DLHC

This article first appeared on GuruFocus. Release Date: July 30, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. DLH Holdings Corp (NASDAQ:DLHC) secured a new IDIQ contract with the US Navy for logistics and IT services, expanding into a new customer segment. The company completed cost scaling initiatives, aligning its cost structure with current revenue levels and improving competitiveness. Debt reduction remains a priority, with total debt lowered to $128.7 million and mandatory payments nearly 9 months ahead of schedule. Management expects gross margins to return to historical levels of around 20% as cost actions take full effect. The procurement environment is showing improved clarity and stability, with increased bidding activity and new opportunities emerging. Revenue declined to $44.2 million in Q3 2026, reflecting the transition of legacy contracts to small business set-asides. The VACOop program transition concluded, eliminating a revenue stream and requiring cost scaling to adjust. Adjusted EBITDA margin was only 7.7% for the quarter, below the company's target of 9-10%. Debt levels are expected to remain relatively stable through fiscal year-end, delaying further reduction. The cancellation of the CIOSP4 vehicle and ongoing procurement flux, especially at CDC, create uncertainty for future growth. Here are the key highlights from the DLH Holdings Corp (NASDAQ:DLHC) Q3 2026 earnings call, presented as summarized Q&A pairs. Warning! GuruFocus has detected 7 Warning Signs with DLHC. Is DLHC fairly valued? Test your thesis with our free DCF calculator. Q: With the VACO program transition complete and cost scaling initiatives implemented, what are the expected gross margin and G&A expense levels for the new, technology-powered revenue base of roughly $160 million annualized? A: **Steve Oroho, CFO**: We expect gross margins to return to historical levels of about 20%. From a G&A perspective, we anticipate that to return to a quantum basis of about $4.5 to $5 million, which would be roughly 11% to 12% of revenue going forward. Q: Is the long-term goal of a 9% to 10% adjusted EBITDA margin still the target, and what revenue level is needed to achieve that? A: **Steve Oroho, CFO**: Yes, that is definitely the goal. We believe we can achieve that level with a modest level of growth over the coming quarters. Our most near-term opportunities to capture additional volume and return to that profitability level are through on-contract growth and convincing our customers to increase scope on our existing contracts. Q: How many of your current IDIQ contracts are actively putting out RFPs, and how many new IDIQ programs is the company looking to bid on? A: **Catherine John Bull, CEO**: The government's procurement strategy is gaining clarity. For more generic services, they are moving to the GSA schedule, which we have. For specialized needs, they are using smaller, focused IDIQs. For example, an IDIQ we won in early 2023 has been quiet, but now we see nearly a dozen opportunities moving through it with only 8 holders. We are encouraged to see this sorting out of strategy, which is finally generating good order flow after a long quiet period. Q: Are any of the agencies you deal with exhibiting materially different procurement trends, and which offer the strongest spending outlook for the next year or two? A: **Catherine John Bull, CEO**: Stability is much stronger on the civilian side, particularly with NIH and HHS. The CDC side is still more in flux, though it has shown recent strength through the Oasis vehicle. However, given political headwinds at the CDC, we have a more cautious view on how quickly that will convert to revenue. Overall, compared to last year, the visibility is much stronger across both civilian and defense sides. Q: Can you provide more color on the leadership transition and how the new management team intends to advance the company's strategy? A: **Catherine John Bull, CEO**: This transition is marked by clarity and sharp focus. Growth remains priority number one, with a near-term focus on contract expansion and smaller "singles and doubles" opportunities. We will aggressively compete for contracts while keeping a disciplined pipeline. We will continue to rely on our deep, credentialed talent pool. Financially, we will continue to emphasize deleveraging the balance sheet and strengthening operating performance, with cost reductions now materially complete. For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Interested in DLH Holdings Corp.? Here are five stocks we like better. DLH reported $44.2 million in fiscal Q3 revenue, with $38 million generated by technology-powered solutions after completing the transition of its Veterans Affairs CMOP program to small-business contractors. Fourth-quarter technology-solutions revenue is expected to remain at a similar level. The company completed most cost-scaling actions, supporting $3.4 million in adjusted EBITDA and $4.2 million in free cash flow, while reducing debt to $128.7 million. Management is targeting adjusted EBITDA margins of 9%–10% and expects further debt reduction beginning in fiscal 2027. DLH sees a clearer government procurement environment and an expanding contract pipeline, including a new Navy logistics IT contract. Growth priorities include contract expansions, smaller new-business wins and opportunities across specialized IDIQ vehicles. DLH (NASDAQ:DLHC) reported fiscal 2026 third-quarter revenue of $44.2 million as the company completed the transition of its Veterans Affairs Consolidated Mail Outpatient Pharmacy, or CMOP, program to small-business set-aside contractors and shifted toward a business base centered exclusively on technology-powered solutions. Technology-powered solutions generated $38 million in revenue during the quarter ended June 30, Chief Financial Officer Steve Oroho said. The company expects fourth-quarter revenue at a similar level. → Why SK hynix Could Be the Best AI Chip Stock to Buy Now The quarter also marked a leadership transition. Kathryn JohnBull became president and chief executive officer, while Oroho assumed the CFO role. Former CEO Zach Parker will remain involved as a board member and consultant supporting selected strategic growth pursuits, JohnBull said. DLH completed cost-scaling initiatives during the third quarter to align its operating structure with expected revenue levels following the CMOP transition. The actions resulted in approximately $3.3 million of eliminated and one-time costs during the quarter, according to Oroho. → 3 Value ETFs to Consider as Growth Stocks Lag Behind While the company expects a small remaining tail of actions in the fourth quarter, JohnBull said the cost reductions are “materially complete.” She said DLH has reestablished a cost structure that is competitive at its current business scale. Adjusted EBITDA was $3.4 million, or 7.7% of revenue, after adjusting for the timing and incremental costs tied to the scaling initiatives. The company generated $4.2 million in free cash flow during the quarter, with most of that cash used for debt reduction. → 5 AI Stocks Are Pulling Back—Which Growth Catalysts Still Look Strongest? In response to an analyst question, Oroho said DLH expects gross margin to return to historical levels of about 20%. He also said general and administrative expense should return to roughly $4.5 million to $5 million, or approximately 11% to 12% of revenue. Management reiterated its longer-term goal of reaching adjusted EBITDA margins of 9% to 10%. Oroho said the company believes it could achieve that profitability level with a modest amount of growth over coming quarters, aided by operating leverage and expansion opportunities within its existing contracts. DLH ended the quarter with $128.7 million of debt, down from $132.7 million at the end of the previous quarter. Oroho said the company remains ahead of its mandatory term-loan repayment schedule and is in compliance with all financial covenants. Debt is expected to remain relatively stable through the end of fiscal 2026 because of the timing and nature of the cost-scaling actions. Beginning in fiscal 2027, however, the company expects to realize more of the benefits from those actions and continue reducing debt. JohnBull said mandatory debt payments are nearly nine months ahead of schedule. She identified balance-sheet deleveraging and stronger operating performance as foundations for the company’s growth strategy. Management said the government procurement environment has become clearer and more stable in recent months after a period marked by government shutdown concerns, budget uncertainty and reductions in federal contracting departments. Those conditions had slowed procurement activity through fiscal 2025 and into the current year. “Numerous key deals and large procurements” tracked by DLH for fiscal 2025 are now coming up for bid, JohnBull said. The company is seeing increased bidding activity heading into the end of its fiscal year and expects certain award decisions in coming quarters, subject to agency timelines and procurement processes. DLH received a multiple-award indefinite-delivery, indefinite-quantity contract in June to provide logistics information technology services to the U.S. Navy. Through task orders under the vehicle, DLH can compete to support systems modernization, integration, sustainment and migration for Naval Air Systems Command, or NAVAIR, which JohnBull described as a new customer for the company. JohnBull said maintaining a robust collection of IDIQ contract vehicles is important as government procurement strategies evolve. She noted that the government canceled the CIO-SP4 vehicle, which DLH had pursued in the civilian market, but she said agencies are increasingly distinguishing between broad procurement opportunities that may move through the General Services Administration schedule and more specialized requirements directed to narrower IDIQ vehicles. DLH holds a GSA schedule vehicle for broader services opportunities. Management said one IDIQ won in early 2023, which had been relatively quiet, is now showing close to a dozen potential opportunities. JohnBull said that vehicle has only eight holders, creating a more controlled competitive environment for specialized work. JohnBull said stability appears stronger at the National Institutes of Health and the Department of Health and Human Services than at the Centers for Disease Control and Prevention. She said DLH remains more cautious about the pace at which CDC-related opportunities may translate into revenue because of political and leadership uncertainty, although recent activity through the OASIS contract vehicle has shown strength. The company’s near-term growth focus is on contract expansions and smaller “singles and doubles” opportunities, according to JohnBull. Management intends to pursue new work while maintaining a disciplined business-development pipeline and relying on DLH’s workforce of technologists and researchers across its capability areas. JohnBull said the company’s strategic direction will be defined by “clarity and sharp focus” rather than an overhaul, with disciplined execution for customers, organic growth and employee development serving as its priorities. DLH Holdings Corp. (NASDAQ: DLHC) is a provider of mission-driven professional services primarily to federal government agencies and select commercial clients. The company designs and delivers tailored solutions across a range of critical mission areas, including program and project management, consulting, technical assistance, and administrative support. Through its Healthcare Solutions offerings, DLH also specializes in supporting clinical and allied health staffing needs for federal health agencies and health systems. Operating under its Federal Solutions segment, DLH partners with agencies such as the Department of Veterans Affairs, Department of Defense, Department of Homeland Security, and the Department of Health and Human Services. This instant news alert was generated by narrative science technology and financial data from MarketBeat in order to provide readers with the fastest reporting and unbiased coverage. Please send any questions or comments about this story to [email protected]. The article "DLH Q3 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for July 2026.

ATLANTA, July 29, 2026 (GLOBE NEWSWIRE) -- DLH Holdings Corp. (NASDAQ: DLHC) (“DLH” or the “Company”), a leading provider of digital transformation and cybersecurity, systems engineering and integration, and science research and development, today announced financial results for its fiscal third quarter ended June 30, 2026. Q3 Highlights: Announced management changes at the end of the quarter, with the appointments of Kathryn JohnBull to President and CEO and Steve Oroho to CFO and Treasurer Revenue declined year-over-year primarily reflecting the transition of legacy programs to small-business set-aside contractors Completed indirect cost reduction actions that strengthen the Company’s competitive position by aligning the operating structure with expected, near-term revenue volumes Delivered Adjusted EBITDA of $3.4 million, or 7.6% of revenue Generated Operating and Free Cash Flow of $4.2 million, as debt was reduced to $128.7 million, from $132.7 million at the end of the second quarter Management Discussion: “Being appointed CEO following Zach Parker’s retirement is a tremendous honor,” said Kathryn JohnBull, President and Chief Executive Officer. “Having aligned indirect costs with expected revenue volumes, I am confident that DLH is competitively positioned to capitalize on a healthy pipeline of organic growth opportunities. As our third-quarter results reflect recent growth challenges and the completion of legacy programs, we expect fourth-quarter revenue to be generated entirely by our technology-powered solutions. We also anticipate our actions to align our indirect costs with these revenue volumes will enable us to maintain Adjusted EBITDA margins at approximately the same level as in the third quarter. “With that in mind our strategic priorities are clear: drive disciplined organic growth across core markets and capabilities; improve operating leverage; and reduce debt as rapidly as possible. We believe DLH is positioned for improved performance in fiscal 2027 and remain laser focused on creating long-term shareholder value.” Operating Financial Summary (1) Reflects the $10.4 million impact of a valuation allowance recorded against our deferred tax assets.(2) Operating cash flow and free cash flow for the quarter are derived by subtracting from this quarter’s year-to-date amount the year-to-date amount reported in the Company’s prior Quarterly Report on Form 10-Q. Reconciliations of EBITDA and Adjusted EBITDA are included later in this press release. Additional Financial Metrics Earnings Call & Webcast: DLH management will discuss third quarter results and provide a general business update, including current competitive conditions and strategies, during a conference call beginning at 10:00 AM Eastern Time tomorrow, July 30, 2026. Interested parties may listen to the conference call by dialing 888-347-5290 or 412-317-5256. Presentation materials will also be posted on the Investor Relations section of the DLH website prior to the commencement of the conference call. A digital recording of the conference call will be available for replay two hours after the completion of the call and can be accessed on the DLH Investor Relations website or by dialing 855-669-9685 and entering the conference ID #1652291. About DLH: DLH (NASDAQ: DLHC) enhances technology, public health, and cyber security readiness missions through science, technology, cyber, and engineering solutions and services. Our experts solve some of the most complex and critical missions faced by federal customers, leveraging digital transformation, artificial intelligence, advanced analytics, cloud-based applications, telehealth systems, and more. With a world-class workforce dedicated to the idea that “Your Mission is Our Passion,” DLH brings a unique combination of government sector experience, proven methodology, and unwavering commitment to innovative solutions to improve the lives of millions. For more information, visit www.DLHcorp.com. Contact Information: Investor RelationsChris Witty(646) [email protected] Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or DLH`s future financial performance. Any statements that refer to expectations, projections or other characterizations of future events or circumstances or that are not statements of historical fact (including without limitation statements to the effect that the Company or its management “believes”, “expects”, “anticipates”, “plans”, “intends” and similar expressions) should be considered forward-looking statements that involve risks and uncertainties which could cause actual events or DLH’s actual results to differ materially from those indicated by the forward-looking statements. Forward-looking statements in this release include, among others, statements regarding benefits of acquisitions, estimates of future revenues, operating income, earnings, earnings per share, backlog, and cash flows. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Our actual results may differ materially from such forward-looking statements made in this release due to a variety of factors, including: the failure to achieve the anticipated benefits of any future acquisition (including anticipated future financial operating performance and results); the inability to retain employees and customers; contract awards in connection with re-competes for present business and/or competition for new business; our ability to manage our debt obligations; compliance with bank financial and other covenants; changes in client budgetary priorities; government contract procurement (such as bid and award protests, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; significant delays or reductions in appropriations for our programs and broader changes in U.S. government funding and spending patterns; legislation that amends or changes discretionary spending levels or budget priorities; legal, regulatory, and political changes from the federal government that could result in economic uncertainty; the impact of inflation and higher interest rates; and other risks described in our SEC filings. For a discussion of such risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in the Company’s periodic reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, as well as interim quarterly filings thereafter. The forward-looking statements contained herein are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry and business. Such forward-looking statements are made as of the date hereof and may become outdated over time. The Company does not assume any responsibility for updating forward-looking statements. Non-GAAP Financial Measures The Company uses Adjusted Income from Operations, EBITDA, Adjusted EBITDA, EBITDA as a percent of revenue, and Adjusted EBITDA as a percent of revenue as supplemental non-GAAP measures of performance. The Company uses Free Cash Flow as a supplemental non-GAAP liquidity measure. We define the measures as follows: Adjusted Income from Operations represents income from operations before the costs associated with scaling indirect expenses within contract and general and administrative costs to revenue volume, referred to below as cost scaling initiatives. EBITDA represents net income before income taxes, interest, depreciation and amortization; Adjusted EBITDA represents net income before income taxes, interest, depreciation and amortization, and the costs associated with scaling general and administrative costs to revenue volume. EBITDA and Adjusted EBITDA as a percent of revenue are calculated by dividing EBITDA or Adjusted EBITDA, respectively, for the measurement period by revenue for the same period. Free Cash Flow is net cash provided by operating activities less the impact of purchases of equipment and improvements. Adjusted Income from Operations, EBITDA, Adjusted EBITDA, EBITDA as a percent of revenue, and Adjusted EBITDA as a percent of revenue are non-GAAP measures of performance and are used by management to conduct and evaluate its business during its review of operating results for the periods presented. Free Cash Flow, a non-GAAP liquidity measure, is used by management to assess our ability to generate cash from our business operations and plan for future operating and capital actions. Management and the Company’s Board utilize these non-GAAP measures to make decisions about the use of the Company’s resources, analyze performance between periods, develop internal projections and measure management performance. We believe that these non-GAAP measures are useful to investors in evaluating the Company’s ongoing operating and financial results and understanding how such results compare with the Company’s historical performance. Adjusted Income from Operations, EBITDA, Adjusted EBITDA, EBITDA as a percent of revenue, Adjusted EBITDA as a percent of revenue, and Free Cash Flow are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance and liquidity 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 Measures to Adjusted Income from Operations, EBITDA and Adjusted EBITDA (in thousands): Reconciliation of Free Cash Flow (in thousands):

Interested in DLH Holdings Corp.? Here are five stocks we like better. Management said the federal procurement backdrop has stabilized after prior disruptions, with the fiscal 2026 budget complete, increased funding (notably in defense and intelligence), and a pickup in solicitations and RFP activity returning to market. Q2 revenue fell to $59.3 million from $89.2 million year-over-year largely due to transitions to small business set-aside contracts (primarily CMOP and Head Start); adjusted EBITDA declined to $5.3 million with a 9% adjusted EBITDA margin, while free cash flow was roughly $3.8 million. DLH reduced debt to $132.7 million and expects to convert about 50–55% of fiscal 2026 EBITDA into debt reduction, remaining ahead of mandatory repayments, and noted a two-year NIH sole-source extension plus returning pipeline activity—though protests could delay some awards. DLH (NASDAQ:DLHC) executives told investors the federal budget environment has stabilized following a period of procurement disruption, and said the company is seeing bidding activity pick up as delayed solicitations return to market. Management also reported fiscal 2026 second-quarter results that reflected year-over-year revenue declines tied largely to program transitions to small business set-aside contracts, while highlighting adjusted EBITDA margin performance and ongoing debt reduction. President and CEO Zach Parker said the fiscal 2026 budget cycle is complete and that DLH believes “the current federal funding environment is favorable,” citing increased funding capacity and improved budget visibility across key client agencies. Parker said several federal health agencies received fiscal 2026 funding increases versus fiscal 2025 levels, “reversing in part the previously proposed funding reductions outlined by the president’s request.” He also pointed to “significant budget increases” in defense and intelligence that he said align well with DLH’s capabilities and have bipartisan support. → Berkshire Hathaway’s Record Cash Hoard: Why and What's Next? Parker described last year’s environment as marked by budget uncertainty and reductions in federal contracting departments that “significantly slowed procurement activity across the government,” contributing to delays in deals DLH expected in fiscal 2025. He said some of those large procurements are “just now coming up for bid,” and the company is experiencing a “busy second half” responding to requests, with certain award decisions expected over the coming months depending on customer timelines and procurement processes. He also said the administration has taken actions intended to simplify contracting and speed transaction timelines, including executive orders aimed at streamlining regulations and shifting some work from cost-reimbursement to fixed-price arrangements with performance metrics. Parker said these changes “align very well with DLH’s strategy and our heritage.” → A Prada Payday: Is AMC Back in Style? Chief Financial Officer Kathryn JohnBull reported revenue of $59.3 million for the three months ended March 31, 2026, down from $89.2 million in the prior-year period. She said results reflected expansion on existing contracts but were offset by the conversion of certain programs to small business set-aside contracts and “certain government efficiency initiatives.” JohnBull said the revenue contraction was “mostly due to small business set-aside initiatives,” primarily involving CMOP and Head Start, with the “remaining change” attributable to year-over-year contract completions and government efficiency initiatives. → Insider Sales: Top AST SpaceMobile Insider Cuts Postion Over 30% Adjusted EBITDA was $5.3 million compared with $9.4 million a year earlier, with JohnBull attributing the decline primarily to lower revenue volumes. Adjusted EBITDA margin was 9% for the quarter, which JohnBull said reflected adjustments for the “timing and incremental cost impact” of cost-scaling initiatives implemented in the second quarter. From a cash flow perspective, JohnBull said DLH generated approximately $3.8 million of free cash flow during the quarter. She contrasted that with the prior-year period, which she said included significant working capital build related to the transition of a CMOP location that restricted cash collections early in fiscal 2025. JohnBull said debt declined to $132.7 million at quarter end from $136.6 million at the end of the previous quarter, calling it a resumption of the company’s deleveraging trend after a “typical seasonal uptick” in the first quarter. She said DLH expects to convert roughly 50% to 55% of fiscal 2026 EBITDA into debt reduction by year-end, and noted the company is ahead of its mandatory repayment schedule and in compliance with all financial covenants. Parker also referenced debt reduction progress during his remarks, saying total debt is aligned with DLH’s fiscal 2026 plans. During the Q&A session, management provided an update on the VA CMOP transition. In response to questions from Joe Gomes of Noble Capital, JohnBull said the company expects to “wrap up the transition of those contracts just before Memorial Day.” Parker said DLH remains committed to supporting veterans and has “irons in the fire” for other VA-related work, while also describing the set-aside shift and changes in acquisition approach as factors in DLH’s decisions regarding bids. Parker also noted “late-breaking news” of a two-year sole-source extension for a contract supporting clinical research services at the National Institutes of Health. JohnBull said the contract would have gone through a normal recompete cycle at the end of its 10-year performance period, but NIH opted for a two-year sole-source bridge. She said the extension provides additional near-term “revenue visibility” and called public health a key part of DLH’s portfolio and market strategy. Asked about whether additional cost scaling may be required, Parker said the company has taken “the significant actions” and believes it has “accomplished the material reductions that are necessary to right-size the business,” while continuing to evaluate areas such as real estate footprint and ensuring its cost structure remains competitive for bidding. Looking ahead, Parker said DLH is encouraged by increased RFP activity and noted that multiple material solicitations the company had been anticipating have now come through, with bids submitted and decision processes expected to continue. He cautioned that protests can delay awards for larger procurements, but said DLH believes some decisions should occur within the fiscal year. On the fiscal 2027 budget request, Parker said the proposal calls for “historic spending increases in the defense and intelligence sector,” partially offset by “unspecified reductions in federal health spending,” while emphasizing that the president’s request is an early step in the broader budget process. He said DLH will remain engaged with Congress, customers, and industry groups as the process advances. Parker said DLH’s capabilities align with what he described as customer priorities, including digital modernization, integration of advanced technologies, interoperability, cybersecurity, cloud migration, and AI adoption. He highlighted DLH’s strategic pillars as science, research and development; digital transformation and cybersecurity; and systems engineering and integration, and said the company intends to compete in an “accelerated acquisition landscape” by leveraging speed, innovation, and agility. DLH Holdings Corp. (NASDAQ: DLHC) is a provider of mission-driven professional services primarily to federal government agencies and select commercial clients. The company designs and delivers tailored solutions across a range of critical mission areas, including program and project management, consulting, technical assistance, and administrative support. Through its Healthcare Solutions offerings, DLH also specializes in supporting clinical and allied health staffing needs for federal health agencies and health systems. Operating under its Federal Solutions segment, DLH partners with agencies such as the Department of Veterans Affairs, Department of Defense, Department of Homeland Security, and the Department of Health and Human Services. The article "DLH Q2 Earnings Call Highlights" was originally published by MarketBeat. View MarketBeat's top stocks for May 2026.

ATLANTA, May 06, 2026 (GLOBE NEWSWIRE) -- DLH Holdings Corp. (NASDAQ: DLHC) (“DLH” or the “Company”), a leading provider of digital transformation and cybersecurity, systems engineering and integration, and science research and development, today announced financial results for its fiscal second quarter ended March 31, 2026. Q2 Highlights: Revenue change both year-over-year and sequentially, from the first quarter of fiscal 2026, primarily reflects the transition of legacy programs to small-business set-aside contractors Adjusted EBITDA of $5.3 million, or 9.0% of revenue, with the Company's cost scaling initiatives sustaining adjusted EBITDA margin on the current revenue volume Free cash flow of $3.8 million, with cash generation expected to accelerate in the second half of fiscal 2026 Debt was reduced to $132.7 million, from $136.6 million at the end of the first quarter, with greater reductions expected before the end of fiscal 2026 Awarded a two-year sole source extension of the Company’s contract to provide clinical research support services to NIH Management Discussion: “Fiscal 2026 is a transition year for DLH, with the previously disclosed conversion of legacy contracts to small businesses continuing and expected to be complete in our third quarter. We have proactively right-sized our cost structure to align with the Technology Powered Solutions business base, successfully protecting our margins.” said Zach Parker, DLH President and Chief Executive Officer. “With a leaner operating model and improving demand from our government customers, we are positioned to capture the digital modernization, cybersecurity and AI opportunities aligned with our core capabilities. We remain focused on profitable growth and free cash flow generation to reduce debt and expand our current portfolio of solutions and services.” (1) Operating cash flow and free cash flow for the quarter are derived by subtracting from this quarter's year-to-date amount the year-to-date amount reported in the Company’s prior Quarterly Report on Form 10-Q. Additional Financial Metrics Earnings Call & Webcast: DLH management will discuss second quarter results and provide a general business update, including current competitive conditions and strategies, during a conference call beginning at 10:00 AM Eastern Time tomorrow, May 7, 2026. Interested parties may listen to the conference call by dialing 888-347-5290 or 412-317-5256. Presentation materials will also be posted on the Investor Relations section of the DLH website prior to the commencement of the conference call. A digital recording of the conference call will be available for replay two hours after the completion of the call and can be accessed on the DLH Investor Relations website or by dialing 855-669-9685 and entering the conference ID #6965160. About DLH: DLH (NASDAQ: DLHC) enhances technology, public health, and cyber security readiness missions through science, technology, cyber, and engineering solutions and services. Our experts solve some of the most complex and critical missions faced by federal customers, leveraging digital transformation, artificial intelligence, advanced analytics, cloud-based applications, telehealth systems, and more. With a world-class workforce dedicated to the idea that “Your Mission is Our Passion,” DLH brings a unique combination of government sector experience, proven methodology, and unwavering commitment to innovative solutions to improve the lives of millions. For more information, visit www.DLHcorp.com. Contact Information: Investor Relations Chris Witty (646) 438-9385 [email protected] Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements relate to future events or DLH`s future financial performance. Any statements that refer to expectations, projections or other characterizations of future events or circumstances or that are not statements of historical fact (including without limitation statements to the effect that the Company or its management “believes”, “expects”, “anticipates”, “plans”, “intends” and similar expressions) should be considered forward-looking statements that involve risks and uncertainties which could cause actual events or DLH’s actual results to differ materially from those indicated by the forward-looking statements. Forward-looking statements in this release include, among others, statements regarding benefits of acquisitions, estimates of future revenues, operating income, earnings, earnings per share, backlog, and cash flows. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Our actual results may differ materially from such forward-looking statements made in this release due to a variety of factors, including: the failure to achieve the anticipated benefits of any future acquisition (including anticipated future financial operating performance and results); the inability to retain employees and customers; contract awards in connection with re-competes for present business and/or competition for new business; our ability to manage our debt obligations; compliance with bank financial and other covenants; changes in client budgetary priorities; government contract procurement (such as bid and award protests, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; significant delays or reductions in appropriations for our programs and broader changes in U.S. government funding and spending patterns; legislation that amends or changes discretionary spending levels or budget priorities; legal, regulatory, and political changes from the federal government that could result in economic uncertainty; the impact of inflation and higher interest rates; and other risks described in our SEC filings. For a discussion of such risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in the Company’s periodic reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended September 30, 2025, as well as interim quarterly filings thereafter. The forward-looking statements contained herein are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry and business. Such forward-looking statements are made as of the date hereof and may become outdated over time. The Company does not assume any responsibility for updating forward-looking statements. Non-GAAP Financial Measures The Company uses Adjusted Income from Operations, EBITDA, Adjusted EBITDA, EBITDA as a percent of revenue, and Adjusted EBITDA as a percent of revenue as supplemental non-GAAP measures of performance. The Company uses Free Cash Flow as a supplemental non-GAAP liquidity measure. We define the measures as follows: Adjusted Income from Operations represents income from operations before the costs associated with scaling general and administrative costs to revenue volume, referred to below as cost scaling initiatives. EBITDA represents net income before income taxes, interest, depreciation and amortization; Adjusted EBITDA represents net income before income taxes, interest, depreciation and amortization and the costs associated with scaling general and administrative costs to revenue volume. EBITDA and Adjusted EBITDA as a percent of revenue are calculated by dividing EBITDA or Adjusted EBITDA, respectively, for the measurement period by revenue for the same period. Free cash flow is net cash provided by operating activities less the impact of purchases of equipment and improvements. Adjusted Income from Operations, EBITDA, Adjusted EBITDA, EBITDA as a percent of revenue, and Adjusted EBITDA as a percent of revenue are non-GAAP measures of performance and are used by management to conduct and evaluate its business during its review of operating results for the periods presented. Free Cash Flow, a non-GAAP liquidity measure, is used by management to assess our ability to generate cash from our business operations and plan for future operating and capital actions. Management and the Company's Board utilize these non-GAAP measures to make decisions about the use of the Company's resources, analyze performance between periods, develop internal projections and measure management performance. We believe that these non-GAAP measures are useful to investors in evaluating the Company's ongoing operating and financial results and understanding how such results compare with the Company's historical performance. Adjusted Income from Operations, EBITDA, Adjusted EBITDA, EBITDA as a percent of revenue, Adjusted EBITDA as a percent of revenue, and free cash flow are not recognized measurements under accounting principles generally accepted in the United States, or GAAP, and when analyzing our performance and liquidity 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. (1) Cost scaling initiatives consist of expenses incurred by the Company in scaling its business to align with its current contract volume resulting from the previously disclosed conversion of programs for which the Company previously served as prime contractor to small business contractors. (1) Operating cash flow and free cash flow for the quarter are derived by subtracting from this quarter's year-to-date amount the year-to-date amount reported in the Company’s prior Quarterly Report on Form 10-Q.

Image source: The Motley Fool. Thursday, May 7, 2026 at 10 a.m. ET President and Chief Executive Officer — Zachary C. Parker Chief Financial Officer — Kathryn M. Johnbull Zachary C. Parker: Thank you, Chris Witty, and good morning, everyone. Welcome to our second quarter conference call. I am pleased for the opportunity to report our financial results and provide color regarding the current environment and our outlook. As I begin, I would like to recognize the performance of our highly skilled workforce. Our people are our number one asset as a company, and we lean on the passion, creativity, and expertise of our staff in order to succeed. This past quarter, you once again demonstrated the innovative thinking required to support our customers' critical missions and delivered excellence across the way. We continue to thank everyone at DLH Holdings Corp. for this execution. Now turning to Slide 4, I will provide an overview of the federal marketplace achievements and financial performance. The fiscal 2026 budget cycle is now complete, and the 2027 outlook is coming into full focus. We believe that the current federal funding environment is favorable to DLH Holdings Corp. Clients across our markets have increased funding capacity and improved budget visibility, allowing for a steadily improving procurement environment. Key federal health agencies received FY 2026 funding increases compared to FY 2025 levels, reversing in part the previously proposed funding reductions outlined by the President's request for fiscal 2026. Agencies in the defense and intelligence market have received significant budget increases that align particularly well with our capabilities. These are supported on both sides of the aisle, and we expect this to be a healthy profile for us in the years to come. We believe that the improved clarity and stability which has emerged in recent months meaningfully expands the company's addressable market and supports the company's strategic organic growth initiatives. Last year, and throughout the shutdown in our fiscal Q1, budget uncertainty and large reductions to federal agency contracting departments significantly slowed procurement activity across the government. As such, numerous key deals and strategic large procurements that we were expecting in 2025 are just now coming up for bid. We are encouraged by the increase in bidding activities and are experiencing a busy second half of the fiscal year responding to procurement requests. We expect certain award decisions over the coming months, subject to customer timelines and procurement processes. DLH Holdings Corp. continues to maintain a healthy pipeline of opportunities which will leverage our world-class workforce, our advanced capabilities, and our recently developed commercial technology differentiators to elevate our win probabilities in this pipeline. Notably, the President's recently released fiscal 2027 budget request calls for historic spending increases in the defense and intelligence sector. The administration proposes that this investment be partially offset by unspecified reductions in federal health spending. As always, the President's budget request is an initial step in the multi-phase federal budget cycle. We will remain engaged with the Hill, our customers, and influential industry groups as this process advances. Additionally, the current administration has taken several actions intended to simplify contracting and to accelerate the time required to complete transactions. We find this is very healthy for our industry. In addition to nontraditional contract arrangements that we discussed at our recent shareholder meeting, there have been executive orders to streamline the regulatory environment in contracting and to rebalance the risk-reward trade-off, moving away from some cost-reimbursement contracts to fixed-price arrangements with performance metrics. The changes align very well with DLH Holdings Corp.'s strategy and our heritage. We welcome this needed shift by our government. Our defense and intelligence customers continue to prioritize prototyping, rapid delivery, cost efficiency, digital modernization, and the integration of advanced technologies, particularly as they relate to C4ISR systems. These align very well with our DLH Holdings Corp. Cyclone and DLH Holdings Corp. Nexus Labs digital sandbox investments that are cloud-secure. In parallel, federal health agencies remain focused on interoperability, cybersecurity including zero trust architectures, cloud migration, and AI adoption. Collectively, these priorities position DLH Holdings Corp. very strongly to grow organically from these initiatives. It is always gratifying when DLH Holdings Corp. innovation and performance excellence are acknowledged by our industry. In recent months, DLH Holdings Corp.-supported projects in automation, artificial intelligence, scientific research, data science, and information technology were recognized by customer and industry organizations for outstanding program performance and significant technology achievements. We are proud of these accomplishments, as they illustrate the thought leadership, ingenuity, and passion of our employees in advancing the missions of our customers. While revenue was down year over year, largely due to the previously discussed program transitions to small business set-aside contracts—these include the VA CMOP and Head Start—we remain committed to maximizing shareholder value. Through strong project management, delivered margins, and implemented cost-scaling initiatives, we delivered adjusted EBITDA margin of 9%. As Kathryn M. Johnbull will discuss in more detail shortly, we continue to delever our commitment to the balance sheet. Total debt was reduced to $132.7 million, aligned with our debt reduction plans for fiscal 2026. In late-breaking news, we were awarded a two-year sole-source extension of one of our contracts to provide world-class clinical research support services to the National Institutes of Health. We truly appreciate the opportunity to continue this tremendous support in this critical public health mission that has been a primary focus area for DLH Holdings Corp. for decades. Overall, we remain well positioned to succeed over the coming years and are excited to vie for the high-value organic growth opportunities that our company was assembled to compete for. Our differentiated suite of data science and AI/ML technology applications, our outstanding capabilities, and our workforce alignment exceptionally well position us for work within our three strategic pillars: science, research and development; digital transformation and cybersecurity; and systems engineering and integration. As government acquisition strategies evolve, we remain prepared and proactive, leveraging speed, innovation, and agility to compete on multiple fronts in an accelerated acquisition landscape. With that, I would now like to turn the call over to our Chief Financial Officer, Kathryn M. Johnbull. Kathryn M. Johnbull? Kathryn M. Johnbull: Thank you, Zachary C. Parker, and good morning, everyone. Thanks for joining as we report on our second quarter results for fiscal 2026. Turning to Slide 6, I would like to first provide a high-level overview of some key financial metrics for the three months ended 03/31/2026. We reported revenue of $59.3 million in the second quarter, versus $89.2 million in the prior-year period, reflecting contributions from expansion on existing contracts offset by the impact of conversion of certain programs to small business set-aside contracts, as discussed in the past, and certain government efficiency initiatives. In total, the revenue contraction was mostly due to small business set-aside initiatives, primarily from CMOP and Head Start, with approximately a $24 million increase in the quarter-over-quarter results [inaudible]. The remaining change was due to year-over-year contract completions and government efficiency initiatives. We reported adjusted EBITDA of $5.3 million for the quarter, compared to $9.4 million in the prior-year period, with the decrease primarily driven by the change in revenue volumes. Adjusted EBITDA margin was 9% for the quarter, adjusting for the timing and incremental cost impact of our cost-scaling initiatives implemented in the second quarter. From a free cash flow standpoint, we generated approximately $3.8 million during the quarter. In comparison to the prior-year period, the prior year reflects the results of significant working capital build stemming from the transition of a CMOP location that restricted cash collections early in fiscal 2025. Now turning to Slide 7, I will wrap up with a summary of our debt reduction efforts, which remain a key focus area for DLH Holdings Corp. Debt reduced during the quarter to $132.7 million, a reduction from $136.6 million at the end of the previous quarter. This marks the resumption of our deleveraging trend after the typical seasonal uptick we experienced in the first quarter. We expect to convert approximately 50% to 55% of EBITDA generated during fiscal 2026 to reduce debt by year end. We remain well ahead of our mandatory repayment schedule and in full compliance with all financial covenants. With that, I would now like to turn the call over to our operator to open up for questions. Operator: We will now begin the question and answer session. If you are using a speakerphone, our first question comes from Joseph Gomes with NOBLE Capital. Joseph Gomes: Good morning. I just want to start out on the VA CMOP. Do we have anything left there? How much longer do you think that is going to run through? I know we were hoping it would end in this fiscal third quarter of this year, but maybe a little update on where we stand on that. Zachary C. Parker: Yes, I think we are still on plan with regard to that reduction. You know, the VA and our team have been working collaboratively towards standing down the final couple operations. Kathryn M. Johnbull, do you have any greater specificity for that? Kathryn M. Johnbull: Sure. Yes, our expectation is that we will wrap up the transition of those contracts just before Memorial Day. Joseph Gomes: Okay. Get that behind us. Kathryn M. Johnbull: Yes, sir. Zachary C. Parker: Yes, it obviously served us well. We remain committed, Joseph Gomes, to supporting our nation's veterans. We have still got irons in the fire for transitioning to different types of work for the VA. But once the VA changed that acquisition process, not only to small business set-aside, but changed it from being a solutions- and tech-derived execution to just butts-in-seats, we withdrew all of our joint venture bids and approached it accordingly. So it is bittersweet. As you know, we had a couple of decades of support in that arena. But we wish the small business community well. Joseph Gomes: Right, exactly. Agreed. And then, Zachary C. Parker, you talked about how there have been multiple delayed procurements. There are some going through the pipeline now, just now coming up for bids. You are hoping to hear something here in the next couple of months. I guess the concern is, obviously, every September 30th we go into a threatened government shutdown, a continuing resolution, all that, which then seems to always delay contracts. What is your comfort level of actually seeing some of these contracts be awarded in a timely manner versus getting caught back up in the whole continuing resolution issue? And then if you might be able to provide us a little more color on the nice late-breaking news of the new award that you received. Zachary C. Parker: You bet, Joseph Gomes. First of all, I will cover what we see in the market, and I will ask Kathryn M. Johnbull to address the extensions. We are always very mindful of what the headwinds could be, as we have come to know continuing resolutions and shutdown risk quite well over the recent years and certainly with this administration. We are also encouraged by some multiyear funding initiatives that have gone forward. They have already been approved, and we anticipate continuing to move forward in selected agencies. We particularly still find good strength and support on both sides for defense and intelligence budgets as well as critical health care programs, so we are pretty comfortable in that arena. More importantly, in the last quarter we have seen multiple RFPs that we have been signaling were coming, and fortunately, these have gotten under the wire before the usual September crisis. I think that was also attributed to some of the budget visibility once they got the budget passed. Customers have had pent-up demands for moving along on some of these procurements. We think that the fact that we have had three or four of the more material ones come through already, we have submitted bids, and we are hopeful that the decision process will also move forward in the coming quarter. Often for very material bids, you may see a protest or something of that nature that might delay the actual award and start of work. But we believe that we have some where we are very well positioned and that we should have decisions by this fiscal year. With regard to the contract extensions, Kathryn M. Johnbull, over to you. Kathryn M. Johnbull: Sure. Yes, as we mentioned, it is the continuation of a key contract we have been working in support of the NIH for a number of decades. It would have gone through a normal recompete cycle at the completion of its 10-year period of performance here shortly, but the NIH has decided to, or made the case to, extend it under a sole-source bridge for two years. So anytime an important part of your portfolio gets an extension and gives you additional revenue visibility, that is always very welcomed. And that is work that really reflects, as Zachary C. Parker mentioned earlier, just as we value a strong presence and continue to have interest in veterans’ health, public health is a key dimension of our portfolio and market-facing strategy for addressing every aspect of federal health care delivery. This part of our portfolio of contracts in that public health sector is very critical to us. So we are pleased and honored to be able to continue to provide that support and to get the additional revenue visibility in the short run. Joseph Gomes: Okay. Thank you for that color. And then on the cost scaling or the right-sizing, are we where we need to be for the current or the expected near-term revenue production, or do you think there might be more cost scaling that needs to occur here? Kathryn M. Johnbull: I think we have done the significant actions. We always have some strategies we are working through, and those would continue to be, as leases come due for example, continuing to evaluate our footprint in our real estate—those kinds of activities. So we continue to evaluate and assure that our cost structure remains competitive and allows our rates to stay competitive for bidding on new work. But we think that we have accomplished the material reductions that are necessary to right-size the business. Joseph Gomes: Okay, great. Thanks. I will get back in queue. Zachary C. Parker: You bet. Thank you, Joseph Gomes. Thanks, Joseph Gomes. Hearing none, do we want to reopen it for Joseph Gomes? Operator: He is not back in the queue. Joseph Gomes, if you need to requeue. Zachary C. Parker: Just give Joseph Gomes a second as he gets himself back in the queue. Operator: We will move forward. Alrighty. So with that— Zachary C. Parker: I would like to thank everyone for your participation throughout this call. Joseph Gomes, anything else? Joseph Gomes: Yes. Maybe a little more. Zachary C. Parker, you talked about some of the potential reprioritizing of federal health spending. Given what we have seen here in the past couple of years, it has been a challenging time for DLH Holdings Corp. with losing the CMOP business and Head Start, and to potentially see reprioritizing federal health spending just throws up additional challenges for the company. Maybe give us a little more of your thoughts and color on how you are going to go about addressing this. Zachary C. Parker: You bet. Great question again, Joseph Gomes. I think the best way we characterize it is, as you well know, we communicated and tried to be very transparent regarding what was largely fueled by the Biden administration's commitment to move not only the VA but a number of other agencies’ contracts to small business. We anticipated that erosion—it started in 2024 and certainly matured in 2025—and as you indicated earlier, we expect to have the final pieces of the headline set-aside for us, which was VA CMOP, running out this year. But we are also well positioned, and we are very optimistic that the RFPs and solicitations that had been earmarked for 2024, aligned with our establishment of our differentiators in data science and data analytics, were going to be fueled by RFPs in 2025. Unfortunately, as we indicated earlier, the overwhelming majority of those basically stalled. So we had a relatively flat bid cycle for the major new business deals that are just now coming around. A few of those have evolved from the government deciding to move toward some grants. The DOJ certainly impacted a lot of our clients where they did not have the acquisition officials to issue those RFPs. They have begun to stabilize that over the course of the last six months, and again we are starting to see both in the defense and intel side and in the public health arena those solicitations come back. So we have got a few we are anticipating in the next few months. We have a pretty healthy revenue potential for some that were recently submitted, so we are optimistic that the trend will continue. We are not expecting to have a series of major DOJ program budget cuts followed by historical shutdowns in the coming months. And the global challenges, including the war in the Gulf, are going to keep a strong commitment of funding and rapid development initiatives for the defense and defense health arena as well. So right now we do see good optimism that the flatness in terms of opportunities for us to compete in 2025 is starting to break, and that is good for us. What we thought was going to be a pretty quick V-curve turned out to become a little more of a bathtub, but we are starting to see the opportunities hit now and certainly feel that we will be able to compete favorably for our share. Joseph Gomes: Thanks for that color, Zachary C. Parker. Much appreciated, and I am looking forward to starting to see some wins be put up on the board here after, as you said, a challenging period—nothing to really do with you guys, it is the government itself—but it would be nice to start to see the engine start back up again and be moving strongly going forward. Zachary C. Parker: We absolutely cannot wait. Yes, 100%. Kathryn M. Johnbull: Yes. Operator: This concludes our question and answer session. I would like to turn the conference back over to Zachary C. Parker for any closing remarks. Zachary C. Parker: Well, again, I want to thank you all for your interest in DLH Holdings Corp. We remain committed to driving shareholder value. We are looking forward to chatting with you in the coming quarters, and we ask everyone to have a blessed day. Joseph Gomes: And we will talk again soon. Zachary C. Parker: Bye for now. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Before you buy stock in Dlh, consider this: The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Dlh wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years. Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $476,034!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $1,274,109!* Now, it’s worth noting Stock Advisor’s total average return is 975% — a market-crushing outperformance compared to 206% for the S&P 500. Don't miss the latest top 10 list, available with Stock Advisor, and join an investing community built by individual investors for individual investors. See the 10 stocks » *Stock Advisor returns as of May 7, 2026. This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. Dlh (DLHC) Q2 2026 Earnings Call Transcript was originally published by The Motley Fool

Management said the recently enacted federal budget restores funding clarity and is driving improving demand for modernization work across defense/intelligence (C6ISR) and federal health (interoperability, Zero Trust, cloud, AI). Revenue fell to $68.9 million (from $90.8M) largely due to about $18 million of program conversions to small‑business set‑asides (notably CMOP and Head Start); adjusted EBITDA was $6.5 million with margin improving sequentially to 9.5% as cost‑reduction efforts continue. DLH expects a CMOP wind‑down in Q3; the company used $4.8 million of free cash flow this quarter, debt rose to $136.6 million but DLH remains covenant‑compliant and plans to convert roughly 50–55% of FY26 EBITDA into debt reduction. Interested in DLH Holdings Corp.? Here are five stocks we like better. DLH (NASDAQ:DLHC) executives said fiscal 2026 first-quarter results were shaped by federal funding disruption early in the period, but emphasized that a recently enacted budget has improved visibility for government clients and could support organic growth initiatives as the year progresses. President and CEO Zach Parker said the quarter followed “the longest government shutdown in our nation’s history,” as well as a short-term funding gap at the end of January. He said the enacted budget provides “increased funding capacity and improved visibility” for clients for the remainder of the fiscal year, adding that several key federal health agencies received funding increases versus fiscal 2025 levels, partially reversing prior reductions that had affected DLH’s current and addressable markets. → 3 ETFs Designed to Survive the Next Market Crash Parker said DLH is seeing improving demand across its core markets, highlighting priorities among defense and intelligence customers such as rapid delivery, cost efficiency, digital modernization, and advanced technology integration, including C6ISR capabilities. In federal health, he pointed to system interoperability, cybersecurity (including Zero Trust), cloud migration, and AI adoption as areas that position the company for modernization-driven awards. While revenue declined year-over-year, Parker attributed much of the decrease to previously discussed program transitions to small-business set-aside contracts, including VA CMOP and Head Start. He also noted sequential improvement in adjusted EBITDA margins from the fourth quarter and reiterated a focus on indirect cost reductions, capital discipline, and deleveraging. → 3 Consumer Staples Stocks Breaking Out This Month Chief Financial Officer Kathryn JohnBull reported revenue of $68.9 million for the three months ended Dec. 31, 2025, down from $90.8 million in the prior-year period. She said the contraction reflected contributions from expansion on existing contracts that were more than offset by conversions of certain programs to small business set-aside contracts and “certain government efficiency initiatives.” JohnBull said the revenue decline was “mostly due to small business set-aside conversions,” primarily CMOP and Head Start, which accounted for an approximate $18 million decrease versus fiscal 2025. In response to a question on the remaining year-over-year decline beyond that $18 million, management cited “nicks and nibbles” from government efficiency initiatives, unbundling activity that moved work to other vehicles, and the completion of a small international USAID project in January 2025. → 2 Subscription Economy Winners That Still Dominate Their Niches Adjusted EBITDA was $6.5 million, compared with $9.9 million in the prior-year period, driven primarily by lower revenue levels and partially offset by indirect cost management. JohnBull said adjusted EBITDA margin improved sequentially to 9.5% and that cost-scaling initiatives would continue into the second quarter, including additional reductions in indirect spending in anticipation of further CMOP site transitions. DLH used approximately $4.8 million of free cash flow during the quarter, which JohnBull said is typical for the first quarter due to seasonal working capital needs. She said the cash usage was an improvement from last year’s $12.1 million use of free cash flow, which had been affected by delayed collection of an unusually high level of receivables. Management said the primary driver of first-quarter cash usage was timing of labor and payroll tax payments around year-end public holidays. Debt increased to $136.6 million during the quarter, which management attributed to first-quarter working capital requirements and the impact of the government shutdown. JohnBull said the company remains ahead of its mandatory term repayment schedule and in compliance with all financial covenants. Looking ahead, she said DLH expects to convert approximately 50% to 55% of EBITDA generated during fiscal 2026 into debt reduction by year-end. On the VA CMOP program, management said it is in a “wind down phase across the board.” JohnBull said the company expects a “complete wrap-up of CMOP in Q3 of this current fiscal year,” noting that DLH had anticipated CMOP’s completion as near-term as early as the first quarter of fiscal 2025. Management also discussed actions to align costs with volume changes. Parker described a phased plan for indirect cost reductions and said the company is applying tools such as AI and machine learning to drive efficiencies in enterprise operations as well as customer delivery. JohnBull said both the cost savings and the costs to achieve the reductions were reflected in first-quarter results and included in the bridge between standard EBITDA and adjusted EBITDA; she added that timing within the quarter affected how quickly the reductions were realized. During the question-and-answer session, management discussed the contracting environment and pipeline dynamics. Parker said the company had experienced a “little bit of each” in terms of impacts, including limited bid opportunities and some opportunities shifting to contract vehicles where DLH could not compete as a prime. He also said customers, facing budget uncertainty, had often relied on bridge work or extensions for incumbents instead of running competitions. Management specifically addressed the cancellation of CIO-SP4, which Parker said had been viewed as a viable vehicle for DLH with anticipated opportunities. JohnBull said the cancellation provided clarity after a prolonged process, even as some opportunities moved to vehicles where the company was not positioned to prime. She added that management believes the “overwhelming majority” of the relevant opportunities appear to be headed to vehicles where DLH can compete as a prime, including GSA Schedules and OASIS, which management referenced as potential alternatives. Parker also said DLH is seeing increased use of “commercial best practice” approaches, including other transaction authorities (OTAs), which can begin with smaller pilot awards and then scale into larger execution phases. He said this shift could change the revenue profile and pipeline appearance—potentially featuring more rapid, smaller initial programs rather than traditional five-year contract structures—while still supporting organic growth trajectories. In response to a question about civilian clients, Parker clarified that DLH’s references to “civilian agencies” primarily mean federal civilian agencies such as NIH, CDC, ASPR, DHS, and others, as distinct from defense-aligned customers. He said DLH has a small amount of commercial work, including through partnerships with universities and grant-funded opportunities, largely within its public health and scientific research organization. Parker and JohnBull said commercial expansion is not expected to become a major portion of the business, and that a meaningful move into commercial markets would likely be led by an acquisition. However, Parker said DLH is evaluating whether it can “pull a little more of that business in-house,” including targeted opportunities in biotech and biopharma, and noted the addition of a new resource with experience with the FDA and the biotech community. Management also said there are no government-contract restrictions that prohibit DLH from pursuing commercial work, though JohnBull noted it requires a different sales model and investment trade-offs compared with federal contracting. DLH Holdings Corp. (NASDAQ: DLHC) is a provider of mission-driven professional services primarily to federal government agencies and select commercial clients. The company designs and delivers tailored solutions across a range of critical mission areas, including program and project management, consulting, technical assistance, and administrative support. Through its Healthcare Solutions offerings, DLH also specializes in supporting clinical and allied health staffing needs for federal health agencies and health systems. Operating under its Federal Solutions segment, DLH partners with agencies such as the Department of Veterans Affairs, Department of Defense, Department of Homeland Security, and the Department of Health and Human Services. The article "DLH Q1 Earnings Call Highlights" was originally published by MarketBeat.

This article first appeared on GuruFocus. Revenue: $68.9 million for Q1 FY2026, down from $90.8 million in the prior year period. Adjusted EBITDA: $6.5 million for the quarter, compared to $9.9 million in the prior year period. Adjusted EBITDA Margin: Improved sequentially to 9.5% for the quarter. Free Cash Flow: Used approximately $4.8 million during the quarter, an improvement from $12.1 million used in the prior year period. Debt: Increased to $136.6 million due to first-quarter working capital requirements. Warning! GuruFocus has detected 10 Warning Signs with DLHC. Is DLHC fairly valued? Test your thesis with our free DCF calculator. Release Date: February 10, 2026 For the complete transcript of the earnings call, please refer to the full earnings call transcript. The recently enacted budget provides increased funding capacity and improved visibility for DLH Holdings Corp (NASDAQ:DLHC) clients, which is expected to positively impact the company. Key federal health agencies received funding increases, reversing previous funding reductions, which supports DLH Holdings Corp (NASDAQ:DLHC)'s organic growth initiatives. DLH Holdings Corp (NASDAQ:DLHC) is well-positioned for modernization-driven awards due to its expertise in areas like digital modernization, cybersecurity, and AI adoption. The company delivered sequential improvement in adjusted EBITDA margins from the fourth quarter, indicating effective cost management. DLH Holdings Corp (NASDAQ:DLHC) remains committed to deleveraging its balance sheet and is on track with its debt reduction plans for fiscal 2026. Revenue was down year over year, primarily due to program transitions to small business set-aside contracts, resulting in an approximate $18 million decrease. The company experienced a contraction in revenue due to small business set-aside conversions and government efficiency initiatives. DLH Holdings Corp (NASDAQ:DLHC) faced delays in contract solicitations and awards, impacting its ability to secure new business. The cancellation of the CIOSP 4 contract vehicle resulted in a loss of anticipated bid opportunities for DLH Holdings Corp (NASDAQ:DLHC). The company had to implement cost reductions due to decreased revenue, which included costs associated with achieving these reductions. Q: Katherine, you mentioned about $18 million of the revenue decline was from CMOP and Head Start. What accounts for the remaining $4 million? A: Kathryn JohnBull, CFO, explained that the remaining $4 million was due to smaller impacts from government efficiency initiatives and the completion of an international project with USAID. These were not strategic and unrelated to small business set-asides. Q: Can you provide an update on the CMOP contracts and their transitions? A: Zachary Parker, CEO, stated that DLH is in the wind-down phase for CMOP work, with the VA improving its transition process. Kathryn JohnBull added that they expect a complete wrap-up of CMOP by Q3 of the current fiscal year. Q: Regarding cost reductions, were there any costs associated with these, and are further reductions needed for CMOP transitions? A: Zachary Parker noted that DLH has a phased plan for indirect cost reductions to maintain competitiveness. Kathryn JohnBull confirmed that the costs and impacts of reductions are reflected in Q1 results, and they will scale costs appropriately as CMOP transitions. Q: How is DLH faring in terms of pipeline and bidding activity, especially with IDIQ contracts? A: Zachary Parker mentioned that DLH has faced delays due to budget uncertainties, affecting bid opportunities. However, with improved budget visibility, they expect more stability and opportunities. Kathryn JohnBull added that clarity on contract vehicles like CIOSP4, despite its cancellation, allows DLH to pivot and compete effectively. Q: Who are DLH's civilian clients, and is there a focus on commercial opportunities? A: Zachary Parker clarified that civilian clients include federal agencies like NIH and CDC. While DLH has some commercial work, primarily through partnerships, significant expansion into commercial markets would likely require an acquisition. Kathryn JohnBull emphasized that commercial opportunities are pursued opportunistically. For the complete transcript of the earnings call, please refer to the full earnings call transcript.