DHI(DHX) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited condensed consolidated financial statements, management's discussion and analysis, market risk disclosures, and controls and procedures for the reporting period Item 1. Unaudited Financial Statements This section presents the unaudited condensed consolidated financial statements of DHI Group, Inc. for the three months ended March 31, 2023 and 2022, including balance sheets, statements of operations, comprehensive income, stockholders' equity, and cash flows, along with detailed notes explaining the basis of presentation, new accounting standards, fair value measurements, revenue recognition, leases, investments, intangible assets, goodwill, indebtedness, commitments, equity transactions, stock-based compensation, earnings per share, and income taxes Condensed Consolidated Balance Sheets This section provides a snapshot of the company's financial position, detailing assets, liabilities, and equity as of March 31, 2023, and December 31, 2022 Condensed Consolidated Balance Sheets (March 31, 2023 vs. December 31, 2022) | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------- | :------------- | :---------------- | | Total assets | $233,009 | $226,704 | | Total liabilities | $131,757 | $120,465 | | Total stockholders' equity | $101,252 | $106,239 | | Cash | $5,368 | $3,006 | | Accounts receivable, net | $24,980 | $20,494 | | Deferred revenue (current) | $58,079 | $50,121 | | Long-term debt | $46,000 | $30,000 | - Total assets increased by $6.3 million, primarily driven by an increase in cash and accounts receivable[10] - Total liabilities increased by $11.3 million, mainly due to a $16.0 million increase in long-term debt and an $8.0 million increase in deferred revenue, partially offset by a decrease in accounts payable and accrued expenses[10] - Total stockholders' equity decreased by $5.0 million, influenced by treasury stock repurchases and a decrease in accumulated earnings[10] Condensed Consolidated Statements of Operations This section details the company's financial performance over the three months ended March 31, 2023 and 2022, including revenues, operating expenses, and net income Condensed Consolidated Statements of Operations (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands, except per share) | 2023 | 2022 | Change ($) | Change (%) | | :------------------------------------ | :------ | :------ | :--------- | :--------- | | Revenues | $38,620 | $34,334 | $4,286 | 12% | | Total operating expenses | $38,047 | $33,706 | $4,341 | 13% | | Operating income | $573 | $628 | $(55) | (9)% | | Income (loss) before income taxes | $(54) | $538 | $(592) | (110)% | | Net income | $460 | $1,301 | $(841) | (65)% | | Basic earnings per share | $0.01 | $0.03 | $(0.02) | (67)% | | Diluted earnings per share | $0.01 | $0.03 | $(0.02) | (67)% | - Revenues increased by 12% year-over-year, driven by strong performance in both Dice and ClearanceJobs brands[12] - Net income decreased significantly by 65% due to higher operating expenses, increased interest expense, and a lower income tax benefit[12] Condensed Consolidated Statements of Comprehensive Income This section presents the company's comprehensive income, including net income and other comprehensive income components, for the three months ended March 31, 2023 and 2022 Condensed Consolidated Statements of Comprehensive Income (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | | :------------------------------ | :--- | :--- | | Net income | $460 | $1,301 | | Foreign currency translation adjustment | $150 | $8 | | Total other comprehensive income | $150 | $8 | | Comprehensive income | $610 | $1,309 | - Comprehensive income decreased by 53% year-over-year, primarily reflecting the decrease in net income, despite a higher foreign currency translation adjustment in 2023[14] Condensed Consolidated Statements of Stockholders' Equity This section outlines the changes in stockholders' equity, including net income, stock-based compensation, and treasury stock transactions, for the three months ended March 31, 2023 Changes in Stockholders' Equity (Three Months Ended March 31, 2023) | Item (in thousands) | Amount | | :------------------------------ | :----- | | Balance at December 31, 2022 | $106,239 | | Net income | $460 | | Other comprehensive income | $150 | | Stock-based compensation | $2,887 | | Treasury stock purchases | $(3,521) | | Treasury stock for tax obligations | $(5,295) | | Cumulative-effect of new accounting principle | $332 | | Balance at March 31, 2023 | $101,252 | - Stockholders' equity decreased from $106.2 million at December 31, 2022, to $101.3 million at March 31, 2023, primarily due to significant treasury stock repurchases for stock repurchase plans and tax obligations, partially offset by net income and stock-based compensation[16] Condensed Consolidated Statements of Cash Flows This section reports the company's cash inflows and outflows from operating, investing, and financing activities for the three months ended March 31, 2023 and 2022 Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, 2023 vs. 2022) | Activity (in thousands) | 2023 | 2022 | Change ($) | | :------------------------------ | :------ | :------ | :--------- | | Operating activities | $11 | $9,218 | $(9,207) | | Investing activities | $(4,833) | $(4,091) | $(742) | | Financing activities | $7,184 | $(1,701) | $8,885 | | Net change in cash | $2,362 | $3,426 | $(1,064) | | Cash, end of period | $5,368 | $4,966 | $402 | - Net cash from operating activities significantly decreased from $9.2 million in Q1 2022 to $0.01 million in Q1 2023, primarily due to higher headcount, timing of bonus payments, and changes in working capital[19][138] - Cash used in investing activities increased due to higher purchases of fixed assets, mainly capitalized development costs[19][139] - Cash from financing activities turned positive in Q1 2023, driven by $16.0 million in net proceeds from long-term debt, offsetting $8.8 million in share repurchases[19][140] Notes to Condensed Consolidated Financial Statements This section provides detailed explanations and disclosures supporting the condensed consolidated financial statements, covering accounting policies, fair value measurements, revenue, leases, investments, and other financial items 1. BASIS OF PRESENTATION This note describes the basis for preparing the unaudited condensed consolidated financial statements in accordance with U.S. GAAP and SEC rules, and the company's single reportable segment - The unaudited condensed consolidated financial statements are prepared in accordance with U.S. GAAP and SEC rules, with all adjustments consisting of normal and recurring accruals[22] - The Company operates as a single reportable segment, 'Tech-focused,' encompassing Dice and ClearanceJobs brands, with all operations located in the United States[24] 2. NEW ACCOUNTING STANDARDS This note details the adoption of new accounting standards, specifically ASU No. 2016-13, and its impact on the company's financial statements - Effective January 1, 2023, the Company adopted ASU No. 2016-13, 'Financial Instruments - Credit Losses (Topic 326),' resulting in a $0.3 million cumulative-effect adjustment to increase accumulated earnings and reduce the allowance for doubtful accounts[25] 3. FAIR VALUE MEASUREMENTS This note explains the company's use of a three-tier fair value hierarchy for financial instruments and the non-recurring fair value measurements of certain assets - The Company uses a three-tier fair value hierarchy (Level 1, 2, 3) for financial instruments, with long-term debt estimated using Level 2 inputs[26][28] - Certain assets like equity investments, operating lease ROU assets, goodwill, and intangible assets are measured at fair value on a non-recurring basis, subject to impairment adjustments[29] 4. REVENUE RECOGNITION This note outlines the company's revenue recognition policies, disaggregated revenue by brand, and contract balances for recruitment services and advertising - Revenue is recognized ratably over the service period from recruitment packages, advertising, classifieds, and event booth rentals[30] Disaggregated Revenue by Brand (Three Months Ended March 31, 2023 vs. 2022) | Brand | 2023 (in thousands) | 2022 (in thousands) | | :------------ | :------------------ | :------------------ | | Dice | $26,910 | $24,634 | | ClearanceJobs | $11,710 | $9,700 | | Total | $38,620 | $34,334 | Contract Balances (March 31, 2023 vs. December 31, 2022) | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Receivables | $24,980 | $20,494 | | Short-term contract liabilities (deferred revenue) | $58,079 | $50,121 | | Long-term contract liabilities (deferred revenue) | $765 | $743 | - The Company recognized $22.987 million in revenue in Q1 2023 from amounts included in contract liabilities at the beginning of the period, up from $20.940 million in Q1 2022[35] 5. LEASES This note provides information on the company's operating leases for office space and equipment, including lease costs and related balance sheet information - The Company has operating leases for corporate office space and equipment, with terms ranging from one to eight years, some including renewal options[37] Lease Costs (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | | :-------------------- | :--- | :--- | | Operating lease cost | $603 | $509 | | Sublease income | $(130) | $(123) | | Total lease cost | $473 | $386 | Supplemental Balance Sheet Information Related to Leases (March 31, 2023 vs. December 31, 2022) | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Operating lease right-of-use-assets | $6,088 | $6,581 | | Total operating lease liabilities | $8,007 | $8,533 | | Weighted Average Remaining Lease Term (years) | 6.0 | 5.8 | | Weighted Average Discount Rate | 4.4% | 4.4% | 6. INVESTMENTS This note details the company's equity investments, including a convertible promissory note conversion, sale of Rigzone interest, and equity method accounting for eFC - A $3.0 million convertible promissory note was converted into preferred shares (4.9% ownership, later 4.1%) in a values-based career destination company in September 2022, resulting in a $2.3 million impairment loss[43][44][46] - The Company sold its 40% interest in Rigzone for $0.3 million in Q2 2022, recognizing a gain on sale[47] - The 40% common share interest in eFC is accounted for under the equity method, contributing $0.2 million in income for the three months ended March 31, 2023 and 2022[49] 7. ACQUIRED INTANGIBLE ASSETS, NET This note describes the company's indefinite-lived acquired intangible asset related to Dice trademarks and brand name, and the absence of impairment - The Company holds an indefinite-lived acquired intangible asset of $23.8 million related to the Dice trademarks and brand name as of March 31, 2023 and December 31, 2022[53] - No impairment was recorded for the Dice trademarks and brand name during the three months ended March 31, 2023 and 2022, with projections approximating those used in the October 1, 2022 analysis[53][54] 8. GOODWILL This note reports the goodwill allocated to the Tech-focused reporting unit and confirms no impairment was recorded during the period - Goodwill allocated to the Tech-focused reporting unit remained at $128.1 million as of March 31, 2023 and December 31, 2022[56] - No goodwill impairment was recorded during the three months ended March 31, 2023 and 2022, as the fair value of the reporting unit was substantially in excess of its carrying value[57] 9. INDEBTEDNESS This note details the company's revolving credit facility, borrowing terms, outstanding debt, and compliance with financial covenants - The Company entered into a Third Amended and Restated Credit Agreement in June 2022, providing a $100 million revolving loan facility (maturing June 2027) with a $50 million expansion option[61] - Borrowings bear interest at SOFR or a base rate plus a margin (2.00%-2.75% for SOFR/SONIA, 1.00%-1.75% for base rate), plus an additional 0.10% spread[62] Long-term Debt and Available Borrowing (March 31, 2023 vs. December 31, 2022) | Metric (in thousands) | March 31, 2023 | December 31, 2022 | | :-------------------------------- | :------------- | :---------------- | | Long-term debt under revolving credit facility | $46,000 | $30,000 | | Available to be borrowed | $54,000 | $70,000 | | Actual interest rates (weighted average) | 6.90% | 6.67% | - As of March 31, 2023, the Company was in compliance with all financial covenants under the Credit Agreement[63] 10. COMMITMENTS AND CONTINGENCIES This note addresses the company's exposure to various claims, lawsuits, and other contingencies in the ordinary course of business - The Company is subject to various claims from taxing authorities, lawsuits, and other complaints in the ordinary course of business, with management believing final resolution will not materially affect financial condition[71] 11. EQUITY TRANSACTIONS This note provides information on the company's stock repurchase programs, including shares repurchased and remaining authorization - The Board approved a new $10.0 million stock repurchase program in February 2023, valid through February 2024, with $8.2 million remaining as of March 31, 2023[76][77] Stock Repurchases (Three Months Ended March 31, 2023 vs. 2022) | Metric | 2023 | 2022 | | :-------------------------- | :-------- | :---------- | | Shares repurchased | 742,536 | 1,302,226 | | Average purchase price per share | $4.76 | $5.78 | | Dollar value of shares repurchased (in thousands) | $3,536 | $7,525 | 12. STOCK-BASED COMPENSATION This note details the stock-based compensation expense, unrecognized compensation, and status of restricted stock and PSU awards - Total stock-based compensation expense was $2.9 million for Q1 2023, up from $2.2 million in Q1 2022[85] - As of March 31, 2023, $20.8 million of unrecognized compensation expense related to unvested awards is expected to be recognized over approximately 1.6 years[85] Restricted Stock Awards Status (Three Months Ended March 31, 2023 vs. 2022) | Metric | 2023 Shares | 2022 Shares | | :---------------------- | :---------- | :---------- | | Non-vested at beginning | 2,639,286 | 3,371,832 | | Granted | 1,107,000 | 932,500 | | Vested | (962,178) | (1,098,127) | | Non-vested at end | 2,780,108 | 3,124,491 | PSU Awards Status (Three Months Ended March 31, 2023 vs. 2022) | Metric | 2023 Shares | 2022 Shares | | :---------------------- | :---------- | :---------- | | Non-vested at beginning | 2,086,932 | 1,593,775 | | Granted | 1,357,587 | 1,553,332 | | Vested | (1,236,074) | (928,717) | | Non-vested at end | 2,208,445 | 2,125,049 | 13. EARNINGS PER SHARE This note presents the calculation of basic and diluted earnings per share, reflecting net income and weighted-average shares outstanding Earnings Per Share (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands, except per share) | 2023 | 2022 | | :------------------------------------ | :------ | :------ | | Net income | $460 | $1,301 | | Weighted-average basic shares outstanding | 43,886 | 44,702 | | Weighted-average diluted shares outstanding | 45,240 | 47,170 | | Basic earnings per share | $0.01 | $0.03 | | Diluted earnings per share | $0.01 | $0.03 | - Diluted EPS decreased from $0.03 in Q1 2022 to $0.01 in Q1 2023, driven by lower operating income and increased interest expense[93][127] 14. INCOME TAXES This note outlines the company's income tax benefit and effective tax rate, primarily influenced by share-based compensation awards Income Taxes (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands, except percentages) | 2023 | 2022 | | :-------------------------------------- | :------- | :------- | | Income (loss) before income taxes | $(54) | $538 | | Income tax benefit | $(514) | $(763) | | Effective tax rate | 951.9% | (141.8)% | - The effective tax rate for Q1 2023 was 952% (vs. -142% in Q1 2022), primarily due to tax benefits from the vesting of share-based compensation awards ($0.5 million in 2023, $0.8 million in 2022)[94][126] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on the Company's financial condition and results of operations for the three months ended March 31, 2023, compared to the same period in 2022, covering business overview, revenue/expense drivers, financial performance, non-GAAP measures, and liquidity Overview This section provides an overview of DHI Group, Inc.'s business, focusing on its career marketplaces for technologists and government-cleared professionals through Dice and ClearanceJobs brands - DHI Group, Inc. provides software products, online tools, and services, operating career marketplaces for technologists and professionals with government security clearances through its Dice and ClearanceJobs brands[100] - The Company specializes in employment categories with high demand for skilled professionals and operates as a single 'Tech-focused' reportable segment[101][102] Our Revenues and Expenses This section details the primary sources of revenue from recruitment packages and resume database access, along with key expense categories like personnel and marketing - The majority of revenues come from customer fees for job postings and access to resume databases, with fees varying by user count, job posting type, and package terms[104] Recruitment Package Customers and Average Annual Revenue (March 31, 2023 vs. 2022) | Metric | March 31, 2023 | March 31, 2022 | Change (%) | | :-------------------------------------- | :------------- | :------------- | :--------- | | Dice Recruitment Package Customers | 6,171 | 6,249 | (1)% | | ClearanceJobs Recruitment Package Customers | 2,078 | 1,928 | 8% | | Dice Average Annual Revenue per Customer | $15,672 | $14,112 | 11% | | ClearanceJobs Average Annual Revenue per Customer | $20,520 | $18,408 | 11% | - Dice customer count decreased due to macroeconomic conditions, but average annual revenue per customer increased due to strong renewal and retention rates among larger recurring customers[106] - ClearanceJobs saw increases in both customer count and average annual revenue per customer, driven by high demand for government-cleared professionals and consistent product enhancements[107] Deferred Revenue and Backlog (March 31, 2023 vs. Prior Periods) | Metric (in thousands) | March 31, 2023 | Dec 31, 2022 | YoY Change (%) | QoQ Change (%) | | :-------------------- | :------------- | :----------- | :------------- | :------------- | | Deferred Revenue | $58,844 | $50,864 | 4% | 16% | | Contractual commitments not invoiced | $65,389 | $66,391 | 33% | (2)% | | Backlog | $124,233 | $117,255 | 17% | 6% | - Backlog increased by 17% year-over-year and 6% quarter-over-quarter, attributed to a strong technology recruitment market, bookings growth, focus on multi-year contracts, and sales/marketing investments[109] - Key expenses include personnel costs (salaries, benefits, incentive compensation) and marketing and sales expenditures (online advertising, brand promotion, lead generation)[114] Three Months Ended March 31, 2023 Compared to the Three Months Ended March 31, 2022 This section provides a detailed comparative analysis of the company's revenues, operating expenses, and profitability for the three months ended March 31, 2023, versus the prior year Revenues This section analyzes the company's revenue performance by brand, highlighting growth drivers for Dice and ClearanceJobs Revenue by Brand (Three Months Ended March 31, 2023 vs. 2022) | Brand (in thousands) | 2023 | 2022 | Increase ($) | Change (%) | | :------------------- | :------ | :------ | :----------- | :--------- | | Dice | $26,910 | $24,634 | $2,276 | 9% | | ClearanceJobs | $11,710 | $9,700 | $2,010 | 21% | | Total revenues | $38,620 | $34,334 | $4,286 | 12% | - Total revenue increased by 12%, with Dice revenue up 9% due to strong renewal/retention rates, and ClearanceJobs revenue up 21% driven by high demand for government-cleared professionals and product enhancements[116] Cost of Revenues This section details the changes in cost of revenues, primarily driven by compensation-related costs and headcount adjustments Cost of Revenues (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | Increase ($) | Change (%) | | :-------------------- | :------ | :------ | :----------- | :--------- | | Cost of revenues | $4,912 | $4,099 | $813 | 20% | | Percentage of revenues | 12.7% | 11.9% | | | - Cost of revenues increased by 20%, primarily due to a $0.7 million increase in compensation-related costs from higher headcount, partially offset by increased capitalized labor[117] Product Development Expenses This section examines the increase in product development expenses, mainly due to higher compensation costs and capitalized labor Product Development Expenses (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | Increase ($) | Change (%) | | :-------------------- | :------ | :------ | :----------- | :--------- | | Product development | $4,694 | $3,942 | $752 | 19% | | Percentage of revenues | 12.2% | 11.5% | | | - Product development expenses increased by 19%, driven by a $1.1 million increase in compensation-related costs from higher headcount, partially offset by increased capitalized labor[119] Sales and Marketing Expenses This section discusses the increase in sales and marketing expenses, attributed to higher compensation costs from increased headcount and quota attainment Sales and Marketing Expenses (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | Increase ($) | Change (%) | | :-------------------- | :------ | :------ | :----------- | :--------- | | Sales and marketing | $16,060 | $13,941 | $2,119 | 15% | | Percentage of revenues | 41.6% | 40.6% | | | - Sales and marketing expenses increased by 15%, primarily due to a $1.9 million increase in compensation-related costs from higher headcount and quota attainment[120] General and Administrative Expenses This section analyzes the changes in general and administrative expenses, influenced by stock-based compensation and headcount costs General and Administrative Expenses (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | Increase ($) | Change (%) | | :-------------------- | :------ | :------ | :----------- | :--------- | | General and administrative | $8,208 | $7,766 | $442 | 6% | | Percentage of revenues | 21.3% | 22.6% | | | - General and administrative expenses increased by 6%, driven by a $0.7 million increase in stock-based compensation due to higher achievement against PSU targets, partially offset by lower headcount compensation costs[121] Depreciation This section explains the increase in depreciation expense, primarily due to higher capitalized internal development costs Depreciation Expense (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | Increase ($) | Change (%) | | :-------------------- | :------ | :------ | :----------- | :--------- | | Depreciation | $4,173 | $3,958 | $215 | 5% | | Percentage of revenues | 10.8% | 11.5% | | | - Depreciation expense increased by 5%, driven by higher capitalized internal development costs in 2022 and Q1 2023[122] Operating Income This section details the decrease in operating income and margin, resulting from increased operating costs and investments Operating Income (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | Decrease ($) | Change (%) | | :-------------------- | :------ | :------ | :----------- | :--------- | | Operating income | $573 | $628 | $(55) | (9)% | | Operating margin | 1.5% | 1.8% | | | - Operating income decreased by 9% and operating margin declined from 1.8% to 1.5%, primarily due to higher operating costs from investments in product and sales/marketing headcount, partially offset by increased revenues[123] Income from Equity Method Investment This section reports the income recognized from the company's equity method investment in eFC Income from Equity Method Investment (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | | :-------------------------------- | :--- | :--- | | Income from equity method investment | $171 | $155 | - The Company recorded $0.2 million of income from its proportionate share of eFC's net income for both periods, recognized three months in arrears[124] Interest Expense and Other This section explains the significant increase in interest expense due to higher outstanding debt and rising interest rates Interest Expense and Other (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands) | 2023 | 2022 | | :-------------------- | :--- | :--- | | Interest expense and other | $798 | $245 | - Interest expense and other increased significantly by 226%, primarily due to higher outstanding debt on the revolving credit facility and increased interest rates[125] Income Taxes This section analyzes the company's income tax benefit and effective tax rate, primarily influenced by share-based compensation awards Income Tax Benefit and Effective Tax Rate (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands, except percentages) | 2023 | 2022 | | :-------------------------------------- | :------- | :------- | | Income (loss) before income taxes | $(54) | $538 | | Income tax benefit | $(514) | $(763) | | Effective tax rate | 951.9% | (141.8)% | - The effective tax rate for Q1 2023 was 951.9%, compared to (141.8)% in Q1 2022, primarily influenced by tax benefits from share-based compensation awards[126] Earnings per Share This section details the decrease in diluted earnings per share, driven by lower operating income and increased interest expense Diluted Earnings Per Share (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands, except per share) | 2023 | 2022 | | :------------------------------------ | :---- | :---- | | Net Income | $460 | $1,301 | | Diluted earnings per share | $0.01 | $0.03 | - Diluted earnings per share decreased from $0.03 in Q1 2022 to $0.01 in Q1 2023, driven by lower operating income and increased interest expense[127] Non-GAAP Financial Measures This section presents and reconciles non-GAAP financial measures, including Adjusted EBITDA and Adjusted EBITDA Margin, used to assess operating performance and cash flow generation - The Company uses non-GAAP measures like Adjusted EBITDA and Adjusted EBITDA Margin to assess operating performance, internal monitoring, planning, and compensation, as they provide insights into cash flow generation for debt service, capital expenditures, and future growth[128][129][131] Adjusted EBITDA and Adjusted EBITDA Margin (Three Months Ended March 31, 2023 vs. 2022) | Metric (in thousands, except percentages) | 2023 | 2022 | | :-------------------------------------- | :------ | :------ | | Net income | $460 | $1,301 | | Adjusted EBITDA | $8,054 | $6,930 | | Net income margin | 1% | 4% | | Adjusted EBITDA Margin | 21% | 20% | - Adjusted EBITDA increased by 16.2% to $8.1 million in Q1 2023, and Adjusted EBITDA Margin improved to 21% from 20% in Q1 2022[134] Liquidity and Capital Resources This section discusses the company's financial liquidity, capital sources, cash flow activities, debt, and future capital requirements Cash Flows This section summarizes the company's cash flows from operating, investing, and financing activities, and the overall change in cash balance Summary of Cash Flows (Three Months Ended March 31, 2023 vs. 2022) | Activity (in thousands) | 2023 | 2022 | | :------------------------------ | :------ | :------ | | Cash from operating activities | $11 | $9,218 | | Cash used in investing activities | $(4,833) | $(4,091) | | Cash from (used in) financing activities | $7,184 | $(1,701) | | Cash, end of period | $5,368 | $4,966 | - The Company's cash balance increased to $5.4 million at March 31, 2023, from $3.0 million at December 31, 2022[136] Liquidity This section outlines the company's principal liquidity sources, including cash, operating cash flow, and available borrowing capacity, and management's assessment of sufficiency - Principal liquidity sources are cash, operating cash flow, and $54.0 million in borrowing capacity under the $100.0 million Credit Agreement as of March 31, 2023[137] - Management believes existing cash, operating cash flow, and available borrowings are sufficient for anticipated cash requirements for at least the next 12 months[137] Operating Activities This section details the significant decrease in net cash flows from operating activities, attributed to higher headcount, bonus timing, and working capital changes - Net cash flows from operating activities decreased by $9.2 million to $0.01 million in Q1 2023, compared to $9.2 million in Q1 2022, due to higher headcount, timing of bonus payments, and changes in working capital[138] Investing Activities This section explains the increase in cash used in investing activities, primarily due to higher purchases of fixed assets and capitalized development costs - Cash used in investing activities increased to $4.8 million in Q1 2023 from $4.1 million in Q1 2022, driven by higher purchases of fixed assets, primarily capitalized development costs[139] Financing Activities This section describes the positive cash flow from financing activities, driven by net proceeds from long-term debt partially offset by share repurchases - Cash from financing activities was $7.2 million in Q1 2023, driven by $16.0 million in net proceeds from long-term debt, partially offset by $8.8 million in share repurchases[140] Financing and Capital Requirements This section outlines the company's revolving credit facility, available borrowing capacity, and anticipated capital expenditures for new product development and leasehold improvements - The Company has a $100 million revolving credit facility maturing in June 2027, with $46.0 million borrowed and $54.0 million available as of March 31, 2023[141] - Anticipated capital expenditures for 2023 are $20 million to $22 million, an increase over prior periods, primarily for new product development and leasehold improvements, funded by operating cash flows[146] Contractual Obligations This section provides information on the company's operating lease right-of-use assets and lease liabilities - As of March 31, 2023, the Company's operating lease right-of-use asset was $6.1 million and lease liability was $8.0 million[142] Other Capital Requirements This section discusses unrecognized tax benefits and the remaining availability under the stock repurchase plan - The Company recorded $0.8 million in unrecognized tax benefits as liabilities, with a possibility of recognizing up to $0.2 million in the next 12 months[144] - As of March 31, 2023, $8.2 million remained available for repurchase under the current stock repurchase plan[145] Cyclicality This section addresses the historical cyclicality of the labor market and its potential impact on the company's revenues and recruitment activity - The labor market and industries served by the Company have historically experienced short-term cyclicality, with online career websites providing strategic value[147] - Slowdowns in recruitment activity can negatively impact revenues, while decreases in unemployment or labor shortages generally have a positive impact, though with a lag in revenue recognition[148][149] Item 3. Quantitative and Qualitative Disclosures About Market Risk This section outlines the Company's exposure to financial market risks, specifically foreign currency exchange rates and interest rates, and how these risks are managed or impact the financial position Foreign Exchange Risk This section assesses the company's exposure to foreign currency exchange rate fluctuations, primarily through its equity method investment - The Company's primary operations are within the United States, limiting direct foreign exchange risk, but its equity method investment in eFC (functional currency British Pound Sterling) introduces foreign exchange risk, though not expected to be significant[152] Interest Rate Risk This section details the company's exposure to interest rate risk, primarily from variable-rate borrowings under its credit agreement - Interest rate risk primarily relates to borrowings under the Credit Agreement, which bear variable interest rates (SOFR or base rate plus a margin)[153] - As of March 31, 2023, with $46.0 million outstanding, a hypothetical 1.0% increase in variable rates would increase interest expense by approximately $0.1 million for the three months ended March 31, 2023[153] Item 4. Controls and Procedures This section details the evaluation of the Company's disclosure controls and procedures and reports on any changes in internal controls over financial reporting Evaluation of Disclosure Controls and Procedures This section reports management's conclusion on the effectiveness of the company's disclosure controls and procedures as of March 31, 2023 - Management, with CEO and CFO participation, concluded that the Company's disclosure controls and procedures were effective as of March 31, 2023, providing reasonable assurance that required information is recorded, processed, summarized, and reported timely[154][156] Changes in Internal Controls This section confirms that no material changes occurred in the company's internal controls over financial reporting during the quarter - No material changes in internal controls over financial reporting occurred during the quarter ended March 31, 2023[157] PART II. OTHER INFORMATION This section includes information on legal proceedings, risk factors, equity security sales, and other required disclosures Item 1. Legal Proceedings This section addresses the Company's involvement in legal disputes and litigation - The Company is not currently a party to any material pending legal proceedings, beyond those noted in the financial statements[159] Item 1A. Risk Factors This section refers to the risk factors that could materially affect the Company's business, financial condition, or results of operations - There have been no material changes to the risk factors previously disclosed in the Company's Annual Report on Form 10-K as of May 10, 2023[160] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section provides information on the Company's stock repurchase programs and related equity security transactions - The Board approved a new $10.0 million stock repurchase program in February 2023, valid through February 2024[162] Stock Repurchases During Q1 2023 | Period | Total Shares Purchased | Average Price Paid per Share | | :-------------------------- | :--------------------- | :--------------------------- | | January 1 through January 31, 2023 | 500,280 | $5.74 | | February 1 through February 28, 2023 | 360,027 | $5.30 | | March 1 through March 31, 2023 | 268,340 | $3.86 | | Total | 1,128,647 | | - Total shares purchased in Q1 2023 included 0.7 million shares under stock repurchase plans and 0.4 million shares withheld for employee income tax obligations[164] - As of March 31, 2023, approximately $8.2 million remained available for purchase under the current stock repurchase plan[164] Item 5. Other Information This section indicates that there is no other information to report - No other information is reported in this section[166] Item 6. Exhibits This section lists all exhibits filed as part of the Form 10-Q - The exhibits include corporate governance documents (Certificate of Incorporation, By-laws), specimen stock certificate, certifications from CEO and CFO (Sarbanes-Oxley Act Sections 302 and 906), and XBRL-related documents[167]