DLH (DLHC) 10-Q 15 May 18 2018 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	6 Months Ended
	Mar. 31, 2018	Apr. 30, 2018
Document and Entity Information
Entity Registrant Name	DLH Holdings Corp.
Entity Central Index Key	785,557
Document Type	10-Q
Document Period End Date	Mar. 31, 2018
Amendment Flag	false
Document Fiscal Year Focus	2,018
Document Fiscal Period Focus	Q2
Current Fiscal Year End Date	--09-30
Entity Current Reporting Status	Yes
Entity Filer Category	Smaller Reporting Company
Entity Common Stock, Shares Outstanding		11,899,494

CONSOLIDATED STATEMENTS OF OPER

CONSOLIDATED STATEMENTS OF OPERATIONS - USD ($) shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Income Statement [Abstract]
Revenue	$ 34,401	$ 29,905	$ 64,616	$ 56,016
Direct expenses	26,953	23,504	50,636	43,804
Gross margin	7,448	6,401	13,980	12,212
General and administrative expenses	4,684	4,008	9,564	8,729
Depreciation and amortization	560	554	1,066	755
Income from operations	2,204	1,839	3,350	2,728
Interest expense, net	261	255	539	619
Income before income taxes	1,943	1,584	2,811	2,109
Income tax expense, net	627	605	4,346	806
Net income (loss)	$ 1,316	$ 979	$ (1,535)	$ 1,303
Net income per share, basic (in dollars per share)	$ 0.11	$ 0.09	$ (0.13)	$ 0.12
Net income (loss) per share - diluted (in dollars per share)	$ 0.10	$ 0.08	$ (0.13)	$ 0.10
Weighted average common shares outstanding
Basic (in shares)	11,889	11,249	11,863	11,225
Diluted (in shares)	12,886	12,745	11,863	12,713

CONSOLIDATED BALANCE SHEETS

CONSOLIDATED BALANCE SHEETS - USD ($) $ in Thousands	Mar. 31, 2018	Sep. 30, 2017
Current assets:
Cash and cash equivalents	$ 3,586	$ 4,930
Accounts receivable	12,338	11,911
Other current assets	945	598
Total current assets	16,869	17,439
Equipment and improvements, net	1,795	1,391
Deferred taxes, net	5,473	9,639
Goodwill, net	25,989	25,989
Intangible assets, net	14,246	15,127
Other long-term assets	89	139
Total assets	64,461	69,724
CURRENT LIABILITIES
Debt obligations - current	3,622	6,518
Derivative financial instruments, at fair value	0	306
Accrued payroll	4,645	3,723
Accounts payable, accrued expenses, and other current liabilities	9,936	10,895
Total current liabilities	18,203	21,442
LONG TERM LIABILITIES
Total long term liabilities	10,658	12,427
Total liabilities	28,861	33,869
Commitments and contingencies
SHAREHOLDERS’ EQUITY
Common stock, $.001 par value; authorized 40,000 shares; issued and outstanding 11,899 at March 31, 2018 and 11,767 at September 30, 2017	12	12
Additional paid-in capital	83,838	82,687
Accumulated deficit	(48,250)	(46,844)
Total shareholders’ equity	35,600	35,855
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$ 64,461	$ 69,724

CONSOLIDATED BALANCE SHEETS (Pa

CONSOLIDATED BALANCE SHEETS (Parenthetical) - $ / shares	Mar. 31, 2018	Sep. 30, 2017
Statement of Financial Position [Abstract]
Common stock, par value (in dollars per share)	$ 0.001	$ 0.001
Common stock, authorized (in shares)	40,000	40,000
Common stock, issued (in shares)	11,899	11,767
Common stock, outstanding (in shares)	11,899	11,767

CONSOLIDATED STATEMENTS OF CASH

CONSOLIDATED STATEMENTS OF CASH FLOWS - USD ($) $ in Thousands	6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017
Operating activities
Net income (loss)	$ (1,535)	$ 1,303
Adjustments to reconcile net income (loss) to net cash (used in) provided by operating activities:
Depreciation and amortization expense	1,066	755
Amortization of debt financing costs as interest expense	132	127
Change in fair value of derivative financial instruments	0	52
Stock based compensation expense	928	549
Deferred taxes, net	4,166	642
Changes in operating assets and liabilities
Accounts receivable	(427)	(2,234)
Other current assets	(347)	(215)
Accounts payable, accrued payroll, accrued expenses and other current liabilities	(31)	1,386
Other long term assets/liabilities	44	124
Net cash provided by operating activities	3,996	2,489
Investing activities
Acquisition, net of cash acquired	0	(250)
Purchase of equipment and improvements	(588)	(674)
Net cash used in investing activities	(588)	(924)
Financing activities
Repayments on senior debt	(4,793)	(1,875)
Repayments of capital lease obligations	(5)	(40)
Proceeds from issuance of stock upon exercise of options	46	14
Net cash used in financing activities	(4,752)	(1,901)
Net change in cash and cash equivalents	(1,344)	(336)
Cash and cash equivalents at beginning of period	4,930	3,427
Cash and cash equivalents at end of period	3,586	3,091
Supplemental disclosures of cash flow information
Cash paid during the period for interest	427	434
Cash paid during the period for income taxes	578	300
Derivative warrant liability reclassified as equity	(306)	0
Noncash issuance of stock upon exercise of options	$ 25	$ 0

Basis of Presentation

Basis of Presentation	6 Months Ended
	Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Basis of Presentation	Basis of Presentation The accompanying consolidated financial statements include the accounts of DLH and its subsidiaries, all of which are wholly owned. All significant intercompany balances and transactions have been eliminated in consolidation. The accompanying financial statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, these statements do not include all of the information and footnotes required by U.S. generally accepted accounting principles ("GAAP") for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring accruals) considered necessary for a fair presentation have been included. Operating results for the period ended March 31, 2018 are not necessarily indicative of the results that may be expected for the year ending September 30, 2018 . Amounts as of and for the periods ended March 31, 2018 and March 31, 2017 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, 2017 filed with the Securities and Exchange Commission on December 9, 2017 , as well as interim quarterly filing thereafter.

Business Overview

Business Overview	6 Months Ended
	Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Business Overview	Business Overview DLH is a full-service provider of technology-enabled health and readiness enhancement services to government agencies including the Department of Veteran Affairs ("VA"), Department of Health and Human Services ("HHS"), Department of Defense ("DoD"), and other government agencies. DLH Holdings Corp. (together with its subsidiaries, "DLH" or the "Company" and also referred to as "we," "us" and "our") manages its operations from its principal executive offices in Atlanta, Georgia. We have complimentary headquarters offices in Silver Spring, Maryland. We employ over 1,400 skilled employees working in more than 30 locations throughout the United States. Presently, the Company derives 100% of its revenue from agencies of the federal government, primarily as a prime contractor but also as a subcontractor to other Federal prime contractors. A major customer is defined as a customer from whom the Company derives at least 10% of its revenues. Our largest customer continues to be the VA, which comprised approximately 63% and 58% of revenue for the six months ended March 31, 2018 and 2017 , respectively. Additionally, HHS, which comprised approximately 33% and 30% of revenue for the six months ended March 31, 2018 and 2017 , respectively, represents a major customer. In addition, substantially all accounts receivable, including unbilled accounts receivable, are from agencies of the U.S. Government as of March 31, 2018 and September 30, 2017 . We believe that the credit risk associated with our receivables is limited due to the creditworthiness of these customers. See Note 4, Supporting Financial Information-Accounts Receivable. As of March 31, 2018, awards from VA and HHS have anticipated periods of performance ranging from approximately six months to up to two years. These agreements are subject to the Federal Acquisition Regulations. While there can be no assurance as to the actual amount of services that the Company will ultimately provide to VA and HHS under its current contracts, we believe that our strong working relationships and our effective service delivery support ongoing performance for the contract term. The Company's results of operations, cash flows and financial condition would be materially adversely affected in the event that we were unable to continue our relationship with VA or HHS.

New Accounting Pronouncements

New Accounting Pronouncements	6 Months Ended
	Mar. 31, 2018
Accounting Changes and Error Corrections [Abstract]
New Accounting Pronouncements	New Accounting Pronouncements Beginning in May 2014, the Financial Accounting Standards Board ("FASB") issued guidance for revenue recognition. Subsequently, the FASB issued an amendment to defer for one year the effective date of the new guidance on revenue recognition, as well as issued additional clarifying amendments. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires improved disclosure to help the users of the financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The new guidance supersedes most current revenue recognition guidance, including industry-specific guidance, and is effective for annual periods (including interim periods therein) beginning after December 15, 2017. The guidance allows either a full retrospective or modified retrospective transition method. The Company is evaluating the effects of this guidance. The Company will adopt the new guidance beginning October 1, 2018. In February 2016, the FASB issued new accounting guidance related to leases. This update, effective for the Company beginning October 1, 2019, will replace existing guidance in GAAP and will require lessees to recognize lease assets and lease liabilities on the balance sheet for all leases and disclose key information about leasing arrangements. When implemented, lessees and lessors will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. As shown in Note 9, the Company currently has approximately $3.3 million of lease obligations as of March 31, 2018 that would be evaluated as the implementation of this guidance becomes effective. In July 2017, the FASB issued new accounting guidance related to certain equity-linked financial instruments with down round features, such as warrants. The guidance provides for a scope exception from derivative accounting if the instruments qualify for equity classification. Should the instruments qualify for equity classification, they would no longer be considered liabilities subject to fair value measurement at each reporting period. This update is effective for the Company as of its fiscal year beginning October 1, 2019, with early adoption permitted. The Company has elected to adopt the provisions of this ASU as of December 31, 2017.

Supporting Financial Informatio

Supporting Financial Information	6 Months Ended
	Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Supporting Financial Information	Supporting Financial Information Accounts receivable (in thousands) March 31, September 30, Ref 2018 2017 Billed receivables $ 11,989 $ 11,862 Unbilled receivables 349 49 Total accounts receivable 12,338 11,911 Less: Allowance for doubtful accounts (a) — — Accounts receivable, net $ 12,338 $ 11,911 Ref (a): Accounts receivable are non-interest bearing, unsecured and carried at net realizable value. 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 both March 31, 2018 and September 30, 2017 . Other current assets (in thousands) March 31, September 30, Ref 2018 2017 Prepaid insurance and benefits $ 605 $ 240 Other receivables and prepaid expenses 340 358 Other current assets $ 945 $ 598 Equipment and improvements, net (in thousands) March 31, September 30, Ref 2018 2017 Furniture and equipment $ 326 $ 331 Computer equipment 810 715 Computer software (a) 1,607 1,108 Leasehold improvements 66 66 Total fixed assets 2,809 2,220 Less accumulated depreciation and amortization (1,014 ) (829 ) Equipment and improvements, net (b) $ 1,795 $ 1,391 Ref (a): The Company implemented a new Enterprise Resource Planning system on January 1, 2018. Capitalized costs include $1.2 million and $0.7 million as of March 31, 2018 and September 30, 2017 , respectively, of software licenses and implementation labor related to application development. The asset was placed in service effective as of January 1, 2018 with an estimated useful life of 5 years. Ref (b): Equipment and improvements are stated 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. Depreciation of equipment was $119 thousand and $85 thousand for the three months ended March 31, 2018 and 2017 respectively and $185 thousand and $170 thousand for the six months ended March 31, 2018 and 2017 respectively. Goodwill and Intangibles (in thousands) as of March 31, 2018 Ref Goodwill Customer Relationships (a) Non Compete Agreement (a) Trade Name (a) Total Gross Balance at September 30, 2017 $ 25,989 $ 16,626 $ 480 $ 517 $ 43,612 Accumulated amortization at September 30, 2017 — (2,355 ) (68 ) (73 ) (2,496 ) Current period amortization — (831 ) (24 ) (26 ) (881 ) Total accumulated amortization — (3,186 ) (92 ) (99 ) (3,377 ) Net balance at March 31, 2018 $ 25,989 $ 13,440 $ 388 $ 418 $ 40,235 Ref (a): Intangible assets subject to amortization. The intangibles are amortized on a straight-line basis over their estimated useful lives of 10 years . Total amount of amortization expense was $0.4 million and $0.4 million for the three months ended March 31, 2018 and 2017 , respectively. Estimated amortization expense for future years: (in thousands) Year 1 $ 1,762 Year 2 1,762 Year 3 1,762 Year 4 1,762 Year 5 1,762 Thereafter 5,436 $ 14,246 Accounts payable, accrued expenses and other current liabilities (in thousands) March 31, September 30, Ref 2018 2017 Accounts payable $ 4,914 $ 5,205 Accrued benefits 1,857 1,831 Accrued bonus and incentive compensation 1,029 1,544 Accrued workers compensation insurance 1,626 1,598 Other accrued expenses 510 717 Accounts payable, accrued expenses, and other current liabilities $ 9,936 $ 10,895 Debt obligations (in thousands) March 31, September 30, Ref 2018 2017 Bank term loan (a) $ 14,896 $ 19,688 Less unamortized debt issuance costs (823 ) (961 ) Net bank debt obligation 14,073 18,727 Less current portion of bank debt obligations (3,622 ) (6,518 ) Long term portion of bank debt obligation $ 10,451 $ 12,209 Ref (a): Maturity of the bank debt obligation as follows, in thousands: Year 1 $ 3,750 Year 2 3,750 Year 3 3,750 Year 4 3,646 Total bank debt obligation $ 14,896 Interest expense (in thousands) (in thousands) Three Months Ended Six Months Ended March 31, March 31, Ref 2018 2017 2018 2017 Interest expense (a) $ (208 ) $ (215 ) $ (427 ) $ (440 ) Amortization of debt financing costs as interest expense (b) (67 ) (67 ) (132 ) (127 ) Change in fair value of derivative financial instruments — 27 — (52 ) Other income (expense), net 14 20 — Interest expense, net $ (261 ) (255 ) $ (539 ) $ (619 ) Ref (a): Interest expense on borrowing Ref (b): Amortizations of expenses related to securing financing

Credit Facilities

Credit Facilities	6 Months Ended
	Mar. 31, 2018
Debt Disclosure [Abstract]
Credit Facilities	Credit Facilities A summary of our loan facilities and subordinated debt financing as of March 31, 2018 is as follows: ($ in Millions) As of March 31, 2018 Lender Arrangement Loan Balance Interest Maturity Date Fifth Third Bank Secured term loan $25 million ceiling (a) $ 14.9 LIBOR* + 3.0% 05/01/21 Fifth Third Bank Secured revolving line of credit $10 million ceiling (b) $ — LIBOR* + 3.0% 05/01/18** *LIBOR rate as of March 31, 2018 was 1.66% **Extension of credit line obtained May 10, 2018 (see note 12) (a) Represents the principal amounts payable on our Term Loan with Fifth Third Bank. The $25.0 million term loan from Fifth Third Bank was funded at closing and is secured by liens on substantially all of the assets of the Company. The principal of the Term Loan is payable in fifty-nine consecutive monthly installments of $312,500 with the remaining balance due on May 1, 2021. The Term Loan agreement requires compliance with a number of financial covenants and contains restrictions on our ability to engage in certain transactions. We are in compliance with all loan covenants and restrictions. Among other matters, we must comply with limitations on: 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 1.35 to 1.0 commencing with the quarter ending June 30, 2016, and for all subsequent periods, and (ii) a Funded Indebtedness to Adjusted EBITDA ratio not exceeding the ratio of 2.99 to 1.0 at closing and thereafter a ratio ranging from 3.0 to 1.0 for the period through March 31, 2018 to 2.5 to 1.0 for the period ending September 30, 2018 through maturity. Adjusted EBITDA ratio is calculated by dividing the Company's total interest-bearing debt by net income adjusted to exclude (i) interest and other expenses, including acquisition expenses, net, (ii) provision for or benefit from income taxes, if any, (iii) depreciation and amortization, and (iv) G&A expenses - equity grants. In addition to monthly 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 each year in which the Funded Indebtedness to Adjusted EBITDA ratio is greater than or equal to 2.50 :1.0, or (b) 50% of the Excess Cash Flow for each fiscal year in which the funded indebtedness to Adjusted EBITDA Ratio is less than 2.50 :1.0 but greater than or equal to 2.0 :1.0. DLH made an excess cash flow payment of $2.9 million on January 16, 2018. DLH does not expect to make any future excess cash flow payments. (b) The secured revolving line of credit from Fifth Third Bank has a ceiling of up to $10.0 million . Borrowing on the line of credit is secured by liens on substantially all of the assets of the Company. The Company's total borrowing availability, based on eligible accounts receivables at March 31, 2018 , was $10.0 million . This capacity was comprised of $0.6 million in a stand-by letter of credit and unused borrowing capacity of $9.4 million . The revolving line of credit is subject to loan covenants as described above in the Term Loan, and DLH is fully compliant with those covenants.

Significant Accounting Policies

Significant Accounting Policies	6 Months Ended
	Mar. 31, 2018
Accounting Policies [Abstract]
Significant Accounting Policies	Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include valuation of goodwill and intangible assets, valuation allowances established against accounts receivable and deferred tax assets, excess cash flow payments on our term debt, and measurement of 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. In particular, a material reduction in the fair value of goodwill could have a material adverse effect on the Company’s financial position and results of operations. We account for the effect of a change in accounting estimate during the period in which the change occurs. Revenue Recognition DLH’s revenue is derived from professional and other specialized service offerings to US Government agencies through a variety of contracts, some of which are fixed-price in nature and/or sourced through Federal Supply Schedules administered by the General Services Administration (“GSA”) at fixed unit rates or hourly arrangements. Revenue on time and materials contracts is recognized based on hours performed times the applicable hourly rate, plus materials and other direct costs incurred on the contract. Revenue on fixed fee for service contracts is recognized over the period of performance of the contract. Revenue on cost reimbursable contracts is recognized equal to allowable costs incurred, plus a ratable portion of the applicable fee. We generally operate as a prime contractor, but have also entered into contracts as a subcontractor. The Company's current business base is 95% prime contracts and 5% subcontracts. DLH recognizes and records revenue on government contracts when: (a) persuasive evidence of an arrangement exists; (b) the services have been delivered to the customer; (c) the sales price is fixed or determinable and free of contingencies or significant uncertainties; and (d) collectibility is reasonably assured. Fair Value of Financial Instruments The carrying amounts of the Company's cash and cash equivalents, accounts receivable, unbilled receivables, accrued expenses, accrued earn outs payable, 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. Goodwill and other intangible assets DLH continues to review its goodwill and other intangible 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. At September 30, 2017 , we performed a goodwill impairment evaluation on the year-end carrying value of approximately $26 million . We performed both a qualitative and quantitative assessment of factors to determine whether it was necessary to perform the goodwill impairment test. Based on the results of the work performed, the Company has concluded that no impairment loss was warranted at September 30, 2017 . For the six months ended March 31, 2018 , the Company determined that no change in business conditions occurred which would have a material adverse effect on the valuation of 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. Long Lived Assets Equipment and improvements are stated 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. Income Taxes DLH accounts for income taxes in accordance with the 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 sheet 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 March 31, 2018 or September 30, 2017 . We report interest and penalties as a component of income tax expense. In the three and six months ended March 31, 2018 and March 31, 2017 , we recognized no interest and no penalties related to income taxes. Stock-based Equity Compensation The Company uses the fair value-based method for stock-based equity compensation. Options issued are designated as either an incentive stock 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 simulation option pricing model 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 capital stock. Cash and Cash Equivalents We consider 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. Earnings (Loss) per Share Basic earnings per share is calculated by dividing income (loss) 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 (loss) 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.

Stock-based Compensation, Equit

Stock-based Compensation, Equity Grants, and Warrants	6 Months Ended
	Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-based Compensation, Equity Grants, and Warrants	Stock-based Compensation, Equity Grants, and Warrants Stock-based compensation expense Options issued under equity incentive plans were designated as either an incentive stock or a non-statutory stock option. No option was 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 March 31, 2018 , there were 1.7 million shares available for grant. Stock-based compensation expense, shown in the table below, is recorded in general and administrative expenses included in our statement of operations: (in thousands) (in thousands) Three Months Ended Six Months Ended Ref March 31, March 31, 2018 2017 2018 2017 DLH employees $ 67 $ 56 $ 131 $ 63 Non-employee directors (a) 104 8 797 486 Total stock option expense $ 171 $ 64 $ 928 $ 549 Ref (a): Equity grants of restricted stock, in accordance with DLH compensation policy for non-employee directors. Unrecognized stock-based compensation expense (in thousands) Six Months Ended March 31, Ref 2018 2017 Unrecognized expense for DLH employees (a) $ 1,011 $ 404 Unrecognized expense for non-employee directors (b) $ — $ 8 Total unrecognized expense $ 1,011 $ 412 Ref (a): 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 binomial model that utilizes various probability factors and other criterion in establishing fair value of the grant. The related compensation expense is recognized over the derived service period determined in the valuation. The remaining term for the weighted average expense of these shares will be 56 months. Ref (b): Unrecognized stock expense related to prior year's equity grants of restricted stock to non-employee directors, based on performance criteria, in accordance with DLH compensation policy for non-employee directors. Stock option activity for the six months ended March 31, 2018 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 Ref Shares Price Term Value Options outstanding September 30, 2017 1,994 $ 3.83 6.4 $ 8,489 Granted 217 $ 6.33 Exercised (42 ) $ 1.69 Options outstanding, March 31, 2018 2,169 $ 4.38 6.1 $ 7,093 Indication of Value Summary Utilizing a volatility range of 50% along with assumptions of a 10 year term and the aforementioned 10 -day stock price threshold results in an indicated range of value of the Options as follows using the Monte Carlo Method. Volatility 50% Vesting Expected Strike Stock Threshold Risk-Free Term Calculated Grant Date Price Price Price Rate (Years) Fair Value 11/29/2017 $ 6.46 $ 6.46 $ 12.00 2.4 % 10 $ 3.98 12/01/2017 $ 6.28 $ 6.28 $ 8.00 2.4 % 10 $ 3.87 12/01/2017 $ 6.28 $ 6.28 $ 10.00 2.4 % 10 $ 3.82 Notes: Results based on 100,000 simulations Stock options shares outstanding, vested and unvested for the period ended (in thousands) Number of Shares March 31, September 30, Ref 2018 2017 Vested and exercisable (a) 1,335 1,327 Unvested 834 667 Options outstanding 2,169 1,994 Ref (a): Certain awards vest upon satisfaction of certain performance criteria.

Earnings (Loss) Per Share

Earnings (Loss) Per Share	6 Months Ended
	Mar. 31, 2018
Earnings Per Share [Abstract]
Earnings (Loss) Per Share	Earnings (Loss) Per Share Basic earnings per share is calculated by dividing income (loss) 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(loss) available to common shareholders by the weighted average number of basic common shares outstanding, adjusted to reflect potentially dilutive securities. Diluted earnings (loss) per share is calculated using the treasury stock method. Three Months Ended Six Months Ended March 31, March 31, 2018 2017 2018 2017 Numerator: Net income (loss) $ 1,316 $ 979 $ (1,535 ) $ 1,303 Denominator: Denominator for basic net income per share - weighted-average outstanding shares 11,889 11,249 11,863 11,225 Effect of dilutive securities: Stock options and restricted stock 997 1,496 — 1,488 Denominator for diluted net income per share - weighted-average outstanding shares 12,886 12,745 11,863 12,713 Net income (loss) per share - basic $ 0.11 $ 0.09 $ (0.13 ) $ 0.12 Net income (loss) per share-diluted $ 0.10 $ 0.08 $ (0.13 ) $ 0.10

Commitment and Contingencies

Commitment and Contingencies	6 Months Ended
	Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	Commitments and Contingencies Contractual Obligations as of March 31, 2018 Payments Due By Period Contractual Obligations Next 12 2-3 4-5 More than 5 (Amounts in thousands) Ref Total Months Years Years Years Debt Obligations $ 14,896 $ 3,750 $ 7,500 $ 3,646 — Facility leases 3,227 912 1,280 660 375 Equipment operating leases 58 26 32 — — Total Obligations $ 18,181 $ 4,688 $ 8,812 $ 4,306 $ 375 Worker's Compensation We accrue worker's 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 March 31, 2018 and September 30, 2017 was $1.63 million and $1.60 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, employment-relations issues, 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	6 Months Ended
	Mar. 31, 2018
Related Party Transactions [Abstract]
Related Party Transactions	Related Party Transactions. The Company has determined that for the three and six months ended March 31, 2018 and 2017 there were no significant related party transactions that have occurred which require disclosure through the date that these financial statements were issued.

Income Taxes

Income Taxes	6 Months Ended
	Mar. 31, 2018
Income Tax Disclosure [Abstract]
Income Taxes	Income Taxes DLH accounts for income taxes in accordance with the liability method. Under this method, 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 balance sheet 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. On December 22, 2017, the Tax Cuts and Jobs Act (the “2017 Tax Act”) was enacted. The 2017 Tax Act significantly reduces U.S. federal tax rates, modifies rules regarding deductibility of executive compensation, limits deductions of interest expense, and revises rules regarding usability of net operating losses. Net loss for the six months ended March 31, 2018 includes an aggregate net discrete tax provision of $3.4 million as a result of the 2017 Tax Act, principally associated with revaluing the benefits of our net operating loss carryforwards from the previously recognized 34% federal rate to the 21% rate enacted. As of March 31, 2018, the Company is reporting a $5.5 million deferred tax asset, which is presented on the balance sheet as tax long-term in the long-term assets section.

Subsequent Events

Subsequent Events	6 Months Ended
	Mar. 31, 2018
Subsequent Events [Abstract]
Subsequent Events	Subsequent Events. On May 10, 2018, the Company, together with its wholly-owned subsidiaries, DLH Solutions, Inc. and Danya International LLC (collectively, the “Borrowers”) and Fifth Third Bank (the “Lender”) entered into an amendment to that certain Loan Agreement dated as of May 2, 2016 (the “Loan Agreement”) among the Borrowers and the Lender. The amendment to the Loan Agreement provides for a three -year extension of the maturity date of the $10.0 million revolving credit facility to May 1, 2021, so that it is coterminous with the existing secured term loan established under the Loan Agreement. In addition, the amendment provides for an increase of the aggregate face value of letters of credit which may be drawn under the revolving credit facility from $1.0 million to $2.0 million and for certain other technical modifications. The credit available to the Borrowers under the revolving credit facility is subject to certain limitations, including a borrowing base, and may be used for general working capital purposes.

Significant Accounting Polici18

Significant Accounting Policies (Policies)	6 Months Ended
	Mar. 31, 2018
Accounting Policies [Abstract]
New Accounting Pronouncements and Adoption of New Accounting Standards	New Accounting Pronouncements Beginning in May 2014, the Financial Accounting Standards Board ("FASB") issued guidance for revenue recognition. Subsequently, the FASB issued an amendment to defer for one year the effective date of the new guidance on revenue recognition, as well as issued additional clarifying amendments. The new guidance outlines a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Additionally, the guidance requires improved disclosure to help the users of the financial statements better understand the nature, amount, timing, and uncertainty of revenue that is recognized. The new guidance supersedes most current revenue recognition guidance, including industry-specific guidance, and is effective for annual periods (including interim periods therein) beginning after December 15, 2017. The guidance allows either a full retrospective or modified retrospective transition method. The Company is evaluating the effects of this guidance. The Company will adopt the new guidance beginning October 1, 2018. In February 2016, the FASB issued new accounting guidance related to leases. This update, effective for the Company beginning October 1, 2019, will replace existing guidance in GAAP and will require lessees to recognize lease assets and lease liabilities on the balance sheet for all leases and disclose key information about leasing arrangements. When implemented, lessees and lessors will be required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. As shown in Note 9, the Company currently has approximately $3.3 million of lease obligations as of March 31, 2018 that would be evaluated as the implementation of this guidance becomes effective. In July 2017, the FASB issued new accounting guidance related to certain equity-linked financial instruments with down round features, such as warrants. The guidance provides for a scope exception from derivative accounting if the instruments qualify for equity classification. Should the instruments qualify for equity classification, they would no longer be considered liabilities subject to fair value measurement at each reporting period. This update is effective for the Company as of its fiscal year beginning October 1, 2019, with early adoption permitted. The Company has elected to adopt the provisions of this ASU as of December 31, 2017.
Use of Estimates	Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Significant estimates include valuation of goodwill and intangible assets, valuation allowances established against accounts receivable and deferred tax assets, excess cash flow payments on our term debt, and measurement of 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. In particular, a material reduction in the fair value of goodwill could have a material adverse effect on the Company’s financial position and results of operations. We account for the effect of a change in accounting estimate during the period in which the change occurs.
Revenue Recognition	Revenue Recognition DLH’s revenue is derived from professional and other specialized service offerings to US Government agencies through a variety of contracts, some of which are fixed-price in nature and/or sourced through Federal Supply Schedules administered by the General Services Administration (“GSA”) at fixed unit rates or hourly arrangements. Revenue on time and materials contracts is recognized based on hours performed times the applicable hourly rate, plus materials and other direct costs incurred on the contract. Revenue on fixed fee for service contracts is recognized over the period of performance of the contract. Revenue on cost reimbursable contracts is recognized equal to allowable costs incurred, plus a ratable portion of the applicable fee. We generally operate as a prime contractor, but have also entered into contracts as a subcontractor. The Company's current business base is 95% prime contracts and 5% subcontracts. DLH recognizes and records revenue on government contracts when: (a) persuasive evidence of an arrangement exists; (b) the services have been delivered to the customer; (c) the sales price is fixed or determinable and free of contingencies or significant uncertainties; and (d) collectibility is reasonably assured.
Fair Value of Financial Instruments	Fair Value of Financial Instruments The carrying amounts of the Company's cash and cash equivalents, accounts receivable, unbilled receivables, accrued expenses, accrued earn outs payable, 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.
Goodwill and Other Intangible Assets	Goodwill and other intangible assets DLH continues to review its goodwill and other intangible 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.
Long-lived Assets	Long Lived Assets Equipment and improvements are stated 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.
Income Taxes	Income Taxes DLH accounts for income taxes in accordance with the 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 sheet 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 March 31, 2018 or September 30, 2017 . We report interest and penalties as a component of income tax expense. In the three and six months ended March 31, 2018 and March 31, 2017 , we recognized no interest and no penalties related to income taxes.
Stock-based Equity Compensation	Stock-based Equity Compensation The Company uses the fair value-based method for stock-based equity compensation. Options issued are designated as either an incentive stock 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 simulation option pricing model 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 capital stock.
Cash and Cash Equivalents	Cash and Cash Equivalents We consider 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.
Earnings (Loss) Per Share	Earnings (Loss) per Share Basic earnings per share is calculated by dividing income (loss) 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 (loss) 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.

Supporting Financial Informat19

Supporting Financial Information (Tables)	6 Months Ended
	Mar. 31, 2018
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Schedule of Accounts Receivable	Accounts receivable (in thousands) March 31, September 30, Ref 2018 2017 Billed receivables $ 11,989 $ 11,862 Unbilled receivables 349 49 Total accounts receivable 12,338 11,911 Less: Allowance for doubtful accounts (a) — — Accounts receivable, net $ 12,338 $ 11,911 Ref (a): Accounts receivable are non-interest bearing, unsecured and carried at net realizable value. 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 both March 31, 2018 and September 30, 2017 .
Schedule of Other Current Assets	Other current assets (in thousands) March 31, September 30, Ref 2018 2017 Prepaid insurance and benefits $ 605 $ 240 Other receivables and prepaid expenses 340 358 Other current assets $ 945 $ 598
Schedule of Equipment and Improvements, Net	Equipment and improvements, net (in thousands) March 31, September 30, Ref 2018 2017 Furniture and equipment $ 326 $ 331 Computer equipment 810 715 Computer software (a) 1,607 1,108 Leasehold improvements 66 66 Total fixed assets 2,809 2,220 Less accumulated depreciation and amortization (1,014 ) (829 ) Equipment and improvements, net (b) $ 1,795 $ 1,391 Ref (a): The Company implemented a new Enterprise Resource Planning system on January 1, 2018. Capitalized costs include $1.2 million and $0.7 million as of March 31, 2018 and September 30, 2017 , respectively, of software licenses and implementation labor related to application development. The asset was placed in service effective as of January 1, 2018 with an estimated useful life of 5 years. Ref (b): Equipment and improvements are stated 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. Depreciation of equipment was $119 thousand and $85 thousand for the three months ended March 31, 2018 and 2017 respectively and $185 thousand and $170 thousand for the six months ended March 31, 2018 and 2017 respectively.
Schedule of Goodwill and Intangibles	Goodwill and Intangibles (in thousands) as of March 31, 2018 Ref Goodwill Customer Relationships (a) Non Compete Agreement (a) Trade Name (a) Total Gross Balance at September 30, 2017 $ 25,989 $ 16,626 $ 480 $ 517 $ 43,612 Accumulated amortization at September 30, 2017 — (2,355 ) (68 ) (73 ) (2,496 ) Current period amortization — (831 ) (24 ) (26 ) (881 ) Total accumulated amortization — (3,186 ) (92 ) (99 ) (3,377 ) Net balance at March 31, 2018 $ 25,989 $ 13,440 $ 388 $ 418 $ 40,235 Ref (a): Intangible assets subject to amortization. The intangibles are amortized on a straight-line basis over their estimated useful lives of 10 years . Total amount of amortization expense was $0.4 million and $0.4 million for the three months ended March 31, 2018 and 2017 , respectively.
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense	Estimated amortization expense for future years: (in thousands) Year 1 $ 1,762 Year 2 1,762 Year 3 1,762 Year 4 1,762 Year 5 1,762 Thereafter 5,436 $ 14,246
Schedule of Accounts Payable, Accrued Expenses, and Other Current Liabilities	Accounts payable, accrued expenses and other current liabilities (in thousands) March 31, September 30, Ref 2018 2017 Accounts payable $ 4,914 $ 5,205 Accrued benefits 1,857 1,831 Accrued bonus and incentive compensation 1,029 1,544 Accrued workers compensation insurance 1,626 1,598 Other accrued expenses 510 717 Accounts payable, accrued expenses, and other current liabilities $ 9,936 $ 10,895
Schedule of Debt Obligations	Debt obligations (in thousands) March 31, September 30, Ref 2018 2017 Bank term loan (a) $ 14,896 $ 19,688 Less unamortized debt issuance costs (823 ) (961 ) Net bank debt obligation 14,073 18,727 Less current portion of bank debt obligations (3,622 ) (6,518 ) Long term portion of bank debt obligation $ 10,451 $ 12,209 Ref (a): Maturity of the bank debt obligation as follows, in thousands: Year 1 $ 3,750 Year 2 3,750 Year 3 3,750 Year 4 3,646 Total bank debt obligation $ 14,896
Schedule of Interest Income (Expense)	Interest expense (in thousands) (in thousands) Three Months Ended Six Months Ended March 31, March 31, Ref 2018 2017 2018 2017 Interest expense (a) $ (208 ) $ (215 ) $ (427 ) $ (440 ) Amortization of debt financing costs as interest expense (b) (67 ) (67 ) (132 ) (127 ) Change in fair value of derivative financial instruments — 27 — (52 ) Other income (expense), net 14 20 — Interest expense, net $ (261 ) (255 ) $ (539 ) $ (619 ) Ref (a): Interest expense on borrowing Ref (b): Amortizations of expenses related to securing financing

Credit Facilities (Tables)

Credit Facilities (Tables)	6 Months Ended
	Mar. 31, 2018
Debt Disclosure [Abstract]
Schedule of Credit Facilities	A summary of our loan facilities and subordinated debt financing as of March 31, 2018 is as follows: ($ in Millions) As of March 31, 2018 Lender Arrangement Loan Balance Interest Maturity Date Fifth Third Bank Secured term loan $25 million ceiling (a) $ 14.9 LIBOR* + 3.0% 05/01/21 Fifth Third Bank Secured revolving line of credit $10 million ceiling (b) $ — LIBOR* + 3.0% 05/01/18** *LIBOR rate as of March 31, 2018 was 1.66% **Extension of credit line obtained May 10, 2018 (see note 12) (a) Represents the principal amounts payable on our Term Loan with Fifth Third Bank. The $25.0 million term loan from Fifth Third Bank was funded at closing and is secured by liens on substantially all of the assets of the Company. The principal of the Term Loan is payable in fifty-nine consecutive monthly installments of $312,500 with the remaining balance due on May 1, 2021.

Stock-based Compensation, Equ21

Stock-based Compensation, Equity Grants, and Warrants (Tables)	6 Months Ended
	Mar. 31, 2018
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Stock-based Compensation Expense	Stock-based compensation expense, shown in the table below, is recorded in general and administrative expenses included in our statement of operations: (in thousands) (in thousands) Three Months Ended Six Months Ended Ref March 31, March 31, 2018 2017 2018 2017 DLH employees $ 67 $ 56 $ 131 $ 63 Non-employee directors (a) 104 8 797 486 Total stock option expense $ 171 $ 64 $ 928 $ 549 Ref (a): Equity grants of restricted stock, in accordance with DLH compensation policy for non-employee directors. Unrecognized stock-based compensation expense (in thousands) Six Months Ended March 31, Ref 2018 2017 Unrecognized expense for DLH employees (a) $ 1,011 $ 404 Unrecognized expense for non-employee directors (b) $ — $ 8 Total unrecognized expense $ 1,011 $ 412 Ref (a): 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 binomial model that utilizes various probability factors and other criterion in establishing fair value of the grant. The related compensation expense is recognized over the derived service period determined in the valuation. The remaining term for the weighted average expense of these shares will be 56 months. Ref (b): Unrecognized stock expense related to prior year's equity grants of restricted stock to non-employee directors, based on performance criteria, in accordance with DLH compensation policy for non-employee directors.
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 Ref Shares Price Term Value Options outstanding September 30, 2017 1,994 $ 3.83 6.4 $ 8,489 Granted 217 $ 6.33 Exercised (42 ) $ 1.69 Options outstanding, March 31, 2018 2,169 $ 4.38 6.1 $ 7,093
Stock Options Fair Value Assumptions	Utilizing a volatility range of 50% along with assumptions of a 10 year term and the aforementioned 10 -day stock price threshold results in an indicated range of value of the Options as follows using the Monte Carlo Method. Volatility 50% Vesting Expected Strike Stock Threshold Risk-Free Term Calculated Grant Date Price Price Price Rate (Years) Fair Value 11/29/2017 $ 6.46 $ 6.46 $ 12.00 2.4 % 10 $ 3.98 12/01/2017 $ 6.28 $ 6.28 $ 8.00 2.4 % 10 $ 3.87 12/01/2017 $ 6.28 $ 6.28 $ 10.00 2.4 % 10 $ 3.82 Notes: Results based on 100,000 simulations
Stock Option Shares Outstanding, Vested and Expected to Vest	Stock options shares outstanding, vested and unvested for the period ended (in thousands) Number of Shares March 31, September 30, Ref 2018 2017 Vested and exercisable (a) 1,335 1,327 Unvested 834 667 Options outstanding 2,169 1,994 Ref (a): Certain awards vest upon satisfaction of certain performance criteria.

Earnings (Loss) Per Share (Tabl

Earnings (Loss) Per Share (Tables)	6 Months Ended
	Mar. 31, 2018
Earnings Per Share [Abstract]
Diluted earnings per share	Diluted earnings (loss) per share is calculated using the treasury stock method. Three Months Ended Six Months Ended March 31, March 31, 2018 2017 2018 2017 Numerator: Net income (loss) $ 1,316 $ 979 $ (1,535 ) $ 1,303 Denominator: Denominator for basic net income per share - weighted-average outstanding shares 11,889 11,249 11,863 11,225 Effect of dilutive securities: Stock options and restricted stock 997 1,496 — 1,488 Denominator for diluted net income per share - weighted-average outstanding shares 12,886 12,745 11,863 12,713 Net income (loss) per share - basic $ 0.11 $ 0.09 $ (0.13 ) $ 0.12 Net income (loss) per share-diluted $ 0.10 $ 0.08 $ (0.13 ) $ 0.10

Commitment and Contingencies (T

Commitment and Contingencies (Tables)	6 Months Ended
	Mar. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Contractual Obligation, Fiscal Year Maturity Schedule	Contractual Obligations as of March 31, 2018 Payments Due By Period Contractual Obligations Next 12 2-3 4-5 More than 5 (Amounts in thousands) Ref Total Months Years Years Years Debt Obligations $ 14,896 $ 3,750 $ 7,500 $ 3,646 — Facility leases 3,227 912 1,280 660 375 Equipment operating leases 58 26 32 — — Total Obligations $ 18,181 $ 4,688 $ 8,812 $ 4,306 $ 375

Business Overview (Details)

Business Overview (Details)	6 Months Ended
	Mar. 31, 2018employeelocation	Mar. 31, 2017
Concentration Risk [Line Items]
Number of employees | employee	1,400
Number of locations in which entity operates | location	30
US Government [Member] | Customer concentration | Revenue concentration
Concentration Risk [Line Items]
Concentration risk percentage	100.00%
Department of Veterans Affairs [Member] | Customer concentration | Revenue concentration
Concentration Risk [Line Items]
Concentration risk percentage	63.00%	58.00%
Human Services and Solutions [Member] | Customer concentration | Revenue concentration
Concentration Risk [Line Items]
Concentration risk percentage	33.00%	30.00%
Department of Defense and Department of Veterans Affairs [Member] | Minimum
Concentration Risk [Line Items]
Government contract, term of award	6 months
Department of Defense and Department of Veterans Affairs [Member] | Maximum
Concentration Risk [Line Items]
Government contract, term of award	2 years

New Accounting Pronouncements (

New Accounting Pronouncements (Details) $ in Millions	Mar. 31, 2018USD ($)
Accounting Changes and Error Corrections [Abstract]
Lease obligations, future minimum payments due	$ 3.3

Supporting Financial Informat26

Supporting Financial Information - Accounts Receivable (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Sep. 30, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable	$ 12,338	$ 11,911
Less: Allowance for doubtful accounts	0	0
Accounts receivable, net	12,338	11,911
Billed Receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable	11,989	11,862
Unbilled Receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total accounts receivable	$ 349	$ 49

Supporting Financial Informat27

Supporting Financial Information - Other Current Assets (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Sep. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Prepaid insurance and benefits	$ 605	$ 240
Other receivables and prepaid expenses	340	358
Other current assets	$ 945	$ 598

Supporting Financial Informat28

Supporting Financial Information - Equipment and Improvements, net (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017	Sep. 30, 2017
Property, Plant and Equipment [Line Items]
Furniture and equipment	$ 326,000		$ 326,000		$ 331,000
Computer equipment	810,000		810,000		715,000
Computer software	1,607,000		1,607,000		1,108,000
Leasehold improvements	66,000		66,000		66,000
Total fixed assets	2,809,000		2,809,000		2,220,000
Less accumulated depreciation and amortization	(1,014,000)		(1,014,000)		(829,000)
Equipment and improvements, net	1,795,000		$ 1,795,000		1,391,000
Minimum
Property, Plant and Equipment [Line Items]
Estimated useful of long-lived assets			3 years
Maximum
Property, Plant and Equipment [Line Items]
Estimated useful of long-lived assets			7 years
New Enterprise Resource Planning (ERP) System
Property, Plant and Equipment [Line Items]
Capitalized costs of license and implementation related to application development			$ 1,200,000		$ 700,000
Estimated useful life of capitalized computer software			5 years
Leasehold Improvements | Minimum
Property, Plant and Equipment [Line Items]
Estimated useful of long-lived assets			3 years
Leasehold Improvements | Maximum
Property, Plant and Equipment [Line Items]
Estimated useful of long-lived assets			7 years
Equipment
Property, Plant and Equipment [Line Items]
Depreciation of equipment	$ 119,000	$ 85,000	$ 185,000	$ 170,000

Supporting Financial Informat29

Supporting Financial Information - Goodwill and Intangible Assets (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Sep. 30, 2017
Finite Lived Intangible Assets [Roll Forward]
Goodwill, net	$ 25,989		$ 25,989	$ 25,989
Intangible assets, including goodwill, gross balance				43,612
Accumulated amortization finite-lived intangibles, beginning balance			(2,496)
Current period amortization	(400)	$ (400)	(881)
Accumulated amortization finite-lived intangibles, ending balance	(3,377)		(3,377)
Finite-lived intangibles, net balance	14,246		14,246
Intangible assets, including goodwill, net balance	40,235		$ 40,235
Estimated useful live of finite-lived intangible assets			10 years
Customer Relationships [Member]
Finite Lived Intangible Assets [Roll Forward]
Finite-lived intangible assets, gross balance				16,626
Accumulated amortization finite-lived intangibles, beginning balance			$ (2,355)
Current period amortization			(831)
Accumulated amortization finite-lived intangibles, ending balance	(3,186)		(3,186)
Finite-lived intangibles, net balance	13,440		13,440
Noncompete Agreements [Member]
Finite Lived Intangible Assets [Roll Forward]
Finite-lived intangible assets, gross balance				480
Accumulated amortization finite-lived intangibles, beginning balance			(68)
Current period amortization			(24)
Accumulated amortization finite-lived intangibles, ending balance	(92)		(92)
Finite-lived intangibles, net balance	388		388
Trade Names [Member]
Finite Lived Intangible Assets [Roll Forward]
Finite-lived intangible assets, gross balance				$ 517
Accumulated amortization finite-lived intangibles, beginning balance			(73)
Current period amortization			(26)
Accumulated amortization finite-lived intangibles, ending balance	(99)		(99)
Finite-lived intangibles, net balance	$ 418		$ 418

Supporting Financial Informat30

Supporting Financial Information - Intangible Assets Estimated Future Amortization Expense (Details) $ in Thousands	Mar. 31, 2018USD ($)
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Year 1	$ 1,762
Year 2	1,762
Year 3	1,762
Year 4	1,762
Year 5	1,762
Thereafter	5,436
Finite-Lived Intangible Assets, Net	$ 14,246

Supporting Financial Informat31

Supporting Financial Information - Accounts Payable, Accrued Expense and Other Current Liabilities (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Sep. 30, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Accounts payable	$ 4,914	$ 5,205
Accrued benefits	1,857	1,831
Accrued bonus and incentive compensation	1,029	1,544
Accrued workers compensation insurance	1,626	1,598
Other accrued expenses	510	717
Total accrued expenses and other current liabilities	$ 9,936	$ 10,895

Supporting Financial Informat32

Supporting Financial Information - Debt Obligations (Details) - Notes Payable to Banks [Member] - USD ($) $ in Thousands	Mar. 31, 2018	Sep. 30, 2017
Debt Instrument [Line Items]
Bank term loan	$ 14,896	$ 19,688
Less unamortized debt issuance costs	(823)	(961)
Net bank debt obligation	14,073	18,727
Less current portion of bank debt obligations	(3,622)	(6,518)
Long term portion of bank debt obligation	$ 10,451	$ 12,209

Supporting Financial Informat33

Supporting Financial Information - Maturities of Debt Obligations (Details) - Notes Payable to Banks [Member] - USD ($) $ in Thousands	Mar. 31, 2018	Sep. 30, 2017
Debt Instrument [Line Items]
Year 1	$ 3,750
Year 2	3,750
Year 3	3,750
Year 4	3,646
Total bank debt obligation	$ 14,896	$ 19,688

Supporting Financial Informat34

Supporting Financial Information - Other Income (Expense) (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Interest expense	$ (208)	$ (215)	$ (427)	$ (440)
Amortization of debt financing costs as interest expense	(67)	(67)	(132)	(127)
Change in fair value of derivative financial instruments	0	27	0	(52)
Other income (expense), net	14		20	0
Other income (expense) net	$ (261)	$ (255)	$ (539)	$ (619)

Credit Facilities - Loan Facili

Credit Facilities - Loan Facilities and Subordinated Debt (Details) - USD ($)	6 Months Ended
	Mar. 31, 2018	Sep. 30, 2017
London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Interest rate (percent)	1.66%
Term Loans | Term Loan with Fifth Third Bank
Line of Credit Facility [Line Items]
Maximum availability	$ 25,000,000
Number of equal installment payments	59 months
Periodic principal payment	$ 312,500
Line of Credit
Line of Credit Facility [Line Items]
Maximum availability	10,000,000
Notes Payable to Banks [Member]
Line of Credit Facility [Line Items]
Loan balance	14,896,000	$ 19,688,000
Notes Payable to Banks [Member] | Term Loans
Line of Credit Facility [Line Items]
Maximum availability	25,000,000
Loan balance	$ 14,900,000
Notes Payable to Banks [Member] | Term Loans | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Basis spread on loan	1.66%
Notes Payable to Banks [Member] | Line of Credit
Line of Credit Facility [Line Items]
Maximum availability	$ 10,000,000
Loan balance	$ 0
Notes Payable to Banks [Member] | Line of Credit | London Interbank Offered Rate (LIBOR) [Member]
Line of Credit Facility [Line Items]
Basis spread on loan	1.66%

Credit Facilities - Narrative (

Credit Facilities - Narrative (Details) $ in Millions	Jan. 16, 2018USD ($)	Mar. 31, 2018USD ($)
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		75.00%
Excess Cash Flows Less Than 2.50 Greater Than 2.00
Line of Credit Facility [Line Items]
Percentage of excess cash flow for each year of funded indebtedness to EBDTA		50.00%
Term Loans
Line of Credit Facility [Line Items]
Fixed charge coverage ratio		0.0135
Ratio of debt to EBITDA at closing at thereafter		0.0299
Ratio of debt to EBDTA for the period through December 31, 2017		3
Ratio of debt to EBDTA for the period ending September 30, 2018 through maturity		0.025
Term Loans | Excess Cash Flows Greater Than Or Equal to 2.50
Line of Credit Facility [Line Items]
Ratio of funded indebtedness to adjusted EBDTA, actual		2.50
Line of Credit
Line of Credit Facility [Line Items]
Unused borrowing capacity		$ 9.4
Line of credit, maximum borrowing capacity		10
Letter of Credit
Line of Credit Facility [Line Items]
Line of credit, maximum borrowing capacity		$ 0.6
Term Loan with Fifth Third Bank | Term Loans
Line of Credit Facility [Line Items]
Excess cash flow payment of loan agreement	$ 2.9
Maximum | Term Loans | Excess Cash Flows Less Than 2.50 Greater Than 2.00
Line of Credit Facility [Line Items]
Ratio of funded indebtedness to adjusted EBDTA, actual		2.50
Minimum | Term Loans | Excess Cash Flows Less Than 2.50 Greater Than 2.00
Line of Credit Facility [Line Items]
Ratio of funded indebtedness to adjusted EBDTA, actual		2

Significant Accounting Polici37

Significant Accounting Policies (Details) - USD ($)	3 Months Ended		6 Months Ended		12 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017	Sep. 30, 2017
Acquired Indefinite-lived Intangible Assets [Line Items]
Business base percentage, prime contracts	95.00%		95.00%
Business base percentage, subcontracts	5.00%		5.00%
Goodwill, net	$ 25,989,000		$ 25,989,000		$ 25,989,000
Goodwill impairment					0
Uncertain tax positions	0		0		$ 0
Income tax interest expense	0	$ 0
Income tax penalties			0	$ 0
Cash, FDIC insured amount	$ 250,000,000		$ 250,000,000
Employee Stock Option
Acquired Indefinite-lived Intangible Assets [Line Items]
Number of awards authorized for issuance (in shares)	0		0
Expiration term of share-based compensation plan			10 years
Employee Stock Option | Long Term Incentive Plan 2006 [Member]
Acquired Indefinite-lived Intangible Assets [Line Items]
Number of awards authorized for issuance (in shares)	0		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

Stock-based Compensation, Equ38

Stock-based Compensation, Equity Grants, and Warrants - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017	Sep. 30, 2017
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total compensation expense	$ 171	$ 64	$ 928	$ 549
Unrecognized stock-based compensation expense	1,011		$ 1,011		$ 412
Weighted average share based compensation expense recognition period			56 months
Selling, General and Administrative Expenses | DLH Employees
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total compensation expense	67	56	$ 131	63
Unrecognized stock-based compensation expense	1,011		1,011		404
Selling, General and Administrative Expenses | Non-employee Directors
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Total compensation expense	104	$ 8	797	$ 486
Unrecognized stock-based compensation expense	$ 0		$ 0		$ 8
Employee Stock Option
Employee Service Share-based Compensation, Allocation of Recognized Period Costs [Line Items]
Number of awards authorized for issuance (in shares)	0		0
Expiration term of share-based compensation plan			10 years
Number of shares available for grant (in shares)	1,700,000		1,700,000

Stock-based Compensation, Equ39

Stock-based Compensation, Equity Grants, and Warrants - Stock Option Activity (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	6 Months Ended	12 Months Ended
	Mar. 31, 2018	Sep. 30, 2017
Number of Shares
Outstanding at the beginning of the period (in shares)	1,994
Granted (in shares)	217
Exercised (in shares)	(42)
Outstanding at the end of the period (in shares)	2,169	1,994
Weighted Average Exercise Price
Outstanding at the beginning of the period (in dollars per share)	$ 3.83
Granted (in dollars per share)	6.33
Exercised (in dollars per share)	1.69
Outstanding at the end of the period (in dollars per share)	$ 4.38	$ 3.83
Weighted Average Remaining Contractual Term
Weighted Average Remaining Contractual Term	6 years 22 days	6 years 4 months 24 days
Aggregate Intrinsic Value
Outstanding at the beginning of the period (in dollars)	$ 8,489
Outstanding at the end of the period (in dollars)	$ 7,093	$ 8,489

Stock-based Compensation, Equ40

Stock-based Compensation, Equity Grants, and Warrants - Stock Options Fair Value Assumptions (Details) - $ / shares	Dec. 01, 2017	Nov. 29, 2017	Mar. 31, 2018
11/29/2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Strike price (in dollars per share)		$ 6.46
Stock price (in dollars per share)		6.46
Threshold vesting price (in dollars per share)		12
Calculated fair value (in dollars per share)		$ 3.98
12/1/2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Strike price (in dollars per share)	$ 6.28
Stock price (in dollars per share)	6.28
Threshold vesting price (in dollars per share)	8
Calculated fair value (in dollars per share)	3.87
12/1/2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Strike price (in dollars per share)	6.28
Stock price (in dollars per share)	6.28
Threshold vesting price (in dollars per share)	10
Calculated fair value (in dollars per share)	$ 3.82
Employee Stock Option
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected volatility rate			50.00%
Expected term (years)			10 years
Stock price threshold term			10 days
Employee Stock Option | 11/29/2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)		10 years
Risk free interest rate		2.40%
Employee Stock Option | 12/1/2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	10 years
Risk free interest rate	2.40%
Employee Stock Option | 12/1/2017
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected term (years)	10 years
Risk free interest rate	2.40%

Stock-based Compensation, Equ41

Stock-based Compensation, Equity Grants, and Warrants - Stock Options Outstanding, Vested and Unvested (Details) - shares shares in Thousands	Mar. 31, 2018	Sep. 30, 2017	Dec. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Vested and exercisable (in shares)	1,335		1,327
Unvested (in shares)	834		667
Option outstanding (in shares)	2,169	1,994

Earnings (Loss) Per Share (Deta

Earnings (Loss) Per Share (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended		6 Months Ended
	Mar. 31, 2018	Mar. 31, 2017	Mar. 31, 2018	Mar. 31, 2017
Numerator [Abstract]
Net income (loss)	$ 1,316	$ 979	$ (1,535)	$ 1,303
Denominator [Abstract]
Denominator for basic net income (loss) per share - weighted-average outstanding shares (shares)	11,889	11,249	11,863	11,225
Effect of dilutive securities:
Stock options and restricted stock (shares)	997	1,496	0	1,488
Denominator for diluted net income (loss) per share - weighted-average outstanding shares (shares)	12,886	12,745	11,863	12,713
Net income (loss) per share - basic (dollars per share)	$ 0.11	$ 0.09	$ (0.13)	$ 0.12
Net income (loss) per share - diluted (in dollars per share)	$ 0.10	$ 0.08	$ (0.13)	$ 0.10

Commitment and Contingencies (D

Commitment and Contingencies (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Sep. 30, 2017
Operating Leases
Total operating leases	$ 3,300
Long Term Debt and Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
Total Obligations	18,181
Next 12 Months	4,688
2-3 Years	8,812
4-5 Years	4,306
More than 5 Years	375
Facility Leases [Member]
Operating Leases
Total operating leases	3,227
Next 12 Months	912
2-3 Years	1,280
4-5 Years	660
More than 5 Years	375
Equipment Leases [Member]
Operating Leases
Total operating leases	58
Next 12 Months	26
2-3 Years	32
4-5 Years	0
More than 5 Years	0
Notes Payable to Banks [Member]
Debt Obligations
Total bank debt obligation	14,896	$ 19,688
Next 12 Months	3,750
2-3 Years	7,500
4-5 Years	3,646
More than 5 Years	$ 0

Commitment and Contingencies -

Commitment and Contingencies - Narrative (Details) - USD ($) $ in Thousands	Mar. 31, 2018	Sep. 30, 2017
Commitments and Contingencies Disclosure [Abstract]
Accrued workers compensation insurance	$ 1,626	$ 1,598

Income Taxes (Details)

Income Taxes (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2018	Sep. 30, 2017
Income Tax Disclosure [Abstract]
Net discrete tax provision as result of 2017 Tax Act	$ 3,400
Deferred tax asset, net, long-term	$ 5,473	$ 9,639

Subsequent Events (Details)

Subsequent Events (Details) - USD ($)	May 10, 2018	Mar. 31, 2018
Line of Credit
Subsequent Event [Line Items]
Line of credit, maximum borrowing capacity		$ 10,000,000
Notes Payable to Banks [Member] | Line of Credit
Subsequent Event [Line Items]
Line of credit, maximum borrowing capacity		10,000,000
Notes Payable to Banks [Member] | Letter of Credit
Subsequent Event [Line Items]
Line of credit, maximum borrowing capacity		$ 1,000,000
Subsequent Event | Notes Payable to Banks [Member] | Line of Credit | Fifth Third Bank [Member]
Subsequent Event [Line Items]
Line of credit, maturity extension period	3 years
Subsequent Event | Notes Payable to Banks [Member] | Letter of Credit | Fifth Third Bank [Member]
Subsequent Event [Line Items]
Line of credit, maximum borrowing capacity	$ 2,000,000