DHI(DHX) - 2020 Q4 - Annual Report

PART I Business DHI Group, Inc. operates specialized online career marketplaces for technology, security-cleared, and financial professionals, enhancing products and sales while maintaining a 22% Adjusted EBITDA margin in 2020 Financial Performance Summary (in thousands) | (in thousands) | FY 2020 | FY 2019 | Change | | :--- | :--- | :--- | :--- | | Revenues | $136,878 | $149,370 | (8)% | | Operating income (loss) | $(29,605) | $17,025 | (274)% | | Net income (loss) | $(30,015) | $12,551 | (339)% | | Diluted earnings (loss) per share | $(0.62) | $0.24 | (358)% | | Net cash flows from operating activities | $18,683 | $22,923 | (18)% | | Adjusted EBITDA | $29,924 | $34,859 | (14)% | | Adjusted EBITDA Margin | 22% | 23% | n.m. | - The significant operating and net losses in 2020 were primarily driven by impairments of intangible assets and goodwill totaling $38.8 million[16] - 2020 Strategic Highlights: - Product Innovation: Launched new career marketplace features across its brands, such as Dice's Recruiter Profile and Remote Jobs, and ClearanceJobs' Automated Recruiter Workflow[21] - Go-To-Market: Expanded sales teams by adding 20 sales representatives and strengthened sales operations[25] - Growth Initiatives: ClearanceJobs began selling directly to the federal government, and Dice exceeded booking targets in Q4 2020, indicating a pivot toward growth for 2021[26] - The company's three core brands are Dice (U.S. technology and engineering), ClearanceJobs (security-cleared professionals), and eFinancialCareers (global financial services)[31][34] - Strategic goals include delivering best-in-class candidate quality, transforming Dice and eFinancialCareers into career marketplaces modeled after the successful ClearanceJobs brand, investing in product innovation, and transforming sales efforts to drive growth[53][54][55] Risk Factors The company faces significant risks including competitive market pressures, potential asset impairments, economic downturns, data privacy regulations, cybersecurity threats, and reliance on third-party technologies - As of December 31, 2020, goodwill and acquired intangible assets constituted approximately 55% and 10% of total assets, respectively, with impairment charges totaling $38.8 million recorded in 2020 due to COVID-19 impacts[93] - The market for career services is highly competitive, with threats from social/professional networking sites like LinkedIn, generalist job boards like Indeed, and niche competitors[94] - The company is subject to stringent data privacy laws such as the EU's GDPR and the California Consumer Privacy Act (CCPA), which impose significant operational requirements and penalties for non-compliance[158][159] - The COVID-19 pandemic slowed recruitment activity in 2020, reducing revenues and operating cash flows, and is expected to continue negatively impacting financial performance, though the ultimate long-term impact remains uncertain[191][192] Unresolved Staff Comments The company reports no unresolved staff comments from the SEC - None[193] Properties DHI Group, Inc. does not own any real estate; it leases all its office facilities, with its corporate headquarters in Centennial, Colorado, and other significant offices in Iowa, London, and New York - The company's corporate headquarters is a leased space of approximately 28,000 square feet in Centennial, Colorado[194] - Other major leased office spaces are located in Urbandale, Iowa (45,000 sq ft), London, England (15,000 sq ft), and New York, New York (16,000 sq ft)[194] Legal Proceedings The company is not currently a party to any material unrecorded pending legal proceedings - The company reports that it is not currently a party to any material unrecorded pending legal proceedings[198] Mine Safety Disclosures This item is not applicable to the company - None[199] PART II Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The company's common stock trades on the NYSE under 'DHX'; it retains earnings for growth, not paying dividends, and maintains a $5 million stock repurchase program - The company has not declared or paid any cash dividends and does not anticipate paying them in the foreseeable future, as earnings are retained to support long-term growth[202] - The Board of Directors approved a stock repurchase program authorizing up to $5 million in common stock repurchases from May 2020 to May 2021[204] Common Stock Repurchases (in thousands) | Period | Total Number of Shares Purchased | Average Price Paid per Share | Approximate Dollar Value of Shares that May Yet Be Purchased | | :--- | :--- | :--- | :--- | | Oct 1 - Oct 31, 2020 | 88,214 | $2.21 | $3,418,295 | | Nov 1 - Nov 30, 2020 | 234,675 | $1.92 | $2,968,803 | | Dec 1 - Dec 31, 2020 | 873,436 | $2.13 | $1,107,534 | | Total Q4 2020 | 1,196,325 | $2.09 | - | Selected Financial Data A five-year financial summary reveals consistent revenue decline from $227.0 million in 2016 to $136.9 million in 2020, with operating and net income turning to significant losses of $29.6 million and $30.0 million respectively in 2020 due to impairments Selected Financial Data (in thousands, except per share data) | (in thousands, except per share data) | 2020 | 2019 | 2018 | 2017 | 2016 | | :--- | :--- | :--- | :--- | :--- | :--- | | Revenues | $136,878 | $149,370 | $161,570 | $207,950 | $226,970 | | Operating income (loss) | $(29,605) | $17,025 | $11,692 | $22,865 | $3,391 | | Net income (loss) | $(30,015) | $12,551 | $7,174 | $15,978 | $(5,398) | | Diluted earnings (loss) per share | $(0.62) | $0.24 | $0.14 | $0.33 | $(0.11) | | Net cash from operating activities | $18,683 | $22,923 | $14,918 | $34,409 | $44,997 | | Total assets | $240,987 | $278,321 | $258,385 | $295,718 | $310,095 | | Long-term debt, net | $19,583 | $9,435 | $17,288 | $41,450 | $84,760 | Management's Discussion and Analysis of Financial Condition and Results of Operations In 2020, DHI's revenues declined 8.4% to $136.9 million due to COVID-19, resulting in a $29.6 million operating loss after $38.8 million in impairment charges, yet maintaining a 22% Adjusted EBITDA margin and sufficient liquidity Results of Operations Revenues declined 8.4% in 2020 due to COVID-19, resulting in a $29.6 million operating loss after $38.8 million impairment charges, while 2019 saw a 7.6% revenue decrease but a 45.6% operating income increase to $17.0 million Consolidated Statements of Operations (in thousands) | (in thousands) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Revenues | $136,878 | $149,370 | $161,570 | | Total operating expenses | $166,483 | $131,808 | $153,247 | | Operating income (loss) | $(29,605) | $17,025 | $11,692 | - 2020 vs. 2019: Revenue decreased by $12.5 million (8.4%), driven by declines at Dice (-11.2%) and eFinancialCareers (-19.9%) due to the COVID-19 pandemic, partially offset by 17.1% growth at ClearanceJobs[270] - 2020 Impairments: The company recorded non-cash impairment charges totaling $38.8 million ($15.2 million for intangible assets and $23.6 million for goodwill) due to the economic impact of COVID-19[279][281] - 2019 vs. 2018: Revenue decreased by $12.2 million (7.6%), primarily due to the divestiture of non-tech businesses in 2018. Operating income increased by $5.3 million (45.6%) due to cost savings initiatives and lower disposition-related costs[290][308] Liquidity and Capital Resources The company maintains liquidity via cash from operations and a $90 million credit facility, with $7.6 million cash and $70.0 million available as of December 31, 2020, and anticipates $16 million to $18 million in 2021 capital expenditures Cash Flow Summary (in thousands) | (in thousands) | 2020 | 2019 | 2018 | | :--- | :--- | :--- | :--- | | Net cash from operating activities | $18,683 | $22,923 | $14,918 | | Net cash from (used in) investing activities | $(15,904) | $(11,505) | $7,489 | | Net cash used in financing activities | $(542) | $(12,423) | $(27,174) | - As of December 31, 2020, the company had $20.0 million in outstanding debt under its Credit Agreement and $70.0 million in available borrowing capacity[328][476] - Adjusted EBITDA, a non-GAAP measure, was $29.9 million in 2020, down from $34.9 million in 2019. The Adjusted EBITDA margin was 22% in 2020 compared to 23% in 2019[325] - Anticipated capital expenditures for 2021 are approximately $16 million to $18 million, an increase intended for investments in new products and features[341] Quantitative and Qualitative Disclosures About Market Risk The company faces foreign exchange risk, with 17% of 2020 revenues from outside the U.S., and interest rate risk from its variable-rate credit facility, without currently using hedging instruments - Foreign Exchange Risk: Approximately 17% of revenues in 2020 were earned outside the U.S., creating exposure to currency fluctuations. A hypothetical 1.0% decrease in the British Pound to USD exchange rate would have reduced 2020 revenues and expenses by approximately $0.1 million each[350] - Interest Rate Risk: The company has $20.0 million in borrowings under its variable-rate Credit Agreement. A hypothetical 1.0% increase in interest rates would increase annual interest expense by approximately $0.2 million. The company also notes the upcoming transition away from LIBOR as a potential risk[352] Financial Statements and Supplementary Data This section presents the company's audited consolidated financial statements for 2018-2020, including the independent auditor's unqualified opinion and primary financial statements with detailed notes - The Report of Independent Registered Public Accounting Firm (Deloitte & Touche LLP) issued an unqualified opinion on the financial statements and the effectiveness of internal control over financial reporting as of December 31, 2020[357][358] - A critical audit matter identified was the impairment of Goodwill and the Dice Trademarks and Brand Name, due to the significant and subjective judgments required by management in estimating fair value, particularly regarding forecasts of future revenue and the selection of discount rates[363][367] Consolidated Balance Sheet (in thousands) | Consolidated Balance Sheet (in thousands) | Dec 31, 2020 | Dec 31, 2019 | | :--- | :--- | :--- | | Total current assets | $33,485 | $33,072 | | Goodwill | $133,353 | $156,059 | | Total assets | $240,987 | $278,321 | | Total current liabilities | $65,385 | $74,103 | | Long-term debt, net | $19,583 | $9,435 | | Total liabilities | $113,417 | $117,126 | | Total stockholders' equity | $127,570 | $161,195 | Consolidated Statement of Operations (in thousands) | Consolidated Statement of Operations (in thousands) | 2020 | 2019 | | :--- | :--- | :--- | | Revenues | $136,878 | $149,370 | | Operating income (loss) | $(29,605) | $17,025 | | Net income (loss) | $(30,015) | $12,551 | Changes in and Disagreements with Accountants on Accounting and Financial Disclosures The company reports no changes in or disagreements with its accountants on accounting and financial disclosures - None[527] Controls and Procedures Management concluded that the company's disclosure controls and internal control over financial reporting were effective as of December 31, 2020, with no material changes reported during Q4 2020 - Management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective as of December 31, 2020[529] - Management concluded that the company's internal control over financial reporting was effective as of December 31, 2020, based on the COSO framework[532] - No material changes in internal control over financial reporting occurred during the quarter ended December 31, 2020[535] Other Information The company reports no other information for this item - None[545] PART III Directors, Executive Officers and Corporate Governance Information on directors, executive officers, and corporate governance is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders - Information required by this item will be set forth in the company's definitive proxy statement to be filed within 120 days of the fiscal year-end[548] Executive Compensation Information regarding executive compensation is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders - Information required by this item will be set forth in the company's definitive proxy statement[561] Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters Information regarding security ownership of certain beneficial owners and management is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders - Information required by this item will be set forth in the company's definitive proxy statement[562] Certain Relationships and Related Transactions, and Director Independence Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders - Information required by this item will be set forth in the company's definitive proxy statement[563] Principal Accounting Fees and Services Information regarding principal accounting fees and services is incorporated by reference from the company's definitive proxy statement for its 2021 Annual Meeting of Stockholders - Information required by this item will be set forth in the company's definitive proxy statement[564] PART IV Exhibits and Financial Statement Schedules This section lists all financial statements, schedules, and exhibits filed with the Form 10-K, including governance documents, material contracts, and Sarbanes-Oxley Act certifications - This item lists all exhibits filed with the Form 10-K, including the company's bylaws, material contracts such as the Credit Agreement, and executive employment agreements[567][568][569] Form 10-K Summary The company did not provide a summary for this item - None[571]