 23,288 | $ | (21,827 | ) | |||||||||||
Impairment loss of long-lived asset (c) | 7,673 | — | 7,673 | 7,673 | — | 7,673 | ||||||||||||||||||
Corporate development costs (b) | — | 364 | (364 | ) | 1,735 | 614 | 1,121 | |||||||||||||||||
Less: | — | — | — | — | 12,479 | (12,479 | ) | |||||||||||||||||
Adjustment for tax effect (g) | (2,714 | ) | (67 | ) | (2,647 | ) | (2,993 | ) | 3,007 | (6,000 | ) | |||||||||||||
Adjusted Net Income | $ | 2,329 | $ | 3,739 | $ | (1,410 | ) | $ | 7,876 | $ | 14,430 | $ | (6,554 | ) | ||||||||||
Adjusted Diluted Earnings Per Share (f) | ||||||||||||||||||||||||
Weighted average diluted shares outstanding | 14,579 | 14,307 | 272 | 14,431 | 14,179 | 252 | ||||||||||||||||||
Diluted earnings per share | $ | (0.18 | ) | $ | 0.24 | $ | (0.42 | ) | $ | 0.10 | $ | 1.64 | $ | (1.54 | ) | |||||||||
Adjusted Diluted Earnings Per Share | $ | 0.16 | $ | 0.26 | $ | (0.10 | ) | $ | 0.55 | $ | 1.01 | $ | (0.46 | ) | ||||||||||
EBITDA, Adjusted EBITDA, EBITDA Margin on Revenue & Adjusted EBITDA Margin on Adjusted Revenue | ||||||||||||||||||||||||
Net Income | $ | (2,630 | ) | $ | 3,442 | $ | (6,072 | ) | $ | 1,461 | $ | 23,288 | $ | (21,827 | ) | |||||||||
Interest expense | 4,760 | 477 | 4,283 | 16,271 | 2,215 | 14,056 | ||||||||||||||||||
Depreciation and amortization | 4,281 | 1,926 | 2,355 | 15,562 | 7,665 | 7,897 | ||||||||||||||||||
Provision for income taxes | (2,018 | ) | 772 | (2,790 | ) | (641 | ) | 7,775 | (8,416 | ) | ||||||||||||||
EBITDA | $ | 4,393 | $ | 6,617 | $ | (2,224 | ) | $ | 32,653 | $ | 40,943 | $ | (8,290 | ) | ||||||||||
Corporate development costs (b) | — | 364 | (364 | ) | 1,735 | 614 | 1,121 | |||||||||||||||||
Impairment loss of long-lived asset (c) | 7,673 | — | 7,673 | 7,673 | — | 7,673 | ||||||||||||||||||
Less: | — | — | — | — | 12,479 | (12,479 | ) | |||||||||||||||||
Adjusted EBITDA | $ | 12,066 | $ | 6,981 | $ | 5,085 | $ | 42,061 | $ | 29,078 | $ | 12,983 | ||||||||||||
Net income margin on Revenue | (2.6)% | 5.1 | % | 0.4 | % | 5.9 | % | |||||||||||||||||
EBITDA Margin on Revenue | 4.3 | % | 9.8 | % | 8.7 | % | 10.4 | % | ||||||||||||||||
Adjusted EBITDA Margin on Adjusted Revenue | 11.9 | % | 10.4 | % | 11.2 | % | 10.8 | % |
(a): Represents revenue adjusted to exclude revenue from the short-term
(b): Represents corporate development costs we incurred to complete the GRSi transaction. These costs primarily include legal counsel, financial due diligence, customer market analysis and representation and warranty insurance premiums.
(c): Represents impairment loss of certain long-lived real estate assets associated with a reduction of the fair value of an asset prompted by a triggering event. During the fourth quarter of fiscal 2023, DLH reduced its leased office space requirement by consolidating underutilized premises as part of an ongoing facility rationalization effort, to accurately reflect the operational needs of the business. As a result, the Company has determined that its Right of Use Assets experienced a reduction in fair value below its associated carrying value and recorded a
(d):Adjusted operating income represents the Company’s consolidated operating income, determined in accordance with GAAP, adjusted to add the corporate development costs associated with the GRSi acquisition for fiscal year 2023, adjusted to add back the impairment loss of certain real estate assets and adjusted to exclude the operating income derived from the
(e) Adjusted net income represents the Company’s consolidated net income, determined in accordance with GAAP, adding back the impairment loss of long-lived assets and corporate development costs as defined, less the net income derived from the
(f) Adjusted diluted earnings per share (adjusted diluted EPS) is calculated by adding back the effect on the Company's diluted EPS determined in accordance with GAAP, of the impairment loss of long-lived assets and corporate development costs as defined, as well as their tax effect as defined, and subtracting the effect on diluted EPS for the
(g) Tax effect is the impact the tax expense per the tax provision
Source:
2023 GlobeNewswire, Inc., source