DLH (DLHC) investor relations material

Executive summary

• Q2 FY2026 revenue was $59.3 million, down 33.5% year-over-year, mainly due to legacy program transitions to small business set-aside contracts and government efficiency initiatives.

• Adjusted EBITDA for the quarter was $5.3 million (9.0% margin), reflecting cost-scaling initiatives and disciplined cost alignment.

• Net loss for the quarter was $2.5 million, compared to net income of $0.9 million in the prior year.

• The company secured a two-year sole source extension for a major NIH contract, enhancing revenue visibility.

• Federal procurement environment is improving, with several large bids submitted and decisions expected in the coming months.

Financial highlights

• Revenue declined 33.5% year-over-year due to contract transitions to small business set-asides.

• Adjusted EBITDA margin was 9.0%, down from 10.5% in Q2 2025.

• Free cash flow for the quarter was $3.8 million, with expectations for accelerated cash generation in the second half of FY2026.

• Net loss per diluted share was $(0.17), compared to $0.06 in the prior year.

• Debt reduced to $132.7 million from $136.6 million sequentially.

Outlook and guidance

• Management expects the transition of legacy contracts to complete in Q3 2026.

• The company targets converting 50%-55% of FY2026 EBITDA to debt reduction by year-end.

• Anticipates decisions on several material contract bids in the next quarter, with optimism for organic growth.

• Federal budget clarity and multi-year funding initiatives support a positive outlook for defense, intelligence, and public health sectors.

• No material impact is expected from recent federal funding disruptions.