DLH Holdings (NASDAQ: DLHC) revenue falls and backlog shrinks amid contract shifts
Filing Impact
Filing Sentiment
Form Type
10-Q
DLH Holdings Corp. reported weaker results for the quarter ended March 31, 2026 as revenue fell and the company swung to a loss. Quarterly revenue dropped to $59.3 million from $89.2 million, mainly because several large federal contracts, including Veterans Affairs pharmacy work, shifted to small-business primes.
The company posted a net loss of $2.5 million, or $(0.17) per share, compared with net income of $0.9 million a year earlier. Operating income turned slightly negative, and margins compressed as general and administrative costs became a larger share of sales despite cost-cutting initiatives.
For the first six months, revenue was $128.2 million and the net loss was $3.9 million. DLH still carries a sizable debt load, with $122.0 million outstanding on its term loan and $10.7 million drawn on its revolver, but it remained in compliance with loan covenants and generated roughly break-even operating cash flow.
Backlog declined to about $442.4 million from $514.3 million, reflecting the contract transitions. Management also conducted a detailed goodwill review after a drop in the share price and concluded that goodwill was not impaired.
Positive
- Debt reduction and lower interest expense: Net interest expense for the six months ended March 31, 2026 fell to $6.5 million from $8.0 million, helped by term‑loan prepayments and lower floating rates.
- Goodwill preserved after quantitative review: Following a triggering event from share‑price decline, management’s multi‑method valuation concluded fair value exceeded book value, so no goodwill impairment was recorded.
- Covenant compliance and available liquidity: Despite the revenue drop, the company remained in compliance with all credit‑facility covenants and retained $9.7 million of unused revolver capacity at March 31, 2026.
Negative
- Large revenue and earnings deterioration: Quarterly revenue declined to $59.3 million from $89.2 million, and the company moved from $0.9 million of net income to a $2.5 million net loss.
- Loss of significant VA pharmacy work: Consolidated Mail Outpatient Pharmacy contracts, historically a major revenue source, are transitioning to Service‑Disabled Veteran‑Owned Small Business primes, reducing future revenue.
- Backlog contraction: Total backlog fell from approximately $514.3 million to $442.4 million, with funded backlog dropping from $114.1 million to $75.0 million, signaling a smaller booked revenue pipeline.
- High floating‑rate leverage: Debt obligations total $132.7 million, all at floating rates tied to SOFR; a 1% rate increase would add about $1.3 million in annual interest expense, pressuring future earnings and cash flow.
Insights
Loss of major contracts drove a sharp revenue decline, margin pressure, and higher relative leverage, a clearly negative development.
DLH Holdings faces a reset in scale after key contracts moved to small-business primes. Revenue for the first half fell to $128.2 million from $179.9 million, and backlog dropped to about $442.4 million, indicating a smaller future revenue base.
Profitability deteriorated: six‑month income from operations fell to $1.4 million, and the company recorded a net loss of $3.9 million. Even with cost‑scaling initiatives, general and administrative expenses rose as a percentage of sales, showing the difficulty of rightsizing overhead quickly when revenue contracts.
Leverage remains elevated with total bank debt near $133 million and all borrowings now at floating rates. A 1% SOFR increase would add about $1.3 million of annual interest expense. Although covenants are currently met and cash generation was roughly neutral in the half, the combination of lower revenue, tighter margins, and floating‑rate debt heightens sensitivity to execution and rate movements.
Key Figures
Quarterly revenue: $59.3M
Quarterly net income (loss): $(2.5M)
Six-month revenue: $128.2M
+5 more
8 metrics
Quarterly revenue
$59.3M
Three months ended March 31, 2026
Quarterly net income (loss)
$(2.5M)
Three months ended March 31, 2026
Six-month revenue
$128.2M
Six months ended March 31, 2026
Six-month net income (loss)
$(3.9M)
Six months ended March 31, 2026
Total debt obligations
$132.7M
Secured term loan and revolver at March 31, 2026
Backlog
$442.4M
Total backlog at March 31, 2026
Funded backlog
$75.0M
Funded portion of backlog at March 31, 2026
Adjusted EBITDA
$11.9M
Six months ended March 31, 2026
Key Terms
Consolidated Mail Outpatient Pharmacy, backlog, Adjusted EBITDA, Service-Disabled Veteran Owned Small Business, +2 more
6 terms
Consolidated Mail Outpatient Pharmacy financial
"CMOP pharmacy and logistic services represent approximately $19.7 million and $28.7 million of revenues"
backlog financial
"At March 31, 2026, our backlog was approximately $442.4 million of which $75.0 million was funded backlog"
A backlog is the amount of work or orders that a company has received but hasn't completed yet. It’s like a restaurant with many dishes to serve; the backlog shows how many orders are still waiting to be finished. It matters because a large backlog can indicate strong demand or potential delays in delivering products or services.
Adjusted EBITDA financial
"Adjusted EBITDA for such periods was $11.9 million and $19.3 million, respectively"
Adjusted EBITDA is a way companies measure how much money they make from their core operations, like running a business, by removing certain costs or income that aren’t part of regular business activities. It helps investors see how well a company is doing without distractions from unusual expenses or gains, making it easier to compare companies or track performance over time.
Service-Disabled Veteran Owned Small Business regulatory
"with a requirement for a Service-Disabled Veteran Owned Small Business, or SDVOSB, to perform as the prime contractor"
goodwill impairment financial
"The assessment at March 31, 2026 indicated a triggering event had occurred requiring that the Company perform additional quantitative assessments"
Goodwill impairment occurs when a company’s valued reputation or brand strength, known as goodwill, is found to be worth less than previously recorded on its financial statements. This usually happens when the company's performance declines or market conditions change, signaling that the expected benefits from acquisitions or brand value are no longer as strong. It matters to investors because it can indicate that a company's assets are less valuable than initially thought, potentially affecting its overall financial health.
Secured Overnight Financing Rate financial
"Secured Overnight Financing Rate ("SOFR") as of March 31, 2026 was 3.8%"
A secured overnight financing rate (SOFR) is a daily benchmark interest rate that reflects the cost of borrowing cash overnight using U.S. Treasury securities as collateral. Think of it as the market price to “rent” cash for a day with a very safe pledge, similar to paying a short-term rental fee for money backed by government bonds. Investors track SOFR because it underpins pricing for loans, bonds and derivatives, so movements change borrowing costs, interest income and the valuation of interest-rate–linked positions.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
For the quarterly period ended March 31, 2026
For the transition period from to
Commission File No. 0-18492
(Exact name of registrant as specified in its charter)
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||||||||||||||||
| | |||||||||||||||||
(Zip code) | |||||||||||||||||
(Address of principal executive offices) | |||||||||||||||||
(770 ) 554-3545
(Registrant’s telephone number, including area code)
Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | |||||||||
| Capital Market | |||||||||||
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No o
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer | ☐ | Accelerated filer | ☐ | |||||||||||
| ☒ | Smaller Reporting Company | |||||||||||||
| Emerging Growth Company | ||||||||||||||
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ý
Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 14,493,035 shares of Common Stock, par value $0.001 per share, were outstanding as of May 5, 2026.
DLH HOLDINGS CORP.
FORM 10-Q
TABLE OF CONTENTS
Page No.
PART I FINANCIAL INFORMATION | 3 | ||||
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED) | 3 | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS | 3 | ||||
CONSOLIDATED BALANCE SHEETS | 4 | ||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | 5 | ||||
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY | 6 | ||||
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS | 7 | ||||
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 21 | ||||
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 31 | ||||
ITEM 4: CONTROLS AND PROCEDURES | 31 | ||||
PART II OTHER INFORMATION | 32 | ||||
ITEM 1: LEGAL PROCEEDINGS | 32 | ||||
ITEM 1A: RISK FACTORS | 32 | ||||
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS | 32 | ||||
ITEM 3: DEFAULTS UPON SENIOR SECURITIES | 33 | ||||
ITEM 4: MINE SAFETY DISCLOSURES | 33 | ||||
ITEM 5: OTHER INFORMATION | 33 | ||||
ITEM 6: EXHIBITS | 34 | ||||
SIGNATURE | 35 | ||||
2
PART I FINANCIAL INFORMATION
ITEM 1: FINANCIAL STATEMENTS (UNAUDITED)
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| March 31, | March 31, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| Revenue | $ | $ | $ | $ | |||||||||||||||||||||||||
| Cost of operations: | |||||||||||||||||||||||||||||
| Contract costs | |||||||||||||||||||||||||||||
| General and administrative costs | |||||||||||||||||||||||||||||
| Depreciation and amortization | |||||||||||||||||||||||||||||
| Total operating costs | |||||||||||||||||||||||||||||
Income (loss) from operations | ( | ||||||||||||||||||||||||||||
Interest expense, net | |||||||||||||||||||||||||||||
Income (loss) before provision for income taxes | ( | ( | |||||||||||||||||||||||||||
Provision for income taxes (benefit) | ( | ( | |||||||||||||||||||||||||||
Net income (loss) | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||
Net income (loss) per share | |||||||||||||||||||||||||||||
| Basic | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||
| Diluted | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||
| Weighted average common stock outstanding | |||||||||||||||||||||||||||||
| Basic | |||||||||||||||||||||||||||||
| Diluted | |||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
3
DLH HOLDINGS CORP.
CONSOLIDATED BALANCE SHEETS
(in thousands, except par value of shares)
| March 31, 2026 | September 30, 2025 | ||||||||||||||||
Unaudited | |||||||||||||||||
| ASSETS | |||||||||||||||||
| Current assets: | |||||||||||||||||
| Cash | $ | $ | |||||||||||||||
| Accounts receivable | |||||||||||||||||
| Other current assets | |||||||||||||||||
| Total current assets | |||||||||||||||||
| Goodwill | |||||||||||||||||
| Intangible assets, net | |||||||||||||||||
| Operating lease right-of-use assets | |||||||||||||||||
Deferred income taxes, net | |||||||||||||||||
| Equipment and improvements, net | |||||||||||||||||
| Other long-term assets | |||||||||||||||||
| Total assets | $ | $ | |||||||||||||||
| LIABILITIES AND SHAREHOLDERS’ EQUITY | |||||||||||||||||
| Current liabilities: | |||||||||||||||||
| Accounts payable and accrued liabilities | $ | $ | |||||||||||||||
| Accrued payroll | |||||||||||||||||
| Debt obligations - current, net of deferred financing costs | |||||||||||||||||
| Operating lease liabilities - current | |||||||||||||||||
| Other current liabilities | |||||||||||||||||
| Total current liabilities | |||||||||||||||||
| Long-term liabilities: | |||||||||||||||||
| Debt obligations - long-term, net of deferred financing costs | |||||||||||||||||
| Operating lease liabilities - long-term | |||||||||||||||||
| Other long-term liabilities | |||||||||||||||||
| Total long-term liabilities | |||||||||||||||||
| Total liabilities | |||||||||||||||||
| Shareholders' equity: | |||||||||||||||||
Common stock, $ | |||||||||||||||||
| Additional paid-in capital | |||||||||||||||||
Retained earnings | |||||||||||||||||
| Total shareholders’ equity | |||||||||||||||||
| Total liabilities and shareholders' equity | $ | $ | |||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
4
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)
| Six Months Ended | |||||||||||||||||
| March 31, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Operating activities | |||||||||||||||||
Net income (loss) | $ | ( | $ | ||||||||||||||
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: | |||||||||||||||||
| Depreciation and amortization | |||||||||||||||||
| Amortization of deferred financing costs charged to interest expense | |||||||||||||||||
| Stock-based compensation expense | |||||||||||||||||
Deferred income taxes, net | ( | ||||||||||||||||
| Changes in operating assets and liabilities: | |||||||||||||||||
| Accounts receivable | ( | ||||||||||||||||
| Other assets | ( | ||||||||||||||||
| Accounts payable and accrued liabilities | ( | ( | |||||||||||||||
| Accrued payroll | ( | ( | |||||||||||||||
| Other liabilities | ( | ||||||||||||||||
Net cash provided by (used in) operating activities | ( | ||||||||||||||||
| Investing activities | |||||||||||||||||
| Purchase of equipment and improvements | ( | ( | |||||||||||||||
| Net cash used in investing activities | ( | ( | |||||||||||||||
| Financing activities | |||||||||||||||||
| Proceeds from revolving line of credit | |||||||||||||||||
Repayments of revolving line of credit | ( | ( | |||||||||||||||
| Repayments of debt obligations | ( | ( | |||||||||||||||
| Payments of deferred financing costs | ( | ||||||||||||||||
Payments for taxes related to net share settlement of restricted stock units | ( | ||||||||||||||||
Net cash provided by (used in) financing activities | ( | ||||||||||||||||
| Net change in cash | ( | ||||||||||||||||
| Cash - beginning of period | |||||||||||||||||
| Cash - end of period | $ | $ | |||||||||||||||
| Supplemental disclosure of cash flow information | |||||||||||||||||
| Cash paid during the period for interest | $ | $ | |||||||||||||||
| Cash paid during the period for income taxes | $ | $ | |||||||||||||||
| Supplemental disclosure of non-cash activity | |||||||||||||||||
Common stock surrendered for the settlement of restricted stock units | $ | $ | |||||||||||||||
Lease liability recognized to acquire a right-of-use asset | $ | $ | |||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
5
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(unaudited, in thousands)
| Common Stock | Additional Paid-In Capital | Retained Earnings | Total Shareholders' Equity | |||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||
Balance at December 31, 2025 | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Expense related to director restricted stock units | — | — | — | |||||||||||||||||||||||||||||
| Expense related to employee stock-based compensation | — | — | — | |||||||||||||||||||||||||||||
Net loss | — | — | — | ( | ( | |||||||||||||||||||||||||||
Balance at March 31, 2026 | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Retained Earnings | Total Shareholders' Equity | |||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||
Balance at September 30, 2025 | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Expense related to director restricted stock units | — | — | — | |||||||||||||||||||||||||||||
| Expense related to employee stock-based compensation | — | — | — | |||||||||||||||||||||||||||||
Common stock surrendered for the settlement of restricted stock units | — | ( | — | ( | ||||||||||||||||||||||||||||
Net loss | — | — | — | ( | ( | |||||||||||||||||||||||||||
Balance at March 31, 2026 | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Retained Earnings | Total Shareholders' Equity | |||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||
Balance at December 31, 2024 | $ | $ | $ | |||||||||||||||||||||||||||||
| Expense related to director restricted stock units | — | — | — | |||||||||||||||||||||||||||||
| Expense related to employee stock-based compensation | — | — | — | |||||||||||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||||||
Balance at March 31, 2025 | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Common Stock | Additional Paid-In Capital | Retained Earnings | Total Shareholders' Equity | |||||||||||||||||||||||||||||
| Shares | Amount | |||||||||||||||||||||||||||||||
Balance at September 30, 2024 | $ | $ | $ | $ | ||||||||||||||||||||||||||||
| Expense related to director restricted stock units | — | — | — | |||||||||||||||||||||||||||||
| Expense related to employee stock-based compensation | — | — | — | |||||||||||||||||||||||||||||
| Net income | — | — | — | |||||||||||||||||||||||||||||
Balance at March 31, 2025 | $ | $ | $ | $ | ||||||||||||||||||||||||||||
The accompanying notes are an integral part of these consolidated financial statements.
6
DLH HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
March 31, 2026
1. Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of DLH Holdings Corp. and its wholly-owned subsidiaries ("DLH" or the "Company" and also referred to as "we," "us" and "our"). All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by GAAP for complete financial statements. Certain prior year amounts have been reclassified to conform to the fiscal 2026 presentation.
Operating results for the six months ended March 31, 2026 are not necessarily indicative of the results that may be expected for the year ending September 30, 2026 or any future period. Amounts as of March 31, 2026 and for the three and six months ended March 31, 2026 are unaudited. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2025 filed with the Securities and Exchange Commission on December 10, 2025.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The most significant of these estimates and assumptions relate to estimating costs including overhead and its allocation, valuing and determining the amortization periods for long-lived intangible assets, interest rate swaps, stock-based compensation, goodwill, and right-of-use assets and lease liabilities. We evaluate these estimates and judgments on an ongoing basis and base our estimates on historical experience, current and expected future outcomes, third-party evaluations, and various other assumptions that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. We revise material accounting estimates if changes occur, such as more experience is acquired, additional information is obtained, or there is new information on which an estimate was or can be based. Actual results could differ from those estimates.
Revenue
The Company's revenues from contracts with customers are derived from offerings that include technology-enabled business process outsourcing, program management solutions, and public health research and analytics, substantially within the U.S. government and its agencies. The Company has various types of contracts including time-and-materials contracts, cost-reimbursable contracts, and firm-fixed-price contracts.
We consider a contract with a customer to exist when there is a commitment by both parties (customer and Company), payment terms are determinable, there is commercial substance, and collectability is probably in accordance with Accounting Standards Codification ("ASC") No. 606, "Revenue from Contracts with Customers" ("Topic 606").
We recognize revenue over time when there is a continuous transfer of control to our customer as performance obligations are satisfied. For our U.S. government contracts, this continuous transfer of control to the customer is transferred over time and revenue is recognized based on the extent of progress toward completion of the performance obligation. We consider control to transfer when we have a right to payment. In some instances, the Company commences providing services prior to formal approval to begin work from the customer. The Company considers these factors, the risks associated with commencing work, and legal enforceability in determining whether a contract exists under Topic 606.
Contract modification can occur throughout the life of the contract and can affect the transaction price, extend the period of performance, adjust funding, or create new performance obligations. We review each modification to assess the impact of these
7
contract changes to determine if it should be treated as part of the original performance obligation or as a separate contract. Contract modifications impact performance obligations when the modification either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue and profit cumulatively. Furthermore, a significant change in one or more estimates could affect the profitability of our contracts. We recognize adjustments in estimated profit on contracts in the period identified.
For service contracts, we satisfy our performance obligations as services are rendered. We use cost-based input and time-based output methods to measure progress based on the contract type.
•Time and material - We bill the customer per labor hour and per material, and revenue is recognized in the amount invoiced as the amount corresponds directly to the value of our performance to date. Revenue is recognized to the extent of billable rates times hours delivered plus materials and other reimbursable costs incurred.
•Cost reimbursable - We record reimbursable costs as incurred, including an estimated share of the contractual fee earned.
•Firm fixed price - We recognize revenue over time using a straight-line measure of progress.
Contract costs generally include direct costs such as labor, materials, subcontract costs, and indirect costs identifiable with or allocable to a specific contract. Costs are expensed as incurred and include an estimate of the contractual fees earned. Contract costs incurred for U.S. government contracts, including indirect costs, are subject to audit and adjustment by various government audit agencies. Historically, our adjustments have not been material.
Contract assets - Amounts are invoiced as work progresses in accordance with agreed-upon contractual terms. In part, revenue recognition occurs before we have the right to bill, resulting in contract assets. These contract assets are reported within accounts receivable on our consolidated balance sheets and are invoiced in accordance with payment terms defined in each contract. Period end balances will vary from period to period due to agreed-upon contractual terms.
Contract liabilities - Amounts are a result of billings in excess of costs incurred or prepayment for services to be rendered.
Fair Value of Financial Instruments
The carrying amounts of the Company's cash, accounts receivable, contract assets, accrued expenses, and accounts payable approximate fair value due to the short-term nature of these instruments. The fair values of the Company's debt instruments approximate fair value because the underlying interest rates approximate market rates that the Company could obtain for similar instruments at the balance sheet dates.
Long-Lived Assets
Our long-lived assets include equipment and improvements, intangible assets, right-of-use assets, and goodwill. The Company continues to review long-lived assets for possible impairment or loss of value at least annually, or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit's carrying amount is greater than its fair value. Specifically related to goodwill, if the qualitative analysis indicates a quantitative assessment is necessary, the Company utilizes multiple methods to determine its implied fair value. Each method utilizes a significant amount of judgment and may not be indicative of the Company's fair value on its own and therefore multiple methods could be combined to determine an implied fair value. Each method utilizes relevant publicly available information as well as observable market conditions. If the book value of goodwill exceeds its fair value, then an impairment is recognized and goodwill is written down to fair value. The impairment loss would be recognized as an operating expense.
Equipment and improvements are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful asset lives (3 to 7 years) and the shorter of the initial lease term or estimated useful life for leasehold improvements. Maintenance and repair costs are expensed as incurred. Intangible assets (other than goodwill) are originally recorded at fair value and are amortized on a straight-line basis over their estimated useful lives of 10 years.
Right-of-use assets are measured at the present value of future minimum lease payments, including all probable renewals, plus lease payments made to the lessor before or at lease commencement and indirect costs paid, less incentives received. Our right-of-use assets include long-term leases for facilities and equipment and are amortized over their respective lease terms.
8
Lease Liabilities
The Company has leases for facilities and office equipment. Our lease liabilities are recognized as the present value of the future minimum lease payments over the lease term. Our lease payments consist of fixed and in-substance fixed amounts attributable to the use of the underlying asset over the lease term. Variable lease payments that do not depend on an index rate or are not in-substance fixed payments are excluded in the measurement of right-of-use assets and lease liabilities and are expensed in the period incurred. The incremental borrowing rate on our secured term loan is used in determining the present value of future minimum lease payments. Some of our lease agreements include options to extend the lease term or terminate the lease. These options are accounted for in our right-of-use assets and lease liabilities when it is reasonably certain that the Company will extend the lease term or terminate the lease. The Company does not have any finance leases. As of March 31, 2026, operating leases for facilities and equipment have remaining lease terms of less than 9 months to 6.8 years.
Goodwill
The Company performs impairment evaluation at least annually at the end of the fiscal year and between annual tests whenever there is an indication of impairment. The assessment at March 31, 2026 indicated a triggering event had occurred requiring that the Company perform additional quantitative assessments. The triggering event was primarily due to the decrease in the Company's share price resulting in a decline in market capitalization. Management then performed a series of quantitative assessments utilizing multiple evaluation methods. Those assessments included both market and income-based methods utilizing level 1 observable market data and level 3 estimates. Significant estimates in the market-based methods included identifying similar companies with comparable business factors such as service offerings, customers, size, growth, profitability, risk and return on investment, as well as assessing comparable market multiples and control premiums in estimating the fair value of the Company. For the market-based methods, the Company used the market capitalization with the inclusion of a control premium as one estimation of fair value. The other market-based method used publicly available market multiples of relevant publicly traded companies applied to our expected EBITDA and revenue for fiscal 2026 to estimate the Company's fair value. The income-based method is a discounted cash flow analysis and the significant estimates included expected growth rates, profitability and the weighted average cost of capital. The Company used a weighted average blend of these methods to assess its fair value. The results of those assessments indicated that the Company's fair value was in excess of the Company's book value and therefore its goodwill was not impaired.
Notwithstanding this evaluation, factors including non-renewal of a major contract or other substantial changes in business conditions could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to future periods’ results of operations. There were no impairments during the prior year ended September 30, 2025.
Income Tax
Stock-Based Compensation
The Company uses the fair value-based method for stock-based compensation. Options issued are designated as either an incentive stock option or a non-statutory stock option. No option may be granted with a term of more than 10 years from the date of grant. Option awards may depend on achievement of certain vesting criteria determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued common shares. All awards to employees and non-employees are recorded at fair value on the date of the grant and expensed over the period of vesting. The Company uses a Monte Carlo method to estimate the fair value of each stock option at the date of grant. Any consideration paid by the option holders to purchase shares is credited to common stock.
Stock-based compensation expense for the portion of equity awards for which the requisite service has not been rendered is recognized as the requisite service is rendered. The stock-based compensation expense for equity awards has been based on the grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. For other equity awards
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that vest based on the Company’s common stock achieving and maintaining defined market prices, the Company values the awards with a Monte Carlo method that utilizes various probability factors and other criterion in establishing fair value of the grant. The related compensation expense is recognized over the service period.
Cash
Accounts Receivable
Receivables include amounts billed and currently due from customers where the right to consideration is unconditional and amounts unbilled. Both billed and unbilled amounts are non-interest bearing, unsecured, and recognized at an estimated realizable value that includes costs and fees, and are generally expected to be billed and received within a single year. We evaluate our receivables for expected credit losses on a quarterly basis and determine whether an allowance for expected credit losses is appropriate based on specific collection issues. No
Earnings Per Share
Treasury Stock
The Company periodically purchases its own common stock that is traded on public markets as part of announced stock repurchase programs. The repurchased common stock is classified as treasury stock on the consolidated balance sheets and held at cost. As of March 31, 2026 and September 30, 2025, the Company did not
Preferred Stock
Interest Rate Swap
The Company uses derivative financial instruments to manage interest rate risk associated with its variable debt. The Company's objective in using these interest rate derivatives is to manage its exposure to interest rate movements and reduce volatility of interest expense. The gains and losses due to changes in the fair value of the interest rate swap agreements completely offset changes in the fair value of the hedged portion of the underlying debt. Offsetting changes in fair value of both the interest rate swaps and the hedged portion of the underlying debt are recognized in interest expense in the consolidated statements of operations. The Company does not hold or issue any derivative instruments for trading or speculative purposes.
Risks and Uncertainties
Management evaluates the impact of global markets and economic factors on our industry and the potential for adverse effects on the Company's consolidated financial position and its operations. As of March 31, 2026 and September 30, 2025, there was no indication of any global or economic impact to our industry.
3. New Accounting Pronouncements
In December 2023, the FASB issued ASU 2023-09, "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" which provides guidance on the requirements such as the requirement that public business entities on an annual basis (1)
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disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. DLH is a public company that reports income tax disclosures and therefore this ASU applies to the Company. ASU 2023-09 is effective for public business entities for fiscal years beginning after December 15, 2024. We will adopt ASU 2023-09 in our Annual Report on Form 10-K for the fiscal year ending September 30, 2026. We are currently evaluating the impacts of the improvements to income tax disclosure.
In March 2024, the Securities and Exchange Commission ("SEC") released a final rule that requires registrants to provide comprehensive climate-related disclosures in their annual reports and registration statements, including those for IPOs, beginning with annual reports for the year ending December 31, 2027, for smaller reporting companies ("SRC"). Registrants must disclose climate-related financial metrics and impacts on their financial estimates and assumptions in a footnote to the audited financial statements. The disclosures will also need to be addressed as part of management’s internal control over financial reporting ("ICFR") and will be subject to the financial statement and ICFR audit (if applicable) of an independent registered public accounting firm. We are currently evaluating the impacts of the improvements to our disclosure.
In November 2024, the FASB issued ASU 2024-03, Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Expense Disaggregation Disclosures. To enhance transparency in financial reporting by requiring public business entities to disclose disaggregated information about expenses in their financial statements. The guidance mandates disclosure of specific cost components, such as inventory purchases, employee compensation, depreciation, and amortization, within relevant income statement expense captions, along with qualitative descriptions of any remaining undissected amounts. Entities must also disclose total selling expenses and define these annually. Effective for annual reporting periods beginning after December 15, 2026, and interim periods in 2027, the ASU allows prospective or retrospective application and permits early adoption. We are currently evaluating the impacts of the improvements to our disclosure.
4. Revenue Recognition
The following table summarizes the contract balances recognized on the Company's consolidated balance sheets as follows (in thousands):
| March 31, | September 30, | |||||||||||||
| 2026 | 2025 | |||||||||||||
| Contract assets | $ | $ | ||||||||||||
Contract assets are included as part of accounts receivable on the consolidated balances sheets. The change from prior period is primarily due to reduced revenue volume. Contract liabilities had no
Disaggregation of Revenue from Contracts with Customers
Revenue by customer was as follows (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Department of Health and Human Services | $ | $ | $ | $ | ||||||||||||||||||||||
| Department of Veterans Affairs | ||||||||||||||||||||||||||
| Department of Defense | ||||||||||||||||||||||||||
| Other | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
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Revenue by contract type was as follows (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Time and Materials | $ | $ | $ | $ | ||||||||||||||||||||||
| Firm Fixed Price | ||||||||||||||||||||||||||
| Cost Reimbursable | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
Revenue by whether the Company acts as a prime contractor or a subcontractor was as follows (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Prime Contractor | $ | $ | $ | $ | ||||||||||||||||||||||
| Subcontractor | ||||||||||||||||||||||||||
| Total | $ | $ | $ | $ | ||||||||||||||||||||||
5. Leases
| March 31, | September 30, | |||||||||||||
| 2026 | 2025 | |||||||||||||
| Operating lease right-of-use assets | $ | $ | ||||||||||||
Operating lease liabilities - current | $ | $ | ||||||||||||
| Operating lease liabilities - long-term | ||||||||||||||
| Total operating lease liabilities | $ | $ | ||||||||||||
As of March 31, 2026, operating leases for facilities and equipment have remaining lease terms of less than 9 months to 6.8 years.
Total lease costs for our leases were as follows (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Operating | $ | $ | $ | $ | ||||||||||||||||||||||
| Short-term | ||||||||||||||||||||||||||
| Variable | ||||||||||||||||||||||||||
| Sublease income (a) | ( | ( | ( | ( | ||||||||||||||||||||||
| Total lease costs | $ | $ | $ | $ | ||||||||||||||||||||||
(a) The Company subleases a portion of one of its leased facilities. The sublease is classified as an operating lease with respect to the underlying asset. The remaining sublease term is 5 years.
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The Company's future minimum lease payments as of March 31, 2026 were as follows (in thousands):
| Fiscal year ending: | ||||||||
| 2026 (remaining) | $ | |||||||
| 2027 | ||||||||
| 2028 | ||||||||
| 2029 | ||||||||
| 2030 | ||||||||
| Thereafter | ||||||||
| Total future lease payments | ||||||||
| Less: imputed interest | ( | |||||||
| Present value of future minimum lease payments | ||||||||
| Less: current portion of operating lease liabilities | ( | |||||||
| Long-term operating lease liabilities | $ | |||||||
At March 31, 2026, the weighted-average remaining lease term and weighted-average discount rate were 5.1 years and 6.9 %, respectively. The calculation of the weighted-average discount rate was determined based on borrowing terms from our secured term loan.
Other information related to our leases was as follows (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | |||||||||||||||||||||||
| Cash paid for amounts included in the measurement of lease liabilities | $ | $ | $ | $ | ||||||||||||||||||||||
| Lease liabilities arising from obtaining right-of-use assets | ||||||||||||||||||||||||||
| Other lease information | $ | $ | $ | $ | ||||||||||||||||||||||
6. Supporting Financial Information
Accounts receivable
The following table summarizes accounts receivable presented on our consolidated balance sheets as follows (in thousands):
| March 31, | September 30, | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Billed receivables | $ | $ | |||||||||||||||
| Contract assets | |||||||||||||||||
| Accounts receivable | $ | $ | |||||||||||||||
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Other current assets
The following table summarizes other current assets presented on our consolidated balance sheets as follows (in thousands):
| March 31, | September 30, | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Prepaid licenses and other expenses | $ | $ | |||||||||||||||
| Prepaid insurance and benefits | |||||||||||||||||
| Other receivables | |||||||||||||||||
| Other current assets | $ | $ | |||||||||||||||
Goodwill
There were no changes in goodwill for the six months ended March 31, 2026. The balance of goodwill was approximately $138.2
Intangible assets
The following table summarizes intangible assets, net presented on our consolidated balance sheets as follows (in thousands):
| March 31, | September 30, | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Intangible assets | |||||||||||||||||
| Customer contracts and related customer relationships | $ | $ | |||||||||||||||
| Backlog | |||||||||||||||||
| Trade name | |||||||||||||||||
Covenants-not-to-compete | |||||||||||||||||
| Total intangible assets | |||||||||||||||||
| Less: accumulated amortization | |||||||||||||||||
| Customer contracts and related customer relationships | ( | ( | |||||||||||||||
| Backlog | ( | ( | |||||||||||||||
| Trade name | ( | ( | |||||||||||||||
Covenants-not-to-compete | ( | ( | |||||||||||||||
| Total accumulated amortization | ( | ( | |||||||||||||||
| Intangible assets, net | $ | $ | |||||||||||||||
Amortization expense was $4.1 million and $4.1 million for the three months ended March 31, 2026 and 2025, respectively, and $8.2 million and $8.2 million for the six months ended March 31, 2026 and 2025, respectively.
As of March 31, 2026, the estimated amortization expense per fiscal year was as follows (in thousands):
| Fiscal year ending: | |||||||||||
| 2026 (remaining) | $ | ||||||||||
| 2027 | |||||||||||
| 2028 | |||||||||||
| 2029 | |||||||||||
| 2030 | |||||||||||
| Thereafter | |||||||||||
| Total amortization expense | $ | ||||||||||
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The weighted-average remaining amortization period at March 31, 2026 is as follows:
| Intangible assets | Weighted-Average Remaining Amortization Period | ||||||||||
| Customer contracts and related customer relationships | |||||||||||
| Backlog | |||||||||||
| Trade names | |||||||||||
| Covenants not to compete | |||||||||||
Total | |||||||||||
Equipment and improvements, net
The following table summarizes equipment and improvements, net presented on our consolidated balance sheets as follows (in thousands):
| March 31, | September 30, | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Furniture and equipment | $ | $ | |||||||||||||||
| Computer equipment and software | |||||||||||||||||
| Leasehold improvements | |||||||||||||||||
| Total equipment and improvements | |||||||||||||||||
Less: accumulated depreciation | ( | ( | |||||||||||||||
| Equipment and improvements, net | $ | $ | |||||||||||||||
Depreciation expense was $0.2 million and $0.2 million for the three months ended March 31, 2026 and 2025, respectively, and $0.4 million and $0.3 million for the six months ended March 31, 2026 and 2025, respectively.
Accounts payable and accrued liabilities
The following table summarizes accounts payable and accrued liabilities presented on our consolidated balance sheets as follows (in thousands):
| March 31, | September 30, | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Accounts payable | $ | $ | |||||||||||||||
| Accrued benefits | |||||||||||||||||
| Accrued workers' compensation insurance | |||||||||||||||||
| Accrued bonus and incentive compensation | |||||||||||||||||
| Accrued interest | |||||||||||||||||
| Other accrued expenses | |||||||||||||||||
| Accounts payable and accrued liabilities | $ | $ | |||||||||||||||
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Accrued payroll
The following table summarizes accrued payroll presented on our consolidated balance sheets as follows (in thousands):
| March 31, | September 30, | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Accrued leave | $ | $ | |||||||||||||||
| Accrued payroll | |||||||||||||||||
| Accrued payroll taxes | |||||||||||||||||
| Accrued severance | |||||||||||||||||
Total accrued payroll | $ | $ | |||||||||||||||
Debt obligations
The following table summarizes debt obligations presented on our consolidated balance sheets as follows (in thousands):
| March 31, | September 30, | ||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Secured term loan | $ | $ | |||||||||||||||
| Secured revolving line of credit | |||||||||||||||||
| Less: unamortized deferred financing costs | ( | ( | |||||||||||||||
| Net bank debt obligations | |||||||||||||||||
| Less: current portion of debt obligations, net of deferred financing costs (a) | ( | ( | |||||||||||||||
| Long-term portion of debt obligations, net of deferred financing costs | $ | $ | |||||||||||||||
As of March 31, 2026, we have satisfied quarterly minimum principal payments on our secured term loan until December 31, 2026, and have made a partial payment toward the principal due as of that date.
(a) As of March 31, 2026, the current portion comprises term loan amortization of $10.4 million and the $10.7 million outstanding balance on the secured revolving line of credit, net of $1.6 million of unamortized deferred financing costs.
Interest expense
The following table summarizes interest expense presented on our consolidated statements of operations as follows (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| March 31, | March 31, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
Interest expense (a) | $ | $ | $ | $ | |||||||||||||||||||||||||
Interest income (b) | ( | ( | ( | ( | |||||||||||||||||||||||||
Amortization of deferred financing costs (c) | |||||||||||||||||||||||||||||
Interest expense, net | $ | $ | $ | $ | |||||||||||||||||||||||||
(a) Interest expense on borrowing.
(b) Interest earned from customer payments received after the due date.
(c) Amortization of expenses related to secured term loan and secured revolving line of credit.
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7. Credit Facilities
A summary of our credit facilities as presented on our consolidated balance sheets as follows (in millions):
| March 31, 2026 | September 30, 2025 | |||||||||||||||||||||||||||||||||||||
| Arrangement | Loan Balance | Interest | Loan Balance | Interest | ||||||||||||||||||||||||||||||||||
| Secured term loan (a) due December 8, 2027 | $ | SOFR1 + | $ | SOFR1 + | ||||||||||||||||||||||||||||||||||
| Secured revolving line of credit (b) due December 8, 2027 | $ | SOFR1 + | $ | SOFR1 + | ||||||||||||||||||||||||||||||||||
1Secured Overnight Financing Rate ("SOFR") as of March 31, 2026 and September 30, 2025 were 3.8 % and 4.3 % respectively.
(a) Represents the principal amounts payable on our term loan, which is secured by liens on substantially all of the assets of the Company. The principal of the term loan is payable in quarterly installments with the remaining balance due on December 8, 2027.
On January 31, 2023, we executed a floating-to-fixed interest rate swap with First National Bank ("FNB") that had an ending notional amount of $74.0 million and a fixed interest rate of 4.1 %, which matured on January 31, 2026. As of March 31, 2026, no interest rate swaps were outstanding, and all debt is subject to floating interest rates.
The Credit Agreement requires compliance with a number of financial covenants and contains restrictions on our ability to engage in certain transactions. Among other matters, we must comply with limitations on: granting liens; incurring other indebtedness; maintenance of assets; investments in other entities and extensions of credit; mergers and consolidations; and changes in nature of business. On November 6, 2024, the Company completed an amendment to its credit facility. The amendment modified certain financial covenants thresholds for future measurement periods and reduced the amount available under the revolving line of credit, as discussed in further detail below. The amendment was approved by the Company's Board of Directors and Executive Management and the credit facility lenders. The loan agreement also requires us to comply with certain quarterly financial covenants including: (i) a minimum fixed charge coverage ratio ranging from 1.25 :1.00 to 1.05 :1.00 and (ii) a total leverage ratio not exceeding the ratio of 4.75 :1.00 to 4.25 :1.00 through maturity. The total leverage ratio is calculated by dividing the Company's total interest-bearing debt by net income adjusted to exclude (i) interest and other expenses, (ii) provision for income taxes, if any, (iii) depreciation and amortization, and (iv) non-cash charges, losses or expenses, including stock-based compensation, and (v) non-recurring charges, losses or expenses to include transaction and non-cash equity expense. We are in compliance with all loan covenants and restrictions as of March 31, 2026.
We are required to pay quarterly amortization payments, which commenced in December 2022. The annual amortization amount is $19.0 million for the fiscal year 2026, and $23.75 million for fiscal year 2027, with the remaining unpaid loan balance due at maturity in December 2027. The quarterly payments are equal installments. The outstanding principal balance on the secured term loan was $122.0 million as of March 31, 2026. We have satisfied the mandatory principal payments until December 2026.
In addition to quarterly payments of the outstanding indebtedness, the loan agreement also requires annual payments of a percentage of excess cash flow, as defined in the loan agreement. The loan agreement states that an excess cash flow recapture payment must be made equal to (a) 75 % of the excess cash flow for the immediately preceding fiscal year in which indebtedness to consolidated EBITDA ratio is greater than or equal to 2.5 :1; (b) 50 % of the excess cash flow for the immediately preceding fiscal year in which the funded indebtedness to consolidated EBITDA Ratio is less than 2.5 :1 but greater than or equal to 1.5 :1; or (c) 0 % of the excess cash flow for the immediately preceding fiscal year in which the funded indebtedness to consolidated EBITDA Ratio is less than 1.5 :1. In addition, the Company must make additional mandatory prepayment of amounts outstanding based on proceeds received from asset sales and sales of certain equity securities or other indebtedness. Due to the voluntary prepayment of term debt, there was no excess cash flow payment required. For additional information regarding the schedule of future payment obligations, please refer to Note 10. Commitments and Contingencies.
(b) As amended, the secured revolving line of credit has a ceiling of up to $50.0 million; as of March 31, 2026, we had unused borrowing capacity of $9.7 million, which is net of outstanding letters of credit. Borrowing on the secured revolving line of credit is secured by liens on substantially all of the assets of the Company. The Company accessed funds from the secured revolving line of credit during the year, which had a $10.7 million outstanding balance at March 31, 2026. As part of the
17
secured revolving line of credit, the lenders agreed to a sublimit of $5.0 million for letters of credit for the account of the Company, subject to applicable procedures.
8. Stock-Based Compensation and Equity Grants
Stock-based compensation expense
Options issued under equity incentive plans were designated as either an incentive stock or a non-statutory stock option. No option was granted with a term of more than 10 years from the date of grant. Exercisability of option awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued shares. As of March 31, 2026, there were 1.0 million shares available for grant under the 2025 Plan.
Stock-based compensation expense shown in the table below, is recorded in general and administrative expenses in our consolidated statements of operations as follows (in thousands):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| March 31, | March 31, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| DLH employees (a) | $ | $ | $ | $ | |||||||||||||||||||||||||
Non-employee directors | |||||||||||||||||||||||||||||
Total stock compensation expense | $ | $ | $ | $ | |||||||||||||||||||||||||
(a) Included in this amount are equity grants of restricted stock units ("RSU") to Executive Officers, which were issued in accordance with the DLH long-term incentive compensation policy in this fiscal year, and stock option grants to employees during prior fiscal years. The RSUs issued and outstanding totaled 959,582 and 697,384 shares at March 31, 2026 and 2025, respectively.
During the six months ended March 31, 2026 and 2025, the Company granted 427,046 and 312,906 shares of restricted stock units, respectively. Of the RSUs granted during the six months ended March 31, 2026, 380,338 shares have performance and market based vesting criteria and the remaining 46,708 shares have service-based vesting criteria. Of the RSUs granted during the six months ended March 31, 2025, 156,453 shares have performance and market based vesting criteria and the remaining 156,453 shares have service-based vesting criteria.
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The RSUs granted were valued using the Monte Carlo Method, and will be amortized over the 3
| Volatility | |||||||||||||||||||||||
| Grant Date | Vesting Base | Vesting Criteria | (Years) | Fair Value | |||||||||||||||||||
| December 17, 2025 | Revenue | Revenue increase at the end of the performance period as compared to the year ended September 30, 2028 | $ | ||||||||||||||||||||
| December 17, 2025 | Stock price | Stock price is at least $ | $ | ||||||||||||||||||||
| December 20, 2024 | Revenue | Revenue increase at the end of the performance period as compared to the year ended September 30, 2027 | $ | ||||||||||||||||||||
| December 20, 2024 | Stock price | Stock price is at least $ | $ | ||||||||||||||||||||
| Notes: | |||||||||||||||||||||||
| Results based on 100,000 simulations | |||||||||||||||||||||||
(b) Equity grants of RSUs were made in accordance with DLH compensation policy for non-employee directors and a total of 67,615 and 61,525 restricted stock units were issued and outstanding at March 31, 2026 and 2025, respectively. These grants have service-based vesting criteria and vest at the end of this fiscal year.
Unrecognized stock-based compensation expense
Unrecognized stock-based compensation expense is presented in the table below (in thousands):
| March 31, | |||||||||||||||||
| 2026 | 2025 | ||||||||||||||||
| Unrecognized expense for DLH employees (a) | $ | $ | |||||||||||||||
| Unrecognized expense for non-employee directors | |||||||||||||||||
| Total unrecognized expense | $ | $ | |||||||||||||||
(a) On a weighted average basis, the unrecognized expense as of March 31, 2026 is expected to be recognized within the next 2.67 years.
Restricted stock unit activity for the six months ended March 31, 2026
| Performance Vesting | Service Vesting | Total | |||||||||||||||||||||
Outstanding, September 30, 2025 | |||||||||||||||||||||||
Granted | |||||||||||||||||||||||
Vested | |||||||||||||||||||||||
| Cancelled | |||||||||||||||||||||||
Outstanding, March 31, 2026 | |||||||||||||||||||||||
Stock option activity for the six months ended March 31, 2026
The aggregate intrinsic value in the table below represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on those dates. This amount will change based on the fair market value of the Company’s stock. A summary of the Company's stock option awards is as follows:
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| (in years) | |||||||||||||||||||||||||||||
| Weighted | |||||||||||||||||||||||||||||
| Weighted | Average | (in thousands) | |||||||||||||||||||||||||||
| (in thousands) | Average | Remaining | Aggregate | ||||||||||||||||||||||||||
| Number of | Exercise | Contractual | Intrinsic | ||||||||||||||||||||||||||
| Shares | Price | Term | Value | ||||||||||||||||||||||||||
Options outstanding, September 30, 2025 | $ | $ | |||||||||||||||||||||||||||
| Granted | — | — | |||||||||||||||||||||||||||
Exercised | — | — | |||||||||||||||||||||||||||
| Cancelled | ( | — | — | ||||||||||||||||||||||||||
Options outstanding, March 31, 2026 | $ | $ | |||||||||||||||||||||||||||
Vested and exercisable, March 31, 2026 | $ | $ | |||||||||||||||||||||||||||
Stock option shares outstanding, vested and unvested balance as follows (in thousands):
| March 31, | September 30, | ||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
| Vested and exercisable | |||||||||||||||||||||||||||||
| Unvested (a) | |||||||||||||||||||||||||||||
| Options outstanding | |||||||||||||||||||||||||||||
(a) Certain awards vest upon satisfaction of certain performance criteria.
9. Earnings Per Share
Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common shares outstanding and restricted stock grants that vested or are likely to vest during the period. Diluted earnings per share is calculated by dividing income available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities, unless such effect is anti-dilutive. Diluted earnings per share is calculated using the treasury stock method.
Earnings per share information is presented in the table below (in thousands except for per share amounts):
| Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
| March 31, | March 31, | ||||||||||||||||||||||||||||
| 2026 | 2025 | 2026 | 2025 | ||||||||||||||||||||||||||
| Numerator: | |||||||||||||||||||||||||||||
Net income (loss) | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||
| Denominator: | |||||||||||||||||||||||||||||
| Denominator for basic net income per share - weighted-average outstanding shares | |||||||||||||||||||||||||||||
| Effect of dilutive securities: | |||||||||||||||||||||||||||||
Stock options and restricted stock (a) | |||||||||||||||||||||||||||||
| Denominator for diluted net income per share - weighted-average outstanding shares | |||||||||||||||||||||||||||||
Net income (loss) per share: | |||||||||||||||||||||||||||||
| Basic | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||
| Diluted | $ | ( | $ | $ | ( | $ | |||||||||||||||||||||||
(a) For the three and six months ended March 31, 2026, stock options and restricted stock units representing approximately 70
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10. Commitments and Contingencies
Contractual obligations as of March 31, 2026 are as follows (in thousands):
| Payments Due Per Fiscal Year | |||||||||||||||||||||||
| (Remaining) | |||||||||||||||||||||||
| Total | 2026 | 2027 | 2028 | 2029 | 2030 | Thereafter | |||||||||||||||||
| Debt obligations | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
| Facility operating leases | |||||||||||||||||||||||
| Total contractual obligations | $ | $ | $ | $ | $ | $ | $ | ||||||||||||||||
Legal proceedings
As a commercial enterprise and employer, the Company is subject to various claims and legal actions in the ordinary course of business. These matters can include professional liability, employment-relations issues, workers’ compensation, tax, payroll and employee-related matters, other commercial disputes arising in the ordinary course of business, and inquiries and investigations by governmental agencies regarding our employment practices or other matters. The Company is not aware of any pending or threatened litigation that it believes is reasonably likely to have a material adverse effect on its results of operations, financial position or cash flows.
11. Related Party Transactions
The Company has determined that for the six months ended March 31, 2026 and 2025, there were no significant related party transactions that have occurred which require disclosure through the date that these consolidated financial statements were issued.
12. Subsequent Events
Management has evaluated subsequent events through the date that the Company's unaudited consolidated financial statements were issued. Based on this evaluation, the Company has determined that no subsequent events have occurred which require disclosure through the date that these consolidated financial statements were issued.
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking and Cautionary Statements
You should read the following discussion in conjunction with the Consolidated Financial Statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended September 30, 2025, and in other reports we have subsequently filed with the SEC. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in this Management’s Discussion and Analysis are forward-looking statements that involve risks and uncertainties. Any statements that refer to expectations, projections or other characterizations of future events or circumstances or that are not statements of historical fact (including without limitation statements to the effect that the Company or its management “believes”, “expects”, “anticipates”, “plans”, “intends” and similar expressions) should be considered forward-looking statements that involve risks and uncertainties which could cause actual events or DLH’s actual results to differ materially from those indicated by the forward-looking statements. Forward-looking statements in this report include, among others, statements regarding benefits of acquisitions, estimates of future revenues, operating income, earnings, earnings per share, backlog, and cash flows. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Our actual results may differ materially from such forward-looking statements made in this report due to a variety of factors, including: the failure to achieve the anticipated benefits of any future acquisition (including anticipated future financial operating performance and results); the inability to retain employees and customers; contract awards in connection with re-competes for present business and/or competition for new business; our ability to manage our debt obligations; compliance with bank financial and other covenants; changes in client budgetary priorities; government contract procurement (such as bid and award protests, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; significant delays or reductions in appropriations for our programs and broader changes in U.S. government funding and spending patterns; legislation that amends or changes discretionary spending levels or budget
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priorities; legal, regulatory, and political changes from the federal government that could result in economic uncertainty; the impact of inflation and higher interest rates; and other risks described in our SEC filings. For a discussion of such risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in the Company’s periodic reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, as well as interim quarterly filings thereafter. The forward-looking statements contained herein are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry and business. Such forward-looking statements are made as of the date hereof and may become outdated over time. The Company does not assume any responsibility for updating forward-looking statements.
Overview and Background
DLH Holdings Corp. ("DLH") delivers improved health and readiness solutions for federal government customers through digital transformation and cyber security, science research and development, and systems engineering and integration. We bring a unique combination of government sector experience, proven methodology, and unwavering commitment to solve the complex problems faced by civilian and military customers alike, doing so by leveraging multiple capabilities, including cyber technology, artificial intelligence, advanced analytics, cloud-based applications, and telehealth systems.
Competitive Advantages
We believe we are advantageously positioned within our markets through a number of features including, but not limited to:
•highly credentialed workforce;
•predominantly performing as the prime contractor;
•strong past performance record across our government contracts; and
•strong bipartisan support for our key contracts.
We have invested in leading credentials and capabilities that we expect will deliver value to our customers. These investments include the development of secure Information Technology ("IT") platforms; sophisticated data analytic tools and techniques; and implementation process improvement and quality assurance programs and techniques. We are actively pursuing additional credentials that will support our customers' ever evolving missions.
Solutions and Services
We primarily focus on improved deployment and efficiency of large-scale health and defense initiatives for multiple agencies within the federal government, including the Department of Health and Human Services ("HHS"), the Department of Veterans Affairs ("VA"), Department of Defense ("DoD"), and many of their sub-agencies.
We deliver services primarily through prime contracts awarded by the federal government through competitive bidding processes. We have a diverse mix of contract vehicles with various agencies of the federal government, which supports our overall corporate growth strategy. Our revenue is distributed to time and materials contracts (40.6%), firm fixed price contracts (37.6%), and cost reimbursable contracts (21.8%).
We provide the following services and solutions, which are aligned with the long-term needs of our customers:
•Digital Transformation and Cyber Security;
•Science Research and Development; and
•Systems Engineering and Integration
Digital Transformation and Cyber Security
We provide critical digital transformation and cyber security solutions across the federal civilian and cyber defense communities, leveraging advanced technology to modernize obsolete systems, protect sensitive information, manage large datasets, enhance operational efficiency and implement robotic process automation. Our suite of tools includes artificial intelligence and machine learning, cloud enablement, cybersecurity ecosystem, big data analytics, and modeling and simulation.
IT modernization and cyber security maturity are priority initiatives throughout our customer set. Our customers, including numerous institutes and centers within the National Institutes of Health ("NIH"), the Defense Health Agency ("DHA"), The U.S. Army Institute of Surgical Research ("USAISR"), and US Navy, rely on our information technology support to enable their vital missions. We work with these customers to reduce risk and build resilience to cyber and physical threats to the federal government’s infrastructure, providing the full spectrum of cyber capabilities, cryptographic and true cyber engineering,
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Certified Information Security Officer ("CISO") / Information System Security Officer ("ISSO") support, risk management frameworks, Continuity of Operations ("COOP") / Disaster Recovery, services under Cybersecurity Maturity Model Certification ("CMMC") Level 2, and enterprise infrastructure and cloud governance focused on designing and implementing zero trust architecture.
Science Research and Development
We advance scientific knowledge and understanding through our extensive research portfolio and domain expertise. We primarily provide large-scale data analytics, testing and evaluation, clinical trials research services, and epidemiology studies to support multiple operating divisions within HHS, including NIH and the Center for Disease Control and Prevention ("CDC"), as well as the Military Health System.
Our employees support innovative, cutting-edge research on emerging trends, health informatics analyses, and the application of best practices including mobile, social, and interactive media. We leverage evidence-based methods and web technology to drive health equity to our most vulnerable populations through public engagement. Projects often involve highly specialized expertise and transformative R&D support services. Our decades of experience designing, conducting, and analyzing studies for our diverse customer base, and our full-service clinical research solutions are designed for each customer’s specific research and development program. Our employees provide expert knowledge and experience that supports the missions of our customers' mission.
System Engineering and Integration
Our employees specialize in delivering engineering solutions that support our customers' evolving needs by rapidly deploying resources, solutions, and services. This includes specialized engineering expertise, encompassing areas of Command, Control, Communications, Computers, Cyber-Defense, Combat Systems, and Intelligence, Surveillance, and Reconnaissance ("C6ISR"), modeling, simulation & training, performance based logistics, system modernization, technology-enabled health solutions and software engineering on behalf of the US Navy, HHS, VA, and other federal customers.
We utilize automation to accelerate infrastructure innovation and help customers define a lifecycle for automation assets, as well as set standards for version control, testing, and release processes that proved a robust foundation for their customers. DLH delivers IT operational resilience and efficiency in parallel with technology innovation integration, via hybrid and multi-cloud solutions, leveraging integrated services, process automation, advanced tool stacks, and mature quality processes. Our employees engineer, implement, and operate solutions that demonstrate measurable results to satisfy our customer’s management requirements, thus helping customers to confidently deploy secure platforms and technologies that reduce operational costs. We have invested in agile software development credentials for our technical staff, and have achieved Capability Maturity Model Integration ("CMMI") level 3. Our enterprise lifecycle logistics support services encompass military systems deployed worldwide, as well as scientific and IT systems and peripherals for Federal civilian agencies.
Major Customers
Our revenues are from agencies of the U.S. Federal government. A major customer is defined as a customer from whom we derive at least 10% of our revenues. The following table summarizes revenue by customer as follows (in thousands and percent):
| Six Months Ended | |||||||||||||||||||||||||||||
| March 31, | |||||||||||||||||||||||||||||
| 2026 | 2025 | ||||||||||||||||||||||||||||
| Revenue | Percent of total revenue | Revenue | Percent of total revenue | ||||||||||||||||||||||||||
| Department of Health and Human Services | $ | 67,125 | 52.4 | % | $ | 86,745 | 48.2 | % | |||||||||||||||||||||
| Department of Veterans Affairs | 46,649 | 36.3 | % | 62,795 | 34.9 | % | |||||||||||||||||||||||
| Department of Defense | 14,056 | 11.0 | % | 28,066 | 15.6 | % | |||||||||||||||||||||||
| Other customers with less than 10% share of total revenue | 328 | 0.3 | % | 2,388 | 1.3 | % | |||||||||||||||||||||||
| Total revenue | $ | 128,158 | 100.0 | % | $ | 179,994 | 100.0 | % | |||||||||||||||||||||
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We remain dependent upon the continuation of our relationships with our major customers as a significant portion of our revenue is concentrated in each of them. Our results of operations, cash flows and financial condition would be materially adversely affected if we were unable to continue our relationship with any of these customers, if we were to lose any of our material current contracts, or if the amount of services we provide to them is materially reduced.
Major Contracts
We operate primarily through prime contracts awarded by the government through competitive bidding processes. We have a diverse mix of contract vehicles with various agencies of the U.S. government, which supports our overall corporate growth strategy. A major contract is defined as a contract or set of contracts from which we derive at least 10% of our revenues.
The revenue attributable to the VA was derived from separate task orders covering the Company's performance of pharmacy and logistics services at various regional locations, in support of the VA's Consolidated Mail Outpatient Pharmacy ("CMOP") program.
•CMOP pharmacy and logistic services represent approximately $19.7 million and $28.7 million of revenues for the three months ended March 31, 2026 and 2025, respectively, and $46.6 million and $62.8 million of revenues for the six months ended March 31, 2026 and 2025, respectively.
As previously reported, the VA has been soliciting proposals for new contracts covering this work with a requirement for a Service-Disabled Veteran Owned Small Business, or SDVOSB, to perform as the prime contractor. At the start of the second quarter, DLH performed services at three CMOP locations. During the quarter, one site transitioned to a SDVOSB prime contractor at the end of February 2026. Regarding the remaining two locations, one transitioned at the end of April and the other is expected to transition at the end of May 2026.
Backlog
At March 31, 2026, our backlog was approximately $442.4 million of which $75.0 million was funded backlog. At September 30, 2025, our backlog was approximately $514.3 million, of which $114.1 million was funded backlog.
We define backlog as our estimate of remaining future revenue from existing signed contracts, assuming the exercise of all options relating to such contracts. Included in backlog are executed standalone contracts, single award IDIQ contracts, and task orders procured under multi-award IDIQ contracts.
We define funded backlog as the portion of backlog for which funding is appropriated and allocated to the contract by the customer and authorized for payment by the customer, once specified work is completed. Funded backlog does not include the full contract value as customers often allocate funding for contracts on a yearly or quarterly basis.
Circumstances and events may cause changes in the amount of our backlog and funded backlog, including the execution of new contracts, extension of existing contracts, non-renewal or completion of current contracts, early termination, and adjustments to estimates. Changes in funded backlog may be affected by the funding cycles of the government. While no assurances can be given that existing contracts will result in earned revenue in any future period, or at all, our major customers have historically exercised their contractual renewal options.
Backlog value is quantified from management's judgment and assumptions about the volume of services based on past volume trends and current planning developed with customers.
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Forward-Looking Business Trends
As we continue to align the Company’s capabilities with well-funded budget priorities and the current budgetary environment, we believe we are well positioned to win new business in our large addressable market. We are focused on increasing organic growth across our addressable market and delivering robust cash flow. We believe these priorities position the Company to expand within key national programs and mission-critical areas of health and national security. However, additional factors that could affect federal government spending in our addressable market include changes in set-asides for small businesses, changes in budgetary priorities associated with the new administration, and the effect of initiatives such as the Department of Government Efficiency ("DOGE"), on limiting or reducing federal government spending in general. Further, the changing priorities of the new administration may have an adverse impact on our results and, as such new priorities are implemented, it may be difficult for us to accurately predict the effect they will have on our results.
Federal budget outlook for fiscal year 2026:
The U.S. budget and regulatory landscape remains uncertain, and this uncertainty is expected to continue. While full-year appropriations have been enacted for a significant portion of federal agencies, the Company’s performance continues to depend on overall federal spending levels and the extent to which its capabilities align with government priorities. The administration is reviewing agency spending to improve efficiency and productivity, which has resulted in contract reductions, cancellations, and price renegotiations for the Company. Ongoing and future reviews may lead to additional adjustments or cost reduction mandates.
On November 12, 2025, Congress passed and the President signed an appropriations bill to fund certain agencies and extend funding at current levels for the remaining agencies through January 30, 2026. On February 3, 2026, Congress passed and the President signed appropriations for the remainder of the government fiscal year. These appropriations covered nearly all major departments and agencies, including the HHS, VA, and DoD.
Although broader funding disruptions were partially addressed in early February 2026, funding for the Department of Homeland Security has remained subject to continued uncertainty, and full-year appropriations for the Department have not yet been enacted, resulting in ongoing funding instability for that department. With minimal revenue generated from that department, we do not expect a significant impact from this budgetary instability.
In April 2026, the Administration released its proposed fiscal year 2027 budget, reflecting a continued emphasis on higher defense spending relative to previous levels. These increases in defense and national security funding are partially offset by reductions in certain civilian agency spending. While the Administration's budget provides insight into their policy initiatives and spending priorities, the federal budget is subject to Congressional appropriations authority.
The Company closely monitors federal budget, legislative, and contracting developments to adapt its strategies accordingly. While defense and national security spending continue to receive bipartisan support amid ongoing global tensions, uncertainty remains regarding future budget priorities, funding levels, and the potential for further legislative or administrative actions affecting federal spending.
We continue to align the Company’s capabilities with well-funded budget priorities and maintain a competitive cost structure in line with expectations of future business opportunities. Based on these actions and the current budgetary environment, we believe the Company is well positioned to continue winning new business within its addressable market. The Company does not expect the funding disruptions described above to have a material impact on its operations or financial performance.
Potential impact of federal contractual set-aside laws and regulations:
The Federal government has an overall goal of 23% of prime contracts flowing through small businesses and various agencies within the federal government have policies that support small business goals. The effect of set-aside provisions may limit our ability to compete for prime contractor positions on programs that we recompete or that we have targeted for growth. In these cases, the Company may elect to join a team with an eligible contractor as prime for specific pursuits that align with our core markets and corporate growth strategy.
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Results of Operations
The following table summarizes results of operations for the three months ended March 31, 2026 and 2025 (in thousands except for per share amounts, and percentage of revenue):
| Three Months Ended | |||||||||||||||||||||||||||||||||||
| March 31, | |||||||||||||||||||||||||||||||||||
| Consolidated Statements of Operations: | 2026 | 2025 | Change | ||||||||||||||||||||||||||||||||
| Revenue | $ | 59,265 | 100.0 | % | $ | 89,212 | 100.0 | % | $ | (29,947) | |||||||||||||||||||||||||
| Cost of operations: | |||||||||||||||||||||||||||||||||||
| Contract costs | 47,490 | 80.1 | % | 71,594 | 80.3 | % | (24,104) | ||||||||||||||||||||||||||||
| General and administrative costs | 7,530 | 12.7 | % | 8,238 | 9.2 | % | (708) | ||||||||||||||||||||||||||||
| Depreciation and amortization | 4,300 | 7.3 | % | 4,265 | 4.8 | % | 35 | ||||||||||||||||||||||||||||
| Total operating costs | 59,320 | 100.1 | % | 84,097 | 94.3 | % | (24,777) | ||||||||||||||||||||||||||||
Income (loss) from operations | (55) | (0.1) | % | 5,115 | 5.7 | % | (5,170) | ||||||||||||||||||||||||||||
Interest expense, net | 3,139 | 5.3 | % | 3,877 | 4.3 | % | (738) | ||||||||||||||||||||||||||||
Income (loss) before provision for income taxes | (3,194) | (5.4) | % | 1,238 | 1.4 | % | (4,432) | ||||||||||||||||||||||||||||
Provision for income taxes (benefit) | (659) | (1.1) | % | 360 | 0.4 | % | (1,019) | ||||||||||||||||||||||||||||
Net income (loss) | $ | (2,535) | (4.2) | % | $ | 878 | 1.0 | % | $ | (3,413) | |||||||||||||||||||||||||
Net income (loss) per share | |||||||||||||||||||||||||||||||||||
| Basic | $ | (0.17) | $ | 0.06 | $ | (0.23) | |||||||||||||||||||||||||||||
| Diluted | $ | (0.17) | $ | 0.06 | $ | (0.23) | |||||||||||||||||||||||||||||
Revenue
Revenue decreased $29.9 million for the three months ended March 31, 2026 over 2025, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors across our customer base.
Cost of Operations
Contract costs primarily include the costs associated with providing services to our customers. These costs are generally comprised of direct labor and associated fringe benefit costs, subcontract cost, other direct costs, and the related management and infrastructure costs. Contract costs decreased $24.1 million for the three months ended March 31, 2026 over 2025; the decrease was primarily due to the decrease in revenue volume.
General and administrative costs are for those employees not directly providing services to our customers, to include but not limited to executive management, business development, accounting, and human resources. These costs decreased $0.7 million for the three months ended March 31, 2026 as compared to 2025. As a percentage of revenue, general and administrative costs increased to 12.7% from 9.2%, primarily due to the decrease in revenue volume. During the quarter, we made additional reductions to general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.
For the three months ended March 31, 2026, depreciation and amortization expense were approximately $0.2 million and $4.1 million, respectively, as compared to approximately $0.2 million and $4.1 million for the three months ended March 31, 2025, respectively.
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Interest Expense, net
Interest expense, net, includes interest expense on the Company's term loan and amortization of deferred financing costs on debt obligations. Interest expense decreased $0.7 million for the three months ended March 31, 2026 over 2025, primarily due to the prepayment of debt and a decrease in the floating interest rate.
Provision for Income Taxes (Benefit)
Provision for income taxes decreased $1.0 million for the three months ended March 31, 2026 over 2025. The effective tax rate for the three months ended March 31, 2026 and 2025 was 20.6% and 29.1%, respectively. The decrease in the effective tax rate compared to the prior year period was primarily attributable to the Company’s pre-tax loss in the current period, which increased the relative impact of state income taxes and permanent differences. Permanent differences primarily consist of non-deductible expenses, including stock-based compensation, executive compensation limitations under Section 162(m), and other non-deductible items, which do not provide a corresponding tax benefit in a loss position. The Company’s effective tax rate differs from the federal statutory rate of 21.0% primarily due to state income taxes and permanent differences, partially offset by the impact of federal tax legislation enacted in July 2025.
The following table summarizes results of operations for the six months ended March 31, 2026 and 2025 (in thousands except for per share amounts, and percentage of revenue):
| Six Months Ended | |||||||||||||||||||||||||||||||||||
| March 31, | |||||||||||||||||||||||||||||||||||
| Consolidated Statements of Operations: | 2026 | 2025 | Change | ||||||||||||||||||||||||||||||||
| Revenue | $ | 128,158 | 100.0 | % | $ | 179,994 | 100.0 | % | $ | (51,836) | |||||||||||||||||||||||||
| Cost of operations: | |||||||||||||||||||||||||||||||||||
| Contract costs | 102,885 | 80.3 | % | 144,365 | 80.2 | % | (41,480) | ||||||||||||||||||||||||||||
| General and administrative costs | 15,291 | 11.9 | % | 16,305 | 9.1 | % | (1,014) | ||||||||||||||||||||||||||||
| Depreciation and amortization | 8,600 | 6.7 | % | 8,572 | 4.8 | % | 28 | ||||||||||||||||||||||||||||
| Total operating costs | 126,776 | 98.9 | % | 169,242 | 94.0 | % | (42,466) | ||||||||||||||||||||||||||||
Income (loss) from operations | 1,382 | 1.1 | % | 10,752 | 6.0 | % | (9,370) | ||||||||||||||||||||||||||||
Interest expense, net | 6,535 | 5.1 | % | 8,010 | 4.5 | % | (1,475) | ||||||||||||||||||||||||||||
Income (loss) before provision for income taxes | (5,153) | (4.0) | % | 2,742 | 1.5 | % | (7,895) | ||||||||||||||||||||||||||||
Provision for income taxes (benefit) | (1,294) | (1.0) | % | 750 | 0.4 | % | (2,044) | ||||||||||||||||||||||||||||
Net income (loss) | $ | (3,859) | (3.0) | % | $ | 1,992 | 1.1 | % | $ | (5,851) | |||||||||||||||||||||||||
Net income (loss) per share | |||||||||||||||||||||||||||||||||||
| Basic | $ | (0.27) | $ | 0.14 | $ | (0.41) | |||||||||||||||||||||||||||||
| Diluted | $ | (0.27) | $ | 0.14 | $ | (0.41) | |||||||||||||||||||||||||||||
Revenue
Revenue decreased $51.8 million for the six months ended March 31, 2026 over 2025, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors.
Cost of Operations
Contract costs primarily include the costs associated with providing services to our customers. These costs are generally comprised of direct labor and associated fringe benefit costs, subcontract cost, other direct costs, and the related management and infrastructure costs. Contract costs decreased $41.5 million for the six months ended March 31, 2026 and 2025. The decrease was primarily due to the decrease in revenue volume.
General and administrative costs are for those employees not directly providing services to our customers, to include but not limited to executive management, business development, accounting, and human resources. These costs decreased $1.0 million for the six months ended March 31, 2026 over 2025. As a percentage of revenue, general and administrative costs increased to 11.9% from 9.1%, with the increase being primarily due to the change in revenue volume. During the quarter, we made
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additional reductions to general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.
For the six months ended March 31, 2026, depreciation and amortization expense were approximately $0.4 million and $8.2 million, respectively, as compared to approximately $0.3 million and $8.2 million for the six months ended March 31, 2025, respectively.
Interest Expense, net
Interest expense, net, includes interest expense on the Company's term loan and amortization of deferred financing costs on debt obligations. Interest expense decreased $1.5 million for six months ended March 31, 2026 over 2025, primarily due to the prepayment of debt and a decrease in the floating interest rate.
Provision for Income Taxes (Benefit)
Provision for income taxes decreased $2.0 million for the six months ended March 31, 2026 over 2025. The effective tax rate for the six months ended March 31, 2026 and 2025 was 25.2% and 27.4%, respectively.
Non-GAAP Financial Measures
The Company is presenting certain non-GAAP measures regarding its financial performance. The measures presented are Earnings Before Interest, Taxes, Depreciation, and Amortization ("EBITDA"), Adjusted EBITDA, and Adjusted Income from Operations. Adjusted EBITDA is calculated by excluding from EBITDA certain costs associated with scaling indirect costs to revenue volume and Adjusted Income from Operations is calculated by excluding such costs associated with scaling indirect costs to revenue volume from Income from Operations. These resulting measures present our financial performance compared to the results delivered in the prior year period.
On a non-GAAP basis, EBITDA for the six months ended March 31, 2026 and 2025 was approximately $10.0 million and $19.3 million, and Adjusted EBITDA for such periods was $11.9 million and $19.3 million, respectively. On a non-GAAP basis, Adjusted Income from Operations for the six months ended March 31, 2026 and 2025 was approximately $3.3 million and $10.8 million, respectively. The year over year decrease in the foregoing measures was primarily due to the decrease in revenue volume driven by conversion of certain VA and HHS contracts to small business contractors.
These non-GAAP measures of performance are used by management to conduct and evaluate its business during its review of operating results for the periods presented. Management and the Company's Board utilize these non-GAAP measures to make decisions about the use of the Company's resources, analyze performance between periods, develop internal projections, and measure management performance. We have prepared Adjusted Income from Operations and Adjusted EBITDA to eliminate the impact of cost scaling initiatives that we do not consider indicative of our ongoing operating performance due to their inherently unusual nature. We believe that these non-GAAP measures are useful to investors in evaluating the Company's ongoing operating and financial results and understanding how such results compare with the Company's historical performance.
These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies in our industry. Adjusted Income from Operations, EBITDA, and Adjusted EBITDA are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance investors should (i) evaluate each adjustment in our reconciliation to the nearest GAAP financial measures and (ii) use these non-GAAP measures in addition to, and not as an alternative to, revenue, operating income, net income or diluted EPS, as measures of operating results, each as defined under GAAP. We have defined these non-GAAP measures as follows:
“Adjusted Income from Operations” represents income from operations before the costs associated with scaling general and administrative costs to revenue volume, referred to below as “Cost scaling initiatives”.
"EBITDA" represents net income before income taxes, interest, depreciation and amortization.
“Adjusted EBITDA” represents net income before income taxes, interest, depreciation and amortization and the costs associated with scaling general and administrative costs to revenue volume.
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Below is a reconciliation of Adjusted Income from Operations, EBITDA, and Adjusted EBITDA reported for the three months ended March 31, 2026 and 2025 to its most directly comparable financial measure calculated and presented in accordance with GAAP as follows (in thousands):
| Three Months Ended | Six Months Ended | |||||||||||||||||||||||||||||||||||||
| March 31, | March 31, | |||||||||||||||||||||||||||||||||||||
| 2026 | 2025 | Change | 2026 | 2025 | Change | |||||||||||||||||||||||||||||||||
Adjusted Income from Operations | ||||||||||||||||||||||||||||||||||||||
Income (loss) from Operations | $ | (55) | $ | 5,115 | $ | (5,170) | $ | 1,382 | $ | 10,752 | $ | (9,370) | ||||||||||||||||||||||||||
Cost scaling initiatives⁽¹⁾ | 1,082 | — | 1,082 | 1,890 | — | 1,890 | ||||||||||||||||||||||||||||||||
Adjusted Income from Operations | $ | 1,027 | $ | 5,115 | $ | (4,088) | $ | 3,272 | $ | 10,752 | $ | (7,480) | ||||||||||||||||||||||||||
EBITDA and Adjusted EBITDA | ||||||||||||||||||||||||||||||||||||||
Net income (loss) | $ | (2,535) | $ | 878 | $ | (3,413) | $ | (3,859) | $ | 1,992 | $ | (5,851) | ||||||||||||||||||||||||||
Depreciation and amortization | 4,300 | 4,265 | 35 | 8,600 | 8,572 | 28 | ||||||||||||||||||||||||||||||||
Interest expense, net | 3,139 | 3,877 | (738) | 6,535 | 8,010 | (1,475) | ||||||||||||||||||||||||||||||||
Provision for income taxes (benefit) | (659) | 360 | (1,019) | (1,294) | 750 | (2,044) | ||||||||||||||||||||||||||||||||
| EBITDA | $ | 4,245 | $ | 9,380 | $ | (5,135) | $ | 9,982 | $ | 19,324 | $ | (9,342) | ||||||||||||||||||||||||||
Cost scaling initiatives⁽¹⁾ | 1,082 | — | 1,082 | 1,890 | — | 1,890 | ||||||||||||||||||||||||||||||||
Adjusted EBITDA | $ | 5,327 | $ | 9,380 | $ | (4,053) | $ | 11,872 | $ | 19,324 | $ | (7,452) | ||||||||||||||||||||||||||
(1) Cost scaling initiatives consist of expenses incurred by the Company in scaling its business to align with its current contract volume resulting from the previously disclosed conversion of programs for which the Company previously served as prime contractor to small business contractors.
Liquidity and capital management
Cash was approximately $0.1 million and $0.1 million as of March 31, 2026 and September 30, 2025, respectively.
Available borrowings under our revolving credit facility was approximately $9.7 million and $23.6 million for the periods ended March 31, 2026 and September 30, 2025, respectively. The decrease is primarily due to a lower outstanding receivables balance at March 31, 2026.
A summary of the change in cash is presented as follows (in thousands):
| Six Months Ended | ||||||||||||||||||||||||||
| March 31, | ||||||||||||||||||||||||||
| 2026 | 2025 | Change | ||||||||||||||||||||||||
Net cash provided by (used in) operating activities | $ | (984) | $ | 2,965 | $ | (3,949) | ||||||||||||||||||||
| Net cash used in investing activities | (39) | (1) | (38) | |||||||||||||||||||||||
Net cash provided by (used in) financing activities | 1,029 | (3,110) | 4,139 | |||||||||||||||||||||||
| Net change in cash | $ | 6 | $ | (146) | $ | 152 | ||||||||||||||||||||
Cash flows provided by (used in) operating activities totaled approximately $(1.0) million and $3.0 million for the six months ended March 31, 2026 and 2025, respectively. The decrease in cash provided by operating activities is primarily due to a decrease in revenue volume as compared to the prior year.
Cash used in investing activities totaled $39.0 thousand and $1.0 thousand for the six months ended March 31, 2026 and 2025, respectively. The cash utilized was predominantly due to capital expenditures in the six months ended March 31, 2026 and 2025, respectively.
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Cash provided by (used in) financing activities during the six months ended March 31, 2026 and 2025 were approximately $1.0 million and $(3.1) million, respectively. The cash provided by financing activities was primarily driven by net borrowings on the revolving credit facility, partially offset by term debt prepayment.
Sources of cash
As of March 31, 2026, our immediate sources of liquidity include cash, accounts receivable, and access to our secured revolving line of credit facility. This credit facility provides us with access of up to $50.0 million, subject to certain conditions including eligible accounts receivable. As of March 31, 2026, we had unused borrowing capacity of $9.7 million, which is net of outstanding letters of credit. The Company's present operating liabilities are largely predictable and consist of vendor and payroll related obligations. We believe that our current investment and financing obligations are adequately covered by cash generated from profitable operations and that planned operating cash flow should be sufficient to support our operations for twelve months from the date of issuance of these consolidated financial statements.
Credit Facilities
A summary of our credit facilities for the period ended March 31, 2026 is as follows (in millions):
| Arrangement | Loan Balance | Interest* | Maturity Date | |||||||||||||||||
| Secured term loan (a) due December 8, 2027 | $ | 122.0 | SOFR1 + 4.1% | December 8, 2027 | ||||||||||||||||
| Secured revolving line of credit (b) due December 8, 2027 | $ | 10.7 | SOFR1 + 4.1% | December 8, 2027 | ||||||||||||||||
1Secured Overnight Financing Rate ("SOFR") as of March 31, 2026 was 3.8%.
On January 31, 2023, we executed a floating-to-fixed interest rate swap with FNB which had a notional amount of $74.0 million, and a fixed interest rate of 4.10%. The swap matured on January 31, 2026. As of March 31, 2026, no interest rate swaps were outstanding and all debt is subject to floating interest rates.
(a) Represents the principal amounts payable on our term loan, which is secured by liens on substantially all of the assets of the Company. The principal of the term loan is payable in quarterly installments with the remaining balance due on December 8, 2027.
(b) As amended, the secured revolving line of credit has a ceiling of up to $50.0 million and a maturity date of December 8, 2027. The Company has accessed funds from the revolving credit facility during the quarter and has a balance outstanding at March 31, 2026 of $10.7 million.
The secured term loan and secured revolving line of credit are secured by liens on substantially all of the assets of the Company. The provisions of our credit facilities are fully described in Note 7. Credit Facilities to the consolidated financial statements.
Contractual Obligations
Contractual obligations as of March 31, 2026 are as follows (in thousands):
| Payments Due by Period | |||||||||||||||||||||||||||||
| Next 12 | 2-3 | 4-5 | More than 5 | ||||||||||||||||||||||||||
| Total | Months | Years | Years | Years | |||||||||||||||||||||||||
| Debt obligations | $ | 132,690 | $ | 21,065 | $ | 111,625 | $ | — | $ | — | |||||||||||||||||||
| Facility operating leases | 18,641 | 3,997 | 6,935 | 6,579 | 1,130 | ||||||||||||||||||||||||
| Total contractual obligations | $ | 151,331 | $ | 25,062 | $ | 118,560 | $ | 6,579 | $ | 1,130 | |||||||||||||||||||
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Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are disclosed in the Critical Accounting Policies and Estimates section in Part II, “Item 7. Management's Discussion of our Annual Report on Form 10-K for the year ended September 30, 2025. There have been no significant changes to the Company’s critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended September 30, 2025. For a detailed discussion on the application of accounting policies, refer to Note 2. Significant Accounting Policies.
Goodwill Impairment Testing
The qualitative assessment of goodwill at March 31, 2026 determined a triggering event occurred requiring that we conduct additional quantitative analyses. The triggering event was primarily due to the decrease in the Company's share price resulting in a decline in market capitalization. Management's assessment was that the market capitalization at the end of the 2nd quarter was not indicative of the Company's fair value.
The Company performed a quantitative assessment to determine its fair value. The quantitative assessment blended multiple methods so as to have a reasonable and complete assessment of fair value. The methods used included both market and income-based approaches with all methods utilizing publicly available information in their respective calculations. Management assessed the relevance and reliability of the information utilized in each method. Significant estimates in the market-based method included identifying similar companies with comparable business factors such as service offerings, customers, size, growth, profitability, risk and return on investment, as well as assessing comparable market multiples and control premiums in estimating the fair value of the Company. The income-based method is a discounted cash flow analysis and the significant estimates included expected growth rates, profitability and the weighted average cost of capital.
For the market-based methods, the Company used the average market capitalization over the current quarter with the inclusion of a control premium as one estimation of fair value. The other market-based method used publicly available market multiples of relevant publicly traded companies applied to our expected EBITDA and revenue for fiscal 2026 to estimate the Company's fair value. For the income-based method, the Company calculated its expected future cash flows. Those cash flows were then discounted to present value using a weighted average cost of capital. The weighted average of the three assessments indicated that the Company's fair value was greater than its book equity value.
As a result of these quantitative assessments, the Company determined that its goodwill was not impaired at the end of the quarter. Management will continue to evaluate market conditions and perform qualitative interim assessments to determine if a triggering event has occurred. Should a triggering event occur, the Company will perform a quantitative assessment to estimate fair value.
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Except as described elsewhere in this report, the Company has not engaged in trading practices in securities or other financial instruments and therefore does not have any material exposure to interest rate risk, foreign currency exchange rate risk, commodity price risk or other similar risks, which might otherwise result from such practices. The Company has limited foreign operations and therefore is not materially subject to fluctuations in foreign exchange rates, commodity prices or other market rates or prices from market sensitive instruments. The Company had floating-to-fixed a interest rate swap with a notional amount of $74.0 million, which matured on January 31, 2026. As of March 31, 2026, no interest rate swaps were outstanding and all debt is subject to floating interest rates.
We have determined that a 1.0% increase to SOFR would impact our interest expense by approximately $1.3 million per year. As of March 31, 2026, the interest rate on the floating interest rate debt was 7.9%.
ITEM 4: CONTROLS AND PROCEDURES
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Evaluation of Disclosure Controls and Procedures
Our CEO and President and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on the evaluation of these controls and procedures, our disclosure controls and procedures were effective at the reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 (i) is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) that such information is accumulated and communicated to our management, including our CEO and President and Chief Financial Officer, to allow timely decisions regarding required disclosure.
Our management, including our CEO and President and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. Our management, however, believes our disclosure controls and procedures are in fact effective to provide reasonable assurance that the objectives of the control system are met.
Changes in Internal Control over Financial Reporting
There were no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) identified in connection with the evaluation of our internal controls that occurred during the fiscal quarter ended March 31, 2026, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS
As a commercial enterprise and employer, the Company is subject to various claims and legal actions in the ordinary course of business. These matters can include professional liability, workers’ compensation, tax, payroll and employee-related matters, other commercial disputes arising in the course of its business, and inquiries and investigations by governmental agencies regarding our employment practices or other matters. The Company is not aware of any pending or threatened litigation that it believes is reasonably likely to have a material adverse effect on its results of operations, financial position or cash flows.
ITEM 1A: RISK FACTORS
Our operating results and financial condition have varied in the past and may in the future vary significantly depending on a number of factors. In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” section in our Annual Report on Form 10-K for the year ended September 30, 2025 and in our other reports filed with the SEC concerning the risks associated with our business, financial condition and results of operations. These factors, among others, could materially and adversely affect our business, results of operations, financial condition or liquidity and cause our actual results to differ materially from those contained in statements made in this report and presented elsewhere by management from time to time. The risks we have identified in our reports are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also materially adversely affect our business, results of operations, financial condition or liquidity. See Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025. We believe that there have been no material changes from the risk factors described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2025.
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the period covered by this report, the Company did not issue any securities that were not registered under the Securities Act of 1933, as amended, except as has been reported in previous filings with the SEC or as set forth elsewhere herein.
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ITEM 3: DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4: MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5: OTHER INFORMATION
(a) None
(b) None
(c) During the three months ended March 31, 2026, no director or officer of the Company adopted terminated
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ITEM 6: EXHIBITS
Exhibits to this report which have previously been filed with the Commission are incorporated by reference to the document referenced in the following table. The exhibits designated with a number sign (#) indicate a management contract or compensation plan or arrangement.
| Exhibit | Incorporated by Reference | Filed | |||||||||||||||||||||||||||||||||
| Number | Exhibit Description | Form | Dated | Exhibit | Herewith | ||||||||||||||||||||||||||||||
| 10.1 | Amendment to 2025 Equity Incentive Plan | DEF 14A | January 28, 2026 | Appendix A | |||||||||||||||||||||||||||||||
| 31.1 | Certification of Chief Executive Officer pursuant to Section 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a) | X | |||||||||||||||||||||||||||||||||
| 31.2 | Certification of Chief Financial Officer pursuant to Section 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a) | X | |||||||||||||||||||||||||||||||||
| 32 | Certification of Chief Executive Officer and Chief Financial Officer pursuant to 17 CFR 240.13a-14(b) or 17 CFR 240.15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code | X | |||||||||||||||||||||||||||||||||
99.1 | Consent of Becker & Poliakoff, P.A. (refiled herewith to correct the hyperlink to Exhibit 23.3 to Form S-8 filed April 1, 2025) | X | |||||||||||||||||||||||||||||||||
99.2 | Consent of Becker & Poliakoff, P.A. (refiled herewith to correct the hyperlink to Exhibit 23.2 to Form S-8 filed April 8, 2026) | X | |||||||||||||||||||||||||||||||||
99.3 | Power of Attorney (refiled herewith to correct the hyperlink to Exhibit 24.1 to Form S-8 filed April 1, 2025) | X | |||||||||||||||||||||||||||||||||
99.4 | Power of Attorney (refiled herewith to correct the hyperlink to Exhibit 24.1 to Form S-8 filed April 8, 2026) | X | |||||||||||||||||||||||||||||||||
| 101.0 | The following financial information from the DLH Holdings Corp. Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2026, formatted in iXBRL (Inline eXtensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Cash Flows; and, (iv) the Notes to the Consolidated Financial Statements. | X | |||||||||||||||||||||||||||||||||
| 104.0 | Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101) | ||||||||||||||||||||||||||||||||||
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SIGNATURE
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized
| DLH HOLDINGS CORP. | |||||||||||
| By: | /s/ Kathryn M. JohnBull | ||||||||||
| Kathryn M. JohnBull | |||||||||||
| Chief Financial Officer | |||||||||||
| (On behalf of the Registrant and as Principal Financial and Accounting Officer) | |||||||||||
Dated: May 06, 2026 | |||||||||||
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FAQ
How did DLHC perform financially in the quarter ended March 31, 2026?
DLHC reported quarterly revenue of $59.3 million and a net loss of $2.5 million, or $(0.17) per diluted share. A year earlier, it generated $89.2 million of revenue and $0.9 million of net income, reflecting a significant year‑over‑year deterioration.
Why did DLHC’s revenue decline compared with the prior year?
Revenue declined mainly because several contracts shifted to small‑business contractors, including major Veterans Affairs Consolidated Mail Outpatient Pharmacy task orders. This transition reduced volume across key federal customers and drove a $29.9 million quarterly revenue drop versus the prior year.
What is DLHC’s current debt and interest rate exposure?
DLHC had $122.0 million outstanding on its secured term loan and $10.7 million on its revolving credit facility at March 31, 2026. All debt now bears floating interest at SOFR plus 4.1%, and a 1% SOFR increase would raise annual interest expense by about $1.3 million.
How much backlog does DLHC report, and what does it indicate?
DLHC reported total backlog of about $442.4 million, including $75.0 million of funded backlog, at March 31, 2026. This compares with $514.3 million total backlog previously, suggesting a reduced base of contracted future work after recent program transitions.
Did DLHC record any goodwill impairment this quarter?
No. After a share‑price decline triggered a detailed goodwill review, DLHC used market and income‑based valuation methods and concluded its fair value exceeded book equity. As a result, the company determined that its goodwill was not impaired for the quarter.
What is DLHC’s liquidity position as of March 31, 2026?
DLHC held $0.1 million of cash and had $9.7 million of unused borrowing capacity on its $50 million revolving credit facility. Management believes operating cash flow and available credit are sufficient to support operations for at least twelve months from the reporting date.
How are DLHC’s non-GAAP metrics trending?
For the six months ended March 31, 2026, DLHC’s EBITDA was $10.0 million and Adjusted EBITDA was $11.9 million, both down from $19.3 million a year earlier. Adjusted Income from Operations fell to $3.3 million from $10.8 million, reflecting lower revenue despite cost‑scaling efforts.