Announces Strategic Reorganization
After market close yesterday, DHI Group (DHX) filed an 8-K announcing a strategic reorganization designed to separate the company into two distinct divisions with their own dedicated leadership. Of course, the two divisions correspond to the company’s branded career marketplaces, Dice and ClearanceJobs. Although DHI Group has long disclosed revenue for both platforms, we believe this round of restructuring will enable the company to more effectively manage and report on the profitability of each brand. The separation of the company into two distinct businesses also provides optionality as it relates to unlocking shareholder value associated with either Dice or ClearanceJobs should an opportunity present itself, but we do not believe that is the primary objective at this juncture.
As for the details, DHI Group’s current Chief Technology Officer Paul Farnsworth has been named President of Dice, while Alex Schildt, currently VP of Sales for ClearanceJobs, has been promoted to President of ClearanceJobs. Both will oversee sales, marketing and product development for their respective brands. DHI Group’s Chief Revenue Officer, Arie Kanofsky, and Chief Marketing Officer, Amy Heidersbach, will be leaving the company. Additionally, the company’s workforce is expected to be reduced by approximately 8% and generate annualized savings of $4 million to $6 million, primarily arising from the consolidation of teams and mid-level management roles within Dice’s product development organization. Approximately $2.2 million in charges related to employee severance and benefits will be incurred in Q1 ’25 with the associated cash outlays completed by Q3 ‘25. Worth noting, new sales and marketing leaders are expected to be appointed for both Dice and ClearanceJobs, but the incremental investment is already reflected in the estimated annualized savings.
From a timing perspective, we note that the final weeks of Q4 and the initial weeks of Q1 mark DHI Group’s key renewal periods and largely dictate the prospects for revenue growth over the ensuing year. As such, we believe the reorganization was timed to ensure minimal disruption during these critical weeks while also providing a pathway to achieving 2025 targets for revenue and adjusted EBITDA that have yet to be disclosed. Given the magnitude of the workforce reduction, we surmise that there may be some downside risk to our current FY ’25 revenue estimate of $137.3 million, which is slightly above consensus of $136.4 million, but we remain comfortable with our adjusted EBITDA estimate of $31.9 million, which sits just above the Street’s $31.4 million. As we do not anticipate a material change to our estimates, we plan to incorporate the impact of the restructuring and adjust our model after management provides formal FY ’25 guidance during its Q4 ’24 earnings call. Our price target remains $5.00 based on an unchanged FY ’25 EV/Sales multiple of 2.0x.
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.