Cover
Cover - shares | 3 Months Ended | |
Dec. 31, 2022 | Feb. 08, 2023 | |
Cover [Abstract] | ||
Document Type | 10-Q | |
Document Quarterly Report | true | |
Document Period End Date | Dec. 31, 2022 | |
Document Transition Report | false | |
Entity File Number | 0-18492 | |
Entity Registrant Name | DLH HOLDINGS CORP. | |
Entity Incorporation, State or Country Code | NJ | |
Entity Tax Identification Number | 22-1899798 | |
Entity Address, Address Line One | 3565 Piedmont Road, | |
Entity Address, Address Line Two | Building 3, | |
Entity Address, Address Line Three | Suite 700 | |
Entity Address, City or Town | Atlanta, | |
Entity Address, State or Province | GA | |
Entity Address, Postal Zip Code | 30305 | |
City Area Code | 770 | |
Local Phone Number | 554-3545 | |
Title of 12(b) Security | Common Stock | |
Trading Symbol | DLHC | |
Security Exchange Name | NASDAQ | |
Entity Current Reporting Status | Yes | |
Entity Interactive Data Current | Yes | |
Entity Small Business | true | |
Entity Emerging Growth Company | false | |
Entity Shell Company | false | |
Entity Common Stock, Shares Outstanding | 13,756,969 | |
Entity Central Index Key | 0000785557 | |
Amendment Flag | false | |
Document Fiscal Year Focus | 2023 | |
Document Fiscal Period Focus | Q1 | |
Current Fiscal Year End Date | --09-30 | |
Entity Filer Category | Accelerated Filer |
CONSOLIDATED STATEMENTS OF OPER
CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Income Statement [Abstract] | ||
Revenue | $ 72,738 | $ 152,801 |
Contract costs | 57,256 | 132,686 |
General and administrative costs | 7,424 | 6,911 |
Depreciation and amortization | 2,402 | 1,985 |
Total operating costs | 68,817 | 141,582 |
Income from operations | 3,921 | 11,219 |
Interest expense | 1,830 | 672 |
Income before provision for income taxes | 2,091 | 10,547 |
Provision for income taxes | 544 | 2,743 |
Net income | $ 1,547 | $ 7,804 |
Net income per share - basic (in dollars per share) | $ 0.12 | $ 0.61 |
Net income per share - diluted (in dollars per share) | $ 0.11 | $ 0.55 |
Weighted average common stock outstanding | ||
Basic (in shares) | 13,306 | |
Diluted (in shares) | 14,276 | 14,295 |
Corporate development costs | $ 1,735 | $ 0 |
CONSOLIDATED BALANCE SHEETS
CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 |
Current assets: | ||
Cash | $ 1,364 | $ 228 |
Accounts receivable | 65,178 | 40,496 |
Other current assets | 3,249 | 2,878 |
Total current assets | 69,791 | 43,602 |
Equipment and improvements, net | 1,875 | 1,704 |
Operating lease right-of-use assets | 19,595 | 16,851 |
Goodwill | 139,277 | 65,643 |
Intangible assets, net | 136,729 | 40,884 |
Other long-term assets | 61 | 328 |
Total assets | 367,328 | 169,012 |
Debt obligations - current, net of deferred financing costs | 28,505 | 0 |
Current liabilities: | ||
Operating lease liabilities - current | 3,379 | 2,235 |
Accrued payroll | 16,540 | 9,444 |
Accounts payable and accrued liabilities | 32,711 | 26,862 |
Total current liabilities | 81,135 | 38,541 |
Deferred taxes, net | 1,521 | 1,534 |
Operating lease liabilities - long-term | 18,221 | 16,461 |
Debt obligations - long-term, net of deferred financing costs | 165,942 | 20,416 |
Total long-term liabilities | 185,684 | 38,411 |
Total liabilities | 266,819 | 76,952 |
SHAREHOLDERS’ EQUITY | ||
Common stock, $0.001 par value; 40,000 shares authorized; 13,757 and 13,047 shares issued and outstanding at December 31, 2022 and September 30, 2022, respectively | 14 | 13 |
Additional paid-in capital | 97,958 | 91,057 |
Retained earnings | 2,537 | 990 |
Total shareholders’ equity | 100,509 | 92,060 |
Total liabilities and shareholders' equity | $ 367,328 | $ 169,012 |
CONSOLIDATED BALANCE SHEETS (Pa
CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares | Dec. 31, 2022 | Sep. 30, 2022 |
Statement of Financial Position [Abstract] | ||
Common stock, par value (in dollars per share) | $ 0.001 | $ 0.001 |
Common stock, authorized (in shares) | 40,000,000 | 40,000,000 |
Common stock, issued (in shares) | 13,757,000 | 13,047,000 |
Common stock, outstanding (in shares) | 13,757,000 | 13,047,000 |
CONSOLIDATED STATEMENTS OF CASH
CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Operating activities | ||
Net income | $ 1,547 | $ 7,804 |
Adjustments to reconcile net income to net cash provided by (used in) operating activities: | ||
Depreciation and amortization | 2,402 | 1,985 |
Amortization of deferred financing costs charged to interest expense | 276 | 151 |
Stock-based compensation expense | 552 | 500 |
Deferred taxes, net | (13) | 0 |
Changes in operating assets and liabilities | ||
Accounts receivable | 780 | (13,396) |
Other current assets | 994 | (632) |
Accrued payroll | 347 | 1,851 |
Deferred revenue | 0 | (12,125) |
Accounts payable and accrued liabilities | 1,075 | (2,335) |
Other long-term assets and liabilities | 13 | 42 |
Net cash provided by (used in) operating activities | 7,973 | (16,155) |
Investing activities | ||
Business acquisition, net of cash acquired | (179,958) | 0 |
Purchase of equipment and improvements | (384) | 0 |
Net cash used in investing activities | (180,342) | 0 |
Financing activities | ||
Proceeds from debt obligations | 200,703 | 6,000 |
Repayments of debt obligations | (19,327) | (9,875) |
Payments of deferred financing costs | (7,221) | 0 |
Proceeds from issuance of common stock upon exercise of options and warrants | 0 | 200 |
Payment of tax obligations resulting from net exercise of stock options | (650) | 0 |
Net cash provided by (used in) financing activities | 173,505 | (3,675) |
Net change in cash | 1,136 | (19,830) |
Cash - beginning of period | 228 | 24,051 |
Cash - end of period | 1,364 | 4,221 |
Supplemental disclosure of cash flow information | ||
Cash paid during the period for interest | 339 | 513 |
Cash paid during the period for income taxes | 5 | 0 |
Common stock surrendered for the exercise of stock options | $ 238 | $ 0 |
CONSOLIDATED STATEMENTS OF SHAR
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY - USD ($) | Total | Common Stock | Additional Paid-In Capital | Retained Earnings |
Beginning Balance (in shares) at Sep. 30, 2021 | 12,714,000 | |||
Beginning Balance at Sep. 30, 2021 | $ 65,608,000 | $ 13,000 | $ 87,893,000 | $ (22,298,000) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Expense related to director restricted stock units | 162,000 | 162,000 | ||
Expense related to employee stock-based compensation | 338,000 | 338,000 | ||
Exercise of stock warrants (in shares) | 54,000 | |||
Exercise of stock warrants | 200,000 | 200,000 | ||
Net income | 7,804,000 | 7,804,000 | ||
Ending Balance (in shares) at Dec. 31, 2021 | 12,768,000 | |||
Ending Balance at Dec. 31, 2021 | $ 74,112,000 | $ 13,000 | 88,593,000 | (14,494,000) |
Beginning Balance (in shares) at Sep. 30, 2022 | 13,047,000 | 13,047,000 | ||
Beginning Balance at Sep. 30, 2022 | $ 92,060,000 | $ 13,000 | 91,057,000 | 990,000 |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||
Issuance of common stock in business combination (in shares) | 527,000 | |||
Issuance of common stock in business combination | $ 7,000,000 | $ 1,000 | 6,999,000 | |
Expense related to director restricted stock units | 180,000 | 180,000 | ||
Expense related to employee stock-based compensation | 372,000 | 372,000 | ||
Common stock surrendered for the exercise of stock options (in shares) | (67,000) | |||
Common stock surrendered for the exercise of stock options | $ 650,000 | 650,000 | ||
Exercise of stock options (in shares) | 250,000 | 250,000 | ||
Exercise of stock options | $ 0 | 0 | ||
Net income | $ 1,547,000 | 1,547,000 | ||
Ending Balance (in shares) at Dec. 31, 2022 | 13,757,000 | 13,757,000 | ||
Ending Balance at Dec. 31, 2022 | $ 100,509,000 | $ 14,000 | $ 97,958,000 | $ 2,537,000 |
Basis of Presentation
Basis of Presentation | 3 Months Ended |
Dec. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Basis of Presentation and Principles of Consolidation The accompanying consolidated financial statements include the accounts of DLH Holdings Corp. and its wholly-owned subsidiaries (together with its subsidiaries, "DLH" or the "Company" and also referred to as "we," "us" and "our"). All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying financial statements have been prepared in accordance with United States generally accepted accounting principles ("GAAP") for interim financial information and with the instructions to Form 10-Q and Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. In management's opinion, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the period ended December 31, 2022 are not necessarily indicative of the results that may be expected for the year ending September 30, 2023 or any future period. Amounts as of and for the three months ended December 31, 2022 and December 31, 2021 are unaudited. For further information, refer to the consolidated financial statements and footnotes thereto included in the Company's Annual Report on Form 10-K for the year ended September 30, 2022 filed with the Securities and Exchange Commission on December 5, 2022. |
New Accounting Pronouncements
New Accounting Pronouncements | 3 Months Ended |
Dec. 31, 2022 | |
Accounting Changes and Error Corrections [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements In March 2020 and January 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope,” respectively (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In December 2022, FASB issued ASU 2022-06 "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848" which defers the end date for electing the relief provided in Topic 848 from December 31, 2022 to December 31, 2024. In the first quarter of fiscal 2023, the Company adopted the optional expedients and exceptions provided in Topic 848. The adoption did not have a material impact on the Company’s consolidated financial statements. |
Significant Accounting Policies
Significant Accounting Policies | 3 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The most significant of these estimates and assumptions relate to estimating revenues and costs including overhead and its allocation, estimating progress toward the completion of performance obligations, assessing fair value of acquired assets and liabilities accounted for through business acquisitions, valuing and determining the amortization periods for long-lived intangible assets, interest rate swaps, stock-based compensation, right-of-use assets and leases liabilities, and loss development on workers' compensation claims. We evaluate these estimates and judgments on an ongoing basis and base our estimates on historical experience, current and expected future outcomes, third-party evaluations, and various other assumptions that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. We revise material accounting estimates if changes occur, such as more experience is acquired, additional information is obtained, or there is new information on which an estimate was or can be based. Actual results could differ from those estimates. Revenue The Company's revenues from contracts with customers are derived from offerings that include technology-enabled business process outsourcing, program management solutions, and public health research and analytics, substantially within the U.S. government and its agencies, and to a lesser extent, subcontractors. The Company has various types of contracts including time-and-materials contracts, cost-reimbursable contracts, and firm-fixed-price contracts. We consider a contract with a customer to exist when there is a commitment by both parties (customer and Company), payment terms are determinable, there is commercial substance, and collectability is probably in accordance with Accounting Standards Codification ("ASC") No. 606, Revenue from Contracts with Customers ("Topic 606"). We recognize revenue over time when there is a continuous transfer of control to our customer as performance obligations are satisfied. For our U.S. government contracts, this continuous transfer of control to the customer is transferred over time and revenue is recognized based on the extent of progress toward completion of the performance obligation. We consider control to transfer when we have a right to payment. In some instances, the Company commences providing services prior to formal approval to begin work from the customer. The Company considers these factors, the risks associated with commencing work, and legal enforceability in determining whether a contract exists under Topic 606. Contract modification can occur throughout the life of the contract and can affect the transaction price, extend the period of performance, adjust funding, or create new performance obligations. We review each modification to assess the impact of these contract changes to determine if it should be treated as part of the original performance obligation or as a separate contract. Contract modifications impact performance obligations when the modification either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue and profit cumulatively. Furthermore, a significant change in one or more estimates could affect the profitability of our contracts. We recognize adjustments in estimated profit on contracts in the period identified. For service contracts, we satisfy our performance obligations as services are rendered. We use cost-based input and time-based output methods to measure progress based on the contract type. • Time and material - We bill the customer per labor hour and per material, and revenue is recognized in the amount invoiced as the amount corresponds directly to the value of our performance to date. Revenue is recognized to the extent of billable rates times hours delivered plus materials and other reimbursable costs incurred. • Cost reimbursable - We record reimbursable costs as incurred, including an estimated share of the contractual fee earned. • Firm fixed price - We recognize revenue over time using a straight-line measure of progress or percentage of completion method whereby progress toward completion is based on a comparison of actual costs incurred to total estimated costs to be incurred over the contract terms. Contract costs generally include direct costs such as labor, materials, subcontract costs, and indirect costs identifiable with or allocable to a specific contract. Costs are expensed as incurred and include an estimate of the contractual fees earned. Contract costs incurred for U.S. government contracts, including indirect costs, are subject to audit and adjustment by various government audit agencies. Historically, our adjustments have not been material. Contract assets - Amounts are invoiced as work progresses in accordance with agreed-upon contractual terms. In part, revenue recognition occurs before we have the right to bill, resulting in contract assets. These contract assets are reported within Accounts receivable, net on our consolidated balance sheets and are invoiced in accordance with payment terms defined in each contract. Period end balances will vary from period to period due to agreed-upon contractual terms. Contract liabilities - Amounts are a result of billings in excess of costs incurred or prepayment for services to be rendered. Fair Value of Financial Instruments The carrying amounts of the Company's cash and cash equivalents, accounts receivable, contract assets, contract liabilities, accrued expenses, and accounts payable approximate fair value due to the short-term nature of these instruments. The fair values of the Company's debt instruments approximate fair value because the underlying interest rates approximate market rates that the Company could obtain for similar instruments at the balance sheet dates. Long-lived Assets Our long-lived assets include equipment and improvements, intangible assets, right-of-use assets, and goodwill. The Company continues to review long-lived assets for possible impairment or loss of value at least annually, or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit's carrying amount is greater than its fair value. Equipment and improvements are recorded at cost. Depreciation and amortization are provided using the straight-line method over the estimated useful asset lives (3 to 7 years) and the shorter of the initial lease term or estimated useful life for leasehold improvements. Maintenance and repair costs are expensed as incurred. Intangible assets (other than goodwill) are originally recorded at fair value and are amortized on a straight-line basis over their estimated useful lives of 10 years. Maintenance and repair costs are expensed as incurred. Right-of-use assets are measured at the present value of future minimum lease payments, including all probable renewals, plus lease payments made to the lessor before or at lease commencement and indirect costs paid, less incentives received. Our right-of-use assets include long-term leases for facilities and equipment and are amortized over their respective lease terms. Lease Liabilities The Company has leases for facilities and office equipment. Our lease liabilities are recognized as the present value of the future minimum lease payments over the lease term. Our lease payments consist of fixed and in-substance fixed amounts attributable to the use of the underlying asset over the lease term. Variable lease payments that do not depend on an index rate or are not in-substance fixed payments are excluded in the measurement of right-of-use assets and lease liabilities and are expensed in the period incurred. The incremental borrowing rate on our secured term loan is used in determining the present value of future minimum lease payments. Some of our lease agreements include options to extend the lease term or terminate the lease. These options are accounted for in our right-of-use assets and lease liabilities when it is reasonably certain that the Company will extend the lease term or terminate the lease. The Company does not have any finance leases. Goodwill The Company reviews goodwill for impairment on an annual basis and on a quarterly basis the company assesses the impact of any macroeconomic changes that may impact the business conditions to determine if these changes have any adverse impact to goodwill. Notwithstanding this evaluation, factors including non-renewal of a major contract or other substantial changes in business conditions could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to future periods’ results of operations. The Company determined that no change in business conditions occurred which would have a material adverse effect on the valuation of goodwill. Provision for Income Taxes The Company accounts for income taxes in accordance with the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reflected on the consolidated balance sheets when it is determined that it is more likely than not that the asset will be realized. This guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is more-likely-than-not that the position will be sustained upon examination. We had no uncertain tax positions at either December 31, 2022 or September 30, 2022. We report interest and penalties as a component of provision for income taxes. During the three months ended December 31, 2022 and December 31, 2021, we recognized no interest and no penalties related to income taxes. Stock-based Compensation The Company uses the fair value-based method for stock-based compensation. Options issued are designated as either an incentive stock option or a non-statutory stock option. No option may be granted with a term of more than 10 years from the date of grant. Option awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued common shares. All awards to employees and non-employees are recorded at fair value on the date of the grant and expensed over the period of vesting. The Company uses a Monte Carlo method to estimate the fair value of each stock option at the date of grant. Any consideration paid by the option holders to purchase shares is credited to common stock. Compensation Expense Compensation expense for the portion of equity awards for which the requisite service has not been rendered is recognized as the requisite service is rendered. The compensation expense for that portion of awards has been based on the grant-date fair value of those awards as calculated for recognition purposes under applicable guidance. For options that vest based on the Company’s common stock achieving and maintaining defined market prices, the Company values the awards with a Monte Carlo method that utilizes various probability factors and other criterion in establishing fair value of the grant. The related compensation expense is recognized over the service period. Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. We maintain cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. Deposits held with financial institutions may exceed the $250,000 limit. Accounts Receivable Receivables include amounts billed and currently due from customers where the right to consideration is unconditional and amounts unbilled. Both billed and unbilled amounts are non-interest bearing, unsecured, and recognized at an estimated realizable value that includes costs and fees, and are generally expected to be billed and received within a single year. We evaluate our receivables on a quarterly basis and determine whether an allowance is appropriate based on specific collection issues. No allowance for doubtful accounts was deemed necessary at either December 31, 2022 or September 30, 2022. Earnings Per Share Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common stock outstanding and restricted stock grants that vested or are likely to vest during the period. Diluted earnings per share is calculated by dividing income available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities. Diluted earnings per share is calculated using the treasury stock method. Treasury Stock The Company periodically purchases its own common stock that is traded on public markets as part of announced stock repurchase programs. The repurchased common stock is classified as treasury stock on the consolidated balance sheets and held at cost. As of December 31, 2022 and September 30, 2022, the Company did not hold any treasury stock. Preferred Stock Our certificate of incorporation authorizes the issuance of "blank check" preferred stock with designations, rights and preferences as may be determined from time to time by our board of directors up to an aggregate of 5,000,000 shares of preferred stock. As of December 31, 2022 and September 30, 2022, the Company has not issued any preferred stock. Interest Rate Swap The Company uses derivative financial instruments to manage interest rate risk associated with its variable debt. The Company's objective in using these interest rate derivatives is to manage its exposure to interest rate movements and reduce volatility of interest expense. The gains and losses due to changes in the fair value of the interest rate swap agreements completely offset changes in the fair value of the hedged portion of the underlying debt. Offsetting changes in fair value of both the interest rate swaps and the hedged portion of the underlying debt are recognized in interest expense in the consolidated statements of operations. The Company does not hold or issue any derivative instruments for trading or speculative purposes. Risks & Uncertainties Management evaluates the impact of global markets and economic factors on our industry and the potential for adverse effects on the Company's consolidated financial position and its operations. As of the date of these consolidated financial statements, there was no indication of any global or economic impacts to our industry. |
Business Combinations
Business Combinations | 3 Months Ended |
Dec. 31, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
Business Combinations | 4. Business Combinations Acquisition of Grove Resource Solutions, LLC On December 8, 2022, the Company acquired 100% of the equity interests of Grove Resource Solution, LLC ("GRSi") for a net preliminary purchase price of $185.1 million, inclusive of the preliminary working capital adjustment. The acquisition was financed through a combination of: • borrowings of $178.1 million under the Company’s amended and restated credit facility; and • common stock issued of approximately 0.5 million shares, which were valued at $7.0 million in the aggregate, based on the 20-day volume-adjusted average price of its common stock. The acquisition of GRSi was consistent with the Company’s growth strategy, as it provided contract diversification, addition of key capabilities and increased presence in the military health market. The estimated goodwill derived from this transaction is primarily due to these attributes. We have used the acquisition method of accounting for this transaction, whereby the assets acquired and liabilities assumed are recognized based upon their estimated fair values at the acquisition date. The preliminary purchase price for GRSi was $188.5 million adjusted to reflect acquired cash, assumed liabilities and preliminary net working capital adjustments. The Purchase Agreement contains customary representations, warranties and covenants by the parties. Subject to certain limitations and conditions, the seller and the equity holders of the seller do not have indemnity obligation for damages resulting from breaches or inaccuracies of the representations, warranties, and covenants of the seller, GRSI and the equity holders as set forth in the Purchase Agreement. The Purchase Agreement also provided for the establishment of an escrow account in order to satisfy (i) any downward adjustment of the purchase price base on GRSI's net working capital at the closing and (ii) certain specified indemnification obligations of the seller and equity holders that may arise following the closing. The escrow account is funded by an aggregate amount of approximately $4.3 million and the stock consideration. A representations and warranties insurance policy has been purchased by the Company in connection with the Purchase Agreement, under which the Company may seek recourse for breaches of the representations and warranties of the seller, GRSI and the equity holders. The representations and warranties insurance policy is subject to certain customary exclusions and a deductible. In accordance with ASU 2017-01, the Company evaluated the transaction as an acquisition of a business. We are still assessing the acquisition price to the fair value of the assets and liabilities of GRSi at the acquisition date. We are awaiting the fair values of the intangibles assets from the third party valuation firm. The preliminary purchase price and its allocation are shown below and are subject to change once the valuation is complete. Based on the unaudited financial statements of GRSi on December 8, 2022, we accounted for the total acquisition consideration and allocation of fair value to the related assets and liabilities on a preliminary basis as follows (in thousands): Preliminary purchase price for GRSi $ 188,458 Purchase price allocation: Cash 747 Accounts receivable 25,468 Other current assets 1,354 Accounts payable and accrued expenses (2,449) Payroll liabilities (7,827) Other current liabilities (325) Equipment and improvements, net 463 Other long-term assets and liabilities (611) Intangible assets 98,004 Total identifiable net assets acquired 114,824 Goodwill 73,634 All operating units are aggregated into a single reportable segment. The acquisition of GRSi did not create an additional reportable segment as all operations report to a single Chief Operating Decision Maker (CODM), serve a similar customer base, and provide similar services within a common regulatory environment. The goodwill represents intellectual capital and the acquired workforce, of which both do not qualify as a separate intangible asset. The tax deductible goodwill is in the process of being calculated. During the three months ended December 31, 2022 following the completion of the acquisition, GRSi contributed approximately $6.9 million of revenue and $0.3 million of income from operations. The following table presents certain results for the three months ended December 31, 2022 and 2021 as though the acquisition of GRSi had occurred on October 1, 2021. The unaudited pro forma information is presented for informational purposes only and is not necessarily indicative of our results if the acquisition had taken place on that date. The pro forma information was prepared by combining our reported historical results with the historical results of GRSi for the pre-acquisition periods. In addition, the reported historical amounts were adjusted for the following items, net of associated tax effects: • The impact of recording GRSi's intangible asset amortization. • The impact of interest expense for the new credit facility. • The removal of legacy GRSi director's fees. • The removal of transaction costs for the acquisition incurred by GRSi. (in thousands) Three Months Ended December 31, Pro forma results 2022 2021 Revenue $ 99,823 $ 178,854 Net income (loss) $ 2,181 $ 6,857 Number of shares outstanding - basic 13,306 12,749 Number of shares outstanding - diluted 14,276 14,295 Basic earnings per share (loss) $0.16 $0.54 Diluted earnings per share (loss) $0.15 $0.48 |
Revenue Recognition
Revenue Recognition | 3 Months Ended |
Dec. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Revenue Recognition | Revenue Recognition The following table summarizes the contract balances recognized on the Company's consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Contract assets $ 10,740 $ 7,682 Contract liabilities $ 509 $ — Disaggregation of Revenue from Contracts with Customers We disaggregate our revenue from contracts with customers by customer, contract type, as well as whether the Company acts as prime contractor or subcontractor. We believe these categories best depict how the nature, amount, timing and uncertainty of our revenue and cash flows are affected by economic factors. The following series of tables present our revenue disaggregated by these categories: Revenue by customer for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 Department of Veterans Affairs $ 33,708 $ 28,193 Department of Health and Human Services 27,305 23,126 Department of Defense 10,263 8,495 Department of Homeland Security 167 91,328 Other 1,295 1,659 Total $ 72,738 $ 152,801 Revenue by contract type for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 Time and Materials $ 48,991 $ 132,540 Cost Reimbursable 12,580 10,110 Firm Fixed Price 11,167 10,151 Total $ 72,738 $ 152,801 Revenue by whether the Company acts as a prime contractor or a subcontractor for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 Prime Contractor $ 67,981 $ 146,107 Subcontractor 4,757 6,694 Total $ 72,738 $ 152,801 |
Leases
Leases | 3 Months Ended |
Dec. 31, 2022 | |
Leases [Abstract] | |
Leases | Leases The following table summarizes lease balances presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Operating lease right-of-use assets $ 19,595 $ 16,851 Operating lease liabilities, current $ 3,379 $ 2,235 Operating lease liabilities - long-term 18,221 16,461 Total operating lease liabilities $ 21,600 $ 18,696 As of December 31, 2022, operating leases for facilities and equipment have remaining lease terms of 0.1 to 8.3 years. For the three months ended December 31, 2022 and 2021, total lease costs for our operating leases as follows (in thousands): 2022 2021 Operating $ 947 $ 952 Short-term 43 27 Variable 31 18 Sublease income (a) (71) (69) Total lease costs $ 950 $ 928 (a) The Company subleases a portion of one of its leased facilities. The sublease is classified as an operating lease with respect to the underlying asset. The sublease term is 5 years and includes two additional 1-year term extension options. The Company's future minimum lease payments as of December 31, 2022 as follows (in thousands): For the Fiscal Year Ending September 30, 2023 (remaining) $ 3,455 2024 4,568 2025 3,884 2026 3,656 2027 2,582 Thereafter 8,513 Total future lease payments 26,658 Less: imputed interest (5,058) Present value of future minimum lease payments 21,600 Less: current portion of operating lease liabilities (3,379) Long-term operating lease liabilities $ 18,221 At December 31, 2022, the weighted-average remaining lease term and weighted-average discount rate are 6.6 years and 6.38%, respectively. The calculation of the weighted-average discount rate was determined based on borrowing terms from our secured term loan. Other information related to our leases for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 Cash paid for amounts included in the measurement of lease liabilities $ 1,022 $ 905 Lease liabilities arising from obtaining right-of-use assets $ 3,541 $ — |
Supporting Financial Informatio
Supporting Financial Information | 3 Months Ended |
Dec. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Supporting Financial Information | Supporting Financial Information Accounts receivable The following table summarizes accounts receivable presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Billed receivables $ 54,438 $ 32,814 Contract assets 10,740 7,682 Allowance for doubtful accounts — — Accounts receivable $ 65,178 $ 40,496 Other current assets The following table summarizes other current assets presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Prepaid insurance and benefits $ 601 $ 737 Other receivables 922 945 Prepaid licenses and other expenses 1,726 1,196 Other current assets $ 3,249 $ 2,878 Equipment and improvements, net The following table summarizes equipment and improvements, net presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Furniture and equipment $ 893 $ 893 Computer equipment 2,730 2,316 Computer software 4,407 4,407 Leasehold improvements 1,614 1,614 Total equipment and improvements 9,644 9,230 Less: accumulated depreciation and amortization (7,769) (7,526) Equipment and improvements, net $ 1,875 $ 1,704 Depreciation expense was $0.2 million and $0.3 million for the three months ended December 31, 2022 and 2021, respectively. Intangible assets The following table summarizes intangible assets, net presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Intangible assets Customer contracts and related customer relationships $ 150,187 $ 62,281 Covenants not to compete 637 522 Trade name 13,034 3,051 Total intangible assets 163,858 65,854 Less: accumulated amortization Customer contracts and related customer relationships (25,622) (23,606) Covenants not to compete (330) (316) Trade name (1,177) (1,048) Total accumulated amortization (27,129) (24,970) Intangible assets, net $ 136,729 $ 40,884 Amortization expense was $2.2 million and $1.6 million for the three months ended December 31, 2022 and 2021. As of December 31, 2022, the estimated amortization expense per fiscal year as follows (in thousands): 2023 (remaining) $ 12,218 2024 16,214 2025 16,214 2026 15,479 2027 14,451 Thereafter 62,153 Total amortization expense $ 136,729 Goodwill The change in the carrying amount of goodwill for the three months ended December 31, 2022 as follows (in thousands): Balance at September 30, 2022 $ 65,643 Preliminary increase from GRSi acquisition (a) 73,634 Balance at December 31, 2022 $ 139,277 Ref (a) The Company is currently assessing the valuation of the GRSi acquisition to make the final purchase price adjustments which may impact the final carrying value of Goodwill. The balance provided is an estimate and subject to revision. Please refer to Note 4 for more information. Accounts payable and accrued liabilities The following table summarizes accounts payable and accrued liabilities presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Accounts payable $ 16,489 $ 11,886 Accrued benefits (a) 3,108 3,857 Accrued bonus and incentive compensation 916 3,625 Accrued workers' compensation insurance 2,795 4,880 Accrued fringe (b) 1,099 775 Accrued interest payable 1,088 — Accrued purchase price adjustment 3,379 — Other accrued expenses 3,837 1,839 Accounts payable and accrued liabilities $ 32,711 $ 26,862 (a) Includes employee insurance plans and other related benefits. (b) Includes the 401(k) plan and other fringe benefits. Debt obligations The following table summarizes debt obligations presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Secured revolving line of credit $ 16,939 $ — Secured term loan 186,438 22,000 Less: unamortized deferred financing costs (8,930) (1,584) Net bank debt obligations 194,447 20,416 Less: current portion of debt obligations, net of deferred financing costs (28,505) — Long-term portion of debt obligations, net of deferred financing costs $ 165,942 $ 20,416 Interest expense The following table summarizes interest expense presented on our consolidated statements of operations for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 Interest expense (a) $ 1,554 $ 521 Amortization of deferred financing costs (b) 276 151 Interest expense $ 1,830 $ 672 (a) Interest expense on borrowing. (b) Amortization of expenses related to secured term loan and secured revolving line of credit. |
Credit Facilities
Credit Facilities | 3 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
Credit Facilities | Credit Facilities A summary of our credit facilities as of December 31, 2022 and September 30, 2022 as follows (in millions): December 31, 2022 September 30, 2022 Arrangement Loan Balance Interest Arrangement Loan Balance Interest Secured term loan (a) due December 8, 2027 $ 186.4 SOFR* + 4.2% Secured term loan due September 30, 2025 $ 22.0 LIBOR + 2.5% Secured revolving line of credit (b) due December 8, 2027 $ 16.9 SOFR* + 4.2% Secured Revolving line of Credit due September 20, 2025 $ — LIBOR + 2.5% *Secured Overnight Financing Rate ("SOFR") as of December 31, 2022 was 4.23%. (a) Represents the principal amounts payable on our term loan, which is secured by liens on substantially all of the assets of the Company. The principal of the term loan is payable in quarterly installments with the remaining balance due on December 8, 2027. The Credit Agreement requires compliance with a number of financial covenants and contains restrictions on our ability to engage in certain transactions. Among other matters, we must comply with limitations on the following: granting liens; incurring other indebtedness; maintenance of assets; investments in other entities and extensions of credit; mergers and consolidations; and changes in nature of business. The loan agreement also requires us to comply with certain quarterly financial covenants including: (i) a minimum fixed charge coverage ratio of at least 1.25 to 1.00, and (ii) a total leverage ratio not exceeding the ratio of 4.50:1.0 to 2.00:1.0 through maturity. The total leverage ratio is calculated by dividing the Company's total interest-bearing debt by net income adjusted to exclude (i) interest and other expenses, (ii) provision for or benefit from income taxes, if any, (iii) depreciation and amortization, and (iv) non-cash charges, losses or expenses, including stock-based compensation, and (v) non-recurring charges, losses or expenses to include transaction and non-cash equity expense. We are in compliance with all loan covenants and restrictions. We are required to pay quarterly amortization payments, which commenced in December 2022. The annual amortization amounts are $14.25 million each for fiscal years 2023 and 2024, $19.0 million each for fiscal years 2025 and 2026, and $23.75 million for fiscal year 2027, with the remaining unpaid loan balance due at maturity in December 2027. The quarterly payments are equal installments. The Company made a mandatory prepayment of $3.6 million during the quarter ended December 31, 2022 bringing the outstanding principal balance on the secured term loan to $186.4 million. We have satisfied mandatory principal amortization until March 31, 2023. In addition to quarterly payments of the outstanding indebtedness, the loan agreement also requires annual payments of a percentage of excess cash flow, as defined in the loan agreement. The loan agreement states that an excess cash flow recapture payment must be made equal to (a) 75% of the excess cash flow for the immediately preceding fiscal year in which the total leverage ratio is greater than or equal to 2.50:1.0; (b) 50% of the excess cash flow for the immediately preceding fiscal year in which the total leverage ratio is less than 2.50:1.0 but greater than or equal to 1.5:1.0; or (c) 0% of the excess cash flow for the immediately preceding fiscal year in which the total leverage ratio is less than 1.5:1.0. In addition, the Company must make additional mandatory prepayment of amounts outstanding based on proceeds received from asset sales and sales of certain indebtedness. For additional information regarding the schedule of future payment obligations, please refer to Note 11. Commitments and Contingencies . On September 30, 2019, we executed a floating-to-fixed interest rate swap with First National Bank ("FNB") as counter-party. The notional amount in the floating-to-fixed interest rate swap as of December 31, 2022 is $16.2 million and matures in 2024. The remaining outstanding balance of our term loan is subject to interest rate fluctuations. On the notional amount, the Company pays a base fixed rate of 1.61%, plus applicable credit spread. As a result, for the three months ended December 31, 2022, interest expense has been decreased by approximately $0.1 million. (b) The secured revolving line of credit has a ceiling of up to $70.0 million; as of December 31, 2022 we had unused borrowing capacity of $31.2 million, wh ich is net of outstanding letters of credit. Borrowing on the line of credit is secured by liens on substantially all of the assets of the Company. The Company accessed funds from the revolving credit facility during the quarter, but had an outstanding balance at December 31, 2022 of $16.9 million. The Company's total borrowing availability, based on eligible accounts receivable at December 31, 2022, was $70.0 million. As part of the revolving credit facility, the lenders agreed to a sublimit of $5 million for letters of credit for the account of the Company, subject to applicable procedures. |
Stock-based Compensation and Eq
Stock-based Compensation and Equity Grants | 3 Months Ended |
Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Stock-based Compensation and Equity Grants | Stock-Based Compensation and Equity Grants Stock-based compensation expense Options issued under equity incentive plans were designated as either incentive stock or non-statutory stock options. No option is granted with a term of more than 10 years from the date of grant. Exercisability of option awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued shares. As of December 31, 2022, there were 1.4 million shares available for grant under the 2016 Omnibus Equity Incentive Plan. Stock-based compensation expense, shown in the table below, is recorded in general and administrative expenses included in our consolidated statements of operations for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 DLH employees (a) $ 372 $ 338 Non-employee directors (b) 180 162 Total stock option expense $ 552 $ 500 (a) Included in this amount are equity grants of restricted stock units to Executive Officers, which were issued in accordance with the DLH long-term incentive compensation policy in this fiscal year, and stock option grants to executive officers and non-executive company employees. The restricted stock units totaled 140,404 and 147,431 restricted stock units issued and outstanding at December 31, 2022 and 2021, respectively. (b) Equity grants of restricted stock units were made in accordance with DLH compensation policy for non-employee directors and a total of 58,517 and 53,510 restricted stock units were issued and outstanding at December 31, 2022 and 2021, respectively. Unrecognized stock-based compensation expense Unrecognized stock-based compensation expense is presented in the table below for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 Unrecognized expense for DLH employees (a) $ 4,750 $ 5,592 Unrecognized expense for non-employee directors 538 486 Total unrecognized expense $ 5,288 $ 6,078 (a) On a weighted average basis, the unrecognized expense for the three months ended December 31, 2022 is expected to be recognized within the next 3.70 years. Stock option activity for the three months ended December 31, 2022 The aggregate intrinsic value in the table below represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on those dates. This amount will change based on the fair market value of the Company’s stock. (in years) Weighted Weighted Average (in thousands) (in thousands) Average Remaining Aggregate Number of Exercise Contractual Intrinsic Shares Price Term Value Options outstanding, September 30, 2022 2,392 $ 7.05 5.40 $ 13,566 Exercised (250) 0.95 — — Cancelled (25) 8.96 — — Options outstanding, December 31, 2022 2,117 $ 7.74 5.78 $ 9,913 Stock options shares outstanding, vested and unvested for the periods ended as follows (shares in thousands): December 31, September 30, 2022 2022 Vested and exercisable (a) 1,892 2,117 Unvested (b) 225 275 Options outstanding 2,117 2,392 (a) The weighted average exercise price of vested and exercisable shares was $6.74 and $5.86 at December 31, 2022 and September 30, 2022, respectively. Aggregate intrinsic value was approximately $9.9 million and $13.6 million at December 31, 2022 and September 30, 2022, respectively. The weighted average contractual term remaining was 5.4 years and 4.9 years at December 31, 2022 and September 30, 2022, respectively. (b) Certain awards vest upon satisfaction of certain performance criteria. |
Earnings Per Share
Earnings Per Share | 3 Months Ended |
Dec. 31, 2022 | |
Earnings Per Share [Abstract] | |
Earnings Per Share | Earnings Per Share Basic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common shares outstanding and restricted stock grants that vested or are likely to vest during the period. Diluted earnings per share is calculated by dividing income available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities. Diluted earnings per share is calculated using the treasury stock method. Earnings per share information is presented in the table below for the three months ended December 31, 2022 and 2021 as follows (in thousands except for per share amounts): 2022 2021 Numerator: Net income $ 1,547 $ 7,804 Denominator: Denominator for basic net income per share - weighted-average outstanding shares 13,306 12,749 Effect of dilutive securities: Stock options and restricted stock 970 1,546 Denominator for diluted net income per share - weighted-average outstanding shares 14,276 14,295 Net income per share - basic $ 0.12 $ 0.61 Net income per share - diluted $ 0.11 $ 0.55 |
Commitment and Contingencies
Commitment and Contingencies | 3 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Contractual obligations as of December 31, 2022 as follows (in thousands): Payments Due Per Fiscal Year (Remaining) Total 2023 2024 2025 2026 2027 Thereafter Debt obligations $ 203,377 $ 18,544 $ 23,333 $ 19,000 $ 19,000 $ 23,750 $ 99,750 Facility operating leases 26,544 3,393 4,516 3,884 3,656 2,582 8,513 Equipment operating leases 114 62 52 — — — — Total contractual obligations $ 230,035 $ 21,999 $ 27,901 $ 22,884 $ 22,656 $ 26,332 $ 108,263 Workers' Compensation We accrue workers' compensation expense based on claims submitted, applying actuarial loss development factors to estimate the costs incurred but not yet recorded. Our accrued liability for claims development as of December 31, 2022 and September 30, 2022 was $3.6 million and $4.9 million, respectively. Legal Proceedings As a commercial enterprise and employer, the Company is subject to various claims and legal actions in the ordinary course of business. These matters can include professional liability, workers’ compensation, tax, payroll and employee-related matters, other commercial disputes arising in the course of its business, and inquiries and investigations by governmental agencies regarding our employment practices or other matters. The Company is not aware of any pending or threatened litigation that it believes is reasonably likely to have a material adverse effect on its results of operations, financial position, or cash flows. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Dec. 31, 2022 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Related Party TransactionsThe Company has determined that for the three months ended December 31, 2022 there were no significant related party transactions that have occurred which require disclosure through the date that these consolidated financial statements were issued. |
Significant Accounting Polici_2
Significant Accounting Policies (Policies) | 3 Months Ended |
Dec. 31, 2022 | |
Accounting Policies [Abstract] | |
New Accounting Pronouncements | New Accounting Pronouncements In March 2020 and January 2021, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2020-04, "Reference Rate Reform (Topic 848): Facilitation of the Effects of Reference Rate Reform on Financial Reporting” and ASU No. 2021-01, “Reference Rate Reform (Topic 848): Scope,” respectively (collectively, “Topic 848”). Topic 848 provides optional expedients and exceptions for applying GAAP to contracts, hedging relationships and other transactions that reference the London Interbank Offered Rate (“LIBOR”) or another reference rate expected to be discontinued because of reference rate reform. In December 2022, FASB issued ASU 2022-06 "Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848" which defers the end date for electing the relief provided in Topic 848 from December 31, 2022 to December 31, 2024. In the first quarter of fiscal 2023, the Company adopted the optional expedients and exceptions provided in Topic 848. The adoption did not have a material impact on the Company’s consolidated financial statements. |
Use of Estimates | Use of Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting periods. The most significant of these estimates and assumptions relate to estimating revenues and costs including overhead and its allocation, estimating progress toward the completion of performance obligations, assessing fair value of acquired assets and liabilities accounted for through business acquisitions, valuing and determining the amortization periods for long-lived intangible assets, interest rate swaps, stock-based compensation, right-of-use assets and leases liabilities, and loss development on workers' compensation claims. We evaluate these estimates and judgments on an ongoing basis and base our estimates on historical experience, current and expected future outcomes, third-party evaluations, and various other assumptions that we believe are reasonable under the circumstances. The results of these estimates form the basis for making judgments about the carrying values of assets and liabilities as well as identifying and assessing the accounting treatment with respect to commitments and contingencies. We revise material accounting estimates if changes occur, such as more experience is acquired, additional information is obtained, or there is new information on which an estimate was or can be based. Actual results could differ from those estimates. Revenue The Company's revenues from contracts with customers are derived from offerings that include technology-enabled business process outsourcing, program management solutions, and public health research and analytics, substantially within the U.S. government and its agencies, and to a lesser extent, subcontractors. The Company has various types of contracts including time-and-materials contracts, cost-reimbursable contracts, and firm-fixed-price contracts. We consider a contract with a customer to exist when there is a commitment by both parties (customer and Company), payment terms are determinable, there is commercial substance, and collectability is probably in accordance with Accounting Standards Codification ("ASC") No. 606, Revenue from Contracts with Customers ("Topic 606"). We recognize revenue over time when there is a continuous transfer of control to our customer as performance obligations are satisfied. For our U.S. government contracts, this continuous transfer of control to the customer is transferred over time and revenue is recognized based on the extent of progress toward completion of the performance obligation. We consider control to transfer when we have a right to payment. In some instances, the Company commences providing services prior to formal approval to begin work from the customer. The Company considers these factors, the risks associated with commencing work, and legal enforceability in determining whether a contract exists under Topic 606. Contract modification can occur throughout the life of the contract and can affect the transaction price, extend the period of performance, adjust funding, or create new performance obligations. We review each modification to assess the impact of these contract changes to determine if it should be treated as part of the original performance obligation or as a separate contract. Contract modifications impact performance obligations when the modification either creates new or changes the existing enforceable rights and obligations. The effect of a contract modification on the transaction price and our measure of progress for the performance obligation to which it relates is recognized as an adjustment to revenue and profit cumulatively. Furthermore, a significant change in one or more estimates could affect the profitability of our contracts. We recognize adjustments in estimated profit on contracts in the period identified. For service contracts, we satisfy our performance obligations as services are rendered. We use cost-based input and time-based output methods to measure progress based on the contract type. • Time and material - We bill the customer per labor hour and per material, and revenue is recognized in the amount invoiced as the amount corresponds directly to the value of our performance to date. Revenue is recognized to the extent of billable rates times hours delivered plus materials and other reimbursable costs incurred. • Cost reimbursable - We record reimbursable costs as incurred, including an estimated share of the contractual fee earned. • Firm fixed price - We recognize revenue over time using a straight-line measure of progress or percentage of completion method whereby progress toward completion is based on a comparison of actual costs incurred to total estimated costs to be incurred over the contract terms. Contract costs generally include direct costs such as labor, materials, subcontract costs, and indirect costs identifiable with or allocable to a specific contract. Costs are expensed as incurred and include an estimate of the contractual fees earned. Contract costs incurred for U.S. government contracts, including indirect costs, are subject to audit and adjustment by various government audit agencies. Historically, our adjustments have not been material. Contract assets - Amounts are invoiced as work progresses in accordance with agreed-upon contractual terms. In part, revenue recognition occurs before we have the right to bill, resulting in contract assets. These contract assets are reported within Accounts receivable, net on our consolidated balance sheets and are invoiced in accordance with payment terms defined in each contract. Period end balances will vary from period to period due to agreed-upon contractual terms. Contract liabilities - Amounts are a result of billings in excess of costs incurred or prepayment for services to be rendered. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying amounts of the Company's cash and cash equivalents, accounts receivable, contract assets, contract liabilities, accrued expenses, and accounts payable approximate fair value due to the short-term nature of these instruments. The fair values of the Company's debt instruments approximate fair value because the underlying interest rates approximate market rates that the Company could obtain for similar instruments at the balance sheet dates. |
Long-Lived Assets | Long-lived Assets Our long-lived assets include equipment and improvements, intangible assets, right-of-use assets, and goodwill. The Company continues to review long-lived assets for possible impairment or loss of value at least annually, or more frequently upon the occurrence of an event or when circumstances indicate that a reporting unit's carrying amount is greater than its fair value. |
Leases | Right-of-use assets are measured at the present value of future minimum lease payments, including all probable renewals, plus lease payments made to the lessor before or at lease commencement and indirect costs paid, less incentives received. Our right-of-use assets include long-term leases for facilities and equipment and are amortized over their respective lease terms. |
Goodwill | Goodwill The Company reviews goodwill for impairment on an annual basis and on a quarterly basis the company assesses the impact of any macroeconomic changes that may impact the business conditions to determine if these changes have any adverse impact to goodwill. Notwithstanding this evaluation, factors including non-renewal of a major contract or other substantial changes in business conditions could have a material adverse effect on the valuation of goodwill in future periods and the resulting charge could be material to future periods’ results of operations. The Company determined that no change in business conditions occurred which would have a material adverse effect on the valuation of goodwill. |
Income Taxes | Income TaxesThe Company accounts for income taxes in accordance with the asset and liability method, whereby deferred tax assets and liabilities are determined based on the difference between the financial statement and tax bases of assets and liabilities, using enacted tax rates in effect for the year in which the differences are expected to reverse. Deferred tax assets are reflected on the consolidated balance sheets when it is determined that it is more likely than not that the asset will be realized. This guidance also requires that deferred tax assets be reduced by a valuation allowance if it is more likely than not that some or all of the deferred tax asset will not be realized. We account for uncertain tax positions by recognizing the financial statement effects of a tax position only when, based upon the technical merits, it is more-likely-than-not that the position will be sustained upon examination. |
Stock-based Equity Compensation | Stock-based Compensation The Company uses the fair value-based method for stock-based compensation. Options issued are designated as either an incentive stock option or a non-statutory stock option. No option may be granted with a term of more than 10 years from the date of grant. Option awards may depend on achievement of certain performance measures determined by the Compensation Committee of our Board. Shares issued upon option exercise are newly issued common shares. All awards to employees and non-employees are recorded at fair value on the date of the grant and expensed over the period of vesting. The Company uses a Monte Carlo method to estimate the fair value of each stock option at the date of grant. Any consideration paid by the option holders to purchase shares is credited to common stock. |
Cash and Cash Equivalents | Cash and Cash Equivalents The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents. We maintain cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation ("FDIC") up to $250,000. Deposits held with financial institutions may exceed the $250,000 limit. Accounts Receivable Receivables include amounts billed and currently due from customers where the right to consideration is unconditional and amounts unbilled. Both billed and unbilled amounts are non-interest bearing, unsecured, and recognized at an estimated realizable value that includes costs and fees, and are generally expected to be billed and received within a single year. We evaluate our receivables on a quarterly basis and determine whether an allowance is appropriate based on specific collection issues. No allowance for doubtful accounts was deemed necessary at either December 31, 2022 or September 30, 2022. |
Earnings per Share | Earnings Per ShareBasic earnings per share is calculated by dividing income available to common shareholders by the weighted average number of common stock outstanding and restricted stock grants that vested or are likely to vest during the period. Diluted earnings per share is calculated by dividing income available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities. Diluted earnings per share is calculated using the treasury stock method. |
Treasury Stock and Preferred Stock | Preferred StockOur certificate of incorporation authorizes the issuance of "blank check" preferred stock with designations, rights and preferences as may be determined from time to time by our board of directors up to an aggregate of 5,000,000 shares of preferred stock. |
Interest Rate Swap | Interest Rate Swap The Company uses derivative financial instruments to manage interest rate risk associated with its variable debt. The Company's objective in using these interest rate derivatives is to manage its exposure to interest rate movements and reduce volatility of interest expense. The gains and losses due to changes in the fair value of the interest rate swap agreements completely offset changes in the fair value of the hedged portion of the underlying debt. Offsetting changes in fair value of both the interest rate swaps and the hedged portion of the underlying debt are recognized in interest expense in the consolidated statements of operations. The Company does not hold or issue any derivative instruments for trading or speculative purposes. |
Revenue Recognition | Revenue Recognition Disaggregation of Revenue from Contracts with Customers |
Business Combinations (Tables)
Business Combinations (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Business Combination and Asset Acquisition [Abstract] | |
Schedule of Total Consideration and Preliminary Fair Value of Assets and Liabilities | Based on the unaudited financial statements of GRSi on December 8, 2022, we accounted for the total acquisition consideration and allocation of fair value to the related assets and liabilities on a preliminary basis as follows (in thousands): Preliminary purchase price for GRSi $ 188,458 Purchase price allocation: Cash 747 Accounts receivable 25,468 Other current assets 1,354 Accounts payable and accrued expenses (2,449) Payroll liabilities (7,827) Other current liabilities (325) Equipment and improvements, net 463 Other long-term assets and liabilities (611) Intangible assets 98,004 Total identifiable net assets acquired 114,824 Goodwill 73,634 |
Schedule of Pro Forma Information | In addition, the reported historical amounts were adjusted for the following items, net of associated tax effects: • The impact of recording GRSi's intangible asset amortization. • The impact of interest expense for the new credit facility. • The removal of legacy GRSi director's fees. • The removal of transaction costs for the acquisition incurred by GRSi. (in thousands) Three Months Ended December 31, Pro forma results 2022 2021 Revenue $ 99,823 $ 178,854 Net income (loss) $ 2,181 $ 6,857 Number of shares outstanding - basic 13,306 12,749 Number of shares outstanding - diluted 14,276 14,295 Basic earnings per share (loss) $0.16 $0.54 Diluted earnings per share (loss) $0.15 $0.48 |
Revenue Recognition (Tables)
Revenue Recognition (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Revenue from Contract with Customer [Abstract] | |
Schedule of Contract Balances Recognized on the Company's Consolidated Balance Sheets | The following table summarizes the contract balances recognized on the Company's consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Contract assets $ 10,740 $ 7,682 Contract liabilities $ 509 $ — |
Schedule of Disaggregation of Revenue From Contracts with Customers | The following series of tables present our revenue disaggregated by these categories: Revenue by customer for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 Department of Veterans Affairs $ 33,708 $ 28,193 Department of Health and Human Services 27,305 23,126 Department of Defense 10,263 8,495 Department of Homeland Security 167 91,328 Other 1,295 1,659 Total $ 72,738 $ 152,801 Revenue by contract type for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 Time and Materials $ 48,991 $ 132,540 Cost Reimbursable 12,580 10,110 Firm Fixed Price 11,167 10,151 Total $ 72,738 $ 152,801 Revenue by whether the Company acts as a prime contractor or a subcontractor for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 Prime Contractor $ 67,981 $ 146,107 Subcontractor 4,757 6,694 Total $ 72,738 $ 152,801 |
Leases (Tables)
Leases (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Leases [Abstract] | |
Schedule of Summarized Lease Balances in Consolidated Balance Sheet | The following table summarizes lease balances presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Operating lease right-of-use assets $ 19,595 $ 16,851 Operating lease liabilities, current $ 3,379 $ 2,235 Operating lease liabilities - long-term 18,221 16,461 Total operating lease liabilities $ 21,600 $ 18,696 |
Schedule of Lease Costs and Other Information Related to Leases | For the three months ended December 31, 2022 and 2021, total lease costs for our operating leases as follows (in thousands): 2022 2021 Operating $ 947 $ 952 Short-term 43 27 Variable 31 18 Sublease income (a) (71) (69) Total lease costs $ 950 $ 928 2022 2021 Cash paid for amounts included in the measurement of lease liabilities $ 1,022 $ 905 Lease liabilities arising from obtaining right-of-use assets $ 3,541 $ — |
Schedule of Company's Future Lease Payments | The Company's future minimum lease payments as of December 31, 2022 as follows (in thousands): For the Fiscal Year Ending September 30, 2023 (remaining) $ 3,455 2024 4,568 2025 3,884 2026 3,656 2027 2,582 Thereafter 8,513 Total future lease payments 26,658 Less: imputed interest (5,058) Present value of future minimum lease payments 21,600 Less: current portion of operating lease liabilities (3,379) Long-term operating lease liabilities $ 18,221 |
Supporting Financial Informat_2
Supporting Financial Information (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Accounts Receivable | Accounts receivable The following table summarizes accounts receivable presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Billed receivables $ 54,438 $ 32,814 Contract assets 10,740 7,682 Allowance for doubtful accounts — — Accounts receivable $ 65,178 $ 40,496 |
Schedule of Other Current Assets | Other current assets The following table summarizes other current assets presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Prepaid insurance and benefits $ 601 $ 737 Other receivables 922 945 Prepaid licenses and other expenses 1,726 1,196 Other current assets $ 3,249 $ 2,878 |
Schedule of Equipment and Improvements, Net | Equipment and improvements, net The following table summarizes equipment and improvements, net presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Furniture and equipment $ 893 $ 893 Computer equipment 2,730 2,316 Computer software 4,407 4,407 Leasehold improvements 1,614 1,614 Total equipment and improvements 9,644 9,230 Less: accumulated depreciation and amortization (7,769) (7,526) Equipment and improvements, net $ 1,875 $ 1,704 Depreciation expense was $0.2 million and $0.3 million for the three months ended December 31, 2022 and 2021, respectively. |
Schedule of Intangible Assets | Intangible assets The following table summarizes intangible assets, net presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Intangible assets Customer contracts and related customer relationships $ 150,187 $ 62,281 Covenants not to compete 637 522 Trade name 13,034 3,051 Total intangible assets 163,858 65,854 Less: accumulated amortization Customer contracts and related customer relationships (25,622) (23,606) Covenants not to compete (330) (316) Trade name (1,177) (1,048) Total accumulated amortization (27,129) (24,970) Intangible assets, net $ 136,729 $ 40,884 Amortization expense was $2.2 million and $1.6 million for the three months ended December 31, 2022 and 2021. |
Schedule of Estimated Amortization of Intangible Assets | 2023 (remaining) $ 12,218 2024 16,214 2025 16,214 2026 15,479 2027 14,451 Thereafter 62,153 Total amortization expense $ 136,729 |
Schedule of Accounts Payable, Accrued Expenses, and Other Current Liabilities | Accounts payable and accrued liabilities The following table summarizes accounts payable and accrued liabilities presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Accounts payable $ 16,489 $ 11,886 Accrued benefits (a) 3,108 3,857 Accrued bonus and incentive compensation 916 3,625 Accrued workers' compensation insurance 2,795 4,880 Accrued fringe (b) 1,099 775 Accrued interest payable 1,088 — Accrued purchase price adjustment 3,379 — Other accrued expenses 3,837 1,839 Accounts payable and accrued liabilities $ 32,711 $ 26,862 |
Schedule of Debt Obligations | Debt obligations The following table summarizes debt obligations presented on our consolidated balance sheets as follows (in thousands): December 31, September 30, 2022 2022 Secured revolving line of credit $ 16,939 $ — Secured term loan 186,438 22,000 Less: unamortized deferred financing costs (8,930) (1,584) Net bank debt obligations 194,447 20,416 Less: current portion of debt obligations, net of deferred financing costs (28,505) — Long-term portion of debt obligations, net of deferred financing costs $ 165,942 $ 20,416 |
Schedule of Interest Expense | Interest expense The following table summarizes interest expense presented on our consolidated statements of operations for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 Interest expense (a) $ 1,554 $ 521 Amortization of deferred financing costs (b) 276 151 Interest expense $ 1,830 $ 672 (a) Interest expense on borrowing. (b) Amortization of expenses related to secured term loan and secured revolving line of credit. |
Schedule of Changes in Carrying Amount of Goodwill | Goodwill The change in the carrying amount of goodwill for the three months ended December 31, 2022 as follows (in thousands): Balance at September 30, 2022 $ 65,643 Preliminary increase from GRSi acquisition (a) 73,634 Balance at December 31, 2022 $ 139,277 Ref (a) The Company is currently assessing the valuation of the GRSi acquisition to make the final purchase price adjustments which may impact the final carrying value of Goodwill. The balance provided is an estimate and subject to revision. Please refer to Note 4 for more information. |
Credit Facilities (Tables)
Credit Facilities (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Debt Disclosure [Abstract] | |
Schedule of Loan Facility | A summary of our credit facilities as of December 31, 2022 and September 30, 2022 as follows (in millions): December 31, 2022 September 30, 2022 Arrangement Loan Balance Interest Arrangement Loan Balance Interest Secured term loan (a) due December 8, 2027 $ 186.4 SOFR* + 4.2% Secured term loan due September 30, 2025 $ 22.0 LIBOR + 2.5% Secured revolving line of credit (b) due December 8, 2027 $ 16.9 SOFR* + 4.2% Secured Revolving line of Credit due September 20, 2025 $ — LIBOR + 2.5% |
Stock-based Compensation and _2
Stock-based Compensation and Equity Grants (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Share-Based Payment Arrangement [Abstract] | |
Schedule of Stock-based Compensation Expense | Stock-based compensation expense, shown in the table below, is recorded in general and administrative expenses included in our consolidated statements of operations for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 DLH employees (a) $ 372 $ 338 Non-employee directors (b) 180 162 Total stock option expense $ 552 $ 500 (a) Included in this amount are equity grants of restricted stock units to Executive Officers, which were issued in accordance with the DLH long-term incentive compensation policy in this fiscal year, and stock option grants to executive officers and non-executive company employees. The restricted stock units totaled 140,404 and 147,431 restricted stock units issued and outstanding at December 31, 2022 and 2021, respectively. (b) Equity grants of restricted stock units were made in accordance with DLH compensation policy for non-employee directors and a total of 58,517 and 53,510 restricted stock units were issued and outstanding at December 31, 2022 and 2021, respectively. Unrecognized stock-based compensation expense Unrecognized stock-based compensation expense is presented in the table below for the three months ended December 31, 2022 and 2021 as follows (in thousands): 2022 2021 Unrecognized expense for DLH employees (a) $ 4,750 $ 5,592 Unrecognized expense for non-employee directors 538 486 Total unrecognized expense $ 5,288 $ 6,078 (a) On a weighted average basis, the unrecognized expense for the three months ended December 31, 2022 is expected to be recognized within the next 3.70 years. |
Schedule of Stock Option Activity | The aggregate intrinsic value in the table below represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on those dates. This amount will change based on the fair market value of the Company’s stock. (in years) Weighted Weighted Average (in thousands) (in thousands) Average Remaining Aggregate Number of Exercise Contractual Intrinsic Shares Price Term Value Options outstanding, September 30, 2022 2,392 $ 7.05 5.40 $ 13,566 Exercised (250) 0.95 — — Cancelled (25) 8.96 — — Options outstanding, December 31, 2022 2,117 $ 7.74 5.78 $ 9,913 |
Schedule of Option Shares Outstanding, Vested and Expected to Vest | Stock options shares outstanding, vested and unvested for the periods ended as follows (shares in thousands): December 31, September 30, 2022 2022 Vested and exercisable (a) 1,892 2,117 Unvested (b) 225 275 Options outstanding 2,117 2,392 (a) The weighted average exercise price of vested and exercisable shares was $6.74 and $5.86 at December 31, 2022 and September 30, 2022, respectively. Aggregate intrinsic value was approximately $9.9 million and $13.6 million at December 31, 2022 and September 30, 2022, respectively. The weighted average contractual term remaining was 5.4 years and 4.9 years at December 31, 2022 and September 30, 2022, respectively. (b) Certain awards vest upon satisfaction of certain performance criteria. |
Earnings Per Share (Tables)
Earnings Per Share (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Earnings Per Share [Abstract] | |
Schedule of Diluted Earnings per Share | 2022 2021 Numerator: Net income $ 1,547 $ 7,804 Denominator: Denominator for basic net income per share - weighted-average outstanding shares 13,306 12,749 Effect of dilutive securities: Stock options and restricted stock 970 1,546 Denominator for diluted net income per share - weighted-average outstanding shares 14,276 14,295 Net income per share - basic $ 0.12 $ 0.61 Net income per share - diluted $ 0.11 $ 0.55 |
Commitment and Contingencies (T
Commitment and Contingencies (Tables) | 3 Months Ended |
Dec. 31, 2022 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Contractual Obligations | Contractual obligations as of December 31, 2022 as follows (in thousands): Payments Due Per Fiscal Year (Remaining) Total 2023 2024 2025 2026 2027 Thereafter Debt obligations $ 203,377 $ 18,544 $ 23,333 $ 19,000 $ 19,000 $ 23,750 $ 99,750 Facility operating leases 26,544 3,393 4,516 3,884 3,656 2,582 8,513 Equipment operating leases 114 62 52 — — — — Total contractual obligations $ 230,035 $ 21,999 $ 27,901 $ 22,884 $ 22,656 $ 26,332 $ 108,263 |
Significant Accounting Polici_3
Significant Accounting Policies (Details) - USD ($) | 3 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2022 | |
Acquired Indefinite-lived Intangible Assets [Line Items] | |||
Estimated useful live of intangible assets | 10 years | ||
Goodwill | $ 139,277,000 | $ 65,643,000 | |
Uncertain tax positions | 0 | 0 | |
Income tax interest expense | 0 | $ 0 | |
Income tax penalties expense | 0 | $ 0 | |
Cash balances | 1,364,000 | $ 228,000 | |
Cash, FDIC insured amount | $ 250,000 | ||
Preferred shares authorized (in shares) | 5,000,000 | ||
Preferred stock issued (in shares) | 0 | 0 | |
Employee Stock Option | |||
Acquired Indefinite-lived Intangible Assets [Line Items] | |||
Number of awards authorized for issuance (in shares) | 0 | ||
Expiration term of share-based compensation plan | 10 years | ||
Minimum | |||
Acquired Indefinite-lived Intangible Assets [Line Items] | |||
Estimated useful of long-lived assets | 3 years | ||
Maximum | |||
Acquired Indefinite-lived Intangible Assets [Line Items] | |||
Estimated useful of long-lived assets | 7 years |
Business Combinations - Narrati
Business Combinations - Narrative (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Dec. 08, 2022 | Dec. 31, 2022 | Dec. 31, 2021 | |
Business Acquisition [Line Items] | |||
Proceeds from debt obligations | $ 200,703 | $ 6,000 | |
Issuance of common stock in business combination | $ 7,000 | ||
Issuance of common stock in business combination (in shares) | 527,000 | ||
Revenue | $ 72,738 | 152,801 | |
Income from operations | 3,921 | $ 11,219 | |
Grove Resource Solutions, LLC | |||
Business Acquisition [Line Items] | |||
Preliminary purchase price | $ 185,100 | ||
Percentage of equity interest acquired | 100% | ||
Preliminary purchase price for GRSi | $ 188,458 | ||
Proceeds from debt obligations | 178,100 | ||
Issuance of common stock in business combination | 7,000 | ||
Escrow funds | $ 4,300 | ||
Revenue | 6,900 | ||
Income from operations | $ 300 | ||
Grove Resource Solutions, LLC | Common Stock | |||
Business Acquisition [Line Items] | |||
Issuance of common stock in business combination (in shares) | 500,000 |
Business Combinations - Schedul
Business Combinations - Schedule of Assets and Liabilities Purchase Price Allocation (Details) - Grove Resource Solutions, LLC $ in Thousands | Dec. 08, 2022 USD ($) |
Business Acquisition, Contingent Consideration [Line Items] | |
Preliminary purchase price for GRSi | $ 188,458 |
Cash | 747 |
Accounts receivable | 25,468 |
Other current assets | 1,354 |
Accounts payable and accrued expenses | 2,449 |
Payroll liabilities | 7,827 |
Other current liabilities | 325 |
Equipment and improvements, net | 463 |
Other long-term assets and liabilities | 611 |
Intangible assets | 98,004 |
Total identifiable net assets acquired | 114,824 |
Goodwill | $ 73,634 |
Business Combinations - Pro For
Business Combinations - Pro Forma Information (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Business Acquisition [Line Items] | ||
Basic (in shares) | 13,306 | |
Diluted (in shares) | 14,276 | 14,295 |
Grove Resource Solutions, LLC | ||
Business Acquisition [Line Items] | ||
Revenue | $ 99,823 | $ 178,854 |
Net income (loss) | $ 2,181 | $ 6,857 |
Basic (in shares) | 13,306 | 12,749 |
Diluted (in shares) | 14,276 | 14,295 |
Basic earnings per share (loss) (in dollars per share) | $ 0.16 | $ 0.54 |
Diluted earnings per share (loss) (in dollars per share) | $ 0.15 | $ 0.48 |
Revenue Recognition - Contract
Revenue Recognition - Contract Balances (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 |
Revenue from Contract with Customer [Abstract] | ||
Contract assets | $ 10,740 | $ 7,682 |
Contract liabilities | $ 509 | $ 0 |
Revenue Recognition - Disaggreg
Revenue Recognition - Disaggregation of Revenue (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Disaggregation of Revenue [Line Items] | ||
Total | $ 72,738 | $ 152,801 |
Prime Contractor | ||
Disaggregation of Revenue [Line Items] | ||
Total | 67,981 | 146,107 |
Subcontractor | ||
Disaggregation of Revenue [Line Items] | ||
Total | 4,757 | 6,694 |
Time and Materials | ||
Disaggregation of Revenue [Line Items] | ||
Total | 48,991 | 132,540 |
Cost Reimbursable | ||
Disaggregation of Revenue [Line Items] | ||
Total | 12,580 | 10,110 |
Firm Fixed Price | ||
Disaggregation of Revenue [Line Items] | ||
Total | 11,167 | 10,151 |
Department Of Homeland Security [Member] | ||
Disaggregation of Revenue [Line Items] | ||
Total | 167 | 91,328 |
Department of Veterans Affairs | ||
Disaggregation of Revenue [Line Items] | ||
Total | 33,708 | 28,193 |
Department of Health and Human Services | ||
Disaggregation of Revenue [Line Items] | ||
Total | 27,305 | 23,126 |
Department of Defense | ||
Disaggregation of Revenue [Line Items] | ||
Total | 10,263 | 8,495 |
Other | ||
Disaggregation of Revenue [Line Items] | ||
Total | $ 1,295 | $ 1,659 |
Leases - Narrative (Details)
Leases - Narrative (Details) | 3 Months Ended |
Dec. 31, 2022 sublease sublease_option | |
New Accounting Pronouncements or Change in Accounting Principle [Line Items] | |
Number of facilities subleased | sublease | 1 |
Sublease term | 5 years |
Sublease number of additional extension options | sublease_option | 2 |
Sublease extension option period | 1 year |
Weighted-average remaining lease term | 6 years 7 months 6 days |
Weighted-average discount rate | 6.38% |
Leases - Summary of Lease Balan
Leases - Summary of Lease Balances in Consolidated Balance Sheets (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 |
Leases [Abstract] | ||
Operating lease right-of-use assets | $ 19,595 | $ 16,851 |
Operating lease liabilities - current | 3,379 | 2,235 |
Operating lease liabilities - long-term | 18,221 | 16,461 |
Total operating lease liabilities | $ 21,600 | $ 18,696 |
Leases - Lease Costs (Details)
Leases - Lease Costs (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Leases [Abstract] | ||
Operating | $ 947 | $ 952 |
Short-term | 43 | 27 |
Variable | 31 | 18 |
Sublease income (a) | (71) | (69) |
Total lease costs | $ 950 | $ 928 |
Leases - Company's Future Minim
Leases - Company's Future Minimum Lease Payments (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 |
Leases [Abstract] | ||
2023 (remaining) | $ 3,455 | |
2024 | 4,568 | |
2025 | 3,884 | |
2026 | 3,656 | |
2027 | 2,582 | |
Thereafter | 8,513 | |
Total future lease payments | 26,658 | |
Less: imputed interest | (5,058) | |
Total operating lease liabilities | 21,600 | $ 18,696 |
Less: current portion of operating lease liabilities | (3,379) | (2,235) |
Long-term operating lease liabilities | $ 18,221 | $ 16,461 |
Leases - Other Information Rela
Leases - Other Information Related to Leases (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Leases [Abstract] | ||
Cash paid for amounts included in the measurement of lease liabilities | $ 1,022 | $ 905 |
Lease liabilities arising from obtaining right-of-use assets | $ 3,541 | $ 0 |
Supporting Financial Informat_3
Supporting Financial Information - Accounts Receivable (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Billed receivables | $ 54,438 | $ 32,814 |
Contract assets | 10,740 | 7,682 |
Less: Allowance for doubtful accounts | 0 | 0 |
Accounts Receivable, before Allowance for Credit Loss, Current | $ 65,178 | $ 40,496 |
Supporting Financial Informat_4
Supporting Financial Information - Other Current Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Prepaid insurance and benefits | $ 601 | $ 737 |
Other receivables | 922 | 945 |
Prepaid licenses and other expenses | 1,726 | 1,196 |
Other current assets | $ 3,249 | $ 2,878 |
Supporting Financial Informat_5
Supporting Financial Information - Equipment and Improvements, Net (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2022 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||
Furniture and equipment | $ 893 | $ 893 | |
Computer equipment | 2,730 | 2,316 | |
Computer software | 4,407 | 4,407 | |
Leasehold improvements | 1,614 | 1,614 | |
Total equipment and improvements | 9,644 | 9,230 | |
Less: accumulated depreciation and amortization | (7,769) | (7,526) | |
Equipment and improvements, net | 1,875 | $ 1,704 | |
Depreciation expense | $ 200 | $ 300 |
Supporting Financial Informat_6
Supporting Financial Information - Intangible Assets (Details) - USD ($) $ in Thousands | 3 Months Ended | ||
Dec. 31, 2022 | Dec. 31, 2021 | Sep. 30, 2022 | |
Finite-Lived Intangible Assets [Line Items] | |||
Intangible assets, gross | $ 163,858 | $ 65,854 | |
Total accumulated amortization | (27,129) | (24,970) | |
Intangible assets, net | $ 136,729 | 40,884 | |
Estimated useful live of intangible assets | 10 years | ||
Amortization expense of intangible assets | $ 2,200 | $ 1,600 | |
Customer contracts and related customer relationships | |||
Finite-Lived Intangible Assets [Line Items] | |||
Intangible assets, gross | 150,187 | 62,281 | |
Total accumulated amortization | (25,622) | (23,606) | |
Covenants not to compete | |||
Finite-Lived Intangible Assets [Line Items] | |||
Intangible assets, gross | 637 | 522 | |
Total accumulated amortization | (330) | (316) | |
Trade name | |||
Finite-Lived Intangible Assets [Line Items] | |||
Intangible assets, gross | 13,034 | 3,051 | |
Total accumulated amortization | $ (1,177) | $ (1,048) |
Supporting Financial Informat_7
Supporting Financial Information - Estimated Future Amortization Expense of Intangible Assets (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
2023 (remaining) | $ 12,218 | |
2024 | 16,214 | |
2025 | 16,214 | |
2026 | 15,479 | |
2027 | 14,451 | |
Thereafter | 62,153 | |
Intangible assets, net | $ 136,729 | $ 40,884 |
Supporting Financial Informat_8
Supporting Financial Information - Accounts Payable, Accrued Expense and Other Current Liabilities (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Accounts payable | $ 16,489 | $ 11,886 |
Accrued benefits (a) | 3,108 | 3,857 |
Accrued bonus and incentive compensation | 916 | 3,625 |
Accrued workers' compensation insurance | 2,795 | 4,880 |
Accrued fringe (b) | 1,099 | 775 |
Accrued interest payable | 1,088 | 0 |
Accrued purchase price adjustment | 3,379 | 0 |
Other accrued expenses | 3,837 | 1,839 |
Accounts payable and accrued liabilities | $ 32,711 | $ 26,862 |
Supporting Financial Informat_9
Supporting Financial Information - Debt Obligations (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 |
Debt Instrument [Line Items] | ||
Long-term debt | $ 203,377 | |
Less: unamortized deferred financing costs | (8,930) | $ (1,584) |
Long-term portion of debt obligations, net of deferred financing costs | 194,447 | 20,416 |
Less: current portion of debt obligations, net of deferred financing costs | (28,505) | 0 |
Long-term portion of debt obligations, net of deferred financing costs | 165,942 | 20,416 |
Secured Debt | ||
Debt Instrument [Line Items] | ||
Long-term debt | 186,438 | 22,000 |
Less: current portion of debt obligations, net of deferred financing costs | (28,505) | 0 |
Secured Revolving Line of Credit | ||
Debt Instrument [Line Items] | ||
Long-term debt | 16,939 | $ 0 |
Revolving Line of Credit | Secured Debt | ||
Debt Instrument [Line Items] | ||
Long-term debt | $ 186,400 |
Supporting Financial Informa_10
Supporting Financial Information - Interest Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Interest Expense | $ 1,554 | $ 521 |
Amortization of deferred financing costs charged to interest expense | 276 | 151 |
Interest expense | $ 1,830 | $ 672 |
Credit Facilities - Summary of
Credit Facilities - Summary of Loan Facility (Details) - USD ($) $ in Thousands | Dec. 31, 2022 | Sep. 30, 2022 |
Line of Credit Facility [Line Items] | ||
Long-term debt | $ 203,377 | |
Secured Debt | ||
Line of Credit Facility [Line Items] | ||
Long-term debt | 186,438 | $ 22,000 |
Secured Debt | Term Loans | ||
Line of Credit Facility [Line Items] | ||
Long-term debt | $ 16,900 | |
Secured Debt | Term Loans | LIBOR | ||
Line of Credit Facility [Line Items] | ||
Interest rate spread | 4.23% | |
Secured Debt | Revolving Line of Credit | ||
Line of Credit Facility [Line Items] | ||
Long-term debt | $ 186,400 | |
Secured Debt | Revolving Line of Credit | LIBOR | ||
Line of Credit Facility [Line Items] | ||
Interest rate spread | 4.23% |
Credit Facilities - Narrative (
Credit Facilities - Narrative (Details) | 3 Months Ended | |
Dec. 31, 2022 USD ($) | Sep. 30, 2022 USD ($) | |
Line of Credit Facility [Line Items] | ||
Debt amortization fiscal year 2021 | $ 23,333,000 | |
Debt amortization fiscal year 2022 | 19,000,000 | |
Debt amortization fiscal year 2023 | 19,000,000 | |
Debt amortization fiscal year 2024 | 23,750,000 | |
Long-term debt | 203,377,000 | |
Interest Rate Swap | ||
Line of Credit Facility [Line Items] | ||
Derivative notional amount | $ 16,200,000 | |
Derivative fixed interest rate | 1.61% | |
Interest expense increase (less than) | $ 100,000 | |
Secured Debt | ||
Line of Credit Facility [Line Items] | ||
Long-term debt | $ 186,438,000 | $ 22,000,000 |
Secured Debt | Term Loans | ||
Line of Credit Facility [Line Items] | ||
Fixed charge coverage ratio | 1.25 | |
Ratio of funded indebtedness to EBITDA through maturity | 2 | |
Debt amortization fiscal year 2021 | $ 14,250,000 | |
Debt amortization fiscal year 2022 | 14,250,000 | |
Debt amortization fiscal year 2023 | 19,000,000 | |
Debt amortization fiscal year 2024 | 19,000,000 | |
Debt amortization fiscal year 2025 | 23,750,000 | |
Voluntary principal amortization of term debt | 3,600,000 | |
Long-term debt | $ 16,900,000 | |
Secured Debt | Term Loans | Excess Cash Flows Greater Than Or Equal to 2.50 | ||
Line of Credit Facility [Line Items] | ||
Percentage of excess cash flow for each year of funded indebtedness to EBDTA | 75% | |
Ratio of funded indebtedness to adjusted EBDTA, actual | 2.50 | |
Secured Debt | Term Loans | Excess Cash Flows Less Than 2.50 | ||
Line of Credit Facility [Line Items] | ||
Percentage of excess cash flow for each year of funded indebtedness to EBDTA | 50% | |
Secured Debt | Term Loans | Excess Cash Flows Equal to 1.50 | ||
Line of Credit Facility [Line Items] | ||
Ratio of funded indebtedness to adjusted EBDTA, actual | 1.5 | |
Secured Debt | Term Loans | Excess Cash Flows Less Than 1.50 | ||
Line of Credit Facility [Line Items] | ||
Percentage of excess cash flow for each year of funded indebtedness to EBDTA | 0% | |
Ratio of funded indebtedness to adjusted EBDTA, actual | 1.5 | |
Secured Debt | Term Loans | Maximum | ||
Line of Credit Facility [Line Items] | ||
Ratio of funded indebtedness to EBITDA through maturity | 4.50 | |
Secured Debt | Term Loans | Maximum | Excess Cash Flows Less Than 2.50 | ||
Line of Credit Facility [Line Items] | ||
Ratio of funded indebtedness to adjusted EBDTA, actual | 2.50 | |
Secured Debt | Term Loans | LIBOR | ||
Line of Credit Facility [Line Items] | ||
Interest rate spread | 4.23% | |
Secured Debt | Revolving Line of Credit | ||
Line of Credit Facility [Line Items] | ||
Line of credit, maximum borrowing capacity | $ 70,000,000 | |
Line of credit, unused borrowing capacity | 31,200,000 | |
Line of credit, current borrowing capacity | 70,000,000 | |
Long-term debt | $ 186,400,000 | |
Secured Debt | Revolving Line of Credit | LIBOR | ||
Line of Credit Facility [Line Items] | ||
Interest rate spread | 4.23% | |
Secured Debt | Letter of Credit | ||
Line of Credit Facility [Line Items] | ||
Line of credit, current borrowing capacity | $ 5,000,000 |
Stock-based Compensation and _3
Stock-based Compensation and Equity Grants - Narrative (Details) - Employee Stock Option | 3 Months Ended |
Dec. 31, 2022 shares | |
Share-based Compensation Arrangement by Share-based Payment Award [Line Items] | |
Number of awards authorized for issuance (in shares) | 0 |
Expiration term of share-based compensation plan | 10 years |
Number of shares available for grant (in shares) | 1,400,000 |
Stock-based Compensation and _4
Stock-based Compensation and Equity Grants - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total unrecognized expense | $ 5,288,000 | $ 6,078 |
DLH employees (a) | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total unrecognized expense | $ 4,750 | 5,592 |
Weighted average share based compensation expense recognition period | 3 years 8 months 12 days | |
Non-employee directors (b) | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total unrecognized expense | $ 538 | $ 486 |
Non-employee directors (b) | Restricted Stock Units | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Number of restricted stock units granted (in shares) | 58,517 | 53,510 |
NEO | Restricted Stock Units | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Number of restricted stock units granted (in shares) | 140,404 | 147,431 |
Selling, General and Administrative Expenses | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total stock option expense | $ 552 | $ 500 |
Selling, General and Administrative Expenses | DLH employees (a) | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total stock option expense | 372 | 338 |
Selling, General and Administrative Expenses | Non-employee directors (b) | ||
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items] | ||
Total stock option expense | $ 180 | $ 162 |
Stock-based Compensation and _5
Stock-based Compensation and Equity Grants - Stock Option Activity (Details) - USD ($) $ / shares in Units, $ in Thousands | 3 Months Ended | 12 Months Ended |
Dec. 31, 2022 | Sep. 30, 2021 | |
Number of Shares | ||
Options outstanding, September 30, 2021 (in shares) | 2,392,000 | |
Exercised (in shares) | (250,000) | |
Cancelled (in shares) | (25,000) | |
Options outstanding, December 31, 2021 (in shares) | 2,117,000 | |
Weighted Average Exercise Price | ||
Options outstanding, September 30, 2021 (in dollars per share) | $ 7.05 | |
Exercised (in dollars per share) | 0.95 | |
Cancelled (in dollars per share) | 8.96 | |
Options outstanding, December 31, 2021 (in dollars per share) | $ 7.74 | |
Weighted Average Remaining Contractual Term | ||
Weighted Average Remaining Contractual Term | 5 years 9 months 10 days | 5 years 4 months 24 days |
Aggregate Intrinsic Value | ||
Options outstanding at September 30, 2021 | $ 13,566 | |
Options outstanding at December 31, 2021 | $ 9,913 |
Stock-based Compensation and _6
Stock-based Compensation and Equity Grants - Stock Options Outstanding, Vested and Unvested (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Millions | 3 Months Ended | 9 Months Ended | |
Dec. 31, 2022 | Jun. 30, 2022 | Sep. 30, 2022 | |
Share-Based Payment Arrangement [Abstract] | |||
Vested and exercisable (in shares) | 225 | 275 | |
Unvested (in shares) | 1,892 | 2,117 | |
Option outstanding (in shares) | 2,117 | 2,392 | |
Weighted average exercise price (in dollars per share) | $ 6.74 | $ 5.86 | |
Aggregate intrinsic value | $ 9.9 | $ 13.6 | |
Weighted average remaining term | 5 years 4 months 24 days | 4 years 10 months 24 days |
Earnings Per Share (Details)
Earnings Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands | 3 Months Ended | |
Dec. 31, 2022 | Dec. 31, 2021 | |
Numerator: | ||
Net income | $ 1,547 | $ 7,804 |
Denominator: | ||
Denominator for basic net income (loss) per share - weighted-average outstanding shares (in shares) | 13,306 | |
Effect of dilutive securities: | ||
Stock options and restricted stock (in shares) | 970 | 1,546 |
Denominator for diluted net income (loss) per share - weighted-average outstanding shares (in shares) | 14,276 | 14,295 |
Net income per share - basic (in dollars per share) | $ 0.12 | $ 0.61 |
Net income per share - diluted (in dollars per share) | $ 0.11 | $ 0.55 |
Commitments and Contingencies -
Commitments and Contingencies - Contractual Obligations (Details) $ in Thousands | Dec. 31, 2022 USD ($) |
Debt obligations | |
Debt obligations | $ 203,377 |
2022 (remaining) | 18,544 |
2024 | 23,333 |
2025 | 19,000 |
2026 | 19,000 |
2027 | 23,750 |
Thereafter | 99,750 |
Operating Leases | |
Total future lease payments | 26,658 |
2023 (remaining) | 3,455 |
2024 | 4,568 |
2025 | 3,884 |
2026 | 3,656 |
2027 | 2,582 |
Thereafter | 8,513 |
Total Contractual Obligations | |
Total Obligations | 230,035 |
2022 (remaining) | 21,999 |
2024 | 27,901 |
2025 | 22,884 |
2026 | 22,656 |
2027 | 26,332 |
Thereafter | 108,263 |
Facility operating leases | |
Operating Leases | |
Total future lease payments | 26,544 |
2023 (remaining) | 3,393 |
2024 | 4,516 |
2025 | 3,884 |
2026 | 3,656 |
2027 | 2,582 |
Thereafter | 8,513 |
Equipment operating leases | |
Operating Leases | |
Total future lease payments | 114 |
2023 (remaining) | 62 |
2024 | 52 |
2025 | 0 |
2026 | 0 |
2027 | 0 |
Thereafter | $ 0 |
Commitment and Contingencies -
Commitment and Contingencies - Narrative (Details) - USD ($) $ in Millions | Dec. 31, 2022 | Sep. 30, 2022 |
Commitments and Contingencies Disclosure [Abstract] | ||
Accrued workers' compensation insurance | $ 3.6 | $ 4.9 |