DLH Holdings Corp.

02/09/2026 | Press release | Distributed by Public on 02/09/2026 15:44

Quarterly Report for Quarter Ending December 31, 2025 (Form 10-Q)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Forward-Looking and Cautionary Statements
You should read the following discussion in conjunction with the Consolidated Financial Statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended September 30, 2025, and in other reports we have subsequently filed with the SEC. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in this Management's Discussion and Analysis are forward-looking statements that involve risks and uncertainties. Any statements that refer to expectations, projections or other characterizations of future events or circumstances or that are not statements of historical fact (including without limitation statements to the effect that the Company or its management "believes", "expects", "anticipates", "plans", "intends" and similar expressions) should be considered forward-looking statements that involve risks and uncertainties which could cause actual events or DLH's actual results to differ materially from those indicated by the forward-looking statements. Forward-looking statements in this report include, among others, statements regarding benefits of acquisitions, estimates of future revenues, operating income, earnings, earnings per share, backlog, and cash flows. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Our actual results may differ materially from such forward-looking statements made in this report due to a variety of factors, including: the failure to achieve the anticipated benefits of any future acquisition (including anticipated future financial operating performance and results); the 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 debt obligations; compliance with bank financial and other covenants; changes in client budgetary priorities; government contract procurement (such as bid and award protests, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; significant delays or reductions in appropriations for our programs and broader changes in U.S. government funding and spending patterns; legislation that amends or changes discretionary spending levels or budget priorities; legal, regulatory, and political changes from the federal government that could result in economic uncertainty; the impact of inflation and higher interest rates; and other risks described in our SEC filings. For a discussion of such risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see "Risk Factors" in the Company's periodic reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, as well as interim quarterly filings thereafter. The forward-looking statements contained herein are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry and business. Such forward-looking statements are made as of the date hereof and may become outdated over time. The Company does not assume any responsibility for updating forward-looking statements.
Overview and Background
DLH Holdings Corp. ("DLH") delivers improved health and readiness solutions for federal government customers through digital transformation and cyber security, science research and development, and systems engineering and integration. We bring a unique combination of government sector experience, proven methodology, and unwavering commitment to solve the complex problems faced by civilian and military customers alike, doing so by leveraging multiple capabilities, including cyber technology, artificial intelligence, advanced analytics, cloud-based applications, and telehealth systems.
Competitive Advantages
We believe we are advantageously positioned within our markets through a number of features including, but not limited to:
•highly credentialed workforce;
•predominantly performing as the prime contractor;
•strong past performance record across our government contracts; and
•strong bipartisan support for our key contracts.
We have invested in leading credentials and capabilities that we expect will deliver value to our customers. These investments include the development of secure Information Technology ("IT") platforms; sophisticated data analytic tools and techniques;
and implementation process improvement and quality assurance programs and techniques. We are actively pursuing additional credentials that will support our customers' ever evolving missions.
Solutions and Services
We primarily focus on improved deployment and efficiency of large-scale health and defense initiatives for multiple agencies within the federal government, including the Department of Health and Human Services ("HHS"), the Department of Veterans Affairs ("VA"), Department of Defense ("DoD"), and many of their sub-agencies.
We deliver services primarily through prime contracts awarded by the federal government through competitive bidding processes. We have a diverse mix of contract vehicles with various agencies of the federal government, which supports our overall corporate growth strategy. Our revenue is distributed to time and materials contracts (44.4%), firm fixed price contracts (35.3%), and cost reimbursable contracts (20.3%).
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"), Telemedicine and Advanced Technology Research Center ("TATRC"), 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.
Science Research and Development
We advance scientific knowledge and understanding through our extensive research portfolio and domain expertise. We primarily provide large-scale data analytics, testing and evaluation, clinical trials research services, and epidemiology studies to support multiple operating divisions within HHS, including NIH and the Center for Disease Control and Prevention ("CDC"), as well as the Military Health System.
Our employees support innovative, cutting-edge research on emerging trends, health informatics analyses, and the application of best practices including mobile, social, and interactive media. We leverage evidence-based methods and web technology to drive health equity to our most vulnerable populations through public engagement. Projects often involve highly specialized expertise and transformative R&D support services. Our decades of experience designing, conducting, and analyzing studies for our diverse customer base, and our full-service clinical research solutions are designed for each customer's specific research development program. Our employees provide expert knowledge and experience that supports our customers' missions.
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.
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):
Three Months Ended
December 31,
2025 2024
Revenue Percent of total revenue Revenue Percent of total revenue
Department of Health and Human Services $ 34,630 50.3 % $ 41,948 46.2 %
Department of Veterans Affairs 26,911 39.1 % 34,099 37.6 %
Department of Defense 7,226 10.5 % 13,355 14.7 %
Other customers with less than 10% share of total revenue 125 0.1 % 1,380 1.5 %
Total revenue $ 68,892 100.0 % $ 90,782 100.0 %
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 $26.9 million and $34.1 million of revenues for the quarter ended December 31, 2025 and 2024, respectively.
As previously disclosed, the VA issued solicitations for performance of the CMOP program under separate contracts for each of its eight locations, with the awards limited to service-disabled veteran owned small business ("SDVOSB") prime contractors. As this ongoing acquisition evaluation is occurring, DLH was awarded a new sole-source Indefinite Quantity/Indefinite Delivery ("IDIQ") contract effective October 28, 2025. The IDIQ has ceiling value of $90.0 million, and a maximum ordering period through October 2026, with the potential for orders placed within that period to extend performance through April 2027. Depending on the timing of the acquisition process, revenue recognized under the IDIQ may be less than the awarded value.
During the quarter, we performed services at four CMOP locations. The VA made an award for one location, which transitioned to a new prime contractor on November 28, 2025. For the remaining three locations, the VA made two awards for additional locations, but that transition timing has not yet been established. Until the VA has completed its procurement and transition 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.
Backlog
At December 31, 2025, our backlog was approximately $517.4 million of which $124.0 million was funded backlog. At September 30, 2025, our backlog was approximately $514.3 million, of which $114.1 million was funded backlog.
We define backlog as our estimate of remaining future revenue from existing signed contracts, assuming the exercise of all options relating to such contracts 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
As we continue to align the Company's capabilities with well-funded budget priorities and the current budgetary environment, we believe we are well positioned to win new business in our large addressable market. We are focused on increasing organic growth across our addressable market and delivering robust cash flow. We believe these priorities position the Company to expand within key national programs and mission-critical areas of health and national security. However, additional factors that could affect federal government spending in our addressable market include changes in set-asides for small businesses, changes in budgetary priorities associated with the new administration, and the effect of initiatives such as the Department of Government Efficiency ("DOGE"), on limiting or reducing federal government spending in general. Further, the changing priorities of the new administration may have an adverse impact on our results and, as such new priorities are implemented, it may be difficult for us to accurately predict the effect they will have on our results.
Federal budget outlook for fiscal year 2026:
The U.S. budget and regulatory landscape remains uncertain, and this uncertainty is expected to continue. The Company's performance depends on overall federal spending levels and how well its capabilities align with government priorities. The administration is reviewing agency spending to improve efficiency and productivity, which has already led to some contract reductions, cancellations, and price renegotiations for the Company. Future reviews may cause further adjustments or mandates to cut costs.
The Company closely monitors federal budget, legislative, and contracting developments to adapt its strategies accordingly. While defense and national security spending enjoy bipartisan support amid global tensions, uncertainty persists around the timing and passage of annual appropriations bills.
We continue to align the Company's capabilities with well-funded budget priorities and take steps to maintain a competitive cost structure in line with our expectations of future business opportunities. In light of these actions, as well as the budgetary environment discussed above, we believe we are well positioned to continue to win new business in our addressable market.
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. As Congress did not enact full-year appropriations or a continuing resolution by the expiration of that funding measure, a partial government shutdown commenced on January 31, 2026. The partial shutdown ended on February 3, 2026 when Congress passed and the President signed funding appropriations for five federal agencies, including DoD and HHS. A short-term continuing resolution providing two weeks of
funding for the Department of Homeland Security (DHS) was included in the appropriations. The Company does not expect this to have a material impact on its operations and financial performance.
Potential impact of federal contractual set-aside laws and regulations:
The Federal government has an overall goal of 23% of prime contracts flowing through small businesses. 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.
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 quarter ended December 31, 2025, we generated revenues of approximately $26.9 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 requirement for a Service-Disabled Veteran Owned Small Business, or SDVOSB, to perform as the prime contractor. To date, the VA has awarded and completed the transition process for five locations to new SDVOSB prime contractors; the remaining three 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 December 31, 2025 and 2024 (in thousands except for per share amounts, and percentage of revenue):
Three Months Ended
December 31
Consolidated Statements of Operations: 2025 2024 Change
Revenue $ 68,892 100.0 % $ 90,782 100.0 % $ (21,890)
Cost of operations:
Contract costs 55,395 80.4 % 72,771 80.2 % (17,376)
General and administrative costs 7,761 11.3 % 8,067 8.9 % (306)
Depreciation and amortization 4,300 6.2 % 4,307 4.7 % (7)
Total operating costs 67,456 97.9 % 85,145 93.8 % (17,689)
Income from operations 1,436 2.1 % 5,637 6.2 % (4,201)
Interest expenses
3,396 4.9 % 4,133 4.7 % (737)
(Loss) income before provision for income taxes
(1,960) (2.8) % 1,504 1.7 % (3,464)
Provision for income taxes (benefit) expense
(636) (0.9) % 389 0.4 % (1,025)
Net (loss) income
$ (1,324) (1.9) % $ 1,115 1.2 % $ (2,439)
Net (loss) income per share
Basic $ (0.09) $ 0.08 $ (0.17)
Diluted $ (0.09) $ 0.08 $ (0.17)
Revenue
Revenue decreased $21.9 million for the three months ended December 31, 2025 over 2024, primarily reflecting the conversion of certain contracts in our contract portfolio to small business contractors.
Cost of Operations
Contract costs primarily include the costs associated with providing services to our customers. These costs are generally comprised of direct labor and associated fringe benefit costs, subcontract cost, other direct costs, and the related management and infrastructure costs. Contract costs decreased $17.4 million for the three months ended December 31, 2025 over 2024; the decrease was primarily due to the decrease in revenue volume.
General and administrative costs are for those employees not directly providing services to our customers, to include but not limited to executive management, business development, accounting, and human resources. These costs decreased $0.3 million for the three months ended December 31, 2025 as compared to 2024. As a percentage of revenue, general and administrative costs increased to 11.3% from 8.9%, with the increase being primarily due to the decrease in revenue volume. Subsequent to the end of the quarter, we reduced general and administrative costs to align more closely with our expected revenue volume. The impact of the cost scaling initiatives is described in more detail in the Non-GAAP Financial Measures section.
For the three months ended December 31, 2025, depreciation and amortization expense were approximately $0.2 million and $4.1 million, respectively, which was flat as compared with the three months ended December 31, 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 $0.7 million for the three months ended December 31, 2025 over 2024, primarily due to the prepayment of debt and a decrease in the floating interest rate.
Provision for Income Taxes (Benefit) Expense
Provision for income taxes decreased $1.0 million for the three months ended December 31, 2025 over 2024. The effective tax rate for the three months ended December 31, 2025 and 2024 was 32.5% and 25.9%, respectively. The increase in the effective tax rate compared to the prior year period was primarily attributable to state income taxes and changes in permanent differences, partially offset by the impact of federal tax legislation enacted in July 2025. The One Big Beautiful Bill Act modified the limitation on the deductibility of business interest expense. The Company's tax provision for the current quarter reflects these changes, including a more favorable limitation on business interest expense under Section 163(j). 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 effects of the legislative changes described above.
Non-GAAP Financial Measures
The Company is presenting certain non-GAAP measures regarding its financial performance. The measures presented are Earnings Before Interest, Tax, Depreciation, and Amortization ("EBITDA") and Adjusted EBITDA. In calculating Adjusted EBITDA, we have added back to EBITDA certain costs associated with scaling indirect costs to revenue volume. These resulting measures present our financial performance compared to the results delivered in the prior year period.
On a non-GAAP basis, EBITDA for the three months ended December 31, 2025 and 2024 was approximately $5.7 million and $9.9 million and Adjusted EBITDA for such periods was $6.5 million and $9.9 million, respectively. The year over year decrease in both measures was primarily due to the decrease in revenue volume driven by conversion of certain VA and HHS contracts to small business contractors.
These non-GAAP measures of performance are used by management to conduct and evaluate its business during its review of operating results for the periods presented. Management and the Company's Board utilize these non-GAAP measures to make decisions about the use of the Company's resources, analyze performance between periods, develop internal projections and measure management performance. We have prepared Adjusted EBITDA to eliminate the impact of items that we do not consider indicative of ongoing operating performance due to their inherently unusual nature. We believe that these non-GAAP measures are useful to investors in evaluating the Company's ongoing operating and financial results and understanding how such results compare with the Company's historical performance.
These supplemental performance measurements may vary from and may not be comparable to similarly titled measures by other companies in our industry. EBITDA and Adjusted EBITDA are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance investors should (i) evaluate each adjustment in our reconciliation to the nearest GAAP financial measures and (ii) use the aforementioned non-GAAP measures
in addition to, and not as an alternative to, revenue, operating income, net income or diluted EPS, as measures of operating results, each as defined under GAAP. We have defined these non-GAAP measures as follows:
"EBITDA" represents net income before income taxes, interest, depreciation and amortization.
"Adjusted EBITDA" represents net income before income taxes, interest, depreciation and amortization and the costs associated with scaling general and administrative costs to revenue volume.
Below is a reconciliation of EBITDA and Adjusted EBITDA reported for the three months ended December 31, 2025 and 2024 to its most directly comparable financial measure calculated and presented in accordance with GAAP as follows (in thousands):
Three Months Ended
December 31,
2025 2024 Change
EBITDA and Adjusted EBITDA
Net (loss) income
$ (1,324) $ 1,115 $ (2,439)
Depreciation and amortization
4,300 4,307 (7)
Interest expense, net
3,396 4,133 (737)
Provision for income taxes (benefit) expense
(636) 389 (1,025)
EBITDA $ 5,736 $ 9,944 $ (4,208)
Cost scaling initiatives
808 - 808
Adjusted EBITDA
$ 6,544 $ 9,944 $ (3,400)
Liquidity and capital management
Cash was approximately $0.3 million and $0.1 million for the period ended December 31, 2025 and September 30, 2025, respectively.
Available borrowings under our revolving credit facility was approximately $10.7 million and $23.6 million for the period ended December 31, 2025 and September 30, 2025, respectively. The decrease is primarily due the additional short-term revolving debt to fund prepayment of labor and payroll tax costs at December 31, 2025 due to banking holidays.
A summary of the change in cash is presented as follows (in thousands):
Three Months Ended
December 31,
2025 2024 Change
Net cash used in operating activities
$ (4,770) $ (11,539) $ 6,769
Net cash used in investing activities (39) (552) 513
Net cash provided by financing activities
4,941 12,199 (7,258)
Net change in cash $ 132 $ 108 $ 24
Cash flows used in operating activities totaled approximately $(4.8) million and $(11.5) million for the three months ended December 31, 2025 and 2024, respectively. The increase in cash from operations was principally due to an increase in collections over the prior year period, which resulted in a reduction in our accounts receivable.
Cash used in investing activities totaled $0.0 million and $(0.6) million for the three months ended December 31, 2025 and 2024, respectively. The cash utilized was predominantly due to capital expenditures in the three months ended December 31, 2025 and 2024, respectively.
Cash provided by financing activities during the three months ended December 31, 2025 and 2024 were approximately $4.9 million and $12.2 million, respectively. The cash provided by financing activities was principally to satisfy short-term working capital needs for the three months ended December 31, 2025.
Sources of cash
As of December 31, 2025, our immediate sources of liquidity include cash of approximately $0.3 million, 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 this filing, we had unused borrowing capacity of$10.7 million, which is net of outstanding letters of credit. The Company's present operating liabilities are largely predictable and consist of vendor and payroll related obligations. We believe that our current investment and financing obligations are adequately covered by cash generated from profitable operations and that planned operating cash flow should be sufficient to support our operations for twelve months from the date of issuance of these consolidated financial statements.
Credit Facilities
A summary of our credit facilities for the period ended December 31, 2025 is as follows (in thousands):
Arrangement Loan Balance Interest* Maturity Date
Secured term loan (a) due December 8, 2027 $ 123,500
SOFR1+ 4.1%
December 8, 2027
Secured revolving line of credit (b) due December 8, 2027 $ 13,101
SOFR1+ 4.1%
December 8, 2027
1Secured Overnight Financing Rate ("SOFR") as of December 31, 2025 was 3.9%.
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 December 31, 2025, afixed interest rate of 4.10% and a maturity date of January 31, 2026. As a result of entering these agreements, for the three months ended December 31, 2025, interest expense has been increased by approximately $0.0 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 December 31, 2025 of $13.1 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 Facilitiesto the consolidated financial statements.
Contractual Obligations
Contractual obligations as of December 31, 2025 are as follows (in thousands):
Payments Due by Period
Next 12 2-3 4-5 More than 5
Total Months Years Years Years
Debt obligations $ 136,601 $ 19,038 $ 117,563 $ - $ -
Facility operating leases 19,627 4,155 6,880 6,679 1,913
Total contractual obligations $ 156,228 $ 23,193 $ 124,443 $ 6,679 $ 1,913
Critical Accounting Policies and Estimates
Our critical accounting policies and estimates are disclosed in the Critical Accounting Policies and Estimates section in Part II, "Item 7. Management's Discussion of our Annual Report on Form 10-K for the year ended September 30, 2025. There have been no significant changes to the Company's critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended September 30, 2025. For a detailed discussion on the application of accounting policies, refer to Note 2. Significant Accounting Policies.
Goodwill Impairment Testing
The qualitative assessment of goodwill at December 31, 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 1st quarter was not indicative of the Company's fair value.
The Company performed a quantitative assessment to determine its fair value. The quantitative assessment blended multiple methods so as to have a reasonable and complete assessment of fair value. The methods used included both market and income-based approaches with all methods utilizing publicly available information in their respective calculations. Management assessed the relevance and reliability of the information utilized in each method. Significant estimates in the market-based method included identifying similar companies with comparable business factors such as service offerings, customers, size, growth, profitability, risk and return on investment, as well as assessing comparable market multiples and control premiums in estimating the fair value of the Company. The income-based method is a discounted cash flow analysis and the significant estimates included expected growth rates, profitability and the weighted average cost of capital.
For the market-based methods, the Company used the average market capitalization over the current quarter with the inclusion of a control premium as one estimation of fair value. The other market-based method used publicly available market multiples of relevant publicly traded companies applied to our expected EBITDA and revenue for fiscal 2026 to estimate the Company's fair value. For the income-based method, the Company calculated its expected future cash flows. Those cash flows were then discounted to present value using a weighted average cost of capital. The weighted average of the three assessments indicated that the Company's fair value was greater than its book equity value.
As a result of these quantitative assessments, the Company determined that its goodwill was not impaired at the end of the quarter. Management will continue to evaluate market conditions and perform qualitative interim assessments to determine if a triggering event has occurred. Should a triggering event occur, the Company will perform a quantitative assessment to estimate fair value.
DLH Holdings Corp. published this content on February 09, 2026, and is solely responsible for the information contained herein. Distributed via EDGAR on February 09, 2026 at 21:45 UTC. If you believe the information included in the content is inaccurate or outdated and requires editing or removal, please contact us at [email protected]