DLH(DLHC) - 2020 Q3 - Earnings Call Transcript

Financial Performance and Key Metrics - The company reported revenue of $51.5 million for Q3 2020, an increase from $38.7 million in the prior year's third quarter, largely due to the impact of the S3 acquisition [28][29] - Operating income rose to $3.8 million in Q3 2020 from $1.7 million in the previous year, reflecting operating margins of 7.4% compared to 4.4% [29] - EBITDA for Q3 2020 was $5.5 million, up from $2.6 million in the prior-year period, with EBITDA as a percentage of sales increasing to 10.7% from 6.7% [30] Business Line Performance - The increase in revenue was attributed to the S3 acquisition, which was fully reported in 2020 compared to only three weeks in the prior year [28] - The company has won new work related to COVID-19 research and testing, which is expected to contribute to future revenues [28][10] Market Data and Key Metrics - The company generated $10 million in operating cash during the quarter and paid down $10.5 million of debt, totaling $25.5 million of senior debt paid down since the S3 acquisition [9][31] - The company anticipates a debt balance of between $40 million to $42 million at fiscal year-end [31] Company Strategy and Industry Competition - The company is focusing on COVID-19 related projects, leveraging its experience in clinical trials and relationships with government agencies [20][23] - New leadership additions are expected to enhance performance and growth trajectory, with a focus on organic growth and new business development initiatives [12][13] Management Commentary on Operating Environment and Future Outlook - Management expressed confidence in the company's resilience and ability to deliver solid performance despite the challenges posed by the pandemic [7][24] - The company is committed to adapting its business model to meet the evolving needs of the market, particularly in response to COVID-19 [15][19] Other Important Information - The company has implemented safety measures for employees and has formed an in-house task force to monitor COVID-19 impacts [19][14] - Management emphasized the importance of diversity and inclusion within the organization and community engagement initiatives [25][27] Q&A Session Summary Question: Expectations for sequential improvement in EBITDA margins into Q4 - Management does not expect a significant bump in Q4 but aims to sustain the levels delivered in Q3 [33] Question: Timing for recognizing COVID-related revenues - Management indicated that revenue flow from COVID-related projects will be variable and dependent on the ongoing situation with the virus [36][37] Question: Discussion on elevated accounts receivable - Management acknowledged elevated accounts receivable due to integration efforts and expects normalization by the end of the fiscal period [48] Question: Estimate of organic growth in the quarter - Management noted substantial organic growth driven by expansion in services to veterans, with further quantification to be provided later [50]