dlhc-20251231

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, 2025

☐ 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: 14,493,035 shares of Common Stock, par value $0.001 per share, were outstanding as of February 6, 2026.

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			30
ITEM 4: CONTROLS AND PROCEDURES			30
PART II OTHER INFORMATION			31
ITEM 1: LEGAL PROCEEDINGS			31
ITEM 1A: RISK FACTORS			31
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			33
SIGNATURE			34

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,
		2025		2024
Revenue		$	68,892	$	90,782
Cost of operations:
Contract costs		55,395		72,771
General and administrative costs		7,761		8,067


Depreciation and amortization		4,300		4,307
Total operating costs		67,456		85,145
Income from operations		1,436		5,637
Interest expenses		3,396		4,133
(Loss) income before provision for income taxes		(1,960)		1,504
Provision for income taxes (benefit) expense		(636)		389
Net (loss) income		$	(1,324)	$	1,115

Net (loss) income per share
Basic		$	(0.09)	$	0.08
Diluted		$	(0.09)	$	0.08
Weighted average common stock outstanding
Basic		14,493		14,386
Diluted		14,563		14,563

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

DLH HOLDINGS CORP.

CONSOLIDATED BALANCE SHEETS

(in thousands, except par value of shares)


	December 31, 2025		September 30, 2025
	(unaudited)
ASSETS
Current assets:
Cash	$	257	$	125
Accounts receivable	35,842		38,394
Other current assets	3,543		4,018
Total current assets	39,642		42,537
Goodwill	138,161		138,161
Intangible assets, net	87,752		91,865
Operating lease right-of-use assets	8,264		8,764
Deferred income taxes, net	8,447		7,947
Equipment and improvements, net	1,127		1,274
Other long-term assets	115		115
Total assets	$	283,508	$	290,663
LIABILITIES AND SHAREHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	14,250	$	19,246
Accrued payroll	5,996		12,153
Debt obligations - current, net of deferred financing costs	17,425		8,067
Operating lease liabilities - current	3,129		2,918
Other current liabilities	226		287
Total current liabilities	41,026		42,671
Long-term liabilities:
Debt obligations - long-term, net of deferred financing costs	116,050		119,966
Operating lease liabilities - long-term	13,199		14,022
Other long-term liabilities	1,045		1,046
Total long-term liabilities	130,294		135,034
Total liabilities	171,320		177,705
Shareholders' equity:
Common stock, $0.001 par value; 40,000 shares authorized; 14,493 and 14,493 shares issued and outstanding at December 31, 2025 and September 30, 2025, respectively	14		14
Additional paid-in capital	102,288		101,734
Retained earnings	9,886		11,210
Total shareholders’ equity	112,188		112,958
Total liabilities and shareholders' equity	$	283,508	$	290,663

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

DLH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(unaudited, in thousands)


	Three Months Ended
	December 31,
	2025		2024
Operating activities
Net (loss) income	$	(1,324)	$	1,115
Adjustments to reconcile net (loss) income to net cash used in operating activities:
Depreciation and amortization	4,300		4,307
Amortization of deferred financing costs charged to interest expense	433		457
Stock-based compensation expense	647		193
Deferred income taxes, net	(501)		780

Changes in operating assets and liabilities:
Accounts receivable	2,552		(14,421)
Other assets	974		(661)
Accounts payable and accrued liabilities	(4,996)		(6,567)
Accrued payroll	(6,157)		2,275
Other liabilities	(698)		984
Net cash used in operating activities	(4,770)		(11,538)
Investing activities

Purchase of equipment and improvements	(39)		(552)
Net cash used in investing activities	(39)		(552)
Financing activities
Proceeds from revolving line of credit	67,396		59,910
Repayment of revolving line of credit	(62,362)		(47,509)


Payments of deferred financing costs	—		(202)

Payment of tax obligations resulting from net exercise of stock options	(93)		—
Net cash provided by financing activities	4,941		12,199
Net change in cash	132		109
Cash - beginning of period	125		342
Cash - end of period	$	257	$	451
Supplemental disclosure of cash flow information
Cash paid during the period for interest	$	3,003	$	3,594
Cash paid during the period for income taxes	$	—	$	32
Supplemental disclosure of non-cash activity
Common stock surrendered for the exercise of stock options	$	(93)	$	—
Lease liability recognized to acquire a right-of-use asset	$	—	$	1,377

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

DLH HOLDINGS CORP.

CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY

(unaudited, in thousands)


	Common Stock			Additional Paid-In Capital		Retained Earnings		Total Shareholders' Equity
	Shares	Amount
Balance at September 30, 2025	14,493	$	14	$	101,734	$	11,210	$	112,958

Expense related to director restricted stock units	—	—		97		—		97
Expense related to employee stock-based compensation	—	—		550		—		550

Common shares surrendered for stock option exercises and restricted stock unit vesting	—	—		(93)		—		(93)
Net loss	—	—		—		(1,324)		(1,324)
Balance at December 31, 2025	14,493	$	14	$	102,288	$	9,886	$	112,188


	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

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

DLH HOLDINGS CORP.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

December 31, 2025

1. Basis of Presentation and Principles of Consolidation

The accompanying consolidated financial statements include the accounts of DLH Holdings Corp. and its wholly-owned subsidiaries ("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 accounting principles generally accepted in the United States of America ("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. Certain prior year amounts have been reclassified to conform to the fiscal 2026 presentation.

Operating results for the three months ended December 31, 2025 are not necessarily indicative of the results that may be expected for the year ending September 30, 2026 or any future period. Amounts for the three months ended December 31, 2025 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, 2025 filed with the Securities and Exchange Commission on December 10, 2025.

2. Significant Accounting Policies

Use of Estimates

The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The most significant of these estimates and assumptions relate to estimating costs including overhead and its allocation, valuing and determining the amortization periods for long-lived intangible assets, interest rate swaps, stock-based compensation, goodwill, and right-of-use assets and lease liabilities. We evaluate these estimates and judgments on an ongoing basis and base our estimates on historical experience, current and expected future outcomes, third-party evaluations, and various other assumptions that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. We revise material accounting estimates if changes occur, such as more experience is acquired, additional information is obtained, or there is new information on which an estimate was or can be based. Actual results could differ from those estimates.

Revenue

The Company's revenues from contracts with customers are derived from offerings that include technology-enabled business process outsourcing, program management solutions, and public health research and analytics, substantially within the U.S. government and its agencies. The Company has various types of contracts including time-and-materials contracts, cost-reimbursable contracts, and firm-fixed-price contracts.

We consider a contract with a customer to exist when there is a commitment by both parties (customer and Company), payment terms are determinable, there is commercial substance, and collectability is probably in accordance with Accounting Standards Codification ("ASC") No. 606, "Revenue from Contracts with Customers" ("Topic 606").

We recognize revenue over time when there is a continuous transfer of control to our customer as performance obligations are satisfied. For our U.S. government contracts, this continuous transfer of control to the customer is transferred over time and revenue is recognized based on the extent of progress toward completion of the performance obligation. We consider control to transfer when we have a right to payment. In some instances, the Company commences providing services prior to formal approval to begin work from the customer. The Company considers these factors, the risks associated with commencing work, and legal enforceability in determining whether a contract exists under Topic 606.

Contract modification can occur throughout the life of the contract and can affect the transaction price, extend the period of performance, adjust funding, or create new performance obligations. We review each modification to assess the impact of these

contract changes to determine if it should be treated as part of the original performance obligation or as a separate contract. Contract modifications impact performance obligations when the modification either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue and profit cumulatively. Furthermore, a significant change in one or more estimates could affect the profitability of our contracts. We recognize adjustments in estimated profit on contracts in the period identified.

For service contracts, we satisfy our performance obligations as services are rendered. We use cost-based input and time-based output methods to measure progress based on the contract type.

•Time and material - We bill the customer per labor hour and per material, and revenue is recognized in the amount invoiced as the amount corresponds directly to the value of our performance to date. Revenue is recognized to the extent of billable rates times hours delivered plus materials and other reimbursable costs incurred.

•Cost reimbursable - We record reimbursable costs as incurred, including an estimated share of the contractual fee earned.

•Firm fixed price - We recognize revenue over time using a straight-line measure of progress.

Contract costs generally include direct costs such as labor, materials, subcontract costs, and indirect costs identifiable with or allocable to a specific contract. Costs are expensed as incurred and include an estimate of the contractual fees earned. Contract costs incurred for U.S. government contracts, including indirect costs, are subject to audit and adjustment by various government audit agencies. Historically, our adjustments have not been material.

Contract assets - Amounts are invoiced as work progresses in accordance with agreed-upon contractual terms. In part, revenue recognition occurs before we have the right to bill, resulting in contract assets. These contract assets are reported within accounts receivable on our consolidated balance sheets and are invoiced in accordance with payment terms defined in each contract. Period end balances will vary from period to period due to agreed-upon contractual terms.

Contract liabilities - Amounts are a result of billings in excess of costs incurred or prepayment for services to be rendered.

Fair Value of Financial Instruments

The carrying amounts of the Company's cash, accounts receivable, contract assets, accrued expenses, and accounts payable approximate fair value due to the short-term nature of these instruments. The fair values of the Company's debt instruments approximate fair value because the underlying interest rates approximate market rates that the Company could obtain for similar instruments at the balance sheet dates.

Long-Lived Assets

Our long-lived assets include equipment and improvements, intangible assets, right-of-use assets, and goodwill. The Company continues to review long-lived assets for possible impairment or loss of value at least annually, or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit's carrying amount is greater than its fair value. Specifically related to goodwill, if the qualitative analysis indicates a quantitative assessment is necessary, the Company utilizes multiple methods to determine its implied fair value. Each method utilizes a significant amount of judgment and may not be indicative of the Company's fair value on its own and therefore multiple methods could be combined to determine an implied fair value. Each method utilizes relevant publicly available information as well as observable market conditions. If the book value of goodwill exceeds its fair value, then an impairment is recognized and goodwill is written down to fair value. The impairment loss would be recognized as an operating expense.

Equipment and improvements are recorded at cost, less accumulated depreciation and amortization. Depreciation and amortization are provided using the straight-line method over the estimated useful asset lives (3 to 7 years) and the shorter of the initial lease term or estimated useful life for leasehold improvements. Maintenance and repair costs are expensed as incurred. Intangible assets (other than goodwill) are originally recorded at fair value and are amortized on a straight-line basis over their estimated useful lives of 10 years.

Right-of-use assets are measured at the present value of future minimum lease payments, including all probable renewals, plus lease payments made to the lessor before or at lease commencement and indirect costs paid, less incentives received. Our right-of-use assets include long-term leases for facilities and equipment and are amortized over their respective lease terms.

Lease Liabilities

The Company has leases for facilities and office equipment. Our lease liabilities are recognized as the present value of the future minimum lease payments over the lease term. Our lease payments consist of fixed and in-substance fixed amounts attributable to the use of the underlying asset over the lease term. Variable lease payments that do not depend on an index rate or are not in-substance fixed payments are excluded in the measurement of right-of-use assets and lease liabilities and are expensed in the period incurred. The incremental borrowing rate on our secured term loan is used in determining the present value of future minimum lease payments. Some of our lease agreements include options to extend the lease term or terminate the lease. These options are accounted for in our right-of-use assets and lease liabilities when it is reasonably certain that the Company will extend the lease term or terminate the lease. The Company does not have any finance leases. As of December 31, 2025, operating leases for facilities and equipment have remaining lease terms of less than 1 year to 7.1 years.

Goodwill

The Company performs impairment evaluation at least annually at the end of the fiscal year and between annual tests whenever there is an indication of impairment. The assessment at December 31, 2025 indicated a triggering event had occurred requiring that the Company perform additional quantitative assessments. The triggering event was primarily due to the decrease in the Company's share price resulting in a decline in market capitalization below the recorded value of shareholder's equity. Management then performed a series of quantitative assessments utilizing multiple evaluation methods. Those assessments included both market and income-based methods utilizing level 1 observable market data and level 3 estimates. Significant estimates in the market-based methods included identifying similar companies with comparable business factors such as service offerings, customers, size, growth, profitability, risk and return on investment, as well as assessing comparable market multiples and control premiums in estimating the fair value of the Company. For the market-based methods, the Company used the market capitalization with the inclusion of a control premium as one estimation of fair value. The other market-based method used publicly available market multiples of relevant publicly traded companies applied to our expected EBITDA and revenue for fiscal 2026 to estimate the Company's fair value. The income-based method is a discounted cash flow analysis and the significant estimates included expected growth rates, profitability and the weighted average cost of capital. The Company used a weighted average blend of these methods to assess its fair value. The results of those assessments indicated that the Company's fair value was in excess of the Company's book value and therefore its goodwill was not impaired.

Notwithstanding this evaluation, factors including non-renewal of a major contract or other substantial changes in business conditions could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to future periods’ results of operations. There were no impairments during the prior year ended September 30, 2025.

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, 2025 or September 30, 2025. We report interest and penalties as a component of provision for income taxes. During the three months ended December 31, 2025 and 2024, 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 vesting criteria 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 equity awards has been based on the

grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. For other equity awards 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, 2025 or September 30, 2025.

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, 2025 and September 30, 2025, 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, 2025 and September 30, 2025, 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, 2025 and September 30, 2025, there was no indication of any global or economic impacts to our industry.

3. New Accounting Pronouncements

In December 2023, the 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 will adopt ASU 2023-09 in our Annual Report on Form 10-K for the fiscal year ending September 30, 2026. We are currently evaluating the impacts of the improvements to income tax disclosure.

In March 2024, the Securities and Exchange Commission ("SEC") 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.

In November 2024, the FASB issued ASU 2024-03, "Income Statement—Reporting Comprehensive Income (Subtopic 220-40): Expense Disaggregation Disclosures." To enhance transparency in financial reporting by requiring public business entities to disclose disaggregated information about expenses in their financial statements. The guidance mandates disclosure of specific cost components, such as inventory purchases, employee compensation, depreciation, and amortization, within relevant income statement expense captions, along with qualitative descriptions of any remaining undissected amounts. Entities must also disclose total selling expenses and define these annually. Effective for annual reporting periods beginning after December 15, 2026, and interim periods in 2027, the ASU allows prospective or retrospective application and permits early adoption. We are currently evaluating the impacts of the improvements to our disclosure.

4. Revenue Recognition

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


	December 31,		September 30,
	2025		2025
Contract assets	$	21,440	$	22,000

Contract assets are included as part of accounts receivable on the consolidated balances sheets. The change from prior period is primarily due to reduced revenue volume. Contract liabilities had no balance as of December 31, 2025 and September 30, 2025.

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,
		2025		2024
Department of Health and Human Services		$	34,630	$	41,948
Department of Veterans Affairs		26,911		34,099
Department of Defense		7,226		13,355

Other		125		1,380
Total		$	68,892	$	90,782

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


	Three Months Ended
	December 31,
		2025		2024
Time and Materials		$	30,605	$	49,400
Firm Fixed Price		24,288		23,239
Cost Reimbursable		13,999		18,143
Total		$	68,892	$	90,782

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


	Three Months Ended
	December 31,
		2025		2024
Prime Contractor		$	64,454	$	84,439
Subcontractor		4,438		6,343
Total		$	68,892	$	90,782

5. Leases

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


	December 31,		September 30,
	2025		2025
Operating lease right-of-use assets	$	8,264	$	8,764

Operating lease liabilities - current	$	3,129	$	2,918
Operating lease liabilities - long-term	13,199		14,022
Total operating lease liabilities	$	16,328	$	16,940

As of December 31, 2025, operating leases for facilities and equipment have remaining lease terms of less than 1 to 7.1 years.

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


	Three Months Ended
	December 31,
		2025		2024
Operating		$	816	$	846
Short-term		67		159
Variable		22		33
Sublease income (a)		(48)		(49)
Total lease costs		$	857	$	989

(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 remaining sublease term is 5.25 years.

The Company's future minimum lease payments as of December 31, 2025 were as follows (in thousands):


Fiscal year ending:
2026 (remaining)	$	3,095
2027	3,591
2028	3,468
2029	3,582
2030	3,194
Thereafter	2,697
Total future lease payments	19,627
Less: imputed interest	(3,299)
Present value of future minimum lease payments	16,328
Less: current portion of operating lease liabilities	(3,129)
Long-term operating lease liabilities	$	13,199

At December 31, 2025, the weighted-average remaining lease term and weighted-average discount rate were 5.2 years and 6.9%, respectively. The calculation of the weighted-average discount rate was determined based on borrowing terms from our secured term loan.

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


	Three Months Ended
	December 31,
	2025		2024
Cash paid for amounts included in the measurement of lease liabilities	$	897	$	968
Lease liabilities arising from obtaining right-of-use assets	—		1,377
Other lease information	$	897	$	2,345

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,
	2025		2025
Billed receivables	$	14,402	$	16,394
Contract assets	21,440		22,000

Accounts receivable	$	35,842	$	38,394

Other current assets

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


	December 31,		September 30,
	2025		2025
Prepaid licenses and other expenses	$	2,250	$	1,892
Prepaid insurance and benefits	620		1,015
Other receivables	673		1,111
Other current assets	$	3,543	$	4,018

Goodwill

There were no changes in goodwill for the three months ended December 31, 2025. The balance of goodwill was approximately $138.2 million as of December 31, 2025 and September 30, 2025.

Intangible assets

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


	December 31,		September 30,
	2025		2025
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	(55,507)		(52,665)
Covenants-not-to-compete	(522)		(506)
Trade name	(5,117)		(4,792)
Backlog	(15,644)		(14,714)
Total accumulated amortization	(76,790)		(72,677)
Intangible assets, net	$	87,752	$	91,865

Amortization expense was $4.1 million and $4.1 million for the three months ended December 31, 2025 and 2024, respectively.

As of December 31, 2025, the estimated amortization expense per fiscal year was as follows (in thousands):


Fiscal year ending:
2026 (remaining)	$	11,607
2027	14,694
2028	14,694
2029	13,734
2030	11,637
Thereafter	21,386
Total amortization expense	$	87,752

The weighted-average remaining amortization period at December 31, 2025 is as follows:


Intangible assets						Weighted-Average Remaining Amortization Period
Customer contracts and related customer relationships						6.3 years
Backlog						6.1 years
Trade names						6.5 years
Covenants not to compete						5.6 years
Total						6.3 years

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,
	2025		2025
Furniture and equipment	$	1,192	$	1,177
Computer equipment and software	4,241		4,217
Leasehold improvements	1,567		1,567
Total equipment and improvements	7,000		6,961
Less: accumulated depreciation	(5,873)		(5,687)
Equipment and improvements, net	$	1,127	$	1,274

Depreciation expense was $0.2 million and $0.2 million for the three months ended December 31, 2025 and 2024, 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,
	2025		2025
Accounts payable	$	9,904	$	12,299
Accrued benefits	1,397		1,214
Accrued workers' compensation insurance	638		750
Accrued bonus and incentive compensation	315		1,527
Accrued interest	463		474
Other accrued expenses	1,533		2,982
Accounts payable and accrued liabilities	$	14,250	$	19,246

Accrued payroll

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


	December 31,		September 30,
	2025		2025
Accrued leave	$	5,100	$	8,112
Accrued payroll	712		3,701
Accrued payroll taxes	154		340
Accrued severance	30		—
Total accrued payroll	$	5,996	$	12,153

Debt obligations

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


	December 31,		September 30,
	2025		2025
Secured term loan	$	123,500	$	123,500
Secured revolving line of credit	13,101		8,067

Less: unamortized deferred financing costs	(3,126)		(3,534)
Net bank debt obligations	133,475		128,033
Less: current portion of debt obligations, net of deferred financing costs (a)	(17,425)		(8,067)
Long-term portion of debt obligations, net of deferred financing costs	$	116,050	$	119,966

As of December 31, 2025, we have satisfied quarterly minimum principal payments on our secured term loan through September 30, 2026.

(a) As of December 31, 2025, the current portion comprises term loan amortization of $5.9 million and the $13.1 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,
		2025		2024
Interest expense (a)		$	2,992	$	3,685
Interest income (b)		(29)		(9)
Amortization of deferred financing costs (c)		433		457
Interest expense		$	3,396	$	4,133

(a) Interest expense on borrowing.

(b) Interest earned from customer payments received after the due date.

7. Credit Facilities

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

December 31, 2025

September 30, 2025

Arrangement

Loan Balance

Interest

Loan Balance

Interest

Secured term loan (a) due December 8, 2027

123,500

SOFR1 + 4.1%

123,500

SOFR1 + 4.1%

Secured revolving line of credit (b) due December 8, 2027

13,101

SOFR1 + 4.1%

8,067

SOFR1 + 4.1%

1Secured Overnight Financing Rate ("SOFR") as of December 31, 2025 and September 30, 2025 was 3.9% and 4.3% 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 $74.0 million at December 31, 2025, a fixed interest rate of 4.10% and a maturity date of January 31, 2026. Due to the immaterial difference between the floating and fixed rates, for the three months ended December 31, 2025, interest expense was minimally impacted by the interest rate swap.

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

SEC Form 10-Q filed by DLH Holdings Corp.