DLH Holdings Corp. Reports Revenue Decline and Decreased Net Income for December 2024

DLH Holdings Corp. reported a decline in financial performance for the three months ended December 31, 2024, with revenues totaling $90.8 million, down from $97.9 million in the same period last year. The decrease of approximately 7.2% was attributed primarily to the conversion of certain contracts within the Department of Veterans Affairs (VA) and Department of Defense (DoD) portfolios to small business contractors. The company's net income also fell to $1.1 million, or $0.08 per share, compared to $2.2 million, or $0.15 per share, in the prior year, reflecting a significant drop in profitability.

In terms of operational costs, DLH reported total operating costs of $85.1 million, a decrease from $91.0 million in the previous year. Contract costs, which include direct labor and associated expenses, decreased by $6.7 million, while general and administrative costs rose by $0.8 million, primarily due to increased business development expenses. Interest expenses also saw a reduction, totaling $4.1 million compared to $4.7 million in the prior year, largely due to a decrease in the floating interest rate and prepayment of debt.

The company’s balance sheet showed an increase in total assets to $325.0 million from $314.4 million at the end of the previous fiscal quarter. Notably, accounts receivable rose significantly to $64.3 million, up from $49.8 million, indicating a potential delay in collections. DLH's backlog decreased to approximately $665.3 million from $690.3 million, with funded backlog also declining, reflecting the impact of contract transitions and funding cycles typical in government contracting.

Strategically, DLH continues to focus on its core capabilities in digital transformation, cybersecurity, and systems engineering for federal government clients. The company has maintained its position as a prime contractor for several key contracts, including a sole-source Indefinite Quantity/Indefinite Delivery (IDIQ) contract with the VA valued at $200 million. However, the company faces challenges due to the competitive landscape, particularly with the VA's preference for service-disabled veteran-owned small businesses in contract awards.

Looking ahead, DLH Holdings Corp. remains cautious about the federal budget outlook for fiscal year 2025, particularly in light of the recent Continuing Resolution passed by Congress. The company is monitoring potential impacts on government funding and is prepared to adapt its strategies accordingly. Management believes that its established relationships with major customers and its diversified contract portfolio will support future growth, despite the current challenges in the contracting environment.