DLH (NasdaqCM:DLHC) Q4 2025 Earnings Call December 11, 2025 10:00 AM ET Company ParticipantsChris Witty - Head of Investor RelationsZach Parker - President and CEOKathryn Johnbull - CFOConference Call ParticipantsJoe Gomes - Senior Research AnalystOperatorGood day and welcome to the DLH Holdings Corp. Fiscal 2025 Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. A ...

Financial Data and Key Metrics Changes - The company reported revenue of $81.2 million in Q4 2025, down from $96.4 million in the prior year, primarily due to contract transitions and government efficiency initiatives [14][15] - EBITDA for Q4 was $6.6 million, compared to $10.7 million in the previous year, reflecting lower revenue and pressure on gross margins [15][16] - For the full year, revenue totaled $344.5 million, with EBITDA at $34 million, approximately 10% of revenue, and free cash flow of $23 million [16][17] - The company reduced debt by $10.7 million during the quarter, ending the fiscal year with $131.6 million in debt, a total reduction of $23 million over the year [17][18] Business Line Data and Key Metrics Changes - The revenue decline was attributed to approximately $11 million from small business set-aside conversions, with $7.5 million related to transitioned CMOP locations and $2.9 million from contract unbundling [14][15] - The company has been awarded a sole-source IDIQ contract to continue providing pharmacy and logistics services, with task orders already received [15] Market Data and Key Metrics Changes - The company achieved cybersecurity maturity model level two certification, enhancing its competitive position in the market [7] - The company is optimistic about growth opportunities in its addressable market as it transitions into a leading technology and engineering solutions provider [6][9] Company Strategy and Development Direction - The company is focused on digital transformation, cybersecurity, systems engineering, and scientific research as core capability pillars [9][10] - Investment in proprietary tools like DLH Cyclone, an AI/ML-powered data science engine, is expected to drive organic growth and enhance competitive differentiation [10][12] - The company aims to return to low double-digit organic growth in the future, leveraging its strategic differentiators and top talent [13] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities despite challenges faced during the fiscal year, emphasizing the importance of diversification and innovation [17][30] - The company anticipates returning to historical growth and EBITDA margins, with new contract awards expected in early 2026 [28][30] Other Important Information - The company has made all mandatory term debt payments through September 30, 2026, a year ahead of schedule [18] - The pipeline of qualified opportunities is strong, exceeding $3 billion, indicating healthy financial growth prospects [31] Q&A Session Summary Question: Status of the Head Start program and potential protest - The company did not participate in the protest regarding the Head Start program transition to small business set-asides, acknowledging the shift in strategy by the government [22] Question: Timeline for remaining CMOP awards - The company is not bidding on remaining CMOP contracts but is supporting a small business partner, with decisions expected in the coming quarter or two [24][25] Question: Expected return to historical growth and EBITDA margins - Management anticipates new business opportunities within the VA and other sectors to positively impact margins, with awards expected in early 2026 [28][30] Question: Current size of the pipeline - The company reported a pipeline exceeding $3 billion, indicating strong growth potential over the next 24 months [31]

Financial Data and Key Metrics Changes - The company reported revenue of $81.2 million in Q4 FY2025, down from $96.4 million in the prior year, primarily due to contract transitions and government efficiency initiatives [14][15] - EBITDA for Q4 was $6.6 million, compared to $10.7 million in the previous year, reflecting lower revenue and pressure on gross margins [15][16] - For the full year, revenue totaled $344.5 million, with EBITDA of $34 million, approximately 10% of revenue, and free cash flow of $23 million [16][17] - The company reduced debt by $10.7 million during the quarter, ending FY2025 with $131.6 million in debt, a total reduction of $23 million over the year [17][18] Business Line Data and Key Metrics Changes - The revenue contraction was largely attributed to the transition of certain programs to small business set-aside contracts, accounting for approximately $11 million of the decrease [14][15] - The company experienced a decline in revenue from transitioned CMOP locations and contract unbundling, with $7.5 million and $2.9 million respectively contributing to the overall decline [15] Market Data and Key Metrics Changes - The company has a strong pipeline of qualified opportunities exceeding $3 billion, indicating healthy financial growth prospects [33] Company Strategy and Development Direction - The company is focused on transforming into a leading technology, engineering, and scientific research solutions provider, emphasizing digital transformation, cybersecurity, and systems engineering [9][10] - Investment in proprietary tools and technologies, such as the DLH Cyclone AI/ML-powered data science engine, is aimed at enhancing competitive differentiation and organic growth [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about growth opportunities in the addressable market and the potential for returning to low double-digit organic growth in the future [12][13] - The company is positioning for new business within the VA and anticipates contract awards that could positively impact margins in the upcoming quarters [30][31] Other Important Information - The company achieved cybersecurity maturity model level two certification, enhancing its ability to compete for higher value business opportunities [7] - The company has made all mandatory term debt payments through September 30, 2026, a year ahead of schedule, and plans to continue debt reduction aligned with historical performance [18] Q&A Session Summary Question: Status of the Head Start program and potential protests - The company did not participate in the protest regarding the Head Start program transition to small business set-asides, acknowledging the shift in strategy by the administration [22] Question: Timeline for remaining CMOP awards - The company expects decisions on the remaining CMOP awards to occur within the next quarter or two, while continuing to operate at the remaining locations [24][25] Question: Return to historical growth and EBITDA margins - Management indicated that new contract awards are anticipated in Q1 2026, which could help return to historical growth and EBITDA margins [28][29] Question: Current size of the pipeline - The company reported a strong pipeline exceeding $3 billion, indicating a healthy outlook for financial growth [33]

FY2025 Fourth Quarter Earnings Three and Twelve Months Ended 9.30.25 December 11, 2025 CONFIDENTIAL & PROPRIETARY © Copyright 2025 DLH Holdings Corp. All Rights Reserved. 1 Call Participants Zach Parker President and Chief Executive Officer Kathryn JohnBull Chief Financial Officer CONFIDENTIAL & PROPRIETARY © Copyright 2025 DLH Holdings Corp. All Rights Reserved. 2 Forward-Looking Statements "Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995: CONFIDENTIAL & PROPRIETARY © Copy ...

Financial Position and Indebtedness - The company has a substantial amount of goodwill on its balance sheet, which may lead to future write-offs that could decrease earnings or increase losses[96] - Following the acquisition of DLH, LLC in December 2022, the company amended its credit agreement, incurring additional indebtedness and modifying financial covenants[97] Dividends and Stock Ownership - The company has not paid dividends on its common stock since inception and does not anticipate paying any in the foreseeable future[100] - As of September 30, 2025, executive officers, directors, and significant stockholders own approximately 41% of the outstanding common stock, which may influence corporate decisions[105] Revenue and Operating Results - The company may experience fluctuations in revenues and operating results due to various factors, including government budgetary delays and contract timing[107] - Increased costs in supply and labor markets due to inflation could adversely affect the company's ability to compete and reduce profits[110] Legal and Insurance Risks - The company is exposed to legal proceedings and disputes, which could result in substantial monetary damages if unfavorable rulings occur[111] - The company does not maintain "key personnel" life insurance on its executive officers, which could materially affect operations if key personnel are lost[112] - The company may not be fully covered by insurance, and inability to renew insurance plans could adversely impact its business[113] Employee Costs and Tax Liabilities - Increases in employee healthcare claims and insurance premiums could significantly affect the company's direct costs and profit margins[114] - Changes to U.S. tax laws may require adjustments in accounting, potentially affecting profitability due to increased tax liabilities and audits[116] Compliance and Operational Risks - Compliance with the Sarbanes-Oxley Act has led to significant management resource allocation, resulting in increased accounting and legal expenses[117] - Future operations may be adversely impacted by global health events, creating volatility and economic disruption, affecting customer demand and service delivery[118] Market Risks and Interest Rates - The company has limited exposure to market risks, with no material engagement in trading practices that would expose it to interest rate or foreign currency risks[187] - A floating-to-fixed interest rate swap with a notional amount of $74.0 million is set to mature on September 30, 2025[187] - A 1.0% increase in SOFR would increase interest expense by approximately $0.6 million annually, with the current floating interest rate debt at 8.38%[188]

ATLANTA, Dec. 10, 2025 (GLOBE NEWSWIRE) -- DLH Holdings Corp. (NASDAQ: DLHC) (“DLH” or the “Company”), a leading provider of digital transformation and cybersecurity, systems engineering and integration, and science research and development, today announced financial results for its fiscal fourth quarter ended September 30, 2025. Q4 Highlights: Revenue performance mixed as budgetary priorities continue to come into focus; solid revenue growth of 8.8% in National Security contract portfolio this quarter as c ...

Core Viewpoint - DLH Holdings Corp. will release its financial results for the fiscal fourth quarter ended September 30, 2025, on December 10, 2025, and will host a conference call for investors on December 11, 2025, to discuss these results and operating trends [1]. Financial Results Announcement - The financial results will be released after market close on December 10, 2025 [1]. - A conference call will take place at 10:00 a.m. Eastern Time on December 11, 2025, featuring a presentation by senior management [1]. Conference Call Details - Interested parties can listen to the conference call by dialing 888-347-5290 or 412-317-5256 [2]. - Presentation materials will be available on the Investor Relations section of the DLH website prior to the call [2]. - A digital recording of the call will be accessible for replay two hours after its completion [2]. Company Overview - DLH Holdings Corp. specializes in science research and development, systems engineering, digital transformation, and cyber security solutions for federal agencies [3]. - The company employs over 2,400 individuals and focuses on enhancing technology, public health, and cyber security readiness missions [3]. - DLH leverages advanced technologies such as artificial intelligence, advanced analytics, and cloud-based applications to address complex missions [3].

Industry Overview - The Staffing Firms industry is expected to gradually return to pre-pandemic levels, enabling companies to distribute regular dividends [1] - The industry encompasses a wide range of human resources and workforce solutions, including recruitment, payroll administration, and organizational planning [2] Market Trends - The industry is characterized by stable demand, with revenues and cash flows anticipated to recover to pre-pandemic levels [3] - The adoption of remote work and hybrid models has surged, prompting staffing agencies to focus on flexible staffing solutions [4] - Technological advancements are being integrated into staffing operations, enhancing efficiency and service quality [5] Performance Metrics - The Zacks Staffing Firms industry currently holds a Zacks Industry Rank of 219, placing it in the bottom 10% of 243 Zacks industries [6] - Over the past year, the industry has underperformed the S&P 500, declining by 35.6% compared to the S&P 500's growth of 19% [8] - The industry is trading at an EV-to-EBITDA ratio of 5.77X, significantly lower than the S&P 500's 18.87X and the sector's 10.93X [11] Company Highlights - **Kelly Services (KELYA)**: The company is experiencing growth driven by the acquisition of Motion Recruitment Partners, with a 5.3% year-over-year organic growth in its education business [15][16] - **Heidrick & Struggles International (HSII)**: The company has shown strong performance due to its focus on executive search and consulting, with a 50.9% increase in shares over the past six months [20][22] - **DLH Holdings (DLHC)**: The company is investing in tech integration and advanced solutions in cybersecurity, with shares increasing by 56.4% in the past six months [25][27]

Core Insights - DLH Holdings Corp. has achieved Cybersecurity Maturity Model Certification (CMMC) Level 2, enhancing its capabilities in digital transformation and cybersecurity [1][2] - The certification validates DLH's ability to secure national defense data and positions the company to compete for new federal contracts as CMMC 2.0 requirements are expected to appear in DoD solicitations starting November 2025 [2] Company Overview - DLH is a provider of technology, public health, and cybersecurity solutions, focusing on complex missions through digital transformation, artificial intelligence, and advanced analytics [3] - The company emphasizes its commitment to improving lives globally through a combination of technology, innovation, and expertise [3]

Core Viewpoint - DLH Holdings Corp. has been awarded a task order valued at up to $46.9 million to provide information technology services to the National Institutes of Health, emphasizing its role in digital transformation and cyber security [1][2]. Group 1: Contract Details - The task order includes a base period and multiple options, aggregating to a three-year performance period [2]. - DLH will support approximately 7,000 end-customers through this contract, leveraging a comprehensive suite of digital transformation and cyber security solutions [2]. Group 2: Company Expertise and Services - DLH specializes in digital transformation, cyber security, science research and development, and systems engineering and integration [1][3]. - The company will implement a cloud migration strategy in partnership with leading commercial cloud service providers such as Azure, AWS, and Google [2]. - DLH's experts will focus on modernizing IT, improving customer experience, optimizing systems, and integrating emerging technologies like artificial intelligence [3]. Group 3: Company Overview - DLH enhances technology, public health, and cyber security readiness through various solutions and services, employing over 2,400 staff dedicated to supporting critical missions [3].