DLH (DLHC) Q3 2024 earnings summary

Executive summary

• Q3 2024 revenue was $100.7M, down 1.5% year-over-year, with EBITDA of $10.0M and net income of $1.1M, impacted by small business set-aside transitions despite growth in public health and IT.

• Nine-month revenue rose 9% to $299.6M, with net income up 25% to $5.1M, driven by the December 2022 acquisition.

• Major customers include HHS (47% of revenue), VA (35%), and DoD (16%).

• Contract backlog at June 30, 2024 was $670.5M ($141.5M funded), down from $736.2M at March 31, 2024.

• Management remains optimistic about new business opportunities and expects several contract awards in late 2024 and early 2025.

Financial highlights

• Q3 2024 revenue: $100.7M vs. $102.2M in Q3 2023 (-1.5%).

• Q3 2024 EBITDA: $10.0M vs. $11.4M in Q3 2023 (-12.2%).

• Operating income for Q3 2024 was $5.8M (5.7% margin), down from $7.1M (7.0%) year-over-year.

• Operating cash flow for Q3 2024 was $4.6M; year-to-date cash from operations was $14.9M, nearly flat year-over-year.

• Interest expense for Q3 2024 decreased to $4.1M from $4.9M year-over-year due to debt prepayments.

Outlook and guidance

• Management expects total debt to decline to $157.0M–$160.0M by fiscal year-end, targeting a leverage ratio below 3.3x–3.5x entering fiscal 2025.

• Robust pipeline of new business opportunities and increased bid activity are expected to drive future growth.

• Government procurement delays and small business set-aside transitions continue to impact timing and outcome of contract awards.

• Management believes current cash flow and credit facilities are sufficient for the next 12 months.