DLH Holdings Corp. Reports 47% Revenue Decline and $16.8M Net Loss in Q3 2026

DLH Holdings Corp. reported a significant decline in financial performance for the third quarter and the first nine months of fiscal 2026, as detailed in its latest 10-Q filing. For the three months ended June 30, 2026, the company generated revenue of $44.2 million, a decrease of 47% from $83.3 million in the same period last year. The nine-month revenue also fell to $172.4 million from $263.3 million, marking a 34% decline. The company recorded a net loss of $16.8 million for the quarter, compared to a net income of $289,000 in the prior year, and a net loss of $20.6 million for the nine months, down from a profit of $2.3 million.

The decline in revenue and profitability is attributed primarily to the conversion of certain contracts to small business contractors, which has impacted the company's contract portfolio. Operating costs also decreased, with total operating costs for the quarter at $48.2 million, down from $79.6 million in the previous year. Contract costs specifically fell to $36.8 million from $67.6 million, reflecting the reduced revenue volume. General and administrative costs decreased slightly to $7.3 million, while depreciation and amortization costs remained relatively stable.

In terms of operational metrics, DLH's backlog as of June 30, 2026, was approximately $408.5 million, down from $514.3 million at the end of the previous fiscal year. The funded backlog also decreased from $114.1 million to $66.7 million. The company continues to focus on its major customers, including the Department of Health and Human Services, which accounted for 57.1% of total revenue for the nine months ended June 30, 2026, compared to 49.3% in the prior year. The Department of Veterans Affairs and the Department of Defense also represented significant portions of revenue, although their contributions have decreased year-over-year.

Looking ahead, DLH Holdings Corp. is navigating a challenging federal budget environment, with ongoing reviews and potential adjustments to government spending impacting its operations. The company is actively pursuing new business opportunities aligned with well-funded budget priorities, particularly in defense and national security sectors. Despite the current challenges, management believes that the company's capabilities position it well for future growth, although it acknowledges the uncertainty surrounding federal budget allocations and the potential impact of set-aside laws for small businesses on its competitive landscape.