Good day ladies and gentlemen and welcome to the DLH Second Quarter Earning Conference Call. My name is Candice and I’ll be the operator for today. At this time all participants are in listen-only mode. Later we will conduct a question-and-answer session. [Operator Instructions] As a reminder this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Casey Stegman with Investor Relations. Please proceed, sir.

Thank you, Candice. And good morning everyone, thank you for joining us on today’s conference call. I’m Casey Stegman of Stonegate Capital Partners, Investor Relations Advisor to DLH Holdings Corp. On the call with me today is Zach Parker, President and Chief Executive Officer of DLH; and Kathryn Johnbull, Chief Financial Officer of DLH. Earlier this week, the company posted its earnings release, which outlines the topics that management, intends to discuss today. Should you have missed that release it can be found on the investor page of DLH’s corporate website at www.dlhcorp.com. As a part of today’s call, we have provided a slide show presentation that can be accessed on the DLH website. Go to the Investor Relations tab towards the right side of the page and click the Presentations under the drop down menu. We’re also providing a simultaneous webcast of today’s call with a replay available later today on our website. Please note that this conference call may contain forward-looking statements as defined by the Federal Securities Laws. Statements in this call regarding DLH Holding Corp’s business, which are not historical facts are forward-looking statements that involve risks and uncertainties. While these statements reflect DLH’s current views and outlook, they are subject to factors that could cause its future results to differ materially. These risks and uncertainties are discussed in detail in our documents filed with the SEC, specifically, the most recent reports on Form 10-Q and 10-K. 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. All comparisons throughout this call will be on a year-over-year basis unless stated otherwise. With that said, it’s my pleasure to turn the call over to Zach Parker, President and Chief Executive Officer of DLH. Zach?

Thank you, Casey. Good morning welcome and welcome to our shareholders and other interested parties. We appreciate your participation in this conference call and webcast. As Casey indicated, earlier this week, we posted our second quarter fiscal year 2016 financial results. As many of you may know two weeks ago, Kathryn and I reported on our acquisition of Danya International. Today’s reported financials will only represent the results of our heritage company. We are pleased to report another quarter of continued growth in revenue and operating margins over the prior year second quarter, as well as cash generation from profitable operations. We’ve improved our gross margins by 18.1% through a combination of effective management controls of our programs, technology enablers, process improvements and specified cost controls. Kathryn will expand upon our financial results later in the call. While we continue to focus on executing our core business and growing the company organically, we’ve moved forward with a strategic plan to accelerate growth through the acquisition of Danya International, which we completed earlier in May. We are very excited about this transaction and believe that Danya represents the perfect complement to DLH’s culture, services and solutions. We believe this combination significantly enhances our abilities, capabilities and enables us to achieve multiple objective of our strategic growth plan, which we have been describing over the recent years. Moreover we expect to leverage our combined experience in mission critical Federal programs to focus on expanding within the Federal health IT market. Danya capabilities include, managing, monitoring and supporting large scale health human services and technology programs across the continuum of care and case management. We’re particularly pleased to have brought on board a strong federal IT system integration, migration and management capabilities. Danya’s monitoring and evaluation services to the Department of Health and…

Thank you, Zach and good morning, everyone. Just a reminder that the results we’re reporting today are pre acquisition, as the Danya transaction closed on May 3rd. We’re pleased with our earnings and financial position, we are reporting to you today. Our second quarter results continue our trend of improving our key metrics, as we delivered growth in revenue, gross margin and adjusted EBITDA, compared to the prior year quarter. We believe that our business base is solid and performing well. Operating margins continue to improve over the prior year period, with adjusted EBITDA increasing by 19.2% over the prior year second quarter. We continue to generate strong operating cash flow, ending second quarter 2016, with a net cash position of approximately $6.9 million and working capital surplus of approximately $5.3 million. Our strong cash position contributed approximately $5 million to a financer acquisition of Danya International earlier this month, allowing us to obtain financing at competitive interest rates. Turning to the results of operation for the three months ended March 31st, revenues for the three months were $16.9 million, an increase of $1 million or 6.6% over the prior year quarter. The increase in revenue is due primarily to expansion on existing contract vehicles, resulting from program management and customer satisfaction with our services. Gross margin for the three months ended March 31st, was approximately $3.2 million, an increase of $0.5 million or 18.1% over the prior year quarter, on higher revenue and improved performance on the contract. As a percentage of revenue first quarter gross margin of 19% increase by 1.8% over the prior year quarter. Favorable gross margin results are due principally to increased contribution from more complex contracts, and effective assignment of staff to deliver strong contract performance with emphasis on improving productivity through application of…

Thank you. [Operator Instructions] And our first question comes from Laura Engel of Stonegate Capital. Your line is now open.

Thank you, good morning. And great results. I had two questions related to Danya. Last call when you were introducing acquisition you mentioned some cost synergies and gave a number in your pro forma. I wondered if you could just review, I guess high level nature of the synergies and now couple of weeks later if that’s still a good number and if you expect additional synergies once the combination is further along?

Hi, good morning Laura how are you? This is Zac. Right well the majority of our synergies of course are result of combined capabilities for growing the business. There is some new development resources we’re repositioning to grow the business. There is always going to be some savings as a result of as you well know common dual infrastructures. And we’ve begun a team already that is orchestrated largely by Fred Wago and Kevin Wilson to take a look today at our respective infrastructures through our earlier due diligence we did realized that there would be some synergies there some of those will be largely in the financial system side of the business where we do believe that we’ll be able to sunset some of our legacy systems. There are probably three or four areas in the IT arena that we also expect some relatively early results as well. So we just begun that integration effort what I guess Kathryn formally last week. But we do remain pretty much on schedule with the plan.

We think that’s a good number.

Okay. And then I just haven’t had a little bit more time to look into Danya and the background information available it looks like they cover many sectors and even historically you’ve had some commercial customers. Do you see the focus of your business remaining strictly on government based on the focus in this healthcare and human services or do you see this as an opportunity to maybe beyond -- expand beyond this that customer base?

We see a huge addressable market for us staying within our lanes of the Federal government space right now. We do believe that the addressable side of several domains within the monitoring, evaluation capability arena, the IT and health IT information systems migration arena as something that is very right targeted market for us where we can continue to grow and keep our resources, our business development resources aligned in that market space. Now that does not preclude us from having occasional commercial opportunity that maybe very synergistically are linked to a Federal space. But we still see a very, very strong addressable market for us within the Federal domain.

Okay, well I appreciate again. Great quarter and I will get back in the queue.

Thank you. [Operator Instructions] And our next question comes from Howard Brous of Wunderlich. Your line is now open.

It’s Howard Brous, but that’s okay. Again Zac, Kathryn congratulations on the acquisition. And a follow-up to the first question about synergies. So SG&A as a percentage of sales on a going forward basis, looking at 2017-2018 what number could one look at SG&A as a percentage of sales rather than going down specifically to what items?

Well thanks for that question Howard it’s great to hear from you again. So…

This is not a softy question.

And I’m going to let regret that right. So SG&A expenses from our perspective both companies operate in a very lean fashion. And so while we do expect to achieve scale from combining the two enterprises from our perspective really the best opportunity for the enterprise is to reinvest that savings in growing the business. Because I think both companies have tremendous opportunities to really expand our reach in the Federal Health IT market, but of course that takes some business development resources. So I wouldn’t be expecting as a percent of revenue that we’re going to get much leaner than where we have traditionally been. We will get some benefits of scale and then as the company grows out that will nudge down similar to what you saw in some of our earlier presentations back in the Ideas Conference contexts. But in the short learn we think there needs to be some particular emphasis on growing the business and reinvesting any resources that we economies on by leveraging the company in the aroma of that business development.

I was going to refer to August of last year even that was…

Right, that’s right.

In your Q unfilled receivables September over March is up about $300,000 anything to point out about that issue?

It’s really just as quirky as is the function of how the month end cuts and what that means in terms of where we are in our billing cycles all of those term very quickly and we don’t in legacy business particularly carry any kind of retainages [ph] or amounts that are not be able to be converted to cash at any short timeframe.

Okay, that’s all I had. Thank you very much.

Yes.

Hey Howard this is Zac, I want to just add one other thing with regard to your very astute question and focused on the SG&A as a percentage of revenue we do monitor that for a number of internal reasons as well to be cost competitive in the markets in which we’re pursuing. We are very sensitive to that as a key metric, which addresses our competitiveness. We look very closely at our peers and benchmark companies and the various markets in which they perceive. So we’ll continue to place great focus on keeping ourselves competitive, leveraging as much as we can on our differentiators to increase our effectiveness and efficiencies so that we can very favorably compete on price and cost in that arena as well.

Absolutely.

Great, again congratulations and thanks. Great quarter.

Thanks for calling in Howard.

My pleasure.

Thank you. And I’m showing no further questions at this time. I’d like to turn the conference back over to Mr. Parker for any further remarks.

Well thank you and we again appreciate everyone’s interest in our continuing performance and as we conclude second quarter and move into our third quarter fiscal ‘16. We look forward to welcoming everyone to our next call and please if you have any questions during this period feel free to contact either Kathryn or myself. With that we are adjourned.

Ladies and gentlemen thank you for participating in today’s conference. This does conclude the program and you may now disconnect. Have a great day everyone.