EDGAR 10-K Filing

Company CIK: 785557
Filing Year: 2025
Filename: 785557_10-K_2025_0000785557-25-000159.json

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ITEM 1. BUSINESS
ITEM 1. BUSINESS
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 of large-scale, technology-powered 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 (51.4%), firm fixed price contracts (27.2%) and cost reimbursable contracts (21.4%).
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, and enhance operational efficiency. Our suite of tools includes artificial intelligence and machine learning, cloud enablement, cybersecurity ecosystem, big data analytics, and modeling and simulation.
IT modernization and cyber security maturity are priority initiatives throughout our customer set. Our customers, including numerous institutes and centers within the National Institutes of Health ("NIH"), the Defense Health Agency ("DHA"), US Army Medical Research & Development Command ("MRDC"), and US Navy, rely on our information technology support to enable their vital missions. We work with these customers to reduce risk and build resilience to cyber and physical threats to the federal government’s infrastructure, providing the full spectrum of cyber capabilities, cryptographic and true cyber engineering, Certified Information Security Officer ("CISO") / Information System Security Officer ("ISSO") support, risk management frameworks, Continuity of Operations ("COOP") / Disaster Recovery, 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-powered 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 the revenues by customer for the years ended September 30, 2025 and 2024, respectively (in thousands and percent):
2025 2024
Revenue Percent of total revenue Revenue Percent of total revenue
Department of Health and Human Services $ 171,717 49.8 % $ 184,544 46.6 %
Department of Veterans Affairs 116,422 33.8 % 139,945 35.3 %
Department of Defense 53,241 15.5 % 64,128 16.2 %
Customers with less than 10% share of total revenue 3,117 0.9 % 7,320 1.9 %
Revenue
$ 344,497 100.0 % $ 395,937 100.0 %
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 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 $116.4 million and $139.9 million of revenues for the years ended September 30, 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..
With respect to the remaining four locations, the VA has made an award for one location which transitioned to a new prime contractor effective November 30, 2025, issued solicitations to evaluate for two locations and has not yet assigned a proposal due date for the remaining location's solicitation. 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.
In addition, as previously disclosed, we performed monitoring, evaluation and compliance services for the Office of Head Start (“OHS”). The contract term for these services ended on October 31, 2025. The revenue earned on this contract was $37.6 million for the fiscal year ended September 30, 2025, representing approximately 10.9% of total revenues for the fiscal year.
Consistent with the policies of the Biden administration promoting unbundling and setting aside contracts for small businesses, OHS conducted a competitive procurement for renewal of the services we have been performing, which was set aside for qualifying small businesses. Our small business partners were not selected by OHS; thus performance transitioned to unaffiliated contractors at the end of the contract term.
Backlog
On September 30, 2025, our backlog was approximately $514.3 million, of which $114.1 million was funded backlog. On September 30, 2024 our backlog was $690.3 million, of which $155.1 million was funded backlog.
We define backlog as our estimate of remaining future revenue from existing signed contracts, assuming the exercise of all options relating to such contracts and including executed task orders issued under IDIQ contracts or if the contract is a single award IDIQ contract.
We define funded backlog as the portion of backlog for which funding is appropriated and allocated to the contract by the customer and authorized for payment by the customer, once specified work is completed. Funded backlog does not include the full contract value as funding for contracts occurs on a periodic 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.
Competitive Landscape
Competitive solicitations and long business development cycles are characteristics of the government contracting industry in which we operate. For major program competitions, the business acquisition cycle typically ranges from 18 to 36 months. Companies may pursue work either as prime contractor or partner with other companies in a subcontractor role. Those competing as prime contractors normally expend substantially more resources than those in subcontractor roles. We predominantly are the prime contractor on our contracts with federal government customers and compete with several large and small-business companies in pursuit of acquiring new business. In some cases, we seek to partner with other companies on new business pursuits to improve our competitive positioning with the customer.
Our competitors include operating units within: Accenture Federal Services LLC, BAE Systems plc, Booz Allen Hamilton Holding Corp., CACI International, Inc., Deloitte, ECS Federal, LLC, The Emmes Company, LLC, General Dynamics Information Technology, Inc., Guidehouse, IBM Federal, ICF International, Inc., Information Management Services, Inc., Leidos Holdings, Inc., LMI Consulting, LLC, ManTech International Corp., NexGen Data Systems Inc., Peraton, Inc., PPD Inc., Scientific Research Corp, Rho, Inc., RTI International, SAIC Inc., The Informatics Applications Group Inc., UnitedHealth Group, Inc. and Westat, Inc.
We compete with these companies by leveraging our differentiating suite of tools and uniquely integrating people and processes and a solid track record of past performance, resulting in highly competitive proposals. We believe that our proprietary tools and processes and our Infinibyte® cloud-based management system differentiate us from our competitors. We compete for awards through a full and open competition on a best-value basis. We draw heavily from our consistently high-quality past performance ratings, proven and evolving technical differentiators, key personnel credentials and growing market recognition to compete. We believe that our track record, knowledge and processes with respect to government contract bidding represent significant competitive advantages. Further, we believe that the range and depth of educational experience and professional credentials and certifications held by our employees allows us to deploy highly qualified teams to implement solutions to address the needs of our customers. Our recent and future success in this competitive landscape hinges on our ability to continue to uniquely integrate people, processes and technology tools to deliver best value solutions for our targeted customers (both government and industry partners).
Additionally, the Federal government may elect to restrict certain procurement activity, including renewals of our current contracts, to bidders that qualify for certain special statuses such as veteran owned, small, or small disadvantaged businesses. For those efforts, we would be limited to a subcontractor role.
Seasonality
The U.S. government's fiscal year ends on September 30 each year. While not certain, it is not uncommon for U.S. government agencies to award extra tasks or complete other contract actions in the weeks before the end of its fiscal year in order to avoid the loss of unexpended fiscal year funds.
Regulation
Our business is affected by numerous laws and regulations relating to the award, administration and performance of U.S. Government contracts. In addition, many federal and state laws materially affect our operations. These laws relate to ethics, labor, tax, and employment matters. As any employer is, we are subject to federal and state statutes and regulations governing their standards of business conduct with the government, including that government contracts typically contain provisions permitting government customers to terminate contracts without cause with limited notice or compensation. The development of additional statutes and regulations and interpretation of existing statutes and regulations with respect to our industry can be expected to evolve over time. Through our corporate membership with the Professional Services Council and other affiliations, we monitor proposed and pending regulations from relevant congressional committees and government agency policies that have potential impact upon our industry and our specific strategically targeted markets. As with any commercial enterprise, we cannot predict with certainty the nature or direction of the development of Federal statutes and regulations that will affect its business operations. See Risk Factors in Part I, Item 1A.
Intellectual Property
Our business involves providing services to government entities, our operations generally are not substantially dependent upon obtaining and/or maintaining copyright or trademark protections, although our operations make use of such protections and benefit from them as discriminators in competition. We claim copyright, trademark and other proprietary rights in a variety of intellectual property, including each of our proprietary computer software and data products and the related documentation. We hold the trademark, Infinibyte®, for our cloud-based solution. We maintain a number of trade secrets that contribute to our success and competitive distinction and endeavor to accord such trade secrets adequate protection to ensure their continuing availability.
Human Capital Management and Employee Relations
Our employees are critical to our success and are the reason we continue to execute at a high level. We believe our continued focus on making employee engagement and development is a key component of delivering high quality services to our customers.
As of September 30, 2025, we employed approximately 2,300 employees performing throughout the U.S. Management believes that it has good relations with its employees.
Vision and Values
DLH’s vision is to be the most trusted provider of technology solutions and readiness enhancement services to Federal civilian and military agencies. Through our work, DLH supports Military Service Members, Veterans, children and families, and other at-risk and underserved communities. As a market influencer and emerging leader, DLH strives to shape and enhance the sustainability and readiness posture of those we serve, delivering value to our customers and stakeholders.
DLH stands on strong values including:
•Integrity and Trust - We establish relationships throughout our organization and with customers and partners that are built on a foundation of mutual trust and respect, which exemplifies the way DLH does business. We are committed to the highest standards of ethical conduct during the course of all business.
•Performance Excellence - We are focused on achieving all requirements, with a passion for continuous improvement in the quality of our services and products. We strive to be our customers' "best value" provider and attain the highest measure of customer and shareholder satisfaction.
•Diversity and Inclusion - We create and sustain a corporate culture that fosters inclusion of all employees and values each individual's unique talents and perspectives. We leverage the value of our diversity into every aspect of our business.
•Agility - As we grow, we continue to evolve in a manner that maintains our flexibility and agility. This allows us to anticipate and respond to ever-changing government service requirements while delivering maximum value to customers and shareholders.
Talent Acquisition, Development, and Retention
Our success depends in large part on our ability to attract talent to meet the needs of our customers. To ensure we have the talent to meet the needs of our customers, we employ broad recruiting and outreach efforts to enable us to attract an inclusive pool of highly qualified candidates. As demand for talent is highly competitive, we continue to invest in our employees through a variety of benefits and overall program enhancements. We continually review and adapt our recruiting, hiring, and training efforts to respond to market imperatives and the needs of our customers.
We seek to attract and cultivate high performing talent by providing opportunities for career growth, skills development, and recognition for their contributions as they work to serve our customers. We provide competitive compensation programs to compete and reward our talented employees. In addition to base compensation, additional compensatory benefits may include bonus programs and participation in a 401(k) Plan. We have used targeted equity-based grants with performance and service based vesting conditions to facilitate attracting and retaining key personnel. We also invest in talent development initiatives including industry-leading learning management solutions, professional credentialing, licensures and continuing education. These benefits will further enhance our talented employee base and augment our efforts to infuse proven best practices into our operations through world-class talent acquisition and talent management tools.
Employee Safety and Health
We are committed to the health, safety and wellness of our employees. We provide our employees and their families with flexible and convenient health and wellness programs, including competitive benefits arrangements to address healthcare needs, including health insurance benefits, health savings and flexible spending accounts, paid time off, family leave, and family care resources.
Company Website and Information
Our corporate headquarters are located at 3565 Piedmont Road NE, Building 3 Suite 700, Atlanta, Georgia 30305. Our telephone number is (770) 554-3545. Our website is www.dlhcorp.com. The website contains information about our company and operations. Links to the Investor Relations section of our website, copies of our filings with the U.S. Securities and Exchange Commission ("SEC") on Forms 10-K, 10-Q, 8-K, and all amendments to those reports, can be viewed and downloaded free of charge as soon as reasonably practicable after the reports and amendments are electronically filed with or furnished to the SEC. In addition, the SEC maintains a website (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC, including DLH. The information on our website is not incorporated by reference into and is not part of this Annual Report on Form 10-K.

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ITEM 1A. RISK FACTORS
ITEM 1A. RISK FACTORS
As provided for under the Private Securities Litigation Reform Act of 1995 ("1995 Reform Act"), we wish to caution shareholders and investors that the following important factors, among others discussed throughout this Annual Report on Form 10-K for the fiscal year ended September 30, 2025, have affected, and in some cases could affect, our actual results of operations and cause our results to differ materially from those anticipated in forward looking statements made herein. Our business, results of operations, cash flows and financial condition may be materially and adversely affected due to any of the following risks. The risks described below are not the only ones we face. Additional risks we are not presently aware of or that we currently believe are immaterial may also impair our business operations. The trading price of our common stock could decline due to any of these risks. In assessing these risks, you should also refer to the other information contained or incorporated by reference in this Annual Report on Form 10-K, including our consolidated financial statements and related notes.
Risks Relating to Our Business and the Industry in which we Compete
We depend on contracts with the Federal government for virtually all of our revenue and our business could be seriously harmed if the Federal government decreased or ceased doing business with us.
At present, we derive 99% of our revenue from agencies of the Federal government, primarily as a prime contractor but also as a subcontractor to other Federal prime contractors. In addition, substantially all accounts receivable, including unbilled accounts receivable, are from agencies of the U.S. Government as of September 30, 2025 and 2024. However, in 2025, the U.S. administration began efforts to reduce federal spending and the size of the federal workforce. In addition, the General Services Administration ("GSA") has instructed all federal agencies to review their contracts with consulting firms and technology product resellers contracting with the U.S. federal government. These and similar spending reductions and contract reviews have resulted in and are likely to continue to result in contract terminations, delays and cancellations of new procurements, and reductions in price and contract scope, which have had an adverse effect on our results, and could in the future have a material impact on our results of operations or financial condition. We expect that Federal government contracts will continue to be our primary source of revenue for the foreseeable future. We believe that the credit risk associated with our receivables is limited due to the creditworthiness of these customers. In general, if we were suspended or debarred from contracting with the federal government or if the government otherwise ceased doing business with us or significantly decreased the amount of business it does with us, our business, financial condition and operating results would be materially and adversely affected.
A significant portion of our revenue is concentrated in a small number of contracts, and we could be seriously harmed if we were unable to continue providing services under, or unsuccessful in our recompete efforts on, these contracts.
A significant portion of our revenue is concentrated in contracts with the VA and HHS. There can be no assurance as to the actual amount of services that we will ultimately provide to VA and HHS under our current contracts, or that we will be successful in recompete efforts. As described in greater detail above in "Item 1 - Business - Major Contracts", our contracts with the VA for the provision of services to its CMOP operations is currently subject to renewal solicitations which have been published as a set aside for a service-disabled veteran owned small business (“SDVOSB”) to perform as the prime contractor. DLH submitted revised proposals with its SDVOSB partner as prime contractor on certain of the opportunities. During this solicitation process, the VA has awarded three task orders to SDVOSBs unaffiliated with DLH. While the acquisition process is being conducted, DLH continues to operate as the prime contractor for the remaining CMOP locations that it currently manages. In addition, our performance under a contract with HHS in support of its Head Start program was completed as of October 31, 2025 and the customer transitioned services to a new small business prime contractor unaffiliated with us. In light of the decisions by these customers to award contracts to new prime contractors on a set-aside basis, our results of operations, cash flows and financial condition have been be adversely affected. Our results of operations, cash flows and financial condition will be further adversely affected if we were unable to continue our relationship with either of these customers, if we were to lose any more of our material current contracts, or if the amount of services we provide to them is further reduced.
The U.S. government may prefer veteran-owned, minority-owned, women-owned and small disadvantaged businesses; therefore, we may have fewer opportunities to bid for or could lose a portion of our existing work to small businesses.
As a result of the Small Business Administration ("SBA") set-aside program, the U.S. government may decide to restrict certain procurement activity only to bidders that qualify as veteran owned, minority-owned, small, or small disadvantaged businesses. In such cases, we would not be eligible to perform as a prime contractor on those programs and would be limited to work as a subcontractor on those programs. As previously reported and described elsewhere herein in further detail, 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 the best value to the U.S. The effect of these set-aside provisions may limit our ability to compete for prime contractor positions on programs that we have targeted for growth and to maintain our prime contractor position as current contracts are subject to renewal.
Loss of our contracting vehicles could impair our ability to win new business and perform under existing contracts.
We currently hold multiple contracting vehicles, which our customers utilize to award contracts. If we were to lose one or more of these contracts or other contracting vehicles, we could lose a significant revenue source and our operating results and financial condition could be materially and adversely affected.
Future legislative or government budgetary and spending changes could negatively impact our business.
U.S. Government programs are subject to annual congressional budget authorization and appropriation processes. For many programs, Congress appropriates funds on a fiscal year basis even though the program performance period may extend over several years. Consequently, programs are often partially funded initially and additional funds are committed only as Congress makes further appropriations. In recent years, we have seen frequent debates regarding the scope of funding of our customers, thereby leading to budgetary uncertainty for our Federal customers. Changes in federal government budgetary priorities or actions taken to address government budget deficits, the national debt, and/or prevailing economic conditions, including government closures or shutdowns, could result in projects being reduced in scope or price, or being terminated, and may directly affect our financial performance. Further, political and economic factors, such as pending elections, the outcome of recent elections, changes in leadership among key executive or legislative decision makers, and revisions to governmental tax or other policies can affect the quantity and terms of new government contracts signed or the speed at which new contracts are signed, decrease future levels of spending and authorizations for programs that we bid, shift spending priorities to programs in areas for which we do not provide services and/or lead to changes in enforcement or how compliance with relevant rules or laws is assessed. Congressional seats may change during election years, and the balance of spending priorities may change along with them. Historically, our customers’ missions have received bipartisan support from the legislative and executive branches of the federal government. However, we anticipate that the current administration and Congress will seek to implement their budget priorities, which may impact our customers’ projects and budgets.
A significant decline in government expenditures, a shift of expenditures away from programs that we support or a change in federal government contracting policies could cause federal government agencies to reduce their purchases under contracts, to exercise their right to terminate contracts at any time without penalty or not to exercise options to renew contracts. In the event the budgets or budgetary priorities of the U.S. Government entities with which we do business are delayed, decreased or underfunded, our consolidated revenues and results of operations could be materially and adversely affected.
VA programs, which accounted for approximately 33.8% and 35.3% of the Company’s revenue for the years ended September 30, 2025 and 2024, respectively, were exempt from the spending caps established under Federal government sequestration targets enacted in 2013.
Because we depend on U.S. government contracts, a delay in the completion of the U.S. government's budget and appropriations process could delay procurement of the services we provide and adversely affect our future revenues.
The funding of U.S. government programs is subject to an annual congressional budget authorization and appropriations process. In years when the U.S. government does not complete its appropriations before the beginning of the new fiscal year on October 1, government operations are typically funded pursuant to a "continuing resolution," which allows federal government agencies to operate at spending levels approved in the previous appropriations cycle but does not authorize new spending initiatives. The U.S. government had been operating under a continuing resolution (CR) which expired on September 30, 2025.
When the U.S. government operates under a CR, delays can occur in the procurement of the services and solutions that we provide and may result in new initiatives being canceled. 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. Subsequent to the expiration of the CR that transpired on September 30, 2025, the U.S. government ceased operations until November 12, 2025 when a new stopgap spending bill was passed by Congress and signed into law by the President. This current funding measure provides funding to support U.S. government operations through January 30, 2026. We continuously review our operations in an attempt to identify programs potentially at risk from CRs so that we can consider appropriate contingency plans.
In general, a federal government shutdown could result in our incurrence of substantial labor or other costs without reimbursement under customer contracts, the delay or cancellation of programs or the delay of contract payments, which could have a negative effect on our cash flows and adversely affect our future results of operations. During a shutdown our customers may issue stop work orders, delay new contract awards, withhold payments, or limit access to government facilities and systems. Although certain of our programs may be deemed essential and continue, others could be delayed or suspended, creating significant unreimbursed costs and deferred revenue. A prolonged shutdown or repeated lapses in funding could also postpone new procurements, reduce activity under existing contracts, and extend the time needed to resume normal operations once funding is restored. These events could materially and adversely affect our business, financial condition, and results of operations.
The markets in which we operate are highly competitive, and many of the companies we compete against have substantial resources. Further, the U.S. Government contract bid process is highly competitive, complex and sometimes lengthy, and is subject to protest and implementation delays.
The markets in which we operate are highly competitive. Further, many of our contracts and task orders with the Federal government are awarded through a competitive bidding process, which is complex and sometimes lengthy. We expect that many of the opportunities we will seek in the foreseeable future will be awarded through competitive bidding. Furthermore, budgetary pressures and developments in the procurement process have caused many government customers to increasingly purchase goods and services through IDIQ contracts, GSA schedule contracts and other government-wide acquisition contracts. These contracts, some of which are awarded to multiple contractors, have increased competition and pricing pressure, requiring that we make sustained post-award efforts to realize revenue under each such contract. Many of our competitors are larger and have greater resources than we do, larger customer bases and greater brand recognition. Our competitors, individually or through relationships with third parties, may be able to provide customers with different or greater capabilities or benefits than we can provide. If we are unsuccessful in competing with these other companies, our revenues and margins may materially decline.
Overall, the competitive bidding process presents a number of risks, including the following: (i) we expend substantial cost and managerial time and effort to prepare bids and proposals for contracts that we may not win, and to defend those bids through any protest process; (ii) we may be unable to estimate accurately the resources and cost structure that will be required to service any contract we win; and (iii) we may encounter expenses and delays if our competitors protest or challenge awards of contracts to us in competitive bidding, and any such protest or challenge could result in the resubmission of bids on modified specifications, or in the termination, reduction or modification of the awarded contract. If we are unable to win particular contracts, we may be prevented from providing the services that are purchased under those contracts for a number of years. If we are unable to consistently win new contract awards over any extended period, our business and prospects will be adversely affected and that could cause our actual results to differ materially and adversely from those anticipated. In addition, upon the expiration of a contract, if the customer requires further services of the type provided by the contract, there is frequently a competitive rebidding process. There can be no assurance that we will win any particular bid, or that we will be able to replace business lost upon expiration or completion of a contract, and the termination or non-renewal of any of our significant contracts could cause our actual results to differ materially and adversely from those anticipated.
If a bid is won and a contract awarded, there still is the possibility of a bid protest or other delays in implementation. Our business could be adversely affected by delays caused by our competitors protesting major contract awards received by us, resulting in the delay of the initiation of work. It can take many months to resolve protests by one or more of our competitors of contract awards we receive. The resulting delay in the startup and funding of the work under these contracts may cause our actual results to differ materially and adversely from those anticipated, and there can be no assurance that such protest process or implementation delays will not have a material adverse effect on our financial condition or results of operations in the future.
Our business may suffer if we or our employees are unable to obtain and maintain the necessary security clearances or other qualifications required to perform services for our customers.
Many federal government contracts require us to have security clearances and employ personnel with specified levels of education, work experience and security clearances. Depending on the level of clearance, security clearances can be difficult and time-consuming to obtain. If we or our employees lose or are unable to obtain necessary security clearances, we may not be able to win new business and our existing customers could terminate their contracts with us or decide not to renew them. To the extent we cannot obtain or maintain the required security clearances for our employees working on a particular contract, we may not derive the revenue anticipated from the contract, which could cause our results to differ materially and adversely from those anticipated.
Our business is regulated by complex federal procurement and contracting laws and regulations, and we are subject to periodic compliance reviews by governmental agencies.
We must comply with complex laws and regulations relating to the formation, administration, and performance of federal government contracts, including the Federal Acquisition Regulation, which, among other things, requires us to certify and disclose cost and pricing data and to divest work in the event of certain organizational conflicts of interest. These laws and regulations create compliance risk and affect how we do business with our federal agency customers and may impose added costs on our business. The government may in the future reform its procurement practices or adopt new contracting rules and regulations, including cost accounting standards, that could be costly to satisfy or that could impair our ability to obtain new contracts or change the basis upon which it reimburses our compensation and other expenses or otherwise limit such reimbursements. These changes could impair our ability to obtain new contracts or win re-competed contracts or adversely affect our future profit margin. Additionally, the government may face restrictions from new legislation, regulations or government union pressures, on the nature and amount of services the government may obtain from private contractors. Any reduction in the government’s use of private contractors to provide federal services could cause our actual results to differ materially and adversely from those anticipated.
Our performance on our U.S. Government contracts and our compliance with applicable laws and regulations, including submission of invoices to our customers, are subject to audit by the government. The scope of any such audits could span multiple fiscal years. These agencies review our performance on contracts, pricing practices, cost structure and compliance with applicable laws, regulations and standards. They also evaluate the adequacy of internal controls over our business systems, including our purchasing, accounting, estimating, earned value management, and government property systems. Any costs found to be improperly allocated or assigned to contracts will not be reimbursed, and any such costs already reimbursed must be refunded and certain penalties may be imposed. Moreover, if any of the administrative processes and systems are found not to comply with requirements, we may be subjected to increased government scrutiny and approval that could delay or otherwise adversely affect our ability to compete for or perform contracts or collect our revenues in a timely manner. Therefore, an unfavorable outcome of an audit could cause actual results to differ materially and adversely from those anticipated. If a government review or investigation uncovers illegal activities or activities not in compliance with a particular contract's terms or conditions, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, harm to our reputation, suspension of payments, fines, and suspension or debarment from doing business with Federal government agencies. Any of these events could lead to a material reduction in our revenues, cash flows and operating results. Further, as the reputation and relationships that we have established and currently maintain with government personnel and agencies are important to our ability to maintain existing business and secure new business, damage to our reputation or relationships could have a material adverse effect on our revenue and operating results.
Federal government contracts may be terminated at will and may contain other provisions that may be unfavorable to us.
Many of the U.S. Government programs in which we participate as a contractor or subcontractor may extend for several years. The U.S. Government may modify, curtail or terminate its contracts and subcontracts for convenience and to the extent that a contract award contemplates one or more option years, the Government may decline to exercise such option periods. Accordingly, the maximum contract value specified under a government contract or task order awarded to us is not necessarily indicative of the revenue that we will realize under that contract. Due to our dependence on these programs, the modification, curtailment or termination of our major programs or contracts may have a material adverse effect on our results of operations and financial condition. In addition, federal government contracts contain provisions and are subject to laws and regulations that give the government rights and remedies, some of which are not typically found in commercial contracts, including allowing the government to (i) cancel multi-year contracts and related orders if funds for contract performance for an subsequent year become unavailable; (ii) claim rights in systems and software developed by us; (iii) suspend or debar us from doing business with the federal government or with a governmental agency; and (iv) impose fines and penalties and subject us to criminal prosecution. If the government terminates a contract for convenience, we may recover only our incurred or committed costs, settlement expenses and profit on work completed prior to the termination. If the government terminates a contract for default, we may be unable to recover even those amounts and instead may be liable for excess costs incurred by the government in procuring undelivered items and services from another source. Depending on the value of a contract, such termination could cause our actual results to differ materially and adversely from those anticipated.
Certain contracts also contain organizational conflict of interest (OCI) clauses that limit our ability to compete for or perform certain other contracts. OCIs arise any time we engage in activities that (i) make us unable or potentially unable to render impartial assistance or advice to the government; (ii) impair or might impair our objectivity in performing contract work; or (iii) provide us with an unfair competitive advantage. For example, when we work on the design of a particular system, we may be precluded from competing for the contract to develop and install that system. Depending upon the value of the matters affected, an OCI issue that precludes our participation in or performance of a program or contract could cause our actual results to differ materially and adversely from those anticipated.
We may not receive the full amounts authorized under the contracts included in our backlog, which could reduce our revenue in future periods below the levels anticipated.
Our total backlog consists of funded and unfunded amounts and may include estimates and assumptions about matters that cannot be determined with certainty at the time the backlog is calculated. Funded backlog represents contract value that has been appropriated by a customer and is expected to be recognized into revenue. Unfunded backlog represents the sum of the unappropriated contract value on executed contracts and unexercised option years that is expected to be recognized into revenue. The maximum contract value specified under a government contract or task order awarded to us is not necessarily indicative of the revenue that we will realize under that contract. For example, we generate revenue from IDIQ contracts, which do not require the government to purchase a pre-determined amount of goods or services under the contract. Action by the government to obtain support from other contractors or failure of the government to order the quantity of work anticipated could cause our actual results to differ materially and adversely from those anticipated. Additionally, many of our multi-year contracts may only be partially-funded at any point during their term with the unfunded portion subject to future appropriations by Congress. As a result of a lack of appropriated funds or efforts to reduce federal government spending, our backlog may not result in revenue. Accordingly, our backlog may not result in actual revenue in any particular period, or at all, which could cause our actual results to differ materially and adversely from those anticipated.
Restrictions on or other changes to the federal government’s use of service contracts may harm our operating results.
We derive a significant amount of revenues from service contracts with the federal government. The government may face restrictions from new legislation, regulations, or government union pressures, on the nature and amount of services the government may obtain from private contractors (i.e., insourcing versus outsourcing). Any reduction in the government’s use of private contractors to provide federal services could cause our actual results to differ materially and adversely from those anticipated.
Our business growth and profitable operations require that we develop and maintain strong relationships with other contractors with whom we partner or otherwise depend on.
We may enter into future teaming ventures with other companies, which carry risk in regard to maintaining strong, trusted working relationships in order to successfully fulfill contract obligations. Teaming arrangements may include being engaged as a subcontractor to a prime contractor, engaging a subcontractor on a contract for which we are the prime contractor, or entering into a joint venture with another company. We may lack control over fulfillment of such contracts, and poor performance on the contract could impact our customer relationship, even if we perform as required. We expect to depend on relationships with other contractors for a portion of our revenue in the foreseeable future. Our revenue and operating results could differ materially and adversely from those anticipated if any such prime contractor or teammate chooses to offer directly to the customer services of the type that we provide or if they team with other companies to provide those services.
Our earnings and margins may vary based on the mix of our contracts and programs.
At September 30, 2025, our backlog includes cost reimbursable, time-and-materials, and firm-fixed-price contracts. Our earnings and margins may vary depending on the relative mix of contract types, the costs incurred in their performance, the achievement of other performance objectives and the stage of performance at which the right to receive fees, particularly under incentive and award fee contracts, is finally determined.
Our employees, or those of our teaming partners, may engage in misconduct or other improper activities which could harm our business.
We are exposed to risk from misconduct or fraud by our employees, or employees of our teaming partners. Such violations could include intentional disregard for Federal government procurement regulations, engaging in unauthorized activities, seeking reimbursement for improper expenses, or falsifying time records. Employee misconduct could also involve the improper use of our customers' sensitive or classified information and result in a serious harm to our reputation. While we have appropriate policies in effect to deter illegal activities and promote proper conduct, it is not always possible to deter employee misconduct. Precautions to prevent and detect this activity may not be effective in controlling such risks or losses. As a result of employee misconduct, we could face fines and penalties, loss of security clearance and suspension or debarment from contracting with the federal government, which could materially and adversely affect our business, results of operations, financial condition, cash flows, and liquidity.
If we are unable to attract qualified personnel, our business may be negatively affected.
We rely heavily on our ability to attract and retain qualified employees and other personnel who possess the skills, experience, and licenses necessary in order to provide our solutions for our assignments. Our business is materially dependent upon the continued availability of such qualified personnel. Our inability to secure qualified personnel would have a material adverse effect on our business. Competition for qualified employees is intense and the cost of attracting qualified personnel and providing them with attractive benefits packages may be higher than we anticipate and, as a result, if we are unable to pass these costs on to our customers, our profitability could decline. Moreover, if we are unable to attract and retain qualified personnel, the quality of our services may decline and, as a result, we could lose customers.
If our subcontractors do not perform their contractual obligations, our performance as a prime contractor and our ability to obtain future business could be materially and adversely impacted and our actual results could differ materially and adversely from those anticipated.
Our performance of government contracts may involve the issuance of subcontracts to other companies upon which we rely to perform all or a portion of the work we are obligated to deliver to our customers. Unsatisfactory performance by one or more of our subcontractors to deliver on a timely basis the agreed-upon supplies, perform the agreed-upon services, or appropriately manage their vendors may materially and adversely impact our ability to perform our obligations as a prime contractor. A subcontractor’s performance deficiency could result in the government terminating our contract for default. A default termination could expose us to liability for excess costs of reprocurement by the government and have a material adverse effect on our ability to compete for future contracts and task orders. Depending upon the level of problem experienced, such problems with subcontractors could cause our actual results to differ materially and adversely from those anticipated.
The federal government’s appropriation process and other factors may delay the collection of our receivables, and our business may be adversely affected if we cannot collect our receivables in a timely manner.
We depend on the collection of our receivables to generate cash flow, provide working capital, pay debt and continue our business operations. If the federal government or any prime contractor for whom we are a subcontractor fails to pay or delays the payment of their outstanding invoices for any reason, our business and financial condition may be materially and adversely affected. The government may fail to pay outstanding invoices for a number of reasons, including lack of appropriated funds or lack of an approved budget. Contracting officers have the authority to impose contractual withholdings, which can also adversely affect our ability to collect timely. If we experience difficulties collecting receivables, it could cause our actual results to differ materially and adversely from those anticipated. In addition, from time to time, when we are awarded a contract, we incur significant expenses before we receive any contract payments. These expenses include leasing and outfitting office space, purchasing office equipment, and hiring personnel. In other situations, contract terms provide for billing upon achievement of specified project milestones. In these situations, we are required to expend significant sums of money before receiving related contract payments. In addition, payments due to us from government agencies may be delayed due to billing cycles or as a result of failures by the government to approve governmental budgets in a timely manner. In addition to these factors, poor execution on project startups could impact us by increasing our use of cash. In certain circumstances, we may defer recognition of costs incurred at the inception of a contract. Such action assumes that we will be able to recover these costs over the life of the contract. To the extent that a project does not perform as anticipated, these deferred costs may not be considered recoverable resulting in an impairment charge.
Our profitability could suffer if our cost-management strategies are unsuccessful, and we may not be able to improve our profitability.
Our ability to improve or maintain our profitability is dependent on our being able to successfully manage our costs, including taking actions to reduce certain costs and optimize our business. Our cost management strategies include maintaining appropriate alignment between the demand for our services and solutions and the workforce needed to deliver them. If we are not effective in managing our operating costs in response to changes in demand or pricing, or if we are unable to cost-effectively hire and retain people with the knowledge and skills necessary to deliver our services and solutions we may incur increased costs, which could reduce our ability to continue to invest in our business in an amount necessary to achieve our planned rates of growth and our desired levels of profitability.
If we do not accurately anticipate the cost, risk and complexity of performing our work or if third parties upon whom we rely do not meet their commitments, then our contracts could have delivery inefficiencies and be less profitable than expected or unprofitable.
Our contract profitability is highly dependent on our forecasts regarding the effort and cost necessary to deliver our services and solutions, which are based on available data and could turn out to be materially inaccurate. If we do not accurately estimate the effort, costs or timing for meeting our contractual commitments and/or completing engagements to a client’s satisfaction, our contracts could yield lower profit margins than planned or be unprofitable. In addition, many of the contracts we perform under require that we utilize subcontractors or that our services and solutions incorporate or coordinate with the software, systems or infrastructure requirements of other vendors and service providers. Our profitability depends on the ability of these subcontractors, vendors and service providers to deliver their products and services in a timely manner, at the anticipated cost, and in accordance with the project requirements, as well as on our effective oversight of their performance. In some cases, these subcontractors are small firms, and they might not have the resources or experience to successfully integrate their services or products with large-scale engagements or enterprises. Some of this work involves new technologies, which may not work as intended or provide anticipated productivity gains, or may take more effort to implement than initially predicted. Any of these factors could adversely affect our ability to perform and subject us to additional liabilities, which could have a material adverse effect on our relationships with clients and on our results of operations.
Risks Relating to Our Information Technology Systems and Intellectual Property
We are highly dependent on the proper functioning of our information systems.
We are highly dependent on the proper functioning of our information systems in operating our business. Critical information systems used in daily operations match employee resources and customer assignments and track regulatory credentialing. They also perform payroll, billing and accounts receivable functions. As the breadth and complexity of this infrastructure continues to grow, including as a result of the increasing reliance on, and use of, mobile technologies, social media and cloud-based services, as more of our employees continue to work remotely, and as cyberattacks become increasingly sophisticated (e.g. deepfakes and AI generated social engineering), the risk of security incidents and cyberattacks has increased. Threat actors may leverage emerging AI technologies to develop new hacking tools and attack vectors, exploit vulnerabilities, obscure their activities, and increase the difficulty of threat attribution. Such incidents could lead to shutdowns or disruptions of or damage to our systems and those of our clients, business partners and vendors, and unauthorized disclosure of sensitive or confidential information, including personal data and proprietary business information. Both our client and our company may experience, data security incidents resulting from unauthorized access to our and our service providers’ systems and unauthorized acquisition of our data and our clients’ data including: inadvertent disclosure, misconfiguration of systems, phishing ransomware or malware attacks. While we have multiple back up plans for these types of contingencies, our information systems are vulnerable to fire, storms, flood, power loss, telecommunication outages, physical break-ins, cyber-attack, ransomware, and similar events. If our information systems become inoperable, or are otherwise unavailable, these functions would have to be accomplished manually, which in turn could impact our financial viability, due to the increased cost associated with performing these functions manually. Unauthorized disclosure or use of, denial of access to, or other incidents involving sensitive or confidential client, vendor, business partner or DLH data, whether through systems failure, employee negligence, fraud, misappropriation, or cybersecurity, ransomware or malware attacks, or other intentional or unintentional acts, could damage our reputation and our competitive positioning in the marketplace, disrupt our or our clients’ business, cause us to lose clients and result in significant financial exposure and legal liability. Cybersecurity threats are constantly expanding and evolving, becoming increasingly sophisticated and complex, increasing the difficulty of detecting and defending against them and maintaining effective security measures and protocols.
Our systems and networks may be subject to cybersecurity breaches, data privacy failures, or other security incidents that could harm our reputation, expose us to liability, and adversely affect our business.
Many of our operations rely heavily upon technology systems and networks to receive, input, maintain and communicate participant and customer data pertaining to the programs we manage. While we have programs designed to protect such information and comply with all relevant privacy and security requirements, the threats that our clients face have grown more frequent and sophisticated. Any systems failures, whether caused by us, a third-party service provider, or unauthorized intruders and hackers, or due to situations such as computer viruses, natural disasters, or power shortages, could cause loss of data or interruptions or delays in our business or that of our customers. If our systems or networks were compromised by a security breach, we could be adversely affected by losing confidential or protected information of program participants and customers, and we could suffer reputational damage and a loss of confidence from prospective and existing customers. Similarly, if our internal networks were compromised, we could be adversely affected by the loss of proprietary, trade secret or confidential technical and financial data. The loss, theft or improper disclosure of that information could subject the Company to sanctions under the relevant laws, remediation costs, contract termination, lawsuits from affected individuals, negative press articles and a loss of confidence from our government customers, all of which could adversely affect our existing business, future opportunities and financial condition. Further, our property and cyber insurance may be inadequate to compensate us for all losses that may occur as a result of any system or operational failure or disruption and, as a result, our actual results could differ materially and adversely from those anticipated. In addition, in order to provide services to our customers, we often depend upon or use customer systems that are supported by the customer or third parties. Any security breach or system failure in such systems could result in an interruption of our customer’s operations which could cause us to experience significant delays under a contract, and a material adverse effect on our results of operations.
Additionally, a number of projects require us to receive, maintain and transmit protected health information or other types of confidential personal information. That information may be regulated by the Health Insurance Portability and Accountability Act ("HIPAA"), the Health Information Technology for Economic and Clinical Health Act of 2009, Internal Revenue Service regulations and other laws. The loss, theft or improper disclosure of that information could subject us to sanctions under these laws, breach of contract claims, lawsuits from affected individuals, negative press articles and a loss of confidence from our government customers, all of which could adversely affect our existing business, future opportunities and financial condition.
Failure to adequately protect, maintain, or enforce our rights in our intellectual property may adversely limit our competitive position.
We rely upon a combination of nondisclosure agreements and other contractual arrangements, as well as copyright, trademark, and trade secret laws to protect our proprietary information. We also enter into proprietary information and intellectual property agreements with employees, which require them to disclose any inventions created during employment, to convey such rights to inventions to us, and to restrict any disclosure of proprietary information. Trade secrets are generally difficult to protect. Although our employees are subject to confidentiality obligations, this protection may be inadequate to deter or prevent misappropriation of our confidential information and/or the infringement of our trademarks and copyrights. Further, we may be unable to detect unauthorized use of our intellectual property or otherwise take appropriate steps to enforce our rights. Failure to adequately protect, maintain, or enforce our intellectual property rights may adversely limit our competitive position.
We may face from time to time, allegations that we or a supplier or customer have violated the intellectual property rights of third parties. If, with respect to any claim against us for violation of third-party intellectual property rights, we are unable to prevail in the litigation or retain or obtain sufficient rights or develop non-infringing intellectual property or otherwise alter our business practices on a timely or cost-efficient basis, our business and competitive position may be adversely affected.
Any infringement, misappropriation or related claims, whether or not meritorious, are time consuming, divert technical and management personnel, and are costly to resolve. As a result of any such dispute, we may have to develop non-infringing intellectual property, pay damages, enter into royalty or licensing agreements, cease utilizing certain products or services, or take other actions to resolve the claims. These actions, if required, may be costly or unavailable on terms acceptable to us.
Risks Relating to Acquisitions
In connection with acquisitions, we may be required to take write-downs or write-offs, restructuring and impairment, or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition, and results of operations.
Although we conduct extensive due diligence in connection with an acquisition, we cannot assure that this diligence revealed all material issues that may be present, that it would be possible to uncover all material issues through customary due diligence, or that factors outside of our control will not later arise. We have also purchased representations and warranties insurance in connection with the acquisition, but there is no assurance that those policies will cover any losses we might experience from breaches of the sellers’ representations and warranties or otherwise arising from the acquisition. Even if our due diligence successfully identifies certain risks, unexpected risks may arise and previously known risks may materialize in a manner not consistent with our preliminary risk analysis. Further, as a result of the acquisition, purchase accounting, and the operation of the combined company after closing, we may be required to take write-offs or write-downs, restructuring and impairment or other charges that could negatively affect business, assets, liabilities, prospects, outlook, financial condition and results of operations.
We may have difficulty identifying and executing other acquisitions on favorable terms and therefore may grow at slower than anticipated rates.
One of our potential paths to growth is to selectively pursue acquisitions. Through acquisitions, we may be able to expand our base of customers, increase the range of solutions we offer to our customers and deepen our penetration of existing markets and customers. We may be unable to identify or complete attractive strategic transactions for many reasons, including competition from other acquirers, and high valuations of potential targets. Even when we identify suitable candidates and reach agreement on terms, regulatory approvals, antitrust reviews, and other legal or contractual restrictions may delay or prevent completion. To the extent that management is involved in identifying acquisition opportunities or integrating new acquisitions into our business, our management may be diverted from operating our core business. Without acquisitions, we may not grow as rapidly otherwise, which could cause our actual results to differ materially and adversely from those anticipated.
We may encounter other risks in regard to making acquisitions, including:
•increased competition for acquisitions may increase the costs of our acquisitions;
•unforeseen expenses, delays, or conditions imposed in connection with regulatory or contractual approvals;
•challenges in retaining key employees, business partners, or customers of an acquired company;
•non-discovery or non-disclosure of material liabilities during the due diligence process, including omissions by prior owners of any acquired businesses or their employees in complying with applicable laws or regulations, or their inability to fulfill their contractual obligations to the federal government or other customers; and
•acquisition financing may not be available on reasonable terms or at all.
Any of these risks could cause our actual results to differ materially and adversely from those anticipated.
We may have difficulty integrating the operations of companies we acquire, which could cause actual results to differ materially and adversely from those anticipated.
The success of a potential future acquisition strategy depends upon our ability to successfully integrate the businesses. We may have difficulty integrating a business that we may acquire in the future. The integration of a business into our operations may result in unforeseen operating difficulties, absorb significant management attention and require significant financial resources that would otherwise be available for the ongoing development of our business. These integration difficulties include the integration of personnel with disparate business backgrounds, the transition to new information systems, coordination of geographically dispersed organizations, loss of key employees of acquired companies, and reconciliation of different corporate cultures. Further, the integration process could take longer than anticipated and could result in the loss of key employees, the disruption of each company’s ongoing businesses, result in tax costs or inefficiencies, or inconsistencies in standards, controls, information technology systems, procedures and policies, any of which could materially adversely affect our ability to maintain relationships with customers, employees or other third parties, or our ability to achieve the anticipated benefits of the transactions, and could harm our financial performance. For these or other reasons, we may be unable to retain key customers of acquired companies. Moreover, any acquired business may not generate the revenue or net income we expected or produce the efficiencies or cost-savings we anticipated. Any of these outcomes could cause our actual results to differ materially and adversely from those anticipated.
If we are ultimately unable to successfully or efficiently integrate our operations with those of the acquired business, we may incur unanticipated liabilities and be unable to realize the revenue growth, synergies, and other anticipated benefits resulting from the acquisition, and our business, results of operations, and financial condition could be materially adversely affected.
We have a substantial amount of goodwill on our balance sheet. Future write-offs of goodwill may have the effect of decreasing our earnings or increasing our losses.
We have obtained growth through acquisitions of other companies and businesses. Under existing accounting standards, we are required to periodically review goodwill for possible impairment. In the event that we are required to write down the value of any assets under these pronouncements, it may materially and adversely affect our earnings. See the more detailed discussion appearing as part of our Management's Discussion and Analysis of Financial Condition and Results of Operations in Item 7 herein.
Risks Relating to Our Outstanding Indebtedness
We have incurred debt in connection with acquisitions and we must make the scheduled principal and interest payments on the facility and maintain compliance with other debt covenants.
Following our acquisition of DLH, LLC (formerly, Grove Resource Solutions, LLC) in December 2022, we amended and restated our credit agreement with First National Bank of Pennsylvania and certain other lenders and incurred additional indebtedness. We amended our credit agreement (as amended, the “Credit Agreement”) in November 2024 to modify the financial covenants and adjust the borrowing capacity of the revolving credit facility. The Credit Agreement requires compliance with a number of financial covenants and contains restrictions on our ability to engage in certain transactions, including limitations on: granting liens; incurring other indebtedness; disposing assets; making investments in other entities; and completing other mergers and consolidations. Also, the Credit Agreement requires us to comply with certain financial covenants including a minimum fixed charge coverage ratio and a maximum total leverage ratio. In addition, the Credit Agreement also requires prepayments of a percentage of excess cash flow. Accordingly, a portion of our cash flow from operations was dedicated to the repayment of our indebtedness and we expect future cash flow to be used to reduce our indebtedness. The Credit Agreement provides for customary events of default, including, among other things, a payment default, covenant default or defaults on other indebtedness or judgments in excess of a stipulated amount, change of control events, suspension or disbarment from contracting with the federal government and the material inaccuracy of our representations and warranties. If we are unable to make the scheduled principal and interest payments on the Credit Agreement or maintain compliance with other debt covenants, we may be in default under the Credit Agreement, which if not waived, could cause our debt to become immediately due and payable and enable the lenders to enforce their rights under the Credit Agreement. Such an event would likely have a material adverse effect on our business, financial condition and results of operations.
Our increased indebtedness could adversely affect us in a number of other ways, including:
•causing us to be less able to take advantage of business opportunities, such as other acquisition opportunities, and to react to changes in market or industry conditions;
•increasing our vulnerability to adverse economic, industry, or competitive developments;
•affecting our ability to pay or refinance debts as they become due during adverse economic, financial market, and industry conditions;
•requiring us to use a larger portion of cash flow for debt service, reducing funds available for other purposes;
•decreasing our profitability and/or cash flow;
•causing us to be disadvantaged compared to competitors with less leverage; and
•limiting our ability to borrow additional funds in the future to fund working capital, capital expenditures, and other general corporate purposes.
Risks Relating to Our Corporate Structure and Capital Stock
Our stock price has been volatile and your investment in our common stock may suffer a decline in value.
The price of our common stock has been subject to fluctuations, has declined in value over the past fiscal year, and may further decline in the future due to risks defined herein, or due to factors beyond our control, including changes in market conditions such as increased interest rates, a recession, or a change in Federal spending priorities. Stock markets in general have experienced volatility that has often been unrelated to the operating performance of a particular company. These broad market fluctuations could adversely affect the trading price of our common stock.
Since we have not paid dividends on our common stock, you cannot expect dividend income from an investment in our common stock.
We have not paid any dividends on our common stock since our inception and do not contemplate or anticipate paying any dividends on our common stock in the foreseeable future. Current lenders do and future potential lenders may prohibit us from paying dividends without prior consent. Therefore, holders of our common stock may not receive any dividends on their investment in us. Earnings, if any, may be retained and used to finance the development and expansion of our business.
We may issue preferred stock with rights senior to our common stock, which may adversely impact the voting and other rights of the holders of our common stock.
Our certificate of incorporation authorizes the issuance of "blank check" preferred stock with such designations, rights and preferences as may be determined from time to time by our board of directors up to an aggregate of 5,000,000 shares of preferred stock. Accordingly, our board of directors is empowered, without stockholder approval, to issue preferred stock with dividend, liquidation, conversion, voting or other rights, which would adversely affect the voting power or other rights of the holders of our common stock. In the event of issuance, the preferred stock could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of our Company, which could have the effect of discouraging bids for our Company and thereby prevent stockholders from receiving the maximum value for their shares. Although we have no present intention to issue any shares of our preferred stock, in order to discourage or delay a change of control of our Company, we may do so in the future. In addition, we may determine to issue preferred stock in connection with capital raising efforts and the terms of the stock so issued could have special voting rights or rights related to the composition of our Board.
The exercise or vesting of our outstanding common stock options and restricted stock units may depress our stock price and dilute your ownership of the Company.
To the extent that options are exercised or restricted stock units vest, dilution to our shareholders will occur. We cannot foresee the impact of any potential sales of our common shares on the market, but it is possible that if a significant percentage of such available shares were attempted to be sold within a short period of time, the market for our shares would be adversely affected. It is also unclear whether or not the market for our common stock could absorb a large number of attempted sales in a short period of time. Moreover, the terms upon which we will be able to obtain additional equity capital may be adversely affected, since the holders of these securities can be expected to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital on terms more favorable to us than the exercise terms provided by those securities. To the extent that these securities are exercised, dilution to our shareholders will occur. Moreover, the terms upon which we will be able to obtain additional equity capital may be adversely affected, since the holders of these securities can be expected to exercise them at a time when we would, in all likelihood, be able to obtain any needed capital on terms more favorable to us than the exercise terms provided by those securities.
Anti-takeover provisions in our Articles of Incorporation make a change in control of our Company more difficult.
The provisions of our Articles of Incorporation and the New Jersey Business Corporation Act, together or separately, could discourage potential acquisition proposals, delay or prevent a change in control and limit the price that certain investors might be willing to pay in the future for our common stock. Among other things, these provisions:
•require certain super majority votes; and
•establish certain advance notice procedures for nomination of candidates for election as directors and for shareholders' proposals to be considered at shareholders' meetings.
In addition, the New Jersey Business Corporation Act contains provisions that, under certain conditions, prohibit business combinations with 10% shareholders and any New Jersey corporation for a period of five years from the time of acquisition of shares by the 10% shareholder. The New Jersey Business Corporation Act also contains provisions that restrict certain business combinations and other transactions between a New Jersey corporation and 10% shareholders.
Our executive officers, directors and significant stockholders will be able to influence matters requiring stockholder approval.
As of September 30, 2025, our executive officers, directors and largest shareholder (Wynnefield Capital, Inc. and its affiliates) own approximately 41% of our outstanding common stock. Within this amount, Wynnefield Capital, Inc. and its affiliates own approximately 26% of our outstanding common stock. This concentration of ownership may have the effect of delaying, preventing or deterring a change in control of the Company, could deprive our stockholders of an opportunity to receive a premium for their common stock as part of a sale or merger of our company and may negatively affect the market price of our common stock. These matters might include proxy contests, tender offers, mergers or other purchases of common stock that could give our stockholders the opportunity to realize a premium over the then-prevailing market price for shares of our common stock.
In addition, a person associated with Wynnefield Capital, Inc. currently serves on our Board of Directors. As a result of this share ownership and relationships on our Board of Directors, our largest stockholder will be able to influence all affairs and actions of our company, including matters requiring stockholder approval such as the election of directors and approval of significant corporate transactions. The interests of our principal stockholders may differ from the interests of the other stockholders.
General Business Risks
We may experience fluctuations in our revenues and operating results from period to period.
Our revenue and operating results may fluctuate significantly and unpredictably in the future. We have expended, and will continue to expend, substantial resources to enhance our health services offerings and expansion into the Federal health market. We may incur growth expenses before new business revenue is realized, thus showing lower profitability in a particular period or consecutive periods. Other factors which may cause our cash flows and results of operations to vary from quarter to quarter include: the terms and progress of contracts; expenses related to certain contracts which may be incurred in periods prior to revenue being recognized; the commencement, completion or termination of contracts during any particular quarter; the timing and terms of award contracts; and government budgetary delays or shortfalls. We may be unable to achieve the desired levels of revenue growth due to circumstances that are beyond our control, as already expressed regarding competition, government budgets, and the procurement process in general. In particular, if the federal government does not adopt, or delays adoption of, a budget for each fiscal year beginning on October 1, or fails to pass a continuing resolution, federal agencies may be forced to suspend our contracts and delay the award of new and follow-on contracts and orders due to a lack of funding. Also, some aspects of this work can be seasonal with regard to resources and funding, and it is difficult to predict the timing of when those resources will be expended. Although we continue to manage our operating costs and expenses, there is no guarantee that we will significantly increase future revenue and profit in any particular future period. Revenue levels achieved from our customers, the mix of solutions that we offer and our performance on future contracts will affect our financial results. Further, changes in the volume of activity and the number of contracts commenced, completed or terminated during any quarter may cause significant variations in our cash flows and results of operations. Therefore, period-to-period comparisons of our operating results may not be a good indication of our future performance.
An increase in the prices of goods and services could raise the costs associated with providing our services, diminish our ability to compete for new contracts or task orders and/or reduce customer buying power.
We may experience an increase in the costs in our supply and labor markets due to global inflationary pressures and other various geopolitical factors. We generate a portion of our revenues through various fixed price and multi-year government contracts which anticipate moderate increases in costs over the term of the contract. With the current pace of inflation our standard approach to moderate annual price escalations in our bids for multi-year work may be insufficient to counter inflationary cost pressures. This could result in reduced profits, or even losses, as inflation increases, particularly for fixed priced contracts and our longer-term multi-year contracts. In the competitive environment in which we operate as a government contractor, the lack of pricing leverage and ability to renegotiate long-term, multi-year contracts, could reduce our profits, disrupt our business, or otherwise materially adversely affect our results of operations.
Our profits and revenues could suffer if we are involved in legal proceedings, investigations, and disputes.
We are exposed to legal proceedings, investigations and disputes. In addition, in the ordinary course of our business we may become involved in legal disputes regarding personal injury or employee disputes. While we provide for these types of incidents through commercial third-party insurance carriers, we often defray these types of cost through higher deductibles. Any unfavorable legal ruling against us could result in substantial monetary damages by losing our deductible portion of carried insurance. We maintain insurance coverage as part of our overall legal and risk management strategy to lower our potential liabilities. If we sustain liabilities that exceed our insurance coverage or for which we are not insured, it could have a material adverse impact on our results of operations, cash flows and financial condition, including our profits, revenues and liquidity.
We are dependent upon certain of our management personnel and do not maintain "key personnel" life insurance on our executive officers.
Our success to date has resulted in part from the significant contributions of our executive officers, who have been instrumental in shaping the strategic direction of the Company. Our executive officers are expected to continue to make important contributions to our success. From time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, potentially disrupting our business. As of September 30, 2025, certain of our officers are under employment contracts. However, we do not maintain "key personnel" life insurance on any of our executive officers. Loss for any reason of the services of our key personnel could materially affect our operations.
We may not be fully covered by the insurance we procure and our business could be adversely impacted if we were not able to renew all of our insurance plans.
Although we carry multiple lines of liability insurance (including coverage for medical malpractice and workers' compensation), they may not be sufficient to cover the total cost of any judgments, settlements or costs relating to any present or future claims, suits or complaints. If we are unable to secure renewal of our insurance contracts or the renewal of such contracts with favorable rates and with competitive benefits, our business could be adversely affected. In addition, sufficient insurance may not be available to us in the future on satisfactory terms or at all. Further, the fact that the majority of our employees are located at customer locations increases our potential liability for negligence and professional malpractice and such liabilities may not become immediately apparent. Any increase in our costs of insurance will impact our profitability to the extent that we cannot offset these increases into our costs of services. If the insurance we carry is not sufficient to cover any judgments, settlements or costs relating to any present or future claims, suits or complaints, our business, financial condition, results of operations and liquidity could be materially adversely affected.
Our financial condition may be affected by increases in employee healthcare claims and insurance premiums, and workers' compensation claims and insurance rates.
Our current workers' compensation and medical plans are partially self-funded insurance programs. The Company currently pays base premiums plus actual losses incurred, not to exceed certain individual and aggregate stop-loss limits. In addition, health insurance premiums, and workers' compensation rates for the Company are in large part determined by our claims experience. These categories of expenditure comprise a significant portion of our direct costs. If we experience a large increase in claim activity, our direct expenditures, health insurance premiums, unemployment taxes or workers' compensation rates may increase. Although we employ internal and external risk management procedures in an attempt to manage our claims incidence and estimate claims expenses and structure our benefit contracts to provide as much cost stability as reasonably possible given the self-funded nature of our plans, we may not be able to prevent increases in claim activity, accurately estimate our claims expenses or pass the cost of such increases on to our customers. Since our ability to incorporate such increases into our fees to our customers is constrained by contractual arrangements with our customers, a delay could occur before such increases could be reflected in our fees, which may reduce our profit margin. As a result, such increases could have a material adverse effect on our financial condition, results of operations and liquidity.
We may be subject to fines, penalties and other sanctions if we do not comply with laws governing our business.
Our business lines operate within a variety of complex regulatory schemes, including but not limited to the FAR, Federal Cost Accounting Standards, the Truth in Negotiations Act, as well as the regulations governing accounting standards. If a government audit finds improper or illegal activities by us or we otherwise determine that these activities have occurred, we may be subject to civil and criminal penalties and administrative sanctions, including termination of contracts, forfeiture of profits, suspension of payments, fines and suspension or disqualification from doing business with the government. Any adverse determination could adversely impact our ability to bid in response to RFPs in one or more jurisdictions. Further, as a government contractor subject to the types of regulatory schemes described above, we are subject to an increased risk of investigations, criminal prosecution, civil fraud, whistleblower lawsuits and other legal actions and liabilities to which private sector companies are not, the result of which could have a material adverse effect on our operating results, cash flows and financial condition.
Changes to U.S. tax laws may adversely affect our financial condition or results of operations and create the risk that we may need to adjust our accounting for these changes.
Changes in tax rates or exposure to additional tax liabilities or assessments could affect our profitability, and audits by tax authorities could lead to additional tax payments. Determining our tax provisions requires significant judgment, and many transactions and calculations involve the application of tax laws whose interpretation is uncertain. The accounting treatment of tax law changes is complex, and some changes may affect both current and future periods. Consistent with SEC guidance, our consolidated financial statements reflect our estimates of the tax effects of the current tax laws and regulations.
We are exposed to increased costs and risks associated with complying with increasing and new regulation of corporate governance and disclosure standards.
Since the implementation of the Sarbanes-Oxley Act of 2002, we spend a significant amount of management's time and resources (both internal and external) to comply with changing laws, regulations and standards relating to corporate governance and public disclosures. This compliance requires management's annual review and evaluation of our internal control systems. This process has caused us to engage outside advisory services and has resulted in additional accounting and legal expenses. We may encounter problems or delays in completing these reviews and evaluation and the implementation of improvements. If we are not able to timely comply with the requirements set forth in the Sarbanes-Oxley Act of 2002, we might be subject to sanctions or investigation by regulatory authorities. Any such action could materially adversely affect our business and our stock price.
Our results of operations could in the future be materially adversely impacted by global, macroeconomic events, such health epidemics, pandemics and other outbreaks, and the response to contain it.
We face various risks related to health epidemics, pandemics, and similar outbreak. The occurrence of a pandemic and the mitigation efforts to control its spread would be expected to create significant volatility, uncertainty and economic disruption and adversely impact the U.S. and global economies. The extent to which future health epidemics or pandemics impacts our business, operations and financial results will depend on numerous factors that we may not be able to accurately predict or control, including: the duration and scope of the pandemic; governmental, business and individuals’ actions that have may be taken in response to such events, including our ability to fully perform on our contracts as a result of government actions; the impact on economic activity and actions taken in response; the effect on our customers and customer demand for our services and solutions; our ability to sell and provide our services and solutions; and any closures of our and our customers’ offices and facilities. Furthermore, the significant increase in remote working of our employees may exacerbate certain risks to our business, including an increased demand for information technology resources and the increased risk of malicious technology-related events, such as cyberattacks and phishing attacks. Any of these events could materially adversely affect our business, financial condition, results of operations and the market price of our common stock.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
ITEM 1B. UNRESOLVED STAFF COMMENTS
There are no unresolved staff comments.

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ITEM 2. PROPERTIES
ITEM 2. PROPERTIES
We do not own any real estate or other properties. As of September 30, 2025, we operate seven locations in the U.S., occupying a total of approximately 162.3 thousand square feet. The Company's corporate headquarters is located at 3565 Piedmont Road NE, Building 3 Suite 700, Atlanta, Georgia 30305, and we presently maintain a National Capital Region office in Bethesda, Maryland. All of our offices are in reasonably modern and well-maintained buildings and we believe that our facilities are adequate for present operations and the foreseeable future. For the fiscal year ended September 30, 2025, our total lease expense was approximately $4.1 million. See Note 6. Leases in Part II of this Annual Report on Form 10-K for additional information.

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ITEM 3. LEGAL PROCEEDINGS
ITEM 3. LEGAL PROCEEDINGS
As a commercial enterprise and employer, the Company is subject to various claims and legal actions in the ordinary course of business. These matters can include professional liability, employment-relations issues, workers’ compensation, tax, payroll and employee-related matters, other commercial disputes arising in the course of its business, and inquiries and investigations by governmental agencies regarding our employment practices or other matters. The Company is not aware of any pending or threatened litigation that it believes is reasonably likely to have a material adverse effect on its results of operations, financial position or cash flows.

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ITEM 4. MINE SAFETY DISCLOSURE
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED SHAREHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
Principal Market
Our common stock is currently traded on The Nasdaq Capital Market under the symbol "DLHC."
Equity Holders
As of September 30, 2025, the number of shareholders of our common stock of record was approximately 100 persons. The number of stockholders of record is not representative of the number of beneficial stockholders due to the fact that many shares are held by depositories, brokers, or nominees.
Dividends
We have not declared or paid any cash dividends on its common stock since inception. We do not intend to pay any cash dividends at this time or in the foreseeable future.
Recent Sales of Unregistered Securities
None.
Repurchase of Equity Securities
None.
Securities Authorized for Issuance under Equity Compensation Plans
The Company presently utilizes one shareholder-approved equity compensation plan under which it makes equity compensation awards available to officers, directors, employees and consultants. The table set forth below discloses outstanding and available awards under our equity compensation plans as of September 30, 2025. All grants of equity securities made to executive officers and directors are now made under the 2025 Equity Incentive Plan (the “2025 Plan”). Our shareholders approved the adoption of the 2025 Plan at the Annual Meeting held in March 2025. The 2025 Plan governs the awarding of equity securities and replaced the 2016 Omnibus Equity Incentive Plan upon approval.
Equity Compensation Plan Information
Plan Category (a)
Number of Securities
to be issued
upon exercise of
outstanding options,
warrants and rights (b)
Weighted Average
exercise price of
outstanding options,
warrants and rights
(or fair value at
date of grant) (c)
Number of securities
remaining available for
future issuances under
equity compensation
plans (excluding securities
reflected in column (a))
Equity Compensation Plans Approved by Security Holders:
Employee stock options 937,400 $ 9.65 1,231,554

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ITEM 6. SELECTED FINANCIAL DATA
ITEM 6. RESERVED

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
ITEM 7. 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 Annual Report on Form 10-K for the year ended September 30, 2025. This discussion 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. In addition, any statements that refer to expectations, projections or other characterizations of future events or circumstances are forward-looking statements. The forward-looking statements are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry and business. Our actual results could differ materially from the results contemplated by these forward-looking statements.
Overview and Background:
DLH Holdings Corp. ("DLH") delivers improved health and cyber readiness solutions for federal government customers through digital transformation, science research and development, and systems engineering and integration. We bring a unique combination of government sector experience, proven methodologies, and unwavering commitment to solve the complex problems faced by civilian and military customers alike, doing so by leveraging a robust capability set, including cyber technology, artificial intelligence, advanced analytics, cloud-based applications, and telehealth systems.
We derive 99% of our revenue from agencies of the Federal government, providing services to several agencies including the HHS, VA, and DoD. The following table summarizes the revenues by customer for the years ended September 30, 2025 and 2024, respectively (in thousands and percent):
2025 2024
Revenue Percent of total revenue Revenue Percent of total revenue
Department of Health and Human Services $ 171,717 49.8 % $ 184,544 46.6 %
Department of Veterans Affairs 116,422 33.8 % 139,945 35.3 %
Department of Defense 53,241 15.5 % 64,128 16.2 %
Customers with less than 10% share of total revenue 3,117 0.9 % 7,320 1.9 %
Revenue
$ 344,497 100.0 % $ 395,937 100.0 %
Forward Looking Business Trends:
Our mission is to expand our position as a trusted provider of technology-enabled healthcare and public health services, medical logistics, and readiness enhancement services to active duty personnel, veterans, and civilian populations and communities. Through our acquisition program, we have built a platform of technology-powered solutions to enable us to provide an array of innovative, high-value solutions in information technology, public health and digital transformation. We are focused on increasing organic growth across our addressable market and delivering robust cash flow. Our primary focus within the defense agency markets includes cyber security, digital transformation, Artificial Intelligence/Machine Learning (AI/ML) and data analytics, C5ISR (Command, Control, Communications, Computers, Cyber, Intelligence, Surveillance & Reconnaissance), cloud enablement and migration, telehealth, behavioral health, medication therapy management, and clinical systems support for military service members and veterans Within the civilian agency market, we focus on healthcare and social program delivery, IT modernization, systems engineering and integration, data-driven program management, and technology solutions that improve outcomes for underserved and at-risk populations. We believe these priorities position the Company to expand within key national programs and mission-critical areas of health and national security.
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 October 1, 2025, the U.S. government entered a shutdown which persisted until November 12, 2025, when Congress passed and the President signed an appropriations bill to fund certain agencies and extend funding at current levels for the remaining agencies until January 30, 2026. Unless full year appropriation bills or a CR are passed and signed at the end of the current CR, the federal government will shutdown operations until legislation has been enacted.
Industry consolidation among federal government contractors:
There has been active consolidation and a strong increase in merger and acquisition activity among federal government contractors over the past few years that we expect to continue, fueled by public companies leveraging strong balance sheets. Companies often look to acquisitions that augment core capabilities, contracts, customers, market differentiators, stability, cost synergies, and higher margin and revenue streams.
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 fiscal year ended September 30, 2025, we generated revenues of approximately $116.4 million from our set of contracts in support of the VA's Consolidated Mail Outpatient Pharmacy ("CMOP") program. As previously disclosed, the VA issued solicitations for performance of the CMOP program by separate contracts for each of its eight locations, with the awards limited to service-disabled veteran owned small business (“SDVOSB”) prime contractors. As this acquisition evaluation is continuing with respect to the remaining locations, we were awarded a new sole-source Indefinite Quantity/Indefinite Delivery contract effective October 28, 2025. The IDIQ has ceiling value of $90.0 million, and a maximum ordering period through October 28, 2026, In addition, we performed monitoring, evaluation and compliance services for the Office of Head Start. The contract term for these services ended on October 31, 2025 and following the procurement for the renewal of these services on a set aside basis, performance transitioned to unaffiliated contractors at the end of the contract term. See Item 1. Business - Major Contracts for additional detail
Results of Operations
Fiscal Year Ended September 30, 2025 as Compared to Fiscal Year Ended September 30, 2024
The following table summarizes, for the years indicated, consolidated statements of operations data expressed (in thousands except for per share amounts, and as percentages of revenue):
Year Ended September 30,
2025 2024 Change
Revenue $ 344,497 100.0 % $ 395,937 100.0 % $ (51,440)
Cost of Operations
Contract costs 279,333 81.0 % 318,447 80.4 % (39,114)
General and administrative costs 31,199 9.1 % 35,538 9.0 % (4,339)
Depreciation and amortization 17,179 5.0 % 17,052 4.3 % 127
Total operating costs 327,711 95.1 % 371,037 93.7 % (43,326)
Income from operations 16,786 4.9 % 24,900 6.3 % (8,114)
Interest expense 15,031 4.4 % 17,153 4.3 % (2,122)
Income before provision for income taxes 1,755 0.5 % 7,747 2.0 % (5,992)
Provision for income taxes
393 0.1 % 350 0.1 % 43
Net income $ 1,362 0.4 % $ 7,397 1.9 % $ (6,035)
Net income per share
Basic
$ 0.09 $ 0.52 $ (0.43)
Diluted
$ 0.09 $ 0.51 $ (0.42)
Revenue
For the year ended September 30, 2025 revenue was $344.5 million, a decrease of $51.4 million over the prior year period. The decrease in revenue was due primarily to the conversion of certain contracts in our HHS, VA and DOD portfolios to small business contractors. The revenue decrease from small business conversion was partially offset by contributions from new contract awards.
Cost of Operations
Contract costs primarily include the costs associated with providing services to our customers. These costs are generally comprised of direct labor and associated fringe benefit costs, subcontract cost, other direct costs, and the related management and infrastructure costs. For the year ended September 30, 2025, the contract costs decreased as compared to the prior fiscal year by $39.1 million, primarily due to the decrease in revenue volume, most notably non-labor costs.
General and administrative costs are for employees and third parties not directly providing services to our customers, including but not limited to executive management, bid and proposal, accounting, and human resources. These costs decreased as compared to the prior fiscal year by $4.3 million, primarily due to a reduction in support costs proportionally with the change in revenue volume.
For the year ended September 30, 2025, depreciation and amortization costs were $0.7 million and $16.5 million, respectively, as compared to $0.6 million and $16.5 million for the year ended September 30, 2024, respectively.
Interest Expense
Interest expense includes items such as interest expense and amortization of deferred financing costs on debt obligations. Interest expense decreased $2.1 million for the year ended September 30, 2025 compared to the prior fiscal year. The decrease in interest expense was primarily due to the prepayment of debt and a decrease in the interest rate.
Provision for Income Taxes
Provision for income taxes for the fiscal year ended September 30, 2025 increased approximately $43.0 thousand from the prior fiscal year. The effective tax rate was 21.3% for the fiscal year ending September 30, 2025 and 4.5% for the fiscal year ending September 30, 2024. The tax provision from the prior year period was positively impacted by the exercise of non-qualifying stock options.
Non-GAAP Financial Measures
The Company uses Earnings Before Interest, Tax, Depreciation, and Amortization ("EBITDA") as a supplemental non-GAAP measure of our performance. DLH defines EBITDA as net income excluding (i) depreciation and amortization, (ii) interest expense, and (iii) provision for income tax expense.
On a non-GAAP basis, EBITDA for years ended September 30, 2025 and 2024 was approximately $34.0 million and $42.0 million, respectively. The decrease was primarily due to the decrease in revenue volume driven by conversion of certain VA and DoD contracts to small business contractors, partially offset by revenue from new contract awards.
This non-GAAP measure of our performance is used by management to conduct and evaluate its business during its regular review of operating results for the periods presented. Management and our Board utilize this non-GAAP measure to make decisions about the use of our resources, analyze performance between periods, develop internal projections and measure management's performance. We believe that this non-GAAP measure is useful to investors in evaluating our ongoing operating and financial results and understanding how such results compare with our historical performance. By providing this non-GAAP measure as a supplement to GAAP information, we believe this enhances investors understanding of our business and results of operations. EBITDA is not a recognized measurement under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance investors should (i) evaluate adjustments in our reconciliation to the nearest GAAP financial measures and (ii) use non-GAAP measures in addition to, and not as an alternative to, measures of our operating results as defined under GAAP.
Reconciliation of GAAP net income to EBITDA and Adjusted EBITDA, non-GAAP measures (in thousands):
Year Ended
September 30,
2025 2024 Change
Net income $ 1,362 $ 7,397 $ (6,035)
Depreciation and amortization 17,179 17,052 127
Interest expense $ 15,031 $ 17,153 (2,122)
Provision for income taxes
393 350 43
EBITDA
$ 33,965 41,952 $ (7,987)
Liquidity and Capital Management
Cash was approximately $0.1 million and $0.3 million for the years ended September 30, 2025 and 2024, respectively.
Credit facility availability was approximately $23.6 million and $32.5 million as of September 30, 2025 and 2024, respectively.
A summary of the change in cash is presented below for the years ended September 30, 2025 and 2024 (in thousands):
Year Ended September 30,
2025 2024
Net cash provided by operating activities $ 23,216 $ 27,366
Net cash used in investing activities (241) (836)
Net cash used in financing activities
(23,192) (26,403)
Net change in cash $ (217) $ 127
Cash provided by operations totaled approximately $23.2 million and $27.4 million for the years ended September 30, 2025 and 2024, respectively. The decrease in cash provided by operating activities is primarily due to a decrease in revenue volume as compared to the prior year.
Cash used in investing activities totaled $0.2 million and $0.8 million for the years ended September 30, 2025 and 2024, respectively. The cash utilized was predominantly for capital expenditures in fiscal years 2025 and 2024, respectively.
Cash used in financing activities during the fiscal years ended September 30, 2025 and September 30, 2024 were approximately $23.2 million and $26.4 million, respectively. The cash used in financing activities was primarily due to the prepayment of term debt.
Sources of Cash
As of September 30, 2025, our immediate sources of liquidity include cash of approximately $0.1 million, accounts receivable, and access to our secured revolving line of credit. This credit facility provides us with access of up to $50.0 million subject to certain conditions including eligible accounts receivable. As of September 30, 2025, we had unused borrowing capacity of $23.6 million. 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 as of September 30, 2025 is as follows (in millions):
Lender Arrangement Loan Balance Interest * Maturity Date
First National Bank of Pennsylvania Secured term loan (a) $ 123.5 SOFR1 + 4.1% December 8, 2027
First National Bank of Pennsylvania Secured revolving line of credit (b) $ 8.1 SOFR1 + 4.1% December 8, 2027
1Secured Overnight Financing Rate ("SOFR") as of September 30, 2025 was 4.3%.
On January 31, 2023, we executed an additional floating-to-fixed interest rate swap with FNB; the notional amount as of September 30, 2025 is $74.0 million, it matures in January 2026, and the fixed rate is 4.1%. As a result of entering interest rate swap agreements, for the twelve months ended September 30, 2025, interest expense has been decreased by approximately $0.2 million.
(a) Represents the principal amounts payable on our secured term loan, which is secured by liens on substantially all of the assets of the Company. The principal of the secured term loan is payable in quarterly installments with the remaining balance due on December 8, 2027.
(b) As of September 30, 2025 the secured revolving line of credit had a borrowing base of $50.0 million. The Company accessed funds from the secured revolving line of credit during the year, and had $8.1 million outstanding balance at September 30, 2025.
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 the secured term loan and secured revolving line of credit, including financial covenants, as amended, are fully described in Note 8 to the consolidated financial statements.
Contractual Obligations as of September 30, 2025
Payments Due By Period
Next 12 2-3 4-5 More than 5
(Amounts in thousands) Total Months Years Years Years
Debt obligations $ 131,567 $ 8,067 $ 123,500 $ - $ -
Facility operating leases 20,525 3,993 7,059 6,776 2,697
Contractual obligations
$ 152,092 $ 12,060 $ 130,559 $ 6,776 $ 2,697
Critical Accounting Policies and Estimates
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include valuation of goodwill and intangible assets, and stock-based compensation. In addition, the Company estimates overhead charges and allocates such charges throughout the year. Actual results could differ from those estimates.
Revenue Recognition
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 service contracts, we satisfy our performance obligations as services are rendered. We use cost-based input and time-based output methods to measure progress.
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.
Refer to Note 5 of the accompanying notes to our consolidated financial statements contained elsewhere in this Annual Report on Form 10-K for discussion relative to the Company's revenue recognition in accordance with ASC-606.
Long-lived Assets
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.
Equipment and improvements are stated at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful asset lives (3 years to 7 years) and the shorter of the initial lease term or estimated useful life for leasehold improvements.
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.
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.
Intangible assets are originally recorded at fair value and amortized on a straight-line basis over their assessed useful lives. The assessed useful lives of the assets are 10 years.
Goodwill Impairment Testing
The qualitative assessment of goodwill at September 30, 2025 determined a triggering event occurred requiring that we conduct additional quantitative analyses. The triggering event was primarily due to the decrease in the Company's share price resulting in a decline in market capitalization. Management's assessment was that the market capitalization at the end of the 4th 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 EBITDA and revenue for fiscal 2025 to estimate the Company's fair value. For the income-based method, the Company calculated its expected future cash flows. Those cash flows were then discounted to present value using a weighted average cost of capital. The weighted average of the three assessments indicated that the Company's fair value was greater than its book equity value.
As a result of these quantitative assessments, the Company determined that its goodwill was not impaired at the end of the year. 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.
Provision for Income Taxes
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 assets will not be realized.
Stock-based Equity Compensation
The Company uses the fair value-based method for stock-based equity 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 the 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.
New Accounting Pronouncements
A discussion of recently issued accounting pronouncements is described in Note 3 of the accompanying notes to our consolidated financial statements contained elsewhere in this Annual Report, and we incorporate such discussion by reference.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Except as described elsewhere in this report, the Company has not engaged in trading practices in securities or other financial instruments and therefore does not have any material exposure to interest rate risk, foreign currency exchange rate risk, commodity price risk or other similar risks, which might otherwise result from such practices. The Company has limited foreign operations and therefore is not materially subject to fluctuations in foreign exchange rates, commodity prices or other market rates or prices from market sensitive instruments. We have executed a set of floating-to-fixed interest rate swaps with a total notional amount of $74.0 million on September 30, 2025. The remaining balance of our debt is subject to floating interest rates.
We have determined that a 1.0% increase to SOFR would impact our interest expense by approximately $0.6 million per year. As of September 30, 2025, the interest rate on the floating interest rate debt was 8.38%.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
Consolidated Financial Statements
Page
Report of Independent Registered Public Accounting Firm (PCAOB ID Number 100)
Consolidated Statements of Operations for the years ended September 30, 2025 and 2024
Consolidated Balance Sheets as of September 30, 2025 and 2024
Consolidated Statements of Cash Flows for the years ended September 30, 2025 and 2024
Consolidated Statements of Changes in Shareholders' Equity for the years ended September 30, 2025 and 2024
Notes to Consolidated Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Shareholders of
DLH Holdings Corp.:
Opinion on the Consolidated Financial Statements
We have audited the accompanying consolidated balance sheets of DLH Holdings Corp. and Subsidiaries (the “Company”) as of September 30, 2025 and 2024, the related consolidated statements of operations, cash flows, and changes in shareholders’ equity for each of the years in the two-year period ended September 30, 2025, and the related notes (collectively referred to as the "consolidated financial statements").
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company and its subsidiaries as of September 30, 2025 and 2024, and the results of its operations and its cash flows for each of the years in the two-year period ended September 30, 2025, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion.
Critical Audit Matters
The critical audit matters communicated below are matters arising from the current period audit of the consolidated financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.
Revenue Recognition
Critical Audit Matter Description
As described in Note 1 to the consolidated financial statements, the Company generally recognizes revenue over time as services are provided, as most of its contracts involve a continuous transfer of control to the customer. The Company accounts for a contract when there is a commitment by both parties (customer and Company), payment terms are determinable, there is commercial substance, and collectability is probable. When control is transferred over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. The Company satisfies performance obligations as services are rendered. 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 performance is set at a predetermined price. Generally, the Company’s firm fixed price contracts are a fixed fee for monthly services and therefore recognized using a straight-line method for recognition as progress is made towards the completion of the performance obligations. Contract modifications are reviewed to determine whether they should be accounted for as part of the original performance obligation or as a separate contract. Contract modifications can occur throughout the life of the contract and can affect the transaction price, extend the period of performance, adjust funding, or create new performance obligations. Contract modifications impact performance obligations when the modification either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the transaction price and the measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue and profit cumulatively. Amounts are invoiced as work progresses in accordance with agreed-upon contractual terms. In part, revenue recognition occurs before the Company has the right to bill, resulting in contract assets. These contract assets are reported within Accounts receivable, net on the consolidated balance sheets and are invoiced in accordance with payment terms defined in each contract. Period end balances will vary from period to period due to agreed-upon contractual terms.
The principal consideration for our determination that performing procedures relating to revenue recognized over time is a critical audit matter is a high degree of auditor effort in performing procedures related to the Company’s revenue recognition, including testing of contract assets.
Response:
The following are the primary procedures we performed to address this critical audit matter. To test the recognition of revenue, our audit procedures included among others, selecting a sample of revenue transactions and performing the following procedures: for time and material contracts, we examined the recorded timesheet data related to the selected invoices, which corroborated management's assessment towards the completion of the performance obligation; and we inspected the signed contract related to the selected invoice, noting each task has an agreed upon unit price per contract and the unit price matched what was shown on the invoice. For cost reimbursable contracts, we examined the recorded timesheet data related to the selected invoices, which corroborated management's assessment towards the completion of the performance obligation; and we inspected the signed contract related to the selected invoice, noting each task has an agreed upon unit price per contract and the unit price matched what was shown on the invoice. We also inspected the supporting evidence for any non-labor costs that are included in the transaction price. For firm fixed price contracts, we inspected the signed contract related to the selected invoice, noting the period of performance was within the period of performance in the contract, and we recalculated the revenue to be recognized based on the contract terms. We also tested for proper revenue recognition cut off in relation to revenue in which recognition occurred before the Company had a right to bill. To test contract assets, we selected a sample of balances and reviewed the signed contract, timesheet data related to the contract assets, and invoices billed subsequent to year-end that related to the contract assets that existed as of September 30, 2025.
Goodwill and Intangible Asset - Impairment Assessment
Critical Audit Matter Description
As described in Note 2 to the consolidated financial statements, management evaluates goodwill and intangible assets on an annual basis, or more frequently if impairment indicators exist. The Company estimates the fair value of the equity by weighting the results from the income approach and two market approaches. The income approach incorporates the use of cash flow projections. The cash-flow projections are based on financial forecasts developed by management that include revenue, weighted cost of capital (“WACC”), and gross margin projections. The market approach utilizes the Company’s market capitalization with the inclusion of a control premium, as well as guideline public company market multiples. Additionally, the fair value of the intangible assets was valued using an undiscounted cash flow.
The determination of fair value involves significant judgment and estimation. Based on the methodologies described above, management concluded that no impairment of goodwill or intangible assets existed as of the measurement date.
The principal considerations for our determination that performing procedures relating to the goodwill and intangible assets assessment as a critical audit matter was the significant judgment by management to determine the fair value estimates, which in turn led to a high degree of auditor judgment, subjectivity and effort in performing procedures and in evaluating management’s significant assumptions in determining fair value, including the involvement of professionals with specialized skill and knowledge.
Response:
The following are the primary procedures we performed to address this critical audit matter. Our audit procedures included, among others, obtaining an understanding of and evaluating management’s process for identifying and evaluating potential triggering events. For the market approach, we performed procedures to test the control premium. Additionally, we evaluated the guideline public companies used for market multiples and analyzed the consistency of external market data and verified the completeness and accuracy of the underlying data. For the income approach, we evaluated management's forecasts for revenue, WACC , and gross margin. We evaluated management’s forecasting capabilities by comparing projections to the Company’s historical and current results and tested the reasonableness of these forecasts to ensure alignment with historical performance. Finally, we utilized professionals with specialized skills and knowledge to assist in (i) evaluating management’s methodology to determine fair value (ii) testing the mathematical accuracy of the models; and (iii) evaluating the reasonableness of the significant assumptions.
/s/ WithumSmith+Brown, PC
We have served as the Company's auditor since 2007.
East Brunswick, New Jersey
December 10, 2025
PCAOB ID Number 100
DLH HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands except per share amounts)
Year Ended
September 30,
2025 2024
Revenue $ 344,497 $ 395,937
Cost of Operations
Contract costs 279,333 318,447
General and administrative costs 31,199 35,538
Depreciation and amortization 17,179 17,052
Total operating costs 327,711 371,037
Income from operations 16,786 24,900
Interest expense 15,031 17,153
Income before provision for income taxes 1,755 7,747
Provision for income taxes
393 350
Net income $ 1,362 $ 7,397
Net income per share
Basic
$ 0.09 $ 0.52
Diluted
$ 0.09 $ 0.51
Weighted average common shares outstanding
Basic 14,387 14,169
Diluted 14,458 14,405
The accompanying notes are an integral part of these consolidated financial statements.
DLH HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands except par value of shares)
September 30,
2025 September 30,
ASSETS
Current assets:
Cash $ 125 $ 342
Accounts receivable 38,394 49,849
Other current assets 4,018 2,766
Total current assets 42,537 52,957
Goodwill 138,161 138,161
Intangible assets, net 91,865 108,321
Operating lease right-of-use assets 8,764 6,681
Deferred income taxes, net 7,947 6,245
Equipment and improvements, net 1,274 1,830
Other long-term assets 115 186
Total assets $ 290,663 $ 314,381
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 19,246 $ 25,290
Accrued payroll 12,153 12,848
Debt obligations - current, net of deferred financing costs 8,067 12,058
Operating lease liabilities - current 2,918 2,652
Other current liabilities 287 394
Total current liabilities 42,671 53,242
Long-term liabilities:
Debt obligations - long-term, net of deferred financing costs 119,966 137,316
Operating lease liabilities - long-term 14,022 12,789
Other long-term liabilities 1,046 902
Total long-term liabilities 135,034 151,007
Total liabilities 177,705 204,249
Shareholders' equity:
Common stock, $0.001 par value; authorized 40,000 shares; issued and outstanding 14,498 and 14,391 at September 30, 2025 and 2024, respectively
14 14
Additional paid-in capital 101,734 100,270
Retained earnings 11,210 9,848
Total shareholders’ equity 112,958 110,132
Total liabilities and shareholders' equity $ 290,663 $ 314,381
The accompanying notes are an integral part of these consolidated financial statements.
DLH HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Year Ended
September 30,
2025 2024
Operating activities
Net income $ 1,362 $ 7,397
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 17,179 17,052
Amortization of deferred financing costs charged to interest expense 1,742 1,839
Stock-based compensation expense 1,464 1,898
Deferred taxes, net (1,702) (3,175)
Changes in operating assets and liabilities
Accounts receivable 11,455 9,270
Other assets (3,190) 3,276
Accounts payable and accrued liabilities
(6,043) (4,414)
Accrued payroll (697) (946)
Other liabilities 1,646 (4,831)
Net cash provided by operating activities 23,216 27,366
Investing activities
Purchase of equipment and improvements (241) (836)
Net cash used in investing activities (241) (836)
Financing activities
Proceeds from revolving line of credit 253,181 361,720
Repayment of revolving line of credit (257,171) (359,208)
Repayments of debt obligations (19,000) (27,313)
Payments of deferred financing costs (202) -
Proceeds from issuance of common stock upon exercise of options and warrants - 261
Payment of tax obligations resulting from net exercise of stock options - (1,863)
Net cash used in financing activities
(23,192) (26,403)
Net change in cash (217) 127
Cash - beginning of year 342 215
Cash - end of year $ 125 $ 342
Supplemental disclosures of cash flow information
Cash paid during the year for interest $ 13,505 $ 16,043
Cash paid during the year for income taxes $ 2,053 $ 3,264
Supplemental disclosures of non-cash activity
Common stock surrendered for the exercise of stock options $ - $ 2,822
Lease liability recognized to acquire a right-of-use asset $ 4,187 $ 839
The accompanying notes are an integral part of these consolidated financial statements.
DLH HOLDINGS CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
For the years ended September 30, 2025 and 2024
(Amounts in thousands)
Common Stock Additional
Paid-In
Capital Retained Earnings
Total Shareholders' Equity
Shares Amount
Balance at September 30, 2024
14,391 $ 14 $ 100,270 $ 9,848 $ 110,132
Expense related to director restricted stock units - - 618 - 618
Expense related to employee stock-based compensation - - 846 - 846
Issuance of Common Stock upon vesting of restricted stock awards 123 - - - -
Common shares surrendered for stock option exercises and restricted stock unit vesting (16) - - - -
Net income - - - 1,362 1,362
Balance at September 30, 2025
14,498 $ 14 $ 101,734 $ 11,210 $ 112,958
Common Stock Additional
Paid-In
Capital Retained Earnings
Total Shareholders' Equity
Shares Amount
Balance at September 30, 2023
13,950 $ 14 $ 99,974 $ 2,451 $ 102,439
Expense related to director restricted stock units - - 618 - 618
Expense related to employee stock-based compensation - - 1,280 - 1,280
Issuance of Common Stock upon vesting of restricted stock awards
62 - - - -
Exercise of stock options 760 - 261 - 261
Common shares surrendered for stock option exercises and restricted stock unit vesting
(381) - (1,863) - (1,863)
Net income - - - 7,397 7,397
Balance at September 30, 2024
14,391 $ 14 $ 100,270 $ 9,848 $ 110,132
The accompanying notes are an integral part of these consolidated financial statements.
DLH HOLDINGS CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2025
1. Basis of Presentation and Principles of Consolidation
The accompanying consolidated financial statements include the accounts of DLH Holdings Corp. and its wholly-owned subsidiaries (together with its subsidiaries, "DLH" or the "Company" and also referred to as "we," "us" and "our"). All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles ("GAAP") and with the instructions to Form 10-K, Regulation S-X, and Regulation S-K. Certain prior year amounts have been reclassified to conform to the fiscal 2025 presentation.
2. Significant Accounting Policies
Use of Estimates
The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The most significant of these estimates and assumptions relate to estimating costs including overhead and its allocation, valuing and determining the amortization periods for long-lived intangible assets, interest rate swaps, stock-based compensation, goodwill, and right-of-use assets and lease liabilities. We evaluate these estimates and judgments on an ongoing basis and base our estimates on historical experience, current and expected future outcomes, third-party evaluations, and various other assumptions that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. We revise material accounting estimates if changes occur, such as more experience is acquired, additional information is obtained, or there is new information on which an estimate was or can be based. Actual results could differ from those estimates.
Segment Reporting
The Company reports operating results and financial data in one operating and reportable segment. The Company provides technology-enabled business process, program management, and digital transformation solutions primarily to U.S. government agencies, which share similar economic characteristics, production processes, customer bases, and regulatory environments. The Chief Executive Officer serves as the Chief Operating Decision Maker ("CODM") and evaluates performance and allocates resources based on consolidated financial results. Significant expense categories regularly provided to the CODM to manage operations are those disclosed in the consolidated statements of operations.
Revenue
The Company's revenues from contracts with customers are derived from offerings that include technology-enabled business process outsourcing, program management solutions, and public health research and analytics, substantially within the U.S. government and its agencies. The Company has various types of contracts including time-and-materials contracts, cost-reimbursable contracts, and firm-fixed-price contracts.
We consider a contract with a customer to exist when there is a commitment by both parties (customer and Company), payment terms are determinable, there is commercial substance, and collectability is probably in accordance with Accounting Standards Codification ("ASC") No. 606, "Revenue from Contracts with Customers" ("Topic 606").
We recognize revenue over time when there is a continuous transfer of control to our customer as performance obligations are satisfied. For our U.S. government contracts, this continuous transfer of control to the customer is transferred over time and revenue is recognized based on the extent of progress toward completion of the performance obligation. We consider control to transfer when we have a right to payment. In some instances, the Company commences providing services prior to formal approval to begin work from the customer. The Company considers these factors, the risks associated with commencing work, and legal enforceability in determining whether a contract exists under Topic 606.
Contract modification can occur throughout the life of the contract and can affect the transaction price, extend the period of performance, adjust funding, or create new performance obligations. We review each modification to assess the impact of these contract changes to determine if it should be treated as part of the original performance obligation or as a separate contract. Contract modifications impact performance obligations when the modification either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue and profit cumulatively. Furthermore, a significant change in one or more estimates could affect the profitability of our contracts. We recognize adjustments in estimated profit on contracts in the period identified.
For service contracts, we satisfy our performance obligations as services are rendered. We use cost-based input and time-based output methods to measure progress based on the contract type.
•Time and material - We bill the customer per labor hour and per material, and revenue is recognized in the amount invoiced as the amount corresponds directly to the value of our performance to date. Revenue is recognized to the extent of billable rates times hours delivered plus materials and other reimbursable costs incurred.
•Cost reimbursable - We record reimbursable costs as incurred, including an estimated share of the contractual fee earned.
•Firm fixed price - We recognize revenue over time using a straight-line measure of progress.
Contract costs generally include direct costs such as labor, materials, subcontract costs, and indirect costs identifiable with or allocable to a specific contract. Costs are expensed as incurred and include an estimate of the contractual fees earned. Contract costs incurred for U.S. government contracts, including indirect costs, are subject to audit and adjustment by various government audit agencies. Historically, our adjustments have not been material.
Contract assets - Amounts are invoiced as work progresses in accordance with agreed-upon contractual terms. In part, revenue recognition occurs before we have the right to bill, resulting in contract assets. These contract assets are reported within accounts receivable on our consolidated balance sheets and are invoiced in accordance with payment terms defined in each contract. Period end balances will vary from period to period due to agreed-upon contractual terms.
Contract liabilities - Amounts are a result of billings in excess of costs incurred or prepayment for services to be rendered.
Fair Value of Financial Instruments
The carrying amounts of the Company's cash, accounts receivable, contract assets, accrued expenses, and accounts payable approximate fair value due to the short-term nature of these instruments. The fair values of the Company's debt instruments approximate fair value because the underlying interest rates approximate market rates that the Company could obtain for similar instruments at the balance sheet dates.
Long-Lived Assets
Our long-lived assets include equipment and improvements, intangible assets, right-of-use assets, and goodwill. The Company continues to review long-lived assets for possible impairment or loss of value at least annually, or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit's carrying amount is greater than its fair value. Specifically related to goodwill, if the qualitative analysis indicates a quantitative assessment is necessary, the Company utilizes multiple methods to determine its implied fair value. Each method utilizes a significant amount of judgment and may not be indicative of the Company's fair value on its own and therefore multiple methods could be combined to determine an implied fair value. Each method utilizes relevant publicly available information as well as observable market conditions. If the book value of goodwill exceeds its fair value, then an impairment is recognized and goodwill is written down to fair value. The impairment loss would be recognized as an operating expense.
Equipment and improvements are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful asset lives (3 to 7 years) and the shorter of the initial lease term or estimated useful life for leasehold improvements. Maintenance and repair costs are expensed as incurred. Intangible assets (other than goodwill) are originally recorded at fair value and are amortized on a straight-line basis over their estimated useful lives of 10 years.
Right-of-use assets are measured at the present value of future minimum lease payments, including all probable renewals, plus lease payments made to the lessor before or at lease commencement and indirect costs paid, less incentives received. Our right-of-use assets include long-term leases for facilities and equipment and are amortized over their respective lease terms.
Lease Liabilities
The Company has leases for facilities and office equipment. Our lease liabilities are recognized as the present value of the future minimum lease payments over the lease term. Our lease payments consist of fixed and in-substance fixed amounts attributable to the use of the underlying asset over the lease term. Variable lease payments that do not depend on an index rate or are not in-substance fixed payments are excluded in the measurement of right-of-use assets and lease liabilities and are expensed in the period incurred. The incremental borrowing rate on our secured term loan is used in determining the present value of future minimum lease payments. Some of our lease agreements include options to extend the lease term or terminate the lease. These options are accounted for in our right-of-use assets and lease liabilities when it is reasonably certain that the Company will extend the lease term or terminate the lease. The Company does not have any finance leases. As of September 30, 2025, operating leases for facilities and equipment have remaining lease terms of less than 1.3 years to 7.3 years.
Goodwill
The Company performs impairment evaluation at least annually at the end of the fiscal year and between annual tests whenever there is an indication of impairment. The assessment at September 30, 2025 indicated a triggering event had occurred requiring that the Company perform additional quantitative assessments. The triggering event was primarily due to the decrease in the Company's share price resulting in a decline in market capitalization. Management then performed a series of quantitative assessments utilizing multiple evaluation methods. Those assessments included both market and income-based methods utilizing level 1 observable market data and level 3 estimates. Significant estimates in the market-based methods included identifying similar companies with comparable business factors such as service offerings, customers, size, growth, profitability, risk and return on investment, as well as assessing comparable market multiples and control premiums in estimating the fair value of the Company. For the market-based methods, the Company used the market capitalization with the inclusion of a control premium as one estimation of fair value. The other market-based method used publicly available market multiples of relevant publicly traded companies applied to our Earnings Before Interest, Taxes, Depreciation and Amortization ("EBITDA") and revenue for fiscal 2025 to estimate the Company's fair value. The income-based method is a discounted cash flow analysis and the significant estimates included expected growth rates, profitability and the weighted average cost of capital. The Company used a weighted average blend of these methods to assess its fair value. The results of those assessments indicated that the Company's fair value was in excess of the Company's book value and therefore its goodwill was not impaired.
Notwithstanding this evaluation, factors including non-renewal of a major contract or other substantial changes in business conditions could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to future periods’ results of operations. There were no impairments during the years ended September 30, 2025 and 2024, respectively.
Income Taxes
The Company accounts for income taxes in accordance with the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reflected on the consolidated balance sheets when it is determined that it is more likely than not that the asset will be realized. This guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax assets will not be realized. We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is more likely than not that the position will be sustained upon examination. We had no uncertain tax positions at either September 30, 2025 and 2024. We report interest and penalties as a component of provision for income taxes. During the years ended September 30, 2025 and 2024, we recognized no interest and no penalties related to income taxes.
Stock-Based Compensation
The Company issues stock-based compensation through option and restricted stock unit ("RSU") grants and uses the fair value-based method to estimate stock-based compensation expense. Options issued are designated as either an incentive stock option or a non-statutory stock option. No option may be granted with a term of more than 10 years from the date of grant. Option and RSU awards may depend on achievement of certain vesting criteria determined by the Compensation Committee of our Board. Shares issued upon RSU vesting and 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 as of the grant date for each grant that vest based on market or performance based criteria. Any consideration paid by the option holders to purchase shares is credited to common stock.
Cash
The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. We maintain cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation up to $250,000. Deposits held with financial institutions may exceed the $250,000 limit.
Accounts Receivable
Receivables include amounts billed and currently due from customers where the right to consideration is unconditional and amounts unbilled. Both billed and unbilled amounts are non-interest bearing, unsecured, and recognized at an estimated realizable value that includes costs and fees, and are generally expected to be billed and received within a single year. We evaluate our receivables for expected credit losses on a quarterly basis and determine whether an allowance for expected credit losses is appropriate based on specific collection issues. No allowance for doubtful accounts was deemed necessary at either September 30, 2025 or September 30, 2024.
Earnings Per Share
Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common stock outstanding and restricted stock grants that vested or are likely to vest during the period. Diluted earnings per share is calculated by dividing income available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities. Diluted earnings per share is calculated using the treasury stock method.
Treasury Stock
The Company periodically purchases its own common stock that is traded on public markets as part of announced stock repurchase programs. The repurchased common stock is classified as treasury stock on the consolidated balance sheets and held at cost. As of September 30, 2025 and 2024, the Company did not hold any treasury stock.
Preferred Stock
Our certificate of incorporation authorizes the issuance of "blank check" preferred stock with designations, rights and preferences as may be determined from time to time by our board of directors up to an aggregate of 5,000,000 shares of preferred stock. As of September 30, 2025 and 2024, the Company has not issued any preferred stock.
Interest Rate Swap
The Company uses derivative financial instruments to manage interest rate risk associated with its variable debt. The Company's objective in using these interest rate derivatives is to manage its exposure to interest rate movements and reduce volatility of interest expense. The gains and losses due to changes in the fair value of the interest rate swap agreements completely offset changes in the fair value of the hedged portion of the underlying debt. Offsetting changes in fair value of both the interest rate swaps and the hedged portion of the underlying debt are recognized in interest expense in the consolidated statements of operations. The Company does not hold or issue any derivative instruments for trading or speculative purposes.
Risks and Uncertainties
Management evaluates the impact of global markets and economic factors on our industry and the potential for adverse effects on the Company's consolidated financial position and its operations. As of September 30, 2025, there was no indication of any global or economic impacts to our industry.
3. New Accounting Pronouncements
In November 2023, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") No. 2023-07, “Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures” (“ASU 2023-07”), which requires public entities to disclose significant segment expenses that are regularly provided to the Company’s Chief Operating Decision Maker (“CODM”) and included in the measure of segment profit or loss. The standard also requires disclosure of the title and position of the CODM, as well as a description of how the CODM uses segment profit or loss information in evaluating performance and allocating resources. The Company adopted ASU 2023-07 in its Annual Report on Form 10-K for the fiscal year ended September 30, 2025. DLH operates as a single reporting segment. Accordingly, the adoption of this standard did not have a material impact on the Company’s consolidated financial statements.
In December 2023, FASB issued ASU 2023-09 "Income Taxes (Topic 740): Improvements to Income Tax Disclosures" which provides guidance on the requirements such as the requirement that public business entities on an annual basis (1) disclose specific categories in the rate reconciliation and (2) provide additional information for reconciling items that meet a quantitative threshold. DLH is a public company that reports income tax disclosures and therefore this ASU applies to the Company. ASU 2023-09 is effective for public business entities for fiscal years beginning after Dec. 15, 2024. We will adopt ASU 2023-09 in our Annual Report on Form 10-K for the fiscal year ending September 30, 2026. We are currently evaluating the impacts of the improvements to income tax disclosure.
In November 2024, the FASB issued ASU 2024-03, “Income Statement - Reporting Comprehensive Income (Subtopic 220-40): Expense Disaggregation Disclosures”. To enhance transparency in financial reporting by requiring public business entities to disclose disaggregated information about expenses in their financial statements. The guidance mandates disclosure of specific cost components, such as inventory purchases, employee compensation, depreciation, and amortization, within relevant income statement expense captions, along with qualitative descriptions of any remaining undissected amounts. Entities must also disclose total selling expenses and define these annually. Effective for annual reporting periods beginning after December 15, 2026, and interim periods in 2027, the ASU allows prospective or retrospective application and permits early adoption. We are currently evaluating the impacts of the improvements to our disclosure.
4. Revenue Recognition
The following table summarizes the contract balances recognized in accounts receivable within the Company's consolidated balance sheets at September 30, 2025 and 2024 (in thousands):
2025 2024
Contract assets $ 22,000 $ 23,945
Contract assets are included as part of accounts receivable on the consolidated balances sheets. The change from prior period was primarily due to invoice timing. There were no contract liabilities as of September 30, 2025 and September 30, 2024.
The opening balance for contract assets for the fiscal year ended September 30, 2024 was $20,542.
Disaggregation of revenue from contracts with customers
We disaggregate our revenue from contracts with customers by customer, contract type, as well as whether the Company acts as prime contractor or subcontractor. We believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The following series of tables presents our revenue disaggregated by these categories:
Revenue by customer for the years ended September 30, 2025 and 2024 (in thousands):
2025 2024
Department of Health and Human Services $ 171,717 $ 184,544
Department of Veterans Affairs 116,422 139,945
Department of Defense 53,241 64,128
Other 3,117 7,320
Revenue
$ 344,497 $ 395,937
Revenue by contract type for the years ended September 30, 2025 and 2024 (in thousands):
2025 2024
Time and Materials $ 177,067 $ 215,341
Firm Fixed Price 93,746 101,115
Cost Reimbursable 73,684 79,481
Revenue
$ 344,497 $ 395,937
Revenue by whether the Company acts as a prime contractor or a subcontractor for the years ended September 30, 2025 and 2024 (in thousands):
2025 2024
Prime Contractor $ 315,505 $ 355,147
Subcontractor 28,992 40,790
Revenue
$ 344,497 $ 395,937
5. Leases
The following table summarizes lease balances presented on our consolidated balance sheets at September 30, 2025 and 2024 (in thousands):
2025 2024
Operating lease right-of-use assets
$ 8,764 $ 6,681
Operating lease liabilities, current $ 2,918 $ 2,652
Operating lease liabilities, long-term 14,022 12,789
Operating lease liabilities
$ 16,940 $ 15,441
As of September 30, 2025, operating leases for facilities and equipment have remaining lease terms of less than 1.3 years to 7.3 years. The non-cash increase in both lease liabilities and right-of-use assets during the current period was primarily attributable to an extension of an existing operating lease. The non-cash increase to lease liabilities from the lease extension was $4.2 million.
For the years ended September 30, 2025 and 2024, total lease costs for our operating leases are as follows (in thousands):
2025 2024
Operating $ 3,288 $ 3,574
Short-term 785 147
Variable 187 135
Sublease income (a) (194) (266)
Lease costs
$ 4,066 $ 3,590
(a): The Company subleases a portion of one of its leased facilities. The sublease is classified as an operating lease with respect to the underlying asset. The sublease term is 5 years and includes two additional 1-year term extension options.
The Company's future minimum lease payments as of September 30, 2025 are as follows (in thousands):
Fiscal year ending:
2026 $ 3,993
2027 3,591
2028 3,468
2029 3,582
2030 3,194
Thereafter 2,697
Total future minimum lease payments 20,525
Less: imputed interest (3,585)
Present value of future minimum lease payments 16,940
Less: current portion of operating lease liabilities (2,918)
Long-term operating lease liabilities $ 14,022
At September 30, 2025, the weighted-average remaining lease term and weighted-average discount rate are 5.4 years and 6.9%, respectively. The calculation of the weighted-average discount rate was determined based on borrowing terms from our secured term loan.
Other information related to our leases was as follows for the years ending September 30, 2025 and 2024 (in thousands):
2025 2024
Cash paid for amounts included in the measurement of lease liabilities $ 3,782 $ 4,572
Lease liabilities arising from obtaining right-of-use assets 4,187 839
Other lease information
$ 7,969 $ 5,411
6. Supporting Financial Information
Accounts receivable
The following table summarizes accounts receivable presented on our consolidated balance sheets at September 30, 2025 and 2024 (in thousands):
2025 2024
Billed receivables $ 16,394 $ 25,904
Contract assets 22,000 23,945
Accounts receivable $ 38,394 $ 49,849
The opening balance for accounts receivable for the fiscal year ended September 30, 2024 was $59,119.
Other current assets
The following table summarizes other current assets presented on our consolidated balance sheets at September 30, 2025 and 2024 (in thousands):
2025 2024
Prepaid licenses and other expenses $ 1,892 $ 1,315
Prepaid insurance and benefits 1,015 545
Other receivables 1,111 906
Other current assets $ 4,018 $ 2,766
Goodwill
There were no changes in goodwill for the year ended September 30, 2025. The balance of goodwill was approximately $138.2 million as of September 30, 2025 and 2024.
Intangible assets, net
The following table summarizes intangible assets, net presented on our consolidated balance sheets at September 30, 2025 and 2024 (in thousands):
2025 2024
Intangible assets
Customer contracts and related customer relationships $ 113,622 $ 113,622
Backlog 37,249 37,249
Trade names 13,034 13,034
Covenants-not-to-compete 637 637
Total intangible assets 164,542 164,542
Less accumulated amortization:
Customer contracts and related customer relationships (52,665) (41,297)
Backlog (14,714) (10,994)
Trade names (4,792) (3,488)
Covenants-not-to-compete (506) (442)
Total accumulated amortization (72,677) (56,221)
Intangible assets, net $ 91,865 $ 108,321
Amortization expense for the years ended September 30, 2025 and 2024 was $16.5 million and $16.5 million, respectively.
As of September 30, 2025, the estimated annual amortization expense was as follows (in thousands):
For the Fiscal Year Ending September 30,
2026 $ 15,720
2027 14,694
2028 14,694
2029 13,734
2030 11,637
Thereafter 21,386
Total amortization expense
$ 91,865
The weighted-average remaining amortization period at September 30, 2025:
Intangible assets Weighted-Average Remaining Amortization Period
Customer contracts and related customer relationships 6.5 years
Backlog 6.4 years
Trade names 6.8 years
Covenants not to compete 5.4 years
Total
6.5 years
Equipment and improvements, net
The following table summarizes equipment and improvements, net presented on our consolidated balance sheets at September 30, 2025 and 2024 (in thousands):
2025 2024
Computer equipment and software
$ 4,217 $ 7,273
Leasehold improvements
1,567 1,614
Furniture and equipment
1,177 1,832
Total equipment and improvements 6,961 10,719
Less: accumulated depreciation and amortization (5,687) (8,889)
Equipment and improvements, net $ 1,274 $ 1,830
Depreciation expense was $0.7 million and $0.6 million for the years ended September 30, 2025 and 2024, respectively.
During the year ended September 30, 2025, the Company disposed of $3.9 million of equipment and improvements, primarily within the computer equipment and software category. All assets were fully depreciated and no longer in use. No cash proceeds were received as part of the disposal of these assets.
Accounts payable and accrued liabilities
The following table summarizes accounts payable and accrued liabilities presented on our consolidated balance sheets at September 30, 2025 and 2024 (in thousands):
2025 2024
Accounts payable $ 12,299 $ 13,421
Accrued benefits 1,214 4,519
Accrued bonus and incentive compensation 1,527 3,641
Accrued workers' compensation insurance 750 1,528
Accrued interest
474 619
Other accrued expenses 2,982 1,562
Accounts payable and accrued liabilities $ 19,246 $ 25,290
Accrued payroll
The following table summarizes accrued payroll presented on our consolidated balance sheets at September 30, 2025 and 2024 (in thousands):
2025 2024
Accrued leave
$ 8,112 $ 8,569
Accrued payroll 3,701 3,070
Accrued payroll taxes 340 981
Accrued severance - 228
Accrued payroll $ 12,153 $ 12,848
Debt obligations
The following table summarizes debt obligations presented on our consolidated balance sheets at September 30, 2025 and 2024 (in thousands):
2025 2024
Secured term loan $ 123,500 $ 142,500
Secured revolving line of credit 8,067 12,058
Less: unamortized deferred financing costs (3,534) (5,184)
Net bank debt obligations 128,033 149,374
Less: current portion of debt obligations, net of deferred financing costs (a) (8,067) (12,058)
Long-term portion of debt obligations, net of deferred financing costs $ 119,966 $ 137,316
Through September 30, 2026, we have satisfied mandatory principal payments on our secured term loan.
(a) As of September 30, 2025, the current portion was comprised of $8.1 million outstanding balance on the secured revolving line of credit. All fiscal 2025 mandatory loan amortization payments have been satisfied by voluntary prepayments.
Interest expense
The following table summarizes interest expense presented on our consolidated statements of operations for the years ended September 30, 2025 and 2024 (in thousands):
2025 2024
Interest expense (a) $ 13,360 $ 15,352
Interest income (b) (71) (38)
Amortization of deferred financing costs (c) 1,742 1,839
Interest expense $ 15,031 $ 17,153
(a): Interest expense on borrowing.
(b): Interest earned from customer payments received after the due date.
(c): Amortization of expenses related to secured term loan and secured revolving line of credit.
7. Credit Facilities
A summary of our credit facilities as presented on our consolidated balance sheets as follows (in millions):
September 30, 2025 September 30, 2024
Arrangement Loan Balance Interest Arrangement Loan Balance Interest
Secured term loan (a) due December 8, 2027
$ 123.5 SOFR1 + 4.1%
Secured term loan (a) due December 8, 2027 $ 142.5 SOFR1 + 4.1%
Secured revolving line of credit (b) due December 8, 2027
$ 8.1 SOFR1 + 4.1%
Secured revolving line of credit (b) due December 8, 2027 $ 12.1 SOFR1 + 4.1%
1Secured Overnight Financing Rate ("SOFR") as of September 30, 2025 and September 30, 2024 was 4.3% and 5.2%, respectively.
(a) Represents the principal amounts payable on our term loan, which is secured by liens on substantially all of the assets of the Company. The principal of the term loan is payable in quarterly installments with the remaining balance due on December 8, 2027.
On January 31, 2023, we executed a floating-to-fixed interest rate swap with First National Bank which has a notional amount of $74.0 million at September 30, 2025, a fixed interest rate of 4.10% and a maturity date of January 31, 2026. As a result of entering interest rate swap agreements, for the twelve months ended September 30, 2025, interest expense has been decreased by approximately $0.2 million.
The Credit Agreement requires compliance with a number of financial covenants and contains restrictions on our ability to engage in certain transactions. Among other matters, we must comply with limitations on: granting liens; incurring other indebtedness; maintenance of assets; investments in other entities and extensions of credit; mergers and consolidations; and changes in nature of business. The loan agreement also requires us to comply with certain quarterly financial covenants including: (i) a minimum fixed charge coverage ratio of at least 1.15 to 1.00, and (ii) a total leverage ratio not exceeding the ratio of 4.75:1.00 to 2.00:1.00 through maturity. The total leverage ratio is calculated by dividing the Company's total interest-bearing debt by net income adjusted to exclude (i) interest and other expenses, (ii) provision for or benefit from income taxes, if any, (iii) depreciation and amortization, and (iv) non-cash charges, losses or expenses, including stock-based compensation, and (v) non-recurring charges, losses or expenses to include transaction and non-cash equity expense. We are in compliance with all loan covenants and restrictions as of September 30, 2025.
We are required to pay quarterly amortization payments, which commenced in December 2022. The annual amortization amounts are $19.0 million for fiscal year 2026, and $23.8 million for fiscal year 2027, with the remaining unpaid loan balance due at maturity in December 2027. The quarterly payments are equal installments. The outstanding principal balance on the secured term loan was $123.5 million as of September 30, 2025 . We have satisfied the mandatory principal payments through September 30, 2026.
In addition to quarterly payments of the outstanding indebtedness, the loan agreement also requires annual payments of a percentage of excess cash flow, as defined in the loan agreement. The loan agreement states that an excess cash flow recapture payment must be made equal to (a) 75% of the excess cash flow for the immediately preceding fiscal year in which indebtedness to consolidated EBITDA ratio is greater than or equal to 2.50:1.00; (b) 50% of the excess cash flow for the immediately preceding fiscal year in which the funded indebtedness to consolidated EBITDA Ratio is less than 2.50:1.00 but greater than or equal to 1.50:1.00; or (c) 0% of the excess cash flow for the immediately preceding fiscal year in which the funded indebtedness to consolidated EBITDA Ratio is less than 1.50:1.00. In addition, the Company must make additional mandatory prepayment of amounts outstanding based on proceeds received from asset sales and sales of certain equity securities or other indebtedness. Due to the voluntary prepayment of term debt, there was no excess cash flow payment required. For additional information regarding the schedule of future payment obligations, please refer to Note 10 Commitments and Contingencies.
(b) As amended, the secured revolving line of credit has a ceiling of up to $50.0 million; as of September 30, 2025, we had unused borrowing capacity of $23.6 million, which is net of outstanding letters of credit. Borrowing on the secured revolving line of credit is secured by liens on substantially all of the assets of the Company. The Company accessed funds from the secured revolving line of credit during the year, which had a $8.1 million outstanding balance at September 30, 2025. As part of the secured revolving line of credit, the lenders agreed to a sublimit of $10.0 million for letters of credit for the account of the Company, subject to applicable procedures.
8. Stock-based Compensation and Equity Grants
Stock-based compensation expense
Options issued under equity incentive plans were designated as either an incentive stock or a non-statutory stock option. No option was granted with a term of more than 10 years from the date of grant. Exercisability of option awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued shares. As of September 30, 2025, there were 1.2 million shares available for grant.
Total stock-based compensation expense, presented in the table below, was recorded in general and administrative expenses included in our consolidated statements of operations for the years ended September 30, 2025 and 2024 (in thousands):
2025 2024
DLH employees (a)
$ 846 $ 1,280
Non-employee directors
618 618
Stock-based compensation expense
$ 1,464 $ 1,898
(a) At a 50% volatility and assumptions of a 3-year term and the performance vesting criteria results in an indicated a fair value. The RSUs granted during the fiscal year ended September 30, 2025, as follows using the Monte Carlo Method.
Volatility
50%
Grant Date Performance Vesting Base Performance Vesting Criteria (Years) Calculated Fair Value
December 20, 2024 Revenue Revenue increase at the end of the measurement period as compared to the year ended September 30, 2024 3 $ 0.65
December 20, 2024 Stock price Stock price is at least $23.04 per share average for the 30 days prior to the end of the performance period
3 $ 1.67
December 15, 2023 Revenue Revenue increase at the end of the measurement period as compared to the year ended September 30, 2023 3 $ 3.82
December 15, 2023 Stock price Stock price is at least $25.65 per share average for the 30 days prior to the end of the performance period
3 $ 5.36
Notes: Results based on 100,000 simulations
Unrecognized stock-based compensation expense
Unrecognized stock-based compensation expense is presented in the table below for the years ending September 30, 2025 and 2024 (in thousands):
2025 2024
Unrecognized expense for stock compensation expense (a)
$ 3,292 $ 4,417
(a): On a weighted average basis, this expense is expected to be recognized within the next 2.3 years.
Restricted Stock Unit ("RSU") activity for the year ended September 30, 2025:
Performance Vesting
Service
Vesting
Total
Outstanding, September 30, 2024 185,574 131,289 316,863
Granted (a)
156,453 235,009 391,462
Vested
- (122,897) (122,897)
Cancelled (109,566) (10,941) (120,507)
Outstanding, September 30, 2025 232,461 232,460 464,921
Equity grants of RSUs were made in accordance with DLH compensation policy for non-employee directors and a total of 67,615 and 61,525 restricted stock units were issued and outstanding at September 30, 2025 and 2024, respectively. These grants have service-based vesting criteria and vest at the end of this fiscal year.
Stock option activity for the year ended September 30, 2025:
The aggregate intrinsic value in the table below represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on those dates. This amount will change based on the fair market value of the Company’s stock. A summary of the Company's stock option awards is as follows:
Weighted
Average
Weighted Remaining Aggregate
Number of Average Contractual Intrinsic
Shares Exercise Term Value
(in thousands) Price (in years) (in thousands)
Outstanding, September 30, 2024 1,236 $ 9.28 6.1 $ 1,313
Granted
- - - -
Exercised - - - -
Cancelled (299) 9.39 - -
Outstanding, September 30, 2025 937 $ 9.65 5.6 $ 10
Vested and exercisable, September 30, 2025 902 $ 9.59 5.5 $ 10
Stock options shares outstanding, vested and unvested for the years ended September 30, 2025 and 2024 (in thousands):
Number of Shares
2025 2024
Vested and exercisable 902 1,176
Unvested (a) 35 60
Options outstanding 937 1,236
(a): Certain awards vest upon satisfaction of certain performance criteria.
9. Earnings Per Share
Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common shares outstanding and restricted stock grants that vested or are likely to vest during the period. Diluted earnings per share is calculated by dividing income available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities. Diluted earnings per share is calculated using the treasury stock method.
Earnings Per Share information is presented in the table below for the years ending September 30, 2025 and 2024 (in thousands except for per share amounts):
2025 2024
Numerator:
Net income $ 1,362 $ 7,397
Denominator:
Denominator for basic net income per share - weighted-average outstanding shares 14,387 14,169
Effect of dilutive securities:
Stock options and restricted stock 71 236
Denominator for diluted net income per share - weighted-average outstanding shares $ 14,458 $ 14,405
Net income per share - basic $ 0.09 $ 0.52
Net income per share - diluted $ 0.09 $ 0.51
10. Commitments and Contingencies
Contractual Obligations as of September 30, 2025 (in thousands):
Payments Due Per Fiscal Year
Total 2026 2027 2028 2029 2030 Thereafter
Debt obligations $ 131,567 $ 8,067 $ 23,750 $ 99,750 $ - $ - $ -
Facility operating leases 20,525 3,993 3,591 3,468 3,582 3,194 2,697
Contractual obligations
$ 152,092 $ 12,060 $ 27,341 $ 103,218 $ 3,582 $ 3,194 $ 2,697
Legal Proceedings
As a commercial enterprise and employer, the Company is subject to various claims and legal actions in the ordinary course of business. These matters can include professional liability, employment-relations issues, workers’ compensation, tax, payroll and employee-related matters, other commercial disputes arising in the course of its business, and inquiries and investigations by governmental agencies regarding our employment practices or other matters. The Company is not aware of any pending or threatened litigation that it believes is reasonably likely to have a material adverse effect on its results of operations, financial position or cash flows.
11. Related Party Transactions
The Company has determined that for the years ended September 30, 2025 and 2024 and through the filing date of this report, there were no related party transactions that have occurred which require disclosure through the date that these consolidated financial statements were issued.
12. Provision for Income Taxes
The significant components of provision for income taxes from continuing operations are summarized as follows for the years ending September 30, 2025 and 2024 (in thousands):
2025 2024
Current expense $ 2,095 $ 3,525
Deferred benefit
(1,702) (3,175)
Provision for income taxes $ 393 $ 350
The following table presents the significant differences between our income taxes at the federal statutory rate and the Company's effective tax rate for continuing operations for the years ending September 30, 2025 and 2024 (in thousands):
2025 2024
Income taxes at the federal statutory rate $ 387 $ 1,654
State taxes, net (25) (200)
Permanent differences
152 (530)
Prior year tax provision adjustments
(260) (574)
State tax rate changes
139 -
Provision for income taxes $ 393 $ 350
An analysis of the Company's deferred tax assets and liabilities at September 30, 2025 and 2024 is as follows (in thousands):
2025 2024
Deferred tax assets:
Net operating loss carry forwards, net $ 2,958 $ 1,903
Stock-based compensation
894 732
Accrued compensation 2,184 2,204
Capitalized transaction costs 587 532
Lease liability
3,830 1,682
Interest limitation 9,185 6,313
Total deferred tax assets 19,638 13,366
Less: valuation allowance (2,952) (1,894)
Total deferred tax assets, net $ 16,686 $ 11,472
Deferred tax liabilities:
Depreciation on fixed assets $ (302) $ (402)
Amortization on identified intangibles and goodwill (5,321) (4,364)
Accrued expenses (723) (461)
Right-of-use asset
(2,393) -
Total deferred tax liabilities (8,739) (5,227)
Net deferred tax assets
$ 7,947 $ 6,245
As of September 30, 2025 the Company had gross state net operating loss carryforwards of approximately $51.2 million. The state net operating losses will not expire and can be carried forward indefinitely. The state net operating loss carryforwards have been reviewed and a net valuation allowance of $3.0 million has been recorded against those that are not likely to be utilized. The increase in the valuation allowance is attributable to additional state net operating losses generated during the year ended September 30, 2025.
The One Big Beautiful Bill Act that amended Section 163(j) of the Internal Revenue Code introduced a change to the calculation of Adjusted Taxable Income ("ATI") that generally allows for a larger deduction of business interest expense. The primary change that makes the deduction more favorable and is likely to increase the company's deductible interest expense is the permanent reinstatement of EBITDA-based ATI.
13. Quarterly Financial Data (Unaudited)
During fiscal year 2025, the Company made reclassification adjustments that resulted in certain transactions previously reported within general and administrative cost being reclassified to contract costs. These adjustments were applied to fiscal 2024 to conform to the current period presentation. The reclassifications did not impact total operating income, net income, or earnings per share for any period presented. The Company will continue this presentation convention in fiscal 2026.
Management believes that these reclassifications enhance the presentation of the Company’s financial results by providing improved transparency and a clearer understanding of the nature of its costs of operations.
A summary of quarterly information for each fiscal year with the reclassified transactions is as follows (in thousands, except per share data)
2025 Quarters
First Second Third Fourth
Revenue $ 90,782 $ 89,212 $ 83,343 $ 81,160
Contract costs 72,771 71,594 67,649 67,319
General and administrative costs 8,067 8,238 7,631 7,263
Depreciation and amortization 4,307 4,265 4,308 4,299
Income from operations
5,637 5,115 3,755 2,279
Interest expense 4,133 3,877 3,540 3,481
Income (loss) before provision for income taxes
1,504 1,238 215 (1,202)
Provision for income tax expenses (benefit from)
389 360 (74) (282)
Net income (loss)
$ 1,115 $ 878 $ 289 $ (920)
Earnings per share:
Basic $ 0.08 $ 0.06 $ 0.02 $ (0.06)
Diluted $ 0.08 $ 0.06 $ 0.02 $ (0.06)
2024 Quarters
First
Second
Third
Fourth
Revenue $ 97,850 $ 101,007 $ 100,694 $ 96,386
Contract costs 79,443 79,487 82,025 77,492
General and administrative costs 7,335 11,335 8,634 8,234
Depreciation and amortization 4,253 4,243 4,272 4,284
Income from operations
6,819 5,942 5,763 6,376
Interest expense 4,658 4,190 4,143 4,162
Income before provision for income taxes
2,161 1,752 1,620 2,214
Provision for income tax expenses (benefit from)
10 (60) 481 (81)
Net income $ 2,151 $ 1,812 $ 1,139 $ 2,295
Earnings per share:
Basic $ 0.15 $ 0.13 $ 0.08 $ 0.16
Diluted $ 0.15 $ 0.12 $ 0.08 $ 0.16
14. Employee Benefit Plans
As of September 30, 2025, the Company maintains a 401(k) Plan (the "401(k) Plan"), a defined contribution and supplemental pension plan for the benefit of its eligible employees. The Company may provide a discretionary matching contribution of a participant's elective contributions under the 401(k) Plan. The Company recorded related expense of $4.2 million and $3.4 million for the years ending September 30, 2025 and 2024, respectively. Participants are always fully vested in their elective contributions and immediately vest in Company matching contributions.
15. Subsequent Events
Management has evaluated subsequent events through the date that the Company's unaudited consolidated financial statements were issued. Based on this evaluation, the Company has determined that no subsequent events have occurred which require disclosure through the date that these consolidated financial statements were issued.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A. CONTROLS AND PROCEDURES
ITEM 9A. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
Our Chief Executive Officer ("CEO") and President and Chief Financial Officer ("CFO"), after evaluating the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this Annual Report. Based on the evaluation of these controls and procedures, our disclosure controls and procedures were effective at the reasonable assurance level to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934 is (i) recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms and (ii) that such information is accumulated and communicated to our management, including our CEO and President and CFO, to allow timely decisions regarding required disclosure.
Our management, including our CEO and President and CFO, does not expect that our disclosure controls and procedures or our internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. Our management, however, believes our disclosure controls and procedures are in fact effective to provide reasonable assurance that the objectives of the control system are met.
Management’s Report on Internal Control over Financial Reporting
Our management, under the supervision of our CEO and CFO, is responsible for establishing and maintaining adequate internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended). Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that:
(i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company;
(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the company; and
(iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company's assets that could have a material effect on the financial statements.
Management, including our CEO and CFO, conducted an evaluation of the effectiveness of our internal control over financial reporting as of September 30, 2025. In making this evaluation, management used the 2013 framework on Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on our evaluation under the COSO framework, our management has concluded that our internal control over financial reporting was effective as of September 30, 2025.
Due to its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
This annual report does not include an attestation report of our independent registered public accounting firm regarding our internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to rules of the Securities and Exchange Commission.
Changes in Internal Controls over Financial Reporting
There have been no changes in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934) identified in connection with the evaluation of our internal control that occurred during the fourth quarter of our fiscal year ended September 30, 2025, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
ITEM 9B. OTHER INFORMATION
(a) None.
(b) During the three months ended September 30, 2024, none of our directors or officers adopted or terminated a “rule 10b5-1 trading arrangement” or “non-rule 10b5-1 trading arrangement,” as each term is defined in Item 408 (a) of Regulation S-K.

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
The information required by this Item with respect to our executive officers, directors, board committees, and corporate governance matters will be set forth in our definitive Proxy Statement under the captions "Executive Officers," "Election of Directors," and "Corporate Governance" of the Proxy Statement, to be filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and is incorporated herein by reference to our Proxy Statement.
We have adopted a written code of business conduct and ethics, which applies to our principal executive officer, principal financial or accounting officer or person serving similar functions and all of our other employees and members of our board of directors. We did not waive any provisions of the code of business ethics during the year ended September 30, 2025. Our code of business conduct and ethics is posted in the investor relations - corporate governance section of our website at www.dlhcorp.com. If we amend, or grant a waiver under, our code of business ethics that applies to our principal executive officer, principal financial or accounting officer, or persons performing similar functions, we intend to post information about such amendment or waiver on our website.

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ITEM 11. EXECUTIVE COMPENSATION
ITEM 11. EXECUTIVE COMPENSATION
The information required by this Item will be set forth in our definitive Proxy Statement, to be filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and is incorporated herein by reference to our Proxy Statement.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
The information required by this Item will be set forth in our definitive Proxy Statement, to be filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and is incorporated herein by reference to our Proxy Statement.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The information required by this Item will be set forth in our definitive Proxy Statement, to be filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and is incorporated herein by reference to our Proxy Statement.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The information required by this Item will be set forth in our definitive Proxy Statement under the caption "Independent Registered Public Accounting Firm", to be filed within 120 days after the end of the fiscal year covered by this Annual Report on Form 10-K, and is incorporated herein by reference to our Proxy Statement.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements
The financial statements and schedules of the Company are included in Part II, Item 8 of this report beginning on page 33.
(a)(2) Financial Statement Schedule
All schedules have been omitted since the required information is not applicable or because the information required is included in the consolidated financial statements or the notes thereto.
(a)(3) Exhibits
The exhibits listed in the Exhibit Index immediately below are filed as part of this Annual Report on Form 10-K or are incorporated by reference herein to the document referenced in brackets following the descriptions of such exhibits.
Exhibit No. Description
2.1 † Equity Purchase Agreement among DLH Holdings Corp., Grove Resource Solutions, LLC, the Equity holders, Omega D and D Corporation, and the Representative of the Equity holders (filed as Exhibit 2.1 to Current Report on Form 8-K filed on December 14, 2022).
3.1
Amended and Restated Certificate of Incorporation (filed as Exhibit A to Definitive Proxy Statement dated May 1, 2000 as filed with the Securities and Exchange Commission).
3.2
Amended and Restated By-Laws of Registrant adopted as of August 27, 2020 (filed as Exhibit 3.1 to the Current Report on Form 8-K filed August 31, 2020).
3.3
Amendment to Amended and Restated Certificate of Incorporation of the Company (filed as Exhibit B to Definitive Proxy Statement dated March 13, 2008 as filed with the Securities and Exchange Commission).
3.4
Amendment to Amended and Restated Certificate of Incorporation of the Company filed June 25, 2012 (filed as Exhibit 3.1 to Current Report on Form 8-K filed on June 26, 2012).
3.5
Amendment to Amended and Restated Certificate of Incorporation filed February 12, 2015 (filed as Annex A to the Company’s Proxy Statement dated December 31, 2014).
4.1
Specimen of the Common Stock Certificate (filed as Exhibit 4.1 to Annual Report on Form 10-K for the fiscal year ended September 30,2017.)
4.2
Description of Securities (filed as Exhibit 4.3 to Annual Report on Form 10-K filed on December 7, 2020).
10.1
Lease Agreement dated April 27, 2015 between DLH Holdings Corp. and Piedmont Center, 1-4 LLC (filed as Exhibit 10.1 to Quarterly Report on Form 10-Q filed on August 5, 2015)
10.2
# 2016 Omnibus Equity Incentive Plan, as amended (incorporated by reference to Appendix A to the Company’s definitive Proxy Statement dated January 28, 2021).
10.3
# Form of Stock Option Award Agreement under the 2016 Omnibus Equity Incentive Plan (filed as Exhibit 10.8 to Quarterly Report on Form 10-Q filed May 16, 2016).
10.4
†† Credit Agreement among DLH Holdings Corp., DLH Solutions, Inc., Danya International, LLC, Social & Scientific Systems, Inc., First National Bank of Pennsylvania, as Administrative Agent and other lenders party thereto (filed as Exhibit 10.1 to Current Report on Form 8-K filed on June 13, 2019).
10.5
First Amendment to Credit Agreement among DLH Holdings Corp., DLH Solutions, Inc,, Danya International, LLC, Social & Scientific Systems, Inc., First National Bank of Pennsylvania, as Administrative Agent and other lenders party thereto (filed as Exhibit 10.1 to Current Report on Form 8-K filed on September 12, 2019).
10.6
†† Amended and Restated Credit Agreement among DLH Holdings Corp., DLH Solutions, Inc., Danya International, LLC, Social & Scientific Systems, Inc., Irving Burton Associates, LLC, First National Bank of Pennsylvania, as Administrative Agent and other lenders party thereto (filed as Exhibit 10.1 to Current Report on Form 8-K filed October 6, 2020).
10.7
†† Second Amended and Restated Credit Agreement among DLH Holdings Corp., DLH Solutions, Inc., Danya International, LLC, Social & Scientific Systems, Inc., Irving Burton Associates, LLC, Grove Resource Solutions, LLC, First National Bank of Pennsylvania, as Administrative Agent and other lenders party thereto.(filed as Exhibit 10.1 to Current Report on Form 8-K filed December 14, 2022).
10.8
†† First Amendment, dated November 6, 2024, to Second Amended and Restated Credit Agreement (filed as Exhibit 10.1 to Current Report on Form 8-K filed November 12, 2024).
10.9
# Employment Agreement between the Company and Zachary C. Parker dated as of September 26, 2022 (filed as Exhibit 10.1 to Current Report on 8-K filed on October 2, 2025).
10.1
# Form of performance-based restricted stock unit award granted under the 2016 Omnibus Equity Incentive Plan (filed as Exhibit 10.1 to Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023).
10.11
# Form of time-based restricted stock unit award granted under the 2016 Omnibus Equity Incentive Plan (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2023).
10.12
# Employment agreement between the Company and Kathryn M JohnBull dated September 21, 2023 (filed as Exhibit 10.1 to Current Report on Form 8-K filed on September 25, 2023).
10.13
# 2025 Equity Incentive Plan (incorporated by reference to Appendix A to the Company’s Proxy Statement dated January 28, 2025).
10.14
# Form of Stock Option Award Agreement under the 2025 Equity Incentive Plan (filed as Exhibit 10.2 to Quarterly Report on Form 10-Q filed May 8, 2025).
10.15
# Form of Restricted Stock Unit for non-employee directors under the 2025 Equity Incentive Plan (filed as Exhibit 10.3 to Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025).
10.16
# Form of time-based restricted stock unit award granted under the 2025 Equity Incentive Plan (filed as Exhibit 10.4 to Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025).
10.17
# Form of performance-based restricted stock unit award granted under the 2015 Equity Incentive Plan (filed as Exhibit 10.5 to Quarterly Report on Form 10-Q for the fiscal quarter ended March 31, 2025).
19.1
DLH Holdings Corp. Insider Trading Policy (filed as Exhibit 19.1 to Annual Report on Form 10-K for the fiscal year ended September 30, 2024).
21.00
* Subsidiaries of Registrants.
23.10
* Consent of WithumSmith+Brown, PC
31.10
* Certification of Chief Executive Officer pursuant to Section 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a).
31.20
* Certification of Chief Financial Officer pursuant to Section 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a).
32.10
* Certification of Chief Executive Officer and Chief Financial Officer pursuant to 17 CFR 240.13a-14(b) or 17 CFR 240.15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code.
Policy Relating to Recovery of Erroneously Awarded Compensation. (filed as Exhibit 97 to Annual Report on Form 10-K for the fiscal year ended September 30, 2023)
101.0 The following financial information from the DLH Holdings Corp. Annual Report on Form 10-K for the fiscal year ended September 30, 2025, formatted in iXBRL (Inline eXtensible Business Reporting Language) and filed electronically herewith: (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Cash Flows; (iv) the Consolidated Statements of Changes in Shareholders' Equity and, (v) the Notes to the Consolidated Financial Statements. Filed electronically herewith.
104.0 Cover Page Interactive Data File. (formatted as Inline XBRL tags and contained in Exhibit 101)
* Indicates exhibit is filed electronically herewith.
# Denotes a management contract or compensation plan or arrangement.
† Schedules and other similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation S-K. The registrant hereby undertakes to furnish supplemental copies of any of the omitted schedules and other similar attachments upon request by the SEC.
†† Schedules omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company agrees to furnish a copy of any omitted schedule to the Securities and Exchange Commission upon request.