DLH Holdings Corp. (NASDAQ:DLHC) Q2 2024 Earnings Call Transcript

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Zachary Parker: Yes, great question. We have, as you might imagine, over the years, continue to model various scenarios that that align with the new acquisition strategies. And of course, this strategy, which came out in the procurement phase last year. We have taken a look at and we have. So we do have some step-down approaches and plans to execute on. It’s going to be a function you have what you know of how many of them are awarded in a given time period. Right now, every indication is they would not award all seven or eight concurrently so that they can manage the phase-in process, which is ranging from 60 to 90 days in those solicitations. So if they would do that, if you think about it, we would be we would have we have various models that we have a scale down associated with the range of contracts, but we but we feel very comfortable that we will within that within a full operating quarter, I’ll be able to hit hit this, but a pretty quick reduction into them and to be able to operate efficiently with regard to our EBITDA margin basis?

Kathryn JohnBull: Yes. I mean that’s a services business. Of course, our components of our cost are the direct cost to performing the contracts. So those are and that is by far and away the majority of the cost. And naturally that scales of the contract moves, the costs move with it. There’s also, of course, cost to running any particular part of our operation that is distinct to that operation. And Seamap, as we’ve described before, is a very large scale up deceptively complex. I mean, we think of it as it’s in its fulfillment of prescriptions. And of course, it is, but it’s complex in terms of the deployment of the workforce in response to variable demand. And so there is an infrastructure supporting that particular operation in a unique way.

And that is, of course, scalable as the as the effort, the volume of business scales. And then there, of course, the corporate costs of running the overall business. So it does suggest the scaling will be I expect to be very well aligned with the timing of the revenue volume changes. And then we have to address the impact to the corporate infrastructure costs. We’re going to go down when we model we model this regularly, and we are we are prepared for this as an outcome, even as we continue to support BA as a key customer and something that we’ve invested in in helping their outcomes be strong and in the operation continued continue to improve.

Joe Gomes: Okay. One more for me and I’ll get back in queue that you guys haven’t talked about the InfiniBand our product here lately. And I was wondering, can you give us kind of an update and how that is going out and being accepted.

Zachary Parker: Great straight man, Joe. I appreciate that. And I know our federal government is really stepping up activity with regard to security and cyber security across across all agencies. And recently believe in the last year, the White House has issued cyber security guidelines is implementing regulations being a phone. There’s a strong, strong commitment to execution of sound cyber security principles as well as a major commitment to cloud modernization for programs. We’re starting to see those, and we’re hearing more from those agencies. I met with some of the highest levels of leadership and federal government just earlier this week in that regard. So we believe that our incentive by solutions still offers a very, very highly secure differentiating capability since we are one of the one of the certified FedRAMP certified companies.

So it still remains, we think, a strong, a strong differentiator as we start to see the cyber security and information assurance opportunities coming down the pipeline, it is an area, Joe, where we have a strong campaign, obviously was bolstered with the with the capabilities that we have brought in both with them with the work that we’re doing, the cybersecurity mission engineering work that we’re doing for the Navy and complemented by some exacting high security up to and including Zero Trust architecture that we’re doing within NIH in driving some of their transitions as for the biomedical research community. So we’re really excited about how we think Infinity by both complements and gives us a breadth and a capability that somewhat unique.

And we’re looking to include that in our value propositions for this new bid backlogs that are finally starting to uncork a little bit with some budget certainty with some of these customers.

Kathryn JohnBull: But that would be a great example of what we talked about earlier in this call about the cross selling opportunities.

Joe Gomes: Yes. Okay, great. Thanks for the taking the questions. I appreciate it and nice strong quarter and look forward to seeing how the second half of the year unfolds.

Kathryn JohnBull: We do too.

Operator: [Operator Instructions]. This concludes our question and answer session. I’d like to turn the call back over to Zach Parker for any closing remarks.

Zachary Parker: Thank you, Andrea, and thank you all for your attention today and please stay tuned over the coming quarter. Kathryn and I will be providing some additional color around our pipeline for new business as well as update on our current and organic on-contract growth opportunities as some upcoming investor conferences. Thank you all for your support and have a blessed day. Bye for now.

Operator: Conference has now concluded. Thank you for attending today’s presentation, and you may now disconnect.

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