DHI Group, Inc. (DHX) research, news, and more from GeoInvesting

Company description

Mon, 25 Jun 2018 14:24:36 GMT

DHI Group, Inc. provides data, insights and employment connections through specialized services for professional communities, including technology and security clearance, financial services and energy. The Company operates through its Tech-focused segment. The Company's Tech-focused segment includes Dice, Dice Europe, ClearanceJobs, Brightmatter and eFinancialCareers. The Company sells recruitment packages, which allow customers to post jobs and source candidates through its resume databases and, in case of Dice, Dice Europe and eFinancialCareers, to utilize its Open Web search service. The Company's Website serves as online marketplaces where employers and recruiters find and recruit employees. The Company's Website offers job postings, news and content, career development and recruiting services. Its brands include Dice, Dice Europe, ClearanceJobs and eFinancialCareers.

Research

Mon, 10 Feb 2020 16:10:08 GMT

Dhi Group, Inc. (NYSE:DHX) (Job Recruitment Platforms) - Removed stock from our Favorite Stock portfolio and lightened up our position. DHX held a place in the Favorite portfolio for 10 months, beginning on April 12, 2019 when it was added to the model portfolio at a price of $3.07. Although our final closing return on the stock is nearly flat at -2.93%, the stock was able to maintain stability in May through September of 2019, briefly touching $4.44, or a 44% peak return.

Having said this, we added the stock to our Mock Takeover Candidate Portfolio as it remains attractive on several valuation metrics. See our expanded note in the Earnings Coverage section below.

Research

Mon, 03 Feb 2020 18:31:42 GMT

Dhi Group, Inc. (NYSE:DHX) (Job Recruitment Platforms)

Regarding DHX, nothing has changed from our Q3 update. Until the company can prove It can grow its revenue, we don't think the stock will command a premium valuation multiple. With a P/E of around 12, we believe the company may be selling at the right price, given the lack of growth. Admittedly, we thought management's turn around plan would have already resulted in better revenue growth.

Research

Fri, 08 Nov 2019 15:58:20 GMT

DHI Group, Inc. (NYSE:DHX) ($3.82; $214.5M market cap), a company that provides data, insights, and connections services to professional communities in the United States and internationally, announced Q3 2109 results:

Sales of $37.2 million vs $38.9 in the prior year and in-line with analyst estimates of $37.0 million
EPS of $0.08 vs $0.02 in the prior year and ahead of analyst estimates of $0.06

“We made continued progress in the third quarter, further strengthening our product offering and go-to-market strategy, both of which will be key drivers of our future growth. Our focus on accelerating product development resulted in hiring additional engineering talent to improve the rate at which we can launch new features, specifically for our largest platform, Dice. We also added new commercial sales people - and with our new CRO, Arie Kanofsky, now on board - we will be expanding our commercial sales force significantly over the next few quarters. We believe these investments will further anchor DHI as an industry leader for matching technologists with employers and position the Company to generate sustained long-term revenue growth in the future."

Outlook:

“DHI expects ongoing tech-focused revenue for the fourth quarter to be sequentially flat with the third quarter and anticipates that Dice revenue will turn to positive year-over-year growth in 2020. The Company continues to expect Adjusted EBITDA margin2 for the full 2019 fiscal year to be approximately 23%, as it continues to increase its product and engineering capacity, as well as invest in more sales resources to accelerate growth. The Company is not providing guidance for net income because it cannot reasonably assess the impact of stock-based compensation and income tax expense”

Should be noted that previous guidance was for Dice growth to turn positive in Q4 2019; the company now expects that will be a 2020 event.

On April 12, 2019 we highlighted some of the key takeaways from our interview with DHX investor relations and a live virtual presentation, which led us to add the stock to our Favorite Stock Portfolio as new management continues to execute its turnaround plan. The next phase of this plan is driving revenue growth, which is what we believe is necessary for valuation multiples to expand.

Research

Fri, 02 Aug 2019 14:21:00 GMT

Sales of $37.4 million vs $41.5 million in the prior year and slightly below analyst estimates of $38.0 million.
Per the earnings conference call, the company issued adjusted EPS of $0.07 vs $0.02 in the prior year and in line with analyst EPS estimates of $0.07. (GAAP EPS for the quarter was $0.06).
Geo-Calculated non-GAAP EPS of $0.12 vs $0.08 in the prior year
Long term debt decreased to $9.3 million from $16.3 million in Q1 2019

We are pleased to report our second consecutive quarter of year-over-year growth in our ongoing tech-focused1 revenues, reflecting the solid progress we continue to make on our product, sales and marketing efforts. We further strengthened our product offering, adopting several industry leading product features from ClearanceJobs into our Dice and eFinancialCareers brands, and continued to build out our commercial sales team, which was launched late last year. While we still have lots of work ahead, we expect these efforts will further position DHI to become the industry leader for matching tech professionals with employers."

The Company expects its ongoing tech-focused business will continue to achieve modest year over year revenue growth in the second half of the year. The Company further anticipates that Dice will turn to positive year over year revenue growth in the fourth quarter of 2019.”

The conference call offered a bit more color on the company’s outlook for future growth:

“Our market research shows that the online recruiting industry is projected to grow over 7% annually from 2018 to 2023, and that the tech professional subset is actually forecast to grow faster at a rate of approximately 12% annually. So we feel that increasing our percentage of revenue from new customer acquisition is a very achievable goal. We are confident that with our strengthened product platform, we can substantially increase our revenue growth rate and grow at least with the market. It won't happen overnight, but we believe today we are laying the foundation to achieve this growth.”

New management has yet to prove that it can drive revenue growth. However, at an annualized EV/S of 1.5 and P/E of 9.4, we continue to believe that our long position in DHX offers a favorable long-term risk/reward tradeoff. We also believe that DHX could become an attractive acquisition target, as this has been the case for other players in the space. In fact, we are somewhat surprised no bid for the company has yet occurred..

Research

Tue, 07 May 2019 16:19:43 GMT

DHI Group, Inc. (NYSE:DHX) ($3.80; $209.2M market cap), a company that provides data, insights, and connections services to professional communities in the United States and internationally, saw shares hit new highs of $3.82 in yesterday’s trading session days after a muted reaction to its Q1 2019 report. In a prior note, we highlighted some information arbitrage in the company’s conference call, which it seems the market has finally caught onto. On April 12, 2019 we highlighted some of the key takeaways from our interview with DHX investor relations which led us to add the stock to our Favorite Stock Portfolio as new management continues to execute its turnaround plan.

Research

Fri, 03 May 2019 16:58:16 GMT

DHI Group, Inc. (NYSE:DHX) ($3.12; $171.2M market cap), a company that provides data, insights, and connections services to professional communities in the United States and internationally reported Q1 2019 results:

Sales of $37.1 million vs $43.0 million in the prior year and in-line with analyst estimates of $37.1 million
Non-GAAP EPS of $0.07 vs $0.06 in the prior year and slightly ahead of analyst estimates of $0.06 (the company paid a 54% tax rate this quarter vs 43% last year; management expects normalize tax rate of 25% for the balance of the year)

The company didn't provide Non-GAAP EPS in its release. Furthermore, headlines on Google mention that the company missed EPS estimates. However, we noticed that there were some non-cash items and non operating costs broken out In the companies presentation of adjusted EBITDA calculation. Some of these costs should be added back to gaap earnings per share in order to calculate a non-gaap or adjusted earnings per share figure. The conference call commentary confirms this.

We speculate that long investors that just took a cursory glance at the press release may sell the stock. We would see selling pressure as a buying opportunity for us.

Comments from press release:

"Our solid quarterly results, which included revenue growth from our ongoing tech-focused business for the first time in several years, reflect the continued positive momentum we are generating against our tech-focused strategy and the hard work of our entire team. We continued to deliver solid adjusted EBITDA margins while also investing in sales, marketing and innovation."

Recent Developments

“In April 2019, the Board of Directors authorized the purchase of up to an additional $7 million of the Company's common stock through May 2020, renewing the Company's prior stock repurchase program. Under the plan, management has discretion in determining the conditions under which shares may be purchased from time to time.”

Business Outlook

“The Company believes that its ongoing tech-focused business will continue to achieve modest improvements in revenue growth rate as the year progresses. The Company further anticipates that Dice will turn to positive year over year revenue growth in the second half of 2019. The Company expects to make further progress on rationalizing its expenses, while at the same time investing prudently for growth, which should enable the Company to maintain its current level of Adjusted EBITDA margin2 for the year. The Company is unable to provide guidance for net income, because it cannot reasonably assess the impact of stock-based compensation and income tax expense.”

Conference call comments:

We saw growth in Asia Pacific, where we continue to see strong demand by the Tier 1 banks and growing penetration of the Tier 2 banks, which represent a substantial pool of potential clients.

This growth was offset by some macro headwinds we're seeing in Europe and some competitive challenges in North America. We're currently testing pay-per-view in these markets and looking to progress further down our innovation roadmap to help address these challenges.

Overall, we believe we've reached the turning point and are at the beginning of sustained long-term revenue growth. We expect that our tech-focused businesses will achieve modest year-over-year revenue growth in the first half of 2019 and continue to improve as the year progresses.

On April 12, 2019 we highlighted some of the key takeaways from our interview with DHX investor relations which led us to add the stock to our Favorite Stock Portfolio as new management continues to execute its turnaround plan.

Research

Fri, 12 Apr 2019 18:28:50 GMT

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.

Research

Tue, 09 Apr 2019 14:59:17 GMT

**Call To Action Added to Our Long Position In DHX

Yesterday we added to our long position in DHI Group, Inc. (NYSE:DHX)($2.85; $156.3M market cap), a company that provides data, insights, and connections services to professional communities in the United States and internationally. We continue to be impressed with what we are learning about the company in our due diligence process, and plan to interview the company.

Research

Tue, 19 Mar 2019 14:20:15 GMT

**Priority Interview

We will be looking to arrange an interview with DHI Group, Inc. (NYSE:DHX)($2.43; $129.2M market cap), a company that provides data, insights, and connections services to professional communities in the United States and internationally.

On June 4, 2018, we took a speculative position and released our reasons for tracking DHX based on an activist 13D filing. The initial 13D from TCS Capital expressed interest in acquiring all DHX shares. In early February, TCS and DHX entered into a standstill agreement in which TCS agreed to drop its plans to pursue the acquisition.

Yesterday, DHX presented at the 31st Annual ROTH Conference. A replay of the presentation can be found here. We believe the Company may have reached an inflection point in its growth trajectory. We look forward to speaking with management to learn more about its growth plans and operating leverage.

Research

Thu, 01 Nov 2018 17:32:55 GMT

DHI Group, Inc. (NYSE:DHX) ($1.67; $89.7M market cap), a leading online career resource and talent acquisition platform providing data, insights, and connections services to professional communities in the United States and internationally, announced Q3 2018 results:

Sales of $38.9 million vs $52.4 million in the prior year (company divested its healthcare operations) Tech focused revenue was $38.0 million vs $38.9 million
EPS of $0.02 vs $0.02 in the prior year

"With the divestitures behind us, we have now transitioned to a simple and more scalable company with three related tech-focused brands," said Luc Gregoire, Chief Financial Officer of the Company. "Our results were in line with our expectation for revenues and slightly better for our Adjusted EBITDA margin as we made progress on rationalizing our expense base. Additionally, trends are improving in several key aspects of our business. We believe that our focused execution will continue to drive progressive improvement, which in turn positions our business for revenue growth and increased profitability in 2019.

Looking ahead, the Company believes that its revenues and margins will show continued positive progression. In the 2018 fourth quarter, the Company expects that its revenues will be comparable to the 2017 fourth quarter, excluding Dice Europe, as Dice U.S. continues to narrow its rate of revenue decline. The Company anticipates that as its customer metrics continue to improve, its revenues will show year-over-year growth in early 2019, while its Adjusted EBITDA margin will show progressive improvement in the upcoming quarters. The Company is unable to provide guidance for net income and operating cash flows because we cannot reasonably assess the impact of stock-based compensation and income tax expense.”

We entered our DHX position on the heels of a 13D filing which showed an activist investor’s interest to acquire the Company. You can see our original research note here. We will also look to interview DHX as it seems it could possibly turn into a fundamental growth play.

Research

Thu, 23 Aug 2018 15:41:30 GMT

DHI Group, Inc. (NYSE:DHX)($2.00; $107.4M market cap) provides data, insights, and connections services to professional communities in the United States and internationally. We took a speculative position in DHX on June 4, 2018 based on an activist 13D filing. The 13D filing showed an activist investor’s interest to acquire the Company. You can see our original research note here.

Today, the activist investor (TCS Capital) filed a 13D/A expressing its disappointment with the existing management team and basically posing an offer to buy company outright. TCS highlighted:

“...sharp declines in the Issuer’s stock price, revenues and EBITDA, low stock ownership levels among the Issuer’s non-executive directors, concerns regarding the Issuer’s growth strategy as communicated by the Issuer’s new CEO, and the Issuer’s apparent unwillingness to return significant capital to shareholders.

The Reporting Persons stated that in light of these developments and the Board’s refusal to seriously consider an earlier acquisition proposal made by the Reporting Persons to the Issuer in private, the Reporting Persons were publicly disclosing, for the benefit of their fellow shareholders, that the Reporting Persons are prepared to buy the Issuer for $2.50 per share in cash. This purchase price represents approximately 5x 2018 estimated EBITDA and a 25% premium to the current trading price."

As we stated in our prior note, the average EV/EBITDA for the recruitment sector is about 10x, so the 5x offer is a major discount, but expected, given management’s poor execution.

Research

Thu, 02 Aug 2018 14:39:01 GMT

DHI Group, Inc. (NYSE:DHX)($2.15; $111.1M market cap) , a leading online career resource and talent acquisition platform, provides data, insights, and connections services to professional communities in the United States and internationally. We engaged a speculative position in DHX on June 4, 2018 based on an activist 13D filing. This was not a fundamental play for us, however, today DHX announced its Q2 2018 results:

Sales of $41.6 million vs $52.4 million in the prior year (divested a business segment)
Loss of $0.05 vs EPS of $0.04

"I have completed my 100-day review and I am genuinely excited about the prospects for our business," said Art Zeile, President and Chief Executive Officer of DHI Group, Inc. "What I have learned over the last three months has confirmed that our strategy for growth is the right one. Although competitive pressures are high, market conditions support a business model based on a specialized offering for technology professionals, which plays to our strengths. We are moving aggressively to streamline our business in order to capitalize on this opportunity. We are also carefully managing our profitability and have a strong balance sheet. We are confident that the combination of these factors will enable DHI to deliver superior value to its shareholders over the long-term."

“The Company believes that the high demand for technology professionals and current competitive dynamics will continue. The Company expects a gradual abatement in the rate of revenue decline for Dice2 if current revenue renewal rates are maintained, and slightly slower top-line growth for ClearanceJobs due to higher year-over-year comparatives and the extremely tight labor market for cleared professionals. eFinancialCareers revenue trends are expected to continue for the near term. Expense management will remain an important focus, as will maintaining a 20% Adjusted EBITDA margin for the 2018 full year.”

The 13D filing on which we made our original decision showed an activist investor’s interest to acquire the Company. You can see our original research note here.

Reasons For Tracking

Mon, 04 Jun 2018 12:53:21 GMT

DHI Group, Inc. (NYSE:DHX)($3.10; $160.2M market cap) provides data, insights, and connections services to professional communities in the United States and internationally. The company is a leading online career resource and talent acquisition platform. On Friday, we issued the following premium tweet:

Investors should note that we have not seen the 13D filing covered on Twitter, so it is likely that news is not widely known. On May 25, 2018, TCS Capital Management filed a 13D disclosing a 9.7% state in DHX. As with all 13D filings, investors should pay special attention to the “purpose of transaction” section. In this case, TCS stated:

“The Reporting Persons have communicated to the Chairman of the Board of Directors of the Issuer (the “Board”) their willingness to acquire the Issuer in cash or alternatively, to acquire a significant position in the Issuer through a tender offer or open market transactions, and with an attendant agreement for significant Board representation.”

The filing also shows the recent transaction that TCS had executed. Below is a snapshot from the filing showing that TCS purchased shares in the open market as well as exercised $2.50 put options to acquire their current stake in DHX.

With TCS Capital purchasing shares at open market prices up to $2.00, one would think that this price is the current floor for the stock. Shares began to gain momentum on Friday, reaching new highs of $3.25 on the session.

TCS Capital is run by Eric Semler - here is a brief look at his bio, courtesy of Bloomberg:

Mr. H. E. Semler is Independent Director at Geeknet, Inc., Managing Member at TCS Capital Management LLC, Managing Member at TCS Capital GP LLC and President & Portfolio Manager at Semler Fund Ltd.

He is on the Board of Directors at Angie's List, Inc., Geeknet, Inc., Classic Media LLC, DealTime Ltd, New York Public Radio, Personal, Inc. (United States), Shopping.com, Inc. and WNET/Channel 13.

He is also Chief Executive Officer of TCS Capital Management.

He received his undergraduate degree from Dartmouth College, a graduate degree from Harvard Law School and an MBA from Harvard University.

As we look at the most recent 13F, it seems the fund prior to its DHX stake had only two other investments, in ANGI and CETV. In July 2015 TCS filed a 13D in ANGI with the following purpose of transaction:

The Reporting Persons believe that the Issuer’s Common Stock at current prices is an attractive investment opportunity. The Reporting Persons also believe that the Issuer may have multiple options to increase its market value. The Reporting Persons intend to have communications from time to time with one or more officers and members of the Board of the Issuer regarding various options to maximize shareholder value, including discussions regarding the operations and strategic direction of the Issuer, consideration of a potential sale of the Issuer, strategic business partnerships and combinations and the pending selection of the Issuer’s next Chief Executive Officer. The Reporting Persons may have discussions with certain other shareholders of the Issuer regarding such considerations.

TCS added to its stake several times becoming a near 10% owner in ANGI. In March 2016 ANGI brought Eric Semler on to the Board of Directors. Here is an excerpt from the release:

“We are delighted to welcome well respected and accomplished individuals to the Angie’s List Board, including veterans of the consumer technology and media industry and a large shareholder who brings deep expertise investing in the digital media and e-commerce space,” said Angie’s List Chairman John Chuang. “George has always had a passion for the intersection of content, digital transformation and consumer experience, set against a backdrop of changing business models. Equally complementary to Angie’s List, Tom brings an outstanding record of catalyzing growth with consumer businesses built on technology-based platforms. Eric has an excellent investing track record in the digital space and we look forward to his input as we work to enhance shareholder value at Angie's List. We are confident these new directors will be valuable contributors to the Company.”

ANGI shares have performed well over the last several years:

For CETV, the first 13D we see is from November 2015. The purpose of transaction section stated the following:

The Reporting Persons purchased the Shares based on the Reporting Persons’ belief that the Shares, when purchased, were undervalued and represented an attractive investment opportunity. Depending upon overall market conditions, other investment opportunities available to the Reporting Persons, and the availability of Shares at prices that would make the purchase or sale of Shares desirable, the Reporting Persons may endeavor to increase or decrease their position in the Issuer through, among other things, the purchase or sale of Shares on the open market or in private transactions or otherwise, on such terms and at such times as the Reporting Persons may deem advisable.

On November 18, 2015, the Reporting Persons delivered a letter to the Issuer’s Chairman and Board of Directors (the “Board”) urging the Board to hire a financial advisor to explore a sale of the Issuer. In the letter, the Reporting Persons expressed their concern with the poor performance of the Issuer’s stock price, which the Reporting Persons believe is directly tied to Time Warner Inc.’s dominant position as both the largest debt and equity holder of the Issuer. The Reporting Persons further expressed their belief in the letter that the most effective strategy for addressing this issue is for the Board to pursue a sale of the Issuer. A copy of the letter can be seen here.

The letter shows that TCS had first invested in CETV as early as 2004. A look at a long term chart shows the stock had early success only to lose all it gains and slowly trend back to historic lows.

We are still currently digesting some other past investments that TCS has made to gain more clarity on the fund’s track record.

Regarding DHX, the financials have been unimpressive over the last several years as the company worked through its previously announced efforts to divest its non-tech businesses in May 2017, which recently concluded with the recent sale of its hospitality business, Hcareers.

The majority of the company's revenues comes from Dice, which provides recruitment services in the technology and engineering sectors, and revenues generated from Dice have been declining. Per the management’s discussion and analysis in its 10-K and 10-Q, the major reasons for the revenue decline are industry competition, declines in recruitment package customer counts in the U.S., challenges in developing and introducing new products and product enhancements to the market.

Below is a look at the historic revenue trend:

The company recently hired a new CEO in April 2018, Art Zeile. Mr. Zeile believes the company is in good position to capitalize on the growing market needs. Quotes from the Q1 2018 earnings release:

"I've joined the Company with the goal to be a catalyst for change and, while still early days, continue to be excited by the tremendous market potential at DHI," said Art Zeile, President and Chief Executive Officer of DHI Group, Inc. "Technology continues to be a high growth market with significant unmet needs, which DHI is poised to capitalize upon. We're building products to help tech professionals grow their careers and we're doing a lot of things to solve the recruiting challenges employers face."

The company also recently announced a $7 million stock repurchase program. With new management in place, the completion of divestitures behind them, and a recently announced stock repurchase program, DHX is looking somewhat compelling without the activist investor angle.

Valuation:

Currently the company is trading at an EV/S of 0.9 and EV/Adj.EBITDA of 4.5. The low valuation is reflective of the company’s declining revenues and adjusted EBITDA. The average EV/EBITDA for the recruitment sector is about 10. If we apply this multiple to DHX, it would give us a target price of about $7.5 a share, representing more than 100% upside to the stock’s current levels.

We have a established a small speculative position in DHX.