Raises FY ’25 Adjusted EBITDA Guidance on Solid Q2 Results and Restructuring

DHI Group’s (DHX) Q2 ’25 results reflected meaningful beats on both the adjusted EBITDA and non-GAAP EPS lines despite a modest revenue shortfall. Relative to our model, the softer top line performance was mostly attributable to the churn of two large Dice customers, one of whom shuttered operations and the other that remains a potential win-back in the future. More importantly, the demand environment for Dice continues to stabilize as evidenced by the number of new technology job postings; sequential revenue growth reported by Dice’s largest staffing, recruiting and consulting customers; and improving trends across most key operating metrics. At ClearanceJobs, revenue tracked in line with our expectations although bookings remained muted by DOGE-related concerns early in the quarter and ensuing budget uncertainty. With over $1 trillion in defense spending now earmarked for the upcoming government fiscal year, however, management remains confident in the prospects for ClearanceJobs to revert to a higher growth trajectory. Below the revenue line, gross margin was ahead of our assumption while product development and sales and marketing expenses were much lower. As a result, both adjusted EBITDA and non-GAAP EPS easily exceeded our estimates and consensus.

In conjunction with its Q2 results, DHI Group also announced the acquisition of AgileATS for $2.0 million, comprised of $1.5 million in cash and a potential earn-out of $0.5 million. Strategically, the acquisition adds an applicant tracking system purpose-built for government contractors and others employing cleared security professionals to the ClearanceJobs platform, thereby expanding potential wallet share with customers. Pricing for AgileATS is on a subscription basis and currently averages $7,000 per seat annually. Financially, the acquisition is not expected to have a material impact on revenue or adjusted EBITDA in the near-term.

As for the outlook, management guided Q3 revenue short of our prior estimate and consensus and lowered its FY ’25 revenue expectations. However, reflecting the performance to date and the savings anticipated from the company’s recent organizational restructuring, management raised its FY ’25 adjusted EBITDA margin target, which more than offset the top line decline. Neither the revenue reduction nor the adjusted EBITDA hike was particularly surprising from our perspective. All told, our revenue estimates decline slightly for this year and next, while our adjusted EBITDA estimates move higher. We now project a 30% adjusted EBITDA margin exiting FY ‘25 and believe that is sustainable in FY ’26, at which time revenue growth should also inflect positively. Our price target remains unchanged at $5.00, representing the same EV/Sales multiple of 2x we used previously but now rolled forward to our FY ’26 projections.

Exhibit I: Reported Results and Guidance Versus Expectations

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

Q2 revenue of $32.0 million (-10.6% Y/Y) was just shy of our $32.4 million estimate and consensus of $32.1 million. Dice revenue of $18.4 million (-17.5% Y/Y) fell short of our $18.6 million projection, while ClearanceJobs revenue of $13.6 million (+0.7% Y/Y) was approximately in line with our $13.7 million estimate.

Dice bookings of $15.6 million (-15.8% Y/Y) were consistent with our $15.5 million projection. Similar to last quarter, Dice’s revenue renewal rate was lower than we modeled as two large customers churned, but new business bookings from staffing and recruiting firms were solid and cushioned the impact. For those customers that did renew in the quarter, we note that the revenue retention rate was in excess of 100% for the first time in two years.

ClearanceJobs bookings of $11.6 million (+0.4% Y/Y) fell short of our $12.6 million forecast as the lingering impact of DOGE-related cuts and uncertainty over the federal government budget for FY ’26 weighed on customer spending decisions. With the government defense budget now expected to exceed $1 trillion in the upcoming fiscal year, however, we continue to expect bookings at ClearanceJobs to reaccelerate in the near future.

Exhibit II: Key Metrics

Sources: DHI Group; K. Liu & Company LLC

Gross margin of 84.0% was ahead of our 83.3% assumption due to lower costs than we projected. Total operating expenses (excluding restructuring charges and severance, professional fees and other non-recurring expenses not factored into our model) were also lower than we modeled. As a result, adjusted EBITDA was $8.5 million (21.6% margin), easily exceeding our $7.6 million estimate and the Street’s $7.2 million. Non-GAAP EPS of $0.07 also beat our estimate of $0.05 and consensus of $0.02.

In Q2, DHI Group generated $6.9 million in cash flow from operations and used $2.0 million for capital expenditures. Cash at quarter-end totaled $2.8 million, while outstanding debt declined by $3.0 million sequentially to $30.0 million. During the quarter, the company repurchased 865,585 shares at a total cost of $1.8 million.

Management’s Q3 guidance calls for revenue of $31.0-$32.0 million. Prior to revisions, we were projecting revenue of $32.7 million while consensus stood at $33.0 million. For FY ’25, management lowered its revenue guidance from $131.0-$135.0 million to $126.0-$128.0 million but raised its adjusted EBITDA margin target from 24.0% to 26.0%, implying adjusted EBITDA of $34.0-$34.6 million versus $31.4-$32.4 million previously.

Exhibit III: Estimate Revisions

Source: K. Liu & Company LLC

We reduce our revenue estimates for this year and next, primarily reflecting a lower base of recurring revenue for Dice exiting Q2 and a slight cut to our bookings expectations for ClearanceJobs. Reflecting the savings from the company’s recent organizational restructuring, however, our adjusted EBITDA estimates increase across our forecast horizon and now reflect an adjusted EBITDA margin of 30% moving forward. Our FY ’25 and FY ’26 non-GAAP EPS estimates also increase in accordance. 

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.