Dhi Group, Inc. (NYSE:DHX)

DHI Group, Inc. (NYSE:DHX) ($3.07; $168.4M market cap), a company that provides data, insights, and connections services to professional communities in the United States and internationally. We had a chance to speak with the Company’s investor relations representative as management is still in a quiet period. Some of the key takeaways from our call were:

• Optimistic that they can continue to rapidly pay down their debt and be debt free by mid year. As of December 31, 2018, the company’s long term debt stood at about $17 million, down from $41 million at the end of 2017. The debt elimination has been something the Company has been working on for some time now. For example, in 2008, the company had $121 million in debt. The reduction in debt has been helped along through the sale of non-core assets.

• Sees margin improvements as the year moves along. The company's current adjusted EBITDA margins stand at 22%. The company believes that significant improvements can be made from this level. Small sales increases can lead to large increases in income.

• Believes Dice, its tech professionals marketplace,  is best in class and sees year over year growth returning in the second half of 2019. Dice accounts for over 60% of annual revenues.

• Overall, the new CEO who joined the company in April 2018 has been implementing strategies to shed assets outside the new core focus of the company which is now serving the technology recruitment area of the recruitment industry.

• So far, we feel pretty good that the company has significant technology and competitive advantages. However, the IR firm is scheduling an interview with management after the company reports its Q1 earnings. The CEO will also be running us through a demo of how their recruitment platform works. The stock is selling at a EV/Sales of 1.0, which we feel is too low for a company that may have a leading technology and a significant amount of recurring revenue. If  the company can ramp up revenue growth, we believe there could be a significant expansion of its EV to sales multiple. We are working on a “Reasons for Tracking” and will provide more updates as they become available.

Even though we have not interviewed management yet, we are now adding DHX to our Favorite Stock portfolio and removing it from our Speculative/Special Situation screen.