DHI Group, Inc. — Q1 2021 Form 10-Q
Business and period: The filing covers the three months ended March 31, 2021, compared with the three months ended March 31, 2020. DHI operates specialized online recruitment marketplaces through Dice, ClearanceJobs, and eFinancialCareers; it reports one Tech-focused segment.
Financial performance
| Metric | Q1 2021 | Q1 2020 | Change |
|---|---|---|---|
| Revenue | $32.6 million | $36.6 million | Down 11% |
| Operating income (loss) | $0.5 million | $(5.3) million | Improved $5.7 million |
| Net income (loss) | $2.7 million | $(6.6) million | Improved $9.2 million |
| Diluted EPS | $0.05 | $(0.13) | Improved |
| Adjusted EBITDA (non-GAAP) | $7.3 million | $7.5 million | Down 3% |
| Adjusted EBITDA margin (non-GAAP) | 22% | 21% | Up 1 percentage point |
| Operating cash flow | $6.4 million | $2.9 million | Up $3.5 million |
| Cash used in investing activities | $(3.7) million | $(4.3) million | Lower spending |
Operating margin was 1.5% versus negative 14.3% a year earlier; the MD&A describes the current margin as approximately 2%. The improvement largely reflects the absence of the $7.2 million Dice trademark impairment recorded in Q1 2020. Net income also benefited from a $2.5 million unrealized gain on an equity investment that became publicly traded. Thus, the return to GAAP profitability does not reflect revenue growth: revenue declined, and Adjusted EBITDA was slightly lower.
Revenue by brand
- Dice: $19.1 million, down 15%, primarily due to lower year-over-year customer renewals amid COVID-19 impacts.
- ClearanceJobs: $7.6 million, up 11%, attributed to continued demand for cleared professionals and product enhancements.
- eFinancialCareers: $6.0 million, down 18%, reflecting pandemic-related effects, Brexit uncertainty, and political unrest in Hong Kong.
Dice had approximately 5,200 U.S. recruitment package customers at quarter-end versus 5,850 a year earlier. Average monthly revenue per U.S. package customer was $1,128 versus $1,153.
Balance sheet, debt, and liquidity
- Cash and cash equivalents were $7.3 million at March 31, 2021, versus $7.6 million at December 31, 2020. Foreign subsidiaries held approximately $3.5 million of cash.
- Gross revolving-credit borrowings were $20.0 million; reported long-term debt, net of financing costs, was $19.6 million. The company had $70.0 million of stated borrowing availability under its $90 million facility, subject to limitations.
- The credit facility matures in November 2023, and there are no scheduled principal payments before maturity. DHI reported compliance with financial covenants at quarter-end.
- Current liabilities were $69.0 million, including $51.8 million of deferred revenue. Deferred revenue plus unbilled contractual commitments produced backlog of $84.0 million, up $3.6 million year over year.
- Operating cash flow improved primarily because of customer billings and collections; deferred revenue increased during the quarter. Financing activities used $3.0 million, mainly for share repurchases.
Material changes, outlook, and risks
- Revenue fell 11%, with declines at Dice and eFinancialCareers partly offset by ClearanceJobs growth. Sales and marketing expense fell 17%, and general and administrative expense fell 12%; depreciation increased 26% as previously capitalized development costs entered service.
- DHI said COVID-19 had slowed recruiting and negatively affected revenue and operating cash flow. Management expected continuing near-term negative effects but, based on information then available, did not anticipate a significant long-term impact; it emphasized that the outlook was uncertain and rapidly changing.
- There was no specific financial guidance in the provided filing text. Management stated that cash, operating cash generation, and available borrowing capacity should be sufficient for anticipated needs through at least the next 12 months, while noting risks from weaker demand or collections, covenant issues, lender availability, and refinancing.
- Goodwill was $133.7 million and the Dice indefinite-lived trademark asset was $23.8 million. No impairment was recorded in Q1 2021, but future impairment remains possible if operating projections are missed or market conditions worsen. Management said current results and projections met or exceeded assumptions used in its 2020 impairment analyses.
- Other notable exposures include economic and recruiting cyclicality, competition and product execution, unhedged foreign-currency exposure, variable-rate debt and the transition away from LIBOR, and tax examinations. DHI reported no material pending legal proceedings and no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether Dice customer counts, renewal trends, and average customer revenue stabilize or improve, and whether ClearanceJobs growth continues.
- How much reported earnings depend on non-operating or nonrecurring items, particularly the $2.5 million unrealized investment gain, versus recurring operating performance.
- Whether backlog converts to revenue as expected and customer collections remain strong.
- Debt availability and covenant headroom under the credit agreement, including the facility’s November 2023 maturity and LIBOR transition terms.
- Whether COVID-19, market conditions, and business performance affect the carrying values of goodwill and the Dice trademark.
- Share-repurchase activity and its effect on cash, share count, and liquidity; the filing reported 589,899 shares repurchased in Q1 for approximately $1.5 million.