DHI Group at Planet MicroCap Showcase: Strategic Growth Amid Challenges

On Wednesday, 23 April 2025, DHI Group (NYSE:DHX) presented at the Planet MicroCap Showcase: VEGAS 2025, detailing its strategic positioning in the tech recruitment sector. The company highlighted robust subscription-based revenue streams and cost reductions, yet acknowledged challenges in the HR tech market. DHI’s platforms, Dice and ClearanceJobs, remain central to its strategy, with a focus on specialized tech skills and government clearance niches.

Key Takeaways

• DHI ended 2024 with net debt of $28 million, maintaining leverage under one times.
• Over 90% of revenue is recurring, driven by subscription models.
• The company achieved a 25% adjusted EBITDA margin in 2024 through cost-cutting measures.
• Dice’s performance is tied to the broader economy, while ClearanceJobs benefits from defense budget trends.
• A new buyback program allows for up to $5 million in share repurchases through February 2026.

Financial Results

• Net Debt: Concluded 2024 with $28 million, translating to less than one times leverage.
• Share Repurchases: $2 million spent on share repurchases, primarily for employee grant vesting.
• Revenue and Bookings Growth: Both have experienced a 6% CAGR since 2020.
• Recurring Revenue: Comprises over 90% of total revenue.
• Cost Reductions: Operating costs were trimmed by approximately $20 million through restructuring.
• ClearanceJobs and Dice Revenues: $54 million and $88 million respectively in 2024.

Operational Updates

• Focus: DHI operates Dice and ClearanceJobs, focusing on tech recruitment.
• Specialization: Manages a taxonomy of over 100,000 tech skills.
• Geographic Focus: Primarily the United States, with a candidate pool exceeding 8 million tech profiles.
• Restructuring: Separation of Dice and ClearanceJobs to enhance performance and strategic options.

Future Outlook

• Tech Workforce Growth: Expected to rise by 18% from 2024 to 2034, outpacing general employment growth.
• ClearanceJobs: Anticipates growth from increased defense spending, potentially reaching $1 trillion.
• Dice: Closely linked to economic conditions, currently at 70% of pre-pandemic job posting levels.
• Buyback Program: Allows for up to $5 million in share repurchases through February 2026.
• Margin Target: Aims for a 24% adjusted EBITDA margin in 2025.

Q&A Highlights

• Economic Impact: Dice is highly correlated with the economy, while ClearanceJobs aligns with defense budgets.
• Pricing Strategy: ClearanceJobs prices have increased by about 5% annually; strategic bundling has enhanced revenue.
• Government Shutdown Impact: ClearanceJobs faced challenges due to budget uncertainties but maintained strong renewal and retention rates.
• Defense Budget: Anticipated to reach $1 trillion, a significant 12% increase.

For a detailed discussion, refer to the full conference call transcript below.

Full transcript - Planet MicroCap Showcase: VEGAS 2025:

Art Zeile, CEO, DHI Group, Inc.: Three. And we focused in that period of time that it was suspended on debt reduction, obviously, as a result. We ended 2024 with net debt of $28,000,000 equating to less than one times leverage. We indicate here that we had $2,000,000 of share repurchases last year even though we didn’t have an official share buyback program. That represents net settlement for employee grant vesting.

So DHI is effectively a holding company for two different brands. There are two tech oriented recruiting platforms named Dice and ClearanceJobs. We create platforms that allow our clients who are recruiting recruiters as well as hiring managers to connect with technology candidates, technology professionals in The United States. And these are two sided marketplaces that serve both the needs of the clients as well as the candidates themselves. And you might say that that sounds pretty familiar with the likes of Indeed and ZipRecruiter.

They do a lot of advertisement constantly on TV or in radio. We are different in that we are a specialist platform or two platforms that focus exclusively on technology professionals. And as a result, we have built specialized search algorithms to find candidates based on their actual tech skills. Secondly, we have spent literally decades, thirty four years in the case of Dice, twenty two years in the case of ClearanceJobs, bringing the highest quality talent to these platforms. So over today, we have over 8,000,000 technology profiles in both of these platforms, across both of the two platforms.

And that represents about two thirds of the total skilled technologists in The United States. Again, the benefit of being around for almost a third of a century. We make money by charging our clients for subscription contracts that allow them to access the platform. So it is charge to the recruiter or the hiring manager, and it’s free to the candidate for right now. 90% over 90% of our revenue is recurring as a result.

So The United States has become more of a technology oriented economy over the course of time, and we have grown the tech workforce traditionally over the last thirty years by about 3% each year. There’s been aberrations for the great recession, for the, .com implosion, for, COVID. But for the most part, the tech workforce grows at the same rate approximately as GDP. We have a unique set of candidates that cannot be found on other career sites. Based on our research, roughly 20 to 30% of our candidates can be found on alternative sites like CareerBuilder, PlusMonster, ZipRecruiter, Indeed, or LinkedIn.

And if they are found there, they generally do not have an updated profile or they do not have a resume and contact information. So we are very unique. ClearanceJobs is the dominant leader in its market for delivering access to technology professionals with a government clearance. ClearanceJobs really does not have a competitor today because LinkedIn does not have a field for clearance. And there was restrictions that were put in place several administrations ago telling federal workers as well as military contractors that have a government clearance not to use LinkedIn because it is a target for foreign spies.

Tech professionals are very well compensated. The average salary for a tech professional as of last year was 11 a hundred and $11,000. And the average worker in The United States makes approximately $50,000. That’s a salary figure for both. As a company interested in finding a tech professional, you fundamentally have two different choices when you’re trying to find one.

You either use a recruiter or you do it yourself. If you use a recruiter, you’ll generally be charged between 2030% of the first year’s salary for that worker, that tech professional. The alternative is to pay for a license to either Dice or ClearanceJobs, and that’s roughly 8,000 to $10,000 per year for a subscription or at least our simplest entry level subscription to those platforms. Then you would essentially try to engage the talent yourself and make that hire for a much lower price point than you would pay for a recruiter. So it’s important to understand that we’ve been around for a long time.

Nevertheless, as you can see from this particular, article that came out in Forbes middle of 02/2024, they rated us the top job board for tech and IT jobs. The bottom line is that the elevated interest rate environment that has been imposed by the Federal Reserve has clearly depressed hiring demand. It was intended to do so. That’s true of the tech sector less so than other sectors, but still has been depressed over the last couple of years. But as we believe, just about every single business in The United States has some form of technology component to it or it is evolving to incorporate technology.

And so there is a long term trend towards more technology professionals in The United States. This particular graphic comes from the Bureau of Labor Statistics as well as CompTIA, which is a association of tech professionals in The United States that indicates that the tech workforce will grow by at least 18% over the period of time 02/2024 to 02/1934, and that is twice as fast as the overall employment growth rate. There are two dominant occupational trends in The United States that have been persistent for many years. There has always been more and more health care workers and there’s always been more and more technology workers. And so if you looked at the the very small point font on the right hand side of this chart, you’d see that the growth is coming from interest in skills that you would logically suspect.

The need for ever more data scientists and engineers to implement AI, more cybersecurity engineers to protect us from ever increasing threats, and armies of software developers to create more code to make our businesses more automated in general. Now I wanna explain a little bit more about the necessity of focusing on skills in both of our platforms. It’s the reason why our two platforms are very unique. LinkedIn and other career sites create a user profile based on titles, and the concept of skills are soft skills like public speaking. Our special sauce comes from the fact that we have this taxonomy of over 10 a hundred thousand tech skills that we manage.

And so our profiles, as well as the job search search algorithm itself, is based on finding people with the exact skills that you need for your tech stack or tech environment. So we win in this market for tech talent because we are specialists in technology skills and not a generalist recruiting platform. Here are a couple of case studies that we want to illustrate the great relationship we have with our customers. In the first case, Leidos has been a client of ClearanceJobs for over ten years and has continuously increased its spend with us. The second case study is Montefiore Healthcare System out of New York City.

They’ve been a client of Dice for over ten years and have more than doubled their spend with us over the

Greg Skippers, CFO, DHI Group, Inc.: course of

Art Zeile, CEO, DHI Group, Inc.: time. Montefiore’s case study also illustrates something that a lot of people don’t understand about Dice. We do have the fan companies as our customers, but we would say that it our best value proposition is really for those customers that are not that easily distinguished inside of of the economy of The United States because they’re not as visible to the tech community. Every technology professional, knows how to find the career page for Amazon, for Google, for Facebook, but not so much for Home Depot or Disney who are current customers of ours. So the opportunity for ClearanceJobs and Dice is associated with the TAMs that we illustrate here.

We have, in the case of ClearanceJobs, approximately 1,900 subscribers today, the government has publicly stated that there are over 10,000 contractors that hold a facility clearance allowing them to conduct business with cleared personnel. We also know that there is over a hundred federal government agencies that can directly contract with us as well. In the case of Dice, we have approximately 5,000 subscription clients today and we know that tens of thousands more fit our ideal customer profile. There are also tens of thousand I’m sorry, thousands of additional staffing recruiting firms that can target us as well. Before I transition to Greg, I want to leave you with this quick summary of how do we, make money and how we have strong visibility into the future revenue profile of the company.

First and foremost, clients pay for the opportunity to access the platform as I explained earlier. There is no charge for a candidate to register, create a profile, or start using the platform today. As I indicated earlier, because we have our subscription based service with a one year minimum term, over 90% of our revenue is recurring. And over 90% of our contracts actually include a auto renewal provision that has a price escalator built into it. So the nature of the subscription is that we cap the number of profile views each contract has based on the number of recruiters associated with the institution, as well as their intended number of tech professionals that they plan to hire for the following year.

So if you think about it, Robert Half, which is one of our larger customers, has a completely different number of profile views than a 100 person tech firm. That’s another key differentiator that makes our platform more effective than those of LinkedIn and Indeed and CareerBuilder. We we focus on these profile views, but we encourage unlimited communication in the form of our own private email service on the platforms as well as our own messaging service. We want the recruiters and candidates to engage as much as possible so that they can essentially have a better relationship and ultimately culminate in a hiring decision by the firm. So with that, I’d like to introduce Greg Skippers, our CFO, to take you through the rest of the presentation.

Greg?

Greg Skippers, CFO, DHI Group, Inc.: Alright. Thank you, Art. I’m gonna try to get through some of the numbers here fairly quickly for you so that you have plenty of time for q and a at the end. And of course, if we wanna go through anything at a later time, more than happy to do that. DHI bookings, which represent the value of our contracts that will be recognized as revenue within twelve months of the start date, has risen at a 6% CAGR since 2020, and revenue has also risen at the same six percent CAGR over the same period.

With over 90% of our bookings and revenue recurring, DHI has a very predictable revenue model with approximately 50% of each year’s revenue already under contract at the start of each year. Our adjusted EBITDA margin has expanded since 2019 to 25% in 2024. Because of the more difficult market conditions in 2023 and 2024, we reduced costs through restructurings in the second quarter of twenty twenty three, in the third quarter of twenty twenty four, and again earlier this year. Together, these restructurings have reduced our operating costs by approximately $20,000,000. The restructure earlier this year also separated our Dice and ClearanceJobs organizations, which is designed to better deliver results for our shareholders, maximize profitability, and provide stronger long term strategic options.

We continue to target a 24% adjusted EBITDA margin for 2025. As previously mentioned, challenging market conditions in the HR tech space have persisted in 2024 with bookings and revenue declining in the mid to upper single digit range. We have, however, managed our cost structure to grow our adjusted EBITDA margin to 25% in 2024. Our subscription based business creates predictable revenue with revenue generally being recognized ratably over the annual contract term as services are delivered to our customers. This slide depicts how our committed contracts at the start of 2024, shown as backlog, become revenue over the year, and then how our customers up for renewal during the year drive revenues as the year progresses.

The remainder of our revenue comes from our new business efforts and our transactional business, which primarily includes short term job postings, career events, and our sourcing services product. DHI produces strong operating cash flows with the low points for operating cash flows over the past five years approximating $20,000,000 in the strong markets in 2021 and 2022, driving operating cash flows to 29,000,000 and 36,000,000 respectively. DHI’s capitalized development costs, which are part of fixed asset purchases and our cash flow statement, primarily represent the cost of our internal labor to build the products and features on the Dyson clearance job sites. With lower internal headcount resulting from the restructurings, capitalized development costs are expected to continue to decline into 2025. By consolidating our tech organization to a smaller number of teams that have subject matter expertise in adjacent areas, we have found that we can accelerate our release schedule.

DHI’s free cash flow, which is operating cash flows less capital expenditures, is driven by adjusted EBITDA levels and our capitalized development costs. Over time, we’re targeting free cash flow at approximately 10% of revenue. As Art mentioned, we suspended our share repurchase program in the middle of twenty twenty three to focus on paying down debt. Our debt at the end of twenty twenty four was $32,000,000 resulting in a leverage of point nine one times our adjusted EBITDA levels. We generally maintain approximately $2,000,000 of cash on hand and utilize our $100,000,000 revolver to manage liquidity.

Since 2019, DHI has repurchased nearly 18,000,000 shares and has reduced shareholder dilution by approximately 6,000,000 shares or 11%. Earlier this year, we announced a new buyback program, which allows us to repurchase up to $5,000,000 of common stock through February of twenty twenty six. Our ClearanceJobs brand is a dual sided marketplace with 2024 revenue of $54,000,000 comprised of approximately 2,000 clients. The overall market has over 10,000 cleared employers and over 100 government agencies. These logos represent a sampling of our ClearanceJobs customer base.

ClearanceJobs quarterly bookings has seasonality with the first quarter being the largest of the year. ClearanceJobs bookings have a five year CAGR of 15% and most recently, Q four bookings were flat year over year as the defense budget continuing resolution and uncertainty due to a possible government shutdown, as well as the change of change of administration impeded CJ bookings in the fourth quarter. Even with these headwinds, ClearanceJobs renewal rate for the fourth quarter was 93% and its retention rate was 111%. ClearanceJobs revenue has a five year CAGR of 16%, with the fourth quarter of twenty four being up 7% year over year. Dice is also a dual sided marketplace that drove $88,000,000 of revenue in 2024 and is comprised of approximately 5,000 subscription clients in a market with roughly 100,000 client opportunities between the commercial and staffing recruiting and consulting accounts.

This slide shows a handful of notable Dice logos. Our market opportunity in the commercial in commercial is comprised of companies across various industries such as Coca Cola, Disney, Bank of America, who aren’t traditionally tech companies, but certainly hire many tech professionals every year and leverage our platform with their tech hiring needs. Now onto Dice bookings. Dice’s quarterly bookings also has seasonality with the first quarter being the largest of the year. Dice bookings have a five year CAGR of 2%, and most recently, q four bookings decreased 14% year over year as the HR tech hiring environment has remained challenged.

Dice’s renewal rate for the fourth quarter was 77%, while its retention rate was 97%, demonstrating the continuing need of Dice’s services by its core customers. Dice revenue was a five year CAGR of 2%, with the most recent quarter being down 14% year over year, similar to bookings. McKinsey and other economists predict tech hiring to grow in double digits over the next ten years, and DHI is at the intersection of fueling the tech economy. Our pool of millions of candidate profiles, coupled with our platform enabled proprietary matching algorithms, allow for efficient and effective identification of talent and ultimate hiring. In summary, DHI is well prepared to capture growth in tech hiring in the coming years.

With that, we’re happy to take any questions you may have.

Art Zeile, CEO, DHI Group, Inc.: Five minutes I believe for Q and A. Welcome to any and all questions. Yes sir? So it does definitely affect the dice business, and the dice business again is one that is really correlated very closely to the state of the economy. We would say it’s incredibly correlated like we’ve done regression analysis that show that the regression coefficient is like 90%, the number of new tech job postings that appear every single month.

And we’re at about 70% of what we consider to be normal number of tech job postings. So we’re still climbing back to what we consider to be like a normal year 2019. ClearanceJobs on the other hand is really correlated to the defense budget because we’re facilitating military contractors hiring tech professionals. And so last year was a challenging year because there was a lot of dissonance in the government. We were constantly worried about going into a government shutdown.

We were negotiating over the debt ceiling being increased. We were under continuing resolution, which is not a real budget for most of the year. We do believe that this year is going to be a much better year for ClearanceJobs because we have a single party government. There is belief that we will get to $1,000,000,000,000 defense budget, which will be a substantial increase based on what we’ve seen in the past. Most defense budgets over the last twenty to thirty years have gone up by about 3%.

That’s a 12% increase if it does get to a $1,000,000,000,000 mark. So the brands definitely are affected differently. The other interesting thing about ClearanceJobs is that military contractors are about 63% of EU defense procurement spend. So if the EU does increase their spend, they’re going to have to go to military contractors in The United States to actually make it effective. Great question.

Yes, sir? So that’s a great question. There’s two dimensions to that. I’d say that in the years past, we have increased CJ pricing, Ernest Jobs pricing by approximately 5% each year. It does have a competitive benefit of not really having anybody that we have to worry about.

Like I said earlier, LinkedIn is not a competitor to ClearanceJobs because there is no field for Clearance inside of a profile. So the other aspect of pricing is that about a year ago, we decided to bundle a whole bunch of different components that we felt were leading to success for our top firms into what we call a pricing bundle. And so we kind of changed the nature of pricing for both platforms in order to essentially get a lift as well. That’s a great question. I’ll tell you that we used to have other verticals and we sold a number of them back in 2018, ’20 ’19.

I really believe that the we have to follow occupational demographic trends. And as I kind of alluded to, there are two trends that have been persistent over the last twenty to thirty years, and that is that as we get older over the course of time as a population, we’re asking for more health care workers, and we have constantly increased the number of technology professionals. So if there was a platform to buy, I would buy it in something that was or started, it would be in healthcare for sure. I think we’re getting close to time.

Greg Skippers, CFO, DHI Group, Inc.: Yeah, we’re about five minutes,

Art Zeile, CEO, DHI Group, Inc.: I think. So we just want to say thank you very much. And if you’re interested in having another discussion, we have our booth that’s in the main hall, and we’d welcome a meeting. So thank you. Absolutely.

Thank you. This presentation has now finished. Please check back shortly for the archive.

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