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- **Revenue Decline**: Q4 2025 revenue down 16% YoY to $81.2M due to government contract transitions, but FY2025 free cash flow of $23M supported $23M debt reduction.
- **Debt Strength**: Total debt reduced to $131.6M, with all mandatory term debt payments completed a year early.
- **AI Investment**: AI tool Cyclone positioned for growth, with several clients expressing interest in transitioning to the platform.
- **Pipeline Growth**: $3B+ pipeline for FY2026+, with focus on defense and cybersecurity opportunities.
- **Margin Outlook**: Expect EBITDA margins to return to historical levels (~10%) as new contracts offset lower-margin VA work.

**【CEO Opening Remarks】**
- Acknowledged challenges from government contract transitions (e.g., Head Start, CMOP) but emphasized strategic focus on high-margin, technology-driven solutions.
- Highlighted achievements: CMMC Level 2 certification, AI/ML tool Cyclone for data analytics, and VA IDIQ contract extension.
- Reported $10.7M debt reduction in Q4, bringing total debt to $131.6M, with all mandatory term debt payments completed a year ahead of schedule.
- Expressed optimism for FY2026, citing a $3B+ pipeline and opportunities in cybersecurity, digital transformation, and defense.

**【CFO Financial Commentary】**
- Q4 2025 revenue: $81.2M (down 16% YoY) due to contract transitions; full-year revenue: $344.5M.
- EBITDA: $6.6M (Q4) and $34M (FY2025), with free cash flow of $23M.
- Emphasized cash flow generation and balance sheet strength, enabling debt reduction and pursuit of growth opportunities.
- Noted FY2026 debt reduction target of 50-55% of EBITDA.

**【Q&A Highlights】**
- **Contract Transitions**: No protests filed for Head Start; 3 remaining CMOP locations transitioning to small businesses, with potential subcontracting opportunities.
- **Margins**: Expect EBITDA margins to return to historical levels (~10%) as new contracts (e.g., defense, cybersecurity) offset lower-margin VA work.
- **Pipeline**: $3B+ pipeline for FY2026+, with focus on high-value solutions like Cyclone and digital transformation projects.
- **Customer Mix**: Shifting from federal healthcare to defense (e.g., Department of War) for higher-margin work.


DLH Holdings Corp.(DLHC)-20251211-2025 Q4 Earnings call transcript

Department of Veterans Affairs

Department of Health and Human Services

Department of Defense

Other

Department of Homeland Security

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