DLH Holdings Corp.

Good morning and welcome to the DLH Holdings Fiscal 2021 Fourth Quarter Earnings Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star then two. Please note this event is being recorded I'd like to turn the conference over to Chris Witte, Investor Relations Advisor. Please go ahead.

Thank you, and good morning, everyone. On the call with me today is Zach Parker, President and Chief Executive Officer, and Catherine Johnball, Chief Financial Officer. The company's earnings release and PowerPoint presentation are available on our website under the Investor page. I would now like to provide a brief safe harbor statement, which is also shown on slide two of the presentation. This call may include forward-looking statements that relate to the company's outlook for fiscal 2022 and beyond. These forward-looking statements are subject to various risks and uncertainties that could cause actual results and events to differ materially from these statements. Please refer to the risk factors contained in the company's annual report on Form 10-K and in our other filings of the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements. On today's call, we will be referencing both GAAP and non-GAAP financial measures. A reconciliation of our non-GAAP results to our reported GAAP results is included in our earnings release and in the investor presentation on DLH's website. President and CEO Zach Parker will speak next, followed by CFO Catherine Johnball, after which we'll open it up for questions. With that, I'd now like to turn the call over to Zach. Please go ahead, Zach.

Excuse me. Thank you, Chris, and good morning, everyone. Welcome to our fourth quarter conference calls. I am pleased with how we finished out the year and I'm excited to tell you about Fiscal 2022. Let me begin by sharing with all of you how proud I am of the extremely talented and committed DLH workforce who are responsible for generating our results. None of us knew that Fiscal 21 would impose such unique challenges, including the pandemic. Yet through it all, our diverse work team remain focused on performance excellence, and for that, we are truly indebted. Starting with slide three, I'll provide a high-level overview of the quarter and the year, which reflects exceptional results. We reported sales of $65.2 million in the fourth quarter and closed out fiscal 21 with revenue of $246.1 million. up nearly 18 percent from last year's 209.2 million. This underscores both the strength of our existing operations, which grew organically, as well as contributions from our IBA acquisition last year. We believe our focus on core health markets and high technology applications has proven a valuable one over the long term even during times of pandemic-related constraints, political paralysis, and economic uncertainty. We posted operating income of $4.0 million for the fourth quarter and $17.2 million for the full year, leading to diluted EPS of $0.21 for Q4 and $0.75 for fiscal 2021 as a whole. These results highlight the impact of our business development initiatives, solid margins, and focus on the fundamentals, including controlling our costs. At the same time, we're able to use our cash-generating ability to pay down roughly $23 million of debt. This really strengthens the company's balance sheet and leaves us in great shape to execute our growth strategy growing forward. We ended the year with a backlog of 651.5 million near record levels, which included some recent FEMA awards serving clients in Alaska, which I will touch on in a moment. Turning to slide four, I'd like to update our investors on our current market positioning and the outlook for FY22. Just last week, Congress approved another continuing resolution that funds the government through mid-February. In such an environment, it is common for projects and programs to face delays based on a general lack of clarity with regard to spending priorities and ultimately their budgets. Decision-making is thus slowed, given the reduced visibility over their budgets, impacting federal contractors across the board. However, even with this uncertainty, we believe that our services and our agencies will remain in high demand going forward. Our primary customers, which of course include the VA, Health and Human Services, Department of Defense, really enjoy widespread bipartisan support, which gives us confidence and continued emphasis on the critical health-related services we provide. In addition, our advanced capabilities in data analytics and cloud computing are allowing DLH to win and pursue new markets, leveraging our cybersecurity and digital transformations across our clients. As evidenced this past year, there's great focus on utilizing telehealth applications, infectious disease research, and big data to find solutions that can benefit millions of people here and abroad. Not only is DLH at the center of many of these initiatives, We've grown during an otherwise uncertain economic environment. Even with the possible implementation of pandemic-related vaccine requirements for government contractors, we do not anticipate any material negative impact to the company. Our employees are ready for 2022 and beyond. With regard to the pandemic, Since the pandemic began, we have had approximately 200 scientists, researchers, and engineers gain intimate knowledge and expertise in support of nationally recognized programs to develop countermeasures to COVID-19. In addition, we have leveraged our contingency and emergency response capabilities to deploy over 500 healthcare practitioners and medical logistics personnel to attack the spread of COVID-19, particularly in rural areas in the country. To make sure we stay on top of our game, of course, we'll need to continue investing in human resources and recruiting top talent. In that vein, as shown on slide five, we recently hired Malik Farabi as our Chief Human Resources Officer. Malik has over 15 years of human capital leadership in positions within the federal government contracting space. He brings a unique set of competencies and strategies to help me and our executive leadership team tackle the challenges not only of today, but what we foresee tomorrow. He is a forward-thinking executive adept at translating business vision into actions that improve performance, employee engagements, profitability, and growth. Our number one asset is our credentialed top tier workforce, which requires both company-wide commitment and strong leadership. So we are really excited to have Malik on board to help us to build the next generation of thought leaders at DLH. Slide six shows some of our recent organic wins, which will of course contribute to a great start to fiscal 2022. We believe This represents a vote of confidence in our strategy, our people, our technology, and our ability to be a trusted supplier of technical solutions and services, as well as unique capabilities across these agencies. Before turning the call over to Catherine, let me summarize where we stand heading into fiscal 2022, as shown on slide seven. This year, while challenging and certainly unique in many ways, has illustrated how adept DLH is in providing steady, solid results and leveraging our new opportunities in our target markets. We've embraced a leadership role in helping the federal government understand and respond to a pandemic, and in doing so, have racked up some impressive awards that have increased our role across the agencies we serve. We've been identifying and penetrating new avenues of expansion as well. In addition, while proving our ability to win new business organically, we have a strong track record of finding and integrating select, attractive acquisitions that improve our technology credentials, our value proposition, and bolster our growth profile. We're confident that we have the leadership team in place to execute the next phase of our strategic vision, building on a history of success while laying out a roadmap for even greater days ahead. In closing, I believe DLH is very well positioned for the year to come due to our strong backlog, including new wins with FEMA and the enduring demand for our services from a broad array of federal agencies. Having closed out a successful year for the company in the midst of a pandemic and lingering issues impacting the economy, from supply chain constraints to elevated costs and a tightening labor profile market, we have proven that we are able to deploy our technology-enabled health solutions to serve the evolving needs of our customers. We're helping people across America to get the healthcare they need, analyze data for clinical research, optimize government-delivered services, and in doing so, improving the lives of millions. It is with this underlying mission to serve others and our passionate, dedicated staff that I remain upbeat about fiscal 22 and beyond. With that, I'd like to turn the call over to our Chief Financial Officer, Katherine Joplin. Katherine?