10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒      QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the quarterly period ended December 31, 2024

☐         TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 

For the transition period from                        to

Commission File No. 0-18492

DLH HOLDINGS CORP.

(Exact name of registrant as specified in its charter)

New Jersey			22-1899798
(State or other jurisdiction of  incorporation or organization)			(I.R.S. Employer Identification No.)
3565 Piedmont Road,	Building 3,	Suite 700	30305
Atlanta,	Georgia		(Zip code)
(Address of principal executive offices)

(770) 554-3545

(Registrant’s telephone number, including area code)

Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock	DLHC	Nasdaq	Capital Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes ☒     No o

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes ☒   No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☒
Non-accelerated filer	☐	Smaller Reporting Company	☒
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes ☐  No ý

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date: 14,386,468 shares of Common Stock, par value $0.001 per share, were outstanding as of February 3, 2025.

DLH HOLDINGS CORP.

FORM 10-Q

TABLE OF CONTENTS

Page No.

PART I FINANCIAL INFORMATION	3
ITEM I: FINANCIAL STATEMENTS (UNAUDITED)	3
CONSOLIDATED STATEMENTS OF OPERATIONS	3
CONSOLIDATED BALANCE SHEETS	4
CONSOLIDATED STATEMENTS OF CASH FLOWS	5
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY	6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS	7
ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	22
ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	29
ITEM 4: CONTROLS AND PROCEDURES	30
PART II OTHER INFORMATION	30
ITEM 1: LEGAL PROCEEDINGS	30
ITEM 1A: RISK FACTORS	30
ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	31
ITEM 3: DEFAULTS UPON SENIOR SECURITIES	31
ITEM 4: MINE SAFETY DISCLOSURES	31
ITEM 5: OTHER INFORMATION	31
ITEM 6: EXHIBITS	32
SIGNATURE	33

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PART I FINANCIAL INFORMATION

ITEM I: FINANCIAL STATEMENTS (UNAUDITED)

DLH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF OPERATIONS

(unaudited, in thousands, except per share amounts)

	Three Months Ended
	December 31,
	2024		2023
Revenue	$	90,782	$	97,850
Cost of operations:
Contract costs	72,382		79,081
General and administrative costs	8,456		7,697
Depreciation and amortization	4,307		4,253
Total operating costs	85,145		91,031
Income from operations	5,637		6,819
Interest expenses	4,133		4,658
Income before provision for income tax	1,504		2,161
Provision for income tax expense	389		10
Net income	$	1,115	$	2,151
Net income per share - basic	$	0.08	$	0.15
Net income per share - diluted	$	0.08	$	0.15
Weighted average common stock outstanding
Basic	14,386		14,032
Diluted	14,563		14,796

The accompanying notes are an integral part of these consolidated financial statements.

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DLH HOLDINGS CORP.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value of shares) 

	December 31, 2024		September 30, 2024
	(unaudited)
ASSETS
Current assets:
Cash	$	451	$	342
Accounts receivable	64,270		49,849
Other current assets	2,853		2,766
Total current assets	67,574		52,957
Goodwill	138,161		138,161
Intangible assets, net	104,207		108,321
Operating lease right-of-use assets	7,255		6,681
Deferred taxes, net	5,465		6,245
Equipment and improvements, net	2,189		1,830
Other long-term assets	158		186
Total assets	$	325,009	$	314,381
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	18,723	$	25,290
Debt obligations - current, net of deferred financing costs	27,595		12,058
Accrued payroll	15,123		12,848
Operating lease liabilities - current	2,753		2,652
Other current liabilities	494		394
Total current liabilities	64,688		53,242
Long-term liabilities:
Debt obligations - long-term, net of deferred financing costs	134,623		137,316
Operating lease liabilities - long-term	13,354		12,789
Other long-term liabilities	904		902
Total long-term liabilities	148,881		151,007
Total liabilities	213,569		204,249
Shareholders' equity:
Common stock, $0.001 par value; 40,000 shares authorized; 14,386 and 14,386 shares issued and outstanding at December 31, 2024 and September 30, 2024, respectively	14		14
Additional paid-in capital	100,463		100,270
Retained earnings	10,963		9,848
Total shareholders’ equity	111,440		110,132
Total liabilities and shareholders' equity	$	325,009	$	314,381

 The accompanying notes are an integral part of these consolidated financial statements.

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DLH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands) 

	Three Months Ended
	December 31,
	2024		2023
Operating activities
Net income	$	1,115	$	2,151
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	4,307		4,253
Amortization of deferred financing costs charged to interest expense	457		642
Stock-based compensation expense	193		620
Deferred taxes, net	780		(6)
Changes in operating assets and liabilities:
Accounts receivable	(14,421)		3,542
Other assets	(661)		510
Accounts payable and accrued liabilities	(6,567)		(7,397)
Accrued payroll	2,275		1,909
Other liabilities	984		(1,153)
Net cash (used in) provided by operating activities	(11,538)		5,071
Investing activities
Purchase of equipment and improvements	(552)		(174)
Net cash used in investing activities	(552)		(174)
Financing activities
Proceeds from revolving line of credit	59,910		69,831
Repayment of revolving line of credit	(47,509)		(64,026)
Repayments of debt obligations	—		(10,378)
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	—		(669)
Net cash provided by (used in) financing activities	12,199		(4,981)
Net change in cash	109		(84)
Cash - beginning of period	342		215
Cash - end of period	$	451	$	131
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	3,594	$	3,972
Cash paid during the period for income taxes	$	32	$	—
Supplemental disclosure of non-cash activity
Common stock surrendered for the exercise of stock options	$	—	$	244
Lease liability recognized to acquire a right of use asset	$	1,377	$	—

The accompanying notes are an integral part of these consolidated financial statements.

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DLH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited, in thousands, except for per share data) 

	Common Stock			Additional Paid-In Capital		Retained Earnings		Total Shareholders' Equity
	Shares	Amount
Balance at September 30, 2024	14,386	$	14	$	100,270	$	9,848	$	110,132
Expense related to director restricted stock units	—	—		180		—		180
Expense related to employee stock-based compensation	—	—		13		—		13
Net income	—	—		—		1,115		1,115
Balance at December 31, 2024	14,386	$	14	$	100,463	$	10,963	$	111,440

	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	—	—		80		—		80
Expense related to employee stock-based compensation	—	—		540		—		540
Exercise of stock options	220	—		261		—		261
Common stock surrendered for the exercise of stock options	(65)	—		(669)		—		(669)
Net income	—	—		—		2,151		2,151
Balance at December 31, 2023	14,105	$	14	$	100,186	$	4,602	$	104,802

The accompanying notes are an integral part of these consolidated financial statements.

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DLH HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

December 31, 2024

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 United States generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by GAAP for complete financial statements.

Operating results for the three months ended December 31, 2024 are not necessarily indicative of the results that may be expected for the year ending September 30, 2025 or any future period. Amounts as of December 31, 2024 and for the three months ended December 31, 2024 are unaudited. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2024 filed with the Securities and Exchange Commission on December 4, 2024.

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, 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.

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.

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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.

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.

8

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 December 31, 2024, operating leases for facilities and equipment have remaining lease terms of less than 1 year to 6.5 years

Goodwill

The Company performs impairment evaluation at least annually and between annual tests whenever there is an indication of impairment. We performed a qualitative assessment of factors to determine whether it was necessary to perform the goodwill impairment test. Based on the results of the work performed, the Company has concluded that no impairment loss was warranted at December 31, 2024, as no change in business conditions occurred which would have a material adverse effect on the valuation of goodwill. 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. Similarly, there were no impairments during the prior year ended September 30, 2024.

Income Tax

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 asset 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 December 31, 2024 or September 30, 2024. We report interest and penalties as a component of provision for income taxes. During the three months ended December 31, 2024 and 2023, we recognized no interest and no penalties related to income taxes.

Stock-Based Compensation

The Company uses the fair value-based method for stock-based compensation. 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 awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued common shares. All awards to employees and non-employees are recorded at fair value on the date of the grant and expensed over the period of vesting. The Company uses a Monte Carlo method to estimate the fair value of each stock option at the date of grant. Any consideration paid by the option holders to purchase shares is credited to common stock.

Stock-based compensation expense for the portion of equity awards for which the requisite service has not been rendered is recognized as the requisite service is rendered. The stock-based compensation expense for that portion of awards has been based on the grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. For options that vest based on the Company’s common stock achieving and maintaining defined market prices, the Company values the awards with a Monte Carlo method that utilizes various probability factors and other criterion in establishing fair value of the grant. The related compensation expense is recognized over the service period.

9

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 December 31, 2024 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 December 31, 2024 and September 30, 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 December 31, 2024 and September 30, 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 December 31, 2024 and September 30, 2024, there was no indication of any global or economic impacts to our industry.

3. New Accounting Pronouncements

In November 2023, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" which provides guidance intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, and each reported measure of segment profit or loss. The ASU requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing segment disclosures in Topic 280. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2023 and interim

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periods beginning after December 15, 2024. We are currently evaluating the impacts of the single reportable segment disclosures.

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 December 15, 2024. We are currently evaluating the impacts of the improvements to income tax disclosure.

In March 2024, the Securities and Exchange Commission ("SEC") has released a final rule that requires registrants to provide comprehensive climate-related disclosures in their annual reports and registration statements, including those for IPOs, beginning with annual reports for the year ending December 31, 2027, for smaller reporting companies ("SRC"). Registrants must disclose climate-related financial metrics and impacts on their financial estimates and assumptions in a footnote to the audited financial statements. The disclosures will also need to be addressed as part of management’s internal control over financial reporting ("ICFR") and will be subject to the financial statement and ICFR audit (if applicable) of an independent registered public accounting firm. We are currently evaluating the impacts of the improvements to our disclosure.

On November 4, 2024, the FASB issued ASU 2024-03 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 on the Company's consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Contract assets	$	31,486	$	23,945

Contract assets are included as part of the accounts receivable on the consolidated balances sheets. The change from prior period is primarily due to invoice timing. Contract liabilities had no balance as of December 31, 2024 and September 30, 2024.

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 present our revenue disaggregated by these categories:

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Revenue by customer was as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Department of Health and Human Services	$	41,948	$	44,297
Department of Veterans Affairs	34,099		34,680
Department of Defense	13,355		16,871
Other	1,380		2,002
Total	$	90,782	$	97,850

Revenue by contract type was as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Time and Materials	$	49,400	$	54,789
Cost Reimbursable	18,143		19,751
Firm Fixed Price	23,239		23,310
Total	$	90,782	$	97,850

Revenue by whether the Company acts as a prime contractor or a subcontractor was as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Prime Contractor	$	84,439	$	87,633
Subcontractor	6,343		10,217
Total	$	90,782	$	97,850

5. Leases

The following table summarizes lease balances presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Operating lease right-of-use assets	$	7,255	$	6,681
Operating lease liabilities - current	$	2,753	$	2,652
Operating lease liabilities - long-term	13,354		12,789
Total operating lease liabilities	$	16,107	$	15,441

As of December 31, 2024, operating leases for facilities and equipment have remaining lease terms of less than 1 year to 6.3 years. The non-cash increase in both lease liabilities and right-of-use assets during the current period is primarily attributable to an extension of an existing operating lease. The non-cash increase to lease liabilities from the lease extension was $1.4 million.

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Total lease costs for our leases were as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Operating	$	846	$	873
Short-term	159		50
Variable	33		37
Sublease income (a)	(49)		(67)
Total lease costs	$	989	$	893

(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 December 31, 2024 were as follows (in thousands):

Fiscal year ending:
2025 (remaining)	$	2,814
2026	3,641
2027	3,052
2028	2,914
2029	3,013
Thereafter	3,880
Total future lease payments	19,314
Less: imputed interest	(3,207)
Present value of future minimum lease payments	16,107
Less: current portion of operating lease liabilities	(2,753)
Long-term operating lease liabilities	$	13,354

At December 31, 2024, the weighted-average remaining lease term and weighted-average discount rate were 5.6 years and 6.6%, 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 were as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities	$	968	$	1,237
Lease liabilities arising from obtaining right-of-use assets	1,377		—
Other lease information	$	2,345	$	1,237

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6. Supporting Financial Information

Accounts receivable

The following table summarizes accounts receivable presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Billed receivables	$	32,784	$	25,904
Contract assets	31,486		23,945
Accounts receivable	$	64,270	$	49,849

Other current assets

The following table summarizes other current assets presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Prepaid licenses and other expenses	$	1,580	$	1,315
Prepaid insurance and benefits	336		545
Other receivables	937		906
Other current assets	$	2,853	$	2,766

Goodwill

There were no activities in goodwill for the three months ended December 31, 2024. The balance of goodwill was approximately $138.2 million as of December 31, 2024 and September 30, 2024.

Intangible assets

The following table summarizes intangible assets, net presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Intangible assets
Customer contracts and related customer relationships	$	113,622	$	113,622
Covenants-not-to-compete	637		637
Trade name	13,034		13,034
Backlog	37,249		37,249
Total intangible assets	164,542		164,542
Less: accumulated amortization
Customer contracts and related customer relationships	(44,139)		(41,297)
Covenants-not-to-compete	(458)		(442)
Trade name	(3,814)		(3,488)
Backlog	(11,924)		(10,994)
Total accumulated amortization	(60,335)		(56,221)
Intangible assets, net	$	104,207	$	108,321

Amortization expense was $4.1 million and $4.1 million for the three months ended December 31, 2024 and 2023, respectively.

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As of December 31, 2024, the estimated amortization expense per fiscal year was as follows (in thousands):

Fiscal year ending:
2025 (remaining)	$	12,340
2026	15,722
2027	14,694
2028	14,694
2029	13,734
Thereafter	33,023
Total amortization expense	$	104,207

At December 31, 2024, the weighted-average remaining amortization period in total was 7.1 years. The weighted-average amortization period for customer contracts and related customer relationships, backlog, trade names and Covenants-not-to-compete was 7.1 years, 7.1 years, 7.5 years, and 5.3 years, respectively.

Equipment and improvements, net

The following table summarizes equipment and improvements, net presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Furniture and equipment	$	1,846	$	1,832
Computer equipment and software	7,573		7,273
Leasehold improvements	1,852		1,614
Total equipment and improvements	11,271		10,719
Less: accumulated depreciation	(9,082)		(8,889)
Equipment and improvements, net	$	2,189	$	1,830

Depreciation expense was $0.2 million and $0.1 million for the three months ended December 31, 2024 and 2023, respectively.

Accounts payable and accrued liabilities

The following table summarizes accounts payable and accrued liabilities presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Accounts payable	$	13,291	$	13,421
Accrued benefits	1,679		4,519
Accrued workers' compensation insurance	2,015		1,528
Accrued bonus and incentive compensation	286		3,641
Accrued interest	711		619
Other accrued expenses	741		1,562
Accounts payable and accrued liabilities	$	18,723	$	25,290

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Accrued payroll

The following table summarizes accrued payroll presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Accrued leave	$	7,912	$	8,569
Accrued payroll	5,968		3,070
Accrued payroll taxes	1,195		981
Accrued severance	48		228
Total accrued payroll	$	15,123	$	12,848

Debt obligations

The following table summarizes debt obligations presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Secured term loan	$	142,500	$	142,500
Secured revolving line of credit	24,459		12,058
Less: unamortized deferred financing costs	(4,741)		(5,184)
Net bank debt obligations	162,218		149,374
Less: current portion of debt obligations, net of deferred financing costs (a)	(27,595)		(12,058)
Long-term portion of debt obligations, net of deferred financing costs	$	134,623	$	137,316

As of December 31, 2024, we have satisfied quarterly minimum principal payments on our secured term loan through September 30, 2025.

(a) As of December 31, 2024, the current portion comprises term loan amortization of $4.8 million and the $24.5 million outstanding balance on the secured revolving line of credit, net of $1.6 million of unamortized deferred financing costs.

Interest expense

The following table summarizes interest expense presented on our consolidated statements of operations as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Interest expense (a)	$	3,685	$	4,016
Interest income (b)	(9)		—
Amortization of deferred financing costs (c)	457		642
Interest expense	$	4,133	$	4,658

(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.

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7. Credit Facilities

A summary of our credit facilities as presented on our consolidated balance sheets as follows (in millions):

December 31, 2024				September 30, 2024
Arrangement	Loan Balance		Interest	Arrangement	Loan Balance		Interest
Secured term loan (a) due December 8, 2027	$	142,500	SOFR1 + 4.1%	Secured term loan (a) due December 8, 2027	$	142,500	SOFR1 + 4.1%
Secured revolving line of credit (b) due December 8, 2027	$	24,459	SOFR1 + 4.1%	Secured revolving line of credit (b) due December 8, 2027	$	12,058	SOFR1 + 4.1%

1Secured Overnight Financing Rate ("SOFR") as of December 31, 2024 and September 30, 2024 were 4.6% 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 ("FNB") which has a notional amount of $80.0 million at December 31, 2024, 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 three months ended December 31, 2024, interest expense has been decreased by approximately $0.1 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. On November 6, 2024, the Company completed an amendment to its credit facility. The amendment modified certain financial covenants thresholds for future measurement periods and reduced the amount available under the revolving line of credit, as discussed in further detail below. The amendment was approved by the Company's Board of Directors and Executive Management and the credit facility lenders. The loan agreement also requires us to comply with certain quarterly financial covenants including: (i) a minimum fixed charge coverage ratio ranging from 1.25:1.00 to 1.05:1.00 and (ii) a total leverage ratio not exceeding the ratio of 4.75:1.00 to 4.25:1.00 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 income taxes (benefit) expense, 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 December 31, 2024.

We are required to pay quarterly amortization payments, which commenced in December 2022. The annual amortization amounts are $19.0 million for fiscal years 2025 and 2026, and $23.75 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 $142.5 million as of December 31, 2024. We have satisfied the mandatory principal payments through September 2025.

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 2.5:1; (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 2.5:1 but greater than or equal to 1.5:1; 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 1.5:1. 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.

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(b) As amended, the secured revolving line of credit has a ceiling of up to $50.0 million; as of December 31, 2024, we had unused borrowing capacity of $11.8 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 $24.5 million outstanding balance at December 31, 2024. 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 December 31, 2024, there were 0.8 million shares available for grant.

Stock-based compensation expense shown in the table below, is recorded in general and administrative expenses in our consolidated statements of operations as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
DLH employees (a)	$	13	$	540
Non-employee directors (b)	180		80
Total stock option expense	$	193	$	620

(a) Included in this amount are equity grants of restricted stock units ("RSU") to Executive Officers, which were issued in accordance with the DLH long-term incentive compensation policy in this fiscal year, and stock option grants to employees during prior fiscal years. The RSUs issued and outstanding totaled 708,325 and 367,795 shares at December 31, 2024 and 2023, respectively. During the three months ended December 31, 2024 and 2023, the Company granted 312,906 and 169,544 shares of restricted stock units, respectively. During the three months ended December 31, 2024, 156,453 shares of the RSUs granted have performance-based vesting criteria and the remaining 156,453 shares have service-based vesting criteria. During the three months ended December 31, 2023, 84,773 shares of the RSUs granted have performance-based vesting criteria and the remaining 84,771 shares have service-based vesting criteria.

The RSUs granted during the three months ended December 31, 2024 and 2023, were valued as follows using the Monte Carlo Method, and will be amortized over the 3-year measurement period.

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				Volatility
				50%
Grant Date	Performance Vesting Base	Performance Vesting Criteria	(Years)	Fair Value
December 20, 2024	Revenue	Revenue increase at the end of the performance period as compared to the year ended September 30, 2027	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 performance 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

(b) Equity grants of RSUs were made in accordance with DLH compensation policy for non-employee directors and a total of 78,556 and 61,525 restricted stock units were issued and outstanding at December 31, 2024 and 2023, respectively. These grants have service-based vesting criteria and vest at the end of this fiscal year.

Unrecognized stock-based compensation expense

Unrecognized stock-based compensation expense is presented in the table below (in thousands):

	December 31,
	2024		2023
Unrecognized expense for DLH employees (a)	$	5,302	$	7,983
Unrecognized expense for non-employee directors	539		539
Total unrecognized expense	$	5,841	$	8,522

(a) On a weighted average basis, the unrecognized expense as of December 31, 2024 is expected to be recognized within the next 2.57 years.

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Stock option activity for the three months ended December 31, 2024

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:

				(in years)
				Weighted
		Weighted		Average	(in thousands)
	(in thousands)	Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Term	Value
Options outstanding, September 30, 2024	1,237	$	9.28	6.1	$	1,313
Granted	—	—		—	—
Exercised	—	—		—	—
Cancelled	(50)	16.01		—	—
Options outstanding, December 31, 2024	1,187	$	9.31	5.80	$	652
Vested and exercisable, December 31, 2024	1,127	$	9.07	5.70	$	652

Stock option shares outstanding, vested and unvested balance as follows (in thousands):

	December 31,	September 30,
	2024	2024
Vested and exercisable	1,127	1,177
Unvested (a)	60	60
Options outstanding	1,187	1,237

(a) Certain awards vest upon satisfaction of certain performance criteria.

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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 (in thousands except for per share amounts):

	Three Months Ended
	December 31,
	2024		2023
Numerator:
Net income	$	1,115	$	2,151
Denominator:
Denominator for basic net income per share - weighted-average outstanding shares	14,386		14,032
Effect of dilutive securities:
Stock options and restricted stock	177		764
Denominator for diluted net income per share - weighted-average outstanding shares	14,563		14,796
Net income per share - basic	$	0.08	$	0.15
Net income per share - diluted	$	0.08	$	0.15

10. Commitments and Contingencies

Contractual obligations as of December 31, 2024 are as follows (in thousands):

			Payments Due Per Fiscal Year
			(Remaining)
	Total		2025		2026		2027		2028		2029		Thereafter
Debt obligations	$	166,959	$	24,459	$	19,000	$	23,750	$	99,750	$	—	$	—
Facility operating leases	19,314		2,814		3,641		3,052		2,914		3,013		3,880
Total contractual obligations	$	186,273	$	27,273	$	22,641	$	26,802	$	102,664	$	3,013	$	3,880

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 ordinary course of 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 three months ended December 31, 2024 and 2023, there were no significant related party transactions that have occurred which require disclosure through the date that these consolidated financial statements were issued.

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12. 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.

ITEM 2: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Forward-Looking and Cautionary Statements

You should read the following discussion in conjunction with the Consolidated Financial Statements and the notes to those statements included elsewhere in this Quarterly Report on Form 10-Q, as well as our Annual Report on Form 10-K for the year ended September 30, 2024, and in other reports we have subsequently filed with the SEC. This Quarterly Report on Form 10-Q contains certain statements that are forward-looking within the meaning of the Private Securities Litigation Reform Act of 1995. Certain statements contained in this Management’s Discussion and Analysis are forward-looking statements that involve risks and uncertainties. Any statements that refer to expectations, projections or other characterizations of future events or circumstances or that are not statements of historical fact (including without limitation statements to the effect that the Company or its management “believes”, “expects”, “anticipates”, “plans”, “intends” and similar expressions) should be considered forward-looking statements that involve risks and uncertainties which could cause actual events or DLH’s actual results to differ materially from those indicated by the forward-looking statements. Forward-looking statements in this report include, among others, statements regarding benefits of acquisitions, estimates of future revenues, operating income, earnings, earnings per share, backlog, and cash flows. These statements reflect our belief and assumptions as to future events that may not prove to be accurate. Our actual results may differ materially from such forward-looking statements made in this report due to a variety of factors, including: the failure to achieve the anticipated benefits of any future acquisition (including anticipated future financial operating performance and results); the diversion of management’s attention from normal daily operations of the business and the challenges of managing larger and more widespread operations; the inability to retain employees and customers; contract awards in connection with re-competes for present business and/or competition for new business; our ability to manage our increased debt obligations; compliance with bank financial and other covenants; changes in client budgetary priorities; government contract procurement (such as bid and award protests, small business set asides, loss of work due to organizational conflicts of interest, etc.) and termination risks; the impact of inflation and higher interest rates; and other risks described in our SEC filings. For a discussion of such risks and uncertainties which could cause actual results to differ from those contained in the forward-looking statements, see “Risk Factors” in the Company’s periodic reports filed with the SEC, including our Annual Report on Form 10-K for the fiscal year ended September 30, 2024, as well as interim quarterly filings thereafter. The forward-looking statements contained herein are not historical facts, but rather are based on current expectations, estimates, assumptions and projections about our industry and business. Such forward-looking statements are made as of the date hereof and may become outdated over time. The Company does not assume any responsibility for updating forward-looking statements.

Overview and Background

DLH Holdings Corp. ("DLH") delivers improved health and readiness solutions for federal government customers through digital transformation, 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 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.

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Solutions and Services

We primarily focus on improved deployment and efficiency of large-scale health and defense initiatives for multiple agencies within the federal government, including the Department of Health and Human Services ("HHS"), the Department of Veterans Affairs ("VA"), Department of Defense ("DoD"), and many of their sub-agencies.

We deliver services primarily through prime contracts awarded by the federal government through competitive bidding processes. We have a diverse mix of contract vehicles with various agencies of the federal government, which supports our overall corporate growth strategy. Our revenue is distributed to time and materials contracts (54.4%), firm fixed price contracts (25.6%), and cost reimbursable contracts (20.0%).

We provide the following services and solutions, which are aligned with the long-term needs of our customers:

•Digital Transformation and Cyber Security;

•Science Research and Development; and

•Systems Engineering and Integration

Digital Transformation and Cyber Security

We provide critical digital transformation and cyber security solutions across the federal civilian and cyber defense communities, leveraging advanced technology to modernize obsolete systems, protect sensitive information, manage large datasets, enhance operational efficiency and implement robotic process automation. Our suite of tools includes artificial intelligence and machine learning, cloud enablement, cybersecurity ecosystem, big data analytics, and modeling and simulation.

IT modernization and cyber security maturity are priority initiatives throughout our customer set. Our customers, including numerous institutes and centers within the National Institutes of Health ("NIH"), the Defense Health Agency ("DHA"), Telemedicine and Advanced Technology Research Center ("TATRC"), and US Navy, rely on our information technology support to enable their vital missions. We work with these customers to reduce risk and build resilience to cyber and physical threats to the federal government’s infrastructure, providing the full spectrum of cyber capabilities, cryptographic and true cyber engineering, Certified Information Security Officer ("CISO") / Information System Security Officer ("ISSO") support, risk management frameworks, Continuity of Operations ("COOP") / Disaster Recovery, 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 application of best practices including mobile, social, and interactive media. We leverage evidence-based methods and web technology to drive health equity to our most vulnerable populations through public engagement. Projects often involve highly specialized expertise and transformative R&D support services. Our decades of experience designing, conducting, and analyzing studies for our diverse customer base, and our full-service clinical research solutions are designed for each customer’s specific research development program. Our employees provide expert knowledge and experience that supports our customers’ missions.

System Engineering and Integration

Our employees specialize in delivering engineering solutions that support our customers' evolving needs by rapidly deploying resources, solutions, and services. This includes specialized engineering expertise, encompassing areas of Command, Control, Communications, Computers, Cyber, Intelligence, Surveillance, and Reconnaissance ("C5ISR"), modeling, simulation & training, performance based logistics, system modernization, technology-enabled health solutions and software engineering on behalf of the US Navy, HHS, VA, and other federal customers.

We utilize automation to accelerate infrastructure innovation and help customers define a lifecycle for automation assets, as well as set standards for version control, testing, and release processes that proved a robust foundation for their customers. DLH delivers IT operational resilience and efficiency in parallel with technology innovation integration, via hybrid and multi-cloud

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solutions, leveraging integrated services, process automation, advanced tool stacks, and mature quality processes. Our employees engineer, implement, and operate solutions that demonstrate measurable results to satisfy our customer’s management requirements, thus helping customers to confidently deploy secure platforms and technologies that reduce operational costs. We have invested in agile software development credentials for our technical staff, and have achieved Capability Maturity Model Integration ("CMMI") level 3. Our enterprise lifecycle logistics support services encompass military systems deployed worldwide, as well as scientific and IT systems and peripherals for Federal civilian agencies.

Major Customers

Our revenues are from agencies of the U.S. Federal government. A major customer is defined as a customer from whom we derive at least 10% of our revenues. The following table summarizes revenue by customer as follows (in thousands and percent):

	Three Months Ended
	December 31,
	2024				2023
	Revenue		Percent of total revenue		Revenue		Percent of total revenue
Department of Health and Human Services	$	41,948	46.2	%	$	44,297	45.3	%
Department of Veterans Affairs	34,099		37.6	%	34,680		35.4	%
Department of Defense	13,355		14.7	%	16,871		17.2	%
Other customers with less than 10% share of total revenue	1,380		1.5	%	2,002		2.1	%
Total revenue	$	90,782	100.0	%	$	97,850	100.0	%

We remain dependent upon the continuation of our relationships with our major customers as a significant portion of our revenue is concentrated in each of them. Our results of operations, cash flows and financial condition would be materially adversely affected if we were unable to continue our relationship with any of these customers, if we were to lose any of our material current contracts, or if the amount of services we provide to them is materially reduced.

Major Contracts

We operate primarily through prime contracts awarded by the government through competitive bidding processes. We have a diverse mix of contract vehicles with various agencies of the U.S. government, which supports our overall corporate growth strategy. A major contract is defined as a contract or set of contracts from which we derive at least 10% of our revenues.

The revenue attributable to the VA was derived from separate task orders covering the Company's performance of pharmacy and logistics services at various regional locations, in support of the VA's Consolidated Mail Outpatient Pharmacy ("CMOP") program.

•CMOP pharmacy and logistic services represent approximately $34.1 million and $34.7 million of revenues for the quarter ended December 31, 2024 and 2023, respectively.

•For the quarter, we operated under the task orders issued at the close of fiscal 2024. Those task orders had varying durations up to four months. The task order for our Hines, Illinois location ended on January 31, 2025 as the site transitions to a new service-disabled veteran owned small business (“SDVOSB”) prime contractor. The task orders for the remaining six sites are expected to be extended to April 30, 2025. As discussed below, further extensions may be requested by the VA.

In connection with DLH’s continuing performance as the prime contractor during the VA's ongoing acquisition evaluation, the VA awarded us a sole-source Indefinite Quantity/Indefinite Delivery ("IDIQ") contract effective May 1, 2024. The IDIQ has a ceiling value of $200.0 million and a maximum period of performance through April 30, 2025, with the potential for orders placed within that period to extend performance beyond April 2025. The seven locations where we continue to provide services are under task orders awarded through this vehicle.

During the quarter ended June 30, 2024, the VA issued amendments to the requests for proposals for the seven remaining CMOP locations, which continue to give preference to an SDVOSB as a prime contractor. The amendments required a current or potentially new bidder to respond to the solicitations' changes with a compliant proposal. As with all proposal opportunities, DLH evaluated the revised CMOP requests for proposal for suitability of terms and conditions. As a result, we elected to not pursue certain opportunities at select locations.

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Proposals were due for four of the seven locations during the quarter ended September 30, 2024. The remaining three locations have not yet had their proposal due dates assigned. While the acquisition and transition process is being conducted, DLH continues to operate as the prime contractor for all seven CMOP locations that it currently manages. DLH intends to provide additional updates to the progression of these solicitations as a part of its regular quarterly and annual filings.

Backlog

At December 31, 2024, our backlog was approximately $665.3 million of which $135.2 million was funded backlog. At September 30, 2024, our backlog was approximately $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 Congress often appropriates funding for contracts on a yearly or quarterly basis.

Circumstances and events may cause changes in the amount of our backlog and funded backlog, including the execution of new contracts, extension of existing contracts, non-renewal or completion of current contracts, early termination, and adjustments to estimates. Changes in funded backlog may be affected by the funding cycles of the government. While no assurances can be given that existing contracts will result in earned revenue in any future period, or at all, our major customers have historically exercised their contractual renewal options.

Backlog value is quantified from management's judgment and assumptions about the volume of services based on past volume trends and current planning developed with customers.

Forward-Looking Business Trends

Our mission is to expand our position as a trusted provider of technology-powered health and readiness services and solutions to active duty personnel, veterans, and civilian populations and communities. These services and solutions are derived from three capabilities sets: Digital Transformation and Cybersecurity, Systems Engineering and Integration and Science Research and Development. Within these capabilities, our scientists and technology professionals provide solutions spanning robotic process automation, cloud migration and computing, enterprise IT systems management, modeling & simulation, data analytics and scientific research. We believe business development priorities in these areas will position the Company to expand within top national priority programs and funded areas.

Federal budget outlook for fiscal year 2025:

On December 20, the U.S. House and Senate passed a Continuing Resolution ("CR") to extend federal spending through March 14, 2025. Under this CR, Federal agencies will continue to operate at fiscal 2024 levels. When a CR expires, unless new appropriations bills have been passed by Congress and signed by the President, or a new CR is passed and signed into law, the government must cease operations, or shutdown, except in certain emergency situations or when the law authorizes continued activity. We are monitoring the impact the new Presidential Administration will have on government funding negotiations as their legislative and political priorities. We continuously review our operations in an attempt to identify programs potentially at risk from CRs so that we can consider appropriate contingency plans. Historically, our customers’ missions have received bipartisan support from the legislative and executive branches of the federal government. However, as the new administration and new Congress will seek to implement their budget priorities, and policies, we will continue to monitor the process for opportunities and impacts to our customers’ projects and budgets.

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

25

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 Company believes that its past performance in this market and track record of success provide a competitive advantage. However, the effect of set-aside provisions may limit our ability to compete for prime contractor positions on programs that we recompete or that we have targeted for growth. In these cases, the Company may elect to join a team with an eligible contractor as prime for specific pursuits that align with our core markets and corporate growth strategy.

During the quarter ended December 31, 2024, we generated revenues of approximately $34.1 million from our set of contracts in support of the VA's CMOP program. As previously reported, the VA has been soliciting proposals for new contracts covering this work with a preference for a Service-Disabled Veteran Owned Small Business, or SDVOSB, to perform as the prime contractor. To date, the VA has awarded two locations to a new SDVOSB prime contractor. The remaining six locations continue to be operated by DLH as the prime contractor. Should awards for the locations for which we have submitted a proposal be offered to a partner of DLH, we expect to continue to perform a significant amount of those contracts' volume of business as a subcontractor.

Results of Operations

The following table summarizes results of operations for the three months ended December 31, 2024 and 2023 (in thousands except for per share amounts, and percentage of revenue):

	Three Months Ended
	December 31
Consolidated Statements of  Operations:	2024				2023				Change
Revenue	$	90,782	100.0	%	$	97,850	100.0	%	$	(7,068)
Cost of operations:
Contract costs	72,382		79.7	%	79,081		80.8	%	(6,699)
General and administrative costs	8,456		9.3	%	7,697		7.9	%	759
Depreciation and amortization	4,307		4.7	%	4,253		4.3	%	54
Total operating costs	85,145		93.8	%	91,031		93.0	%	(5,886)
Income from operations	5,637		6.2	%	6,819		7.0	%	(1,182)
Interest expense	4,133		4.6	%	4,658		4.9	%	(525)
Income before provision for income tax	1,504		1.7	%	2,161		2.2	%	(657)
Provision for income tax expense	389		0.4	%	10		—	%	379
Net income	$	1,115	1.2	%	$	2,151	2.2	%	$	(1,036)
Net income per share - basic	$	0.08			$	0.15			$	(0.07)
Net income per share - diluted	$	0.08			$	0.15			$	(0.07)

Revenue

Revenue decreased $7.1 million for the three months ended December 31, 2024 over 2023, primarily reflecting the conversion of certain contracts in our VA and DOD portfolios to small business contractors.

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Cost of Operations

Contract costs primarily include the costs associated with providing services to our customers. These costs are generally comprised of direct labor and associated fringe benefit costs, subcontract cost, other direct costs, and the related management and infrastructure costs. Contract costs decreased $6.7 million for the three months ended December 31, 2024 over 2023; the decrease was primarily due to a decrease in revenue volume from low margin non-labor costs and a decrease in our overhead costs.

General and administrative costs are for those employees not directly providing services to our customers, to include but not limited to executive management, business development, accounting, and human resources. These costs increased $0.8 million for the three months ended December 31, 2024 as compared to 2023. As a percentage of revenue, general and administrative costs increased to 9.3% from 7.9%, with the increase being primarily due to an increase in business development expenses.

For the three months ended December 31, 2024, depreciation and amortization expense were approximately $0.2 million and $4.1 million, respectively, as compared to approximately $0.1 million and $4.1 million for the three months ended December 31, 2023, respectively.

Interest Expense, net

Interest expense, net, includes interest expense on the Company's term loan and amortization of deferred financing costs on debt obligations. Interest expense decreased $0.5 million for the three months ended December 31, 2024 over 2023, primarily due to the prepayment of debt and a decrease in the floating interest rate.

Provision for Income Tax Expense

Provision for income tax expense increased $379.0 thousand for the three months ended December 31, 2024 over 2023. The effective tax rate for the three months ended December 31, 2024 and 2023 was 25.9% and 0.4%, respectively. 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 the three months ended December 31, 2024 and 2023 was approximately $9.9 million and $11.1 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.

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.

27

Reconciliation of GAAP net income to EBITDA, a non-GAAP measure (in thousands):

	Three Months Ended
	December 31,
	2024		2023		Change
Net income	$	1,115	$	2,151	$	(1,036)
(i) Depreciation and amortization	4,307		4,253		54
(ii) Interest expense, net	4,133		4,658		(525)
(iii) Provision for income tax expense	389		10		379
EBITDA	$	9,944	$	11,072	$	(1,128)

Liquidity and capital management

Cash was approximately $0.5 million and $0.3 million for the period ended December 31, 2024 and September 30, 2024, respectively.

Available borrowings under our revolving credit facility was approximately $11.8 million and $18.1 million for the period ended December 31, 2024 and September 30, 2024, respectively. The decrease is primarily due to increased borrowing under the revolving credit facility for the period ended December 31, 2024.

A summary of the change in cash is presented as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023		Change
Net cash (used in) provided by operating activities	$	(11,538)	$	5,071	$	(16,609)
Net cash used in investing activities	(552)		(174)		(378)
Net cash provided (used in) by financing activities	12,199		(4,981)		17,180
Net change in cash	$	109	$	(84)	$	193

Cash flows used in and provided by operating activities totaled approximately $(11.5) million and $5.1 million for the three months ended December 31, 2024 and 2023, respectively. The decrease in cash from operations was principally due to an increase in accounts receivable due to a short-term decrease in collections.

Cash used in investing activities totaled $(0.6) million and $(0.2) million for the three months ended December 31, 2024 and 2023, respectively. The cash utilized was predominantly due capital expenditures in the three months ended December 31, 2024 and 2023, respectively.

Cash provided by and used in financing activities during the three months ended December 31, 2024 and 2023 were approximately $12.2 million and $(5.0) million, respectively. The cash provided by financing activities was principally to satisfy short-term working capital needs for the three months ended December 31, 2024.

Sources of cash

As of December 31, 2024, our immediate sources of liquidity include cash of approximately $0.5 million, accounts receivable, and access to our secured revolving line of credit facility. This credit facility provides us with access of up to $50.0 million, subject to certain conditions including eligible accounts receivable. As of December 31, 2024, we had unused borrowing capacity of $11.8 million, which is net of outstanding letters of credit. The Company's present operating liabilities are largely predictable and consist of vendor and payroll related obligations. We believe that our current investment and financing obligations are adequately covered by cash generated from profitable operations and that planned operating cash flow should be sufficient to support our operations for twelve months from the date of issuance of these consolidated financial statements.

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Credit Facilities

A summary of our credit facilities for the period ended December 31, 2024 is as follows (in thousands):

Arrangement	Loan Balance		Interest*	Maturity Date
Secured term loan (a) due December 8, 2027	$	142,500	SOFR1 + 4.1%	December 8, 2027
Secured revolving line of credit (b) due December 8, 2027	$	24,459	SOFR1 + 4.1%	December 8, 2027

1Secured Overnight Financing Rate ("SOFR") as of December 31, 2024 was 4.6%.

On January 31, 2023, we executed a floating-to-fixed interest rate swap with FNB which has a notional amount of $80.0 million at December 31, 2024, a fixed interest rate of 4.10% and a maturity date of January 31, 2026. As a result of entering these agreements, for the three months ended December 31, 2024, interest expense has been decreased by approximately $0.1 million.

(a) Represents the principal amounts payable on our term loan, which is secured by liens on substantially all of the assets of the Company. The principal of the term loan is payable in quarterly installments with the remaining balance due on December 8, 2027.

(b) As amended, the secured revolving line of credit has a ceiling of up to $50.0 million and a maturity date of December 8, 2027. The Company has accessed funds from the revolving credit facility during the quarter and has a balance outstanding at December 31, 2024 of $24.5 million.

The secured term loan and secured revolving line of credit are secured by liens on substantially all of the assets of the Company. The provisions of our credit facilities are fully described in Note 7. Credit Facilities to the consolidated financial statements.

Contractual Obligations

Contractual obligations as of December 31, 2024 are as follows (in thousands):

				Payments Due by Period
				Next 12		2-3		4-5		More than 5
	Ref	Total		Months		Years		Years		Years
Debt obligations		$	166,959	$	29,209	$	137,750	$	—	$	—
Facility operating leases	(a)	19,314		2,814		6,693		5,927		3,880
Total contractual obligations		$	186,273	$	32,023	$	144,443	$	5,927	$	3,880

(a) The increase in facility operating lease obligations was due to an extension executed during the period to an existing lease.

Critical Accounting Policies and Estimates

Our critical accounting policies and estimates are disclosed in the Critical Accounting Policies and Estimates section in Part II, “Item 7. Management's Discussion of our Annual Report on Form 10-K for the year ended September 30, 2024. There have been no significant changes to the Company’s critical accounting policies as disclosed in our Annual Report on Form 10-K for the year ended September 30, 2024. For a detailed discussion on the application of accounting policies, refer to Note 2. Significant Accounting Policies.

ITEM 3: 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

29

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 $80.0 million at December 31, 2024. 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 $0.9 million per year. As of December 31, 2024, the interest rate on the floating interest rate debt was 8.7%.

ITEM 4: CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Our CEO and President and Chief Financial Officer, evaluated 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 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 (i) is 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 Chief Financial Officer, to allow timely decisions regarding required disclosure.

Our management, including our CEO and President and Chief Financial Officer, 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.

Changes in Internal Control over Financial Reporting

There were 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 controls that occurred during the fiscal quarter ended December 31, 2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II OTHER INFORMATION 

ITEM 1: 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, 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.

ITEM 1A: RISK FACTORS

Our operating results and financial condition have varied in the past and may in the future vary significantly depending on a number of factors. In addition to the other information set forth in this report, you should carefully consider the factors discussed in the “Risk Factors” section in our Annual Report on Form 10-K for the year ended September 30, 2024 and in our other reports filed with the SEC concerning the risks associated with our business, financial condition and results of operations. These factors, among others, could materially and adversely affect our business, results of operations, financial condition or liquidity and cause our actual results to differ materially from those contained in statements made in this report and presented elsewhere by management from time to time. The risks we have identified in our reports are not the only risks facing us. Additional risks and uncertainties not currently known to us or that we currently believe are immaterial may also materially adversely affect our business, results of operations, financial condition or liquidity. See Item 1A, Risk Factors, in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024. We believe that there have been no material changes from the risk factors described in our Annual Report on Form 10-K for the fiscal year ended September 30, 2024.

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ITEM 2: UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

During the period covered by this report, the Company did not issue any securities that were not registered under the Securities Act of 1933, as amended, except as has been reported in previous filings with the SEC or as set forth elsewhere herein. 

ITEM 3: DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4: MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5: OTHER INFORMATION

(a) None

(b) None

(c) During the three months ended December 31, 2024, no director or officer of the Company 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 6: EXHIBITS

Exhibits to this report which have previously been filed with the Commission are incorporated by reference to the document referenced in the following table. The exhibits designated with a number sign (#) indicate a management contract or compensation plan or arrangement.

Exhibit		Incorporated by Reference			Filed
Number	Exhibit Description	Form	Dated	Exhibit	Herewith
10.1	First Amendment dated November 6, 2024 to the Second Amended & Restated Credit Agreement*	8-K	November 12, 2024	10.1
31.1	Certification of Chief Executive Officer pursuant to Section 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)				X
31.2	Certification of Chief Financial Officer pursuant to Section 17 CFR 240.13a-14(a) or 17 CFR 240.15d-14(a)				X
32	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				X
101.0	The following financial information from the DLH Holdings Corp. Quarterly Report on Form 10-Q for the fiscal quarter ended December 31, 2024, 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; and, (iv) the Notes to the Consolidated Financial Statements.				X
104.0	Cover Page Interactive Data File (formatted as inline XBRL and contained in Exhibit 101)

32

SIGNATURE

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized

	DLH HOLDINGS CORP.
	By:	/s/ Kathryn M. JohnBull
		Kathryn M. JohnBull
		Chief Financial Officer
		(On behalf of the Registrant and as Principal Financial and Accounting Officer)
Dated: February 05, 2025

33

EX-31.1

{N0401184 } EXHIBIT 31.1 Certification I, Zachary C. Parker, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DLH Holdings Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 5, 2025 /s/ Zachary C. Parker Zachary C. Parker Chief Executive Officer (Principal Executive Officer)

EX-31.2

{N0401184 } EXHIBIT 31.2 Certification I, Kathryn M. JohnBull, certify that: 1. I have reviewed this quarterly report on Form 10-Q of DLH Holdings Corp.; 2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; 4. The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: a) designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; b) designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; c) evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and d) disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and 5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): a) all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and b) any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. Date: February 5, 2025 /s/ _Kathryn M. JohnBull____ Kathryn M. JohnBull Chief Financial Officer (Principal Accounting Officer)

EX-32

{N0401184 } EXHIBIT 32 Certification of Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 In connection with the Quarterly Report of DLH Holdings Corp. (the “Company”) on Form 10-Q for the period ended December 31, 2024 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, being, Zachary C. Parker, Chief Executive Officer, and Kathryn M. JohnBull, Chief Financial Officer and Principal Accounting Officer, certify, pursuant to 18 U.S.C. ss.1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that: (1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and (2) The information contained in the Report fairly presents, in all material respects, the financial condition and result of operations of the Company. Dated: February 5, 2025 /s/ Zachary C. Parker _____ /s/ _Kathryn M. JohnBull_________ Zachary C. Parker Kathryn M. JohnBull Chief Executive Officer (Principal Executive Officer) Chief Financial Officer (Principal Accounting Officer) A signed original of this written statement required by Section 906 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.

XML

Cover - shares	3 Months Ended
	Dec. 31, 2024	Feb. 03, 2025
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Dec. 31, 2024
Document Transition Report	false
Entity File Number	0-18492
Entity Registrant Name	DLH HOLDINGS CORP.
Entity Incorporation, State or Country Code	NJ
Entity Tax Identification Number	22-1899798
Entity Address, Address Line One	3565 Piedmont Road,
Entity Address, Address Line Two	Building 3,
Entity Address, Address Line Three	Suite 700
Entity Address, City or Town	Atlanta,
Entity Address, State or Province	GA
Entity Address, Postal Zip Code	30305
City Area Code	770
Local Phone Number	554-3545
Title of 12(b) Security	Common Stock
Trading Symbol	DLHC
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		14,386,468
Entity Central Index Key	0000785557
Amendment Flag	false
Document Fiscal Year Focus	2025
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--09-30

XML

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2024	Dec. 31, 2023
Income Statement [Abstract]
Revenue	$ 90,782	$ 97,850
Contract costs	72,382	79,081
General and administrative costs	8,456	7,697
Depreciation and amortization	4,307	4,253
Total operating costs	85,145	91,031
Income from operations	5,637	6,819
Interest expenses	4,133	4,658
Income before provision for income tax	1,504	2,161
Provision for income tax expense	389	10
Net income	$ 1,115	$ 2,151
Net income per share - basic (in dollars per share)	$ 0.08	$ 0.15
Net income per share - diluted (in dollars per share)	$ 0.08	$ 0.15
Weighted average common stock outstanding
Basic (in shares)	14,386	14,032
Diluted (in shares)	14,563	14,796

XML

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Current assets:
Cash	$ 451	$ 342
Accounts receivable	64,270	49,849
Other current assets	2,853	2,766
Total current assets	67,574	52,957
Goodwill	138,161	138,161
Intangible assets, net	104,207	108,321
Operating lease right-of-use assets	7,255	6,681
Deferred taxes, net	5,465	6,245
Equipment and improvements, net	2,189	1,830
Other long-term assets	158	186
Total assets	325,009	314,381
Current liabilities:
Accounts payable and accrued liabilities	18,723	25,290
Debt obligations - current, net of deferred financing costs	27,595	12,058
Accrued payroll	15,123	12,848
Operating lease liabilities - current	2,753	2,652
Other current liabilities	494	394
Total current liabilities	64,688	53,242
Long-term liabilities:
Debt obligations - long-term, net of deferred financing costs	134,623	137,316
Operating lease liabilities - long-term	13,354	12,789
Other long-term liabilities	904	902
Total long-term liabilities	148,881	151,007
Total liabilities	213,569	204,249
Shareholders' equity:
Common stock, $0.001 par value; 40,000 shares authorized; 14,386 and 14,386 shares issued and outstanding at December 31, 2024 and September 30, 2024, respectively	14	14
Additional paid-in capital	100,463	100,270
Retained earnings	10,963	9,848
Total shareholders’ equity	111,440	110,132
Total liabilities and shareholders' equity	$ 325,009	$ 314,381

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CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares shares in Thousands	Dec. 31, 2024	Sep. 30, 2024
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	40,000	40,000
Common stock, issued (in shares)	14,386	14,386
Common stock, outstanding (in shares)	14,386	14,386

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CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2024	Dec. 31, 2023
Operating activities
Net income	$ 1,115	$ 2,151
Adjustments to reconcile net income to net cash (used in) provided by operating activities:
Depreciation and amortization	4,307	4,253
Amortization of deferred financing costs charged to interest expense	457	642
Stock-based compensation expense	193	620
Deferred taxes, net	780	(6)
Changes in operating assets and liabilities:
Accounts receivable	(14,421)	3,542
Other assets	(661)	510
Accounts payable and accrued liabilities	(6,567)	(7,397)
Accrued payroll	2,275	1,909
Other liabilities	984	(1,153)
Net cash (used in) provided by operating activities	(11,538)	5,071
Investing activities
Purchase of equipment and improvements	(552)	(174)
Net cash used in investing activities	(552)	(174)
Financing activities
Proceeds from revolving line of credit	59,910	69,831
Repayment of revolving line of credit	(47,509)	(64,026)
Repayments of debt obligations	0	(10,378)
Payments of deferred financing costs	(202)	0
Proceeds from issuance of common stock upon exercise of options and warrants	0	261
Payment of tax obligations resulting from net exercise of stock options	0	(669)
Net cash provided by (used in) financing activities	12,199	(4,981)
Net change in cash	109	(84)
Cash - beginning of period	342	215
Cash - end of period	451	131
Supplemental disclosure of cash flow information
Cash paid during the period for interest	3,594	3,972
Cash paid during the period for income taxes	32	0
Common stock surrendered for the exercise of stock options	0	244
Lease liability recognized to acquire a right of use asset	$ 1,377	$ 0

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) shares in Thousands, $ in Thousands	Total	Common Stock	Additional Paid-In Capital	Retained Earnings
Beginning Balance (in shares) at Sep. 30, 2023		13,950
Beginning balance at Sep. 30, 2023	$ 102,439	$ 14	$ 99,974	$ 2,451
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Expense related to director restricted stock units	80		80
Expense related to employee stock-based compensation	540		540
Exercise of stock options (in shares)		220
Exercise of stock options	261		261
Common stock surrendered for the exercise of stock options (in shares)		(65)
Common stock surrendered for the exercise of stock options	(669)		(669)
Net income	2,151			2,151
Ending Balance (in shares) at Dec. 31, 2023		14,105
Ending balance at Dec. 31, 2023	$ 104,802	$ 14	100,186	4,602
Beginning Balance (in shares) at Sep. 30, 2024	14,386	14,386
Beginning balance at Sep. 30, 2024	$ 110,132	$ 14	100,270	9,848
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Expense related to director restricted stock units	180		180
Expense related to employee stock-based compensation	$ 13		13
Exercise of stock options (in shares)	0
Net income	$ 1,115			1,115
Ending Balance (in shares) at Dec. 31, 2024	14,386	14,386
Ending balance at Dec. 31, 2024	$ 111,440	$ 14	$ 100,463	$ 10,963

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Basis of Presentation and Principles of Consolidation

3 Months Ended

Dec. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Basis of Presentation and Principles of Consolidation

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 United States generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by GAAP for complete financial statements.

Operating results for the three months ended December 31, 2024 are not necessarily indicative of the results that may be expected for the year ending September 30, 2025 or any future period. Amounts as of December 31, 2024 and for the three months ended December 31, 2024 are unaudited. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2024 filed with the Securities and Exchange Commission on December 4, 2024.

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Significant Accounting Policies

3 Months Ended

Dec. 31, 2024

Accounting Policies [Abstract]

Significant Accounting Policies

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, 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.

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.

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 December 31, 2024, operating leases for facilities and equipment have remaining lease terms of less than 1 year to 6.5 years

Goodwill

The Company performs impairment evaluation at least annually and between annual tests whenever there is an indication of impairment. We performed a qualitative assessment of factors to determine whether it was necessary to perform the goodwill impairment test. Based on the results of the work performed, the Company has concluded that no impairment loss was warranted at December 31, 2024, as no change in business conditions occurred which would have a material adverse effect on the valuation of goodwill. 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. Similarly, there were no impairments during the prior year ended September 30, 2024.

Income Tax

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 asset 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 December 31, 2024 or September 30, 2024. We report interest and penalties as a component of provision for income taxes. During the three months ended December 31, 2024 and 2023, we recognized no interest and no penalties related to income taxes.

Stock-Based Compensation

The Company uses the fair value-based method for stock-based compensation. 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 awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued common shares. All awards to employees and non-employees are recorded at fair value on the date of the grant and expensed over the period of vesting. The Company uses a Monte Carlo method to estimate the fair value of each stock option at the date of grant. Any consideration paid by the option holders to purchase shares is credited to common stock.

Stock-based compensation expense for the portion of equity awards for which the requisite service has not been rendered is recognized as the requisite service is rendered. The stock-based compensation expense for that portion of awards has been based on the grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. For options that vest based on the Company’s common stock achieving and maintaining defined market prices, the Company values the awards with a Monte Carlo method that utilizes various probability factors and other criterion in establishing fair value of the grant. The related compensation expense is recognized over the service period.

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 December 31, 2024 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 December 31, 2024 and September 30, 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 December 31, 2024 and September 30, 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 December 31, 2024 and September 30, 2024, there was no indication of any global or economic impacts to our industry.

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New Accounting Pronouncements

3 Months Ended

Dec. 31, 2024

Accounting Changes and Error Corrections [Abstract]

New Accounting Pronouncements

New Accounting Pronouncements

In November 2023, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" which provides guidance intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, and each reported measure of segment profit or loss. The ASU requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing segment disclosures in Topic 280. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2023 and interim

periods beginning after December 15, 2024. We are currently evaluating the impacts of the single reportable segment disclosures.

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 December 15, 2024. We are currently evaluating the impacts of the improvements to income tax disclosure.

In March 2024, the Securities and Exchange Commission ("SEC") has released a final rule that requires registrants to provide comprehensive climate-related disclosures in their annual reports and registration statements, including those for IPOs, beginning with annual reports for the year ending December 31, 2027, for smaller reporting companies ("SRC"). Registrants must disclose climate-related financial metrics and impacts on their financial estimates and assumptions in a footnote to the audited financial statements. The disclosures will also need to be addressed as part of management’s internal control over financial reporting ("ICFR") and will be subject to the financial statement and ICFR audit (if applicable) of an independent registered public accounting firm. We are currently evaluating the impacts of the improvements to our disclosure.

On November 4, 2024, the FASB issued ASU 2024-03 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.

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Revenue Recognition

3 Months Ended

Dec. 31, 2024

Revenue from Contract with Customer [Abstract]

Revenue Recognition

Revenue Recognition

The following table summarizes the contract balances recognized on the Company's consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Contract assets	$	31,486	$	23,945

Contract assets are included as part of the accounts receivable on the consolidated balances sheets. The change from prior period is primarily due to invoice timing. Contract liabilities had no balance as of December 31, 2024 and September 30, 2024.

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 present our revenue disaggregated by these categories:

Revenue by customer was as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Department of Health and Human Services	$	41,948	$	44,297
Department of Veterans Affairs	34,099		34,680
Department of Defense	13,355		16,871
Other	1,380		2,002
Total	$	90,782	$	97,850

Revenue by contract type was as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Time and Materials	$	49,400	$	54,789
Cost Reimbursable	18,143		19,751
Firm Fixed Price	23,239		23,310
Total	$	90,782	$	97,850

Revenue by whether the Company acts as a prime contractor or a subcontractor was as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Prime Contractor	$	84,439	$	87,633
Subcontractor	6,343		10,217
Total	$	90,782	$	97,850

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Leases

3 Months Ended

Dec. 31, 2024

Leases [Abstract]

Leases

Leases

The following table summarizes lease balances presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Operating lease right-of-use assets	$	7,255	$	6,681
Operating lease liabilities - current	$	2,753	$	2,652
Operating lease liabilities - long-term	13,354		12,789
Total operating lease liabilities	$	16,107	$	15,441

As of December 31, 2024, operating leases for facilities and equipment have remaining lease terms of less than 1 year to 6.3 years. The non-cash increase in both lease liabilities and right-of-use assets during the current period is primarily attributable to an extension of an existing operating lease. The non-cash increase to lease liabilities from the lease extension was $1.4 million.

Total lease costs for our leases were as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Operating	$	846	$	873
Short-term	159		50
Variable	33		37
Sublease income (a)	(49)		(67)
Total lease costs	$	989	$	893

(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 December 31, 2024 were as follows (in thousands):

Fiscal year ending:
2025 (remaining)	$	2,814
2026	3,641
2027	3,052
2028	2,914
2029	3,013
Thereafter	3,880
Total future lease payments	19,314
Less: imputed interest	(3,207)
Present value of future minimum lease payments	16,107
Less: current portion of operating lease liabilities	(2,753)
Long-term operating lease liabilities	$	13,354

At December 31, 2024, the weighted-average remaining lease term and weighted-average discount rate were 5.6 years and 6.6%, 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 were as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities	$	968	$	1,237
Lease liabilities arising from obtaining right-of-use assets	1,377		—
Other lease information	$	2,345	$	1,237

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Supporting Financial Information

3 Months Ended

Dec. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Supporting Financial Information

Supporting Financial Information

Accounts receivable

The following table summarizes accounts receivable presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Billed receivables	$	32,784	$	25,904
Contract assets	31,486		23,945
Accounts receivable	$	64,270	$	49,849

Other current assets

The following table summarizes other current assets presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Prepaid licenses and other expenses	$	1,580	$	1,315
Prepaid insurance and benefits	336		545
Other receivables	937		906
Other current assets	$	2,853	$	2,766

Goodwill

There were no activities in goodwill for the three months ended December 31, 2024. The balance of goodwill was approximately $138.2 million as of December 31, 2024 and September 30, 2024.

Intangible assets

The following table summarizes intangible assets, net presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Intangible assets
Customer contracts and related customer relationships	$	113,622	$	113,622
Covenants-not-to-compete	637		637
Trade name	13,034		13,034
Backlog	37,249		37,249
Total intangible assets	164,542		164,542
Less: accumulated amortization
Customer contracts and related customer relationships	(44,139)		(41,297)
Covenants-not-to-compete	(458)		(442)
Trade name	(3,814)		(3,488)
Backlog	(11,924)		(10,994)
Total accumulated amortization	(60,335)		(56,221)
Intangible assets, net	$	104,207	$	108,321

Amortization expense was $4.1 million and $4.1 million for the three months ended December 31, 2024 and 2023, respectively.

As of December 31, 2024, the estimated amortization expense per fiscal year was as follows (in thousands):

Fiscal year ending:
2025 (remaining)	$	12,340
2026	15,722
2027	14,694
2028	14,694
2029	13,734
Thereafter	33,023
Total amortization expense	$	104,207

At December 31, 2024, the weighted-average remaining amortization period in total was 7.1 years. The weighted-average amortization period for customer contracts and related customer relationships, backlog, trade names and Covenants-not-to-compete was 7.1 years, 7.1 years, 7.5 years, and 5.3 years, respectively.

Equipment and improvements, net

The following table summarizes equipment and improvements, net presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Furniture and equipment	$	1,846	$	1,832
Computer equipment and software	7,573		7,273
Leasehold improvements	1,852		1,614
Total equipment and improvements	11,271		10,719
Less: accumulated depreciation	(9,082)		(8,889)
Equipment and improvements, net	$	2,189	$	1,830

Depreciation expense was $0.2 million and $0.1 million for the three months ended December 31, 2024 and 2023, respectively.

Accounts payable and accrued liabilities

The following table summarizes accounts payable and accrued liabilities presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Accounts payable	$	13,291	$	13,421
Accrued benefits	1,679		4,519
Accrued workers' compensation insurance	2,015		1,528
Accrued bonus and incentive compensation	286		3,641
Accrued interest	711		619
Other accrued expenses	741		1,562
Accounts payable and accrued liabilities	$	18,723	$	25,290

Accrued payroll

The following table summarizes accrued payroll presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Accrued leave	$	7,912	$	8,569
Accrued payroll	5,968		3,070
Accrued payroll taxes	1,195		981
Accrued severance	48		228
Total accrued payroll	$	15,123	$	12,848

Debt obligations

The following table summarizes debt obligations presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Secured term loan	$	142,500	$	142,500
Secured revolving line of credit	24,459		12,058
Less: unamortized deferred financing costs	(4,741)		(5,184)
Net bank debt obligations	162,218		149,374
Less: current portion of debt obligations, net of deferred financing costs (a)	(27,595)		(12,058)
Long-term portion of debt obligations, net of deferred financing costs	$	134,623	$	137,316

As of December 31, 2024, we have satisfied quarterly minimum principal payments on our secured term loan through September 30, 2025.

(a) As of December 31, 2024, the current portion comprises term loan amortization of $4.8 million and the $24.5 million outstanding balance on the secured revolving line of credit, net of $1.6 million of unamortized deferred financing costs.

Interest expense

The following table summarizes interest expense presented on our consolidated statements of operations as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Interest expense (a)	$	3,685	$	4,016
Interest income (b)	(9)		—
Amortization of deferred financing costs (c)	457		642
Interest expense	$	4,133	$	4,658

(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.

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Credit Facilities

3 Months Ended

Dec. 31, 2024

Debt Disclosure [Abstract]

Credit Facilities

Credit Facilities

A summary of our credit facilities as presented on our consolidated balance sheets as follows (in millions):

December 31, 2024				September 30, 2024
Arrangement	Loan Balance		Interest	Arrangement	Loan Balance		Interest
Secured term loan (a) due December 8, 2027	$	142,500	SOFR1 + 4.1%	Secured term loan (a) due December 8, 2027	$	142,500	SOFR1 + 4.1%
Secured revolving line of credit (b) due December 8, 2027	$	24,459	SOFR1 + 4.1%	Secured revolving line of credit (b) due December 8, 2027	$	12,058	SOFR1 + 4.1%

1Secured Overnight Financing Rate ("SOFR") as of December 31, 2024 and September 30, 2024 were 4.6% 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 ("FNB") which has a notional amount of $80.0 million at December 31, 2024, 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 three months ended December 31, 2024, interest expense has been decreased by approximately $0.1 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. On November 6, 2024, the Company completed an amendment to its credit facility. The amendment modified certain financial covenants thresholds for future measurement periods and reduced the amount available under the revolving line of credit, as discussed in further detail below. The amendment was approved by the Company's Board of Directors and Executive Management and the credit facility lenders. The loan agreement also requires us to comply with certain quarterly financial covenants including: (i) a minimum fixed charge coverage ratio ranging from 1.25:1.00 to 1.05:1.00 and (ii) a total leverage ratio not exceeding the ratio of 4.75:1.00 to 4.25:1.00 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 income taxes (benefit) expense, 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 December 31, 2024.

We are required to pay quarterly amortization payments, which commenced in December 2022. The annual amortization amounts are $19.0 million for fiscal years 2025 and 2026, and $23.75 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 $142.5 million as of December 31, 2024. We have satisfied the mandatory principal payments through September 2025.

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 2.5:1; (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 2.5:1 but greater than or equal to 1.5:1; 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 1.5:1. 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 December 31, 2024, we had unused borrowing capacity of $11.8 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 $24.5 million outstanding balance at December 31, 2024. 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.

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Stock-Based Compensation and Equity Grants

3 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

Stock-Based Compensation and Equity Grants

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 December 31, 2024, there were 0.8 million shares available for grant.

Stock-based compensation expense shown in the table below, is recorded in general and administrative expenses in our consolidated statements of operations as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
DLH employees (a)	$	13	$	540
Non-employee directors (b)	180		80
Total stock option expense	$	193	$	620

(a) Included in this amount are equity grants of restricted stock units ("RSU") to Executive Officers, which were issued in accordance with the DLH long-term incentive compensation policy in this fiscal year, and stock option grants to employees during prior fiscal years. The RSUs issued and outstanding totaled 708,325 and 367,795 shares at December 31, 2024 and 2023, respectively. During the three months ended December 31, 2024 and 2023, the Company granted 312,906 and 169,544 shares of restricted stock units, respectively. During the three months ended December 31, 2024, 156,453 shares of the RSUs granted have performance-based vesting criteria and the remaining 156,453 shares have service-based vesting criteria. During the three months ended December 31, 2023, 84,773 shares of the RSUs granted have performance-based vesting criteria and the remaining 84,771 shares have service-based vesting criteria.

The RSUs granted during the three months ended December 31, 2024 and 2023, were valued as follows using the Monte Carlo Method, and will be amortized over the 3-year measurement period.

				Volatility
				50%
Grant Date	Performance Vesting Base	Performance Vesting Criteria	(Years)	Fair Value
December 20, 2024	Revenue	Revenue increase at the end of the performance period as compared to the year ended September 30, 2027	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 performance 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

(b) Equity grants of RSUs were made in accordance with DLH compensation policy for non-employee directors and a total of 78,556 and 61,525 restricted stock units were issued and outstanding at December 31, 2024 and 2023, respectively. These grants have service-based vesting criteria and vest at the end of this fiscal year.

Unrecognized stock-based compensation expense

Unrecognized stock-based compensation expense is presented in the table below (in thousands):

	December 31,
	2024		2023
Unrecognized expense for DLH employees (a)	$	5,302	$	7,983
Unrecognized expense for non-employee directors	539		539
Total unrecognized expense	$	5,841	$	8,522

(a) On a weighted average basis, the unrecognized expense as of December 31, 2024 is expected to be recognized within the next 2.57 years.

Stock option activity for the three months ended December 31, 2024

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:

				(in years)
				Weighted
		Weighted		Average	(in thousands)
	(in thousands)	Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Term	Value
Options outstanding, September 30, 2024	1,237	$	9.28	6.1	$	1,313
Granted	—	—		—	—
Exercised	—	—		—	—
Cancelled	(50)	16.01		—	—
Options outstanding, December 31, 2024	1,187	$	9.31	5.80	$	652
Vested and exercisable, December 31, 2024	1,127	$	9.07	5.70	$	652

Stock option shares outstanding, vested and unvested balance as follows (in thousands):

	December 31,	September 30,
	2024	2024
Vested and exercisable	1,127	1,177
Unvested (a)	60	60
Options outstanding	1,187	1,237

(a) Certain awards vest upon satisfaction of certain performance criteria.

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Earnings Per Share

3 Months Ended

Dec. 31, 2024

Earnings Per Share [Abstract]

Earnings Per Share

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 (in thousands except for per share amounts):

	Three Months Ended
	December 31,
	2024		2023
Numerator:
Net income	$	1,115	$	2,151
Denominator:
Denominator for basic net income per share - weighted-average outstanding shares	14,386		14,032
Effect of dilutive securities:
Stock options and restricted stock	177		764
Denominator for diluted net income per share - weighted-average outstanding shares	14,563		14,796
Net income per share - basic	$	0.08	$	0.15
Net income per share - diluted	$	0.08	$	0.15

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Commitment and Contingencies

3 Months Ended

Dec. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and Contingencies

Contractual obligations as of December 31, 2024 are as follows (in thousands):

			Payments Due Per Fiscal Year
			(Remaining)
	Total		2025		2026		2027		2028		2029		Thereafter
Debt obligations	$	166,959	$	24,459	$	19,000	$	23,750	$	99,750	$	—	$	—
Facility operating leases	19,314		2,814		3,641		3,052		2,914		3,013		3,880
Total contractual obligations	$	186,273	$	27,273	$	22,641	$	26,802	$	102,664	$	3,013	$	3,880

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 ordinary course of 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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Related Party Transactions

3 Months Ended

Dec. 31, 2024

Related Party Transactions [Abstract]

Related Party Transactions

Related Party Transactions

The Company has determined that for the three months ended December 31, 2024 and 2023, there were no significant related party transactions that have occurred which require disclosure through the date that these consolidated financial statements were issued.

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Subsequent Events

3 Months Ended

Dec. 31, 2024

Subsequent Events [Abstract]

Subsequent Events

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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Insider Trading Arrangements	3 Months Ended
	Dec. 31, 2024
Trading Arrangements, by Individual
Rule 10b5-1 Arrangement Adopted	false
Non-Rule 10b5-1 Arrangement Adopted	false
Rule 10b5-1 Arrangement Terminated	false
Non-Rule 10b5-1 Arrangement Terminated	false

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Significant Accounting Policies (Policies)

3 Months Ended

Dec. 31, 2024

Accounting Policies [Abstract]

Use of Estimates

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, 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.

Revenue

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.

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.

Fair Value of Financial Instruments

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

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.

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 and Lease Liabilities

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 December 31, 2024, operating leases for facilities and equipment have remaining lease terms of less than 1 year to 6.5 years

Goodwill

Goodwill

The Company performs impairment evaluation at least annually and between annual tests whenever there is an indication of impairment. We performed a qualitative assessment of factors to determine whether it was necessary to perform the goodwill impairment test. Based on the results of the work performed, the Company has concluded that no impairment loss was warranted at December 31, 2024, as no change in business conditions occurred which would have a material adverse effect on the valuation of goodwill. 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. Similarly, there were no impairments during the prior year ended September 30, 2024.

Income Tax

Income Tax

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 asset 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.

Stock-based Compensation

Stock-Based Compensation

The Company uses the fair value-based method for stock-based compensation. 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 awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued common shares. All awards to employees and non-employees are recorded at fair value on the date of the grant and expensed over the period of vesting. The Company uses a Monte Carlo method to estimate the fair value of each stock option at the date of grant. Any consideration paid by the option holders to purchase shares is credited to common stock.

Stock-based compensation expense for the portion of equity awards for which the requisite service has not been rendered is recognized as the requisite service is rendered. The stock-based compensation expense for that portion of awards has been based on the grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. For options that vest based on the Company’s common stock achieving and maintaining defined market prices, the Company values the awards with a Monte Carlo method that utilizes various probability factors and other criterion in establishing fair value of the grant. The related compensation expense is recognized over the service period.

Cash

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

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 December 31, 2024 or September 30, 2024.

Earnings Per Share

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 and Preferred Stock

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 December 31, 2024 and September 30, 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.

Interest Rate Swap

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

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 December 31, 2024 and September 30, 2024, there was no indication of any global or economic impacts to our industry.

New Accounting Pronouncements

New Accounting Pronouncements

In November 2023, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2023-07 "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures" which provides guidance intended to improve reportable segment disclosure requirements, primarily through enhanced disclosures about significant segment expenses, and each reported measure of segment profit or loss. The ASU requires that a public entity that has a single reportable segment provide all the disclosures required by the amendments in this ASU and all existing segment disclosures in Topic 280. The amendments in this update are effective for all entities for fiscal years beginning after December 15, 2023 and interim

periods beginning after December 15, 2024. We are currently evaluating the impacts of the single reportable segment disclosures.

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 December 15, 2024. We are currently evaluating the impacts of the improvements to income tax disclosure.

In March 2024, the Securities and Exchange Commission ("SEC") has released a final rule that requires registrants to provide comprehensive climate-related disclosures in their annual reports and registration statements, including those for IPOs, beginning with annual reports for the year ending December 31, 2027, for smaller reporting companies ("SRC"). Registrants must disclose climate-related financial metrics and impacts on their financial estimates and assumptions in a footnote to the audited financial statements. The disclosures will also need to be addressed as part of management’s internal control over financial reporting ("ICFR") and will be subject to the financial statement and ICFR audit (if applicable) of an independent registered public accounting firm. We are currently evaluating the impacts of the improvements to our disclosure.

On November 4, 2024, the FASB issued ASU 2024-03 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.

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Revenue Recognition (Tables)

3 Months Ended

Dec. 31, 2024

Revenue from Contract with Customer [Abstract]

Schedule of Contract Balances Recognized on the Company's Consolidated Balance Sheets

The following table summarizes the contract balances recognized on the Company's consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Contract assets	$	31,486	$	23,945

Schedule of Disaggregation of Revenue From Contracts with Customers

The following series of tables present our revenue disaggregated by these categories:

Revenue by customer was as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Department of Health and Human Services	$	41,948	$	44,297
Department of Veterans Affairs	34,099		34,680
Department of Defense	13,355		16,871
Other	1,380		2,002
Total	$	90,782	$	97,850

Revenue by contract type was as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Time and Materials	$	49,400	$	54,789
Cost Reimbursable	18,143		19,751
Firm Fixed Price	23,239		23,310
Total	$	90,782	$	97,850

Revenue by whether the Company acts as a prime contractor or a subcontractor was as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Prime Contractor	$	84,439	$	87,633
Subcontractor	6,343		10,217
Total	$	90,782	$	97,850

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Leases (Tables)

3 Months Ended

Dec. 31, 2024

Leases [Abstract]

Schedule of Summarized Lease Balances in Consolidated Balance Sheet

The following table summarizes lease balances presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Operating lease right-of-use assets	$	7,255	$	6,681
Operating lease liabilities - current	$	2,753	$	2,652
Operating lease liabilities - long-term	13,354		12,789
Total operating lease liabilities	$	16,107	$	15,441

Schedule of Lease Costs and Other Information Related to Leases

Total lease costs for our leases were as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Operating	$	846	$	873
Short-term	159		50
Variable	33		37
Sublease income (a)	(49)		(67)
Total lease costs	$	989	$	893

Other information related to our leases were as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Cash paid for amounts included in the measurement of lease liabilities	$	968	$	1,237
Lease liabilities arising from obtaining right-of-use assets	1,377		—
Other lease information	$	2,345	$	1,237

Schedule of Company's Future Lease Payments

The Company's future minimum lease payments as of December 31, 2024 were as follows (in thousands):

Fiscal year ending:
2025 (remaining)	$	2,814
2026	3,641
2027	3,052
2028	2,914
2029	3,013
Thereafter	3,880
Total future lease payments	19,314
Less: imputed interest	(3,207)
Present value of future minimum lease payments	16,107
Less: current portion of operating lease liabilities	(2,753)
Long-term operating lease liabilities	$	13,354

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Supporting Financial Information (Tables)

3 Months Ended

Dec. 31, 2024

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Schedule of Accounts Receivable

The following table summarizes accounts receivable presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Billed receivables	$	32,784	$	25,904
Contract assets	31,486		23,945
Accounts receivable	$	64,270	$	49,849

Schedule of Other Current Assets

The following table summarizes other current assets presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Prepaid licenses and other expenses	$	1,580	$	1,315
Prepaid insurance and benefits	336		545
Other receivables	937		906
Other current assets	$	2,853	$	2,766

Schedule of Intangible Assets

The following table summarizes intangible assets, net presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Intangible assets
Customer contracts and related customer relationships	$	113,622	$	113,622
Covenants-not-to-compete	637		637
Trade name	13,034		13,034
Backlog	37,249		37,249
Total intangible assets	164,542		164,542
Less: accumulated amortization
Customer contracts and related customer relationships	(44,139)		(41,297)
Covenants-not-to-compete	(458)		(442)
Trade name	(3,814)		(3,488)
Backlog	(11,924)		(10,994)
Total accumulated amortization	(60,335)		(56,221)
Intangible assets, net	$	104,207	$	108,321

Schedule of Estimated Amortization of Intangible Assets

As of December 31, 2024, the estimated amortization expense per fiscal year was as follows (in thousands):

Fiscal year ending:
2025 (remaining)	$	12,340
2026	15,722
2027	14,694
2028	14,694
2029	13,734
Thereafter	33,023
Total amortization expense	$	104,207

Schedule of Equipment and Improvements, Net

The following table summarizes equipment and improvements, net presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Furniture and equipment	$	1,846	$	1,832
Computer equipment and software	7,573		7,273
Leasehold improvements	1,852		1,614
Total equipment and improvements	11,271		10,719
Less: accumulated depreciation	(9,082)		(8,889)
Equipment and improvements, net	$	2,189	$	1,830

Schedule of Accounts Payable, Accrued Expenses, and Other Current Liabilities

The following table summarizes accounts payable and accrued liabilities presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Accounts payable	$	13,291	$	13,421
Accrued benefits	1,679		4,519
Accrued workers' compensation insurance	2,015		1,528
Accrued bonus and incentive compensation	286		3,641
Accrued interest	711		619
Other accrued expenses	741		1,562
Accounts payable and accrued liabilities	$	18,723	$	25,290

Schedule of Accrued Payroll

The following table summarizes accrued payroll presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Accrued leave	$	7,912	$	8,569
Accrued payroll	5,968		3,070
Accrued payroll taxes	1,195		981
Accrued severance	48		228
Total accrued payroll	$	15,123	$	12,848

Schedule of Debt Obligations

The following table summarizes debt obligations presented on our consolidated balance sheets as follows (in thousands):

	December 31,		September 30,
	2024		2024
Secured term loan	$	142,500	$	142,500
Secured revolving line of credit	24,459		12,058
Less: unamortized deferred financing costs	(4,741)		(5,184)
Net bank debt obligations	162,218		149,374
Less: current portion of debt obligations, net of deferred financing costs (a)	(27,595)		(12,058)
Long-term portion of debt obligations, net of deferred financing costs	$	134,623	$	137,316

As of December 31, 2024, we have satisfied quarterly minimum principal payments on our secured term loan through September 30, 2025.

(a) As of December 31, 2024, the current portion comprises term loan amortization of $4.8 million and the $24.5 million outstanding balance on the secured revolving line of credit, net of $1.6 million of unamortized deferred financing costs.

Schedule of Interest Expense

The following table summarizes interest expense presented on our consolidated statements of operations as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
Interest expense (a)	$	3,685	$	4,016
Interest income (b)	(9)		—
Amortization of deferred financing costs (c)	457		642
Interest expense	$	4,133	$	4,658

(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.

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Credit Facilities (Tables)

3 Months Ended

Dec. 31, 2024

Debt Disclosure [Abstract]

Summary of Credit Facilities

A summary of our credit facilities as presented on our consolidated balance sheets as follows (in millions):

December 31, 2024				September 30, 2024
Arrangement	Loan Balance		Interest	Arrangement	Loan Balance		Interest
Secured term loan (a) due December 8, 2027	$	142,500	SOFR1 + 4.1%	Secured term loan (a) due December 8, 2027	$	142,500	SOFR1 + 4.1%
Secured revolving line of credit (b) due December 8, 2027	$	24,459	SOFR1 + 4.1%	Secured revolving line of credit (b) due December 8, 2027	$	12,058	SOFR1 + 4.1%

1Secured Overnight Financing Rate ("SOFR") as of December 31, 2024 and September 30, 2024 were 4.6% 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 ("FNB") which has a notional amount of $80.0 million at December 31, 2024, 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 three months ended December 31, 2024, interest expense has been decreased by approximately $0.1 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. On November 6, 2024, the Company completed an amendment to its credit facility. The amendment modified certain financial covenants thresholds for future measurement periods and reduced the amount available under the revolving line of credit, as discussed in further detail below. The amendment was approved by the Company's Board of Directors and Executive Management and the credit facility lenders. The loan agreement also requires us to comply with certain quarterly financial covenants including: (i) a minimum fixed charge coverage ratio ranging from 1.25:1.00 to 1.05:1.00 and (ii) a total leverage ratio not exceeding the ratio of 4.75:1.00 to 4.25:1.00 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 income taxes (benefit) expense, 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 December 31, 2024.

We are required to pay quarterly amortization payments, which commenced in December 2022. The annual amortization amounts are $19.0 million for fiscal years 2025 and 2026, and $23.75 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 $142.5 million as of December 31, 2024. We have satisfied the mandatory principal payments through September 2025.

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 2.5:1; (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 2.5:1 but greater than or equal to 1.5:1; 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 1.5:1. 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 December 31, 2024, we had unused borrowing capacity of $11.8 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 $24.5 million outstanding balance at December 31, 2024. 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.

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Stock-Based Compensation and Equity Grants (Tables)

3 Months Ended

Dec. 31, 2024

Share-Based Payment Arrangement [Abstract]

Schedule of Stock-based Compensation Expense

Stock-based compensation expense shown in the table below, is recorded in general and administrative expenses in our consolidated statements of operations as follows (in thousands):

	Three Months Ended
	December 31,
	2024		2023
DLH employees (a)	$	13	$	540
Non-employee directors (b)	180		80
Total stock option expense	$	193	$	620

(a) Included in this amount are equity grants of restricted stock units ("RSU") to Executive Officers, which were issued in accordance with the DLH long-term incentive compensation policy in this fiscal year, and stock option grants to employees during prior fiscal years. The RSUs issued and outstanding totaled 708,325 and 367,795 shares at December 31, 2024 and 2023, respectively. During the three months ended December 31, 2024 and 2023, the Company granted 312,906 and 169,544 shares of restricted stock units, respectively. During the three months ended December 31, 2024, 156,453 shares of the RSUs granted have performance-based vesting criteria and the remaining 156,453 shares have service-based vesting criteria. During the three months ended December 31, 2023, 84,773 shares of the RSUs granted have performance-based vesting criteria and the remaining 84,771 shares have service-based vesting criteria.

Unrecognized stock-based compensation expense is presented in the table below (in thousands):

	December 31,
	2024		2023
Unrecognized expense for DLH employees (a)	$	5,302	$	7,983
Unrecognized expense for non-employee directors	539		539
Total unrecognized expense	$	5,841	$	8,522

(a) On a weighted average basis, the unrecognized expense as of December 31, 2024 is expected to be recognized within the next 2.57 years.

Summary of Performance Vesting Critera

				Volatility
				50%
Grant Date	Performance Vesting Base	Performance Vesting Criteria	(Years)	Fair Value
December 20, 2024	Revenue	Revenue increase at the end of the performance period as compared to the year ended September 30, 2027	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 performance 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

Schedule of Stock Option Activity

A summary of the Company's stock option awards is as follows:

				(in years)
				Weighted
		Weighted		Average	(in thousands)
	(in thousands)	Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Term	Value
Options outstanding, September 30, 2024	1,237	$	9.28	6.1	$	1,313
Granted	—	—		—	—
Exercised	—	—		—	—
Cancelled	(50)	16.01		—	—
Options outstanding, December 31, 2024	1,187	$	9.31	5.80	$	652
Vested and exercisable, December 31, 2024	1,127	$	9.07	5.70	$	652

Schedule of Option Shares Outstanding, Vested and Expected to Vest

Stock option shares outstanding, vested and unvested balance as follows (in thousands):

	December 31,	September 30,
	2024	2024
Vested and exercisable	1,127	1,177
Unvested (a)	60	60
Options outstanding	1,187	1,237

(a) Certain awards vest upon satisfaction of certain performance criteria.

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Earnings Per Share (Tables)

3 Months Ended

Dec. 31, 2024

Earnings Per Share [Abstract]

Schedule of Diluted Earnings per Share

Earnings per share information is presented in the table below (in thousands except for per share amounts):

	Three Months Ended
	December 31,
	2024		2023
Numerator:
Net income	$	1,115	$	2,151
Denominator:
Denominator for basic net income per share - weighted-average outstanding shares	14,386		14,032
Effect of dilutive securities:
Stock options and restricted stock	177		764
Denominator for diluted net income per share - weighted-average outstanding shares	14,563		14,796
Net income per share - basic	$	0.08	$	0.15
Net income per share - diluted	$	0.08	$	0.15

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Commitment and Contingencies (Tables)

3 Months Ended

Dec. 31, 2024

Commitments and Contingencies Disclosure [Abstract]

Schedule of Contractual Obligations

Contractual obligations as of December 31, 2024 are as follows (in thousands):

			Payments Due Per Fiscal Year
			(Remaining)
	Total		2025		2026		2027		2028		2029		Thereafter
Debt obligations	$	166,959	$	24,459	$	19,000	$	23,750	$	99,750	$	—	$	—
Facility operating leases	19,314		2,814		3,641		3,052		2,914		3,013		3,880
Total contractual obligations	$	186,273	$	27,273	$	22,641	$	26,802	$	102,664	$	3,013	$	3,880

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Significant Accounting Policies (Details) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Dec. 31, 2024	Dec. 31, 2023	Sep. 30, 2024
Acquired Indefinite-lived Intangible Assets [Line Items]
Estimated useful live of intangible assets	10 years
Goodwill impairment loss	$ 0.0		$ 0.0
Uncertain tax positions	0.0		0.0
Income tax interest expense	0.0	$ 0.0
Income tax penalties expense	0.0	$ 0.0
Allowance for doubtful accounts	$ 0.0		$ 0.0
Treasury stock held (in shares)	0		0
Preferred shares authorized (in shares)	5,000,000		5,000,000
Preferred stock issued (in shares)	0		0
Employee Stock Option | Omnibus Equity Incentive Plan 2016
Acquired Indefinite-lived Intangible Assets [Line Items]
Expiration term of share-based compensation plan	10 years
Minimum
Acquired Indefinite-lived Intangible Assets [Line Items]
Estimated useful of long-lived assets	3 years
Minimum | Facilities and Equipment
Acquired Indefinite-lived Intangible Assets [Line Items]
Operating lease term (in years)	1 year
Maximum
Acquired Indefinite-lived Intangible Assets [Line Items]
Estimated useful of long-lived assets	7 years
Maximum | Facilities and Equipment
Acquired Indefinite-lived Intangible Assets [Line Items]
Operating lease term (in years)	6 years 6 months

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Revenue Recognition - Contract Balances (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Revenue from Contract with Customer [Abstract]
Contract assets	$ 31,486	$ 23,945

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Revenue Recognition - Narrative (Details) - USD ($) $ in Millions	Dec. 31, 2024	Sep. 30, 2024
Revenue from Contract with Customer [Abstract]
Contract liabilities	$ 0.0	$ 0.0

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Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2024	Dec. 31, 2023
Disaggregation of Revenue [Line Items]
Total	$ 90,782	$ 97,850
Prime Contractor
Disaggregation of Revenue [Line Items]
Total	84,439	87,633
Subcontractor
Disaggregation of Revenue [Line Items]
Total	6,343	10,217
Time and Materials
Disaggregation of Revenue [Line Items]
Total	49,400	54,789
Cost Reimbursable
Disaggregation of Revenue [Line Items]
Total	18,143	19,751
Firm Fixed Price
Disaggregation of Revenue [Line Items]
Total	23,239	23,310
Department of Health and Human Services | Revenue from Contract with Customer | Customer concentration
Disaggregation of Revenue [Line Items]
Total	41,948	44,297
Department of Veterans Affairs | Revenue from Contract with Customer | Customer concentration
Disaggregation of Revenue [Line Items]
Total	34,099	34,680
Department of Defense | Revenue from Contract with Customer | Customer concentration
Disaggregation of Revenue [Line Items]
Total	13,355	16,871
Other | Revenue from Contract with Customer | Customer concentration
Disaggregation of Revenue [Line Items]
Total	$ 1,380	$ 2,002

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Leases - Summary of Lease Balances in Consolidated Balance Sheets (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Leases [Abstract]
Operating lease right-of-use assets	$ 7,255	$ 6,681
Operating lease liabilities - current	2,753	2,652
Operating lease liabilities - long-term	13,354	12,789
Total operating lease liabilities	$ 16,107	$ 15,441

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Leases - Narrative (Details) $ in Thousands	3 Months Ended
	Dec. 31, 2024 USD ($) sublease sublease_option	Dec. 31, 2023 USD ($)
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Lease liability recognized to acquire a right of use asset | $	$ 1,377	$ 0
Number of facilities subleased | sublease	1
Sublease term	5 years
Sublease number of additional extension options | sublease_option	2
Sublease extension option period	1 year
Weighted-average remaining lease term	5 years 7 months 6 days
Weighted-average discount rate	6.60%
Minimum | Facilities and Equipment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease term (in years)	1 year
Maximum | Facilities and Equipment
New Accounting Pronouncements or Change in Accounting Principle [Line Items]
Operating lease term (in years)	6 years 3 months 18 days

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Leases - Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2024	Dec. 31, 2023
Leases [Abstract]
Operating	$ 846	$ 873
Short-term	159	50
Variable	33	37
Sublease income	(49)	(67)
Total lease costs	$ 989	$ 893

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Leases - Company's Future Minimum Lease Payments (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Leases [Abstract]
2025 (remaining)	$ 2,814
2026	3,641
2027	3,052
2028	2,914
2029	3,013
Thereafter	3,880
Total future lease payments	19,314
Less: imputed interest	(3,207)
Total operating lease liabilities	16,107	$ 15,441
Less: current portion of operating lease liabilities	(2,753)	(2,652)
Long-term operating lease liabilities	$ 13,354	$ 12,789

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Leases - Other Information Related to Leases (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2024	Dec. 31, 2023
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities	$ 968	$ 1,237
Lease liabilities arising from obtaining right-of-use assets	1,377	0
Other lease information	$ 2,345	$ 1,237

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Supporting Financial Information - Accounts Receivable (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Billed receivables	$ 32,784	$ 25,904
Contract assets	31,486	23,945
Allowance for doubtful accounts	0	0
Accounts receivable	$ 64,270	$ 49,849

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Supporting Financial Information - Other Current Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Prepaid licenses and other expenses	$ 1,580	$ 1,315
Prepaid insurance and benefits	336	545
Other receivables	937	906
Other current assets	$ 2,853	$ 2,766

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Supporting Financial Information - Goodwill (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Goodwill	$ 138,161	$ 138,161

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Supporting Financial Information - Intangible Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Finite-Lived Intangible Assets [Line Items]
Total intangible assets	$ 164,542	$ 164,542
Total accumulated amortization	(60,335)	(56,221)
Intangible assets, net	104,207	108,321
Customer contracts and related customer relationships
Finite-Lived Intangible Assets [Line Items]
Total intangible assets	113,622	113,622
Total accumulated amortization	(44,139)	(41,297)
Covenants-not-to-compete
Finite-Lived Intangible Assets [Line Items]
Total intangible assets	637	637
Total accumulated amortization	(458)	(442)
Trade name
Finite-Lived Intangible Assets [Line Items]
Total intangible assets	13,034	13,034
Total accumulated amortization	(3,814)	(3,488)
Backlog
Finite-Lived Intangible Assets [Line Items]
Total intangible assets	37,249	37,249
Total accumulated amortization	$ (11,924)	$ (10,994)

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Supporting Financial Information - Narrative (Details) - USD ($) $ in Millions	3 Months Ended
	Dec. 31, 2024	Dec. 31, 2023
Finite-Lived Intangible Assets [Line Items]
Amortization expense of intangible assets	$ 4.1	$ 4.1
Intangible assets, remaining amortization period	7 years 1 month 6 days
Depreciation	$ 0.2	$ 0.1
Customer contracts and related customer relationships
Finite-Lived Intangible Assets [Line Items]
Intangible assets, remaining amortization period	7 years 1 month 6 days
Backlog
Finite-Lived Intangible Assets [Line Items]
Intangible assets, remaining amortization period	7 years 1 month 6 days
Trade name
Finite-Lived Intangible Assets [Line Items]
Intangible assets, remaining amortization period	7 years 6 months
Covenants-not-to-compete
Finite-Lived Intangible Assets [Line Items]
Intangible assets, remaining amortization period	5 years 3 months 18 days

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Supporting Financial Information - Estimated Future Amortization Expense of Intangible Assets (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
2025 (remaining)	$ 12,340
2026	15,722
2027	14,694
2028	14,694
2029	13,734
Thereafter	33,023
Intangible assets, net	$ 104,207	$ 108,321

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Supporting Financial Information - Equipment and Improvements, Net (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Furniture and equipment	$ 1,846	$ 1,832
Computer equipment and software	7,573	7,273
Leasehold improvements	1,852	1,614
Total equipment and improvements	11,271	10,719
Less: accumulated depreciation	(9,082)	(8,889)
Equipment and improvements, net	$ 2,189	$ 1,830

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Supporting Financial Information - Accounts Payable, Accrued Expense and Other Current Liabilities (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accounts payable	$ 13,291	$ 13,421
Accrued benefits	1,679	4,519
Accrued workers' compensation insurance	2,015	1,528
Accrued bonus and incentive compensation	286	3,641
Accrued interest	711	619
Other accrued expenses	741	1,562
Accounts payable and accrued liabilities	$ 18,723	$ 25,290

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Supporting Financial Information - Accrued Payroll (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accrued leave	$ 7,912	$ 8,569
Accrued payroll	5,968	3,070
Accrued payroll taxes	1,195	981
Accrued severance	48	228
Total accrued payroll	$ 15,123	$ 12,848

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Supporting Financial Information - Debt Obligations (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Sep. 30, 2024
Debt Instrument [Line Items]
Long-term debt	$ 166,959
Net bank debt obligations	162,218	$ 149,374
Less: current portion of debt obligations, net of deferred financing costs (a)	(27,595)	(12,058)
Long-term portion of debt obligations, net of deferred financing costs	134,623	137,316
Term loan amortization	19,000
Secured Debt
Debt Instrument [Line Items]
Long-term debt	142,500	142,500
Less: unamortized deferred financing costs	(4,741)	(5,184)
Term loan amortization	4,800
Current unamortized deferred financing costs	1,600
Revolving Line of Credit
Debt Instrument [Line Items]
Long-term debt	24,459	12,058
Revolving Line of Credit | Secured Debt
Debt Instrument [Line Items]
Long-term debt	$ 24,459	$ 12,058

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Supporting Financial Information - Interest Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2024	Dec. 31, 2023
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Interest expense	$ 3,685	$ 4,016
Interest income	(9)	0
Amortization of deferred financing costs	457	642
Interest expense	$ 4,133	$ 4,658

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Credit Facilities - Schedule of Credit Facilities (Details) - USD ($) $ in Thousands	3 Months Ended	6 Months Ended
	Dec. 31, 2024	Mar. 31, 2024	Sep. 30, 2024
Line of Credit Facility [Line Items]
Long-term debt	$ 166,959
Interest rate spread	4.60%		5.20%
Revolving Line of Credit
Line of Credit Facility [Line Items]
Long-term debt	$ 24,459		$ 12,058
Secured Debt
Line of Credit Facility [Line Items]
Long-term debt	142,500		142,500
Secured Debt | Term Loans
Line of Credit Facility [Line Items]
Long-term debt	$ 142,500		142,500
Interest	4.10%	4.10%
Secured Debt | Revolving Line of Credit
Line of Credit Facility [Line Items]
Long-term debt	$ 24,459		$ 12,058
Interest	4.10%	4.10%

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Credit Facilities - Narrative (Details)	3 Months Ended
	Dec. 31, 2024 USD ($)	Sep. 30, 2024 USD ($)
Line of Credit Facility [Line Items]
Debt amortization fiscal year 2025	$ 23,750,000
2026	19,000,000
Debt amortization fiscal year 2027	99,750,000
Long-term debt	166,959,000
Maturity Two
Line of Credit Facility [Line Items]
Derivative notional amount	80,000,000
Interest Rate Swap
Line of Credit Facility [Line Items]
Decrease in interest expense	$ 100,000
Interest Rate Swap Due 2026
Line of Credit Facility [Line Items]
Derivative fixed interest rate	4.10%
Revolving Line of Credit
Line of Credit Facility [Line Items]
Long-term debt	$ 24,459,000	$ 12,058,000
Secured Debt
Line of Credit Facility [Line Items]
2026	4,800,000
Long-term debt	142,500,000	142,500,000
Secured Debt | Term Loans
Line of Credit Facility [Line Items]
Debt amortization fiscal year 2025	19,000,000
2026	19,000,000
Debt amortization fiscal year 2027	23,750,000
Long-term debt	$ 142,500,000	142,500,000
Secured Debt | Term Loans | Excess Cash Flows Greater Than Or Equal to 2.50
Line of Credit Facility [Line Items]
Percentage of excess cash flow for each year of funded indebtedness to EBDTA	75.00%
Ratio of funded indebtedness to adjusted EBIDTA	2.5
Secured Debt | Term Loans | Excess Cash Flows Less Than 2.50 But Greater Than 1.50
Line of Credit Facility [Line Items]
Percentage of excess cash flow for each year of funded indebtedness to EBDTA	50.00%
Secured Debt | Term Loans | Excess Cash Flows Less Than 2.50
Line of Credit Facility [Line Items]
Ratio of funded indebtedness to adjusted EBIDTA	2.5
Secured Debt | Term Loans | Excess Cash Flows Equal to 1.50
Line of Credit Facility [Line Items]
Ratio of funded indebtedness to adjusted EBIDTA	1.5
Secured Debt | Term Loans | Excess Cash Flows Less Than 1.50
Line of Credit Facility [Line Items]
Percentage of excess cash flow for each year of funded indebtedness to EBDTA	0.00%
Ratio of funded indebtedness to adjusted EBIDTA	1.5
Secured Debt | Term Loans | Maximum
Line of Credit Facility [Line Items]
Fixed charge coverage ratio	1.25
Ratio of funded indebtedness to EBITDA through maturity	4.75
Secured Debt | Term Loans | Minimum
Line of Credit Facility [Line Items]
Fixed charge coverage ratio	1.05
Ratio of funded indebtedness to EBITDA through maturity	4.25
Secured Debt | Revolving Line of Credit
Line of Credit Facility [Line Items]
Long-term debt	$ 24,459,000	$ 12,058,000
Line of credit, maximum borrowing capacity	50,000,000
Line of credit, unused borrowing capacity	11,800,000
Secured Debt | Letter of Credit
Line of Credit Facility [Line Items]
Line of credit, current borrowing capacity	$ 10,000,000

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Stock-Based Compensation and Equity Grants - Narrative (Details) - shares	3 Months Ended
	Dec. 31, 2024	Dec. 31, 2023
Omnibus Equity Incentive Plan 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of shares available for grant (in shares)	800,000
Employee Stock Option | Omnibus Equity Incentive Plan 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration term of share-based compensation plan	10 years
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of restricted stock units granted (in shares)	708,325	367,795
Restricted Stock Units | NEO
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of restricted stock units granted (in shares)	312,906	169,544
Performance Shares | NEO
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of restricted stock units granted (in shares)	156,453	84,773
Service Based Restricted Stock Units | NEO
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of restricted stock units granted (in shares)	156,453	84,771

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Stock-Based Compensation and Equity Grants - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended
	Dec. 31, 2024	Dec. 31, 2023
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock option expense	$ 193	$ 620
Restricted Stock Units
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of restricted stock units granted (in shares)	708,325	367,795
Expected term (years)	3 years	3 years
DLH employees
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Weighted average share based compensation expense recognition period	2 years 6 months 25 days
Non-employee directors | Restricted Stock Units
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of restricted stock units granted (in shares)	78,556	61,525
NEO | Restricted Stock Units
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of restricted stock units granted (in shares)	312,906	169,544
NEO | Performance Shares
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of restricted stock units granted (in shares)	156,453	84,773
NEO | Service Based Restricted Stock Units
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of restricted stock units granted (in shares)	156,453	84,771
Selling, General and Administrative Expenses | DLH employees
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock option expense	$ 13	$ 540
Selling, General and Administrative Expenses | Non-employee directors
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total stock option expense	$ 180	$ 80

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Stock-Based Compensation and Equity Grants - Performance Based Awards (Details)	3 Months Ended
	Dec. 31, 2024 $ / shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Volatility	50.00%
December 2024 Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Minimum average price (in dollars per share)	$ 23.04
December 2023 Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Minimum average price (in dollars per share)	$ 25.65
Revenue | December 2024 Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	3 years
Calculated fair value (in dollars per share)	$ 0.65
Revenue | December 2023 Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	3 years
Calculated fair value (in dollars per share)	$ 3.82
Stock price | December 2024 Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	3 years
Calculated fair value (in dollars per share)	$ 1.67
Stock price | December 2023 Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	3 years
Calculated fair value (in dollars per share)	$ 5.36

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Stock-Based Compensation and Equity Grants - Schedule of Unrecognized Stock-Based Compensation Expense (Details) - USD ($) $ in Thousands	Dec. 31, 2024	Dec. 31, 2023
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total unrecognized expense	$ 5,841	$ 8,522
DLH employees
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total unrecognized expense	5,302	7,983
Non-employee directors
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total unrecognized expense	$ 539	$ 539

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Stock-Based Compensation and Equity Grants - Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended	12 Months Ended
	Dec. 31, 2024	Sep. 30, 2024
Number of Shares
Options outstanding, beginning (in shares)	1,237
Granted (in shares)	0
Exercised (in shares)	0
Cancelled (in shares)	(50)
Options outstanding, ending (in shares)	1,187	1,237
Weighted Average Exercise Price
Options outstanding, beginning (in dollars per share)	$ 9.28
Granted (in dollars per share)	0
Exercised (in dollars per share)	0
Cancelled (in dollars per share)	16.01
Options outstanding, ending (in dollars per share)	$ 9.31	$ 9.28
Weighted Average Remaining Contractual Term
Weighted Average Remaining Contractual Term	5 years 9 months 18 days	6 years 1 month 6 days
Aggregate Intrinsic Value
Aggregate Intrinsic Value	$ 652	$ 1,313
Vested and exercisable (in shares)	1,127
Vested and exercisable, weighted average exercise price (in dollars per share)	$ 9.07
Vested and exercisable, weighted average remaining contractual term (in years)	5 years 8 months 12 days
Vested and exercisable, intrinsic value	$ 652

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Stock-Based Compensation and Equity Grants - Stock Options Outstanding, Vested and Unvested (Details) - shares shares in Thousands	Dec. 31, 2024	Sep. 30, 2024
Share-Based Payment Arrangement [Abstract]
Vested and exercisable (in shares)	1,127	1,177
Unvested (in shares)	60	60
Option outstanding (in shares)	1,187	1,237

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Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Dec. 31, 2024	Dec. 31, 2023
Numerator:
Net income	$ 1,115	$ 2,151
Denominator:
Denominator for basic net income (loss) per share - weighted-average outstanding shares (in shares)	14,386	14,032
Effect of dilutive securities:
Stock options and restricted stock (in shares)	177	764
Denominator for diluted net income (loss) per share - weighted-average outstanding shares (in shares)	14,563	14,796
Net income per share - basic (in dollars per share)	$ 0.08	$ 0.15
Net income per share - diluted (in dollars per share)	$ 0.08	$ 0.15

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Commitments and Contingencies - Contractual Obligations (Details) $ in Thousands	Dec. 31, 2024 USD ($)
Debt obligations
Debt obligations	$ 166,959
2025	24,459
2026	19,000
2027	23,750
2028	99,750
2029	0
Thereafter	0
Operating Leases
Total future lease payments	19,314
2025 (remaining)	2,814
2026	3,641
2027	3,052
2028	2,914
2029	3,013
Thereafter	3,880
Total Contractual Obligations
Total Obligations	186,273
2025	27,273
2026	22,641
2027	26,802
2028	102,664
2029	3,013
Thereafter	3,880
Facility operating leases
Operating Leases
Total future lease payments	19,314
2025 (remaining)	2,814
2026	3,641
2027	3,052
2028	2,914
2029	3,013
Thereafter	$ 3,880