DLH Q2 Adjusted EBITDA $5.3M, Free Cash Flow $3.8M Despite 33.5% Revenue Drop
DLH's Q2 revenue dropped 33.5% to $59.3 million due to legacy program transitions, while adjusted EBITDA reached $5.3 million (9.0% margin) and free cash flow totaled $3.8 million. Debt fell to $132.7 million and DLH secured a two-year NIH clinical research support contract extension.
1. Q2 Financial Performance
DLH reported fiscal Q2 revenue of $59.3 million, a 33.5% decrease from the prior year, resulting in a net loss of $2.5 million. Adjusted EBITDA was $5.3 million, representing a 9.0% margin down from 10.5% in the year-earlier period.
2. Cash Flow and Debt Reduction
Operating and free cash flow for the quarter were both $3.8 million, down 73.8% year over year, as cost scaling initiatives were offset by lower revenues. The company reduced total debt to $132.7 million from $136.6 million at the end of Q1 and aims for further reductions by year-end.
3. Backlog Trends and Contract Extension
Backlog stood at $442.4 million, reflecting a 14.0% decline from the September fiscal year-end. DLH won a two-year sole-source extension to provide clinical research support services to NIH, enhancing its science and R&D services pipeline.
4. Management Commentary and Outlook
Management labeled fiscal 2026 a transition year, noting legacy contracts’ shift to small-business set-asides will complete in Q3. With a leaner cost structure and improving government demand, DLH is targeting digital modernization, cybersecurity and AI opportunities to drive profitable growth and accelerate cash generation.