DHI Group, Inc. — Q1 2022 Form 10-Q
Reporting period: Three months ended March 31, 2022. DHI operates U.S. technology-focused career marketplaces through Dice and ClearanceJobs. The company has one reportable segment. Its eFinancialCareers business was deconsolidated in June 2021 and is presented as a discontinued operation for the 2021 comparison; DHI retained a 40% interest.
Financial performance
| Metric | Q1 2022 | Q1 2021 | Change / context |
|---|---|---|---|
| Revenue | $34.3 million | $26.7 million | Up 29%; Dice revenue rose 29% and ClearanceJobs rose 27%. |
| Operating income (loss) | $0.6 million | $(0.2) million | Operating margin improved to 1.8% from (0.7%). |
| Net income | $1.3 million | $2.7 million | Declined despite higher revenue; the prior-year period included a $2.5 million investment gain and $0.7 million from discontinued operations. |
| Diluted EPS | $0.03 | $0.05 | Continuing-operations diluted EPS was $0.03 versus $0.04. |
| Adjusted EBITDA (non-GAAP) | $6.9 million | $5.6 million | Adjusted EBITDA margin was 20% versus 21%. |
| Operating cash flow | $9.2 million | $6.4 million | Increase attributed primarily to stronger billings and collections. |
Cost of revenue was 11.9% of revenue, down from 13.9%. Sales and marketing expense rose 43% to $13.9 million, and general and administrative expense rose 26% to $7.8 million. Management attributed expense growth to increased headcount, marketing investment, higher stock-based compensation and increased operating activity.
Balance sheet, cash flow and capital allocation
- Cash was $5.0 million at March 31, 2022, up from $1.5 million at year-end 2021.
- Long-term debt, net of financing costs, was $32.8 million; borrowings under the revolving facility were $33.0 million. The $90 million facility had $57.0 million available, subject to limits. It matures in November 2023; the stated borrowing rate was 2.25%. The company reported compliance with financial covenants.
- Cash used in investing activities was $4.1 million, primarily for fixed assets and internal development. Management anticipated approximately $20 million of capital expenditures in 2022.
- Cash used in financing activities was $1.7 million, including $10.0 million of net debt proceeds and $11.7 million related to share repurchases and shares withheld for taxes. A new repurchase plan authorized up to $15 million through February 2023; $13.1 million remained available at quarter-end.
- Deferred revenue was $56.8 million and backlog was $106.0 million, up 50% year over year. Backlog includes deferred revenue and unbilled contractual commitments.
Changes, outlook and risks
- Recruitment package customers increased year over year: Dice to 6,249 (+20%) and ClearanceJobs to 1,928 (+10%). Average annual revenue per customer rose 4% for Dice and 12% for ClearanceJobs. Management cited renewals, new business, demand for cleared professionals and product releases.
- Management said available cash, operating cash generation and facility availability should meet anticipated requirements for at least the next 12 months. No specific revenue or earnings guidance was provided.
- Management identified recruiting-market cyclicality, competition, customer demand and collections, product execution, COVID-19 uncertainty, data privacy regulation, and borrowing or refinancing availability as risks. The floating-rate debt is exposed to rate changes; a 1 percentage-point increase was estimated to add about $0.2 million of 2022 interest expense on current borrowings. The company was monitoring the planned LIBOR transition.
- Goodwill of $128.1 million and Dice indefinite-lived intangible assets of $23.8 million were unchanged, with no impairment recorded. Management noted that weaker market conditions or lower projected cash flows could lead to future impairment.
- The effective tax rate was (142)% in Q1 2022, reflecting a $0.8 million tax benefit from vesting or settlement of share-based awards; the rate is not a straightforward indicator of ongoing tax expense. The company also reported approximately $0.9 million of unrecognized tax benefits.
- Management reported no material changes to previously disclosed risk factors, no material pending legal proceedings, and effective disclosure controls. It noted ordinary-course claims and tax examinations, while stating their resolution was not expected to materially affect the company.
Important facts for investors to verify
- Whether revenue, customer growth and backlog convert into recognized revenue and sustained operating-margin improvement.
- Whether elevated sales, marketing, development spending and planned capital expenditures generate returns while preserving cash flow.
- Debt availability, covenant headroom, floating-rate exposure and refinancing plans ahead of the November 2023 maturity.
- The sustainability of earnings excluding the prior-year investment gain, discontinued-operation results and the current-period share-based compensation tax benefit.
- Impairment assumptions for goodwill and the Dice brand, and the value and performance of DHI’s retained eFC investment.