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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2025
☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission File No. 0-18492
DLH HOLDINGS CORP.
(Exact name of registrant as specified in its charter)

New Jersey |  | 22-1899798
(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)
3565 Piedmont Road, | Building 3, | Suite 700 |  |  | 30305
Atlanta, | Georgia |  |  |  | (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
Common Stock | DLHC | Nasdaq | 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 | ☒
Non-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: 14,386,468 shares of Common Stock, par value $0.001 per share, were outstanding as of August 4, 2025.

DLH HOLDINGS CORP.
FORM 10-Q
TABLE OF CONTENTS
Page No.

PART I FINANCIAL INFORMATION | 3
ITEM I: 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 | 22
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 | 32
ITEM 4: MINE SAFETY DISCLOSURES | 32
ITEM 5: OTHER INFORMATION | 32
ITEM 6: EXHIBITS | 33
SIGNATURE | 34

2

PART I FINANCIAL INFORMATION
ITEM I: FINANCIAL STATEMENTS (UNAUDITED)
DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in thousands, except per share amounts)

|  | Three Months Ended |  | Nine Months Ended |
|  | June 30, |  | June 30, |
|  | 2025 |  | 2024 |  | 2025 |  | 2024 |
Revenue |  | $ | 83,343 |  |  | $ | 100,694 |  |  | $ | 263,337 |  |  | $ | 299,551 |  |
Cost of operations: |  |  |  |  |  |  |  |  |
Contract costs |  | 67,420 |  |  | 81,646 |  |  | 211,012 |  |  | 239,839 |  |
General and administrative costs |  | 7,860 |  |  | 9,013 |  |  | 24,939 |  |  | 28,420 |  |
Depreciation and amortization |  | 4,308 |  |  | 4,272 |  |  | 12,880 |  |  | 12,769 |  |
Total operating costs |  | 79,588 |  |  | 94,931 |  |  | 248,831 |  |  | 281,028 |  |
Income from operations |  | 3,755 |  |  | 5,763 |  |  | 14,506 |  |  | 18,523 |  |
Interest expense |  | 3,540 |  |  | 4,143 |  |  | 11,549 |  |  | 12,991 |  |
Income before provision for income tax |  | 215 |  |  | 1,620 |  |  | 2,957 |  |  | 5,532 |  |
Provision for income tax (benefit) expense |  | (74) |  |  | 481 |  |  | 676 |  |  | 430 |  |
Net income |  | $ | 289 |  |  | $ | 1,139 |  |  | $ | 2,281 |  |  | $ | 5,102 |  |
Net income per share - basic |  | $ | 0.02 |  |  | $ | 0.08 |  |  | $ | 0.16 |  |  | $ | 0.36 |  |
Net income per share - diluted |  | $ | 0.02 |  |  | $ | 0.08 |  |  | $ | 0.16 |  |  | $ | 0.35 |  |
Weighted average common stock outstanding |  |  |  |  |  |  |  |  |
Basic |  | 14,386 |  |  | 14,232 |  |  | 14,386 |  |  | 14,156 |  |
Diluted |  | 14,450 |  |  | 14,704 |  |  | 14,458 |  |  | 14,716 |  |

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)

|  | June 30, 2025 |  | September 30, 2024 |
|  | Unaudited |  |  |
ASSETS |  |  |  |  |
Current assets: |  |  |  |  |
Cash |  | $ | 194 |  |  | $ | 342 |  |
Accounts receivable |  | 44,916 |  |  | 49,849 |  |
Other current assets |  | 4,477 |  |  | 2,766 |  |
Total current assets |  | 49,587 |  |  | 52,957 |  |
Goodwill |  | 138,161 |  |  | 138,161 |  |
Intangible assets, net |  | 95,979 |  |  | 108,321 |  |
Operating lease right-of-use assets |  | 9,259 |  |  | 6,681 |  |
Deferred income taxes, net |  | 4,808 |  |  | 6,245 |  |
Equipment and improvements, net |  | 1,432 |  |  | 1,830 |  |
Other long-term assets |  | 115 |  |  | 186 |  |
Total assets |  | $ | 299,341 |  |  | $ | 314,381 |  |
LIABILITIES AND SHAREHOLDERS’ EQUITY |  |  |  |  |
Current liabilities: |  |  |  |  |
Accounts payable and accrued liabilities |  | $ | 13,676 |  |  | $ | 25,290 |  |
Debt obligations - current, net of deferred financing costs |  | 14,039 |  |  | 12,058 |  |
Accrued payroll |  | 15,022 |  |  | 12,848 |  |
Operating lease liabilities - current |  | 2,711 |  |  | 2,652 |  |
Other current liabilities |  | 375 |  |  | 394 |  |
Total current liabilities |  | 45,823 |  |  | 53,242 |  |
Long-term liabilities: |  |  |  |  |
Debt obligations - long-term, net of deferred financing costs |  | 124,309 |  |  | 137,316 |  |
Operating lease liabilities - long-term |  | 14,829 |  |  | 12,789 |  |
Other long-term liabilities |  | 682 |  |  | 902 |  |
Total long-term liabilities |  | 139,820 |  |  | 151,007 |  |
Total liabilities |  | 185,643 |  |  | 204,249 |  |
Shareholders' equity: |  |  |  |  |
Common stock, $0.001 par value; 40,000 shares authorized; 14,386 and 14,386 shares issued and outstanding at June 30, 2025 and September 30, 2024, respectively |  | 14 |  |  | 14 |  |
Additional paid-in capital |  | 101,555 |  |  | 100,270 |  |
Retained earnings |  | 12,129 |  |  | 9,848 |  |
Total shareholders’ equity |  | 113,698 |  |  | 110,132 |  |
Total liabilities and shareholders' equity |  | $ | 299,341 |  |  | $ | 314,381 |  |

The accompanying notes are an integral part of these consolidated financial statements.
4

DLH HOLDINGS CORP.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(unaudited, in thousands)

|  | Nine Months Ended |
|  | June 30, |
|  | 2025 |  | 2024 |
Operating activities |  |  |  |  |
Net income |  | $ | 2,281 |  |  | $ | 5,102 |  |
Adjustments to reconcile net income to net cash provided by operating activities: |  |  |  |  |
Depreciation and amortization |  | 12,880 |  |  | 12,769 |  |
Amortization of deferred financing costs charged to interest expense |  | 1,309 |  |  | 1,437 |  |
Stock-based compensation expense |  | 1,284 |  |  | 2,290 |  |
Deferred income taxes, net |  | 1,437 |  |  | (311) |  |
Changes in operating assets and liabilities: |  |  |  |  |
Accounts receivable |  | 4,933 |  |  | 778 |  |
Other assets |  | (4,216) |  |  | 2,484 |  |
Accounts payable and accrued liabilities |  | (11,614) |  |  | (6,515) |  |
Accrued payroll |  | 2,175 |  |  | 437 |  |
Other liabilities |  | 2,067 |  |  | (3,540) |  |
Net cash provided by operating activities |  | 12,536 |  |  | 14,931 |  |
Investing activities |  |  |  |  |
Purchase of equipment and improvements |  | (213) |  |  | (627) |  |
Net cash used in investing activities |  | (213) |  |  | (627) |  |
Financing activities |  |  |  |  |
Proceeds from revolving line of credit |  | 172,056 |  |  | 257,067 |  |
Repayment of revolving line of credit |  | (170,075) |  |  | (252,123) |  |
Repayments of debt obligations |  | (14,250) |  |  | (17,813) |  |
Payments of deferred financing costs |  | (202) |  |  | — |  |
Proceeds from issuance of common stock upon exercise of options and warrants |  | — |  |  | 261 |  |
Payment of tax obligations resulting from net exercise of stock options |  | — |  |  | (1,488) |  |
Net cash used in financing activities |  | (12,471) |  |  | (14,096) |  |
Net change in cash |  | (148) |  |  | 208 |  |
Cash - beginning of period |  | 342 |  |  | 215 |  |
Cash - end of period |  | $ | 194 |  |  | $ | 423 |  |
Supplemental disclosure of cash flow information |  |  |  |  |
Cash paid during the period for interest |  | $ | 10,415 |  |  | $ | 11,656 |  |
Cash paid during the period for income taxes |  | $ | 563 |  |  | $ | 2,280 |  |
Supplemental disclosure of non-cash activity |  |  |  |  |
Common stock surrendered for the exercise of stock options |  | $ | — |  |  | $ | 2,432 |  |
Lease liability recognized to acquire a right-of-use asset |  | $ | 4,187 |  |  | $ | — |  |

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 March 31, 2025 |  | 14,386 |  | $ | 14 |  |  | $ | 100,995 |  |  | $ | 11,840 |  |  | $ | 112,849 |
Expense related to director restricted stock units |  | — |  |  | — |  |  | 155 |  |  | — |  |  | 155 |
Expense related to employee stock-based compensation |  | — |  |  | — |  |  | 405 |  |  | — |  |  | 405 |
Net income |  | — |  |  | — |  |  | — |  |  | 289 |  |  | 289 |
Balance at June 30, 2025 |  | 14,386 |  | $ | 14 |  |  | $ | 101,555 |  |  | $ | 12,129 |  |  | $ | 113,698 |

|  | Common Stock |  | Additional Paid-In Capital |  | Retained Earnings |  | Total Shareholders' Equity
|  | Shares |  | Amount |  |  |
Balance at September 30, 2024 |  | 14,386 |  | $ | 14 |  |  | $ | 100,270 |  |  | $ | 9,848 |  |  | $ | 110,132 |
Expense related to director restricted stock units |  | — |  |  | — |  |  | 464 |  |  | — |  |  | 464 |
Expense related to employee stock-based compensation |  | — |  |  | — |  |  | 821 |  |  | — |  |  | 821 |
Net income |  | — |  |  | — |  |  | — |  |  | 2,281 |  |  | 2,281 |
Balance at June 30, 2025 |  | 14,386 |  | $ | 14 |  |  | $ | 101,555 |  |  | $ | 12,129 |  |  | $ | 113,698 |

|  | Common Stock |  | Additional Paid-In Capital |  | Retained Earnings |  | Total Shareholders' Equity
|  | Shares |  | Amount |  |  |
Balance at March 31, 2024 |  | 14,230 |  | 14 |  | $ | 100,322 |  |  | $ | 6,414 |  |  | $ | 106,750 |
Expense related to director restricted stock units |  | — |  |  | — |  |  | 180 |  |  | — |  |  | 180 |
Expense related to employee stock-based compensation |  | — |  |  | — |  |  | 537 |  |  | — |  |  | 537 |
Common stock surrendered for the exercise of stock options |  | (47) |  | — |  |  | (1) |  |  | — |  |  | (1) |
Net income |  | — |  |  | — |  |  | — |  |  | 1,139 |  |  | 1,139 |
Balance at June 30, 2024 |  | 14,183 |  |  | $ | 14 |  |  | $ | 101,038 |  |  | $ | 7,553 |  |  | $ | 108,605 |

|  | Common Stock |  | Additional Paid-In Capital |  | Retained Earnings |  | Total Shareholders' Equity
|  | Shares |  | Amount |  |  |
Balance at September 30, 2023 |  | 13,950 |  | $ | 14 |  |  | $ | 99,974 |  |  | $ | 2,451 |  |  | $ | 102,439 |
Expense related to director restricted stock units |  | — |  |  | — |  |  | 439 |  |  | — |  |  | 439 |
Expense related to employee stock-based compensation |  | — |  |  | — |  |  | 1,851 |  |  | — |  |  | 1,851 |
Exercise of stock options |  | 535 |  | — |  |  | 261 |  |  | — |  |  | 261 |
Common stock surrendered for the exercise of stock options |  | (302) |  | — |  |  | (1,487) |  |  | — |  |  | (1,487) |
Net income |  | — |  |  | — |  |  | — |  |  | 5,102 |  |  | 5,102 |
Balance at June 30, 2024 |  | 14,183 |  |  | $ | 14 |  |  | $ | 101,038 |  |  | $ | 7,553 |  |  | $ | 108,605 |

The accompanying notes are an integral part of these consolidated financial statements.
6

DLH HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
June 30, 2025
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 United States generally accepted accounting principles ("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.
Operating results for the nine months ended June 30, 2025 are not necessarily indicative of the results that may be expected for the year ending September 30, 2025 or any future period. Amounts as of June 30, 2025 and for the three and nine months ended June 30, 2025 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, 2024 filed with the Securities and Exchange Commission on December 4, 2024.
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.
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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 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.
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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 June 30, 2025, operating leases for facilities and equipment have remaining lease terms of less than 1 year to 6.5 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 June 30, 2025 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 2025 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 year ended September 30, 2024.
Income Tax
The Company accounts for income taxes in accordance with the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reflected on the consolidated balance sheets when it is determined that it is more likely than not that the asset will be realized. This guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is more likely than not that the position will be sustained upon examination. We had no uncertain tax positions at either June 30, 2025 or September 30, 2024. We report interest and penalties as a component of provision for income taxes. During the nine months ended June 30, 2025 and 2024, we recognized no interest and no penalties related to income taxes.
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
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grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. For other equity awards 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
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. We maintain cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000. Deposits held with financial institutions may exceed the $250,000 limit.
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 allowance for doubtful accounts was deemed necessary at either June 30, 2025 or September 30, 2024.
Earnings Per Share
Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common stock 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. Diluted earnings per share is calculated using the treasury stock method.
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 June 30, 2025 and September 30, 2024, the Company did not hold any treasury stock.
Preferred Stock
Our certificate of incorporation authorizes the issuance of "blank check" preferred stock with designations, rights and preferences as may be determined from time to time by our board of directors up to an aggregate of 5,000,000 shares of preferred stock. As of June 30, 2025 and September 30, 2024, the Company has not issued any 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 June 30, 2025 and September 30, 2024, there was no indication of any global or economic impact to our industry.
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3. New Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which will require public entities to disclose significant segment expenses that are regularly provided to the Company’s Chief Operating Decision Maker (“CODM”) and included in the measure of segment profit or loss. The standard also requires disclosure of the title and position of the CODM, as well as a description of how the CODM uses segment profit or loss information in evaluating performance and allocating resources. We will adopt ASU 2023-07 in our Annual Report on Form 10-K for the fiscal year ending September 30, 2025. DLH operates as a single reporting segment. Given the single-segment structure, we do not expect the adoption of this standard to have a significant impact on our consolidated financial statements or related disclosures.
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) 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):

|  | June 30, |  | September 30,
|  | 2025 |  | 2024
Contract assets |  | $ | 19,837 |  |  | $ | 23,945 |

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. There were no contract liabilities as of June 30, 2025 and September 30, 2024.
Disaggregation of Revenue from Contracts with Customers
We disaggregate our revenue from contracts with customers by customer, contract type, as well as whether the Company acts as prime contractor or subcontractor. We believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The following series of tables present our revenue disaggregated by these categories:
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Revenue by customer was as follows (in thousands):

|  | Three Months Ended |  | Nine Months Ended
|  | June 30, |  | June 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Department of Health and Human Services |  | $ | 43,088 |  |  | $ | 48,301 |  |  | $ | 129,834 |  |  | $ | 139,937 |
Department of Veterans Affairs |  | 26,979 |  |  | 35,492 |  |  | 89,774 |  |  | 105,788 |
Department of Defense |  | 12,722 |  |  | 15,175 |  |  | 40,788 |  |  | 48,458 |
Other |  | 554 |  |  | 1,726 |  |  | 2,941 |  |  | 5,368 |
Total |  | $ | 83,343 |  |  | $ | 100,694 |  |  | $ | 263,337 |  |  | $ | 299,551 |

Revenue by contract type was as follows (in thousands):

|  | Three Months Ended |  | Nine Months Ended
|  | June 30, |  | June 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Time and Materials |  | $ | 42,438 |  |  | $ | 54,978 |  |  | $ | 138,178 |  |  | $ | 165,260 |
Firm Fixed Price |  | 22,559 |  |  | 26,203 |  |  | 69,088 |  |  | 74,125 |
Cost Reimbursable |  | 18,346 |  |  | 19,513 |  |  | 56,071 |  |  | 60,166 |
Total |  | $ | 83,343 |  |  | $ | 100,694 |  |  | $ | 263,337 |  |  | $ | 299,551 |

Revenue by whether the Company acts as a prime contractor or a subcontractor was as follows (in thousands):

|  | Three Months Ended |  | Nine Months Ended
|  | June 30, |  | June 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Prime Contractor |  | $ | 76,598 |  |  | $ | 90,791 |  |  | $ | 241,457 |  |  | $ | 269,109 |
Subcontractor |  | 6,745 |  |  | 9,903 |  |  | 21,880 |  |  | 30,442 |
Total |  | $ | 83,343 |  |  | $ | 100,694 |  |  | $ | 263,337 |  |  | $ | 299,551 |

5. Leases
The following table summarizes lease balances presented on our consolidated balance sheets as follows (in thousands):

|  | June 30, |  | September 30,
|  | 2025 |  | 2024
Operating lease right-of-use assets |  | $ | 9,259 |  |  | $ | 6,681 |
Operating lease liabilities - current |  | $ | 2,711 |  |  | $ | 2,652 |
Operating lease liabilities - long-term |  | 14,829 |  |  | 12,789 |
Total operating lease liabilities |  | $ | 17,540 |  |  | $ | 15,441 |

As of June 30, 2025, operating leases for facilities and equipment have remaining lease terms of less than 1.5 years to 7.6 years. The non-cash increase in both lease liabilities and right-of-use assets during the current period is primarily attributable to an extension of an existing operating lease. The non-cash increase to lease liabilities from the lease extension was $4.2 million.
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Total lease costs for our leases were as follows (in thousands):

|  | Three Months Ended |  | Nine Months Ended
|  | June 30, |  | June 30,
|  | 2025 |  | 2024 |  | 2025 |  | 2024
Operating |  | $ | 860 |  |  | $ | 909 |  |  | $ | 2,471 |  |  | $ | 2,665 |
Short-term |  | 201 |  |  | 24 |  |  | 574 |  |  | 124 |
Variable |  | 99 |  |  | 30 |  |  | 160 |  |  | 105 |
Sublease income (a) |  | (48) |  |  | (67) |  |  | (145) |  |  | (200) |
Total lease costs |  | $ | 1,112 |  |  | $ | 896 |  |  | $ | 3,060 |  |  | $ | 2,694 |

(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 sublease term is 5 years and includes two additional 1 year term extension options.
The Company's future minimum lease payments as of June 30, 2025 were as follows (in thousands):

Fiscal year ending: |  |
2025 (remaining) |  | $ | 895 |
2026 |  | 3,993 |
2027 |  | 3,591 |
2028 |  | 3,468 |
2029 |  | 3,582 |
Thereafter |  | 5,891 |
Total future lease payments |  | 21,420 |
Less: imputed interest |  | (3,880) |
Present value of future minimum lease payments |  | 17,540 |
Less: current portion of operating lease liabilities |  | (2,711) |
Long-term operating lease liabilities |  | $ | 14,829 |

At June 30, 2025, the weighted-average remaining lease term and weighted-average discount rate were 5.6 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 |  | Nine Months Ended |
|  | June 30, |  | June 30, |
|  | 2025 |  | 2024 |  | 2025 |  | 2024 |
Cash paid for amounts included in the measurement of lease liabilities |  | $ | 937 |  |  | $ | 869 |  |  | $ | 2,887 |  |  | $ | 3,233 |  |
Lease liabilities arising from obtaining right-of-use assets |  | 2,810 |  |  | — |  |  | 4,187 |  |  | — |  |
Other lease information |  | $ | 3,747 |  |  | $ | 869 |  |  | $ | 7,074 |  |  | $ | 3,233 |  |

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6. Supporting Financial Information
Accounts receivable
The following table summarizes accounts receivable presented on our consolidated balance sheets as follows (in thousands):

|  | June 30, |  | September 30, |
|  | 2025 |  | 2024 |
Billed receivables |  | $ | 25,079 |  |  | $ | 25,904 |  |
Contract assets |  | 19,837 |  |  | 23,945 |  |
Accounts receivable |  | $ | 44,916 |  |  | $ | 49,849 |  |

Other current assets
The following table summarizes other current assets presented on our consolidated balance sheets as follows (in thousands):

|  | June 30, |  | September 30, |
|  | 2025 |  | 2024 |
Prepaid licenses and other expenses |  | $ | 2,070 |  |  | $ | 1,315 |  |
Prepaid insurance and benefits |  | 1,318 |  |  | 545 |  |
Other receivables |  | 1,089 |  |  | 906 |  |
Other current assets |  | $ | 4,477 |  |  | $ | 2,766 |  |

Goodwill
There were no changes in goodwill for the nine months ended June 30, 2025. The balance of goodwill was approximately $138.2 million as of June 30, 2025 and September 30, 2024.
Intangible assets
The following table summarizes intangible assets, net presented on our consolidated balance sheets as follows (in thousands):

|  | June 30, |  | September 30, |
|  | 2025 |  | 2024 |
Intangible assets |  |  |  |  |
Customer contracts and related customer relationships |  | $ | 113,622 |  |  | $ | 113,622 |  |
Backlog |  | 37,249 |  |  | 37,249 |  |
Trade name |  | 13,034 |  |  | 13,034 |  |
Covenants-not-to-compete |  | 637 |  |  | 637 |  |
Total intangible assets |  | 164,542 |  |  | 164,542 |  |
Less: accumulated amortization |  |  |  |  |
Customer contracts and related customer relationships |  | (49,823) |  |  | (41,297) |  |
Backlog |  | (13,784) |  |  | (10,994) |  |
Trade name |  | (4,466) |  |  | (3,488) |  |
Covenants-not-to-compete |  | (490) |  |  | (442) |  |
Total accumulated amortization |  | (68,563) |  |  | (56,221) |  |
Intangible assets, net |  | $ | 95,979 |  |  | $ | 108,321 |  |

Amortization expense was $4.1 million and $4.1 million for the three months ended June 30, 2025 and 2024, respectively, and $12.3 million and $12.3 million for the nine months ended June 30, 2025 and 2024, respectively.
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As of June 30, 2025, the estimated amortization expense per fiscal year was as follows (in thousands):

Fiscal year ending: |  |  |
2025 (remaining) |  | $ | 4,112 |  |
2026 |  | 15,722 |  |
2027 |  | 14,694 |  |
2028 |  | 14,694 |  |
2029 |  | 13,734 |  |
Thereafter |  | 33,023 |  |
Total amortization expense |  | $ | 95,979 |  |

At June 30, 2025, the weighted-average remaining amortization period in total was 6.7 years. The weighted-average amortization period for customer contracts and related customer relationships, backlog, trade names and covenants-not-to-compete was 6.7 years, 6.6 years, 7.0 years, and 5.3 years, respectively.
Equipment and improvements, net
The following table summarizes equipment and improvements, net presented on our consolidated balance sheets as follows (in thousands):

|  | June 30, |  | September 30, |
|  | 2025 |  | 2024 |
Furniture and equipment |  | $ | 1,177 |  |  | $ | 1,832 |  |
Computer equipment and software |  | 4,190 |  |  | 7,273 |  |
Leasehold improvements |  | 1,567 |  |  | 1,614 |  |
Total equipment and improvements |  | 6,934 |  |  | 10,719 |  |
Less: accumulated depreciation |  | (5,502) |  |  | (8,889) |  |
Equipment and improvements, net |  | $ | 1,432 |  |  | $ | 1,830 |  |

Depreciation expense was $0.2 million and $0.2 million for the three months ended June 30, 2025 and 2024, respectively, and $0.5 million and $0.4 million for the nine months ended June 30, 2025 and 2024, respectively.
During the three months ended June 30, 2025, the Company disposed of $3.9 million of equipment and improvements, primarily within computer equipment and software category. All assets were fully depreciated and no longer in use. No cash proceeds were received as part of the disposal of these assets.
Accounts payable and accrued liabilities
The following table summarizes accounts payable and accrued liabilities presented on our consolidated balance sheets as follows (in thousands):

|  | June 30, |  | September 30, |
|  | 2025 |  | 2024 |
Accounts payable |  | $ | 9,894 |  |  | $ | 13,421 |  |
Accrued benefits |  | 143 |  |  | 4,519 |  |
Accrued workers' compensation insurance |  | 795 |  |  | 1,528 |  |
Accrued bonus and incentive compensation |  | 835 |  |  | 3,641 |  |
Accrued interest |  | 501 |  |  | 619 |  |
Other accrued expenses |  | 1,508 |  |  | 1,562 |  |
Accounts payable and accrued liabilities |  | $ | 13,676 |  |  | $ | 25,290 |  |

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Accrued payroll
The following table summarizes accrued payroll presented on our consolidated balance sheets as follows (in thousands):

|  | June 30, |  | September 30, |
|  | 2025 |  | 2024 |
Accrued leave |  | $ | 8,774 |  |  | $ | 8,569 |  |
Accrued payroll |  | 5,719 |  |  | 3,070 |  |
Accrued payroll taxes |  | 491 |  |  | 981 |  |
Accrued severance |  | 38 |  |  | 228 |  |
Total accrued payroll |  | $ | 15,022 |  |  | $ | 12,848 |  |

Debt obligations
The following table summarizes debt obligations presented on our consolidated balance sheets as follows (in thousands):

|  | June 30, |  | September 30, |
|  | 2025 |  | 2024 |
Secured term loan |  | $ | 128,250 |  |  | $ | 142,500 |  |
Secured revolving line of credit |  | 14,039 |  |  | 12,058 |  |
Less: unamortized deferred financing costs |  | (3,941) |  |  | (5,184) |  |
Net bank debt obligations |  | 138,348 |  |  | 149,374 |  |
Less: current portion of debt obligations, net of deferred financing costs (a) |  | (14,039) |  |  | (12,058) |  |
Long-term portion of debt obligations, net of deferred financing costs |  | $ | 124,309 |  |  | $ | 137,316 |  |

As of June 30, 2025, we have satisfied quarterly minimum principal payments on our secured term loan through June 30, 2026.
(a) As of June 30, 2025, the current portion comprises the $14.0 million outstanding balance on the secured revolving line of credit.
Interest expense
The following table summarizes interest expense presented on our consolidated statements of operations as follows (in thousands):

|  | Three Months Ended |  | Nine Months Ended |
|  | June 30, |  | June 30, |
|  | 2025 |  | 2024 |  | 2025 |  | 2024 |
Interest expense (a) |  | $ | 3,127 |  |  | $ | 3,756 |  |  | $ | 10,297 |  |  | $ | 11,588 |  |
Interest income (b) |  | (15) |  |  | (10) |  |  | (57) |  |  | (34) |  |
Amortization of deferred financing costs (c) |  | 428 |  |  | 397 |  |  | 1,309 |  |  | 1,437 |  |
Interest expense |  | $ | 3,540 |  |  | $ | 4,143 |  |  | $ | 11,549 |  |  | $ | 12,991 |  |

(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):

|  | June 30, 2025 |  |  |  | September 30, 2024 |  |
Arrangement |  | Loan Balance |  | Interest |  |  |  | Loan Balance |  | Interest |  |
Secured term loan (a) due December 8, 2027 |  | $ | 128,250 |  |  | SOFR 1 + 4.1% |  |  |  | $ | 142,500 |  |  | SOFR 1 + 4.1% |  |
Secured revolving line of credit (b) due December 8, 2027 |  | $ | 14,039 |  |  | SOFR 1 + 4.1% |  |  |  | $ | 12,058 |  |  | SOFR 1 + 4.1% |  |

1 Secured Overnight Financing Rate ("SOFR") as of June 30, 2025 and September 30, 2024 were 4.3% and 5.2% 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") which has a notional amount of $74.0 million at June 30, 2025, a fixed interest rate of 4.1% and a maturity date of January 31, 2026. As a result of entering interest rate swap agreements, for the nine months ended June 30, 2025, interest expense has been decreased by approximately $0.2 million.
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 1.15:1.00 to 1.05:1.00 and (ii) a total leverage ratio not exceeding the ratio of 4.50:1.00 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 (benefit) expense, 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 June 30, 2025.
We are required to pay quarterly amortization payments, which commenced in December 2022. The annual amortization amount is $19.0 million for each of fiscal years 2025 and 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 $128.3 million as of June 30, 2025. We have satisfied the mandatory principal payments through June 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 June 30, 2025, we had unused borrowing capacity of $15.1 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 $14.0 million outstanding balance at June 30, 2025. As part of the secured
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revolving line of credit, the lenders agreed to a sublimit of $10.0 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. Our shareholders approved the adoption of the 2025 Equity Incentive Plan (the “2025 Plan”), which governs the awarding of equity compensation agreements. Upon approval, the 2025 Plan replaced the 2016 Equity Incentive Plan. As of June 30, 2025, there were 1.2 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 |  | Nine Months Ended |
|  | June 30, |  | June 30, |
|  | 2025 |  | 2024 |  | 2025 |  | 2024 |
DLH employees (a) |  | $ | 405 |  |  | $ | 537 |  |  | $ | 821 |  |  | $ | 1,851 |  |
Non-employee directors (b) |  | 155 |  |  | 180 |  |  | 464 |  |  | 439 |  |
Total stock option expense |  | $ | 560 |  |  | $ | 717 |  |  | $ | 1,284 |  |  | $ | 2,290 |  |

(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 697,384 and 429,320 shares at June 30, 2025 and 2024, respectively.
No grants were awarded during the three months ended June 30, 2025 and 2024.
During the nine months ended June 30, 2025 and 2024, the Company granted 312,906 and 169,544 shares of restricted stock units, respectively. Of the RSUs granted during the nine months ended June 30, 2025, 156,453 shares have performance and market based vesting criteria and the remaining 156,453 shares have service-based vesting criteria. Of the RSUs granted during the nine months ended June 30, 2024, 84,773 shares have performance and market based vesting criteria and the remaining 84,771 shares have service-based vesting criteria.
The RSUs granted were valued using the Monte Carlo Method, and will be amortized over the 3-year measurement period.
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|  |  |  |  |  | Volatility |
|  |  |  |  |  | 50% |
Grant Date | Vesting Base | Vesting Criteria |  | (Years) |  | Fair Value |
December 20, 2024 | Revenue | Revenue increase at the end of the measurement period as compared to the year ended September 30, 2024 |  | 3 |  | $ | 0.65 |  |
December 20, 2024 | Stock price | Stock price is at least $23.04 per share average for the 30 days prior to the end of the performance period |  | 3 |  | $ | 1.67 |  |
December 15, 2023 | Revenue | Revenue increase at the end of the measurement period as compared to the year ended September 30, 2023 |  | 3 |  | $ | 3.82 |  |
December 15, 2023 | Stock price | Stock price is at least $25.65 per share average for the 30 days prior to the end of the performance period |  | 3 |  | $ | 5.36 |  |
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 June 30, 2025 and 2024, 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):

|  | June 30, |
|  | 2025 |  | 2024 |
Unrecognized expense for DLH employees (a) |  | $ | 4,003 |  |  | $ | 6,119 |  |
Unrecognized expense for non-employee directors |  | 155 |  |  | 180 |  |
Total unrecognized expense |  | $ | 4,158 |  |  | $ | 6,299 |  |

(a) On a weighted average basis, the unrecognized expense as of June 30, 2025 is expected to be recognized within the next 2.29 years.
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Stock option activity for the nine months ended June 30, 2025
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:

|  |  |  |  |  | (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, 2024 |  | 1,237 |  |  | $ | 9.28 |  |  | 6.1 |  | $ | 1,313 |  |
Granted |  | — |  |  | — |  |  | — |  |  | — |  |
Exercised |  | — |  |  | — |  |  | — |  |  | — |  |
Cancelled |  | (250) |  |  | 8.85 |  |  | — |  |  | — |  |
Options outstanding, June 30, 2025 |  | 987 |  |  | $ | 9.77 |  |  | 5.8 |  | $ | 15 |  |
Vested and exercisable, June 30, 2025 |  | 927 |  |  | $ | 9.51 |  |  | 5.7 |  | $ | 15 |  |

Stock option shares outstanding, vested and unvested balance as follows (in thousands):

|  |  | June 30, |  | September 30, |  |
|  |  | 2025 |  | 2024 |  |  |  |
Vested and exercisable |  |  | 927 |  |  | 1,177 |  |  |  |  |
Unvested (a) |  |  | 60 |  |  | 60 |  |  |  |  |
Options outstanding |  |  | 987 |  |  | 1,237 |  |  |  |  |

(a) Certain awards vest upon satisfaction of certain performance criteria.
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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. 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 |  | Nine Months Ended |
|  | June 30, |  | June 30, |
|  | 2025 |  | 2024 |  | 2025 |  | 2024 |
Numerator: |  |  |  |  |  |  |  |  |
Net income |  | $ | 289 |  |  | $ | 1,139 |  |  | $ | 2,281 |  |  | $ | 5,102 |  |
Denominator: |  |  |  |  |  |  |  |  |
Denominator for basic net income per share - weighted-average outstanding shares |  | 14,386 |  |  | 14,232 |  |  | 14,386 |  |  | 14,156 |  |
Effect of dilutive securities: |  |  |  |  |  |  |  |  |
Stock options and restricted stock |  | 64 |  |  | 472 |  |  | 72 |  |  | 560 |  |
Denominator for diluted net income per share - weighted-average outstanding shares |  | 14,450 |  |  | 14,704 |  |  | 14,458 |  |  | 14,716 |  |
Net income per share - basic |  | $ | 0.02 |  |  | $ | 0.08 |  |  | $ | 0.16 |  |  | $ | 0.36 |  |
Net income per share - diluted |  | $ | 0.02 |  |  | $ | 0.08 |  |  | $ | 0.16 |  |  | $ | 0.35 |  |

10. Commitments and Contingencies
Contractual obligations as of June 30, 2025 are as follows (in thousands):

|  | Payments Due Per Fiscal Year
|  | (Remaining) |  |  |  |  |
| Total | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter
Debt obligations | $ | 142,289 |  | $ | 14,039 |  | $ | 4,750 |  | $ | 23,750 |  | $ | 99,750 |  | $ | — |  | $ | — |
Facility operating leases | 21,420 |  | 895 |  | 3,993 |  | 3,591 |  | 3,468 |  | 3,582 |  | 5,891 |
Total contractual obligations | $ | 163,709 |  | $ | 14,934 |  | $ | 8,743 |  | $ | 27,341 |  | $ | 103,218 |  | $ | 3,582 |  | $ | 5,891 |

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 nine months ended June 30, 2025 and 2024, there were no significant related party transactions that have occurred which require disclosure through the date that these consolidated financial statements were issued.
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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, 2024, 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 diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations; 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 increased 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; 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, 2024, 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, 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 development of secure Information Technology ("IT") platforms; sophisticated data analytic tools and techniques; and
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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 (52.5%), firm fixed price contracts (26.2%), and cost reimbursable contracts (21.3%).
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"), US Army Medical Research & Development Command ("MRDC"), 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, Certified Information Security Officer ("CISO") / Information System Security Officer ("ISSO") support, risk management frameworks, Continuity of Operations ("COOP") / Disaster Recovery, 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 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.
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, Intelligence, Surveillance, and Reconnaissance ("C5ISR"), 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.
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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):

|  | Nine Months Ended |
|  | June 30, |
|  | 2025 |  | 2024 |
|  | Revenue |  | Percent of total revenue |  | Revenue |  | Percent of total revenue |
Department of Health and Human Services |  | $ | 129,834 |  |  | 49.3 | % |  | $ | 139,937 |  |  | 46.7 | % |
Department of Veterans Affairs |  | 89,774 |  |  | 34.1 | % |  | 105,788 |  |  | 35.3 | % |
Department of Defense |  | 40,788 |  |  | 15.5 | % |  | 48,458 |  |  | 16.2 | % |
Other customers with less than 10% share of total revenue |  | 2,941 |  |  | 1.1 | % |  | 5,368 |  |  | 1.8 | % |
Total revenue |  | $ | 263,337 |  |  | 100.0 | % |  | $ | 299,551 |  |  | 100.0 | % |

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 $89.8 million and $105.8 million of revenues for the nine months ended June 30, 2025 and 2024, respectively.
As previously disclosed, the VA issued solicitations for performance of the CMOP program by separate contracts for each of its eight locations, with the awards limited to service-disabled veteran owned small business (“SDVOSB”) prime contractors. As that ongoing acquisition evaluation is occurring, DLH continues performance as the prime contractor under a sole-source Indefinite Quantity/Indefinite Delivery ("IDIQ") contract effective May 1, 2024. The IDIQ initially had ceiling value of $200.0 million, and the ceiling value was increased by $50 million to $250 million in April 2025. It also has a maximum ordering period through April 30, 2025, with the potential for orders placed within that period to extend performance beyond April 2025. To date, VA has transitioned performance for two locations previously covered by this IDIQ: Chelmsford, Massachusetts (July 31, 2024) and Hines, Illinois (January 31, 2025).
We were awarded new task orders under this IDIQ contract for the remaining six locations with varying periods of performance. The task order for the Leavenworth, Kansas location has an end date of August 31, 2025. The VA has awarded a task order to provide services at the Leavenworth location to a new prime contractor with whom we are not affiliated. At the conclusion of our task order ending August 31, 2025, we expect to cease operations at that location. The remaining five
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locations have task orders with periods of performance through October 2025. To continue ordering services after expiration of the current task orders, the VA would need to award a new bridge contract.
With respect to the remaining five locations that DLH expects to operate through October 2025, the VA has solicitations to evaluate for three locations and has not yet assigned a proposal due date for the solicitations for the remaining two locations. Until the VA has completed its procurement processes, we expect to continue providing pharmacy and logistics services at these locations. DLH intends to provide additional updates to the progression of these solicitations as a part of its regular quarterly and annual filings.
The Company's contract with HHS in support of its Head Start program generated $28.4 million and $31.4 million of revenues for the nine months ended June 30, 2025 and 2024 respectively. This contract has a period of performance through October 2025. The customer is evaluating responses to its request for proposals and until the procurement process is complete, we expect to continue providing monitoring and evaluation services.
Backlog
At June 30, 2025, our backlog was approximately $555.3 million of which $92.3 million was funded backlog. At September 30, 2024, our backlog was approximately $690.3 million, of which $155.1 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 and including executed task orders issued under IDIQ contracts or if the contract is a single award IDIQ contract.
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 Congress often appropriates 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.
Forward-Looking Business Trends
Federal budget outlook for fiscal year 2026:
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. 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.
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. As previously reported, various agencies within the federal government have policies that support small business goals, including the adoption of the “Rule of Two” by the VA, which provides that the agency shall award contracts by restricting competition for the contract to service-disabled or other veteran-owned businesses. To restrict competition pursuant to this rule, the contracting officer must reasonably expect that at least two of these businesses, which are capable of delivering the services, will submit offers and that the award can be made at a fair and reasonable price that offers best value to the U.S. When two qualifying small businesses cannot be identified, the VA may proceed to award contracts following a full and open bid process.
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The Company believes that its past performance in this market and track record of success provide a competitive advantage. However, 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.
During the nine months ended June 30, 2025, we generated revenues of approximately $89.8 million from our set of contracts in support of the VA's CMOP program. As previously reported, the VA has been soliciting proposals for new contracts covering this work with a preference for a Service-Disabled Veteran Owned Small Business, or SDVOSB, to perform as the prime contractor. To date, the VA has awarded three locations to a new SDVOSB prime contractor, including the Leavenworth, Kansas location, which is expected to transition to the new contractor on August 31, 2025. The remaining five locations continue to be operated by DLH as the prime contractor. Should awards for the locations for which we have submitted a proposal be offered to a partner of DLH, we expect to continue to perform a significant amount of those contracts' volume of business as a subcontractor.
Results of Operations
The following table summarizes results of operations for the three months ended June 30, 2025 and 2024 (in thousands except for per share amounts, and percentage of revenue):

|  | Three Months Ended |
|  | June 30, |
Consolidated Statements of Operations: |  | 2025 |  | 2024 |  | Change
Revenue |  | $ | 83,343 |  |  | 100.0 | % |  | $ | 100,694 |  |  | 100.0 | % |  | $ | (17,351) |  |
Cost of operations: |  |  |  |  |  |  |  |  |  |  |
Contract costs |  | 67,420 |  |  | 80.9 | % |  | 81,646 |  |  | 81.1 | % |  | (14,226) |  |
General and administrative costs |  | 7,860 |  |  | 9.4 | % |  | 9,013 |  |  | 9.0 | % |  | (1,153) |  |
Depreciation and amortization |  | 4,308 |  |  | 5.2 | % |  | 4,272 |  |  | 4.2 | % |  | 36 |  |
Total operating costs |  | 79,588 |  |  | 95.5 | % |  | 94,931 |  |  | 94.3 | % |  | (15,343) |  |
Income from operations |  | 3,755 |  |  | 4.5 | % |  | 5,763 |  |  | 5.7 | % |  | (2,008) |  |
Interest expense |  | 3,540 |  |  | 4.2 | % |  | 4,143 |  |  | 4.1 | % |  | (603) |  |
Income before provision for income tax |  | 215 |  |  | 0.3 | % |  | 1,620 |  |  | 1.6 | % |  | (1,405) |  |
Provision for income tax (benefit) expense |  | (74) |  |  | (0.1) | % |  | 481 |  |  | 0.5 | % |  | (555) |  |
Net income |  | $ | 289 |  |  | 0.4 | % |  | $ | 1,139 |  |  | 1.1 | % |  | $ | (850) |  |
Net income per share - basic |  | $ | 0.02 |  |  |  |  | $ | 0.08 |  |  |  |  | $ | (0.06) |  |
Net income per share - diluted |  | $ | 0.02 |  |  |  |  | $ | 0.08 |  |  |  |  | $ | (0.06) |  |

Revenue
Revenue decreased $17.4 million for the three months ended June 30, 2025 over 2024, primarily reflecting the conversion of certain contracts in our VA and DOD portfolios to small business contractors. The revenue decrease from small business conversion was partially offset by contributions from new contract awards.
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 $14.2 million for the three months ended June 30, 2025 over 2024; the decrease was primarily due to the decrease in revenue volume and a decrease in overhead costs.
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 $1.2 million
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for the three months ended June 30, 2025 as compared to 2024. As a percentage of revenue, general and administrative costs increased to 9.4% from 9.0%, with the increase primarily due to incremental business development costs.
For the three months ended June 30, 2025, 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 June 30, 2024, 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 $0.6 million for the three months ended June 30, 2025 over 2024, primarily due to the prepayment of debt and a decrease in the floating interest rate.
Provision for Income Tax (Benefit) Expense
Provision for income tax expense decreased $0.6 million for the three months ended June 30, 2025 over 2024. The effective tax rate for the three months ended June 30, 2025 and 2024 was (34.2)% and 29.7%, respectively. The tax provision for this quarter reflects the positive impact of an increase in estimated year end income before provision for income tax as the year end effective tax rate decreased from approximately 28% to approximately 23%.
The following table summarizes results of operations for the nine months ended June 30, 2025 and 2024 (in thousands except for per share amounts, and percentage of revenue):

|  | Nine Months Ended |
|  | June 30, |
Consolidated Statements of Operations: |  | 2025 |  | 2024 |  | Change
Revenue |  | $ | 263,337 |  |  | 100.0 | % |  | $ | 299,551 |  |  | 100.0 | % |  | $ | (36,214) |  |
Cost of operations: |  |  |  |  |  |  |  |  |  |  |
Contract costs |  | 211,012 |  |  | 80.1 | % |  | 239,839 |  |  | 80.1 | % |  | (28,827) |  |
General and administrative costs |  | 24,939 |  |  | 9.5 | % |  | 28,420 |  |  | 9.5 | % |  | (3,481) |  |
Depreciation and amortization |  | 12,880 |  |  | 4.9 | % |  | 12,769 |  |  | 4.3 | % |  | 111 |  |
Total operating costs |  | 248,831 |  |  | 94.5 | % |  | 281,028 |  |  | 93.8 | % |  | (32,197) |  |
Income from operations |  | 14,506 |  |  | 5.5 | % |  | 18,523 |  |  | 6.2 | % |  | (4,017) |  |
Interest expense |  | 11,549 |  |  | 4.4 | % |  | 12,991 |  |  | 4.3 | % |  | (1,442) |  |
Income before provision for income tax |  | 2,957 |  |  | 1.1 | % |  | 5,532 |  |  | 1.8 | % |  | (2,575) |  |
Provision for income tax expense |  | 676 |  |  | 0.3 | % |  | 430 |  |  | 0.1 | % |  | 246 |  |
Net income |  | $ | 2,281 |  |  | 0.9 | % |  | $ | 5,102 |  |  | 1.7 | % |  | $ | (2,821) |  |
Net income per share - basic |  | $ | 0.16 |  |  |  |  | $ | 0.36 |  |  |  |  | $ | (0.20) |  |
Net income per share - diluted |  | $ | 0.16 |  |  |  |  | $ | 0.35 |  |  |  |  | $ | (0.19) |  |

Revenue
Revenue decreased $36.2 million for the nine months ended June 30, 2025 over 2024, primarily reflecting the conversion of certain contracts in our VA and DOD portfolios to small business contractors. The revenue decrease from small business conversion was partially offset by contributions from new contract awards.
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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 $28.8 million for the nine months ended June 30, 2025 and 2024. The decrease was primarily due to a decrease in revenue volume from low margin non-labor costs and a decrease in overhead costs.
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 $3.5 million for the nine months ended June 30, 2025 over 2024. As a percentage of revenue, general and administrative costs were 9.5% for both periods. The decrease in general and administrative costs are primarily due to a reduction in support costs proportionally with the change in revenue volume.
For the nine months ended June 30, 2025, depreciation and amortization expense were approximately $0.5 million and $12.3 million, respectively, as compared to approximately $0.4 million and $12.3 million for the nine months ended June 30, 2024, 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 $1.4 million for nine months ended June 30, 2025 over 2024, primarily due to the prepayment of debt and a decrease in the floating interest rate.
Provision for Income Tax Expense
Provision for income tax expense increased $0.2 million for the nine months ended June 30, 2025 over 2024. The effective tax rate for the nine months ended June 30, 2025 and 2024 was 22.9% and 7.8%, respectively. The tax provision from the prior year period was positively impacted by the exercise of non-qualifying stock options.
Non-GAAP Financial Measures
The Company uses Earnings Before Interest, Tax, Depreciation, and Amortization ("EBITDA") as a supplemental non-GAAP measure of our performance. DLH defines EBITDA as net income excluding (i) depreciation and amortization, (ii) interest expense, and (iii) provision for income tax expense.
On a non-GAAP basis, EBITDA for the nine months ended June 30, 2025 and 2024 was approximately $27.4 million and $31.3 million, respectively. The decrease was primarily due to the decrease in revenue volume driven by conversion of certain VA and DoD contracts to small business contractors, partially offset by revenue from new contract awards.
This non-GAAP measure of our performance is used by management to conduct and evaluate its business during its regular review of operating results for the periods presented. Management and our Board utilize this non-GAAP measure to make decisions about the use of our resources, analyze performance between periods, develop internal projections and measure management's performance. We believe that this non-GAAP measure is useful to investors in evaluating our ongoing operating and financial results and understanding how such results compare with our historical performance. By providing this non-GAAP measure as a supplement to GAAP information, we believe this enhances investors understanding of our business and results of operations. EBITDA is not a recognized measurement under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance investors should (i) evaluate adjustments in our reconciliation to the nearest GAAP financial measures and (ii) use non-GAAP measures in addition to, and not as an alternative to, measures of our operating results as defined under GAAP.
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Reconciliation of GAAP net income to EBITDA, a non-GAAP measure (in thousands):

|  | Three Months Ended |  | Nine Months Ended
|  | June 30, |  | June 30,
|  | 2025 |  | 2024 |  | Change |  | 2025 |  | 2024 |  | Change
Net income |  | $ | 289 |  |  | $ | 1,139 |  |  | $ | (850) |  |  | $ | 2,281 |  |  | $ | 5,102 |  |  | $ | (2,821) |
(i) Depreciation and amortization |  | 4,308 |  |  | 4,272 |  |  | 36 |  |  | 12,880 |  |  | 12,769 |  |  | 111 |
(ii) Interest expense, net |  | 3,540 |  |  | 4,143 |  |  | (603) |  |  | 11,549 |  |  | 12,991 |  |  | (1,442) |
(iii) Provision for income tax (benefit) expense |  | (74) |  |  | 481 |  |  | (555) |  |  | 676 |  |  | 430 |  |  | 246 |
EBITDA |  | $ | 8,063 |  |  | $ | 10,035 |  |  | $ | (1,972) |  |  | $ | 27,386 |  |  | $ | 31,292 |  |  | $ | (3,906) |

Liquidity and capital management
Cash was approximately $0.2 million and $0.3 million as of June 30, 2025 and September 30, 2024, respectively.
Available borrowings under our revolving credit facility was approximately $15.1 million and $18.1 million for the periods ended June 30, 2025 and September 30, 2024, respectively. The decrease is primarily due to a lower outstanding receivables balance at June 30, 2025.
A summary of the change in cash is presented as follows (in thousands):

|  |  |  | Nine Months Ended |  |
|  |  |  | June 30, |  |
|  |  |  | 2025 |  | 2024 |  | Change
Net cash provided by operating activities |  |  |  | $ | 12,536 |  |  | $ | 14,931 |  |  | $ | (2,395) |
Net cash used in investing activities |  |  |  | (213) |  |  | (627) |  |  | 414 |
Net cash used in financing activities |  |  |  | (12,471) |  |  | (14,096) |  |  | 1,625 |
Net change in cash |  |  |  | $ | (148) |  |  | $ | 208 |  |  | $ | (356) |

Cash flows provided by operating activities totaled approximately $12.5 million and $14.9 million for the nine months ended June 30, 2025 and 2024, 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 $0.2 million and $0.6 million for the nine months ended June 30, 2025 and 2024, respectively. The cash utilized was predominantly due to capital expenditures in the nine months ended June 30, 2025 and 2024, respectively.
Cash used in financing activities during the nine months ended June 30, 2025 and 2024 were approximately $12.5 million and $14.1 million, respectively. The cash used in financing activities was primarily due to the prepayment of term debt.
Sources of cash
As of June 30, 2025, 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 June 30, 2025, we had unused borrowing capacity of $15.1 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.
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Credit Facilities
A summary of our credit facilities for the period ended June 30, 2025 is as follows (in millions):

Arrangement |  | Loan Balance |  | Interest* |  | Maturity Date
Secured term loan (a) due December 8, 2027 |  | $ | 128.3 |  |  | SOFR 1 + 4.1% |  | December 8, 2027
Secured revolving line of credit (b) due December 8, 2027 |  | $ | 14.0 |  |  | SOFR 1 + 4.1% |  | December 8, 2027

1 Secured Overnight Financing Rate ("SOFR") as of June 30, 2025 wa s 4.3%.
On January 31, 2023, we executed a floating-to-fixed interest rate swap with FNB which has a notional amount of $74.0 million at June 30, 2025, a fixed interest rate of 4.10% and a maturity date of January 31, 2026. As a result of entering these agreements, for the nine months ended June 30, 2025, interest expense has been decreased by approximately $0.2 million.
(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 June 30, 2025 of $14.0 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 June 30, 2025 are as follows (in thousands):

|  |  |  | Payments Due by Period
|  |  |  | Next 12 |  | 2-3 |  | 4-5 |  | More than 5
| Ref | Total |  | Months |  | Years |  | Years |  | Years
Debt obligations |  | $ | 142,289 |  |  | $ | 14,039 |  |  | $ | 128,250 |  |  | $ | — |  |  | $ | — |
Facility operating leases | (a) | 21,420 |  |  | 3,831 |  |  | 7,235 |  |  | 6,873 |  |  | 3,481 |
Total contractual obligations |  | $ | 163,709 |  |  | $ | 17,870 |  |  | $ | 135,485 |  |  | $ | 6,873 |  |  | $ | 3,481 |

(a) The increase in facility operating lease obligations was due to an amendment to an existing lease extending the lease term.
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, 2024. 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, 2024. For a detailed discussion on the application of accounting policies, refer to Note 2. Significant Accounting Policies.
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Goodwill Impairment Testing
The qualitative assessment of goodwill at June 30, 2025 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 3rd 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 2025 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. We have executed a set of floating-to-fixed interest rate swaps with a total notional amount of $74.0 million at June 30, 2025. The remaining balance of our debt is subject to floating interest rates.
We have determined that a 1.0% increase to SOFR would impact our interest expense by approximately $0.7 million per year. As of June 30, 2025, the interest rate on the floating interest rate debt was 8.4%.
ITEM 4: CONTROLS AND PROCEDURES
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
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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 June 30, 2025, 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, 2024 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, 2024. 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, 2024.
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.
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 June 30, 2025, no director or officer of the Company adopted or terminated a "rule 10b5-1 trading arrangement" or "non-rule 10b5-1 trading arrangement," as each term is defined in Item 408 (a) of Regulation S-K.
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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
| 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
| 101.0 |  | The following financial information from the DLH Holdings Corp. Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 2025, 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: August 06, 2025 |  |  |

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