DHI Group, Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with Q1 2022 unless otherwise noted. DHI operates a single Tech-focused segment, including Dice and ClearanceJobs, serving technology and security-cleared recruiting markets.
Financial performance
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Revenue | $38.6 million | $34.3 million | +12% |
| Operating income / margin | $0.6 million / 1.5% | $0.6 million / 1.8% | Income down 9% |
| Net income | $0.5 million | $1.3 million | Down 65% |
| Diluted EPS | $0.01 | $0.03 | Down $0.02 |
| Adjusted EBITDA / margin (non-GAAP) | $8.1 million / 21% | $6.9 million / 20% | EBITDA up 16% |
| Operating cash flow | $11,000 | $9.2 million | Down $9.2 million |
| Capital expenditures | $4.8 million | $4.1 million | Up $0.7 million |
Dice revenue was $26.9 million, up 9%; ClearanceJobs revenue was $11.7 million, up 21%. Higher personnel, sales and marketing, product development and depreciation costs more than offset revenue growth at the operating-income level. Interest expense and other rose to $0.8 million from $0.2 million, primarily reflecting higher borrowings and interest rates. The company recorded a $0.5 million income tax benefit despite a $54,000 pretax loss; the reported effective tax rate was unusually high at 951.9%, reflecting tax benefits from vesting share-based awards.
Balance sheet and liquidity
- Cash was $5.4 million at March 31, 2023, versus $3.0 million at year-end 2022. Current assets were $34.2 million and current liabilities were $70.8 million; current liabilities include $58.1 million of deferred revenue.
- Long-term debt was $46.0 million, up from $30.0 million at December 31, 2022. The $100 million revolving facility matures in June 2027, with $54.0 million of stated availability, subject to borrowing limits and covenants. The effective rate on SOFR borrowings was 6.90%. DHI reported compliance with financial covenants.
- Management said cash, operating cash generation and available borrowing capacity should meet anticipated needs for at least the next 12 months. Operating cash flow was nearly zero this quarter, driven in part by timing of vendor payments, bonuses, billings and collections.
- Cash used for share repurchases was $3.5 million under the repurchase plan and $5.3 million for shares withheld for employee taxes. A new authorization allows up to $10 million of repurchases through February 2024; $8.2 million remained available at quarter-end.
Business trends, outlook and risks
- Dice had 6,171 recruitment-package customers, down 1% year over year, while average annual revenue per customer rose 11% to $15,672. ClearanceJobs customers rose 8% to 2,078, and average annual revenue per customer increased 11% to $20,520. Management attributed Dice customer softness to macroeconomic conditions and cited demand for cleared professionals and product enhancements at ClearanceJobs.
- Backlog was $124.2 million, up 17% year over year. Management attributed the increase to bookings growth at both brands, multi-year contracts and sales and marketing investment; it noted Q1 is generally the largest bookings quarter.
- Management expects 2023 capital expenditures of approximately $20 million to $22 million, primarily for product development and leasehold improvements. The filing provides no specific revenue or earnings guidance.
- Principal stated risks include recruiting-market cyclicality and economic slowdowns, competition, attracting and retaining marketplace users and customers, technology and cybersecurity risks, and debt, covenant and interest-rate exposure. A 1 percentage-point increase in rates on quarter-end variable-rate debt would have increased quarterly interest expense by approximately $0.1 million.
- Goodwill of $128.1 million and Dice trademarks of $23.8 million were unchanged, with no Q1 impairment recorded. Management cautioned that weaker market conditions or results below projections could lead to future impairment. No material pending legal proceedings were reported; management stated there were no material changes to previously disclosed risk factors.
Important facts for investors to verify
- Whether the near-zero operating cash flow reflects temporary working-capital timing or persists, particularly given planned capital expenditures.
- Whether revenue growth and backlog convert into recognized revenue while Dice customer counts and operating margins remain under pressure.
- How higher debt and variable interest rates affect earnings, cash requirements and covenant headroom.
- The assumptions supporting the carrying values of goodwill and the Dice brand, and any subsequent impairment indicators.
- Adjusted EBITDA is a non-GAAP measure; compare its reconciliation and exclusions with GAAP earnings and cash flow.