Stock-based Compensation and Equity Grants (Tables)

9 Months Ended

Jun. 30, 2023

Share-Based Payment Arrangement [Abstract]

Schedule of Stock-based Compensation Expense

Stock-based compensation expense, shown in the table below, is recorded in general and administrative expenses included in our consolidated statements of operations for the three and nine months ended June 30, 2023 and 2022 was as follows (in thousands):

	(in thousands)				(in thousands)
	Three Months Ended				Nine Months Ended
	June 30,				June 30,
	2023		2022		2023		2022
DLH employees (a)	$	489	$	481	$	1,481	$	1,466
Non-employee directors (b)	179		162		539		486
Total stock option expense	$	668	$	643	$	2,020	$	1,952

(a) Included in this amount are equity grants of restricted stock units ("RSU") 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 employees during prior fiscal years. The RSUs totaled 337,578 and 161,485 issued and outstanding at June 30, 2023 and 2022, respectively. During the nine months ended June 30, 2023, 197,174 RSUs were granted to Executive Officers. Of the RSUs granted, 141,892 have performance-based vesting criteria and the remaining 55,282 have service-based vesting criteria. Utilizing a volatility of 50% along with assumptions of a 3-year term and the performance vesting criteria results in an indicated range of value, the RSUs granted during nine months ended June 30, 2023, as follows using the Monte Carlo Method.

Unrecognized stock-based compensation expense is presented in the table below for the three months ended June 30, 2023 and 2022 as follows (in thousands):

	2023		2022
Unrecognized expense for DLH employees (a)	$	7,358	$	5,498
Unrecognized expense for non-employee directors	155		162
Total unrecognized expense	$	7,513	$	5,660

(a) On a weighted average basis, the unrecognized expense for the three months ended June 30, 2023 is expected to be recognized within the next 4.1 years.

Schedule of Stock Option Activity

The aggregate intrinsic value in the table below represents the total pretax intrinsic value (i.e., the difference between the Company’s closing stock price on the last trading day of the period and the exercise price, times the number of shares) that would have been received by the option holders had all option holders exercised their in the money options on those dates. This amount will change based on the fair market value of the Company’s stock.

				(in years)
				Weighted
		Weighted		Average	(in thousands)
	(in thousands)	Average		Remaining	Aggregate
	Number of	Exercise		Contractual	Intrinsic
	Shares	Price		Term	Value
Options outstanding, September 30, 2022	2,392	$	7.05	5.40	$	13,566
Granted (a)	400	11.66		—	—
Exercised (b)	(393)	3.42		—	—
Cancelled	(158)	9.07		—	—
Options outstanding, June 30, 2023	2,241	$	8.36	5.92	$	6,499

Ref (a): Utilizing a volatility of 50% along with assumptions of a 10-year term and the aforementioned 10-day stock price threshold results in an indicated range of value of the Options granted during three months ended March 31, 2023, as follows using the Monte Carlo Method.

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):

	June 30,	September 30,
	2023	2022
Vested and exercisable (a)	1,616	2,117
Unvested (b)	625	275
Options outstanding	2,241	2,392

(a) The weighted average exercise price of vested and exercisable shares was $6.45 and $5.86 at June 30, 2023 and September 30, 2022, respectively. Aggregate intrinsic value was approximately $6.5 million and $13.6 million at June 30, 2023 and September 30, 2022, respectively. The weighted average contractual term remaining was 4.6 years and 4.9 years at June 30, 2023 and September 30, 2022, respectively.

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

Summary of Performance Vesting Critera

				Volatility
				50%
				Calculated
Grant Date	Performance Vesting Base	Performance Vesting Criteria	(Years)	Fair Value
January 27, 2023	Revenue	Revenue increase at the end of the performance period as compared to the year ended September 30, 2022	3	$	3.51
January 27, 2023	Stock price	Stock price is at least $33.21 per share average for the 30 days prior to the end of the performance period	3	$	2.92
Notes:
Results based on 100,000 simulations

(b) Equity grants of RSUs were made in accordance with DLH compensation policy for non-employee directors and a total of 50,367 and 53,510 restricted stock units were issued and outstanding at June 30, 2023 and 2022, respectively. These grants have service-based vesting criteria and vest at the end of this fiscal year.

Schedule of Share-Based Payment Award, Stock Options, Valuation Assumptions

								Volatility
								50%
					Vesting		Expected
	Strike		Stock		Threshold		Term	Calculated
Grant Date	Price		Price		Price		(Years)	Fair Value
January 26, 2023	$	11.66	$	11.66	$	15.00	10	$	7.41
Notes:
Results based on 100,000 simulations