DLH(US:DLHC)2021-02-03 19:16Financial Performance - The company reported revenue of $57.9 million for Q1 2021, an increase from $52.2 million in the prior year, reflecting a $7 million contribution from the IBA acquisition [21][22] - Operating income was $3.6 million with operating margins improving to 6.3% from 6% in the previous year [23] - Net income was approximately $1.8 million or $0.13 per diluted share, compared to $1.6 million or $0.12 per share last year [24] - EBITDA for Q1 2021 was $5.7 million, representing 9.8% of sales, up from 9.5% in the prior year [25] Business Lines and Market Data - The company experienced stable revenue delivery from labor year-over-year, with expectations for organic growth due to expansions in current programs and new business wins [22] - Approximately 60% of sales in the quarter were derived from Defense and VA markets, with significant contributions from the IBA acquisition [53] - The backlog at the end of the quarter was $665 million, indicating strong revenue visibility [10] Strategic Outlook and Industry Competition - The company anticipates greater opportunities for growth due to the new administration's focus on healthcare technology improvements, particularly in defense and health agencies [13][14] - The company is integrating acquisitions and enhancing service offerings to differentiate itself in the market [14] - There is an increased focus on digital transformation and artificial intelligence within federal agencies, which is expected to drive bidding activity [16] Management Commentary on Operating Environment and Future Prospects - Management expressed optimism about the year ahead, citing a strong proposal environment and active bidding activity [10][19] - The company is addressing pandemic-related challenges by leveraging technology to continue compliance programs with reduced travel [32] - Management expects to return to normal cash flow in Q2 2021, following a backlog in collections during Q1 [47] Other Important Information - The company has a debt position of $77.4 million, up from $70 million at the start of the fiscal year, primarily due to the IBA acquisition [26] - Management expects to achieve debt levels between $50 million and $52 million by the end of fiscal 2021 [50] Q&A Session Summary Question: Impact of compliance program restrictions on revenue - Management indicated that over 90% of compliance-related revenue reductions were due to onsite visit restrictions, but they are working on alternative methodologies to recover some of that revenue [30][32] Question: Opportunities related to pandemic response - Management highlighted a significant increase in bid activity related to public health and life sciences, with a focus on vaccine rollout and telehealth applications [38][40] Question: Transition in key contract payment offices - Management explained that the transition was impacted by the start of the new fiscal year and the continuing resolution, which caused delays in collections [43][46] Question: Expectations for deleveraging and cash flow - Management expects a strong Q2 in terms of cash delivery, with a historical trend of increasing cash flow through the fiscal year [50][47] Question: Growth in Defense and VA markets - Management noted that the contribution from core VA programs grew from 46% to 48% of revenue, indicating strong growth in that segment [57][59]