DLH Holdings Corp. Reports Revenue Decline in Q2 Fiscal 2025

DLH Holdings Corp. reported a decline in financial performance for the second quarter of fiscal 2025, with revenues totaling $89.2 million, down from $101.0 million in the same period last year. For the six months ending March 31, 2025, total revenue was $180.0 million, a decrease from $198.9 million in the prior year. The company attributed this decline primarily to the conversion of certain contracts within its Department of Veterans Affairs (VA) and Department of Defense (DoD) portfolios to small business contractors, although new contract awards provided some offsetting revenue.

Operating costs also decreased, with total operating expenses falling to $84.1 million from $95.1 million year-over-year. Contract costs, which include direct labor and associated expenses, decreased by $7.9 million, reflecting lower revenue volume and reduced overhead costs. General and administrative expenses also saw a reduction, dropping to $8.6 million from $11.7 million, which contributed to a slight decrease in income from operations to $5.1 million compared to $5.9 million in the previous year. However, net income fell significantly to $0.9 million, or $0.06 per share, down from $1.8 million, or $0.13 per share, in the prior year.

In terms of strategic developments, DLH continues to focus on its core government contracts, with a backlog of approximately $646.9 million as of March 31, 2025, down from $690.3 million at the end of September 2024. The funded backlog, which represents contracts with appropriated funding, was $106.2 million. The company remains heavily reliant on major customers, including the Department of Health and Human Services, the Department of Veterans Affairs, and the Department of Defense, which collectively accounted for 98.7% of total revenue for the six months ended March 31, 2025.

Operationally, DLH's employee headcount remained stable, with 14,386 shares of common stock outstanding as of March 31, 2025. The company has also been proactive in managing its debt, with total liabilities decreasing to $193.8 million from $204.2 million. Interest expense for the quarter was $3.9 million, down from $4.2 million, reflecting a decrease in the floating interest rate and prepayment of debt. The company has access to a secured revolving line of credit with an unused capacity of $19.8 million, which it plans to utilize to support ongoing operations.

Looking ahead, DLH Holdings Corp. anticipates challenges due to the federal budget outlook, which includes a proposed 7.6% reduction in discretionary spending for fiscal year 2026. The company is strategically aligning its capabilities with well-funded budget priorities and remains optimistic about securing new business opportunities in its addressable market. However, it acknowledges that changes in government procurement policies and budgetary priorities could impact future performance.