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DLH reports Q2 fiscal year 2014 results

Table 1 - Financial Highlights

Three Months Ended

Six Months Ended

 

March 31,

 

March 31,

($ in thousands, except per share amounts)

2014

2013

 

2014

2013

Revenues

$

14,745

 

$

13,007

 

$

29,222

 

$

26,002

 

Gross profit

$

2,199

 

$

1,771

 

$

4,311

 

$

3,560

 

Gross profit %

14.9

%

13.6

%

 

14.8

%

13.7

%

Income (loss) from operations

$

225

 

$

9

 

$

291

 

$

(84

)

Net income (loss)

$

197

 

$

(109

)

 

$

330

 

$

(237

)

Income (loss) per share - basic and diluted

$

0.02

 

$

(0.01

)

 

$

0.03

 

$

(0.03

)

Other Data

 

 

 

 

 

Adjusted EBITDA (1)

$

330

 

$

80

 

$

638

 

$

109

 

Management Discussion

Commenting on the Company's results, President and Chief Executive Officer of DLH, Zach Parker stated:  "We are very pleased with our second quarter fiscal year 2014 results.  We believe that our results validate our strategy for navigating a challenging budgetary environment.  Our strategic focus on a particular segment of the federal market has allowed us to deliver increasing revenue for the sixth consecutive quarter, during a cycle that the general contracting market has experienced erosion in the business base.  Our operations have delivered gross profit increase with the addition of our new business, which is consistent with our strategy to move up the value chain within our healthcare portfolio.  We are committed to continuing our efforts to enhance shareholder value through measured growth and quality financial results.

DLH Executive Vice-President, John Armstrong added:  "During the quarter, the White House released its proposed FY15 budget for the Department of Veterans Affairs (DVA), including a projected 6.5% increase in the budget, to support VA's goals, including expanded access to health care and other benefits.  This increasing addressable market is good news for DLH against the headwinds of an overall decreasing Federal budget. We believe that our expertise in leveraging technology to effectively and efficiently manage key missions for DVA positions us well to extend our long-term commitment to supporting veterans."

Kathryn JohnBull, DLH CFO, added, "Our second quarter results sustain our trend of delivering increased revenue and gross profit, while continuing to apply strong controls to general and administrative expenses.  Though total G&A expenses increased compared to our prior year second quarter, those increases were largely associated with revenue-driven fees to maintain our GSA contracts, non-cash stock option expense, and increased spending on business development.   As a percent of revenue, G&A expense was favorable over prior year second quarter. 

JohnBull added, "During the quarter, we worked with our lender to amend our credit facility, substantially reducing interest rates and other service charges.  We believe this amendment reflects the progress we've made to date in establishing a sound business model.  We generated strong operating cash flow during the quarter and we believe we have access to adequate capital to support ongoing growth.

Results for Three Months Ended March 31, 2014

Revenues for the three months ended March 31, 2014 and 2013 were $14.7 million and $13.0 million, respectively, which represents an increase of $1.7 million or 13.4%.  The increase in revenue is due primarily to new business awarded in 2013 and expansion on current programs.

Gross profit for the three months ended March 31, 2014 and 2013 was $2.2 million and $1.8 million, respectively, which represents an increase of $0.4 million or 24.2%. As a percentage of revenue, gross profit was 14.9% and 13.6%, for the three months ended March 31, 2014 and 2013, respectively. The gross profit rate benefited from new business awarded in 2013 and improved contract performance and cost management.

G&A expenses for the three months ended March 31, 2014 and 2013 were $1.9 million and $1.7 million, respectively, an increase of $0.2 million or 12.6%.  The increase was due principally to expenses related to growing our contract base, and non-cash stock option expense.  As a percent of revenue, G&A expenses were favorable over prior year at 13.2% and 13.3% for the three months ended March 31, 2014 and 2013, respectively.

Income from operations for the three months ended March 31, 2014 was approximately $225 thousand as compared to income from operations for the three months ended March 31, 2013 of approximately $9 thousand.  The improvement in income from operations results from improved gross profit described above.

Other income (expense), net was $(28) thousand for the three months ended March 31, 2014 as compared to $(118) thousand for the three months ended March 31, 2013. The improvement is due principally to settlement of our convertible debentures and warrants during first quarter fiscal 2014, which eliminated related interest and amortization expense incurred in the prior year quarter.

Net income for the three months ended March 31, 2014 was $197 thousand, or $0.02 per basic and diluted share, as compared to net loss of $(109) thousand or $(0.01) per basic and diluted share for the three months ended March 31, 2013. This improvement is due principally to increased gross profit as described in the preceding paragraphs.

Earnings (Loss) Before Interest Tax Depreciation and Amortization ("EBITDA") adjusted for other non-cash charges ("Adjusted EBITDA"(1)) for the three months ended March 31, 2014 was $330 thousand as compared to $80 thousand for the three months ended March 31, 2013, due principally to increased gross profit as described above.

Results for Six Months Ended March 31, 2014

Revenues for the six months ended March 31, 2014 and 2013 were $29.2 million and $26.0 million, respectively, which represents an increase of $3.2 million or 12.4%. The increase in revenue is due primarily to new business awarded in 2013 and expansion on current programs.

Gross profit for the six months ended March 31, 2014 and 2013 was $4.3 million and $3.6 million, respectively, which represents an increase of $0.7 million or 21.1%. As a percentage of revenue, gross profit was 14.8% and 13.7%, for the six months ended March 31, 2014 and 2013, respectively. The gross profit rate benefited from new business awarded in 2013 and improved contract performance and cost management.

G&A expenses for the six months ended March 31, 2014 and 2013 were $4.0 million and $3.6 million, respectively, an increase of $0.4 million or 10.9%.  Non-cash stock option expense was a significant contributor to the increase in G&A expenses, as those costs were $0.3 million and $0.1 million for the six months ended March 31, 2014 and 2013, respectively.  As a percent of revenue, G&A expenses were 13.6% and 13.8% for the three months ended March 31, 2014 and 2013, respectively, an improvement of 0.2% over prior year second quarter.

Income from operations for the six months ended March 31, 2014 was approximately $291 thousand as compared to loss from operations for the six months ended March 31, 2013 of approximately $84 thousand.  The improvement in income from operations results from improved gross profit described above.

Other income (expense), net was $39 thousand for the six months ended March 31, 2014 as compared to $(153) thousand for the six months ended March 31, 2013. The improvement is due principally to a gain recognized on the maturity of the derivative financial instruments associated with our convertible debentures.

Net income for the six months ended March 31, 2014 was $330 thousand or $0.03 per basic and diluted share, as compared to net loss of $(237) thousand or $(0.03) per basic and diluted share for the six months ended March 31, 2013. This improvement is due principally to increased gross profit as described in the preceding paragraphs.

Earnings (Loss) Before Interest Tax Depreciation and Amortization ("EBITDA") adjusted for other non-cash charges ("Adjusted EBITDA"(1)) for the six months ended March 31, 2014 was $638 thousand as compared to $109 thousand for the six months ended March 31, 2013, due principally to increased gross profit as described above.

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