Your Mission is Our Passion DLH Investor Presentation Zach Parker, President and Chief Executive Officer Kathryn JohnBull, Chief Financial Officer August 8, 2018
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: This presentation may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or DLH`s future financial performance. Any statements that are not statements of historical fact (including without limitation statements to the effect that the Company or its management “believes”, “expects”, “anticipates”, “plans”, “intends” and similar expressions) should be considered forward looking statements that involve risks and uncertainties which could cause actual events or DLH’s actual results to differ materially from those indicated by the forward- looking statements. Those risks and uncertainties include, but are not limited to, the following: failure to achieve contract awards in connection with re-competes for present business and/or competition for new business; the risks and uncertainties associated with client interest in and purchases of new services; changes in client budgetary priorities; government contract procurement (such as bid protest, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; the ability to successfully integrate the operations of our recent and any future acquisitions; and other risks described in our SEC filings. 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, including our Annual Report on Form 10-K for the fiscal year ended September 30, 2017, as well as interim quarterly filings thereafter. The forward-looking statements contained herein are made as of the date hereof and may become outdated over time. The Company does not assume any responsibility for updating forward-looking statements.
Overview Zach Parker President, CEO, and Board Director, DLH Corporation Financial Highlights Questions and Answers Kathryn M. JohnBull Chief Financial Officer, DLH Corporation
Financial Strength Prime Contractor Offerings Established mid-tier Government services Excellent cash flow, consistent margins, business with an excellent service and solid balance sheet reputation and long-term customer Long-term contracts, high re-compete win relationships rates, and healthy pipeline Strong prime contractor position in key Federal agencies like VA, DOD, and HHS Seasoned Leadership Positioned for Growth Focused on critical areas of Federal Executive leadership built to leverage health technology, data analytics, and industry best practices health and human service market Strong industry representation on board segments of directors Aligned with favorable Federal market trends and demand dynamics
Offering the best of innovation and trusted mission-critical, long-term relationships Program Management Health IT Monitoring and evaluation Architecture and legacy migration (M&E) Web and mobile platforms Medical/clinical solutions Interoperability and integration Population health Reporting design Pharmacy distribution and implementation Capacity Building Data Analytics Health and scientific program Public and behavioral health results Web-based design Medical research and health and management informatics eLearning courses Analytics-based performance and VIRTEX management Evidence-based practices Tech-enabled Solutions Client intelligence and program Training and TA outcomes Web resource allocation tools Telehealth and virtual pharmacy Web and digital communication Medication adherence
Defense and Veterans Affairs Agencies Civilian Agencies FY2017 Spending for Health Services, IT, and FY2017 Spending for Health Services, IT, and Professional Services over $116B Professional Services over $15B Source: Deltek GovWin
“Strategies Driving Focus” “Healthy and Growing” “High -priority Mission Programs” Niche (targeted) vs broad IT/professional services Programs we manage solutions continue to gain spending continues to grow continue to move forward traction despite other priorities and Federal spend on IT and new leadership "Agile" as a Professional Services up in mindset/strategy is FY17 Majority of DLH’s federal beginning to take hold customers saw budget ▪ IT Services – 10% increases Mid-tier companies have increase unique opportunities for Deliver long-term benefits ▪ Professional Services – to populations served scale with tech-enabled 6.5% increase solutions Source: Deltek GovWin
Historical Revenue ($ in millions) Historical EBITDA* ($ in millions) $10 $8 $6 $115.7 $8.4 $4 $85.6 $65.3 $60.5 $4.5 $2 $53.5 $2.6 $0.9 $0.4 $0 FY13 FY14 FY15 FY16 FY17 FY13 FY14 FY15 FY16 FY17 *A reconciliation of Net Income to EBITDA is provided at the back of this presentation.
Strong Cash Flow and 1 2 3 Disciplined Capital Management ▪ ▪ ▪ Scale technology-enabled and Optimize workforce and service Expand EBITDA and reduce health analytics offerings delivery leverage, strengthening balance sheet ▪ ▪ Focus on Federal agencies with Leverage expertise in IT system ▪ high growth architecture design and migration Drive working capital efficiency services and free cash flow, supported by ▪ Shift business mix toward no inventory, minimal capex, and ▪ greater complexity and Focus on capture of professional minimal cash taxes until ~2024 professional work requirements work projects that typically yield ▪ higher gross margins Re-invest in business and make ▪ Make strategic acquisitions to targeted acquisitions ▪ expand DLH offerings Pursue excellence across key dimensions of agility and cost efficiency
“Driving Operational “ Winning New Business” “Deploying Capital to Excellence” Support Growth” Ensuring excellence, Optimizing business Adding capability and efficiency and effectiveness development customers to accelerate in program delivery growth Bidding selectively and Investing in continuous building a significant Targeting acquisitions to improvement (quality) backlog strengthen DLH’s position certifications and broaden its footprint Increasing technology- across known market areas Developing leadership enabled solutions to support the government’s Delivering long-term abilities and potential of shareholder value program managers high-priority missions
Uniquely positioned mid-tier company Broad Experience Established Innovator — National recognition for qualitative — Deliver efficiently with and innovative change standardized processes Deep CRM Profile Proven Methodology — Processes yielding measurable — Decades-long relationships results and savings with key Federal clients Large programs and suite of capabilities position DLH as a differentiated go-to-market performance leader
Revenue Gross Profit Gross Profit $M $10 $36.1 $30 $29.3 $8 $8.3 $6 $6.4 $20 24% 31% $4 $10 $2 $0 $0 FY17Q3 FY18Q3 FY17Q3 FY18Q3 Operating Income EBITDA $3.0 $3.0 $2.6 $2.5 $3.2 $2.0 $1.8 $2.0 $2.3 $1.5 42% 49% $1.0 $1.0 $0.5 $0.0 $0.0 FY17Q3 FY18Q3 FY17Q3 FY18Q3 A reconciliation of Net Income to EBITDA is provided at the back of this presentation.
9/30/2016 9/30/2017 6/30/2018 Term loan balance* $23.4 M $19.7 M $14.0 M Revolver balance** -0- -0- -0- Less Cash on Hand 3.4 4.9 6.6 Net Debt $20.0 $14.8 $7.4 LTM EBITDA $4.5 $8.4 $10.3 Net Debt/LTM EBITDA 4.44 1.76 0.72 *$25M originally **$10M ceiling; availability $10M; no borrowing as of 6/30/18 A reconciliation of LTM EBITDA is provided in the back of this presentation
This document contains non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results, and providing meaningful period-to-period comparisons. These measures should be used in conjunction with, rather than instead of, their comparable GAAP measures. A reconciliation of non-GAAP measures to the comparable GAAP measures presented in this document is also contained in the Company’s most recent quarterly earnings press release. For an expanded discussion of our use of this non-GAAP measure, please refer to the Earnings Release dated August 6, 2018.
This document contains non-GAAP financial information. Management uses this information in its internal analysis of results and believes that this information may be informative to investors in gauging the quality of our financial performance, identifying trends in our results, and providing meaningful period-to-period comparisons. These measures should be used in conjunction with, rather than instead of, their comparable GAAP measures. A reconciliation of non-GAAP measures to the comparable GAAP measures presented in this document is also contained in the Company’s most recent quarterly earnings press release. For an expanded discussion of our use of this non-GAAP measure, please refer to the Earnings Release dated August 6, 2018.
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