DLH Holdings Revenue Plunges 13% Amid Key Contract Losses

TL;DR

**DLHC is a sell; contract losses and shrinking backlog point to continued revenue pressure and increased risk in a competitive government market.**

AI Summary

DLH Holdings Corp. reported a significant decline in revenue for the fiscal year ended September 30, 2025, falling to $344.5 million from $395.9 million in 2024, a decrease of 13.0%. This reduction is primarily attributed to the loss of major contracts, including a $23.5 million decrease in VA CMOP pharmacy and logistics services revenue and the termination of the Office of Head Start (OHS) contract, which contributed $37.6 million in 2025 but ended October 31, 2025. The company's backlog also decreased substantially to $514.3 million from $690.3 million in 2024, with funded backlog dropping from $155.1 million to $114.1 million. Key risks include heavy reliance on U.S. federal government contracts, with 49.8% of revenue from HHS, 33.8% from VA, and 15.5% from DoD, and the competitive nature of government contracting, particularly with small business set-asides impacting contract renewals. Despite these challenges, DLH secured a new sole-source IDIQ contract with the VA valued at $90.0 million, extending through October 2026, indicating some continued government trust.

Why It Matters

DLH's substantial revenue decline and shrinking backlog signal significant headwinds for investors, reflecting increased competition and the impact of government contracting policies favoring small businesses. The loss of major contracts like the OHS and reduced VA CMOP work directly impacts future earnings potential and could pressure profitability. For employees, this could mean job insecurity or slower growth opportunities as the company navigates a more challenging landscape. Customers, particularly federal agencies, might see shifts in service providers, potentially affecting continuity or service quality. In the broader market, this highlights the inherent volatility and policy risks within the government contracting sector, where even established players face disruption from evolving procurement strategies.

Risk Assessment

Risk Level: high — DLH Holdings Corp. faces high risk due to significant customer concentration, with 99.1% of its 2025 revenue derived from three U.S. federal government agencies (HHS, VA, DoD). The company's backlog decreased by $176 million, or 25.5%, from $690.3 million in 2024 to $514.3 million in 2025, indicating reduced future revenue visibility. Furthermore, the loss of the $37.6 million OHS contract due to small business set-asides highlights vulnerability to evolving government procurement policies.

Analyst Insight

Investors should consider reducing exposure to DLHC given the substantial revenue decline, shrinking backlog, and heightened contract renewal risks. Monitor future contract awards and the impact of the new $90.0 million VA IDIQ, but remain cautious as the company navigates a challenging competitive landscape and government policy shifts.

Financial Highlights

debt To Equity

N/A

revenue

$344.5M

operating Margin

N/A

total Assets

N/A

total Debt

N/A

net Income

N/A

eps

N/A

gross Margin

N/A

cash Position

N/A

revenue Growth

-13.0%

Revenue Breakdown

Key Numbers

• $344.5M — Total Revenue (Decreased from $395.9M in 2024, a 13.0% decline)
• $514.3M — Total Backlog (Decreased from $690.3M in 2024, a 25.5% decline)
• $114.1M — Funded Backlog (Decreased from $155.1M in 2024)
• 49.8% — HHS Revenue Share (Represents the largest customer concentration for 2025)
• $116.4M — VA CMOP Revenue (Decreased from $139.9M in 2024)
• $37.6M — OHS Contract Revenue (Revenue earned in 2025 before contract termination)
• $90.0M — New VA IDIQ Contract Ceiling (Sole-source contract awarded effective October 28, 2025)
• 14,493,035 — Shares Outstanding (As of December 9, 2025)

Key Players & Entities

• DLH Holdings Corp. (company) — registrant
• Department of Health and Human Services (company) — major customer, 49.8% of 2025 revenue
• Department of Veterans Affairs (company) — major customer, 33.8% of 2025 revenue
• Department of Defense (company) — major customer, 15.5% of 2025 revenue
• Office of Head Start (company) — former major contract, $37.6 million revenue in 2025
• Consolidated Mail Outpatient Pharmacy (company) — VA program, $116.4 million revenue in 2025
• Biden administration (person) — policies promoting small business set-asides
• Nasdaq Capital Market (regulator) — exchange where DLHC common stock is registered

FAQ

Risk Factors

• Revenue Concentration [high — financial]: DLH is heavily reliant on U.S. federal government contracts, with significant revenue derived from specific agencies: 49.8% from HHS, 33.8% from VA, and 15.5% from DoD. This concentration exposes the company to risks associated with government budget changes, contract renewals, and policy shifts within these agencies.
• Government Contracting Competition [high — market]: The government contracting landscape is highly competitive, with small business set-asides posing a particular challenge for contract renewals and new awards. This competitive pressure can impact pricing and the ability to secure future business.
• Loss of Major Contracts [high — operational]: The company experienced a significant revenue decline of 13.0% in FY2025, partly due to the loss of major contracts such as the VA CMOP pharmacy and logistics services (a $23.5 million decrease) and the termination of the Office of Head Start (OHS) contract ($37.6 million in FY2025).
• Backlog Reduction [medium — financial]: Total backlog decreased by 25.5% to $514.3 million from $690.3 million in the prior year. Funded backlog also saw a substantial drop from $155.1 million to $114.1 million, indicating a reduced pipeline of secured future revenue.
• Cybersecurity Threats [medium — operational]: As a provider of digital transformation and cybersecurity solutions to federal agencies, DLH is exposed to cybersecurity risks. Breaches or vulnerabilities could lead to reputational damage, loss of customer trust, and potential financial liabilities.

Industry Context

DLH operates within the highly competitive U.S. federal government contracting market, focusing on health and readiness solutions. Key customers include HHS, VA, and DoD, which are subject to government budget cycles and policy shifts. The industry is characterized by a strong emphasis on past performance, cybersecurity, and digital transformation capabilities.

Regulatory Implications

DLH's heavy reliance on federal government contracts means it is subject to stringent procurement regulations, compliance requirements, and potential changes in government spending priorities. The company must navigate complex rules, including those related to small business set-asides and cybersecurity mandates.

What Investors Should Do

1. Monitor contract wins and losses closely.
2. Assess the impact of the new VA IDIQ contract.
3. Evaluate diversification efforts.
4. Analyze competitive positioning in small business set-aside markets.

Key Dates

• 2025-09-30: Fiscal Year End — Reporting period for the 10-K, showing a 13.0% revenue decline.
• 2025-10-28: New VA IDIQ Contract Awarded — A $90.0 million sole-source contract provides some stability and continued government trust despite overall revenue decline.
• 2025-10-31: Office of Head Start (OHS) Contract Termination — Contributed $37.6 million in FY2025 revenue but its termination impacted the company's top line.

Glossary

IDIQ Contract

Indefinite Delivery/Indefinite Quantity. A type of contract that provides for an indeterminate quantity of supplies or services to be furnished during a fixed contract period, with the Government making purchases against the contract on an as-needed basis. (The new $90.0 million VA IDIQ contract represents a significant new revenue stream and demonstrates continued business with a key government client.)

Backlog

The total value of work to be performed on contracts that have been awarded to the company but not yet completed. It includes funded backlog (appropriated funds) and unfunded backlog (contract value not yet funded). (The substantial decrease in total backlog ($514.3M) and funded backlog ($114.1M) indicates a reduced pipeline of future revenue and potential challenges in securing new business.)

Small Business Set-Asides

A contracting preference where a certain percentage of government contracts are reserved for bidding exclusively by small businesses. (This is a key risk factor as it can limit DLH's ability to compete for and renew contracts, especially if they no longer qualify as a small business for certain procurements.)

Time and Materials Contracts

A type of contract where the buyer pays the seller for the time spent by the seller's employees and for the cost of materials used in performing the contract. (Representing 51.4% of DLH's revenue mix, this contract type indicates a significant portion of their business is based on labor hours and direct costs.)

Year-Over-Year Comparison

DLH Holdings Corp. reported a significant 13.0% decrease in revenue for the fiscal year ended September 30, 2025, down to $344.5 million from $395.9 million in the prior year. This decline was driven by the loss of major contracts, including VA CMOP and OHS. The company's total backlog also saw a substantial reduction of 25.5%, falling to $514.3 million, with funded backlog decreasing to $114.1 million, indicating a weaker pipeline of future work compared to the previous year. New risks related to contract losses and competitive pressures, particularly from small business set-asides, have become more pronounced.

Key Financial Figures

• $116.4 million — gistic services represent approximately $116.4 million and $139.9 million of revenues for the
• $139.9 million — resent approximately $116.4 million and $139.9 million of revenues for the years ended Septemb
• $90.0 m — 28, 2025. The IDIQ has ceiling value of $90.0 million, and a maximum ordering period th
• $37.6 million — The revenue earned on this contract was $37.6 million for the fiscal year ended September 30,
• $514.3 m — 30, 2025, our backlog was approximately $514.3 million, of which $114.1 million was fund
• $114.1 million — approximately $514.3 million, of which $114.1 million was funded backlog. On September 30, 20
• $690.3 m — . On September 30, 2024 our backlog was $690.3 million, of which $155.1 million was fund
• $155.1 million — ur backlog was $690.3 million, of which $155.1 million was funded backlog. We define backlog

Filing Documents

• dlhc-20250930.htm (10-K) — 1259KB
• ex21.htm (EX-21) — 5KB
• ex231.htm (EX-23) — 2KB
• ex311certificate1.htm (EX-31) — 22KB
• ex312certificate1.htm (EX-31) — 22KB
• ex321certificate1.htm (EX-32) — 10KB
• 0000785557-25-000159.txt ( ) — 7412KB
• dlhc-20250930.xsd (EX-101.SCH) — 48KB
• dlhc-20250930_cal.xml (EX-101.CAL) — 112KB
• dlhc-20250930_def.xml (EX-101.DEF) — 145KB
• dlhc-20250930_lab.xml (EX-101.LAB) — 640KB
• dlhc-20250930_pre.xml (EX-101.PRE) — 448KB
• dlhc-20250930_htm.xml (XML) — 1065KB

Business

Business 3 Item 1A.

Risk Factors

Risk Factors 9 Item 1B. Unresolved Staff Comments 22 Item 1C. Cybersecurity 23 Item 2.

Properties

Properties 24 Item 3.

Legal Proceedings

Legal Proceedings 24 Item 4. Mine Safety Disclosure 24 PART II Item 5. Market For the Registrant's Common Equity, Related Shareholder Matters and Issuer Purchases of Equity Securities 25 Item 6.

Selected Financial Data

Selected Financial Data 25 Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations

Management's Discussion and Analysis of Financial Condition and Results of Operations 26 Item 7A.

Quantitative and Qualitative Disclosures About Market Risk

Quantitative and Qualitative Disclosures About Market Risk 33 Item 8.

Financial Statements and Supplemental Data

Financial Statements and Supplemental Data 33 Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure 58 Item 9A.

Controls and Procedures

Controls and Procedures 58 Item 9B. Other Information 59 Item 9C . Disclosure Regarding Foreign Jurisdictions that Prevent Inspections 59 PART III Item 10. Directors, Executive Officers and Corporate Governance 59 Item 11.

Executive Compensation

Executive Compensation 59 Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters 59 Item 13. Certain Relationships and Related Transactions, and Director Independence 59 Item 14. Principal Accountant Fees and Services 60 PART IV Item 15. Exhibits and Financial Statement Schedules 60 Item 16. Form 10-K Summary 61 2 PART I

FORWARD-LOOKING STATEMENTS

FORWARD-LOOKING STATEMENTS Certain information included or incorporated by reference in this document may not address historical facts and, therefore, could be interpreted to be "forward-looking statements" as that term is defined in the Private Securities Litigation Reform Act of 1995 and other federal securities laws. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including projections of financial performance; statements of plans, strategies and objectives of management for future operations; any statement concerning developments, performance or industry rankings relating to products or services; any statements regarding future economic conditions or performance; any statements of assumptions underlying any of the foregoing; and any other statements that address activities, events or developments that DLH Holdings Corp and its subsidiaries ("DLH" or the "Company" and also referred to as "we," "us" and "our") intends, expects, projects, believes or anticipates will or may occur in the future. Forward-looking statements may be characterized by terminology such as "believe," "anticipate," "expect," "should," "intend," "plan," "will," "estimates," "projects," "strategy" and similar expressions. These statements are based on assumptions and assessments made by the Company's management in light of its experience and its perception of historical trends, current conditions, expected future developments and other factors it believes to be appropriate. Any such forward-looking statements are not guarantees of future performance (financial or operating), and actual results, developments and business decisions may differ materially from those envisioned by such forward-looking statements. These forward-looking statements are subject to a number of risks and uncertainties that include but are not limited to the following: the failure to achieve the anticipated benefits of our recent acquisition or any

BUSINESS

ITEM 1. BUSINESS Overview and Background DLH Holdings Corp. ("DLH") delivers improved health and readiness solutions for federal government customers through digital transformation and cyber security, science research and development, and systems engineering and integration. We bring a unique combination of government sector experience, proven methodology, and unwavering commitment to solve the complex problems faced by civilian and military customers alike, doing so by leveraging multiple capabilities, including cyber technology, artificial intelligence, advanced analytics, cloud-based applications, and telehealth systems. Competitive Advantages We believe we are advantageously positioned within our markets through a number of features including, but not limited to: highly credentialed workforce; predominantly performing as the prime contractor; strong past performance record across our government contracts; and strong bipartisan support for our key contracts. We have invested in leading credentials and capabilities that we expect will deliver value to our customers. These investments include the development of secure Information Technology ("IT") platforms; sophisticated data analytic tools and techniques; and implementation process improvement and quality assurance programs and techniques. We are actively pursuing additional credentials that will support our customers' ever-evolving missions. 3 Solutions and Services We primarily focus on improved deployment of large-scale, technology-powered health and defense initiatives for multiple agencies within the federal government, including the Department of Health and Human Services ("HHS"), the Department of Veterans Affairs ("VA"), Department of Defense ("DoD"), and many of their sub-agencies. We deliver services primarily through prime contracts awarded by the federal government through competitive bidding processes. We have a diverse mix of contract vehicles with various agencies of the federal

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