DLH Holdings (DLHC) risk factors, FY2025 10-K

Risks Relating to Our Business and the Industry in which we Compete

1. 01We depend on contracts with the Federal government for virtually all of our revenue and our business could be seriously harmed if the Federal government decreased or ceased doing business with us52% rewritten
2. 02A significant portion of our revenue is concentrated in a small number of contracts, and we could be seriously harmed if we were unable to continue providing services under, or unsuccessful in our recompete efforts on, these contracts47% rewritten
3. 03The U.S. government may prefer veteran-owned, minority-owned, women-owned and small disadvantaged businesses; therefore, we may have fewer opportunities to bid for or could lose a portion of our existing work to small businesses
4. 04Loss of our contracting vehicles could impair our ability to win new business and perform under existing contracts55% rewritten
5. 05Future legislative or government budgetary and spending changes could negatively impact our business38% rewritten
6. 06VA programs, which accounted for approximately 33.8% and 35.3% of the Company’s revenue for the years ended September 30, 2025 and 2024, respectively, were exempt from the spending caps established under Federal government sequestration targets enacted in 201321% rewritten
7. 07Our business may suffer if we or our employees are unable to obtain and maintain the necessary security clearances or other qualifications required to perform services for our customers
8. 08Our business is regulated by complex federal procurement and contracting laws and regulations, and we are subject to periodic compliance reviews by governmental agencies
9. 09Federal government contracts may be terminated at will and may contain other provisions that may be unfavorable to us
10. 10We may not receive the full amounts authorized under the contracts included in our backlog, which could reduce our revenue in future periods below the levels anticipated
11. 11Restrictions on or other changes to the federal government’s use of service contracts may harm our operating results
12. 12Our business growth and profitable operations require that we develop and maintain strong relationships with other contractors with whom we partner or otherwise depend on
13. 13Our earnings and margins may vary based on the mix of our contracts and programs
14. 14Our employees, or those of our teaming partners, may engage in misconduct or other improper activities which could harm our business
15. 15If we are unable to attract qualified personnel, our business may be negatively affected
16. 16If our subcontractors do not perform their contractual obligations, our performance as a prime contractor and our ability to obtain future business could be materially and adversely impacted and our actual results could differ materially and adversely from those anticipated
17. 17The federal government’s appropriation process and other factors may delay the collection of our receivables, and our business may be adversely affected if we cannot collect our receivables in a timely manner
18. 18Our profitability could suffer if our cost-management strategies are unsuccessful, and we may not be able to improve our profitability
19. 19If we do not accurately anticipate the cost, risk and complexity of performing our work or if third parties upon whom we rely do not meet their commitments, then our contracts could have delivery inefficiencies and be less profitable than expected or unprofitable

Risks Relating to Our Information Technology Systems and Intellectual Property

1. 20We are highly dependent on the proper functioning of our information systems
2. 21Our systems and networks may be subject to cybersecurity breaches, data privacy failures, or other security incidents that could harm our reputation, expose us to liability, and adversely affect our businessNew
3. 22Failure to adequately protect, maintain, or enforce our rights in our intellectual property may adversely limit our competitive position

Risks Relating to Acquisitions

1. 23In connection with acquisitions, we may be required to take write-downs or write-offs, restructuring and impairment, or other charges that could negatively affect our business, assets, liabilities, prospects, outlook, financial condition, and results of operations
2. 24We may have difficulty identifying and executing other acquisitions on favorable terms and therefore may grow at slower than anticipated rates36% rewritten
3. 25We may have difficulty integrating the operations of companies we acquire, which could cause actual results to differ materially and adversely from those anticipated27% rewritten
4. 26We have a substantial amount of goodwill on our balance sheet. Future write-offs of goodwill may have the effect of decreasing our earnings or increasing our losses

Risks Relating to Our Outstanding Indebtedness

1. 27We have incurred debt in connection with acquisitions and we must make the scheduled principal and interest payments on the facility and maintain compliance with other debt covenants

Risks Relating to Our Corporate Structure and Capital Stock

1. 28Our stock price has been volatile and your investment in our common stock may suffer a decline in value
2. 29Since we have not paid dividends on our common stock, you cannot expect dividend income from an investment in our common stock
3. 30We may issue preferred stock with rights senior to our common stock, which may adversely impact the voting and other rights of the holders of our common stock
4. 31The exercise or vesting of our outstanding common stock options and restricted stock units may depress our stock price and dilute your ownership of the Company
5. 32Anti-takeover provisions in our Articles of Incorporation make a change in control of our Company more difficult
6. 33Our executive officers, directors and significant stockholders will be able to influence matters requiring stockholder approval

General Business Risks

1. 34We may experience fluctuations in our revenues and operating results from period to period
2. 35An increase in the prices of goods and services could raise the costs associated with providing our services, diminish our ability to compete for new contracts or task orders and/or reduce customer buying power
3. 36Our profits and revenues could suffer if we are involved in legal proceedings, investigations, and disputes
4. 37We are dependent upon certain of our management personnel and do not maintain "key personnel" life insurance on our executive officers52% rewritten
5. 38We may not be fully covered by the insurance we procure and our business could be adversely impacted if we were not able to renew all of our insurance plans
6. 39Our financial condition may be affected by increases in employee healthcare claims and insurance premiums, and workers' compensation claims and insurance rates
7. 40We may be subject to fines, penalties and other sanctions if we do not comply with laws governing our business
8. 41Changes to U.S. tax laws may adversely affect our financial condition or results of operations and create the risk that we may need to adjust our accounting for these changes78% rewritten
9. 42We are exposed to increased costs and risks associated with complying with increasing and new regulation of corporate governance and disclosure standards
10. 43Our results of operations could in the future be materially adversely impacted by global, macroeconomic events, such health epidemics, pandemics and other outbreaks, and the response to contain it