DLH Holdings Corp.

DLH reported second-quarter fiscal 2026 revenue of $59.3 million, down from $89.2 million in the prior-year period. Adjusted EBITDA was $5.3 million versus $9.4 million a year ago, and adjusted EBITDA margin was 9%. Free cash flow was approximately $3.8 million. Debt ended the quarter at $132.7 million, down from $136.6 million at the end of the prior quarter. Management did not give formal next-quarter or full-year revenue/EPS guidance, but said it expects to convert approximately 50% to 55% of fiscal 2026 EBITDA into debt reduction by year end and expects award decisions on several material bids over the coming months.

CEO Zachary Parker said the federal funding backdrop has improved, with better budget visibility and more active procurement across defense, intelligence, and health agencies. He emphasized that several delayed opportunities are finally coming to bid, that the company’s AI/data science and cloud-secure capabilities fit current customer priorities, and that DLH is well positioned for organic growth. He also framed the company’s recent loss of work to small-business set-asides as a known transition rather than a structural failure, while expressing confidence that the pipeline is starting to reopen.

CFO Kathryn Johnbull highlighted the quarter’s core numbers: $59.3 million of revenue, $5.3 million of adjusted EBITDA, 9% adjusted EBITDA margin, and about $3.8 million of free cash flow. She said the revenue decline was primarily driven by small-business set-aside conversions, especially CMOP and Head Start, plus contract completions and government efficiency initiatives. On capital structure, she noted debt fell to $132.7 million from $136.6 million sequentially, the company expects to convert about 50% to 55% of fiscal 2026 EBITDA into debt reduction, and DLH remains in compliance with all covenants and ahead of mandatory repayments.

Analysts focused on the remaining wind-down of VA CMOP, timing risk around delayed procurements and possible shutdown/continuing resolution impacts, and whether more cost-right-sizing was needed. Management said the final CMOP transition should wrap up just before Memorial Day and that they are still on plan, while also saying several material RFPs have already come through and decisions on some should arrive by fiscal year-end. On costs, Johnbull said the material reductions needed to right-size the business have already been completed, with only ongoing footprint/lease reviews and similar efficiency work remaining. The late-breaking NIH contract extension was described as a two-year sole-source bridge that improves revenue visibility on a long-standing public health program.