DLH (DLHC) investor relations material

Executive summary

• Q1 revenue was $68.9 million, down 24% year-over-year, mainly due to program transitions to small business set-aside contractors and government efficiency initiatives.

• Net loss was $1.3 million, compared to net income of $1.1 million in the prior year.

• Adjusted EBITDA was $6.5 million (9.5% of revenue), down from $9.9 million, reflecting cost reduction and operational streamlining.

• Demand is improving in core markets, with emphasis on digital modernization, cybersecurity, and advanced technology integration.

• Management remains focused on expanding efficiencies, margins, and deleveraging the balance sheet.

Financial highlights

• Revenue for Q1 FY2026 was $68.9 million, down from $90.8 million year-over-year.

• Adjusted EBITDA was $6.5 million, with a margin of 9.5%, compared to $9.9 million (11.0%) in the prior year.

• Free cash flow usage improved to $(4.8) million from $(12.1) million year-over-year.

• Net loss margin was (1.9)% compared to a net income margin of 1.2% a year ago.

• Backlog at quarter-end was $517.4 million, with $124.0 million funded.

Outlook and guidance

• Budget clarity and increased federal funding support a positive midterm outlook, with improved visibility for federal clients.

• Management expects to align expenses with lower revenue volumes and restore margins to competitive levels after cost scaling initiatives.

• Anticipates converting 50%-55% of fiscal 2026 EBITDA to debt reduction by year-end.

• Operating cash flow is expected to be deployed toward reducing debt levels, enhancing long-term financial flexibility.

• Operating fundamentals and organic growth initiatives expected to improve as the year progresses.