Core Insights - The Zacks Rank system emphasizes earnings estimates and revisions to identify winning stocks, with value investing being a preferred strategy in various market conditions [1] - Zacks has developed a Style Scores system to identify stocks with specific traits, particularly in the Value category, where stocks with "A" grades and high Zacks Ranks are considered strong [2] Company Analysis: DLH (DLHC) - DLHC currently holds a Zacks Rank of 2 (Buy) and a Value grade of A, indicating it is a strong value stock to watch [2] - The company's P/B ratio is 0.64, significantly lower than the industry average of 1.65, suggesting it may be undervalued [3] - DLHC's P/S ratio stands at 0.2, compared to the industry's average of 0.32, further indicating potential undervaluation [4] - The P/CF ratio for DLHC is 2.98, which is attractive relative to the industry's average of 11.26, reinforcing the notion of undervaluation based on cash flow [5] - Overall, DLHC's key metrics suggest it is likely undervalued, especially when considering its strong earnings outlook [6]

Group 1 - Momentum investing focuses on "buying high and selling higher" rather than traditional strategies of "buying low and selling high" [1] - Fast-moving trending stocks can be risky if their valuations exceed future growth potential, leading to potential losses for investors [2] - A safer strategy involves investing in bargain stocks that exhibit recent price momentum, identified through the Zacks Momentum Style Score [3] Group 2 - DLH Holdings Corp. (DLHC) has shown significant recent price momentum with a four-week price change of 41.2%, indicating strong investor interest [4] - DLHC has gained 1.8% over the past 12 weeks and has a beta of 1.33, suggesting it moves 33% more than the market [5] - DLHC has a Momentum Score of B, indicating a favorable time to invest based on its momentum characteristics [6] Group 3 - DLHC has received a Zacks Rank 2 (Buy) due to upward revisions in earnings estimates, which attract more investor interest [7] - The stock is trading at a low Price-to-Sales ratio of 0.19, meaning investors pay only 19 cents for each dollar of sales, indicating a reasonable valuation [7] - DLHC is positioned for potential growth at a fast pace, with other stocks also passing the 'Fast-Paced Momentum at a Bargain' screen [8]

Revenue Performance - Revenue for the three months ended March 31, 2025, was $89.2 million, a decrease of 11.7% compared to $101.0 million for the same period in 2024[9] - Revenue for the six months ended March 31, 2025, was $179,994,000, down 9.5% from $198,857,000 in the prior year[9] - Total revenue for the three months ended March 31, 2025, was $89,212 thousand, a decrease of 11.7% compared to $101,007 thousand for the same period in 2024[58] - Revenue from the Department of Health and Human Services for the six months ended March 31, 2025, was $86,745 thousand, down from $91,636 thousand in 2024, a decline of about 5.0%[58] Net Income and Earnings Per Share - Net income for the six months ended March 31, 2025, was $1.99 million, down 49.8% from $3.96 million for the same period in 2024[9] - The company reported a net income per share of $0.06 for the three months ended March 31, 2025, compared to $0.13 for the same period in 2024[9] - For the three months ended March 31, 2025, net income was $878,000, a decrease of 51.5% compared to $1,812,000 for the same period in 2024[9] - Basic net income per share for the six months ended March 31, 2025, was $0.14, compared to $0.28 for the same period in 2024, reflecting a 50% decrease[9] - The net income for the six months ended March 31, 2025, was reported at $878,000, a decrease from $1,992,000 for the same period in the previous year, indicating a decline of about 56%[18] Operating Costs and Expenses - Total operating costs for the three months ended March 31, 2025, were $84.1 million, a decrease of 11.6% from $95.1 million in the same period of 2024[9] - Total lease costs for the six months ended March 31, 2025, were $1,949 thousand, compared to $1,798 thousand for the same period in 2024, an increase of approximately 8.4%[60] - Stock-based compensation expense for the three months ended March 31, 2025, totaled $533,000, down from $954,000 in the same period of 2024, representing a decline of 44.1%[83] Assets and Liabilities - Total assets as of March 31, 2025, were $306.6 million, a decrease from $314.4 million as of September 30, 2024[12] - The company had total liabilities of $193.8 million as of March 31, 2025, compared to $204.2 million as of September 30, 2024[12] - Current assets increased to $55,038,000 as of March 31, 2025, from $52,957,000 as of September 30, 2024[12] - Total liabilities decreased to $193,758,000 as of March 31, 2025, compared to $204,249,000 as of September 30, 2024[12] Cash Flow and Operating Activities - Cash at the end of the period was $196,000, down from $342,000 at the beginning of the period[14] - The company provided $2.97 million in net cash from operating activities for the six months ended March 31, 2025, down from $10.3 million for the same period in 2024[14] - The company reported a net cash provided by operating activities of $2,965,000 for the six months ended March 31, 2025, compared to $10,301,000 in the prior year[15] Shareholders' Equity - Shareholders' equity increased to $112.8 million as of March 31, 2025, from $110.1 million as of September 30, 2024[12] - As of March 31, 2025, the total shareholders' equity increased to $112,849,000 from $110,132,000 as of September 30, 2024, reflecting a growth of approximately 2.5%[18] - The balance of retained earnings increased to $11,840,000 as of March 31, 2025, compared to $9,848,000 as of September 30, 2024, representing a growth of approximately 20.2%[18] Goodwill and Intangible Assets - The company performed a goodwill impairment evaluation and determined that its fair value exceeded its book value, indicating no impairment[38] - The balance of goodwill remained unchanged at approximately $138.2 million as of March 31, 2025, and September 30, 2024[65] - Total intangible assets, net decreased to $100,093,000 as of March 31, 2025, from $108,321,000 as of September 30, 2024, a decline of approximately 7%[66] Debt and Interest Expenses - The secured term loan balance was $137,750,000 as of March 31, 2025, with a fixed interest rate of 4.1%[75] - Interest expense for the three months ended March 31, 2025, was $3,877,000, a decrease of 7.5% compared to $4,190,000 for the same period in 2024[73] - Interest expense for the six months ended March 31, 2025, was $8,010,000, a decrease from $8,848,000 in the same period of 2024[9] Compliance and Regulations - The company is in compliance with all loan covenants and restrictions as of March 31, 2025[77] - The company has not identified any significant related party transactions for the six months ended March 31, 2025[96] Stock-Based Compensation - The company granted 312,906 restricted stock units during the six months ended March 31, 2025, compared to 169,544 in the same period of 2024[85] - Unrecognized stock-based compensation expense was $4,876,000 as of March 31, 2025, down from $7,385,000 in 2024, indicating a decrease of 34.1%[89]

Core Viewpoint - DLH Holdings Corp. has been awarded a five-year task order valued at up to $37.7 million to provide scientific research and development services for the Telemedicine and Advanced Technology Research Center, focusing on improving medical outcomes for military personnel [1][2]. Group 1: Contract Details - The contract is part of the OMNIBUS IV procurement vehicle and will enable DLH to deliver a range of technology-enabled solutions, including AI modeling, bioengineering, and cyber security [2]. - The task order emphasizes DLH's long-standing partnership with the medical research and development community, showcasing its capability to address readiness challenges through advanced engineering solutions [2][3]. Group 2: Company Positioning - DLH is recognized as an industry leader in information systems and scientific research, with a focus on merging technology with medical research to enhance military health systems [3]. - The company aims to leverage its cutting-edge capabilities to pursue similar opportunities across military health and adjacent markets, indicating a strategic alignment with military missions [4]. Group 3: Company Overview - DLH, a Russell 2000 company, specializes in enhancing technology, public health, and cyber security readiness through various solutions and services, employing over 2,400 staff dedicated to mission-critical operations [5].

Financial Data and Key Metrics Changes - The company reported revenue of $89.2 million for the second quarter, down from $101 million in the prior year period, primarily due to the conversion of certain VA and DoD programs to small business set-aside contracts [16][18] - EBITDA for the second quarter was $9.4 million compared to $10.2 million last year, reflecting a decrease due to lower overall revenue levels [18] - Operating cash generation was approximately $14.5 million during the quarter, leading to a year-to-date operating cash flow of $3 million, down from $10.3 million last year [19] Business Line Data and Key Metrics Changes - The company experienced a contraction of approximately $11.8 million in revenue due to small business set-aside conversions, which accounted for the total decrease in revenue [18] - Despite the revenue decline, key technology services revenue grew over first quarter results, indicating resilience in certain business lines [17] Market Data and Key Metrics Changes - The company has over $1 billion in contracts currently under review, with expected award decisions in the second half of the fiscal year [12] - The administration's focus on efficiency and cost-cutting is expected to create opportunities for the company, particularly in digital transformation and cybersecurity [13] Company Strategy and Development Direction - The company aims to leverage its advanced capabilities and new business pipeline to align with the current administration's goals and policies, focusing on efficiency and accountability [10][13] - The strategy includes moving up the margin scale in a large market by providing unique, comprehensive solutions that enhance federal program effectiveness [14][21] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the alignment of the company's capabilities with the administration's priorities, despite some uncertainty in government programs and budget cuts [10][11] - The company believes it is on sound financial footing and has a portfolio of high-value technology-enabled applications that remain in demand [21] Other Important Information - The company reduced its debt by $15.3 million during the quarter, ending with $151.7 million outstanding, and expects to continue this trend throughout the fiscal year [19][20] - The company is contracted to manage five CMOP locations through October 2025, providing visibility into future revenue contributions [20] Q&A Session Summary Question: What is the revenue run rate on CMOP contracts for the rest of the year? - Management expects the quarterly run rate to be around $23 to $25 million for the remaining locations, providing better visibility for the third and fourth quarters [28] Question: How is the company impacted by NIH's shutdown of the long-term women's health study? - Management confirmed that they were not involved in that study and believe the overall budgetary impact from the new administration will be neutral to slightly positive [30][31] Question: What is the status of the $76 million Navy award contract? - The contract is continuing to grow, with ongoing phases of work and no anticipated dips in performance [42][43] Question: Are the upcoming $1 billion awards related to IDIQs? - Yes, the company is seeing continued activity related to IDIQs, although the administrative process has caused some delays in contract awards [46][48]

Financial Data and Key Metrics Changes - The company reported revenue of $89.2 million for Q2 2025, down from $101 million in the prior year, primarily due to the conversion of certain VA and DoD programs to small business set-aside contracts [15][16] - EBITDA for Q2 2025 was $9.4 million, compared to $10.2 million in the previous year, reflecting lower overall revenue levels [17][18] - Operating cash generation was strong at $14.5 million for the quarter, contributing to a total cash flow of $3 million year-to-date [18][19] - The company reduced its debt by $15.3 million during the quarter, ending with $151.7 million outstanding [19] Business Line Data and Key Metrics Changes - The technology services revenue grew over Q1 results, despite a decrease in overall revenue due to small business set-aside conversions [15][16] - The company is under contract to manage five CMOP locations through October 2025, with revenue run rates expected to be around $23 to $25 million for the remaining locations [26][27] Market Data and Key Metrics Changes - The company has over $1 billion in contracts under review, with expected award decisions in the second half of the fiscal year [11] - The new business pipeline remains healthy with estimated opportunities of $3.5 billion across various market areas [13] Company Strategy and Development Direction - The company aims to leverage its advanced capabilities and new business pipeline to align with the current administration's goals, focusing on efficiency and cost reduction [9][12] - The strategy includes moving up the margin scale in a large market by providing unique, comprehensive solutions [12][13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the alignment of the company's capabilities with the administration's priorities, despite uncertainties in government programs and budget cuts [9][10] - The company anticipates a neutral to slightly positive budgetary impact from the new administration, with ongoing demand for its technology-enabled applications [29][30] Other Important Information - The company has made all mandatory debt payments through March 2026, a year ahead of schedule, and continues to benefit from financial flexibility due to an amended credit facility [7][19] - Management is closely monitoring changes in contract administration resources at customer agencies to protect cash flow generation [19] Q&A Session Summary Question: What is the revenue run rate for CMOP contracts for the rest of the year? - The company expects the quarterly run rate to be around $23 to $25 million for the remaining locations [26] Question: How is the company impacted by NIH's shutdown of the long-term women's health study? - The company was not involved in that study and expects the overall budgetary impact from the new administration to be neutral to slightly positive [28][29] Question: What is the status of the $76 million Navy award contract? - The contract is continuing to grow, with ongoing phases of work being implemented [39][40] Question: Are the upcoming $1 billion awards related to IDIQs? - Yes, the company is seeing continued activity related to IDIQs, with more RFPs expected to be released [43][44]

FY2025 Second Quarter Earnings Three Months Ended 3.31.25 May 8, 2025 CONFIDENTIAL & PROPRIETARY © Copyright 2025 DLH Holdings Corp. All Rights Reserved. 1 President and Chief Executive Officer Kathryn JohnBull Chief Financial Officer 2 CONFIDENTIAL & PROPRIETARY © Copyright 2025 DLH Holdings Corp. All Rights Reserved. Forward-Looking Statements Call Participants Zach Parker "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This press release may contain forward-looking sta ...

Group 1: Earnings Performance - DLH Holdings Corp. reported quarterly earnings of $0.06 per share, missing the Zacks Consensus Estimate of $0.07 per share, and down from $0.12 per share a year ago, representing an earnings surprise of -14.29% [1] - The company posted revenues of $89.21 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 0.88%, and down from $101.01 million year-over-year [2] - Over the last four quarters, DLH has surpassed consensus EPS estimates only once and has not beaten consensus revenue estimates during the same period [2] Group 2: Stock Performance and Outlook - DLH shares have declined approximately 49.4% since the beginning of the year, compared to a decline of -4.7% for the S&P 500 [3] - The current consensus EPS estimate for the upcoming quarter is -$0.11 on revenues of $74 million, and -$0.13 on revenues of $320.78 million for the current fiscal year [7] - The estimate revisions trend for DLH is mixed, resulting in a Zacks Rank 3 (Hold), indicating that shares are expected to perform in line with the market in the near future [6] Group 3: Industry Context - The Staffing Firms industry, to which DLH belongs, is currently ranked in the bottom 15% of over 250 Zacks industries, suggesting that the outlook for the industry can significantly impact stock performance [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can be tracked by investors [5]

Revenue Performance - Second quarter revenue was $89.2 million in fiscal 2025, down from $101.0 million in fiscal 2024, reflecting a decrease of approximately 11.8% due to small business conversions[6] - Revenue for the six months ended March 31, 2025, was $179,994 million, down from $198,857 million in the same period of 2024, a decrease of 9.5%[29] Earnings and Profitability - Earnings for the second quarter were $0.9 million, or $0.06 per diluted share, compared to $1.8 million, or $0.12 per diluted share in the same quarter of fiscal 2024, representing a decline of 50%[10] - EBITDA for the second quarter was $9.4 million, down from $10.2 million in the prior-year period, reflecting a decrease of approximately 7.8%[11] - EBITDA for the six months ended March 31, 2025, was $19,324 million, compared to $21,257 million for the same period in 2024, a decline of 9.1%[29] - The company reported an operating margin of 5.7% for the second quarter of fiscal 2025, slightly down from 5.9% in the prior-year period[8] - EBITDA as a percentage of revenue remained stable at 10.7% for the six months ended March 31, 2025, compared to 10.7% for the same period in 2024[29] Cash Flow and Liquidity - The company generated $14.5 million of operating cash during the quarter, driven by strong accounts receivable collections[4] - Cash at the end of the period decreased to $196 million from $238 million, reflecting a decline of 17.6%[24] - Net cash provided by operating activities for the six months ended March 31, 2025, was $2,965 million, down from $10,301 million in the same period of 2024, a decrease of 71.2%[24] - The company reported a net change in cash of $(146) million for the six months ended March 31, 2025, compared to an increase of $23 million in the same period of 2024[24] Debt and Liabilities - Total debt was reduced by $15.3 million during the quarter, bringing it to $151.7 million as of March 31, 2025, compared to $167.0 million at the end of December 2024[4] - Total current liabilities decreased from $53,242 million on September 30, 2024, to $49,917 million on March 31, 2025, a reduction of approximately 6.2%[22] Assets and Equity - Total assets decreased from $314,381 million on September 30, 2024, to $306,607 million on March 31, 2025, a decline of approximately 2.5%[22] - Total shareholders' equity increased from $110,132 million on September 30, 2024, to $112,849 million on March 31, 2025, an increase of 2.5%[22] Contract and Business Outlook - Contract backlog as of March 31, 2025, was approximately $646.9 million, down from $690.3 million as of September 30, 2024[6] - The company has a robust pipeline with over $1.0 billion in new business proposals currently being evaluated[5] - The company anticipates converting 50-55% of EBITDA to debt reduction over the fiscal year[12] General and Administrative Expenses - General and administrative expenses decreased by $3.1 million year-over-year, from $11.7 million in fiscal 2024 to $8.6 million in fiscal 2025[8]

Core Insights - DLH Holdings Corp. reported a revenue of $89.2 million for the second quarter of fiscal 2025, down from $101.0 million in the same period of fiscal 2024, primarily due to the impact of small business set-aside transitions [6][7] - The company reduced its debt by approximately $15.3 million during the quarter, bringing total debt to $151.7 million, supported by $14.5 million in operating cash generated [4][12] - A significant increase in bid activity was noted following the enactment of a Continuing Resolution in March, with over $1.0 billion in new business proposals currently under evaluation [5] Financial Performance - Revenue for the second quarter of fiscal 2025 was $89.2 million, a decrease of $11.8 million compared to $101.0 million in fiscal 2024 [6][30] - Operating income was reported at $5.1 million, with an operating margin of 5.7%, slightly down from 5.9% in the prior year [7][30] - Net income for the quarter was approximately $0.9 million, or $0.06 per diluted share, compared to $1.8 million, or $0.12 per diluted share, in the same quarter of fiscal 2024 [10][30] Debt Management - The company utilized $14.5 million of operating cash to reduce debt, achieving a total debt reduction of $15.3 million during the quarter [4][12] - As of March 31, 2025, DLH's total debt stood at $151.7 million, down from $167.0 million at the end of December 2024 [12][6] - The company anticipates converting 50-55% of EBITDA to debt reduction throughout the fiscal year [12] Business Outlook - The company expects a higher volume of decision-making in the third and fourth quarters, which could lead to growth opportunities into fiscal 2026 [5] - DLH is well-positioned to benefit from the President's fiscal year 2026 discretionary funding request, particularly in advanced engineering, digital transformation, data analytics, and cybersecurity [5] - The contract backlog as of March 31, 2025, was approximately $646.9 million, down from $690.3 million as of September 30, 2024 [6][13]