DLH Holdings Corp
For the period ended Mar 31, 2024. Filed May 1, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Mar 31, 2024 · Filed May 1, 2024
DLHC$3.61-0.6%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2023-12-31; filed 2024-01-31.
0000785557-24-000015
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-03-31; filed 2024-05-01.
0000785557-24-000037
ITEM 2. : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 102 previous paragraphs and 108 current paragraphs.
55 unchanged; 25 reworded; 23 added; 22 removed; 0 previous and 5 current paragraphs rearranged.
Tables are not compared: 6 previous and 8 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (23)
Current report
•As discussed below, the Company has received a new Indefinite-Delivery Indefinite-Quantity ("IDIQ") contract to continue providing prime contractor services at all eight CMOP locations while the pending procurements are evaluated. The ceiling value of the IDIQ contract is $200.0 million with the initial tasking through July 31, 2024. These initial task orders provide adequate funding to support the expected service volume of approximately $35.0 million for the three month period. Additional task orders may be issued under this IDIQ contract until the end of its period of performance.
Current report
The VA has issued eight separate requests for proposals for healthcare logistics and pharmacy services for each of its eight CMOP locations. Each of the eight procurements are being evaluated separately and may be subject to differing timelines for award. The procurements were set-aside for a service-disabled veteran owned small business (“SDVOSB”) as the prime contractor. DLH responded to each request for proposal as a joint venture partner with an SDVOSB prime contractor. While the acquisition process is being conducted, DLH continues to operate as the prime contractor for all CMOP locations.
Current report
As disclosed in the Company’s Form 8-K filings during the quarter ended March 31, 2024, the VA has begun the process of evaluating the proposals for the eight solicitations mentioned above. We were advised that the VA had made an award decision for the Chelmsford CMOP Staffing Services location to an SDVOSB unrelated to DLH. Between the announcement of the award and the commencement of the contract, Federal acquisition guidelines provide each of the 17 competitors for this contract the right to a debriefing to explain the results. Based on the debriefing, a bidder may then contest the decision. Our joint venture continues to pursue its remedies under the Federal acquisition regulations. A final award decision on this proposal has not yet been made.
Current report
Following the award notice for the Chelmsford location, the VA had apparently reconsidered its options for achieving the transition of CMOP operations to an SDVOSB provider through five-year contracts and issued Notices of Intent to Award Sole Source Procurements for healthcare logistics and pharmacy services by location to various SDVOSBs, including the joint venture between DLH and its SDVOSB partner, for durations of up to three months. These notices were subsequently cancelled by the VA. Accordingly, DLH expects that it will continue providing healthcare logistics and pharmacy services until award decisions on the five-year contracts are completed.
Current report
In support of DLH’s continuing performance as the prime contractor during the ongoing acquisition evaluation, the VA awarded us a sole-source IDIQ contract effective May 1, 2024. The IDIQ has a ceiling value of $200 million and a period of performance extendable through April 30, 2025 with the potential for orders placed within that period to extend performance for up to 180 days through October 2025. Initial task orders have been issued for DLH’s prime contractor performance through July 31, 2024.
Current report
The President’s budget proposal for fiscal year ("FY") 2025 outlines initiatives for the federal government in its next operating year. The proposal includes key investments for our customers.
Current report
Department of Veterans Affairs
Current report
The VA is requesting a total of $369.3 billion for FY 2025, an increase of $32.9 billion above the FY 2024 enacted level. It includes $134.0 billion in discretionary funding, a decrease of $8.9 billion, and $235.3 billion in mandatory funding, an increase of $41.8 billion from FY 2024 budget request. The VA research program is expected to allocate increased funding to advance the Department’s understanding of the impact of traumatic brain injury and toxic exposure(s) on long-term health outcomes, coronavirus related research and impacts, and precision oncology. The FY 2025 budget request for the VA's research enterprise is $2.3 billion, which includes investments in understanding traumatic brain injuries, improving infectious and pandemic preparedness, and preventing suicide.
Current report
The FY 2025 budget request proposes $1.8 trillion in budget authority for HHS and $1.7 trillion in mandatory funding for the department comprised mainly of spending on Medicare and Medicaid. The budget proposes $46.4 billion in discretionary and mandatory resources for NIH, an increase of $0.9 billion above FY 2024 enacted, to continue making investments in mental health, gun violence research, and women’s health research. The budget also requests $15.7 billion for the Centers for Disease Control and Prevention ("CDC"), an increase of $1.0 billion. The budget also provides for investment in programs that improve the health and well-being of young children and their families. This includes $12.5 billion for the Office of Head Start, principally to expand eligibility for participation in the program.
Current report
Department of Defense
Current report
The Military Health System ("MHS") is one of the largest health care systems, serving over 9.5 million beneficiaries. As a part of the DoD, the Defense Health Agency ("DHA") manages a global health care network of military and civilian medical professionals, military hospitals and clinics around the world, and supports the delivery of integrated health services to MHS beneficiaries. The funding and personnel to support MHS’s mission is referred to as the Unified Medical Budget ("UMB"). The FY 2025 UMB request for the Defense Health Program ("DHP") is $61.4 billion, an increase of 4.6% from FY 2024 enacted.
Current report
Revenue increased $1.6 million for the three months ended March 31, 2024 over 2023, reflecting growth across the Company's programs, particularly in public health and IT services, offset in part by national security contracts converting to small business set-aside companies.
Current report
Provision for Income Tax Expense and Benefit
Current report
Provision for income tax expense and benefit decreased $0.4 million for the three months ended March 31, 2024 over 2023. The effective tax rate for the three months ended March 31, 2024 and 2023 was (3.4)% and 32.1%, respectively. The decrease in the tax provision is primarily due to the beneficial impact of stock-based compensation expense as options are exercised.
Current report
Revenue
Current report
Revenue increased $26.7 million for the six months ended March 31, 2024 over 2023 . The increase in revenue is primarily due to the December 2022 acquisition.
Current report
Cost of Operations
Current report
For the six months ended March 31, 2024, depreciation and amortization expense were approximately $0.3 million and $8.2 million, respectively, as compared to approximately $0.4 million and $6.5 million for the six months ended March 31, 2023, respectively.
Current report
Interest Expense, net
Current report
Provision for Income Tax Expense and Benefit
Current report
Provision for income tax expense and benefit decreased $1.0 million for the six months ended March 31, 2024 over 2023. The effective tax rate for the six months ended March 31, 2024 and 2023 was (1.3)% and 28.2%, respectively. The decrease in the tax provision is primarily due to the beneficial impact of stock based compensation expense as options are exercised..
Current report
The following table summarizes changes in available liquidity (in thousands):
Current report
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, 2023. 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, 2023. For a detailed discussion on the application of accounting policies, refer to Note 2. Significant Accounting Policies.
Removed paragraphs (22)
Previous report
The President’s budget proposal for fiscal year ("FY") 2024 outlines many initiatives that include investments to rebuild our country’s physical infrastructure, strengthen supply chains, combat inflation, expand economic opportunity, respond to the changing climate, sustain and strengthen national defense, and bolster America's public health infrastructure. Specifically, the investment in public health infrastructure involves improving the nation’s readiness for future pandemics and other biological threats, expanding access to vaccines and healthcare, and defeating diseases and epidemics such as, but not limited to, the opioid and HIV/AIDS epidemics. The budget's initiatives are further reflected in the budget requests for the HHS, VA, and DoD.
Previous report
While Congress has not completed the final appropriation bills for the government’s 2024 fiscal year, the Company continues to believe that its key programs benefit from bipartisan support and does not expect a material impact on its current business base from budget negotiations. If the appropriations bills are not timely enacted, government agencies operate under a continuing resolution ("CR"), which may negatively impact our business due to delays in new program starts, delays in contract award decisions, and other factors. On January 19, 2024, the President signed a CR providing funds to the federal government through March 1, 2024 for several agencies and through March 8, 2024 for the remaining. When a CR expires, unless appropriations bills have been passed by Congress and signed by the President, or a new CR is passed and signed into law, the government must cease operations, or shutdown, except in certain emergency situations or when the law authorizes continued activity. We continuously review our operations in an attempt to identify programs potentially at risk from CRs so that we can consider appropriate contingency plans.
Previous report
Revenue for the three months ended December 31, 2023 increased of $25.1 million over the prior year period, principally due to the December 2022 acquisition.
Previous report
Provision for Income Tax Expense
Previous report
For the three months ended December 31, 2023 and 2022, DLH recorded a $0.0 million and $0.5 million provision for income taxes expense, respectively. The effective tax rate for the three months ended December 31, 2023 and 2022 was 0.4% and 26.0%, respectively.
Previous report
Use of Estimates
Previous report
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, and right-of-use assets and leases 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. For a detailed discussion on the application of these and other accounting policies, refer to Note 2. Significant Accounting Policies of the accompanying notes to our consolidated financial statements contained elsewhere in this his Quarterly Report on Form 10-Q for discussion relative to the Company's use of estimates.
Previous report
Revenue Recognition
Previous report
We recognize revenue over time when there is a continuous transfer of control to our customer. For our U.S. government contracts, this continuous transfer of control to the customer is supported by clauses in the contract that allow the U.S. government to unilaterally terminate the contract for convenience, pay us for costs incurred plus a reasonable profit, and take control of any work in process. When control is transferred over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. For services contracts, we satisfy our performance obligations as services are rendered. We use cost-based input and time-based output methods to measure progress.
Previous report
For time and materials contracts, revenue is recognized to the extent of billable rates times hours delivered plus materials and other reimbursable costs incurred. Revenue for cost reimbursable contracts is recorded as reimbursable costs are incurred, including an estimated share of the applicable contractual fees earned. For firm fixed price contracts, the consideration received for our performance is set at a predetermined price. Revenue for our firm fixed price contracts is recognized over time using a straight-line measure of progress. Contract costs are expensed as incurred. Estimated losses are recognized when identified.
Previous report
Refer to Note 4. Revenue Recognition of the accompanying notes to our consolidated financial statements contained elsewhere in this Quarterly Report on Form 10-Q for discussion relative to the Company's revenue recognition in accordance with ASC-606.
Previous report
Long-lived Assets
Previous report
Our long-lived assets include equipment and improvements, right-of-use assets, intangible assets, and goodwill. The Company continues to review its 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.
Previous report
Equipment and improvements are stated at cost. 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.
Previous report
Costs incurred to place the asset in service are capitalized and costs incurred after implementation are expensed. Amortization expense is recorded when the software is placed in service on a straight-line basis over the estimated useful life of the software.
Previous report
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, less incentives received. Our right-of-use assets include long-term leases for facilities and equipment and are amortized over their respective lease terms.
Previous report
Intangible assets are originally recorded at fair value and amortized on a straight-line basis over the assessed useful lives. The assessed useful lives of the assets are 10 years.
Previous report
The Company continues to review its goodwill 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. Based on the results of the work performed, the Company has concluded that no impairment loss was warranted, as no change in business conditions occurred which would have a material adverse effect on the valuation of goodwill. 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.
Previous report
Provision for Income Tax Expense
Previous report
The Company accounts for income taxes in accordance with the 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 sheet 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. The Company has fully utilized its net operating loss carryforwards.
Previous report
Stock-based Equity Compensation
Previous report
The Company uses the fair value-based method for stock-based compensation. Options issued are designated as either an incentive stock 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 performance measures 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 capital stock.
Reworded paragraphs (25)
Previous wording
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, 2023, 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 the acquisition, 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; an 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, 2023, as well as interim quarterly filings thereafter. The forward-looking statements contained herein are not historical facts, but rather are based on current e…
Excerpt shortened here; the source contains the full paragraph.
Current wording
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, 2023, 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 the acquisition, 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, 2023, as well as interim quarterly filings thereafter. The forward-looking statements contained herein are not historical facts, but rather are based on current …
Excerpt shortened here; the source contains the full paragraph.
Previous wording
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 (56.0%), firm fixed price contracts (23.8%), and cost reimbursable contracts (20.2%).
Current wording
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 (55.4%), firm fixed price contracts (23.9%), and cost reimbursable contracts (20.7%).
Previous wording
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 for the three months ended December 31, 2023 and 2022 as follows (in thousands and percent):
Current wording
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):
Previous wording
We remain dependent upon the continuation of our relationships with the VA and HHS as a significant portion of our revenue is concentrated in contracts with these customers. Our results of operations, cash flows and financial condition would be materially adversely affected if we were unable to continue our relationship with either 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.
Current wording
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.
Previous wording
•Nine contracts for pharmacy services, which represent approximately $19.2 million and $19.2 million of revenues for the three months ended December 31, 2023 and 2022, respectively, are currently operating under a bridge contract through February 29, 2024. We are currently engaging with the VA for further extensions of the bridge contract.
Current wording
•Nine orders for pharmacy services, which represent approximately $39.1 million and $39.4 million of revenues for the six months ended March 31, 2024 and 2023, respectively, and operated under a bridge contract through April 30, 2024.
Previous wording
•Seven contracts for logistics services represent approximately $15.5 million and $14.5 million of revenues for the three months ended December 31, 2023 and 2022, respectively, are currently operating under a bridge contract through February 29, 2024. We are currently engaging with the VA for further extensions of the bridge contract.
Current wording
•Seven orders for logistics services represent approximately $31.2 million and $29.2 million of revenues for the six months ended March 31, 2024 and 2023, respectively, and operated under a bridge contract through April 30, 2024.
Previous wording
The VA has issued a request for proposal for healthcare logistics and pharmacy services for each CMOP location. The procurements were set-aside for a service-disabled veteran owned small business ("SDVOSB") as the prime contractor. DLH maintains relationships with SDVOSB partners. Should the new contracts for performance of these services be awarded to a partner of DLH, the Company expects to continue to perform a significant amount of the contract’s volume of business as a subcontractor. Should the VA conclude that an award to an SDVOSB prime contractor is not in the best interest of the government, they may reissue a solicitation in an unrestricted competition. DLH believes that its service excellence over many years on the program would provide an advantage in any competition.
Current wording
Should the new contracts for performance of these services be awarded to a partner of DLH, the Company expects to continue to perform a significant amount of the contract’s volume of business as a subcontractor. Should the VA conclude that an award to an SDVOSB prime contractor is not in the best interest of the government, they may reissue a solicitation in an unrestricted competition. DLH believes that its service excellence over many years on the program would provide an advantage in any competition.
Previous wording
At December 31, 2023, our backlog was approximately $653.5 million, of which $132.3 million was funded backlog. At September 30, 2023, our backlog was approximately $704.8 million, of which $169.9 million was funded backlog.
Current wording
At March 31, 2024, our backlog was approximately $736.2 million, of which $106.9 million was funded backlog. At September 30, 2023, our backlog was approximately $704.8 million, of which $169.9 million was funded backlog.
Previous wording
The following table summarizes results operations for the three months ended December 31, 2023 and 2022 as follows (in thousands except for per share amounts, and percentage of revenue):
Current wording
The following table summarizes results of operations for the three months ended March 31, 2024 and 2023 (in thousands except for per share amounts, and percentage of revenue):
Previous wording
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. For the three months ended December 31, 2023, contract costs increased by approximately $21.8 million primarily due to the December 2022 acquisition.
Current wording
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 increased $0.9 million for the three months ended March 31, 2024 over 2023, the increase was primarily due to the increase in revenue
Previous wording
For the three months ended December 31, 2023, depreciation and amortization costs were approximately $0.1 million and $4.1 million, respectively, as compared to approximately $0.2 million and $2.2 million for the prior fiscal year period, respectively.
Current wording
For the three months ended March 31, 2024, depreciation and amortization expense were approximately $0.1 million and $4.1 million, respectively, as compared to approximately $0.2 million and $4.3 million for the three months ended March 31, 2023, respectively.
Previous wording
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 increased by approximately $0.3 million from the same period in the prior fiscal year. As a percentage of revenue general administrative costs decreased to 7.9% from 10.2%. The decrease as a percentage of revenue was primarily due to increased operating leverage and timing of business development expenses.
Current wording
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 increased $1.3 million for the six months ended March 31, 2024 over 2023. As a percentage of revenue general administrative costs decreased to 9.8% from 10.5%. The decrease was primarily due to increased operating leverage and timing of strategic corporate planning and business development expenses.
Previous wording
Interest expense, net, includes interest expense on the Company's term loan and amortization of deferred financing costs on debt obligations. For the three months ended December 31, 2023 and 2022, interest expense, net was approximately $4.7 million and $1.8 million, respectively. The increase in interest expense was primarily due to the borrowing required to finance the December 2022 acquisition.
Current wording
Interest expense, net, includes interest expense on the Company's term loan and amortization of deferred financing costs on debt obligations. Interest expense increased $2.3 million for six months ended March 31, 2024 over 2023, primarily due to the borrowing required to finance the December 2022 acquisition.
Previous wording
The Company uses EBITDA as a supplemental non-GAAP measure of our performance. DLH defines EBITDA as net income excluding (i) interest expense, (ii) income tax expense, and (iii) depreciation and amortization.
Current wording
The Company uses EBITDA as a supplemental non-GAAP measure of our performance. DLH defines EBITDA as net income excluding (i) interest expense, (ii) income tax expense and benefit, and (iii) depreciation and amortization.
Previous wording
On a non-GAAP basis, Earnings Before Interest, Tax, Depreciation, and Amortization ("EBITDA") for the three months ended December 31, 2023 was approximately $11.1 million and $6.3 million, respectively. The increase from the same period in the prior fiscal year was principally due to the contribution of the December 2022 acquisition.
Current wording
On a non-GAAP basis, Earnings Before Interest, Tax, Depreciation, and Amortization ("EBITDA") for the six months ended March 31, 2024 and 2023 was approximately $21.3 million and $16.8 million, respectively. The increase was principally due to the contribution of the December 2022 acquisition.
Previous wording
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 are 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.
Current wording
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.
Previous wording
Reconciliation of GAAP net income to EBITDA, a non-GAAP measure:
Current wording
Reconciliation of GAAP net income to EBITDA, a non-GAAP measure(in thousands):
Previous wording
A summary of the change in cash is presented below for the three months ended December 31, 2023 and 2022 as follows (in thousands):
Current wording
A summary of the change in cash is presented as follows (in thousands):
Previous wording
Cash flows from operations totaled approximately $5.1 million and $8.0 million for the three months ended December 31, 2023 and 2022, respectively. The decrease in cash from operations was principally due to a decrease in accounts payable.
Current wording
Cash flows provided by operating activities totaled approximately $10.3 million and $6.9 million for the six months ended March 31, 2024 and 2023, respectively. The increase in cash from operations was principally due to a improvement in the collection cycle for accounts receivable.
Previous wording
We used $0.2 million and $180.3 million of cash in investing activities during the three months ended December 31, 2023 and 2022, respectively. The cash utilized in the prior fiscal year period was predominantly due to the December 2022 acquisition.
Current wording
Cash used in investing activities totaled $0.5 million and $181.2 million for the six months ended March 31, 2024 and 2023, respectively. The cash utilized in the prior fiscal year period was predominantly due to the December 2022 acquisition.
Previous wording
Cash used in and provided by financing activities during the three months ended December 31, 2023 and 2022 were approximately $5.0 million and $173.5 million, respectively. The cash used in the three months ended December 31, 2023 was principally due to retiring outstanding term debt while in the three months ended December 31, 2022 the cash provided was to finance the December 2022 acquisition.
Current wording
Cash used in and provided by financing activities during the six months ended March 31, 2024 and 2023 were approximately $9.8 million and $174.2 million, respectively, was principally due to retiring outstanding term debt while in the six months ended March 31, 2023 the cash provided was to finance the December 2022 acquisition.
Previous wording
As of December 31, 2023, our immediate sources of liquidity include cash of approximately $0.1 million, accounts receivable, and access to our secured revolving line of credit facility. This credit facility provides us with access of up to $70.0 million, subject to certain conditions including eligible accounts receivable. As of December 31, 2023, we had unused borrowing capacity of $22.8 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.
Current wording
As of March 31, 2024, our immediate sources of liquidity include cash of approximately $0.2 million, accounts receivable, and access to our secured revolving line of credit facility. This credit facility provides us with access of up to $70.0 million, subject to certain conditions including eligible accounts receivable. As of March 31, 2024, we had unused borrowing capacity of $22.5 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.
Previous wording
1 Secured Overnight Financing Rate ("SOFR") as of December 31, 2023 was 5.4%.
Current wording
1 Secured Overnight Financing Rate ("SOFR") as of March 31, 2024 was 5.3%.
Previous wording
On September 19, 2019, we executed a floating-to-fixed interest rate swap with First National Bank ("FNB") as counter party. The swap has a notional of $9.0 million at December 31, 2023, a fixed interest rate of 1.61% and a maturity date of June 7, 2024. On January 31, 2023, we executed an additional floating-to-fixed interest rate swap with FNB which has a notional amount of$96.0 million at December 31, 2023, a fixed interest rate is 4.10% and a maturity date of January 31, 2026. As a result of entering these agreements, for the three months ended December 31, 2023, interest expense has been decreased by approximately $0.4 million.
Current wording
On September 19, 2019, we executed a floating-to-fixed interest rate swap with First National Bank ("FNB") as counter party. The swap has a notional of $9.0 million at March 31, 2024, a fixed interest rate of 1.61% and a maturity date of June 7, 2024. On January 31, 2023, we executed an additional floating-to-fixed interest rate swap with FNB which has a notional amount of$80.0 million at March 31, 2024, a fixed interest rate is 4.10% and a maturity date of January 31, 2026. As a result of entering these agreements, for the six months ended March 31, 2024, interest expense has been decreased by approximately $0.7 million.
Previous wording
(b) The secured revolving line of credit has a ceiling of up to $70.0 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 December 31, 2023 of $15.4 million
Current wording
(b) The secured revolving line of credit has a ceiling of up to $70.0 million and a maturity date of December 8, 2027. The Company has accessed funds from the revolving credit facility during the quarter and has a balance outstanding at March 31, 2024 of $14.0 million
Rearranged current paragraphs (5)
Current report — wording carried from elsewhere
Department of Health and Human Services
Current report — wording carried from elsewhere
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 increased $1.0 million for the three months ended March 31, 2024 over 2023. As a percentage of revenue general administrative costs increased to 11.6% from 10.8%, the increase as a percentage of revenue was primarily due to increase in legal costs associated with customer procurements and strategic corporate planning costs.
Current report — wording carried from elsewhere
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 March 31, 2024 over 2023, primarily due to the prepayment of debt resulting in reduced interest payments.
Current report — wording carried from elsewhere
The following table summarizes results of operations for the six months ended March 31, 2024 and 2023 (in thousands except for per share amounts, and percentage of revenue):
Current report — wording carried from elsewhere
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 increased $22.7 million for the six months ended March 31, 2024 over 2023. The increase in costs is primarily due to increased revenue.