Contract. Under a Federal Emergency Management Agency (FEMA) contract to provide support for states seeking temporary hospital support during the COVID-19 pandemic, DLH has been awarded a contract to support the state of Alaska. The contract has a ceiling value of $87 million for the 90-day base period, with the potential for three one-month extensions. The contract begins Monday.Details. As the prime contractor, DLH will manage the emergency medical logistics coordination for the healthcare services teams fielded by its subcontractor, which will provide a significant percentage of the services. DLH will leverage its relationship with a nationally recognized temporary medical staffing firm to place experienced medical support personnel in communities throughout the state.More to Come? Under the program, all states can access FEMA assistance. Much will depend upon the ongoing impact of COVID. With more of the population vaccinated, it is possible demand winds down. However, we are entering the high period for virus spread which may increase the demand for FEMA assistance.Financial Impact. While DLH could record the $87 million of top line in 1Q22 assuming full use of the contract, the impact on EBITDA and bottom line will be more muted given the significant use of subcontractors. Ongoing financial impact will depend on exercise of the potential extensions. We are estimating 1Q22 revenue to be in the $145 million range and EBITDA in the $11.5 million range.Maintaining Outperform Rating. Given the "one-off" nature of the FEMA contract, we are maintaining our Outperform rating and our twelve month price target of $14.00 per share. At our price target, DLHC shares would trade at 8.7x our fiscal 2021 adjusted EBITDA estimate and 0.9x our fiscal 2021 revenue estimate, still discounts to its peer group. Read More >>