Fri, May 9, 11:49 AM (13 days ago)
**DLH Holdings Corp. (DLHC) Q1 2025 Financial Summary** DLH Holdings Corp. (DLHC) reported a mixed quarter with revenue declining but improved profit margins and cash flow. Here are the key points: **Financial Performance:** - **Revenue:** $89,212,000 (down 11.8% YoY) due to contract conversions to small business contractors, partially offset by new contract awards. - **Operating Income:** $5,115,000 (down 14.3% YoY) due to lower revenue but improved profit margins. - **Net Income:** $878,000 (down 51.6% YoY) due to higher interest expense and tax provision. - **Earnings per Share (EPS):** Basic $0.06, Diluted $0.06 (down 53.8% and 50.0% YoY, respectively). - **Profit Margins:** Gross margin improved to 20.2% (up from 21.7% YoY), Operating margin at 5.7% (down from 5.9% YoY), and Net margin at 1.0% (down from 1.8% YoY). **Cash Flow:** - **Operating Cash Flow:** $2,965,000 (down 71.2% YoY) due to lower revenue and changes in working capital. - **Investing Cash Flow:** $(1,000) (improved from $(466,000) YoY) due to lower capital expenditures. - **Financing Cash Flow:** $(3,110,000) (improved from $(9,812,000) YoY) due to lower debt repayments. **Balance Sheet Highlights:** - **Cash:** $196,000 (down from $342,000 YoY). - **Debt:** Total debt at $147,307,000 (down from $149,374,000 YoY) with a current portion of $17,036,000. - **Shareholders' Equity:** $112,849,000 (up from $110,132,000 YoY). **Trends and Uncertainties:** - **Contract Conversions:** DLHC experienced contract conversions to small business contractors, impacting revenue. - **Backlog:** Backlog decreased to $646.9 million (from $690.3 million YoY) with funded backlog at $106.2 million (from $155.1 million YoY). - **Federal Budget Outlook:** The White House proposed a 7.6% reduction in discretionary spending for FY 2026, with mixed impacts on DLHC's key customers. - **Set-Aside Provisions:** Federal set-aside provisions may limit DLHC's ability to compete for prime contractor positions. **Future Operations Impact:** - DLHC expects to continue providing services at locations currently managed, pending VA's procurement processes. - The company is well-positioned to win new business in its large addressable market, aligning capabilities with well-funded budget priorities. - DLHC will continue to evaluate market conditions and perform qualitative interim assessments for goodwill impairment. **Management's Discussion:** - DLHC's competitive advantages include a highly credentialed workforce, strong past performance, and bipartisan support for key contracts. - The company is focused on digital transformation, cybersecurity, science research, and systems engineering to meet federal customers' evolving needs. - DLHC's liquidity is supported by cash, accounts receivable, and access to its secured revolving line of credit facility. **Risks and Uncertainties:** - DLHC faces risks related to federal budget priorities, set-aside provisions, and competition for new business. - The company's results may vary significantly depending on various factors, including changes in client budgetary priorities and government contract procurement risks.