DLH Holdings Corp. (DLHC) Earnings Call Transcript & Summary

Good morning, and welcome to the DLH 2020 Annual Meeting Conference Call. [Operator Instructions] Please note, this event is being recorded. I would now like to turn the conference over to Rick Wasserman, Chairman of the Board. Please go ahead.

We're all set. Okay. Good morning, everybody. This is the 2020 Annual Meeting of Shareholders of DLH Holdings Corp. I am Rick Wasserman, Chairman of the Board of the company. I would like to take this opportunity to introduce Zachary C. Parker, the President and Chief Executive Officer of DLH Holdings, who will be acting as the Chairman of this meeting. Zach?

Thank you, Rick. Good morning. I am Zachary Parker, President and Chief Executive Officer of DLH Holdings. It is now 10 a.m., and the meeting will please come to order. First, I would like to thank all of the shareholders who are in attendance at this annual meeting. We are also making this meeting available by webcast, and I thank those shareholders who have joined us remotely. We truly appreciate your continued support of DLH. We will begin today's meeting with the formal agenda, which will be immediately followed by a presentation on the company's business and a brief question-and-answer session. I would now like to introduce the directors, nominees and members of our senior management of DLH, who are at the meeting today either in person or attending remotely. The directors include: James Allen, who is participating by phone; Martin Delaney, who is in attendance here; Elder Granger; Frances Murphy; Austin Yerks, who are all participating by phone; our Chairman, Rick Wasserman. And from management team here, I'm joined by Kathryn JohnBull, our Chief Financial Officer; and Steve Oroho, our Corporate Controller. I would also like to take this opportunity to introduce Marc Silverman of WithumSmith+Brown, our independent accountants for the current fiscal year. Mr. Silverman will be available to respond to appropriate questions during the general question-and-answer period. Also joining us today are Victor DiGioia and Michael Goldstein of Becker & Poliakoff, our outside Corporate Counsel. We will now proceed with the formal business of the annual meeting. Victor DiGioia will serve and act as our secretary of the meeting. The agenda items for this meeting are as follows: one, determining the presence of a quorum; two, electing 7 members nominees to the Board of Directors to serve until the next Annual Meeting of the Shareholders or until their respective successors shall have been duly elected and qualified; an advisory vote on the compensation of our named executive officers; fourth, ratifying the appointment of WithumSmith+Brown as the company's independent registered public accounting firm for the fiscal year ending September 30, 2020; fifth, transacting other such business as may be properly brought before this meeting. The first order of business is to determine the presence of a quorum. Pursuant to the action of the Board of Directors, only holders of record of the common stock of the company at the close of business on January 22, 2020, are entitled to vote at this meeting.

Mr. Chairman, I wish to report that I have examined the list of shareholders of common stock entitled to vote at this meeting and have determined that the number of shares of common stock outstanding at the record date, January 22, 2020, and entitled to vote is 12,297,610 shares. I am advised by the inspector of election that the number of shares of common stock represented at this meeting in person or by proxy is not less than 6,148,806 shares, and a quorum is therefore constituted. Accordingly, the meeting is legally convened.

Thank you. On the basis of the report of the secretary, a quorum is in attendance. Michael Goldstein of Becker & Poliakoff has been appointed as Inspector of Election and has sworn to the oath of Inspector of Election. The next order of business is the election of the directors of the company. The Board has nominated 7 individuals to serve as directors of the company for a term of 1 year or until their respective successors shall have been duly elected and qualified. I will now entertain nominations for the 7 directors of the company in accordance with the company's bylaws. Are there any nominations to the Office of Director of the company in accordance with the bylaws of the company?

I nominate the following persons to hold office as directors of the company: James P. Allen, Martin, J. Delaney, Elder Granger, Frances M. Murphy, Zachary C Parker, Frederick Wasserman and Austin Yerks.

And I second the nominations.

No other nominations having been received, in accordance with the company's bylaws, it is ordered that the nominations be closed. The next order of business is the nonbinding advisory vote to approve the compensation of the company's named executive officers as described in our proxy statement for this annual meeting, more commonly known as say-on-pay. As discussed in our proxy statement, we believe our executive compensation programs and policies provide fair, reasonable and competitive levels of compensation to our executive officers and the Board of Directors, and they recommend a vote in favor of this proposal. The secretary will now present a resolution approving the adoption of the proposal by shareholders.

Resolved that the company's compensation of its named executive officers is hereby approved, and it is further resolved that the officers of the company are hereby authorized and directed to take any and all action as such officers of the company saw it being reasonable and necessary in their discretion in order to implement this resolution.

Will someone move for adoption of the resolutions?

I so move.

And I second the nomination -- the motion.

The next order of business is the proposal to ratify the appointment of WithumSmith+Brown as the company's independent registered public accounting firm for the fiscal year ending September 30, 2020. The secretary will now present a resolution approving the adoption of the proposal by the shareholders.

Resolved that the company's appointment of WithumSmith+Brown, PC as its independent registered public accounting firm for the fiscal year ending September 30, 2020, is hereby ratified and approved in all respects.

Will someone move for the adoption of the resolutions?

I so move.

And I second the motion.

We will now open the polls for voting on these proposals. Will all the shareholders who wish to vote in person and who have not voted please raise their hands so that the inspector of elections may obtain their identification and distribute ballots. [Voting]

We will now entertain questions relating to the election of directors and other proposals discussed in our proxy statement for this annual meeting, which are the sole matters before the shareholders at this annual meeting. Questions not relevant to these proposals but relating generally to the business of the company will not be entertained at this time. Please hold such inquiries for the question-and-answer period that will follow our presentation.

Mr. Chairman, I am in possession and present the alphabetical list of shareholders of the company at the close of business on the record date who are entitled to vote at this meeting.

The list of shareholders is open for inspection by any shareholder present and will remain open for inspection during this meeting. Each shareholder of record entitled to vote at this meeting was provided with the notice of this meeting and has received a copy of the notice of Internet available -- availability of proxy materials, which was distributed to shareholders, commencing on January 28, 2020, as evidenced by an affidavit of mailing by an authorized agent of Continental Stock Transfer & Trust Company, the transfer agent for the company's common stock. Unless there is a motion from the floor to the contrary, I suggest that a reading of the notice be waived. Very good. Are there any shareholders who desire to vote and who have not done so? Hearing no response, I declare the polls closed at 10:12. The votes will now be tabulated.

Okay. So the report of the inspection of -- inspector of elections for the -- first, for the 8 directors nominated by the Board of Directors to serve until the 2020 Annual Meeting. The following individuals have been elected to the Board of Directors: James P. Allen, Martin J. Delaney, Dr. Elder Granger, Dr. Frances M. Murphy, Zachary C. Parker, Frederick G. Wasserman, Austin J. Yerks III. On the advisory vote for the approval of the compensation to our named executive officers, the amount of votes: for, 7,082,357; against, 1,721,734; with 11,119 abstaining. On the vote for the ratification of the independent registered public accounting firm: 11,133,154, for; 7,703, against; and 4,987, abstaining.

I'm ready. As indicated by the report of the inspector, all of the matters voted on by the shareholders have been approved. We will formally report the results of the meeting on Form 8-K within 4 business days. The secretary will file the report of the inspector of elections as part of the records of this meeting. For the purpose of reference, the secretary is directed to file the following additional papers with the records of the company: one, a list of the shareholders of common stock entitled to vote at this meeting; two, notice of Internet availability of proxy materials and the proxy statement; three, affidavit of mailing; four, ballots and proxies presented to this meeting; five, Inspector's Oath; and six, the report of the inspector of election. There appears to be no other business to come before this meeting. We will adjourn the meeting and have a presentation by the company's management followed by a brief question-and-answer period. A motion to adjourn is in order.

I move the meeting to be adjourned.

I second.

Moved and seconded that the meeting be adjourned. All in favor, say aye. [Voting]

All opposed, say nay. [Voting]

I declare DLH's 2020 Annual Meeting of the Shareholders adjourned. I will now report on the business of the company, which will be followed by a question-and-answer period. I'll be joined by my Chief Financial Officer, Kathryn JohnBull. Okay. Can everyone -- can all of you see the screen there?

Not really.

A little configuration [ glitch ].

Let's really do it right.

There you go.

There you go.

Got it. I think that's a violation of the social distancing.

Between the shareholders and the directors.

Yes. We're less risk. All right. We did put together a few slides to really stimulate a conversation discussion and also make available to the folks not in attendance today. So we'll cover a brief overview of the business and some financial highlights and, of course, be open to questions and answers. We're moving to Slide 8. This was intended. This one that we use for other meetings. As you may know, Kathryn and I participate in some investor conferences and other activities. And frequently, they want to understand the legacy of the company. This kind of gives that overview. As many of you know, last year was our 50th year as a company. We've morphed a great deal, and we generally tell the story that we -- we're really a relative new start company in that -- in 2009 and fully executed by 2010. The company made a substantial divestiture of its commercial business that had been in practice for quite some time and then we like to retain a small portion of the business, it was at or around $40 million at the time that happened to be all government contracting. And today, they're still -- and it's in our book of business. And it's that which we commonly refer to as the CMOP business, the mail order pharmacy work for the VA. And that business operating unit has continued to grow throughout our heritage. Few key milestones. Of course, there was a relative turnaround objective for us as a company. So it was very important for me to work with our Board of Directors to develop a strategic plan and to look at all aspects of the business to determine where we could take it. In addition to a strategic plan, as I brought Kathryn on board in 2012, we laid out a plan to move from what was a period of survival and instability and trying to get to breakeven to now. Let's convince many of you all that the book of business we had at the time could become profitable. So with Kathryn as my copilot, we implemented a number of measures that we referred to as our lean projects to drive out a number of what we consider nonessential aspects of the business and to focus both on stability and organic growth at that time. Pleased to say that we accomplished the majority of those fundamental objectives, including having turned the corner and become positive, which we celebrated quite a bit, for even those table stakes, something that we saw as an early challenge that we wanted to deliver on and we're able to do so. As we improved our financials, our balance sheet and our glide path, we continued to grow relatively fast organically through that 2013 and '14 period. And we got the concurrence of our Board of Directors to at least open the aperture to an acquisition. This is very important for a few reasons. As you know, Kathryn and I, as I indicated, by taking over a business in the $40 million to $50 million range, we've kind of set our sights really -- the reason we're here is to do demonstrative change and growth to that business. And as many of you know, in the GovCon space, the government contracting business, most -- many of our peers and, of course, most of our benchmark companies, were really thriving and accelerating their growth through acquisition. And so we felt, to some extent, we needed to de-handicap DLH and to make sure that we can augment that growth with the acquisition piece. And our Board of Directors is very supportive. This, of course, was coming right after a sequestration period where there's real difficulty with the government to commit budgets for new programs. A lot of our companies -- a lot of our peer companies were able to, in many cases, hold their own, but even the guidance folks, folks with guidance were -- in our space were generally 1% to 1.5% or just hold on. So with that, our first time up at bat. We gave it a shot for what we thought was a real good strategic fit for us, and that was the Danya acquisition. It was the first that we moved through our process, which starts, of course, with a review of our executive leadership team, determining its fitness for our long-range strategic plan. And then we -- as we decided to move to an IOI or an indication of interest, we take it to the Board of Directors. Kathryn then retained really what we consider a real, real strong due diligence team of experts that we have known from our experience in the industry. And we're happy to say had a good successful acquisition, which really expanded our health and human services focus area, brought on -- but just as importantly, built a strong capability within the company to address major information technology and technology-enabled solutions for us. And so we're really excited and, to this day, feel real strong about that acquisition. The headline program on that one, among probably 6 customer sets, is the Office of Head Start, of which we are entering that -- we compete phase this calendar year. And then, of course, with that acquisition, we really felt that we wanted to build our federal IT -- health IT-related capabilities. And in very short order, in less than 12 months after the acquisition, we were awarded the Federal Health IT Innovation Award (sic) [ FedHealthIT Innovation Award ], largely for the system migration that we built for the Health and Human Services Agency, largely through our Head Start program but also developing agile processes and delivering on agile development processes and cloud migration to some of the other clients concurrently. So real good vote of confidence, not only with the acquisition but our ability to change their trajectory in that technology enablement in this space. And so we continue to really look at credentials. We think that organic growth for us, it is -- for us, it's going to be important to have differentiating qualifications and in some cases, ensure that we at least have the qualifications that are required to play. ISO 9001 contributes to that. Our Joint Commission certification in the health care arena was key. But also very timely for us in 2018, under Helene Fisher's leadership, we were able to establish a CMMI Level 3 capability. That has opened doors to us in our new business pipeline. We'll talk a little bit about it later. But this gives you a really good sense of how strategically we wanted to build certain capabilities into our book of business to help us organically in our growth footprint going forward. And then most recently, you may have seen our recent press release with regard to FedRAMP market-ready status, and we'll talk a little bit more about that as well. Any questions, comments on evolution?

You didn't mention S3.

Oh, yes. Yes, I could on that. Yes. And you'll notice also in 2019 is our second acquisition of Social & Scientific Systems. We refer to them as S3. And that, of course, was one in which we felt like it was important for us to get the balance around our 3 market focus areas that we have been talking about since 2015 as we came out of that strategic plan. Those, of course, were DoD and the VA business we have. The second one being the human solutions and services kind of marketplace. And the third being public health and life sciences, right? And while we had some legacy business with some of those agencies and our heritage company under Kevin Wilson, we also had built some small qualifications in the Public Health and Life Sciences through Helene's business with the Center for Disease Control. It was constantly less than 10% of our book of business, and concentration would continue to be an issue for us. So this acquisition did really a major part of rounding out that strategic plan of balancing our portfolio in those 3 arenas. And we've been really excited about some of the key credentials that came with that. Front and center for us was also in this FedRAMP certification capability. We knew that they were in the middle stages of achieving that. It was going to take some continued investment. But that's going to -- and our belief -- and it is our belief that, that was going to be a major differentiator for us as we open our aperture in our new business pipeline. Thank you, Rick. Kathryn?

Right. So as Zach mentioned earlier, the acquisition strategy has really helped -- help position us to build a significant presence in our 3 key market areas. Those are market areas we defined in the roughly 2014, '15 time frame as we were stabilizing the company and really position [indiscernible] for growth. These are broad markets that have strong support across -- bipartisan support across the government and tend to be relatively insulated from impacts and changes in the federal government budgets. So these are the 3 market areas that we positioned for in '15, and they remain the 3 areas of focus for us now. And as Zach mentioned, each of our acquisitions has plugged in and allowed us to build a credible footprint in those 3 markets. And now we will be augmenting and continuing to build our positions within those 3 focus areas.

Yes. I might add that in the health research side and the disease prevention part of the business, those, of course, are very focused around the public health and life sciences community, things such as the -- of course, the headlines for the day around the coronavirus. Our capabilities and our credentials in that arena are really strong, also as a result of those 2 acquisitions. Today, as you watch things on the news, you'll find Dr. Fauci as kind of the face of the government for this. He is out of the NIH's -- in what we call NIAID organization, that's National Institute for Allergies and Infectious Diseases (sic) [ National Institute of Allergy and Infectious Diseases ]. That's where most of the research is being done. That's where the oversight around clinical trials or developing vaccines and so forth is done. And that is a fair portion of our business. That is a customer of ours that came through the acquisition. We've got multiple contracts with that organization. Are in the process of looking at what potential impact they may have on our current book of business. Ideally, we like to leverage our current contracts as opposed to having to compete, and we're working some initiatives there as well as disease prevention. And that's -- generally, the center of universe there is the Center for Disease Control. And that is, of course, a current customer of ours, one in which we're expanding our new business activities with the acquisition -- with the award -- relatively recent award of our new contract for their Center for Preparedness and Response. I can tell you that they're very active right now in that arena. We have a proposal in that we hope to hear in the next few days, a quick turnaround for supporting their health communications around the disease. So really excited about the credentials that we have built with the most recent expansion of our portfolio. This is a slide, again, gives a graphic depiction of how we've now really accomplished some of the diversification that we thought was very important for us to build over the course of the last few years and start to reduce that concentration challenge with our customer sets. We have done so strategically and that we're keeping focused around certain types of key customers where our adjacencies -- what used to be adjacencies are now core for us, and we're going to continue to keep that focus around those target agencies. On occasion, we'll look outside of our 4 to 5 strategically targeted agencies where we have some good flows. Our business development folks see some low-hanging fruit, but these are still going to continue to be our core focus areas, et cetera. We have communicated in both our 10-K and we'll continue to communicate to TheStreet our core competencies. We think it's important that we leverage those. These do drive some of our strategic decisions on new business development. And Kathryn and I are actively on bimonthly basis with our business development teams. And these, of course, represent the totality of the company. I can also say that we operate with 3 operating units, and each of those 3 operating units have a relative share and ownership of these core competencies. 2 or 3 of our operating units across probably 5 or 6 of these companies -- and that's important for us as we look at our go-to-market strategies. And these, of course, are consistent what you're seeing a little bit historically from us and then the kind of capabilities that we've described that came with our most recent acquisition. Any questions on Slide 11? Okay. And as we approach our market and our new business pipeline, we do so with a continued focus around the strategic value proposition, right? There will be occasions, again, where there's some low-hanging fruit and some short turnaround bids that may be a little more sensitive to a unique relationships and/or pricing strategies. But we generally will try to focus on jobs where the customer is looking to add value, where there's a degree of complexity required to get the job done. And that complexity ties to some of the things that we have been investing in so that we can continue to differentiate when those proposals are due. And we've been building around this wheel that you've seen here with data analytics and ability to have secure data analytics being fundamental to each aspect of our operations. With the implementation now of our secure data analytics capability as certified by the FedRAMP community, we've recently taken that to make sure that we've structured it in a way that it services the entire enterprise that changes our cost profile in a number of ways for each of those 3 market areas as well as our 3 operating units. But we'll continue to be fundamentally focused around areas where we're leveraging information, leveraging data to allow our customers to make more evidence-based and more -- better-rounded decisions as we go forward. And those decisions are generally aligned with things involving public health on the research side, public health side or on the delivery side where we have care and case management activity in our HLS operating unit. The right side reflects, of course, what we think are going to continue to be parts of our story as we go to these markets as both myself and our business development team and our presidents start to make FaceTime with some of the key decision-makers on these agencies. We're -- these are key themes that we'll generally leverage to differentiate. You'll be hearing more about the term and expression in Infinibyte, right? It is our trademark tool that helped us to achieve the FedRAMP certification this month -- earlier this month, and we're going to be branding it pretty actively. It is a cloud-based solution for not only the storage of -- secure storage of this data, but also has bundled in its capabilities to leverage relatively agnostic analytic tools. And we're finding that, that's a differentiator, something that also is very germane out there in the commercial space. And we've got 1 or 2 opportunities that are of commercial nature as well. You can think of these as -- the 2 big boys in this arena are AWS or -- and -- which is the Amazon Web Solutions, and Microsoft's Azure. And while there are a few others, those are generally the 2 solutions of choice. Our platform will, in many ways, compete with other organizations that are leveraging 1 of those 2 as a partner. And so this really creates opportunities for us to maybe even displace some of them as a value-added partner for some of the larger companies in our space. Slide 13. Just as a synopsis -- and again, much of what we've talked about here, the Infinibyte solution and its ability to -- its contributions for us achieving the FedRAMP certification. It is a secured data and analytics platform, not only for us as we go forward, but has been one that we've been leveraging for some current customers over the last couple of years. That also helps differentiate us from some of the other companies that are just now starting up that effort. And it's one that we're finding just real, real good traction as the government is starting to place these requirements in their solicitations. A few years ago, I want to say 2016 and '17, when the government started making edicts that if you're going to play and if you're going to be able to compete in their space, you're going to have to demonstrate strong cybersecurity principles and ability to protect the data as it needs from outside attack as well as cross-pollination across the various vendors. And we've been able to demonstrate that in a strong way, and that will now afford us the opportunity to compete in relatively differentiating way, whether it will be limited competition in those cases where the government will cite these as required requirements. And then lastly, here on the -- on that component, we've really continued to shape our business development pipeline. We're focusing here on just the new business. As you know, we do have some large recompetes up for renewal over the course of the next year. But it's important for us, as we look at the financial health of the company, that we look not only at our backlog, which is an indicator of the business base that we have until it is funded in the future years, but also with our potential for growth. We have had real good industry-leading performance on the organic growth arena for what we call small- to midsized contract awards. And generally, in our industry, if you're in and around the 30%, 35% win rates for new business, that's usually, for us, a new business, it's usually taking away business from another incumbent, you're doing pretty well. And that's been our history over the course of the last couple to few years. But we're believing now that we're just as strong on the organic front at -- now that we're a $200 million run rate company, to be able to compete on some of those larger opportunities as well. So maybe fewer opportunities but larger, and we think we've invested and structured our business development to do so. So we think we have a healthy new business pipeline. As you can see right here, some are emerging opportunities that we're very active on proposals now. You heard Kathryn, during our last call, give some color around the portion of our spend that has been in proposal development arena. And that's going to continue into Q2 to be a very high -- high #4. So we're really excited about what the potential holds in that arena. All right. And just a note here on our activities around the highlights of today. The news, of course, is appropriately hijacked by what's going on in the coronavirus arena. As you might -- as I've shared before, we are rare in that we're a company of less than 2,000 people but with a very high concentration of the type of talent, clinicians and researchers that are focused around the public health challenge. We've got several hundred folks that represent private -- principal investigators in and around infectious diseases, hundreds of pharmacists in preparation for the deployment of tools and vaccines in the near future and also a very large core of MDs and MPHs or the public health certified folks, a really, really large team to draw up on there. And so we've -- we're going to continue to brief the community as well as our Board of Directors around these 3 areas. That is what we're doing in the areas of communication, what business impact we see for us and then, of course, how we're going to mitigate those risks. Few key highlights there is we do have internally a number of initiatives in motion. They include our communications to the Board. If you'll notice, we have a very limited number of folks in attendance today. We have invoked a -- discouraging travel and attendance in large events, consistent with the guidance from our agencies du jour. For us, our agencies du jour include -- front and center are the Center for Disease Control. We also are post around State Department as -- particularly as it relates to travel regulations and then, of course, the World Health Organization. We are a highly distributed company with offices throughout the country. In many cases, more than 100 employees in a given location. And it's important that we walk the talk around all those things that are very important. We're also, effective Monday, going to be expanding a liberal telecommute program that we have in place, discouraging large number of our folks from coming to the offices. There are still something -- some fiduciary things that are required. Steve has a team that's going to have to collaborate on certain areas. We, of course, need to still be able to receive packages and ship packages. So it's not that we're shutting the doors, but we're doing our part in really reducing the risk of exposure to our workforce as we go forward. Go ahead, Rick, your question.

No, no.

Okay. And then in terms of the business impact, we're doing real deep dive looks at each of our contracts. A number of our folks work on site with some of our customers. We have to be -- we have to address what that vulnerability, what that risk could be in a number of domains. A, if they close their doors, can we still operate? Kathryn has a team taking a look at, "Okay, what -- is there any risk to our ability to ensure that we have billing? And if we go to a very liberal telecommute basis, what kind of substantiation can we provide for our customers across our enterprise to ensure that we don't have any challenges there?" And then, of course, the common sense principles, of course, that we're hearing a lot from our government agencies. We have implemented a daily call with our executive leadership team to keep our pulse around activities going on amongst our various locations. We believe that we can -- this also means we have a strong local community context as we're communicating to our teams, right? We have a large number of folks in Cheyenne, Wyoming, large number of folks in Lancaster, Texas. And our communications can't just be -- for those of us in headquarters between Atlanta and the National Capital Region but also to make sure we're providing good connectivity with the local community health officials. This is something that we've done on a regular basis for our customers. Helene Fisher has a team that's very focused around how do we provide outreach to various locations throughout the country. And so we're drawing upon our experts, in many cases, that support customers to help us. And we're standing up pulling in 2 of our health infectious disease experts to be a part of a standing call that we're going to have 3 -- that we have 3 days a week, Monday, Wednesday and Friday, to be able to address what are we doing differently, right? So we'll have folks that are staying in tune with what's happening, what's being communicated, where are the hotspots, how do those hotspots relate to where we have large [ talent -- ] of employees and what can we do to facilitate them to make sure that they're taking all the appropriate precautions. So we'll continue to keep you advised of those things as we will our Board of Directors. But please realize that this is not only something that we're doing for our customers, but we take it very seriously. And today's meeting, again, is indication of that and that majority of -- all of our Board Members that would have travel either by air or rail are not here physically but are very active with us -- with the Board of Directors meeting we're having today. That's it for the overview. Quick overview of our highlights of our financials, and Kathryn, if you'll take 17 and 18.

Sure. Happy to do that. So as we mentioned earlier, given our turnaround opportunity with DLH, FY '13 was our inflection point. It was when we turned the company from loss-making to profitable. And obviously, our trajectory since then has been very positive. But within those numbers, thinking about what we've been able to also accomplish, for most of the things you've seen in terms of building capabilities and credentials and things that allow us to further differentiate ourselves and deliver stronger EBITDA margins, those investments and those capabilities really derived from ability to find ways to redeploy costs and drive -- continually work to drive out unproductive costs, refocus those costs in ways that allow us to continue to grow our capabilities and our credibility in the marketplace, competing with other companies for growth in new business. So it's a several-pronged theme: it's growth, adding responsible growth and meaningful growth to the company; continuing to move up the margin profile in terms of improving the quality of the work and the differentiation of the work, all while improving EBITDA delivery but also funding responsible investments in things that make the company more sound and more competitive. We do -- as you've seen, we've had a couple of significant acquisitions, both of which we've accomplished solely through debt financing. So we've been able to avoid dilution of the shareholders in accomplishing those transactions where we have developed a very strong relationship with a bank group, syndication of banks that understands the business and is highly supportive of the company's growth objectives and understanding that a lot of times to accomplish meaningful growth and you really get access to new customers that you need to tuck in an appropriate acquisition that really positions you well for that. So we did close the transaction on June 7. That's the actionable date for us and closed it with a borrowing of $70 million, of which we paid down now to $53 million as of the end of January. So we're well ahead of the payment schedule on that debt. That's a 5-year term debt, and it's fairly light amortization on the front end of it, but we're well ahead of that. We're paid now up through the required payment schedule through FY '22. So we don't use debt other than for purposes of a special transaction. And so in that case, we are a company that generates strong cash flow because we don't have many CapEx requirements. We have some tax shields that -- one silver lining, right, to the distress of the company in the early 2000s is that we did generate some pretty hefty tax operating losses. We're obviously able to use those to shield current period income, and we've structured both of our acquisition transactions in a way that created tax deductible purchase price. So from a tax-paying perspective, we expect to have a shield through at least FY '22. So we're well able to generate operating cash flow and -- other than making our debt service payments. That's our primary need for it. So that's really supported our being able to extinguish debt very quickly. So we get the question a lot because of -- we've disclosed, as Zach said before, about recompete risk. And this is not really intended to represent any particular one of those recompete risk but really to have you to understand that as a services business, most of our costs are very variable. And so as the business scales up and down, the 2 drivers to really how that impacts the P&L and how you should think about that is the margin of the business that's exiting and the ability to scale the infrastructure, the corporate costs that are supporting the business as the business scales up and down. So the middle scenario is kind of where we are now roughly. That's our operating run rate. If you had a scenario where you divested business and had to scale the business down, you should expect that it's going to be -- the outcome of that is going to be a function of the margin of the business leaving in the event of an unfavorable outcome on recompeting work and a function of how quickly you scale corporate costs. So we're built to respond to changes in the business. And you can see, as you look at our history, where we've been when we've had different levels of revenue. And conversely, on the other hand, if we're able to continue to grow the base of business, we expect our investment and our focus is in work that is going to continue to improve the gross margin of the business, and we think we have further operating leverage to achieve by growing the business. So we've got the infrastructure to support a business of roughly $300 million to $400 million. And we'll, of course, add incremental costs to support that but not at a rate that's consistent with the current rate. We'll be able to achieve some operating leverage from those indirect costs. So those are the 2 main drivers, the gross margin of the work exiting or adding and the leverage achieved on the corporate structure that supports that business.

And just to round out, again, in our space in the GovCon arena, there are several factors that we have to look at as we make determinations on the go-forward and our strategic plan. Here, there's really 4 key levers, and Kathryn kind of touched on most of those. It's -- a big part of it is where we're focusing. There are some agencies within the federal government that are very cost-sensitive.

Right.

There are those that are what we call a low price technically acceptable competitions. We generally avoid those. Whether that's not consistent with our strategic plan. There are also agencies that generally do not offer very much in the way of margins due to the nature of the work allowed. The humanitarian work is a good example of that, some of the things under USAID international footprint. And so we're constantly looking at the type of revenue stream that we're going to develop, not just there. We do that also in our acquisition side. It's a key factor as we filter through books that we continue to receive. There are a lot of properties out there that would be useful only for scale. And that's not consistent with our strategy. We have nothing that we're trying to fill until we're able to stay very focused strategically and also make sure that we're obtaining the right type of skill sets and talent because we're still -- we're still largely in the labor- and employee-focused kind of business. Cash flow, of course, is not only king but an integral part of our focus as we look at both organic and acquisitive growth. We are consistently -- constantly looking at, on a quarterly basis, not only the performance and execution of all of our contracts and our operating units, but how are we doing with maximizing our ability to throw down -- throw that to the bottom line. We do have what we picked up in our last deal, a large portion of our contract base is what we call cost reimbursable, cost plus fixed-fee-type contracts. Those generally top out at or around 8% fixed fee in our space. There's a few cases where you can go north of that and others where there's -- the way in which you manage it, you can erode that quite well. So we're constantly looking at, on a quarterly basis as a minimum, how are we doing, what levers can we take and work with our program -- project managers. And each of our president of our operating says that is a key objective. And as Kathryn indicated also, our ability to continue to move up the food chain will help us to drive that margin expansion. It certainly is something we factor in when we look at pursuits of some of our legacy business as well and just as importantly, as we fill that new business pipeline we talked about earlier to make sure it is consistent with our strategy. It's not necessarily just focused on the impact. It's clearly not just focused on a number that we think is the margin but the type of business and the type of customers where we -- where our research has indicated will continue to drive us there strategically. So as long as we know there's a strong addressable market still there over the course of the next 18 to 36 months, it will usually went out in our decisions to add it to our pipeline. And then, as Kathryn has shown you also, we're going to continue to focus on that balance sheet and deploy it in ways, as she indicated, which is generally reduce our structural costs, ensure we have scalability and leverage it where appropriate for an acquisition. All right. Well, that concludes the presentation part of our session. We do have about 10 minutes still available for any questions and answers. We'll start with those here in attendance, and I'll turn it over to our Chairman.

So welcome. A couple of people came in while we were talking, we'll come over afterwards and introduce ourselves and the like, look forward to meeting you. But does anyone present have any questions for the Board or the management team?

Two. One is, can I have a look at that shareholder list, please? And the second is, if you've mentioned some great things to add value to the company. So [ Benjamin Graham's ] been dead for 30 years. Yes. There's really only 2 ways you guys can share that value with us. And one is through stock price appreciation and another is through some dividend of some kind. And stock price appreciation is just not there. And Zach, you told me 8 years ago at one of these meetings, we were kind of working towards the dividend. Are we any closer?

I'd say, right now, it is still not a very active part of something we see in the near term. We do address it at some of our periodic Board meetings. I don't want to steal any communications there from Board. But we think that we're at a really critical juncture right now where investing back into certain objectives are very, very, very critical for us. But again, I don't want steal any thunder from our Board on that. A key compliment on that, in our opinion, and certainly in my opinion, is that, as you know, we believe that we're still undervalued for a variety of reasons. We're heavily focused on what we think we can do to turn that around. We think there's still some opportunity to get us where we should be in the relatively near term. That's been a real key compliment of our priority, not to say that sharing with our shareholders dividend would necessarily stunt that, but that is a critical focus. Rick?

I'm -- the only thing really to add to that is we are aware of exactly the two-pronged approach that you're talking about. We believe right now that bringing our debt down is the appropriate focus at this moment. I will focus you on the fact that our debt repayment is in excess of $1 a share annually. So on one hand, we expect -- there is an expectation that at some point the market will recognize that. And we're also growing, but we are also focused on the fact that, to date right now, we're having trouble getting the stock price to -- with the overhang related to the recompetes, which we believe is overstated. We understand it's an issue, and we're monitoring the situation as we go. And we're not unaware of what you're saying. But again, at this point, our debt -- we've done a great job of bringing the debt down, and we continue to focus on that, while not monitoring what you're -- the question you're raising.

An interesting comment on your part. I know what you feel, okay? I know I have recently...

Well, not everybody does that.

I have recently gone to companies -- I never liked dividends, and I've recently gone to a company and asked them to put in a dividend, but they didn't have the characteristics of this company. They didn't have the magnitude of debt, and they weren't paying down the debt, and they didn't have the opportunities to grow. I'm just interested in [indiscernible]

If you're looking for that...

It's just more philosophical. Right? You've heard that statement. The market can stay illogical longer than you can stay solvent. Have you heard of that? But in order to put a dividend in, first of all, this might be signaling it, feeling you can grow. The dividend -- this was an interesting -- we maybe -- pick it up later on.

Right. Right. I mean there's -- it's difficult to have that complete conversation. There's a format where there's people on the phone.

[indiscernible] I never thought I would have and said, "I want you to put a dividend in but it wouldn't be DLH," I can tell you that.

And just for the folks on the phone, I just want to make sure we restated the question, really had to do that we have continued to look over the years at a potential of a dividend and what's our current thinking in that process. So probably we're delaying on that, but let's be sure we restate the call -- the question for everyone on the phone.

That's true. And then the other thing I would say because you used a word that is a little scary and not applicable. But you -- your comment that the -- there is an expression that the market can stay illogical longer than you can stay solvent, please -- it's important for everyone to focus on the fact that we've delevered at a tremendously quick rate. We're well ahead of our situation. And of the demands of our situation are -- if there was any thought that our -- after the acquisition that our leverage ratio was higher than we wanted it to be, those are clearly have been dismissed because our leverage ratio at the current point is quite acceptable in that. So just wanted to stay away from the word that is -- you know a bad word that is.

And we'll continue to do that.

Yes. No, but a good question. I appreciate that. Do you have a second question?

Other questions?

The share list.

Oh, the share list. Okay. Let's take that...

I have a quick question. The slide of the 3 scenarios, which had some very interesting projections in there.

We're not projecting.

We want to emphasize that these are 3 scenarios. They relate to no specific year, and they're not a projection.

How long is that slide been available?

About 48 hours.

Well, there was a similar slide last year. Yes. There was a similar slide last year.

I think it was very significant.

And there's one that we published in 2016, similar -- or '17.

Right. Right.

I would assume the $100 million is mostly CMOP.

It could be anything. It could be anything.

We were very intentionally around not making it a CMOP, a Head Start, a particular opportunity or 2, but -- and of course, it can be a divestiture of sorts as well. But yes, we were very intentional on making sure it's not just a CMOP number.

So in S3, you're down but there could be components of that business...

Yes.

That you wouldn't been for, right? I'd assume there's some customers you have to take lower-margin business in order to get in the higher margin. But apart from CMOP, if you could separate some business. And the $12 million involves fully -- a public -- as a public company.

Yes, a good point. So this has a few baseline assumptions. A, is that we do remain a publicly traded company. No change in that. That we look at scaling our corporate allocations to each of our businesses, et cetera, and that we will effectively look at the scaling. There's also a factor, in particular on the downside when -- there's a toggle, when you want to look at the 2 inner circles, right, as do I make a decision that we go into a caretaker status for some point in our business, et cetera, or I'm not going to lean forward on saying, "Okay, let's share that particular piece of the business and continue on the strategic plan around that growth, et cetera." So that toggle, that $12 million was a number that probably could range from high $10 million to $14 million as a function of decisions I may make, right, in that regard.

Exactly right.

Please don't treat it as a point estimate, is to give really a modeling that we do on a periodic basis as we come to our Board with our long-range forecast that factor in those risks. So...

The last question on the $20 million, on the baseline. The progression of debt paydown that we've achieved, we could -- using the baseline, which is where we are today, there's no reason to believe that the cadence of that paydown would change if the baseline remained in place.

That's right. That's right.

And that is our plan. It says there...

Right. Right. There are limited need for CapEx, and there's almost no tax payments required. So that is -- that's operating cash flow except for interest.

And just to add to that, in terms of our balance sheet, we have receivables, but we have no inventory and the likes. So our working capital needs are controllable. And as Kathryn said, there's no CapEx and few -- some but minimal tax payments.

Yes. And we -- our free cash flow is very critical and important component for us. As we look at how to leverage our FedRAMP, secured data analytics environment, that's probably where we would find our most capital-intensive arena if we make certain decisions. And we've been able to invest north of $2 million over the last couple of years in building that capability, staying up with the Amazons, the AWSs and the Azures depending upon what our go-to-market strategy is. It's going to continue to involve different types of software tools and hardware tools, much of which we will capitalize on things of that nature. But we'll stay tuned as to what 2021 is going to look like, and we'll come to our Board with some questions in that regard to the downstream.

Sir?

[ Jim ] [indiscernible]

Nice to meet you, [ Jim ].

[indiscernible].

Glad you can make it.

New shareholder. So my 2 questions. One was, I thought your differentiation and advantage slides were phenomenal. I guess could you zone in on what is the differentiation slide -- or sorry, the main differentiation for CMOP, in particular, where you guys first see yourself as a competition? And then my second question was back on the number slide, the numbers with different scenarios. So I -- our models are similarly on the downside. Baseline, though, I mean, presumably, can I ask you to zone in again on CMOP. The way I understand the contracts, one prefers that you use small business partner, one requires it. And so I would have thought the top line will naturally come down unless there's some other growth coming elsewhere, which you might explain, because it's just going to be a misunderstanding, but of course, they come down just by the nature of the RFP. And so you if you could comment on that. And also, what's the time line on this at this point, in the next year or 3 years?

Yes.

Just in case people on the broadcast couldn't hear, it was a long question, and I'm not going to repeat the whole thing. It's actually a couple of questions. But in general, it deals with the background to and the context of the CMOP renewal and also the adaptability of our business to changes in the CMOP contract. And the first part of the question related to points of differentiation for our company compared to others. And I'll now bounce it back to Zach and Kathryn to answer the questions, but just so in case people couldn't hear what that was about.

Sure. I'll take the first 2 and Kathryn address the third. First one being a differentiation on CMOP, what do we see as our differentiation there. And obviously, this is a public forum with -- if you didn't know, this is being recorded and will be transcribed, I should say, and will be available to others. So we are in a competition-sensitive phase, as you well know, so we're also very restricted on what we say. But I can certainly tell you what we've shared with most of the folks. We have worked real hard to help invest in the business in ways of converting it historically from what was a [ butt-in-seats ] temporary staffing kind of contract model to a solution and analytics-based quality and productivity-focused engine, right? And in doing so, that brought in a number of things that we have introduced voluntarily to the customer set has helped them to translate from the time we became 100% provider of that work, having gone from about 40% when we competed in early stages to now 100% of all 9 locations providing the service was largely to help them through that transition. And they have since then had 8 consecutive J.D. Power Award wins against the rest of the community, commercial community and other federal agencies. So we think that, that has certainly earned some value for us in our last round of recompetes in '16 and '17. We didn't have to buy it, right? We didn't substantially lower our price and nor did we really felt like we can differentiate ourselves with some value. This last round of the solicitation also still had elements where it valued those things that we consider differentiating in many cases for us. So that gives us a high degree of confidence that where we to compete in either unrestricted or in a set aside arena that us or our teammates would have a high degree of confidence of winning. So we will continue to leverage or fill some of those factors that we've done. Obviously, I'm being a little bit cryptic as far as what those are because they are in the evaluation criteria. The other part of -- in terms of the status of that contract relative to the set aside arena, we've been real clear and intentional to disclose as much as we can in our filings with regard to that recompete and recompete risk. It clearly has materiality and north of 10% of our book of business. And the headlines are 2016 is when Kingdomware decision came out. That was for the VA, the legal community directing the VA go back to setting aside all contracts first for service disabled veteran-owned small businesses. November of '16 happened to be when our pharmacy contract expired, happened to be one of the few that was caught up right in that window. As you may recall, also, that's the time where Secretary of the VA position also transitioned. So most of those that were advocates, staunch advocates of "let's protect this program and exempt it" were not available as this thing was going through its acquisition shop. So we think that played heavily into this one not making it out. We have been given and the market has been given indications from the VA that it would not be set aside in. They had done their diligence and made the decision to keep it there. So for a variety of reasons that folks are left to speculate with the new GC there or council there, adhere to the Kingdomware decision and no one was able to overcome it. But as you know -- as you may all well know, with our contract ending in November of '16, we've been on sole source extensions since then. They've had proposals from us and others for well over a year, a couple of years and the first one and made no decisions. We do know that they're, as you might imagine, reconsidering the acquisition strategy, okay? We would be hopeful that the right heads would prevail on The Hill now, saying, "Look, this is a shiny star program, particularly given the sensitivity of us being able to deliver meds and vaccines and so forth to our veteran population throughout the U.S., especially at a time, even like now and what's facing us, let's revisit that strategy, right?" So that, we believe and hope to be still in play and that -- not giving it a probability, but we think there's discussions at appropriate levels and on both sides of the aisle to saying, "Is this one that we want to make that change?" And you're right, there will be a haircut for us on the top line should a go forward with the acquisition strategy that started in '16 and '17. And we can model those as well. And we, Kathryn and I and our team, did factor some of those as we looked at them. But baseline, I can tell you right now, our current contracts are really strong through FY '20 -- through the rest of this fiscal. Even if they were to make a decision, a negative decision in the next week, given that we're already into March, there's generally a 3-month phase-in and phase-out period, okay? Arguably, there can be a protest, it could delay it from 45 days to several months, if not longer. And so there's -- every indication is including our extensions and bridges that will allow them to take out through October and November of this year. This is the baseline. It's pretty protected. And we feel highly confident in that.

And just to emphasize, we're a September year-end. So when we say, again, our fiscal word.

And the last part of your question with regard to...

I think it's just timing and if you get that.

And the timing and what do we have in there, Kathryn?

Well, there is no timing in here. This is -- at any point in time, the -- really, the message here is the upside, downside is a function of margin of the business and leverage of corporate costs.

I don't know if Nelson put you up to try and to second bite at that timing and that.

I don't know what he [indiscernible]

Any other -- sir?

[indiscernible] I have a question about the 3 scenarios, like how does that play into plan to pay down debt and also like how does that play into, as the other gentleman mentioned about your capital allocation decision, when that gives you more room to decide whether dividends, whether acquisitions, whether something else has to go forward with that.

Right. So our practice with respect to paying down debt is really independent of any downside on the business or any decisions on same operating like that. We're always -- we manage the company conservatively, and really don't have a practice of maintaining debt other than for a special event like an acquisition. And then once an acquisition is done, we're sort of on fire to get it paid off as quickly as possible. So we paid off -- on the Danya acquisition, we paid off 5-year debt in 2.5 years. I always like to beat my last record, right? So we're certainly on a pace to pay off this debt quickly as well, so independent of what's going on.

But will it be fair to say that the downside scenario that becomes tougher to keep the same pace of debt paydown as you are right now?

Well, certainly, if you have contraction in the business, yes, you generate less operating cash flow. But I think part of the thought process on that is that we're 2 years ahead on our repayment schedule. So hence, the reason why you never really leave for tomorrow what you could do today. And today, we have cash available, we can pay down debt, we should do that. In any event, right to mitigate interest expense in any case. But it provides, to your point, provides extra mitigation for the risk in the event that...

We take that risk out of that equation, right, for our bankers, right? And of course, they love us and hate us for that reason.

Right.

So we're darlings of 1/2 of their camp, but, "hey, can slow your roll a little bit on keeping some of that debt with them." But they're strategic partners with us. We met with them at the consortium, January?

End of January.

Yes, end of January and keep them up to date on this kind of profiles as well to your point, is it very important for them because their first question, that we'll see, in their mind, is yours there that, hey, look, that headline risk, what can that do in terms of...

I mean they obviously diligence that extensively.

Yes.

Is it still about like when or how the dynamic changes where instead of the focus being just paydown debt, which is maybe over some other opportunity since?

Yes. So thank you. The question was with regard to our paying down debt, what -- in what other ways do we look at impacting the business and leveraging our capital, I think, is that -- did I say that correctly?

Right. And so we will always be a growth-oriented company. We believe that though we -- as you saw on our trend chart since FY '13, we've been up into the right. But while we're proud of that, what we've accomplished so far, I think we still believe there's quite a bit of upward room there, right? So no one likes a setback or step back. But all businesses have to go through them from time to time. And nonetheless, we think that we have quite a bit of upward trajectory. We've done things to position ourselves and building credentials and capabilities. So whether we're using our capital, allocating it to support pursuit of organic growth in major contract pursuits or investing in those capabilities and tools that allow us to be a credible competitor for that work or whether we're doing another acquisition. Things are not mutually exclusive. We view both of those as viable path to growth, and that's our passport in the event that we wrap up serving our debt, that those are the places we see capital going.

And the only other thing I could say that which would be a summary top side is that we're an engaged Board and an engaged management team, and we undergo these discussions on a recurring and perpetual basis. So whereas, I can't -- we cannot and will not point to a date and say, "Well, when the debt gets to this level or the like, this is the next step," we can assure you that as both a Board team and as a management team, we're thinking about those issues as they develop and on into the future, and we'll react accordingly. I'd like to think that we'll have more opportunities, then we'll have the ability to fund them all. And accordingly, perhaps dividends and the like would become a back -- an idea in the back of our heads. But if that situation weren't to develop, we'll believe we'll see it coming ahead of time and react accordingly. And that's our commitment to the shareholders is that we refused to become entrenched, and we refused to perpetuate today, simply because it's today. So that's our commitment to you. Any other questions from the people here?

We also open the floor for questions for WithumSmith+Brown, if there's any questions?

Do we? Or should we ask them -- and can we ask the moderator, if there's questions from the...

From the floor.

From the audience on the conference.

We do have a question. It comes from Joe Gomes of NOBLE Capital.

Thanks for the overview and taking the questions. It's very informative. I just wanted to circle back a little bit on the coronavirus, and you talked a little bit on the -- basically the S3 side, and you're working on a proposal with the CDC. I was wondering if you could might give us a little more color as how it could possibly be -- hopefully, positively impacting the S3 side of the business and then also the impact on the rest of the business. I know I've had a couple of other companies report here recently, and they've all basically stated is that their clients that have become so focused, laser-focused on the impact of coronavirus on their own businesses that it's been soft Q get them to focus on some of their -- the other outside companies that are providing services to them. I'm wondering if you guys are seeing any of that at all. And I know most of it -- you're basically government, but those people also tend to become very laser-focused in times like this, if that is having an impact at all on some of the other parts of the business.

Yes. Thank you, Joe. Very good question. It's not uncommon. In fact, a very common question. I had an opportunity to spend a fair amount of time with our peers, generally C-suite folks both in our space and in the commercial space and the government space. So I can tell you that as you indicated, probably front and center for most of those folks that are not aligned like us is, their supply chain, right? Those other partners, vendors, very critical, in many cases, crippling to their businesses. We are fortunate that we're different in that regard and relatively fortunate that 95% of our -- north of 95% of our revenue stream, we are a prime on, right? And so we're less dependent upon distractions or contraction or things of that nature from some of our peer and partner companies. That has been a strategic focus for us is to do what we can to remain in that kind of position. And so our dialogue in that context does relate more to our government revenue-providing customer. As it relates to S3, you're spot on with regard to the agency that today is very active and is looking now at prioritizing a number of activities associated with the coronavirus. That agency that is probably most front and center on that is the National Institute of Health, which is where -- which is our largest book of business in S3. If you drill down to some 18 to 20 operating divisions that they have, the organization that is front and center for them, in many cases, associated with the coronavirus is the NIAID, as I indicated earlier. And that's where if you watch many of the -- what this administration is leveraging for the face of their approach, besides the Vice President, there's none higher than Dr. Fauci. And he is, of course, of this particular agency. They've been a long-time customer of ours in our S3 business unit. We've got multiple IDIQ contracts that we are in discussions right now. Kevin Beverly and his team have built a tremendously good relationship with that community, and we're looking to see where we can leverage some potential add-ons to our current contract base in that arena. They generally are already set up for emergency response and planning. We provide contingency planning and support for them both on infectious disease and allergies as well as environmental aspects to threats from our country. And we're hopeful that we may see some expansion this year in that regard. Some of those could be what we call near sole-sourced that they use an IDIQ, where we are the sole prime. Some of those we have to compete for where there may be multiple primes limited for competition. The CDC portion of that, as we indicated, we think that both our operating units under the Danya side of the house and S3 side of the house have credentials that we're currently putting in front of this customer in the form of white papers. We do have a bid that, as I indicated, relatively small. It will be less than $6 million or $7 million, over $5 million. And it may very well -- it's one of those kind of turnkey projects that we do frequently, like these other task orders may be. They literally could be a 6-month contract and then you're out of business. But they have the ability to extend it with options, 3 months at a pop and carry beyond that. But we're all hopeful, okay, as taxpayers that we won't be seeing revenues beyond 6 months on that one, but we do have those contingencies. So we're, again, very involved and staying positive with that community. And was there another part of that, Joe? Did I answer -- I know I got the first 2. Was there a third part of that?

No, that was it.

All right. Are there additional questions on the queue?

There was another question from [ Michael Pusateri ]. He's a private investor.

I'm a new investor, and I thank you for taking my call, and I hope you guys are all staying safe.

Yes. Thank you, and welcome to our group -- to us.

Thank you. I'm kind of going to flip this the other way positively. I view you guys as a very, very attractive, accretive and synergistic company from others in the space. I think that while you've done very nicely and growing through accretive acquisitions, you have certainly developed a very healthy run rate. You have a low debt. So while the other -- I can appreciate the other gentleman's question, I don't actually think you'll even be in the game long enough to have to worry about offering dividends because I think perhaps you could be. Now again, that's my own perception and research, but I'm curious if you -- how you would respond to this question today.

Well, thank you very much, Michael, for one, your participation, and definitely for the kind words. Join the club. Kathryn and I and our management team has worked real hard to ensure that, strategically, we're aligned with that, which our Board has approved us to do as we grow. And again, we've never looked for growth for the sake of scale. And we stayed to our core growth areas, both organically and acquisitively. And they've continued to allow us to be able to get the kind of accretive results that we have. Of course, they were almost on day 1 visible under our first deal and has started to show up on our second, so we thank you very much, and we'll continue to believe that with that accretion, debt reduction is important key. I think if I understand the third part of your -- the last part of your question, it's how would we continue to deal with success and what that might look like from outside partners. There probably hasn't been more than a 24-month period where someone hasn't had some degree of seriousness that have approached Rick or I or Kathryn and certainly expressed interest. We do believe that we can't be naive to think that if we continue down this glide path relative to our peers, because our results are substantially higher than many, not better than all, but we're in very attractive client sets, right? There are a number of folks that have been really aggressively trying to get into the VA, right? And we can help them there. There are a number of folks that have been working real hard, either organically or acquisitively, to try to get into the research, public health research side of the house. These -- we have very differentiating skill sets and people in this team working in a very highly complex arenas. And that's attractive, right? They generally can generate greater margins, especially if we move -- if they are able to transition that business as we're looking at from cost reimbursable to fixed price and T&M kind of arena. So we know that we're very attractive to folks. And that there is some interest. And if I might say, if you don't mind me saying, Rick, we think that it is still that overhang that usually becomes the decision point for them. And it's overhang that you've talked about as well. It's when can we take that risk out of the equation, and we think we'll see some real fair value.

Right. And just -- and just to emphasize that, obviously, we deal with the situations that are in front of us, but the prime mover of all of our decision-making is what's best for the shareholders and what would be the best direction for them. And we believe we've been true to that all along, and we see no reason why we would ever change from that. So as situations come to us, we react to them with that in mind. I hope that answered your question, sir?

Oh, yes. Thank you so much, and I wish you very well.

Thank you.

Thank you, and thank you for joining the family there, Michael.

Absolutely. Take care.

Take care. Is there another question?

There are no other questions at this time.

Okay. So -- all right. Well, we'd like to thank everyone for attending, both those in person and those on the phone. We'll end the proceedings now, but thank you very much. And again, if there are questions come to mind later, feel free to reach out to the management team. We're always here for -- to help the shareholders. Thank you very much. .

Thank you.

Have a good day, everybody.

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