Q2 2025 DLH Holdings Corp Earnings Call

Unknown Executive: Good morning, and welcome to the DLH Fiscal 2025 Second Quarter Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key, followed by zero.

Good morning, and welcome to the DLH fiscal 2025 second quarter earnings Conference call, all participants will be in listen only mode.

Did you need assistance. Please signal a conference specialist by pressing the Starkey followed by zero.

Unknown Executive: After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star, then 1 on a touch-tone phone. To withdraw your question, please press star, then 2. Please note this event is being recorded.

After today's presentation there'll be an opportunity to ask questions.

To ask a question you May press Star then one on the touch sensor.

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Chris Witty: I would now like to turn the conference over to Chris Witty, Investor Relations Advisor. Please go ahead.

Speaker Change: I would now like to turn the conference over to Chris Witty Investor Relations adviser. Please go ahead.

Chris Witty: Thank you and good morning everyone. On the call with me today is Zach Parker, President and Chief Executive Officer, and Kathryn JohnBull, Chief Financial Officer. The company's earnings release and PowerPoint presentation are available on our website under the investor page.

Speaker Change: Thank you and good morning, everyone on the call with me today, as Zach Parker, President and Chief Executive Officer, and Kathryn <unk>, Chief Financial Officer, The Companys earnings release, and Powerpoint presentation are available on our website under the Investor page.

Chris Witty: I would now like to provide a brief safe harbor statement, which is also shown on slide three of the presentation. This call may include forward-looking statements that relate to the company's outlook for fiscal 2025 and beyond. These statements are subject to various risks and uncertainties, which could cause actual results and events to differ materially from such statements. Please refer to the risk factors contained in the company's annual report on Form 10-K and in our other filings with the SEC. We do not undertake any duty to update any forward-looking statements.

Speaker Change: I'd now like to provide a brief safe Harbor statement, which is also shown on slide three of the presentation.

Speaker Change: This call May include forward looking statements that relate to the company's outlook for fiscal 2025 and beyond these statements are subject to various risks and uncertainties, which could cause actual results and events to differ materially from such statements. Please refer to the risk factors contained in the company's annual report on Form 10-K and in our other filings with the SEC, we do not undertake.

Speaker Change: Our duty to update any forward looking statements on today's call, we will be referencing both GAAP and non-GAAP financial measures a reconciliation of our non-GAAP results to our reported GAAP results is included in the earnings release and in the Investor presentation on <unk> website.

Chris Witty: On today's call, we will be referencing both GAAP and non-GAAP financial measures. A reconciliation of our non-GAAP results to our reported GAAP results is included in our earnings release and in the investor presentation on DLH's website.

Chris Witty: President and CEO Zach Parker will speak next, followed by CFO Kathryn JohnBull, after which we'll open it up for questions. With that, I'd now like to turn the call over to Zach. Please go ahead, Zach. Thank you, Chris. And good morning, everyone.

Speaker Change: President and CEO Zach Parker will speak next followed by CFO, Kathryn Jumbo after which we'll open it up for questions with that I'd now like to turn the call over to Zach. Please go ahead Zach.

Speaker Change: Yeah.

Speaker Change: Thank you, Chris and good morning, everyone welcome to our second quarter fiscal 2025 conference call.

Zach Parker: Welcome to our second quarter fiscal 2025 conference call. I am pleased for the opportunity to report our financial results and several important accomplishments for the second quarter. First, let me acknowledge that, you know, our truly skilled team throughout this year and throughout this period has continued to do a fantastic job. Throughout this period of significant disruption in the government services industry, we have had, they have continued to demonstrate what sets DLH apart. And that is the delivery of innovative solutions, strong capability and efficiencies in the commitment to our customers and their passion for our collective mission.

Speaker Change: I am pleased with the opportunity to report our financial results and several important and important accomplishments for the second quarter.

Speaker Change: First let me acknowledge that are truly skilled team throughout this year and throughout this period have continued to do a fantastic job.

Speaker Change: Throughout this period of significant disruption in the government services industry. We have had some they have continued to demonstrate what sets DLH apart and that is the delivery of innovative solutions strong capability and efficiencies.

Speaker Change: The commitment to our customers.

Speaker Change: Their passion for our collective mission.

Zach Parker: Now turning to slide four, I'll provide an overview of our financial results. Our performance this quarter was in line with our expectations and on par with the performance in Q1 for revenue and EBITDA. With respect to cash flow generation and debt repay debt pay down, we've made significant progress this quarter as we reduced our debt by 15.3 million from the previous quarter. As you may recall, we experienced some collection delays last quarter leading to an $11.5 million of cash usage and a short term increase in our debt. This quarter, by contrast, we generated strong operating cash of $14.5 million and concurrently reduced debt, as Kathryn will further describe in a moment.

Speaker Change: Now turning to slide four I'll provide an overview of our financial results.

Speaker Change: Our performance this quarter was in line with our expectations and on par with our performance in Q1 for revenue and EBITDA.

Speaker Change: With respect to cash flow generation and debt repay debt Paydown, we've made significant progress this quarter as we reduced our debt by $15 3 million from the previous quarter.

Speaker Change: As you May recall, we experienced some collection delays last quarter, leading to an $11.5 million of cash usage.

Speaker Change: Short term increase in our debt.

Speaker Change: This quarter by contrast, we generated strong operating cash of $14 5 million and concurrently reduced debt as Kathryn will further describe in a moment.

Zach Parker: Throughout the first quarter of Q3, we have continued, I'm sorry, throughout the first half of the quarter, we have continued to reduce debt and expect that trend to continue throughout the balance of the fiscal year. As of today, we have made all mandatory debt payments through March of 2026, a year ahead of schedule. We continue to benefit from the support of our bank group as they provide additional financial flexibility with the November 2024 amendment to our credit facility as we navigate the recovery from the unbundling and rebidding of certain contracts now set aside for small business entities that were set in motion by the previous administration.

Speaker Change: Throughout the first quarter of Q3, we have continued I'm sorry, it's throughout the first half.

Speaker Change: We have continued to reduce debt and expect that trend to continue throughout the balance of the fiscal year.

Speaker Change: As of today, we have made all mandatary that mandatory debt payments through March of 'twenty 26, a year ahead of schedule.

Speaker Change: We continue to benefit from the support of our Bank group as they provide additional financial flexibility with the November 2020 for amendment to our credit facility as we navigate the recovery from the unbundling and Rebidding of certain contracts now set aside for small business entities there was set.

Speaker Change: In motion by the previous administration.

Zach Parker: At the same time, the continuing resolution from March has provided an element of stability in terms of overall budget parameters for the remainder of fiscal 25. Congress is now working to define the longer term spending priorities through budget reconciliation with the hope of having a blueprint in the coming month. This administration has recently released the skinny budget for fiscal 2026. Discretionary budget requests providing some insight into future initiatives and priorities. We pay very, very close attention to these documents and to these positions. While certain details are still yet to come, we are very excited about the alignment of our advanced capabilities and our new business pipeline with the current administration's goals and policies.

Speaker Change: At the same time, the continuing resolution for March has provided an element element of stability in terms of overall budget parameters for the remainder of fiscal 'twenty. Five Congress is now working to define the longer term spending priorities through budget reconciliation with the hope of having a blue.

Speaker Change: In the coming months.

Speaker Change: This administration has recently released the skinny budget.

Speaker Change: For fiscal 2026 discretionary budget request, providing some insight into future initiatives and priorities.

Speaker Change: We pay very very close attention to these documents and two these are positioned well.

Speaker Change: While certain details are still yet to come.

Speaker Change: I'm very excited about the alignment of our advanced capabilities and our new business pipeline with the current administration's goals and policies.

Zach Parker: We continue to believe that there is a sustained demand for our capabilities, despite a rather noisy macro environment. that includes some uncertainty on some government programs, but budget-cutting initiatives, in fact, is tied to tariffs and other macro- Thus far, we have seen negligible impact to DLH from program termination. Our technology-powered solutions businesses remain in high demand for our customers, as evidenced by a recent win to continue providing research and development and advanced technology services to include artificial intelligence and machine learning, modeling and simulation, robotics engineering, clinical support, biostatistics, and more to the U.S. Army's Medical Research and Development Command.

Speaker Change: We continue.

Speaker Change: To believe that there is a sustained demand for our capabilities, despite a rather noisy macro environment.

Speaker Change: That includes some uncertainty on some government programs, but budget cutting initiatives and factors tied to tariffs and other macro issues.

Speaker Change: Thus far we have seen negligible impact to DLH.

Speaker Change: Program termination.

Speaker Change: Our technology powered solutions businesses remain in high demand for our customers as evidenced by our recent win to.

Speaker Change: To continue providing research and development and advanced technology services to include artificial intelligence and machine learning modeling simulation, we bought robotics engineering clinical support bio statistics and more to the U S Army Medical research and development command.

Zach Parker: For more information visit www.fema.gov This work highlights our ability to deliver advanced solutions at the nexus of science and technology. As the fiscal year enters its second half, we're engaged in a heightened level of bid activity, illustrating ongoing demand for unique applications that can improve performance outcomes, enhance readiness, and deliver solutions with the cost efficiency. With more than a billion in contracts now under review, we expect award decisions in the second half of the fiscal year that would position us well for 2026 and beyond.

Speaker Change: This work highlights our ability to deliver advanced solutions at the Nexus of science and technology.

Speaker Change: As the fiscal year enters its second half we're engaged in a heightened level of bid activity illustrating the ongoing demand for unique applications that can improve performance outcomes enhance readiness and deliver solutions with the court with the cost efficiencies.

Speaker Change: With more than 1 billion in contracts now under review, we expect award decisions in the second half fiscal year that would position us well for 2026 and beyond.

Zach Parker: Turning to slide five, I'd like to go a bit deeper and provide additional color on what we currently see as the outlook under this new administration. The left column identifies some of the administration's stated priorities. A focus on promoting efficiency, cutting costs, ensuring accountability, and lowering regulatory hurdles. In a nutshell, the administration is focused on getting things done faster with less red tape at a lower price. This includes modernizing health data systems and surveillance capabilities for early outbreak detection and response while investing in healthy lifestyle initiatives, even as we reduce spending elsewhere. Applications of some of the technologies of digital transformation that we have just described, including our most recent win, really position us well to thrive in the marketplace where these initiatives are valued.

Speaker Change: Turning to slide five I'd like to go a bit deeper and provide additional color on what we currently see as the outlook under this new administration. The last column identifies some of the administration's stated priorities are focused on promoting efficiency cutting costs, ensuring accountability and lowering lowering regulatory heard.

Speaker Change: In a nutshell. The administration is focused on getting things done faster with less red tape at a lower price.

Speaker Change: This includes modernizing health data systems and surveillance capabilities for early outbreak detection of responsible investing in healthy lifestyle initiatives, even as we reduced spending elsewhere.

Speaker Change: Applications with some of the technologies digital transformation that we have just described including her most recent win really position us well to survive in the marketplace, where these initiatives all of that.

Zach Parker: As a leading provider of digital transformation and cybersecurity, systems engineering and integration, and science, research, and development services, we have significant experience leveraging technology to enhance program effectiveness, drive innovation, and result in cost efficiency. By leveraging these interconnected capabilities, DLH can bid on complex, high-value work. This is consistent with our strategy of continuing to move up the margin scale in this very large market. Our new business pipeline still remains very healthy with more than four times revenue in our qualified pipelines. We're estimating at $3.5 billion in opportunities of various sizes, various scope across each of our market areas.

Speaker Change: Absolutely.

Speaker Change: Digital transformation and cyber security systems Engineering, and integration and Science research and development services, we have significant experience leveraging technology to enhance program effectiveness drive innovation and result in cost efficiencies.

Speaker Change: By leveraging these interconnected capabilities delays can bid on complex high value work. This is consistent with our strategy of continuing to move up the margin of scale in this in this very.

Speaker Change: Large market, our new business pipeline still remains very healthy was more than four times revenue.

Speaker Change: In our qualified pipeline, we were estimating a 3.5 billion and opportunities of various sizes vary scope across each of our market areas.

Zach Parker: With the increased bid activities starting June 3 and a robust roster of bidding opportunities for the remaining fiscal year, we are highly encouraged about our new business prospect.

Speaker Change: With the increased bid activity started in Q3, and a robust roster of bidding opportunities for the remainder of this fiscal year. We are highly encouraged about our new business prospects. Our company remains strong and are positioned for organic growth our number one corporate priority.

Zach Parker: Our company remains strong in a position for organic growth, our number one corporate priority. We will leverage our unique capabilities to continue to expand and penetrate across new programs and agencies. We'll continue to invest in the future, and with our track record of success, world-class capabilities, and strong cash flow, we look forward to what the future will bring to DLH.

Speaker Change: We will leverage our unique capabilities to continue to expand and penetrate across new programs and agencies will continue to invest in the future.

Speaker Change: And with our track record of success World class capabilities and strong cash flow, we look forward to what the future will bring.

Speaker Change: H and Russia.

Zach Parker: and Murshyir. With that.

Speaker Change: With that I'd.

Kathryn JohnBull: I'd now like to turn the call over to our Chief Financial Officer, Kathryn JohnBull. Kathryn. Thank you, Zach, and good morning, everyone. We're pleased to report our second quarter results for fiscal 2025. Turning to slide 7, I'd like to provide a high-level overview of some key financial metrics for the three months ended March 31st, 2025. We reported revenue of $89.2 million in the second quarter versus $101 million in the prior year period, reflecting contributions from recent contract awards and business delivery timing offset by the conversion of certain VA and DoD programs to small business set-aside contracts, as discussed in the past.

Speaker Change: I'd now like to turn the call over to our Chief Financial Officer, Kathryn Dzhambul Kathryn.

Kathryn Dzhambul: Thank you Zach and good morning, everyone. We're pleased to report our second quarter results for fiscal 2020 back.

Kathryn Dzhambul: Turning to slide seven I'd like to provide a high level overview of some key financial metrics for the three months ended March 31, 2025, we reported revenue of $89 2 million in the second quarter versus $101 million in the prior year period, reflecting contributions from recent contract awards and business delivery.

Kathryn Dzhambul: Many offset by the conversion of certainly the a and D. O D programs to small business set aside contracts has discussed in the past.

Kathryn JohnBull: Notably, our revenue was nearly in line sequentially with Q1 levels, even though we finished the quarter with one less CMOP site under management. That means our key technology services revenue grew over first quarter results. In total, revenue contraction due to small business set-aside conversions including CMOP versus 2024 was approximately $11.8 million in the quarter, accounting for our total decrease in revenue. We are under contract to manage five of the remaining CMOP locations through the end of October 2025, so beyond the current fiscal year, and one location through the end of August. Award decisions for these services appear to be trending towards mid-December 2026 and could extend further as procurement strategies are shaped by the policies of the new administration.

Kathryn Dzhambul: Thirdly, notably our revenue was nearly in line sequentially with Q1 levels, even though we finished the quarter with one less seem off site under management.

Kathryn Dzhambul: It means our key technology services revenue grew over first quarter results in total revenue contraction due to small business set aside conversions, including Cmos versus 2024 was approximately 11 8 million in the quarter accounting for our total decrease in revenue.

Kathryn Dzhambul: We are under contract to manage five other remaining steam up locations through the end of October 2025, so beyond the current fiscal year and one location through the end of August.

Kathryn Dzhambul: Our decisions for these services appear to be trending towards.

Kathryn Dzhambul: It could extend further at past procurement strategies are shaped by the policies of the new administration.

Kathryn JohnBull: We reported EBITDA of $9.4 million for the second quarter versus $10.2 million last year. EBITDA was down primarily due to the lower overall revenue level, partially offset by managing indirect support costs as we scale the business. Notably EBITDA as a percent of revenue was 10.5% this year versus 10.1% in fiscal 2021. From a cash standpoint, we generated approximately $14.5 million of operating cash during the quarter, as Zach mentioned, due to increased collections of receivables, leading to operating cash flow of $3 million year-to-date versus $10.3 million last year. True to form, we used this year's Q2 cash generation to pay down debt, as I'll discuss on slide 8.

Kathryn Dzhambul: We reported EBITDA of $9 4 million for the second quarter versus $10 2 million last year EBITDA was down primarily due to the lower overall revenue level, partially offset by managing indirect support costs as we scale the business.

Kathryn Dzhambul: Notably EBITDA as a percent of revenue was $10 five this year versus 10, 1% in fiscal <unk>.

Kathryn Dzhambul: Yes.

Kathryn Dzhambul: From a cash standpoint.

Kathryn Dzhambul: Generated excuse me approximately $14 5 million of operating cash during the quarter as Zach mentioned due to increased collections of receivables leading to operating cash flow of 3 million year to date versus $10 3 million last year.

Kathryn Dzhambul: For them, we use this year's Q2 cash generation to pay down debt as I'll discuss on slide eight today Q3 activities have continued that trend is clearing receivable backlogs in support of our current debt level today is 146 million.

Kathryn JohnBull: Today, Q3 activities have continued the trend of clearing receivable backlogs in support of a current debt level today of $146 million. As you can see on slide 8, we reduced debt by $15.3 million during the quarter, ending the period with $151.7 million outstanding. Our delevering strategy and amended credit facility combine to deliver performance that puts us comfortably ahead of our debt covenants by approximately 80 basis points. We believe our credit facility provides sufficient capital to support our robust bid pipeline and subsequent revenue growth as Zach discussed. As I mentioned earlier, we are contracted with at least five of the CMOP locations through October, possibly longer.

Kathryn Dzhambul: As you can see on slide <unk>.

Kathryn Dzhambul: <unk> debt by $15 3 million during the quarter ending the period with $151 7 million outstanding our Delevering strategy and amended credit facility combined to deliver performance that puts us comfortably ahead of our debt covenants by approximately 80 basis points.

Kathryn Dzhambul: We believe our credit facility provides sufficient capital to support our robust bid pipeline and subsequent revenue growth does that discussed.

Kathryn Dzhambul: As I mentioned earlier, we are contracted with at least five of the Cmos locations through October possibly longer decisions on those sites, including some we have built with our small business partner may be made in fiscal 2026, although we are not yet certain on the exact timing.

Kathryn JohnBull: Decisions on those sites, including some we have bid with our small business partner, may be made in fiscal 2026, although we are not yet certain on exact time. We are mindful of substantial changes in the contract administration resources at our customers, which have been proposed by the administration and which we are actively monitoring to protect invoice approval and cash flow generation. Assuming a successful implementation of that change within our customer agencies, we expect that by the end of the fiscal year, we would have utilized approximately 50 to 55% of EBITDA to pay down debt. While we navigate through the various puts and takes that are a normal part of each transition to a new administration, we continue to believe the company is on a sound financial footing, and most importantly, has a portfolio of high value added technology enabled applications that remain in demand across the agencies we support.

Kathryn Dzhambul: We are mindful of substantial changes in the contract administration resources at our customers, which had been proposed by the administration and which we are actively monitoring to protect invoice approval and cash flow generation.

Kathryn Dzhambul: Assuming a successful implementation of that change within our customer agencies, we expect that by the end of the fiscal year, we would be we have utilized approximately 50% to 55% of EBITDA to pay down debt.

Kathryn Dzhambul: While we navigate through the various puts and takes that are a normal part of each transaction to a new administration. We continue to believe the company is on sound financial footing and most importantly has a portfolio of high value added technologies enabled applications that remain in demand across the agencies we support.

Kathryn Dzhambul: <unk>.

Kathryn JohnBull: With bid activity accelerating as we near the end of the government's fiscal year, we believe there is ample room to increase bookings even as we face the headwinds of uncertainty and program set-asides we have discussed in the past. The key to our success is to expand our market presence by providing unique, comprehensive solutions that can make federal programs more efficient, more effective and impactful to the soldiers, veterans and citizens they serve. Given our capabilities and highly credentialed workforce, combined with our strong pipeline of new business opportunities, we are well positioned to do just that.

Kathryn Dzhambul: With very with bid activity accelerating as we near the end of the government's fiscal year. We believe there is ample room to increase bookings, even as we face the headwinds of uncertainty and program set asides, we have discussed in the past.

Kathryn Dzhambul: Key to our success is to expand our market presence by providing unique comprehensive solutions that can make federal programs more efficient more effective and impactful to the soldiers veterans and citizens day Sir.

Kathryn Dzhambul: Given our capabilities and highly credentialed workforce combined with our strong pipeline of new business opportunities, we are well positioned to do just that.

Kathryn JohnBull: And that concludes my discussion of the financial statements.

Kathryn Dzhambul: And that concludes my discussion of the financial statements with that I would now like to turn the call over to our operator to open.

Unknown Executive: With that, I would now like to turn the call over to our operator to open. Thank you.

Unknown Executive: We will now begin the question and answer session. To ask a question, you may press star then one on your touchtone phone.

Speaker Change: Thank you we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Unknown Executive: If you are using a speakerphone, please pick up your handset before pressing the key. If at any time your question has been addressed and you would like to withdraw your question, please press star, then two.

Speaker Change: We're using a speakerphone please pick up your handset before pressing the keys.

Speaker Change: If at any time your question has been addressed and you'd like to withdraw. Your question. Please press Star then two.

Joe Gomes: Our first question will come from Joe Gomes with Noble Capital. Please go ahead. Good morning, Kathryn and Zach. Good morning Joe, how are you my friend? So one of the to start out, I guess it's, you know, kind of the long running soggy here with with CMOP contracts. You know, good news is, you know, got them sounds like through said the end of this fiscal year. but the one that you've lost, I guess, kind of figure out where are we on a revenue run rate on those contracts? You know, let's do the back half of this year.

Announcer: Our first question will come from Joe Gomes with Noble capital. Please go ahead.

Joe Gomes: Good morning, Kathryn Zach.

Announcer: Yeah.

Announcer: Right right.

Announcer: Oh Wow.

Announcer: Just to start out I guess.

Announcer: Kind of a long running saga here with with Seamark contracts you know good news as you know we got them sounds like through it like you said the end of this fiscal year.

Announcer: But the one that you've lost I guess kind of figure out where are we on a revenue run rate on those contracts you know, let's do the back half of this year I go to the first quarter you did about 34 million of revenue.

Kathryn JohnBull: You know, the first quarter, you did about 34 million of revenue. I haven't seen the queue yet, so I don't know what it was in for the second quarter. I'm assuming it's somewhat less because of the one last contract, but just trying to figure out for the rest of the year what contribution that might be able to have. Yeah, we're expecting the quarterly run rate to be around 23 to 25. for the for the remaining locations that we expect to extend. And, you know, it is obviously helpful in terms of visibility. And you can deal with this more than more than many.

Announcer: I haven't seen the Q, yet so I don't know what it's been for the second quarter I'm, assuming it's somewhat last as the last one last contract, but just trying to figure out for the rest of the year, what contribution that might be able to have.

Announcer: Yeah, we're expecting a quarterly burn rate to be around 23 to 25.

Announcer: Pardon me.

Announcer: Remaining locations that we expect to extend and you know it is obviously helpful. In terms of visibility you can deal with this more than once it Nate.

Joe Gomes: I'm just trying to put your report out.

Announcer: Trying to think of a report out but there's nothing there.

Joe Gomes: But the visibility moving from the one month and three month arrangements to now a six month extension gives us better assurance that the third and fourth quarter will have a revenue contribution from CMAH somewhere between twenty and twenty three and twenty. Okay, perfect. Thank you for that. And I know you mentioned You know, some of the things that have been going on, I just, you know, I saw one article talking about, you know, over at the NIH. where they were shutting down a long-term women's health study. And wondering, A, were you guys involved in that study, and how much more of that NIH type of business do you think is potentially gonna be impacted by some of these?

Announcer: Moving from the one month and three month arrangements to now a six month extension gives us a better assurance that the third and fourth quarter will have a revenue contribution from say MA somewhere between 2020 three and 'twenty five.

Speaker Change: Okay perfect. Thank you for that.

Announcer: And I know you mentioned.

Announcer: Yeah. Some of the things that had been going on I just I saw one article talking about you know over at the NIH.

Announcer: Or are they were shutting down the long term Womans health study and I was wondering a where do you guys involved in that in that study.

Announcer: Know how much more of that NIH type of business do you think is potentially going to be impacted by some of the needs.

Zach Parker: those. Yeah, as you might imagine, Joe, we spend a great deal of time with NIH. We're in a large number of their operating divisions and pay very close attention. niinjo.org & www.hldgrants.org There are some Engagement strongest investments and high stakes investments in the health of our employee's minds while mankind's lives depend in greater danger of being taken away from them. House bill Security—which is just a simple sortscale task of submitting important documents such as our annual earthquake statistics and the twenty eight-point bridge cliff statistics. in the recent quarter. And so we, you know, that still is well within our position.

Announcer: Those efforts.

Announcer: Yeah as you might imagine we spent a great deal of time with.

Announcer: With NIH.

Announcer: A large number of others.

Announcer: Their operating divisions and pay very close attention.

Announcer: Two most signal and noise, there's coming out with regard to them.

Announcer: We first of all the answer to your question that it's not worth it.

Announcer: For me.

Announcer: And so we've had no.

Announcer: Hard to do that.

Announcer: But they are you know the administration has been sending their shingles.

Announcer: You know what.

Announcer: He's going forward both in terms of budget.

Announcer: As well as actions taken.

Announcer: Yeah.

Announcer: The recent quarter.

Announcer: And so we are in that scale is well within our position, we still remain well within our position.

Zach Parker: We still remain well within our position that we've described over the last couple of quarters that we feel overall. that the budgetary impact of the new administration will be new to the slightly positive to us overall. But you are hitting in the area where I think we have probably some of our risk exposure around the. research side and that is the funding that will continue to go forward that may have been funded in some cases by research grants. You know this administration has taken a very tough position on grant-funded studies and research and that has been a part of and continues to be from time to time a part of part of our book of business and that's largely almost exclusively I should say in NIH.

Announcer: Described over the last couple of quarters, we feel overall.

Announcer: That does.

Announcer: Germany impacts the new administration will be neutral to slightly positive overall.

Announcer: But you are hitting in the area, where I think we have problems.

Announcer: Some of our risk exposure around.

Announcer: Research.

Announcer: That is the funding.

Announcer: We will continue to go forward that may have been Sunday in some cases by research grants you know this is mixed.

Announcer: And illustrations.

Announcer: Taking a very tough position grant funded studies research.

Announcer: It's been a part of it.

Announcer: Sometimes part of as part of our book of business.

Announcer: And that's largely excuse me I should say.

Announcer: For us we still continues in Q2.

Zach Parker: But we still continue to see an overall positive net positive, including NIH from our waterfall that includes current contracts. And I think some of the initial reaction or what the things you see focused on is, as the one that you mentioned suggests, it got a bit swept up in some of the maybe AI-enabled kind of identification of programs and their affiliation with the DEI and the political overhangs, if you will. My understanding of that program specifically is that once communicated how relevant that was to scientific disease and health conditions management, that program was restored. And, you know, so we do think that there'll be some bit of a herky-jerky kind of a, or a little bit of a, maybe some initial responses made or decisions made that the benefit of better context and information provided at the program level will help, will help protect those programs that are really related to the overall MAHA objectives of Studying and delivering healthier lifestyles through studies of the chronic conditions and lifestyle management and disease conditions and surveillance of, you know, the really the core missions of a health organization.

Announcer: Yeah overall positives.

Announcer: Net positive, including an age from a waterfall and keeps our contracts.

Announcer: Okay.

Announcer: Uh huh.

Announcer: And that's the kind of initial reaction.

Announcer: You should see focused on it.

Announcer: That's the one that you mentioned suggest it got a bit swept up in some of the.

Announcer: Indeed AI enabled.

Announcer: Vacation programs and their affiliation with with the D. B I D.

Announcer: The political kinds if you will.

Announcer: My understanding is that program specifically.

Announcer: Once communicated how relevant that was too.

Announcer: These NK cell.

Announcer: Oh condition management programs. Your story, so we didn't think that they'll visa.

Announcer: Perky, jerky kind of that or a little bit about.

Announcer: Maybe some initial responses may die or decisions made that.

Announcer: This benefit.

Announcer: The information provided at the program level.

Announcer: Health well helped.

Announcer: Protect is programs that are really related to the overall market.

Announcer: Objectives.

Announcer: Oh.

Announcer: Duffy and delivering healthier lifestyles studying chronic conditions and lifestyle.

Announcer: And these conditions and surveillance of the really formulations.

Announcer: Hmm.

Zach Parker: So it'll be maybe some bumps here and there in this accent. I'm sure there will be some some nicks in programs as we go, but materially the programs that we're connected to, we see being very limited.

Announcer: They may be some bumps here and there it is actually I'm sure there will be some sudden and programs as we go but materially the programs that we're connected to the ECB.

Announcer: Very.

Announcer: Yes, that's right.

Joe Gomes: And one more for me if I may. How far through are we with the, you know, the small business set of sides and the loss of, you know, existing acquired small business? When do we think that that's kind of going to peter out as being something to call out on on a quarterly call? Yeah, I think it's going to probably be, we'll see in our in our pipeline, we'll probably see it go through Q3, and I think it'll settle out in terms of the opportunities that we have in our pipeline, revenue-wise, of course, that would be trailing.

Announcer: Okay and one more for me if I may.

Announcer: Hum.

Announcer: How far through are we with the you know the small business set asides and and the loss of existing acquired small business.

Announcer: You know what when do we think that that's kind of kind of Peter out as being something to call out on the quarterly calls.

Announcer: Yeah, I think it's going to probably be well see in our pipeline will probably see it.

Announcer: During Q3.

Speaker Change: Thank you I will settle out and changes.

Speaker Change: The opportunities that we have in our pipeline revenue wise of course that would be true.

Zach Parker: But there is still some pressure there. There's, you know, for some of the opportunities that have not, you know, some that have already been in motion. This administration has taken some actions to stop some acquisitions that have been going forward in a manner that's not consistent with their strategy, as Kathryn said, as one of those factors. If they're unbundling some of the contracts, it doesn't make sense to unbundle it and get the efficiencies and the cost efficiencies of keeping it bundled. This administration is putting halts on some of those, and so we think there's some potential upside around some of the things that, coming from the previous administration, were being set aside and or unbundled, that they're making some cessation of that work.

Speaker Change: But theres still some pressure there.

Speaker Change: As you know for some of the opportunities and if not.

Speaker Change: But you know some that have already been in motion.

Speaker Change: Some that have not been awarded.

Speaker Change: This administration.

Speaker Change: <unk> taken some actions to stop some acquisitions that has to be going forward in a.

Speaker Change: Magnus, it's not consistent with their strategy as Kathryn.

Speaker Change: One of those factors if theyre unbundling some contracts it doesn't make sense to you to unbundle, it and get the efficiencies and cost efficiencies bundle. This administration is putting wholesome some news.

Speaker Change: And so we think there's some potential upside.

Speaker Change: Some of the things that are coming from the previous administration where gangs.

Speaker Change: Set aside.

Speaker Change: They're making some suspicion that work.

Zach Parker: But for us right now, I think as we look at our book of business as we have it today, we see that largely running out in the Q3 timeframe, subbing out revenue-wise by Q4.

Speaker Change: For US right now I think as we look at our book of business.

Speaker Change: We see that largely running out.

Speaker Change: And in Q3 timeframe subbing out revenue wise by Q4.

Unknown Executive: Great, thanks for that. I'll get back in queue. Again, if you have a question, please press star, then 1. At this time, we will pause momentarily to assemble our roster. There appears to be no further questions in the queue.

Speaker Change: Great Thanks for that and I'll get back in queue.

Speaker Change: Yeah.

Speaker Change: You bet.

Speaker Change: Again, if you have a question. Please press Star then one.

Speaker Change: At this time, we will pause momentarily to assemble our roster.

Speaker Change: Yeah.

Speaker Change: There appears to be no further questions in the queue.

Speaker Change: Oh.

Joe Gomes: It appears Joe Gomes has come back, so Joe Gomes, please go ahead. We'll do a couple of more. So so that the $76 million Navy award contract that you got out too long ago. I just wonder if you might be able to give us an update on how that has progressed. Yeah, it's continuing to grow. We are continuing to phase in certain aspects of that work. I think we may have said before, it was not going to be fully staffed up front and just run it out accordingly. We don't see any dips, but we do see continued expansion.

Speaker Change: Yes, Joe Gunn says come back so Joe guns. Please go ahead.

Speaker Change: Well do a couple of more [laughter] right.

Speaker Change: Yeah.

Speaker Change: So.

Speaker Change: The $76 million Navy award contract that you you got not too long ago. I was just wondering if you might be able to give us an update on how that is progressing.

Speaker Change: Yeah, it's a continuing to grow.

Speaker Change: We continue.

Speaker Change: <unk> continued to say is in.

Speaker Change: Certain aspects of that work I think we may have said before it was not going to be a oh fully staffed upfront.

Speaker Change: And just run it out accordingly.

Speaker Change: Don't see any Jeff, but we do see continued expansion. There is some some of it is tied to the program and certain platforms that we will receive the <unk>.

Zach Parker: Some of it is tied to certain platforms that will receive the command and control systems that we're managing and continuing to do the software updates. Some of those are coming on. Ship schedules vary and we're making sure we're responsive to that. We do anticipate that some of the work, I believe up in Norfolk, Virginia, with the Navy's presence up there, we expect. start to level off with us and target some of those additional resources in the coming months. We also have had some work out in the Pacific side associated with that contract. and the San Diego area.

Speaker Change: The command and control systems that we're managing and continuing to Oh Gee do software updates and so some of those are coming off a ship schedules vary.

Speaker Change: We're making sure we're responsive to that.

Speaker Change: We do anticipate some of the work and particularly I believe up in Norfolk, Virginia with the.

Speaker Change: Maybe some presence up there where you expect them to.

Speaker Change: To start to level off.

Speaker Change: With us.

Speaker Change: Some of those additional resources in the coming months, we also yes.

Speaker Change: Some work on them.

Speaker Change: Vic side associated with that contract.

Speaker Change: And San Diego area.

Zach Parker: That level of effort still, I believe we still have some potential growth there in the early part of FY26 potentially. Those are still subject to change. The government's taking a look at some contract vehicles, which are the appropriate ones. We believe our vehicle might be appropriate. for them to do some new things coming out.

Speaker Change: That level of effort still I believe we still have some potential growth there.

Speaker Change: In the.

Speaker Change: Early part of it.

Speaker Change: FY 'twenty six potentially.

Speaker Change: Those are still subject to change the government is taking a look at it.

Key contract vehicles once you're right.

Speaker Change: The appropriate ones, we believe light vehicle might be appropriate for us.

Speaker Change: And to do some new things come out.

Speaker Change: Oh pardon me.

Speaker Change: Yeah.

Joe Gomes: Okay.

Zach Parker: And then one last one. We talked about this in the past. I think we're starting to see some More additional movement here, you know, you got a couple of these large IDIQs, and, you know, you talked about, you know, the billion awards, you think, coming, you know, in the second half. Is most of that related to these IDIQs? Are we seeing some more RFPs being released under these vehicles? Yes, we are. We're continuing to see that, you know, one of the more notable ones, of course, is the one we were awarded at the beginning of this year, let's see, Oasis Plus.

Speaker Change: Okay, and then one last one.

Speaker Change: We've talked about this in the past.

Speaker Change: And I think we're starting to see some.

Speaker Change: More digital movement here, you've got a couple of these large IDI cues.

Speaker Change: And you know you've talked about another 1 billion awards, you think coming you know in the second half.

Speaker Change: Most of that related to visa IDI cues are we seeing some more rfps being released under these vehicles.

Speaker Change: Yeah, we are we're continuing to see that.

Speaker Change: The more notable ones of course is what we are rewarded.

Speaker Change: Beginning this year.

Speaker Change: This blessed.

Zach Parker: that it's continuing to have some activity that's germane to our pipeline. And we do, we are still seeing some continued commitments. In many cases, the government, they give you what we call heads up, they'll ask for a request for information. So it's not quite an RFP. But once they do issue those RFIs, it's an indicator to us that sometime within the coming months, they may issue those RFPs. We've seen, I will say that this administration's, one of the effects of this administration has been to provide more oversight before they release request for proposals, or even allow the contracts folks to award contracts.

Speaker Change: Uh huh.

Speaker Change: You need to have some activity that's driven H R.

Speaker Change: Why.

Speaker Change: And we do but we are still seeing.

Speaker Change: Some continued commitments in many cases governments. They give you what we call a heads up.

Speaker Change: As for our request information so it's quite an RFP, but once they do issues RFID is an indicator to us at <unk>.

Speaker Change: Sometime within the coming months they may issue those rfps, we've seen a I will say that this administration is one of the effects of this administration has been to provide more oversight before they release question propulsion for either allow the.

Speaker Change: Contracts folks to award contracts.

Zach Parker: So while they haven't canceled any material ones for us, it has had an effect of slipping things to the right of late. Just because the administrative process of going up higher in the organization, some cases, they want to make sure that a political appointee has eyes on a procurement before they commit the dollars. And that has slowed some things for our customers. And I would probably also add that, as you may have seen in the headlines, a number of agencies, and particularly within our market, have taken a large haircut already with regard to incentivize retirements and forced retirements, if you will, to the acquisition folks, the contract administration folks.

Speaker Change: While they havent.

Speaker Change: Castle baby material ones for us It has had an effect of slipping things to the right.

Speaker Change: Is that just because of the administrative process of growing up higher in New York amortization. Some cases, they want to make sure that our political appointee has either on a procurement before they commit the dollars and that has slowed some things for them.

Speaker Change: Uh huh.

Speaker Change: And I would probably also add that as you.

Speaker Change: As you may have seen in the headlines a number of agencies.

Speaker Change: Particularly within our.

Speaker Change: The market has taken a lot of shared already with regard to them.

Speaker Change: And supervise retirements and forced retirements.

Speaker Change: To to the acquisition folks to contract administration folks and so that is.

Zach Parker: And so that has affected also a delay in just about all types of contract actions. In some cases, even getting funding on contracts. We've not suffered from that materially, but we've had peer companies that have. So things are slowing down as a function of this. So the thing that I don't want to have folks as well as our folks panic on that, it's just that things seem to be sliding to the right just because of the reduced resources. We're hopeful that that was some implementation of some new best practice.

Speaker Change: It is also a delay in just about all types of contract actions in some cases, even getting funding our contracts we've not suffered from that.

Speaker Change: But we've had fewer companies that have so things are slowing down as a function of those.

Speaker Change: I don't want that.

Speaker Change: Okay.

Speaker Change: There's also a panic on that it's just the things seem to be sliding to the right just because of the reduced resources, we're hopeful that.

Speaker Change: That was some metal mutations.

Speaker Change: Best practices.

Zach Parker: https://www.fema.gov Right, and it's really a point-in-time status right now, Joe, as, you know, in the relatively short run, I think the administration's goals of simplifying procurement, consolidating procurement, there's a whole lot out there in the executive orders around consolidating contract activities, and particularly for domestic, for the civilian agencies, probably would be less likely to happen in defense and intel. But I think in the civilian agencies, there's a general view that consolidating under the GSA is going to be helpful in making the procurement process more standard and more efficient. But getting from here to there is the challenge, right?

Speaker Change: That would be big.

Joe Gomes: Right and that's really the point in time status right now Joe.

Speaker Change: In the end really.

Speaker Change: Really it's just a short while it hasnt changed administrations goals simplifying procurement consolidating procurement, there's a whole lot out there.

Speaker Change: And the executive orders from our consolidated contract activities, particularly for.

Speaker Change: Sure Josh civilian agencies.

Speaker Change: Probably it would be less likely to happen in defense and Intel and I think in the civilian agencies as a general to use that consolidating GSA, it's going to be helpful and named human processes standard it more efficient.

Speaker Change: But getting to adhere to their kids into it.

Speaker Change: Is the challenge right. So at this point in time right now.

Zach Parker: So at this point in time right now, what we knew is a lot of our counterparts we've been used to engaging and working with in the agencies have been given a time frame that they're exiting, and I'm unclear how many of them are going to end up at GSA and how many of them are going to, you know, how that's all going to roll out. So we certainly have to keep our eye on that ball, you know, on a daily basis and make sure that we're tracking where the paper's flowing to and how the processes are changing.

Speaker Change: A lot of our camera, perhaps they've been used to engaging and working hand in the agencies has had been given a timeframe that they're exiting.

Speaker Change: How many of them are getting it done.

Speaker Change: GSA. So many of them are going to how that's all going to go out. So we certainly have to keep our eye on that ball, even on a daily basis to make sure that we're tracking we're with paper swelling too.

Speaker Change: What's how the processes are changing that you know I do think it's it's a it's a noble goal with any outcome to just simplify and shorten the procurement side.

Zach Parker: But, you know, I do think it's a noble goal as an outcome to simplify and shorten the procurement cycle. We all know how frustrating it is to wait on some of these things that seem to take quite a long time. So that's kind of the state of ability to get contracts awarded at the moment. And great, thanks for that.

Speaker Change: We all know frustrating it is to wait on some of these things that seem to take quite a long time. So so that's kind of the state of.

Speaker Change:

Speaker Change: The ability to get contracts awarded at the movies.

Speaker Change: Okay, great. Thanks for that.

Unknown Executive: With no further questions in the queue, this will conclude today's question and answer session.

Speaker Change: You bet with no further questions in the queue. This will conclude today's question and answer session I would like to turn the conference back over to Mr. Parker for any closing comments.

Zach Parker: I would like to turn the conference back over to Mr. Parker for any closing comments. Thank you. And thank you all again, to our shareholder community and interested investors. We appreciate you taking the time to hear our story. Kathryn and I again do remain available over the coming weeks to be available to add any clarity that you might need as we as we move forward in this journey together.

Parker: Thank you.

Kathryn Dzhambul: You all again to our shareholder community and interested investors. We appreciate your taking the time to hear our story Kathryn and I again do remain available over the coming.

Kathryn Dzhambul: Rates to be available to add any clarity that you might need as we speak.

Kathryn Dzhambul: Move forward in this journey together.

Zach Parker: I want to thank you all again and have a wonderful, blessed and productive day. Bye for now.

Kathryn Dzhambul: Thank you all again and have a wonderful blessed and productive day bye for now.

Unknown Executive: The conference is now concluded. Thank you for attending today's presentation. You may now disconnect. www.dlh.gov.au © The Ultimate Parody Site!

Kathryn Dzhambul: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Kathryn Dzhambul: Yeah.

Kathryn Dzhambul: Okay.

Kathryn Dzhambul: [music].

Kathryn Dzhambul: Hum.

Kathryn Dzhambul: Yeah.

Kathryn Dzhambul: [music].

Kathryn Dzhambul: Oh.

Kathryn Dzhambul: [music].

Kathryn Dzhambul: Hum.

Kathryn Dzhambul: