DLH Holdings Corp.
For the period ended Jun 30, 2026. Filed Jul 29, 2026.
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.
Jun 30, 2026 · Filed Jul 29, 2026
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 2026-03-31; filed 2026-05-06.
0001628280-26-031322
ITEM 2. : MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONSCurrent report: 10-Q
Period ended 2026-06-30; filed 2026-07-29.
0001628280-26-050627
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 112 previous paragraphs and 110 current paragraphs.
75 unchanged; 31 reworded; 3 added; 5 removed; 1 previous and 1 current paragraphs rearranged.
Tables are not compared: 7 previous and 7 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 (3)
Current report
Systems Engineering and Integration
Current report
Provision for income taxes increased by $9.8 million for the three months ended June 30, 2026 over 2025. The effective tax rate for the three months ended June 30, 2026 and 2025 was (139.4)% and (34.2)%, respectively. The Company's effective tax rate differed from the federal statutory rate of 21.0% for the current period, primarily due to the establishment of a valuation allowance against deferred tax assets. During the current period, the Company concluded that it is more likely than not that its deferred tax assets would not be realized based primarily on cumulative losses in recent periods. The effective tax rate was also impacted by state income taxes and permanent differences. See Note 6. Supporting Financial Information, Income Taxes, for additional information regarding the valuation allowance.
Current report
Provision for income taxes increased by $7.8 million for the nine months ended June 30, 2026 over 2025. The effective tax rate for the nine months ended June 30, 2026 and 2025 was (69.7)% and 23.0%, respectively. The Company's effective tax rate differed from the federal statutory rate of 21.0% for the current period, primarily due to the establishment of a valuation allowance against deferred tax assets. During the current period, the Company concluded that it is more likely than not that its deferred tax assets would not be realized based primarily on cumulative losses in recent periods. The effective tax rate was also impacted by state income taxes and permanent differences. See Note 6. Supporting Financial Information, Income Taxes, for additional information regarding the valuation allowance.
Removed paragraphs (5)
Previous report
System Engineering and Integration
Previous report
On November 12, 2025, Congress passed and the President signed an appropriations bill to fund certain agencies and extend funding at current levels for the remaining agencies through January 30, 2026. On February 3, 2026, Congress passed and the President signed appropriations for the remainder of the government fiscal year. These appropriations covered nearly all major departments and agencies, including the HHS, VA, and DoD.
Previous report
Although broader funding disruptions were partially addressed in early February 2026, funding for the Department of Homeland Security has remained subject to continued uncertainty, and full-year appropriations for the Department have not yet been enacted, resulting in ongoing funding instability for that department. With minimal revenue generated from that department, we do not expect a significant impact from this budgetary instability.
Previous report
Provision for income taxes decreased $1.0 million for the three months ended March 31, 2026 over 2025. The effective tax rate for the three months ended March 31, 2026 and 2025 was 20.6% and 29.1%, respectively. The decrease in the effective tax rate compared to the prior year period was primarily attributable to the Company’s pre-tax loss in the current period, which increased the relative impact of state income taxes and permanent differences. Permanent differences primarily consist of non-deductible expenses, including stock-based compensation, executive compensation limitations under Section 162(m), and other non-deductible items, which do not provide a corresponding tax benefit in a loss position. The Company’s effective tax rate differs from the federal statutory rate of 21.0% primarily due to state income taxes and permanent differences, partially offset by the impact of federal tax legislation enacted in July 2025.
Previous report
Provision for income taxes decreased $2.0 million for the six months ended March 31, 2026 over 2025. The effective tax rate for the six months ended March 31, 2026 and 2025 was 25.2% and 27.4%, respectively.
Reworded paragraphs (31)
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 (40.6%), firm fixed price contracts (37.6%), and cost reimbursable contracts (21.8%).
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 (34.6%), firm fixed price contracts (40.7%), and cost reimbursable contracts (24.7%).
Previous wording
IT modernization and cyber security maturity are priority initiatives throughout our customer set. Our customers, including numerous institutes and centers within the National Institutes of Health ("NIH"), the Defense Health Agency ("DHA"), The U.S. Army Institute of Surgical Research ("USAISR"), and US Navy, rely on our information technology support to enable their vital missions. We work with these customers to reduce risk and build resilience to cyber and physical threats to the federal government’s infrastructure, providing the full spectrum of cyber capabilities, cryptographic and true cyber engineering,
Current wording
IT modernization and cyber security maturity are priority initiatives throughout our customer set. Our customers, including numerous institutes and centers within the National Institutes of Health ("NIH"), the Defense Health Agency ("DHA"), The U.S. Army Institute of Surgical Research ("USAISR"), and US Navy, rely on our information technology support to enable their vital missions. We work with these customers to reduce risk and build resilience to cyber and physical threats to the federal government’s infrastructure, providing the full spectrum of cyber capabilities, cryptographic and true cyber engineering, Certified Information Security Officer ("CISO") / Information System Security Officer ("ISSO") support, risk management frameworks, Continuity of Operations ("COOP") / Disaster Recovery, services under Cybersecurity Maturity Model Certification ("CMMC") Level 2, and enterprise infrastructure and cloud governance focused on designing and implementing zero trust architecture.
Previous wording
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.
Current wording
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 Centers for Disease Control and Prevention ("CDC"), as well as the Military Health System.
Previous wording
•CMOP pharmacy and logistic services represent approximately $19.7 million and $28.7 million of revenues for the three months ended March 31, 2026 and 2025, respectively, and $46.6 million and $62.8 million of revenues for the six months ended March 31, 2026 and 2025, respectively.
Current wording
•CMOP pharmacy and logistic services represent approximately $6.3 million and $27.0 million of revenues for the three months ended June 30, 2026 and 2025, respectively, and $52.9 million and $89.8 million of revenues for the nine months ended June 30, 2026 and 2025, respectively.
Previous wording
As previously reported, the VA has been soliciting proposals for new contracts covering this work with a requirement for a Service-Disabled Veteran Owned Small Business, or SDVOSB, to perform as the prime contractor. At the start of the second quarter, DLH performed services at three CMOP locations. During the quarter, one site transitioned to a SDVOSB prime contractor at the end of February 2026. Regarding the remaining two locations, one transitioned at the end of April and the other is expected to transition at the end of May 2026.
Current wording
As previously reported, the VA has been soliciting proposals for new contracts covering this work with a requirement for a Service-Disabled Veteran Owned Small Business, or SDVOSB, to perform as the prime contractor. At the start of the third quarter, DLH performed services at two CMOP locations, both of which transitioned to new contractors during the quarter.
Previous wording
At March 31, 2026, our backlog was approximately $442.4 million of which $75.0 million was funded backlog. At September 30, 2025, our backlog was approximately $514.3 million, of which $114.1 million was funded backlog.
Current wording
At June 30, 2026, our backlog was approximately $408.5 million of which $66.7 million was funded backlog. At September 30, 2025, our backlog was approximately $514.3 million, of which $114.1 million was funded backlog.
Previous wording
As we continue to align the Company’s capabilities with well-funded budget priorities and the current budgetary environment, we believe we are well positioned to win new business in our large addressable market. We are focused on increasing organic growth across our addressable market and delivering robust cash flow. We believe these priorities position the Company to expand within key national programs and mission-critical areas of health and national security. However, additional factors that could affect federal government spending in our addressable market include changes in set-asides for small businesses, changes in budgetary priorities associated with the new administration, and the effect of initiatives such as the Department of Government Efficiency ("DOGE"), on limiting or reducing federal government spending in general. Further, the changing priorities of the new administration may have an adverse impact on our results and, as such new priorities are implemented, it may be difficult for us to accurately predict the effect they will have on our results.
Current wording
As we continue to align the Company’s capabilities with well-funded budget priorities and the current budgetary environment, we believe we are well positioned to win new business in our large addressable market. We are focused on increasing organic growth across our addressable market and delivering robust cash flow. We believe these priorities position the Company to expand within key national programs and mission-critical areas of health and national security. However, additional factors that could affect federal government spending in our addressable market include changes in set-asides for small businesses, changes in budgetary priorities associated with the current administration, and the effect of initiatives aimed at improving governmental efficiency, 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.
Previous wording
Revenue decreased $29.9 million for the three months ended March 31, 2026 over 2025, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors across our customer base.
Current wording
Revenue decreased $39.1 million for the three months ended June 30, 2026 over 2025, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors across our customer base.
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. Contract costs decreased $24.1 million for the three months ended March 31, 2026 over 2025; the decrease was primarily due to the decrease in revenue volume.
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 decreased $30.8 million for the three months ended June 30, 2026 over 2025; the decrease was primarily due to the decrease in revenue volume.
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 decreased $0.7 million for the three months ended March 31, 2026 as compared to 2025. As a percentage of revenue, general and administrative costs increased to 12.7% from 9.2%, primarily due to the decrease in revenue volume. During the quarter, we made additional reductions to general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.
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 decreased $0.3 million for the three months ended June 30, 2026 as compared to 2025. As a percentage of revenue, general and administrative costs increased to 16.6% from 9.2%, primarily due to the decrease in revenue volume. During the quarter, we made additional reductions to general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.
Previous wording
For the three months ended March 31, 2026, depreciation and amortization expense were approximately $0.2 million and $4.1 million, respectively, as compared to approximately $0.2 million and $4.1 million for the three months ended March 31, 2025, respectively.
Current wording
For the three months ended June 30, 2026, depreciation and amortization expense were approximately $0.2 million and $3.8 million, respectively, as compared to approximately $0.2 million and $4.1 million for the three months ended June 30, 2025, respectively.
Previous wording
Interest expense, net, includes interest expense on the Company's term loan and amortization of deferred financing costs on debt obligations. Interest expense decreased $0.7 million for the three months ended March 31, 2026 over 2025, primarily due to the prepayment of debt and a decrease in the floating interest rate.
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 decreased $0.5 million for the three months ended June 30, 2026 over 2025, primarily due to the prepayment of debt and a decrease in the floating interest rate.
Previous wording
The following table summarizes results of operations for the six months ended March 31, 2026 and 2025 (in thousands except for per share amounts, and percentage of revenue):
Current wording
The following table summarizes results of operations for the nine months ended June 30, 2026 and 2025 (in thousands except for per share amounts, and percentage of revenue):
Previous wording
Revenue decreased $51.8 million for the six months ended March 31, 2026 over 2025, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors.
Current wording
Revenue decreased $91.0 million for the nine months ended June 30, 2026 over 2025, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors.
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. Contract costs decreased $41.5 million for the six months ended March 31, 2026 and 2025. The decrease was primarily due to the decrease in revenue volume.
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 decreased $71.8 million for the nine months ended June 30, 2026 over 2025. The decrease was primarily due to the decrease in revenue volume.
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 decreased $1.0 million for the six months ended March 31, 2026 over 2025. As a percentage of revenue, general and administrative costs increased to 11.9% from 9.1%, with the increase being primarily due to the change in revenue volume. During the quarter, we made additional reductions to general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.
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 decreased $1.8 million for the nine months ended June 30, 2026 over 2025. As a percentage of revenue, general and administrative costs increased to 12.8% from 9.1%, with the increase being primarily due to the change in revenue volume. During the quarter ended June 30,
Previous wording
For the six months ended March 31, 2026, depreciation and amortization expense were approximately $0.4 million and $8.2 million, respectively, as compared to approximately $0.3 million and $8.2 million for the six months ended March 31, 2025, respectively.
Current wording
For the nine months ended June 30, 2026, depreciation and amortization expense were approximately $0.6 million and $12.0 million, respectively, as compared to approximately $0.5 million and $12.3 million for the nine months ended June 30, 2025, respectively.
Previous wording
Interest expense, net, includes interest expense on the Company's term loan and amortization of deferred financing costs on debt obligations. Interest expense decreased $1.5 million for six months ended March 31, 2026 over 2025, primarily due to the prepayment of debt and a decrease in the floating interest rate.
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 decreased $1.9 million for nine months ended June 30, 2026 over 2025, primarily due to the prepayment of debt and a decrease in the floating interest rate.
Previous wording
On a non-GAAP basis, EBITDA for the six months ended March 31, 2026 and 2025 was approximately $10.0 million and $19.3 million, and Adjusted EBITDA for such periods was $11.9 million and $19.3 million, respectively. On a non-GAAP basis, Adjusted Income from Operations for the six months ended March 31, 2026 and 2025 was approximately $3.3 million and $10.8 million, respectively. The year over year decrease in the foregoing measures was primarily due to the decrease in revenue volume driven by conversion of certain VA and HHS contracts to small business contractors.
Current wording
On a non-GAAP basis, EBITDA for the nine months ended June 30, 2026 and 2025 was approximately $10.1 million and $27.4 million, and Adjusted EBITDA for such periods was $15.2 million and $27.4 million, respectively. On a non-GAAP basis, Adjusted Income from Operations for the nine months ended June 30, 2026 and 2025 was approximately $2.6 million and $14.5 million, respectively. The year over year decrease in the foregoing measures primarily reflects the conversion of certain contracts in our contract portfolio to small business contractors across our customer base.
Previous wording
“Adjusted Income from Operations” represents income from operations before the costs associated with scaling general and administrative costs to revenue volume, referred to below as “Cost scaling initiatives”.
Current wording
“Adjusted Income from Operations” represents income from operations before the costs associated with scaling indirect expenses within contract and general and administrative costs to revenue volume, referred to below as “Cost scaling initiatives”.
Previous wording
(1) Cost scaling initiatives consist of expenses incurred by the Company in scaling its business to align with its current contract volume resulting from the previously disclosed conversion of programs for which the Company previously served as prime contractor to small business contractors.
Current wording
(1) Cost scaling initiatives represent expenses the Company has incurred as it scales its operations to align with its current contract volume, driven by the previously disclosed transition of programs from the Company's role as prime contractor to small business contractors. These costs are reported within the contract costs and general and administrative line items.
Previous wording
Cash was approximately $0.1 million and $0.1 million as of March 31, 2026 and September 30, 2025, respectively.
Current wording
Cash was approximately $0.2 million and $0.1 million as of June 30, 2026 and September 30, 2025, respectively.
Previous wording
Available borrowings under our revolving credit facility was approximately $9.7 million and $23.6 million for the periods ended March 31, 2026 and September 30, 2025, respectively. The decrease is primarily due to a lower outstanding receivables balance at March 31, 2026.
Current wording
Available borrowings under our revolving credit facility were approximately $5.0 million and $23.6 million for the periods ended June 30, 2026 and September 30, 2025, respectively. The decrease is primarily due to a lower outstanding receivables balance at June 30, 2026.
Previous wording
Cash flows provided by (used in) operating activities totaled approximately $(1.0) million and $3.0 million for the six months ended March 31, 2026 and 2025, respectively. The decrease in cash provided by operating activities is primarily due to a decrease in revenue volume as compared to the prior year.
Current wording
Cash flows provided by operating activities totaled approximately $3.2 million and $12.5 million for the nine months ended June 30, 2026 and 2025, respectively. The decrease in cash provided by operating activities is primarily due to a decrease in revenue volume as compared to the prior year.
Previous wording
Cash used in investing activities totaled $39.0 thousand and $1.0 thousand for the six months ended March 31, 2026 and 2025, respectively. The cash utilized was predominantly due to capital expenditures in the six months ended March 31, 2026 and 2025, respectively.
Current wording
Cash used in investing activities totaled $39.0 thousand and $213.1 thousand for the nine months ended June 30, 2026 and 2025, respectively. The cash utilized was predominantly due to capital expenditures in the nine months ended June 30, 2026 and 2025, respectively.
Previous wording
Cash provided by (used in) financing activities during the six months ended March 31, 2026 and 2025 were approximately $1.0 million and $(3.1) million, respectively. The cash provided by financing activities was primarily driven by net borrowings on the revolving credit facility, partially offset by term debt prepayment.
Current wording
Cash used in financing activities during the nine months ended June 30, 2026 and 2025 were approximately $3.1 million and $12.5 million, respectively. The cash used in financing activities was primarily due to prepayment of term debt.
Previous wording
As of March 31, 2026, our immediate sources of liquidity include cash, accounts receivable, and access to our secured revolving line of credit facility. This credit facility provides us with access of up to $50.0 million, subject to certain conditions including eligible accounts receivable. As of March 31, 2026, we had unused borrowing capacity of $9.7 million, which is net of outstanding letters of credit. The Company's present operating liabilities are largely predictable and consist of vendor and payroll related obligations. We believe that our current investment and financing obligations are adequately covered by cash generated from profitable operations and that planned operating cash flow should be sufficient to support our operations for twelve months from the date of issuance of these consolidated financial statements.
Current wording
As of June 30, 2026, our immediate sources of liquidity include cash, accounts receivable, and access to our secured revolving line of credit facility. This credit facility provides us with access of up to $50.0 million, subject to certain conditions including eligible accounts receivable. As of June 30, 2026, we had unused borrowing capacity of $5.0 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 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 March 31, 2026 was 3.8%.
Current wording
1 Secured Overnight Financing Rate ("SOFR") as of June 30, 2026 was 3.7%.
Previous wording
(b) As amended, the secured revolving line of credit has a ceiling of up to $50.0 million and a maturity date of December 8, 2027. The Company has accessed funds from the revolving credit facility during the quarter and has a balance outstanding at March 31, 2026 of$10.7 million.
Current wording
(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, 2026 of$13.7 million.
Previous wording
The qualitative assessment of goodwill at March 31, 2026 determined a triggering event occurred requiring that we conduct additional quantitative analyses. The triggering event was primarily due to the decrease in the Company's share price resulting in a decline in market capitalization. Management's assessment was that the market capitalization at the end of the 2nd quarter was not indicative of the Company's fair value.
Current wording
The qualitative assessment of goodwill at June 30, 2026 determined a triggering event occurred requiring that we conduct additional quantitative analyses. The triggering event was primarily due to the decrease in the Company's share price resulting in a decline in market capitalization. Management's assessment was that the market capitalization at the end of the third quarter was not indicative of the Company's fair value.
Previous wording
For the market-based methods, the Company used the average market capitalization over the current quarter with the inclusion of a control premium as one estimation of fair value. The other market-based method used publicly available market multiples of relevant publicly traded companies applied to our expected EBITDA and revenue for fiscal 2026 to estimate the Company's fair value. For the income-based method, the Company calculated its expected future cash flows. Those cash flows were then discounted to present value using a weighted average cost of capital. The weighted average of the three assessments indicated that the Company's fair value was greater than its book equity value.
Current wording
For the market-based methods, the Company used the market capitalization over the current quarter with the inclusion of a control premium as one estimation of fair value. The other market-based method used publicly available market multiples of relevant publicly traded companies applied to our expected EBITDA and revenue for fiscal 2026 to estimate the Company's fair value. For the income-based method, the Company calculated its expected future cash flows. Those cash flows were then discounted to present value using a weighted average cost of capital. The weighted average of the three assessments indicated that the Company's fair value was greater than its book equity value.
Rearranged current paragraphs (1)
Current report — wording carried from elsewhere
2026, we made additional reductions to general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.
Rearranged previous paragraphs (1)
Previous report — wording carried elsewhere
Certified Information Security Officer ("CISO") / Information System Security Officer ("ISSO") support, risk management frameworks, Continuity of Operations ("COOP") / Disaster Recovery, services under Cybersecurity Maturity Model Certification ("CMMC") Level 2, and enterprise infrastructure and cloud governance focused on designing and implementing zero trust architecture.