- **Revenue Decline**: Q3 revenue fell 17% YoY to $83.3M due to government contract transitions and scope narrowing.
- **Debt Reduction**: Reduced debt by $9.4M to $142.3M, a year ahead of schedule, with 50-55% of EBITDA allocated to debt repayment.
- **Federal Alignment**: Positioning for growth in AI, cybersecurity, and cloud computing, with optimism for 2026 recovery.
- **Challenges**: Slowed RFP flow and contract awards due to government workforce cuts, but expecting stabilization in Q4.

**【CEO Summary Section】**
- **Revenue Erosion**: Q3 revenue declined to $83.3M (vs. $100.7M YoY) due to unbundling and small business set-asides, including $8.5M from VA and $3.2M from DoD. Scope narrowing reduced revenue by $2.2M.
- **Administrative Challenges**: New administration delays funding approvals, slowing contract awards and pipeline conversion. RFP flow and proposal submissions ($25M+ and $100M+) were lower than expected.
- **Financial Resilience**: Reduced debt by $9.4M to $142.3M, a year ahead of schedule. Generated $9.5M in operating cash flow, improving DSO to 46 days.
- **Strategic Focus**: Aligning with federal tech priorities (AI, cybersecurity, cloud) and preparing for potential 2026 recovery. Optimistic about administrative reforms accelerating contract approvals.

**【CFO Financial Commentary】**
- **Earnings Performance**: EBITDA of $8.1M (9.7% of revenue) vs. $10M last year. Non-GAAP metrics reflect cost management amid lower revenue.
- **Debt Management**: Converted 50-55% of EBITDA to debt repayment, reducing leverage. $50M revolver provides liquidity flexibility.
- **Cash Flow Efficiency**: Year-to-date operating cash flow of $12.5M, supporting debt reduction and balance sheet strength.

**【Q&A Highlights】**
- **VA Transition**: Mail order pharmacy program transitioning to small businesses, slower than anticipated but ongoing. Leavenworth site transition on track for August 31.
- **Government Workforce Impact**: Administration cuts in acquisition workforce delayed RFPs and contract awards. Some recovery in workforce stability expected.
- **Outlook**: Anticipate Q4 stabilization and strong 2026 growth driven by federal tech initiatives and administrative reforms.

DLH (DLHC)-7 Aug 25-2025 Q3 Earnings call transcript

Revenue

Sales and Services Revenue

Financing Services Revenue

Other Revenue

Cost of Revenue

Cost of Goods and Services

Cost of Financing Services

Other Cost

Gross Profit

Other Operating Income

Operating Expenses

Selling, General and Administrative Expenses

Selling and Marketing Expenses

General and Administrative Expenses

Research and Development Expenses

Loss on Bad Debts

Loss on Impairment of Other Assets

Loss on Disposal of Assets

Other Operating Expenses

Operating Income

Non-Operating Income (Loss)

Income (Loss) from Affiliates

Income (Loss) from Associates

Income (Loss) from Joint ventures

Gain (Loss) on Other Investment

Gain (Loss) on Change in Fair Value

Gain (Loss) on Foreign Currency Exchange

Other Non-Operating Income (Loss)

Net Interest Expense

Interest Expense

Interest Income

Pretax Income From Continuing Operations

Income Tax Expense

Current Income Tax

Deferred Income Tax

Income Tax Adjustments

Net Income from Continuing Operations

Income from Discontinued Operations

Other Items Before Net Income

Net Income

Net Income Attributable to Minority Interests

Net Income Attributable to Owners of the Company

Preferred Stock Dividends

Other Adjustments

Net Income Attributable to Common Stockholders

Other Comprehensive Income

Total Comprehensive Income

Total Comprehensive Income Attributable to Minority Interests

Total Comprehensive Income Attributable to Owners of the Company

Basic EPS

Basic EPS from Continuing Operations

Basic EPS from Discontinued Operations

Diluted EPS

Diluted EPS from Continuing Operations

Diluted EPS from Discontinued Operations

DLHC

DLHC fundamentals

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