Q3 ’24 Earnings Preview
DHI Group, Inc. (DHX) reports Q3 ’24 results on Tuesday, November 12, after market close. Following a reset in expectations last quarter, we expect the upcoming print and guide to be consistent with our estimates and consensus, both of which mirror management’s revised outlook for FY ’24. Stabilization and pent-up demand have been the key themes across the IT staffing and services providers that have reported thus far in the Q3 earnings season. Regarding the former, the IT spending environment remains challenging, reflecting elongated sales cycles, delayed project starts and limited hiring activity. However, the magnitude of the revenue declines experienced across the industry has stabilized over the past two quarters and appears to have improved modestly in October. Looking forward, the potential for further interest rate cuts and the end of election uncertainty against a backdrop of easier comparisons seem to be fueling more optimism for growth in the new year.
While the qualitative commentary from companies is encouraging, we note that data from the U.S. Bureau of Labor Statistics’ Job Openings and Labor Turnover Survey (JOLTS) also provides some quantitative support that we may be touching bottom as it relates to labor market conditions. Job openings in each month of Q3 declined in a similar range to the levels seen in Q2, and the average number of job openings each quarter has fallen at roughly the same rate in each quarter this year. More relevant to DHI Group, a recovery already appears to be underway for technology jobs as CompTIA’s analysis of the BLS data points to a sustained increase in active technology job postings between April and October with new job postings reaching new highs for the year over the past three months. We believe the data also suggests fill rates for open technology positions continue to trail the number of new job postings, which coupled with the low unemployment rate among technologists bodes well for a tightening of labor market conditions. In other words, there is pent-up demand for technologists, and DHI Group stands to benefit when that hiring materializes. Our price target remains $5.25, representing an unchanged FY ’25 EV/Sales multiple of 2.0x.
Exhibit I: Our Estimates Versus Consensus
Sources: K. Liu & Company LLC; FactSet Estimates
Our Q3 estimates include revenue of $35.2 million, adjusted EBITDA of $8.2 million and EPS of $(0.01), all of which are generally in line with consensus of $35.3 million, $8.3 million and $0.00, respectively. From a segment perspective, our top line projection assumes revenue of $21.7 million from Dice and $13.4 million from ClearanceJobs. We also model a mid-single digit decline in bookings, which reflects a low double digit decrease in Dice bookings, partially offset by mid-single digit bookings growth for ClearanceJobs. Consistent with both management’s and Street expectations, we expect no material change in the trajectory of the company’s revenue and bookings growth in Q4, but we remain optimistic that DHI Group will return to modest growth in FY ’25.
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.