DHI(US:DHX)2023-08-01 16:00PART I. FINANCIAL INFORMATION Item 1. Unaudited Financial Statements Unaudited financial statements for Q2 and H1 2023 show a Q2 net loss from restructuring and a significant H1 net income decline Condensed Consolidated Balance Sheets Total assets slightly decreased to $223,712 thousand, long-term debt increased to $43,000 thousand, and stockholders' equity declined Balance Sheet Summary (in thousands) | Account | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Total Assets | $223,712 | $226,704 | | Cash | $2,724 | $3,006 | | Accounts receivable, net | $18,990 | $20,494 | | Goodwill | $128,100 | $128,100 | | Total Liabilities | $123,236 | $120,465 | | Deferred revenue (Current) | $52,768 | $50,121 | | Long-term debt | $43,000 | $30,000 | | Total stockholders' equity | $100,476 | $106,239 | Condensed Consolidated Statements of Operations Q2 2023 reported a net loss of $127 thousand due to restructuring, while H1 net income declined to $333 thousand Statement of Operations Highlights (in thousands) | Metric | Q2 2023 | Q2 2022 | YTD 2023 | YTD 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $38,538 | $37,057 | $77,158 | $71,391 | | Operating Income (Loss) | $(29) | $905 | $544 | $1,533 | | Restructuring Charge | $2,115 | $0 | $2,115 | $0 | | Net Income (Loss) | $(127) | $1,450 | $333 | $2,751 | | Diluted EPS | $0.00 | $0.03 | $0.01 | $0.06 | Condensed Consolidated Statements of Cash Flows H1 2023 net cash from operating activities significantly decreased to $8,077 thousand, while cash used in investing activities increased Cash Flow Summary (in thousands) | Activity | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net cash from operating activities | $8,077 | $19,448 | | Net cash used in investing activities | $(9,221) | $(8,210) | | Net cash from (used in) financing activities | $862 | $(9,163) | | Net change in cash | $(282) | $2,075 | Notes to Condensed Consolidated Financial Statements Notes detail accounting policies, revenue by brand, a $2,115 thousand Q2 2023 restructuring charge, credit facility, and stock repurchase programs - The company operates as a single reportable segment, Tech-focused, which includes the Dice and ClearanceJobs brands, with all operations in the United States25 - In May 2023, the company initiated a restructuring, reducing its workforce by approximately 10% and recognizing a charge of $2,115 thousand, consisting of severance and accelerated stock-based compensation38 - As of June 30, 2023, the company had $43,000 thousand in borrowings under its $100,000 thousand revolving credit facility, which matures in June 20276571 - A new stock repurchase program was approved in February 2023, authorizing up to $10,000 thousand in purchases through February 2024, with $4,800 thousand remaining available under this plan as of June 30, 20237980 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses H1 2023 financial results, noting 8% revenue growth, operating income decline due to restructuring, and a 13% increase in backlog to $117,762 thousand Our Revenue and Expenses Revenue from recruitment packages, with Dice customer count down but average revenue up, ClearanceJobs customers and average revenue up, and total backlog increased 13% to $117,762 thousand Recruitment Package Customer Metrics (as of June 30, 2023 vs 2022) | Brand | Customer Count | % Change | Avg. Annual Revenue per Customer (Q2) | % Change | | :--- | :--- | :--- | :--- | :--- | | Dice | 6,007 | (6)% | $15,534 | 9% | | ClearanceJobs | 2,069 | 5% | $20,842 | 11% | Backlog Summary (in thousands) | Date | Backlog Amount | % Change vs Prior Year End | % Change YoY | | :--- | :--- | :--- | :--- | | June 30, 2023 | $117,762 | 0% | 13% | Results of Operations Q2 2023 revenue grew 4% but a restructuring charge led to a net loss, while H1 revenue increased 8% but operating and net income significantly declined Q2 2023 vs Q2 2022 Financial Comparison (in thousands) | Metric | Q2 2023 | Q2 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $38,538 | $37,057 | 4% | | Operating Income (Loss) | $(29) | $905 | (103)% | | Net Income (Loss) | $(127) | $1,450 | (109)% | Six Months 2023 vs 2022 Financial Comparison (in thousands) | Metric | YTD 2023 | YTD 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Revenue | $77,158 | $71,391 | 8% | | Operating Income | $544 | $1,533 | (65)% | | Net Income | $333 | $2,751 | (88)% | - The primary driver for the decline in operating and net income was a $2,115 thousand restructuring charge taken in Q2 2023128143 Non-GAAP Financial Measures Adjusted EBITDA and Adjusted EBITDA Margin are key non-GAAP measures; H1 2023 Adjusted EBITDA increased to $16,799 thousand with the margin improving to 22% Reconciliation of Net Income to Adjusted EBITDA (in thousands) | Metric | Six Months Ended June 30, 2023 | Six Months Ended June 30, 2022 | | :--- | :--- | :--- | | Net income | $333 | $2,751 | | Adjustments | $16,466 | $11,982 | | Adjusted EBITDA | $16,799 | $14,733 | | Revenue | $77,158 | $71,391 | | Adjusted EBITDA Margin | 22% | 21% | Liquidity and Capital Resources Primary liquidity sources are cash from operations and the revolving credit facility, with $2,724 thousand cash and $57,000 thousand available, and anticipated 2023 capital expenditures between $21,000 thousand and $23,000 thousand - Cash from operating activities decreased to $8,077 thousand for the first six months of 2023, down from $19,448 thousand in the prior year period161 - At June 30, 2023, the company had $43,000 thousand of borrowings outstanding on its $100,000 thousand credit facility, leaving $57,000 thousand available160164 - Anticipated capital expenditures for the full year 2023 are projected to be between $21,000 thousand and $23,000 thousand, an increase from prior periods due to investments in new products and features169 Item 3. Quantitative and Qualitative Disclosures About Market Risk Primary market risk is interest rate fluctuations on its variable-rate credit facility, with a hypothetical 1.0% increase in rates raising interest expense by approximately $200 thousand for H1 2023 - The company's main market risk is interest rate fluctuations on its $43,000 thousand of variable-rate debt under the Credit Agreement176 - A hypothetical 1.0% increase in interest rates would have increased interest expense by $200 thousand for the six months ended June 30, 2023176 - Foreign exchange risk is not significant as operations are conducted within the United States175 Item 4. Controls and Procedures Management, including the CEO and CFO, concluded that disclosure controls and procedures were effective as of June 30, 2023, with no material changes to internal controls during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures are effective to provide reasonable assurance that required information is recorded and reported in a timely manner179 - No material changes to internal controls over financial reporting occurred during the quarter ended June 30, 2023180 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any material pending legal proceedings, aside from ordinary course claims and tax contingencies - The company is not currently a party to any material pending legal proceedings, other than claims arising in the ordinary course of business182 Item 1A. Risk Factors No material changes have occurred from the risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2022 - As of August 2, 2023, there have been no material changes from the risk factors previously disclosed in the Annual Report on Form 10-K183 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds This section details the company's stock repurchase activity, with 945,003 shares repurchased in Q2 2023, and a $10,000 thousand repurchase program authorized through February 2024 Share Repurchases (Q2 2023) | Period | Total Shares Purchased | Average Price Paid per Share | | :--- | :--- | :--- | | April 2023 | 496,680 | $3.81 | | May 2023 | 416,025 | $3.54 | | June 2023 | 32,298 | $3.83 | | Total Q2 | 945,003 | - | - The total number of shares purchased includes approximately 26,000 shares withheld to satisfy employee income tax obligations upon the vesting of restricted stock awards185 Item 5. Other Information Director Kathleen Swann adopted a Rule 10b5-1 trading plan on June 12, 2023, for the potential sale of up to 11,733 shares of common stock between May 2024 and December 2024 - Director Kathleen Swann adopted a Rule 10b5-1 trading plan on June 12, 2023, for the sale of up to 11,733 shares of common stock, with sales planned for the period of May 14, 2024, to December 31, 2024191 Item 6. Exhibits This section lists all exhibits filed with the Form 10-Q, including corporate governance documents, compensatory agreements, and CEO/CFO certifications - The report includes exhibits such as the Amended and Restated Certificate of Incorporation, various award agreements, and CEO/CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act193