Q1 '23 Earnings Preview
DHI Group, Inc. (DHX) reports Q1 ’23 results next Wednesday, May 10. We expect results at least in line with our estimates, which are mixed relative to consensus, and we would not be surprised to see results above Street expectations. Our confidence stems from DHI Group’s high levels of recurring revenue, management’s prior commentary indicating renewal rates were strong during the key months of December and January, and the discretionary nature of investments in sales and marketing, which may provide for greater operating leverage than assumed in our model. Although we expect strength in the headline revenue and adjusted EBITDA numbers, the uncertain macroeconomic environment has resulted in softening labor market conditions since the latter half of FY ’22, a trend which has persisted thus far in FY ‘23. We therefore project another quarter of muted bookings growth. That said, we believe bookings growth could reaccelerate rather quickly as DHI Group’s customers and prospects firm up hiring plans, and we expect management to reaffirm its prior guidance for the year. Our price target remains $9.50 based on a FY ’23 EV/Sales multiple of 3x.
Exhibit I: Our Estimates Versus Consensus
Sources: K. Liu & Company LLC; FactSet Estimates
Our Q1 estimates include revenues of $38.1 million (+11% Y/Y), comprised of $26.7 million (+8% Y/Y) from Dice and $11.4 million (+18% Y/Y) from ClearanceJobs. and adjusted EBITDA of $6.4 million (17% margin). The consensus estimates call for revenue and adjusted EBITDA of $37.5 million and $7.0 million, respectively. Turning to bookings, we project growth of 4% Y/Y, reflecting Dice and ClearanceJobs bookings of $36.8 million (flat Y/Y) and $16.0 million (+16% Y/Y), respectively.
Although data from the U.S. Bureau of Labor Statistics reflects an accelerating rate of decline in the number of job openings over the course of Q1 ’23, the number of employer job postings for tech positions actually increased by 76,546 from February to March according to CompTIA. In other words, demand for technology workers remains stronger than reflected in the broader labor market data, which should be conducive to renewed bookings growth for Dice moving forward. With this in mind, we remain comfortable with our current estimates, and we expect management’s prior FY ’23 guidance for low-double digit revenue growth throughout the year along with an adjusted EBITDA margin of approximately 20% to be reaffirmed.
Exhibit II: U.S. Job Openings in Thousands
Source: U.S. Bureau of Labor Statistics Job Openings and Labor Turnover Survey
Exhibit III: U.S. Quits in Thousands
Source: U.S. Bureau of Labor Statistics Job Openings and Labor Turnover Survey
Our report with model and disclosures is available here.
Disclosure(s):
K. Liu & Company LLC (“the firm”) receives or intends to seek compensation from the companies covered in its research reports. The firm has received compensation from DHI Group, Inc. (DHX) in the past 12 months for “Sponsored Research.”
Sponsored Research produced by the firm is paid for by the subject company in the form of an initial retainer and a recurring monthly fee. The analysis and recommendations in our Sponsored Research reports are derived from the same process and methodologies utilized in all of our research reports whether sponsored or not. The subject company does not review any aspect of our Sponsored Research reports prior to publication.