0000785557-23-000026 | 10-Q | XBRL Viewer

Commitment and Contingencies (Tables)

3 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

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 Policies (Details) - USD ($)	3 Months Ended
Significant Accounting Policies (Details) - USD ($)	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

Credit Facilities

3 Months Ended

Dec. 31, 2022

Debt Disclosure [Abstract]

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, which 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.

The revolving line of credit has a maturity date of December 8, 2027 and is subject to loan covenants as described above. The Company is fully compliant with those covenants.

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

Leases

3 Months Ended

Dec. 31, 2022

Leases [Abstract]

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	$	—

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.

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

Significant Accounting Policies	3 Months Ended
Significant Accounting Policies	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 (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

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	100.00%
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

Revenue Recognition

3 Months Ended

Dec. 31, 2022

Revenue from Contract with Customer [Abstract]

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

- Definition

The entire disclosure of revenue from contract with customer to transfer good or service and to transfer nonfinancial asset. Includes, but is not limited to, disaggregation of revenue, credit loss recognized from contract with customer, judgment and change in judgment related to contract with customer, and asset recognized from cost incurred to obtain or fulfill contract with customer. Excludes insurance and lease contracts.

+ References

Reference 1: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-URI https://asc.fasb.org/topic&trid=49130388

Reference 2: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 10
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130551-203045

Reference 3: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 13
-Subparagraph (b)(2)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130556-203045

Reference 4: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (b)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 5: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 9
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130550-203045

Reference 6: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (e)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 7: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (a)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 8: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (d)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

Reference 9: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 15
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130558-203045

Reference 10: http://www.xbrl.org/2003/role/disclosureRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 606
-SubTopic 10
-Section 50
-Paragraph 12
-Subparagraph (c)
-URI https://asc.fasb.org/extlink&oid=126920106&loc=SL49130554-203045

+ Details

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

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%

*Secured Overnight Financing Rate ("SOFR") as of December 31, 2022 was 4.23%.

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

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

Leases - Narrative (Details)	3 Months Ended
Leases - Narrative (Details)	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%

Supporting Financial Information

3 Months Ended

Dec. 31, 2022

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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.

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

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 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%

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

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 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.

As of December 31, 2022, the estimated amortization expense per fiscal year as follows (in thousands):

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

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

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

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

- Definition

Amount, excluding unamortized premium (discount) and debt issuance cost, of long-term debt. Excludes lease obligation.

+ References + Details

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

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

Related Party Transactions	3 Months Ended
Related Party Transactions	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.

Credit Facilities - Narrative (Details)	3 Months Ended
Credit Facilities - Narrative (Details)	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	2.00
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	75.00%
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	50.00%
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	0.00%
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 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

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

- Definition

The amount of net income (loss) for the period per each share of common stock or unit outstanding during the reporting period.

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- Definition

The amount of net income (loss) for the period available to each share of common stock or common unit outstanding during the reporting period and to each share or unit that would have been outstanding assuming the issuance of common shares or units for all dilutive potential common shares or units outstanding during the reporting period.

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The consolidated profit or loss for the period, net of income taxes, including the portion attributable to the noncontrolling interest.

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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

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

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 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

Leases - Lease Costs (Details) - USD ($) $ in Thousands	3 Months Ended
Leases - Lease Costs (Details) - USD ($) $ in Thousands	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 - 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

New Accounting Pronouncements	3 Months Ended
New Accounting Pronouncements	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.

- Definition

The entire disclosure for change in accounting principle. Includes, but is not limited to, nature, reason, and method of adopting amendment to accounting standards or other change in accounting principle.

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+ Details

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

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

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

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

Cover - shares	3 Months Ended
Cover - shares	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

Earnings Per Share

3 Months Ended

Dec. 31, 2022

Earnings Per Share [Abstract]

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

Stock-based Compensation and Equity Grants (Tables)

3 Months Ended

Dec. 31, 2022

Share-Based Payment Arrangement [Abstract]

Schedule of Stock-based Compensation Expense





	2022		2021
DLH employees (a)	$	372	$	338
Non-employee directors (b)	180		162
Total stock option expense	$	552	$	500

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


				(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

(b) Certain awards vest upon satisfaction of certain performance criteria.

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

Basis of Presentation	3 Months Ended
Basis of Presentation	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.

Significant Accounting Policies (Policies)	3 Months Ended
Significant Accounting Policies (Policies)	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. 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.
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 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.

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

Commitment and Contingencies

3 Months Ended

Dec. 31, 2022

Commitments and Contingencies Disclosure [Abstract]

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.

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)

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

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

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