DLH Holdings Corp (DLHC) 2012 Q1 法說會逐字稿

Good morning, ladies and gentlemen, and welcome to the first-quarter 2012 TeamStaff, Incorporated earnings conference call. My name is Chris, and I will be your conference moderator for today.

Presently all participants are in a listen only mode. Later we will facilitate a question-and-answer session. (Operator Instructions).

At this time I would now like to turn the conference over to your presenter for today, Mr. Donald Weinberger. Sir, you may proceed.

Thank you, Chris. Good morning and thank you all for joining us for today's conference call. I am Donald Weinberger, Managing Member of Wolfe Axelrod Weinberger Associates, Investor Relations counsel on behalf of TeamStaff.

On the call with me today is Mr. Zach Parker, President and Chief Executive Officer; Mr. John Kahn, Chief Financial Officer; and Mr. John Armstrong, Executive Vice President.

Before I turn the call over to our host, let me take a moment to read the forward-looking statement. This conference call may contain forward-looking statements as defined by the federal securities laws. Statements in this conference call regarding TeamStaff Inc.'s business, which are not historical facts, are forward-looking statements that involve risks and uncertainties.

TeamStaff's actual results could differ materially from those described in such forward-looking statements as a result of certain risk factors and uncertainties, including, but not limited to, our ability to secure renewals of contracts under which we currently provide services; our ability to enter into contracts with the United States government facilities and agencies on terms attractive to us and to secure orders related to those contracts; changes in the timing of orders for and/or placement of professionals and administrative staff; the variation in pricing of the contracts under which we place professionals; the overall level of demand for our services; our ability to successfully implement our strategic growth, acquisition and integration strategies; the effect of existing or future government legislation and regulation; the loss of key offices and management personnel that could adversely affect our ability to remain competitive; other regulatory and tax developments; and the effect of other events and important factors disclosed previously and from time to time in TeamStaff's filings with the US Securities and Exchange Commission.

For a discussion of such risks and uncertainties, which could cause actual results to differ from those contained in the forward-looking statements, see risk factors in the Company's periodic reports filed with the SEC.

The information in this conference call should be considered accurate only as of the date of the call. TeamStaff expressly disclaims any current intention to update any forecast, estimates or other forward-looking statements contained in this call.

As part of today's call we have created a slideshow presentation, which can be accessed on our new website at www.dlhcorp.com under the Investor Relations tab towards the right side of the page, and click onto presentations under the drop-down menu.

With that out of the way, let me turn the discussion over to Zach Parker, President and CEO of TeamStaff. Zach, please proceed.

Thank you, Don. Good morning everyone and thank you for joining us today for our quarterly report. I would like to welcome shareholders, investors and interested parties to our quarterly conference call to discuss the operational highlights and the financial results for the first quarter of fiscal year 2012.

My plan is to first summarize the key highlights of the first quarter, then hand the call over to John Kahn for a brief discussion of our financial results for the quarter and fiscal year. I will then ask John Armstrong to address and update investors on Company business development activities. I will then conclude my formal remarks with a brief market overview and a perspective on what that means for us.

Today's call marks my two-year anniversary since my tenure at TeamStaff commenced, and I am very pleased to announce that we believe our strategic plan that was implemented shortly after I joined has been very successful.

We developed and started implementation of a long-range strategic plan, of course, during 2010 fiscal year and quickly moved to address the financial stability and the necessary runway to support implementation of new infrastructure and business development requirements.

After securing additional financing, we addressed the lack of new and sustainable business by focusing resources on core competencies, existing and adjacent markets, larger and longer term contracts, and development of differentiators to enhance competitiveness.

Major changes in both resource allocation and new business development pipelines were implemented to align with the strategy of establishing sustainable, profitable growth while diversifying our portfolio and creating substantial backlog.

This strategy has seen success, which can be seen in our backlog figures, which increased to approximately $160 million at the fiscal year-end of 2011 compared with an $11 million backlog at the end of September 2010.

During fiscal 2011 the Company completed and won -- competed on and won 100% of our major health care recompete programs. In addition, new business contacts with an estimated value of $10 million annually were obtained.

Due to government delays, the new business revenue was not recognized until the middle of the first quarter of FY12. As seen in our quarterly results, revenues improved nicely off of commencement of the new business contracts. As a result, our revenues and gross profits in the quarter were two-year highs for the Company.

We continue to strive for profitability, and although we had a net loss for the quarter, we came very close to achieving breakeven on the basis of EBITDA adjusted for other non-cash charges. These, of course, were impacted by new contract startup costs for our new Veteran Affairs contracts.

Specifically speaking, we needed to phase in nearly 250 new employees and implement some technology upgrades for our new contract awards. We are highly pleased with the results we have achieved and look forward to the second quarter which will have a full quarter of benefit of the revenue from the new contract wins.

Supporting our strategic portfolio diversification, subsequent to the quarter's end, we announced that we are part of a winning team selected to provide clinical acquisition support services, known as CLASS, at Air Force medical treatment facilities in the United States and Guam.

CLASS is a multiple award, indefinite delivery/indefinite quantity contract vehicle with a maximum value of approximately $1 billion over five years, under which the awardees are eligible to seek individual service task orders.

The Federal Staffing Resources team is one of the several companies selected to participate on the contract, and we are pleased that they have incorporated us into their pursuit. We have a long-standing partnership with FSR, and we are looking forward to working together on this opportunity.

We believe that this award complements our existing portfolio of health care support contracts as our wholly-owned subsidiary, DLH Solutions, has been providing the full continuum of care to our war fighters at medical treatment facilities and medical centers across the country. John Armstrong will also address some additional subsequent wins as well.

Lastly, I would like to briefly mention that we are moving forward with our rebranding efforts, including a company name change, which shareholders will vote on at tomorrow's annual meeting. We began planning our rebranding campaign during the fiscal year 2011, and launched the initial phase of the branding of DLH Solutions in Washington DC on October 10, 2011. It was followed by standing up our newly consolidated website, which features enhanced Investor Relations tools and information. I encourage you to take a look.

The Company is now leveraging state-of-the-art Web technology in its rebranding communication initiatives, including an extensive communications campaign towards establishing the brand and creating brand equity. We believe a new company name will better reflect who we are post-divestiture of the TeamStaff Rx entity, and improve our profile in the strategic markets as we enable ourselves to create a strong brand identity within the federal marketplace.

To summarize, the investments and adjustments we made during the last couple of years in order to continue building our business development team are already paying off. As seen in our new contract wins and the first-quarter fiscal year improvements, we have positioned ourselves well for fiscal 2012 and beyond.

With that I will turn the call over to John Kahn for a more detailed discussion of our financial results for the first quarter of fiscal 2012.

Thank you, Zach. Revenues for the three months ended December 31, 2011 and 2010 were $11.5 million and $10.6 million, respectively, which represents an increase of $0.9 million or 8.7% despite federal government delays in major contract awards. The increase in revenues is due primarily to new business awards.

First-quarter gross profit increased 19% to nearly $1.6 million from approximately $1.3 million in the prior-year period, and as a percentage of revenue, increased from 12.5% to 13.6%.

The improvement over prior year reflects enhancements to project management and an improved mix of higher-margin work, consistent with the Company's reported growth strategy.

General and administrative or G&A expenses for the three months ended December 31, 2011 and 2010, were $1.8 million and $1.6 million, respectively, which represents an increase of $0.2 million or 12.2%.

The difference is attributed largely to costs and investments associated with startup of work under new contracts in three different states during the quarter, issuance of non-cash stock grants and expanded new business development activity.

Loss from operations for the three months ended December 31, 2011, was $210,000 as compared to a loss from operations for the three months ended December 31, 2010, of $275,000. This represents an improvement of $65,000 in results from operations with most of it due to increased gross profit.

Net loss for the three months ended December 31, 2011, was $389,000 or $0.06 per basic and diluted share as compared to a net loss of $337,000 or $0.07 per basic and diluted share for the three months ended December 31, 2010.

Given the other non-cash charges, as well as our interest expense, we thought it important to delineate our earnings before interest, tax, depreciation and amortization, or EBITDA, adjusted for other non-cash charges.

For the three months ended December 31, 2011, adjusted EBITDA was a loss of $16,000 as compared to a loss of $179,000 for the three months ended December 31, 2010, which shows an improvement of $163,000.

And for those of you interested in the details, we reconciled our adjusted EBITDA with our net loss in the presentation materials.

As of December 31, 2011, the Company had $0.5 million in cash and $0.4 million in availability under its credit facility. The Company believes that it has adequate liquidity resources to fund operations over the next 12 months in view of its existing cash position, the additional funding committed by the Company's lender and other parties during fiscal 2011, and other factors, including forecasted cash flow from operations and the effects of cost reduction programs and initiatives put into place during fiscal 2011.

That concludes my discussion of the financial statements. I will now turn it back over to Zach.

Thank you, John. I would now like to call upon John Armstrong, Executive Vice President, to briefly update us on the Company's business development initiatives. John, please proceed.

Thank you, Zach. Having been with the Company for a little over a year, I am pleased to be able to report that we have succeeded in rebuilding our new business pipeline around strategic markets, while leveraging our existing strong core capabilities in the areas of health care delivery solutions and logistics and technical services.

We have expanded our strategic partnerships and alliances and developed a robust growth pipeline with a substantial level of qualified opportunities and have multiple bids awaiting government decisions. It is important to note that much of our pipeline is in high priority, federal and DoD budget areas of focus, and we have solidified our indefinite delivery/indefinite quantity government-wide acquisition contract portfolio with the recent award of three vehicles, including the Air Force CLASS, mentioned earlier by Zach, that could reach a ceiling of $2.5 billion over a five-year period.

Last month the Secretary of Defense announced a revised national security strategy and associated priorities. We are generally encouraged by the priorities outlined by the administration and the Pentagon, in that it further validates the portfolio shaping activities that we have embarked upon in the recent years.

Our continued focus and development in the areas including military and veteran health care, logistics and supply chain management and affordability, and productivity enhancements align well with the new strategy and stated budget priorities. We continue to build a large, qualified pipeline of addressable and winnable programs and are optimistic that we will fuel our growth in the future.

That concludes my remarks, Zach, and I will turn it back over to you.

Thank you, John. As John just noted, the Department of Defense has addressed its strategic and budgetary priorities against a backdrop of federal budget deficit and debt reduction uncertainties. Months ago, the Congressional super committee, powered by the Budget Control Act of 2011, failed to reach an agreement, which set into motion plans for sequestration.

The President is expected to release his 2013 budget shortly. We expect that the FY 2013 budget process again will be long and contentious, with another continuing resolution likely. The net effect of these budgetary debates and uncertainties typically lead to delays and some degree of paralysis by government program managers and procurement officials as they sort out their available funds.

Despite these headwinds, given the national priority alignment of our recent and anticipated new business awards, we see continued growth for the Company. This progress, coupled with continued improved performance by our leadership team under the leadership of Kevin Wilson on several key programs, positions us to remain on plan for increasing customer and shareholder value as more than -- as our more than 1,000 employees continue to deliver affordable and mission-critical services to the government and the men and women who serve.

That concludes my formal remarks. I would now like to open the call for any questions. Chris, please proceed.

(Operator Instructions). We have no questions at this time, sir.

Thank you for participating in today's conference call. As always, should you have any additional questions, do not hesitate to contact Don Weinberger of our Investment Relations firm, Wolfe Axelrod Weinberger Associates, who will be happy to help you or to put you in touch with myself or my management team.

We thank you for your interest and support and look forward to speaking with you at tomorrow's annual shareholders' meeting or again in a few months to discuss the second-quarter results of fiscal year 2012. Have a great day.

Ladies and gentlemen, that concludes today's conference. Thank you so much for your participation. You may now disconnect.