Reports Q1 ’25 Results In Line with Expectations and Reaffirms FY ’25 Guidance

DHI Group (DHX) reported Q1 ’25 results in line with our estimates and consensus. Although growth at Dice remains hampered by ongoing economic uncertainty, we were encouraged to see both revenue and bookings come in modestly ahead of our projections. Like last quarter, Dice generated solid new business bookings from staffing and recruiting companies while commercial customers remained cautious. Considering that demand for temporary and contract labor typically rises early in a recovery, we think the bottom may be in for Dice, at least as it relates to the magnitude of declines moving forward. We further note that the last of the multi-year contracts Dice entered into during the boom years post-COVID were right-sized in Q1 to levels more commensurate with the current hiring environment. As such, revenue retention rates should move higher from here and present less of a drag on overall growth in the coming quarters. Turning to ClearanceJobs, both revenue and bookings were just shy of our estimates as new business activity was essentially frozen during the latter part of the quarter. Not surprisingly, the culprit was the Department of Government Efficiency (DOGE) and the uncertainty created by its efforts to slash government spending. On a more positive note, DHI Group provided insight into segment profitability for the first time, and ClearanceJobs generated an impressive adjusted EBITDA margin of 43% in Q1.

Looking forward, management’s Q2 guidance was consistent with our expectations for flattish revenue on a sequential basis. Management also reaffirmed its prior revenue and adjusted EBITDA guidance for FY ’25. In accordance, our prior estimates remain largely intact for this year and next. Between the green shoots emerging among staffing and recruiting companies for Dice and the potential benefit to ClearanceJobs from the proposed $150 billion increase in defense spending for the upcoming government fiscal year, we remain optimistic that DHI Group’s bookings growth trajectory will improve from hereon out.

Whether based on a multiple of recurring revenue (less than 1x) or adjusted EBITDA (3x), we continue to believe shares of DHX are exceedingly cheap. Given the company’s new segment disclosures, it’s also worth highlighting that at the current stock price, investors are basically buying the ClearanceJobs platform, which has a solid track record of double-digit revenue growth and an adjusted EBITDA margin in excess of 40%, for less than 2x revenue while receiving the Dice business for free. Despite its current challenges, Dice still boasts a sizeable revenue and customer base and generates an adjusted EBITDA margin in the high-teens, making it an attractive business in its own right. Our price target remains unchanged at $5.00, representing a FY ’25 EV/Sales multiple of 2x.

Exhibit I: Reported Results and Guidance Versus Expectations

Sources: DHI Group; K. Liu & Company LLC; FactSet Estimates

Q1 revenue of $32.3 million (-10.3% Y/Y) was in line with our $32.4 million estimate and the consensus of $32.3 million. Revenue from Dice totaled $18.9 million (-17.8% Y/Y), slightly above our $18.7 million projection, while revenue from ClearanceJobs of $13.4 million (+2.9% Y/Y) was just shy of our $13.6 million estimate.

Dice bookings of $25.3 million (-20.4% Y/Y) were modestly ahead of our $25.0 million projection. Although Dice’s revenue renewal rate of 70% was lower than we modeled, new business bookings from staffing and recruiting firms were solid for the second consecutive quarter and mitigated the impact to an extent. Per management, the low revenue retention rate in Q1 reflected the right-sizing of multi-year contracts entered into in early FY ’23 when labor market conditions were significantly tighter.

ClearanceJobs bookings of $16.8 million (-1.0% Y/Y) fell short of our $17.4 million forecast as uncertainty arising from DOGE-related cuts to government spending created a pause in new business bookings during the latter part of Q1. Given the proposed increase to the government defense budget for the coming fiscal year, we expect bookings at ClearanceJobs to rebound in relatively short order.

Exhibit II: Key Metrics

Sources: DHI Group; K. Liu & Company LLC

Gross margin of 83.4% was below our 84.2% assumption due to slightly higher costs than we projected. However, total operating expenses (excluding goodwill impairment, restructuring charges, severance, professional fees and other non-recurring expenses not factored into our model) were lower than we modeled. As a result, adjusted EBITDA of $7.0 million (21.6% margin) was in line with our $7.0 million estimate and the Street’s $7.1 million.

In Q1, DHI Group generated $2.2 million in cash flow from operations and used $2.2 million for capital expenditures. Cash at quarter-end totaled $2.7 million, while outstanding debt increased by $1.0 million sequentially to $33.0 million. During the quarter, the company repurchased 886,000 shares at a total cost of $2.1 million.

Management’s Q2 guidance calls for revenue of $32.0-$33.0 million, encompassing both our estimate and the consensus heading into the print. Management also reaffirmed its prior FY ‘25 guidance for revenue of $131.0-$135.0 million and an adjusted EBITDA margin of 24.0%, implying adjusted EBITDA of $31.4-$32.4 million.

Exhibit III: Estimate Revisions

Source: K. Liu & Company LLC

Our revenue and adjusted EBITDA estimates are only nominally changed for this year and next as we fine-tune our assumptions. On the top line, a reduction in our forecast of non-recurring revenue was largely offset by an uptick in our estimate of recurring revenue. As for margins, we lower our gross margin assumption slightly while also reducing our operating expense estimates, leaving our adjusted EBITDA projections generally intact. We note that our EPS estimate for this year declines due to a number of non-recurring expenses incurred in Q1 but remains virtually unchanged at $0.21 on a non-GAAP basis compared to $0.20 previously.

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.