DHI(DHX) - 2022 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents DHI Group, Inc.'s unaudited financial statements and management's analysis for Q1 2022 Item 1. Unaudited Financial Statements This section presents DHI Group, Inc.'s unaudited condensed consolidated financial statements for Q1 2022 and 2021, with accompanying detailed notes - Financial statements are unaudited and prepared in accordance with SEC rules and U.S. GAAP, with adjustments consisting of normal and recurring accruals[25] - Operating results for the three-month period ended March 31, 2022, are not necessarily indicative of full-year results[25] - The eFinancialCareers (eFC) business was deconsolidated as of June 30, 2021, and is reflected as a discontinued operation, with ongoing operations focused on the Tech-focused segment (Dice and ClearanceJobs) in the United States[27][28] Condensed Consolidated Balance Sheets This section presents the Company's condensed consolidated balance sheets as of March 31, 2022, and December 31, 2021 | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (vs Dec 31, 2021) | | :-------------------------------- | :---------------------------- | :------------------------------- | :----------------------- | | Total Assets | $228,419 | $221,578 | +$6,841 | | Total Liabilities | $120,214 | $105,216 | +$14,998 | | Total Stockholders' Equity | $108,205 | $116,362 | -$8,157 | | Cash and cash equivalents | $4,966 | $1,540 | +$3,426 | | Accounts receivable, net | $22,205 | $18,385 | +$3,820 | | Deferred revenue (current) | $55,787 | $45,217 | +$10,570 | | Long-term debt, net | $32,767 | $22,730 | +$10,037 | Condensed Consolidated Statements of Operations This section presents the Company's condensed consolidated statements of operations for Q1 2022 and 2021, detailing revenues, expenses, and net income | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | YoY Change | YoY % Change | | :--------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :----------- | | Revenues | $34,334 | $26,676 | +$7,658 | +28.7% | | Total Operating Expenses | $33,706 | $26,860 | +$6,846 | +25.5% | | Operating Income (Loss) | $628 | $(184) | +$812 | -441.3% | | Income before income taxes | $538 | $2,134 | -$1,596 | -74.8% | | Net Income | $1,301 | $2,671 | -$1,370 | -51.3% | | Basic EPS - continuing operations | $0.03 | $0.04 | -$0.01 | -25.0% | | Diluted EPS - continuing operations | $0.03 | $0.04 | -$0.01 | -25.0% | | Basic EPS | $0.03 | $0.06 | -$0.03 | -50.0% | | Diluted EPS | $0.03 | $0.05 | -$0.02 | -40.0% | Condensed Consolidated Statements of Comprehensive Income (Loss) This section presents the Company's condensed consolidated statements of comprehensive income (loss) for the three months ended March 31, 2022, and 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | YoY Change | YoY % Change | | :---------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | :----------- | | Net Income | $1,301 | $2,671 | -$1,370 | -51.3% | | Foreign currency translation adjustment | $8 | $297 | -$289 | -97.3% | | Total other comprehensive income | $8 | $297 | -$289 | -97.3% | | Comprehensive Income | $1,309 | $2,968 | -$1,659 | -55.9% | Condensed Consolidated Statements of Stockholders' Equity This section presents the Company's condensed consolidated statements of stockholders' equity for Q1 2022 and December 31, 2021 | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change | | :-------------------------------- | :---------------------------- | :------------------------------- | :----- | | Total Stockholders' Equity | $108,205 | $116,362 | -$8,157 | | Additional Paid-in Capital | $244,065 | $241,854 | +$2,211 | | Accumulated Earnings | $25,530 | $24,229 | +$1,301 | | Treasury Stock | $(162,099) | $(150,398) | -$11,701 | - Net income for the period was $1.301 million[21] - Stock-based compensation added $2.235 million to additional paid-in capital[21] - Purchase of treasury stock under stock repurchase plan amounted to $7.499 million[21] Condensed Consolidated Statements of Cash Flows This section presents the Company's condensed consolidated statements of cash flows for the three months ended March 31, 2022, and 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | YoY Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------- | | Net cash flows from operating activities | $9,218 | $6,424 | +$2,794 | | Net cash flows used in investing activities | $(4,091) | $(3,703) | -$388 | | Net cash flows used in financing activities | $(1,701) | $(3,012) | +$1,311 | | Net change in cash and cash equivalents | $3,426 | $(321) | +$3,747 | | Cash and cash equivalents, end of period | $4,966 | $7,319 | -$2,353 | Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures for the condensed consolidated financial statements, covering accounting policies, fair value, revenue, and equity - The Company operates as a single reportable segment, "Tech-focused," comprising Dice and ClearanceJobs brands, with all operations now in the United States following the deconsolidation of eFinancialCareers (eFC)[28] - Management believes all adjustments (normal and recurring accruals) have been made to fairly present the financial position, results of operations, and cash flows[25] Note 1. BASIS OF PRESENTATION This note outlines the basis of presentation for the unaudited condensed consolidated financial statements, including GAAP and segment reporting - Unaudited condensed consolidated financial statements prepared under SEC rules and U.S. GAAP, with normal and recurring accruals[25] - eFinancialCareers (eFC) business was deconsolidated on June 30, 2021, and is now reflected as a discontinued operation[27] - The Company operates as a single "Tech-focused" reportable segment, including Dice and ClearanceJobs, with all operations in the United States[28] Note 2. NEW ACCOUNTING STANDARDS This note discusses the Company's evaluation of new accounting standards and their potential impact on financial statements - The Company is evaluating the expected impact of ASU No. 2016-13 (Financial Instruments - Credit Losses) on its consolidated financial statements, effective for Smaller Reporting Companies for fiscal years beginning after December 15, 2022[29] Note 3. FAIR VALUE MEASUREMENTS This note details the Company's fair value measurements for financial instruments, including the hierarchy of inputs used for valuation - Fair value hierarchy (Level 1, 2, 3) is used for financial instruments[31] - Carrying amounts of cash, receivables, payables, and long-term debt approximate fair values[32] - Investments (non-current) at fair value use Level 3 inputs (discounted cash flow based on probability of outcomes), while long-term debt fair value uses Level 2 inputs (present value techniques and market-based rates)[32] - The 40% interest in eFC was valued using a combination of discounted cash flow and market approach, with a 19.0% discount rate[34] Note 4. DISCONTINUED OPERATIONS This note provides details on the eFinancialCareers (eFC) business, which was deconsolidated and is now reflected as a discontinued operation - Majority ownership of eFinancialCareers (eFC) was transferred on June 30, 2021, and its financial results are reflected as discontinued operations[35] Discontinued Operations Financial Summary | Metric | 2021 (in thousands) | | :------------------------- | :----- | | Revenues | $5,957 | | Operating expenses | $(5,275) | | Operating income | $682 | | Net income | $659 | Discontinued Operations Cash Flow Items | Metric | 2021 (in thousands) | | :------------------------ | :----- | | Depreciation | $465 | | Purchases of fixed assets | $124 | Note 5. REVENUE RECOGNITION This note explains the Company's revenue recognition policies, including how revenue is generated and recognized from contracts with customers - Revenue is recognized when control of the promised goods or services is transferred, net of discounts, ratably over the service period[39] - Revenue is primarily generated from recruitment packages, advertising, classifieds, and event booth rentals[39] Revenue by Brand | Brand | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | YoY Change (in thousands) | YoY % Change | | :------------ | :-------------------------------- | :-------------------------------- | :--------- | :----------- | | Dice | $24,634 | $19,051 | +$5,583 | +29.3% | | ClearanceJobs | $9,700 | $7,625 | +$2,075 | +27.2% | | Total | $34,334 | $26,676 | +$7,658 | +28.7% | Contract Balances | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :------------- | :---------------- | | Receivables | $22,205 | $18,385 | | Short-term deferred revenue | $55,787 | $45,217 | | Long-term deferred revenue | $999 | $929 | Revenue from Contract Liability | Period | 2022 (in thousands) | 2021 (in thousands) | | :-------------------------------------------------- | :----- | :----- | | Revenue from contract liability at beginning of period | $20,940 | $17,296 | Remaining Performance Obligations | Period | Tech-focused (in thousands) | | :------------------------ | :----------- | | Remainder of 2022 | $52,404 | | 2023 | $4,092 | | 2024 | $274 | | 2025 | $16 | | Total | $56,786 | Note 6. LEASES This note describes the Company's operating leases for corporate office space and equipment, including lease costs and liabilities - The Company has operating leases for corporate office space and equipment, with terms from one to eight years, some with renewal options[45] Lease Costs | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------------- | :-------------------------------- | :-------------------------------- | | Operating lease cost | $509 | $564 | | Sublease income | $(123) | $(180) | | Total lease cost | $386 | $384 | Lease Balances and Rates | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :-------------------------------- | :------------- | :---------------- | | Operating lease right-of-use assets | $6,445 | $6,888 | | Total operating lease liabilities | $8,784 | $9,370 | | Weighted Average Remaining Lease Term (in years) | 3.4 | 3.6 | | Weighted Average Discount Rate | 3.81% | 3.80% | Operating Lease Maturities | Period | Operating Leases (in thousands) | | :-------------------------------- | :--------------- | | April 1, 2022 through Dec 31, 2022 | $2,029 | | 2023 | $2,451 | | 2024 | $1,965 | | 2025 | $1,946 | | 2026 | $992 | | 2027 and thereafter | $85 | | Total lease payments | $9,468 | | Less imputed interest | $684 | | Total | $8,784 | Note 7. INVESTMENTS This note details the Company's investments, including equity securities, convertible promissory notes, and equity method investments in Rigzone and eFC - The Company recognized a $2.5 million unrealized gain on an equity security investment in Q1 2021, which was sold in Q3 2021, resulting in a $1.2 million realized gain for the nine months ended September 30, 2021[51] - A $3.0 million investment was made in Q3 2021 via a subordinated convertible promissory note in a values-based career destination company, recorded at fair value ($3.0 million) as a trading security[53] - The Company retains a 40% common share interest in Rigzone and eFC, accounted for under the equity method[54][56] - Rigzone investment is recorded at zero due to approximately zero accumulated earnings[56] - For eFC, the Company recorded $0.2 million of income in Q1 2022 from its proportionate share of net income, net of currency translation and basis difference amortization[56] Note 8. ACQUIRED INTANGIBLE ASSETS, NET This note discusses the Company's acquired intangible assets, primarily the Dice.com trademarks and brand name, and related impairment assessments - The Dice.com trademarks and brand name are an indefinite-lived acquired intangible asset valued at $23.8 million as of March 31, 2022, and December 31, 2021[61] - No impairment was recorded for indefinite-lived acquired intangible assets during the three-month periods ended March 31, 2022, and 2021[61] - The fair value of Dice trademarks and brand name was determined using a relief from royalty rate method (4.0% royalty rate, 12.5% discount rate) in the October 1, 2021 analysis[62] Note 9. GOODWILL This note provides information on the Company's goodwill, specifically for the Tech-focused reporting unit, and its annual impairment testing - Goodwill for the Tech-focused reporting unit remained at $128.1 million as of March 31, 2022, with no changes from December 31, 2021[64] - The annual impairment test as of October 1, 2021, indicated the fair value of the Tech-focused reporting unit substantially exceeded its carrying value[64] - No quantitative impairment test was performed as of March 31, 2022, as results exceeded projections, and no impairment was recorded in Q1 2022 or Q1 2021[65] - The October 1, 2021 analysis used a discount rate of 11.5% for the Tech-focused reporting unit[68] Note 10. INDEBTEDNESS This note details the Company's indebtedness, primarily its revolving loan facility, and compliance with financial covenants - The Company has a $90 million revolving loan facility under a Credit Agreement maturing in November 2023[70] Revolving Credit Facility Details | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | | :------------------------------------------------------------------------------------------------------- | :------------- | :---------------- | | Revolving credit facility | $33,000 | $23,000 | | Long-term debt, net | $32,767 | $22,730 | | Available to be borrowed under revolving facility, subject to certain limitations | $57,000 | $67,000 | Interest Rates | Metric | March 31, 2022 | December 31, 2021 | | :---------------- | :------------- | :---------------- | | LIBOR rate loans: Interest margin | 1.75% | 1.75% | | Actual interest rates | 2.25% | 1.88% | | Commitment fee | 0.30% | 0.30% | - The Company was in compliance with all financial covenants under the Credit Agreement as of March 31, 2022[72] Note 11. COMMITMENTS AND CONTINGENCIES This note outlines the Company's commitments and contingencies, including routine legal claims and management's assessment of their impact - The Company is subject to various claims from taxing authorities, lawsuits, and other complaints arising in the ordinary course of business[76] - Management believes the final resolution of these legal matters will not have a material effect on the Company's financial condition, operations, or liquidity[76] - Provisions for losses are recorded when claims are probable and estimable[76] Note 12. EQUITY TRANSACTIONS This note describes the Company's equity transactions, including stock repurchase programs and shares repurchased - The Board approved a new stock repurchase program in February 2022, authorizing the purchase of up to $15 million of common stock through February 2023[78] - As of March 31, 2022, $13.1 million remained available for repurchase under the current plan[80] Stock Repurchases | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------- | :-------------------------------- | :-------------------------------- | | Shares repurchased | 1,302,226 | 589,899 | | Average purchase price per share | $5.78 | $2.62 | | Dollar value of shares repurchased | $7,525 | $1,546 | Shares Repurchased Upon Vesting | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :-------------------------------------------------------------------------------- | :-------------------------------- | :-------------------------------- | | Shares repurchased upon restricted stock/PSU vesting | 773,048 | 508,899 | | Average purchase price per share | $5.44 | $2.64 | | Dollar value of shares repurchased upon restricted stock/PSU vesting | $4,202 | $1,343 | Note 13. STOCK-BASED COMPENSATION This note provides details on the Company's stock-based compensation expense and the status of non-vested awards - Total stock-based compensation expense was $2.2 million for Q1 2022, up from $1.8 million in Q1 2021[85] - Unrecognized compensation expense related to unvested awards was $18.1 million as of March 31, 2022, expected to be recognized over approximately 1.5 years[85] Restricted Stock Units (RSUs) Activity | Metric | Three Months Ended March 31, 2022 (Shares) | Three Months Ended March 31, 2021 (Shares) | | :---------------------------- | :--------------------------------------- | :--------------------------------------- | | Non-vested at beginning of period | 3,371,832 | 3,877,853 | | Granted | 932,500 | 1,468,223 | | Forfeited | (81,714) | (204,175) | | Vested | (1,098,127) | (1,034,684) | | Non-vested at end of period | 3,124,491 | 4,107,217 | Performance Stock Units (PSUs) Activity | Metric | Three Months Ended March 31, 2022 (Shares) | Three Months Ended March 31, 2021 (Shares) | | :---------------------------- | :--------------------------------------- | :--------------------------------------- | | Non-vested at beginning of period | 1,593,775 | 1,352,438 | | Granted | 1,553,332 | 990,000 | | Forfeited | (93,341) | (105,656) | | Vested | (928,717) | (339,111) | | Non-vested at end of period | 2,125,049 | 1,897,671 | - No stock options were granted during the three months ended March 31, 2022, and 2021[91] Note 14. EARNINGS PER SHARE This note presents the Company's basic and diluted earnings per share calculations for continuing and discontinued operations Earnings Per Share Calculation | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (in thousands) | $1,301 | $2,671 | | Weighted-average shares outstanding—diluted (in thousands) | 47,170 | 48,606 | | Diluted earnings per share - continuing operations | $0.03 | $0.04 | | Diluted earnings per share - discontinued operations | $0.00 | $0.01 | | Diluted earnings per share | $0.03 | $0.05 | - Diluted EPS decreased from $0.05 in Q1 2021 to $0.03 in Q1 2022, primarily due to an unrealized gain on equity securities in 2021[139] Note 15. INCOME TAXES This note provides information on the Company's income tax expense (benefit) and effective tax rates for the periods presented Income Tax Details | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :----------------------- | :-------------------------------- | :-------------------------------- | | Effective tax rate | (141.8)% | 5.7% | - The effective tax rate for Q1 2022 was (142)% due to a $0.8 million tax benefit from share-based compensation awards[96][137] - The effective tax rate for Q1 2021 was 6% due to a $0.5 million tax benefit from the release of a valuation allowance on capital loss carryforward[96][137] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's analysis of the Company's financial condition and results of operations for Q1 2022 versus Q1 2021, covering revenue, expenses, liquidity, and Adjusted EBITDA - The Company's strategy is tech-focused, with Dice and ClearanceJobs brands serving specialized technology and security-cleared professions in the U.S.[104][105] - The eFinancialCareers (eFC) business was transferred to management on June 30, 2021, and is now a discontinued operation[106] - Key metrics for business analysis include total recruitment package customers and average revenue per customer[109] Overview This section provides an overview of DHI Group, Inc.'s business, focusing on its tech-focused career marketplaces in the U.S. - DHI Group, Inc. provides software products, online tools, and services for career marketplaces in the U.S., focusing on technology and government security clearance professionals through its Dice and ClearanceJobs brands[104] - The Company specializes in employment categories with long-term scarcity of highly skilled professionals[105] - eFinancialCareers (eFC) business was transferred on June 30, 2021, making all ongoing DHI operations (Dice and ClearanceJobs) U.S.-based[106] - The Company operates as a single reportable segment, "Tech-focused"[107] Our Revenues and Expenses This section discusses the Company's revenue generation from job postings and resume databases, and the primary components of its operating expenses - Majority of revenues are derived from fees for job postings and access to resume databases, varying by customer based on user count, job postings, and package terms[109] Recruitment Package Customers | Brand | March 31, 2022 (customers) | March 31, 2021 (customers) | Increase (Decrease) (customers) | Percent Change | | :------------ | :------------- | :------------- | :------------------ | :------------- | | Dice | 6,249 | 5,200 | 1,049 | 20% | | ClearanceJobs | 1,928 | 1,753 | 175 | 10% | Average Revenue Per Customer | Brand | 2022 (in thousands) | 2021 (in thousands) | Increase (Decrease) (in thousands) | Percent Change | | :------------ | :----- | :----- | :------------------ | :------------- | | Dice | $14,112 | $13,536 | $576 | 4% | | ClearanceJobs | $18,408 | $16,476 | $1,932 | 12% | - Dice customer increase driven by strong renewal rates and new business activity; ClearanceJobs increase due to high demand for cleared professionals and product enhancements[113] Deferred Revenue and Backlog | Metric | March 31, 2022 (in thousands) | December 31, 2021 (in thousands) | Change (vs Dec 31, 2021) (in thousands) | % Change (vs Dec 31, 2021) | March 31, 2021 (in thousands) | Change (vs Mar 31, 2021) (in thousands) | % Change (vs Mar 31, 2021) | | :-------------------------------- | :------------- | :---------------- | :----------------------- | :------------------------- | :------------- | :----------------------- | :------------------------- | | Deferred Revenue | $56,786 | $46,146 | $10,640 | 23% | $44,835 | $11,951 | 27% | | Contractual commitments not invoiced | $49,262 | $46,497 | $2,765 | 6% | $25,931 | $23,331 | 90% | | Backlog | $106,048 | $92,643 | $13,405 | 14% | $70,766 | $35,282 | 50% | - Backlog growth attributed to strong technology recruitment market, bookings growth at Dice and ClearanceJobs, focus on multi-year contracts, and investments in sales and marketing[115] - The Company continues to develop new software products and features to attract and engage qualified professionals and match them with employers[117] - Largest components of expenses are personnel costs and marketing/sales expenditures[122] Critical Accounting Estimates This section confirms no material changes to critical accounting estimates compared to the prior fiscal year's Annual Report on Form 10-K - No material changes to critical accounting estimates compared to the Annual Report on Form 10-K for fiscal year ended December 31, 2021[123] Three Months Ended March 31, 2022 Compared to the Three Months Ended March 31, 2021 This section provides a detailed comparative analysis of the Company's financial performance for Q1 2022 versus Q1 2021, covering revenues, operating expenses, operating income, and EPS - Overall revenue increased by $7.7 million (29%) year-over-year[124] - Operating income improved by $0.8 million, moving from a loss to a positive margin, driven by higher revenues despite increased operating costs[132] - Net income decreased by $1.37 million, primarily due to a $2.5 million unrealized gain on an equity security in Q1 2021 that did not recur in Q1 2022[14][135] Revenues This section analyzes the Company's revenue performance for Q1 2022 compared to Q1 2021, broken down by Dice and ClearanceJobs brands | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Increase (in thousands) | Percent Change | | :---------------- | :-------------------------------- | :-------------------------------- | :------- | :------------- | | Dice | $24,634 | $19,051 | $5,583 | 29% | | ClearanceJobs | $9,700 | $7,625 | $2,075 | 27% | | Total revenues | $34,334 | $26,676 | $7,658 | 29% | - Dice revenue growth (29%) was due to improved renewal rates, new business activity, and increasing customer counts[124] - ClearanceJobs revenue growth (27%) was driven by high demand for government-cleared professionals and consistent product releases[124] Cost of Revenues This section details the changes in the Company's cost of revenues for Q1 2022 compared to Q1 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Increase (in thousands) | Percent Change | | :----------------- | :-------------------------------- | :-------------------------------- | :------- | :------------- | | Cost of revenues | $4,099 | $3,702 | $397 | 11% | | Percentage of revenues | 11.9% | 13.9% | | | - Increase in cost of revenues (11%) was primarily due to higher compensation-related costs from increased headcount and a decrease in capitalized labor[125] Product Development Expenses This section analyzes the changes in product development expenses for Q1 2022 compared to Q1 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Increase (in thousands) | Percent Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------- | :------------- | | Product development | $3,942 | $3,602 | $340 | 9% | | Percentage of revenues | 11.5% | 13.5% | | | - Product development expenses increased by $0.3 million (9%) due to higher compensation-related costs, partially offset by increased capitalized labor[127] Sales and Marketing Expenses This section details the changes in sales and marketing expenses for Q1 2022 compared to Q1 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Increase (in thousands) | Percent Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------- | :------------- | | Sales and marketing | $13,941 | $9,771 | $4,170 | 43% | | Percentage of revenues | 40.6% | 36.6% | | | - Sales and marketing expenses increased by $4.2 million (43%) due to higher compensation costs from increased headcount and quota attainment, a $1.4 million increase in discretionary marketing, and a $0.4 million increase in operational costs as COVID-19 restrictions eased[128] General and Administrative Expenses This section analyzes the changes in general and administrative expenses for Q1 2022 compared to Q1 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Increase (in thousands) | Percent Change | | :----------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------------- | | General and administrative | $7,766 | $6,154 | $1,612 | 26% | | Percentage of revenues | 22.6% | 23.1% | | | - General and administrative expenses increased by $1.6 million (26%) due to a $0.6 million increase in stock-based compensation (higher PSU achievement), a $0.5 million increase in compensation-related costs, and a $0.4 million increase in operational costs[129] Depreciation This section details the changes in depreciation expense for Q1 2022 compared to Q1 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Increase (in thousands) | Percent Change | | :----------------- | :-------------------------------- | :-------------------------------- | :------- | :------------- | | Depreciation | $3,958 | $3,631 | $327 | 9% | | Percentage of revenues | 11.5% | 13.6% | | | - Depreciation expense increased by $0.3 million (9%) due to increasing capitalized development costs throughout 2021 and projects being placed into service[130] Operating Income (Loss) This section analyzes the Company's operating income (loss) for Q1 2022 compared to Q1 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Increase (in thousands) | Percent Change | | :-------------------- | :-------------------------------- | :-------------------------------- | :------- | :------------- | | Operating income (loss) | $628 | $(184) | $812 | -441% | | Percentage of revenues | 1.8% | (0.7)% | | | - Operating income improved by $0.8 million, moving from a loss to a positive margin, driven by higher revenues, partially offset by increased operating costs for future growth[132] Income from Equity Method Investment This section discusses income from the Company's equity method investment for Q1 2022 compared to Q1 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Increase (in thousands) | Percent Change | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | :------- | :------------- | | Income from equity method investment | $155 | $0 | $155 | n/a | | Percentage of revenues | 0.5% | 0% | | | - The Company recorded $0.2 million of income in Q1 2022 from its proportionate share of eFC's net income[133] Interest Expense and Other This section details the Company's interest expense and other income/expense for Q1 2022 compared to Q1 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Increase (in thousands) | Percent Change | | :----------------------- | :-------------------------------- | :-------------------------------- | :------- | :------------- | | Interest expense and other | $245 | $195 | $50 | 26% | | Percentage of revenues | 0.7% | 0.7% | | | - Interest expense and other remained approximately flat year-over-year[134] Gain on Investment This section analyzes the gain on investment for Q1 2022 compared to Q1 2021, noting the non-recurrence of a prior year gain | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | Decrease (in thousands) | Percent Change | | :----------------- | :-------------------------------- | :-------------------------------- | :------- | :------------- | | Gain on investment | $0 | $2,513 | $(2,513) | -100% | | Percentage of revenues | 0% | 9.4% | | | - The $2.5 million unrealized gain in Q1 2021 was related to an equity security investment that became publicly traded. This gain did not recur in Q1 2022[135] Income Taxes This section details the Company's income tax expense (benefit) and effective tax rates for Q1 2022 compared to Q1 2021 | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------------------- | :-------------------------------- | :-------------------------------- | | Income before income taxes | $538 | $2,134 | | Income tax expense (benefit) | $(763) | $122 | | Effective tax rate | (141.8)% | 5.7% | - The Q1 2022 effective tax rate was (141.8)% due to a $0.8 million tax benefit from share-based compensation[137] - The Q1 2021 effective tax rate was 5.7% due to a $0.5 million tax benefit from releasing a valuation allowance on capital loss carryforward[137] Income from discontinued operations, net of tax This section reports income from discontinued operations for Q1 2022 compared to Q1 2021, reflecting the eFC transfer | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Income from discontinued operations, net of tax | $0 | $659 | | Percentage of revenues | 0% | 2.5% | - Income from discontinued operations in Q1 2021 represented eFC's earnings before its transfer on June 30, 2021[138] Earnings per Share This section presents the Company's diluted earnings per share for Q1 2022 compared to Q1 2021, for both continuing and discontinued operations | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income (in thousands) | $1,301 | $2,671 | | Weighted-average shares outstanding - diluted (in thousands) | 47,170 | 48,606 | | Diluted earnings per share - continuing operations | $0.03 | $0.04 | | Diluted earnings per share - discontinued operations | $0.00 | $0.01 | | Diluted earnings per share | $0.03 | $0.05 | - Diluted EPS decreased from $0.05 in Q1 2021 to $0.03 in Q1 2022, primarily due to the non-recurrence of the unrealized gain on equity securities from 2021[139] Liquidity and Capital Resources This section discusses the Company's cash flows, liquidity, capital resources, and non-GAAP financial measures like Adjusted EBITDA - Principal internal sources of liquidity are cash and cash equivalents and cash flow from operations[152] - The Company had $5.0 million in cash and cash equivalents and $57.0 million in available borrowing capacity under its $90.0 million revolving credit facility as of March 31, 2022[151][152] - Management believes existing liquidity sources will be sufficient for anticipated cash requirements for at least the next 12 months and the foreseeable future[152] Non-GAAP Financial Measures This section explains the Company's use of non-GAAP financial measures, such as Adjusted EBITDA and Adjusted EBITDA Margin, and their definitions - Non-GAAP financial measures like Adjusted EBITDA and Adjusted EBITDA Margin are provided as additional information for operating results, not as alternatives to GAAP measures[141] - Management uses these measures for internal monitoring, planning, investment analysis, and performance comparisons[142] - Adjusted EBITDA is defined as net income adjusted for interest, taxes, depreciation, amortization, non-cash stock-based compensation, certain gains/losses, and other non-recurring items[142] - Adjusted EBITDA Margin is computed as Adjusted EBITDA divided by Revenues[143] Adjusted EBITDA and Adjusted EBITDA Margin This section presents the reconciliation of net income to Adjusted EBITDA and Adjusted EBITDA Margin for Q1 2022 and Q1 2021 Adjusted EBITDA Reconciliation | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Net income | $1,301 | $2,671 | | Interest expense | $245 | $188 | | Income tax expense (benefit) | $(763) | $122 | | Depreciation | $3,958 | $3,631 | | Non-cash stock-based compensation | $2,235 | $1,604 | | Income from equity method investment | $(155) | $0 | | Gain on investment | $0 | $(2,513) | | Severance and related costs | $109 | $562 | | Income from discontinued operations, net of tax | $0 | $(659) | | Adjusted EBITDA | $6,930 | $5,611 | Adjusted EBITDA Margin | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :------------------------ | :-------------------------------- | :-------------------------------- | | Revenues | $34,334 | $26,676 | | Net Income | $1,301 | $2,671 | | Net Income Margin | 4% | 10% | | Adjusted EBITDA | $6,930 | $5,611 | | Adjusted EBITDA Margin | 20% | 21% | - Adjusted EBITDA increased by $1.3 million (23.5%) year-over-year, while Adjusted EBITDA Margin slightly decreased from 21% to 20%[148] Cash Flows This section summarizes the Company's cash flows from operating, investing, and financing activities for Q1 2022 and Q1 2021 Cash Flow Summary | Metric | Three Months Ended March 31, 2022 (in thousands) | Three Months Ended March 31, 2021 (in thousands) | | :--------------------------------------- | :-------------------------------- | :-------------------------------- | | Cash from operating activities | $9,218 | $6,424 | | Cash used in investing activities | $(4,091) | $(3,703) | | Cash used in financing activities | $(1,701) | $(3,012) | - Cash and cash equivalents at March 31, 2022, were $5.0 million, up from $1.5 million at December 31, 2021[151] Liquidity This section discusses the Company's primary liquidity sources, including cash, cash equivalents, and available credit facility - The Company's primary liquidity sources are cash and cash equivalents and cash flow from operations[152] - As of March 31, 2022, $57.0 million was available under the $90.0 million revolving credit facility[152] - Management anticipates sufficient liquidity for the next 12 months and foreseeable future, but acknowledges risks like lender refusal, covenant violations, or inability to refinance debt[152] Operating Activities This section analyzes the Company's net cash flows from operating activities for Q1 2022 compared to Q1 2021 - Net cash flows from operating activities increased by $2.8 million to $9.2 million in Q1 2022, compared to $6.4 million in Q1 2021[153] - The increase was primarily due to strong billings and collections from customers[153] Investing Activities This section analyzes the Company's net cash flows used in investing activities for Q1 2022 compared to Q1 2021 - Cash used in investing activities increased to $4.1 million in Q1 2022 from $3.7 million in Q1 2021[154] - The increase was due to higher internal development costs, mainly from increased product development headcount[154] Financing Activities This section analyzes the Company's net cash flows used in financing activities for Q1 2022 compared to Q1 2021 - Cash used in financing activities decreased to $1.7 million in Q1 2022 from $3.0 million in Q1 2021[155] - Q1 2022 activities were driven by $10.0 million net proceeds on long-term debt and $11.7 million in share repurchases[155] - Q1 2021 activities were primarily driven by share repurchases[155] Financing and Capital Requirements This section outlines the Company's financing and capital requirements, including its revolving credit facility and estimated interest payments - The Company has a $90 million revolving credit facility maturing in November 2023, with $33.0 million borrowed and $57.0 million available as of March 31, 2022[157] - Interest payments on current borrowings are estimated at $0.6 million in 2022 and $0.8 million in 2023, assuming a 2.25% interest rate[157] - The Company was in compliance with all financial covenants under the Credit Agreement as of March 31, 2022[157] Contractual Obligations This section details the Company's contractual obligations, primarily operating lease liabilities for office space and equipment - Operating lease obligations for corporate office space and equipment totaled $6.4 million as of March 31, 2022[158] - No significant long-term obligations to purchase fixed or minimum amounts from online advertising vendors[159] Other Capital Requirements This section discusses other capital requirements, including unrecognized tax benefits, share repurchases, and anticipated capital expenditures - Approximately $0.9 million of unrecognized tax benefits were recorded as liabilities as of March 31, 2022, with $0.2 million potentially recognized in the next 12 months[160] - $13.1 million remained available for share repurchases under the current plan as of March 31, 2022[161] - Anticipated capital expenditures for 2022 are approximately $20 million, an increase over prior periods, primarily for new product and feature development, to be funded by operating cash flows[162] Impact of COVID-19 on our Business This section discusses the impact of the COVID-19 pandemic on the Company's business, including recruitment activity and operational adjustments - COVID-19 caused an economic downturn and slowed recruitment activity in 2020 and early 2021, impacting revenues and operating cash flows[163] - The Company is not anticipating a significant long-term impact on its business, but the situation is uncertain and rapidly changing[163][165] - The Company has adopted work-from-home policies and temporary office closures to protect employee health and safety[163] Cyclicality This section addresses the historical cyclicality of the labor market and its potential impact on the Company's recruitment services - The labor market and industries served have historically experienced short-term cyclicality, but online career websites continue to provide economic and strategic value[166] - Slowdowns in recruitment activity (e.g., COVID-19 in 2020-early 2021) can negatively impact revenues and results[167][168] - Decreased unemployment or labor shortages generally lead to increased demand for recruitment services and positive revenue impact, though with a lag due to revenue recognition over contract length[167] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the Company's exposure to financial market risks, including foreign currency exchange rates and interest rates - The Company has exposure to financial market risks, including changes in foreign currency exchange rates and interest rates[169] Foreign Exchange Risk This section discusses the Company's foreign exchange risk, primarily related to its equity method investment in eFC after deconsolidation - Post-June 30, 2021, the Company's direct operations are solely within the United States, eliminating direct foreign exchange risk[170] - The Company's 40% equity method investment in eFC (British Pound Sterling functional currency) subjects it to foreign exchange risk, but the impact on its share of eFC's net income is not expected to be significant[170] Interest Rate Risk This section details the Company's interest rate risk, primarily from borrowings under its Credit Agreement, and the impact of rate changes - Interest rate risk primarily relates to borrowings under the Credit Agreement, which bear interest at a LIBOR or base rate plus a margin[171] - As of March 31, 2022, $33.0 million was outstanding under the Credit Agreement. A 1.0% increase in interest rates would increase 2022 interest expense by approximately $0.2 million[171] - The Company is monitoring the planned phasing out of USD LIBOR tenors by June 30, 2023, and is working with lenders to minimize impact[174] Item 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures and reports on changes in internal control - Disclosure controls and procedures were evaluated as of March 31, 2022, and deemed effective by the CEO and CFO to provide reasonable assurance that required information is recorded, processed, summarized, and reported timely[175] Evaluation of Disclosure Controls and Procedures This section reports on the CEO and CFO's conclusion regarding the effectiveness of the Company's disclosure controls and procedures - CEO and CFO concluded that disclosure controls and procedures are effective as of March 31, 2022, ensuring timely and accurate reporting of information[175] Changes in Internal Controls This section reports that no material changes occurred in internal control over financial reporting during Q1 2022 - No changes in internal control over financial reporting occurred during the quarter ended March 31, 2022, that materially affected or are reasonably likely to materially affect internal control over financial reporting[176] PART II. OTHER INFORMATION This section provides additional information, including legal proceedings, risk factors, equity sales, and exhibits Item 1. Legal Proceedings This section states that the Company is involved in routine legal disputes but has no material pending legal proceedings - The Company is subject to various claims and lawsuits in the ordinary course of business[178] - No material pending legal proceedings are currently a party to, beyond what is noted in Part 1, Item 1[178] Item 1A. Risk Factors This section refers readers to the comprehensive risk factors in the Annual Report on Form 10-K, noting no material changes as of May 4, 2022 - No material changes to risk factors have occurred as of May 4, 2022, compared to those disclosed in the Annual Report on Form 10-K[179] - Readers should carefully consider all risk factors, as additional unknown or immaterial risks could adversely affect the business[179] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the Company's stock repurchase programs, including the $15 million program approved in February 2022, and summarizes shares repurchased in Q1 2022 - The Board approved a new stock repurchase program in February 2022, authorizing the purchase of up to $15 million of common stock through February 2023[180] Stock Repurchase Program Activity | Period | Total Number of Shares Purchased (1) | Average Price (2) Paid per Share | Total Shares Purchased as Part of Publicly Announced Programs (3) | Approximate Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs (in thousands) | | :--------------------------------- | :----------------------------------- | :------------------------------- | :---------------------------------------------------------------- | :--------------------------------------------------------------------------------------- | | January 1 through January 31, 2022 | 943,036 | $5.69 | 742,286 | $1,504,702 | | February 1 through February 28, 2022 | 543,371 | $5.73 | 327,407 | $14,499,672 | | March 1 through March 31, 2022 | 232,533 | $5.84 | 232,533 | $13,142,226 | | Total | 1,718,940 | $5.72 | 1,302,226 | | - The total number of shares purchased includes those under the stock repurchase plan and shares withheld for income tax from employee restricted stock/PSU vesting[180] Item 5. Other Information This section states that there is no other information to report - No other information to report[182] Item 6. Exhibits This section lists the exhibits filed with the Form 10-Q, including certifications and XBRL documents - Includes Certifications of CEO and CFO pursuant to Sarbanes-Oxley Act Sections 302 and 906[184] - XBRL Instance Document, Taxonomy Extension Schema, Calculation Linkbase, Definition Linkbase, Label Linkbase, and Presentation Linkbase Documents are filed[184] - Cover Page Interactive Data File is formatted as inline XBRL[184] SIGNATURES This section contains the official signatures of DHI Group, Inc.'s President and CEO, and CFO, certifying the report - The report is duly signed on behalf of DHI Group, Inc. by Art Zeile (President and CEO) and Kevin Bostick (CFO) on May 4, 2022[187]