Q2 '23 Earnings Preview
DHI Group, Inc. (DHX) reports Q2 ’23 results on Wednesday, August 2. We believe the labor market trends that began in 2H ’22, namely declines in the number of job openings and quits, persisted over the past quarter. Although the drop in percentage terms may have peaked exiting Q1, data from the U.S. Bureau of Labor Statistics through May continues to exhibit double-digit Y/Y declines in the number of job postings, which on a more positive note remain high by historical standards. Additionally, we note that CompTIA’s Tech Jobs report reflects a similar dynamic with the number of job postings for tech positions declining in both April and May from nearly 316,000 in March before edging higher to just under 236,000 in June. Considering the backdrop, we believe DHI Group continued to face a softer demand environment as employers moved more methodically to fill existing job openings. That said, we believe DHI Group’s Q2 and FY ’23 guidance already reflected expectations for more challenging macro conditions throughout the remainder of the year. Recall that management reduced its full year outlook in conjunction with last quarter’s earnings release and subsequently announced a 10% reduction in force expected to generate annual cost savings of $8-$10 million. As such, we anticipate Q2 revenue and adjusted EBITDA in line with our estimates and consensus, and we expect management to reaffirm its prior guidance for the year. Our price target remains $9.00, reflecting a FY ’23 EV/Sales multiple of 3x.
Exhibit I: Our Estimates Versus Consensus
Sources: K. Liu & Company LLC; FactSet Estimates
Management’s Q2 guidance calls for revenue growth of 4%-5% and an adjusted EBITDA margin of 21%, implying revenue and adjusted EBITDA of $38.5-$38.9 million and $8.1-$8.2 million, respectively. Our Q2 estimates include revenue of $38.8 million, including $26.9 million from Dice and $11.9 million from ClearanceJobs, and adjusted EBITDA of $8.1 million. Our estimates are generally consistent with consensus, which calls for revenue and adjusted EBITDA of $38.7 million and $8.1 million, respectively. We note that our EPS estimate of $(0.06) sits below consensus of $(0.02), which we suspect is due to our inclusion of restructuring costs. Given current market conditions, we model bookings growth of just 5% in Q2 to $37.1 million. However, we believe this leaves the company on track to achieve its full year plan, and we expect management to reaffirm its prior FY ’23 guidance for revenue growth of 5%-6% and an adjusted EBITDA margin of 25%.
Exhibit II: U.S. Job Openings in Thousands
Sources: U.S. Bureau of Labor Statistics Job Openings and Labor Turnover Survey
Exhibit III: U.S. Quits in Thousands
Sources: 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.