Q1 2021 DHI Group Inc Earnings Call
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Good afternoon, and welcome to the D. H I group incorporated first quarter 2021 financial results conference call on.
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I would now like to turn the conference over to Todd Curly of M. K R. Investor Relations. Please go ahead.
Thank you operator, good afternoon, and welcome to <unk> group's fiscal 2020, One first quarter earnings conference call with me on today's call are D. H I C E O Art, Bailey, and Chief Financial Officer, Kevin and Boston.
Before I turn the call over to art I'd like to cover a few quick items.
This afternoon, and DH <unk> issued a press release announcing its fiscal 2021 first quarter financial results. The release is available on the company's website at D. H I Group, Inc. Dot Com. This call is being broadcast live over the Internet for all interested parties and the webcast will be archived on the Investor Relations page of the Companys.
Web site.
I want to remind everyone that during today's call management will make forward looking statements that involve risks and uncertainties. Please note that except for the historical information statements on today's call may constitute forward looking statements within the meaning of section 21 E of the Securities Exchange Act of 19 and 34.
When used the words anticipate believe expect intend future and other similar expressions identify forward looking statements. These forward looking statements reflect the HIV and management's current views concerning future events and financial performance and are subject to risks and uncertainties.
And actual results may differ materially from the outcomes contained and any forward looking statements.
Factors that could cause these forward looking statements to differ from actual results include delays and development marketing or sales the adverse impact of and uncertainty surrounding the COVID-19 pandemic and other risks and uncertainties discussed and the company's periodic reports on form 10-K, and 10-Q and other filings.
With the Securities and Exchange Commission D. H I undertakes no obligation to update or revise any forward looking statements.
Lastly, during today's call management will be referring to specific financial measures, including adjusted EBITDA adjusted EBITDA margin.
The earnings per share and net debt that are not prepared in accordance with U S. GAAP.
Information about and reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are available and our earnings release and on our website at DHL Group, Inc. Dot com and the Investor Relations section.
With that and I'll turn the call over to Art Daily C. E O D H I group.
Thank you Todd good afternoon, everyone and welcome to our fiscal 2021 first quarter earnings Conference call.
Thank you for joining us today, I hope that everyone and stay safe and healthy.
Let's start with a quick summary of the highlights of the quarter and then I'll dig deeper into our improved sales performance product updates and on <unk>.
Expectations for revenue growth and the second half of the year.
I am pleased to report another strong quarter of bookings for ehi with our three new business teams handily exceeding their and year over year average monthly bookings level during the first quarter.
These include our dice commercial accounts team, our day staffing and recruiting team and our clearance jobs new business team.
Another highlight of the quarter is that our dice revenue renewal rate continues to strengthen and came in at 82% for the quarter up from 75% from the fourth quarter and higher than Q1 2020.
Dice is poised to benefit from the healthy economy ahead, and the increase and hiring as enterprises focus on tech, enabling their business models. We have created the industry, leading online marketplaces for matching companies with the highest quality tech professionals and on now positioned to capitalize on the millions of new technologists.
Jobs expected over the next five years.
We are successfully executing the business plan that we've put in place. We spent 2019 and 2020 building a better product and in 2020. One we will capitalize on that product innovation through accelerating our sales and marketing efforts.
We have already seen some early success from these efforts with our solid bookings over the past two quarters and as such we expect <unk> to return to total revenue growth for the first time and over five years, starting in the second half of this year.
Now, let me dig into each of our brands and their performance during the quarter and where we see them heading this fiscal year.
Let's start with dice, which is our biggest brand and our largest opportunity for revenue growth.
According to burning glass U S tech job postings surged, 28% from the fourth quarter to the first quarter.
The number of employer job postings for open positions surpassed 307000 and March a 12 month high.
And it occupations throughout the U S economy expanded by 50000 jobs and that month alone the and.
Unemployment rate for occupations remained at two 4% compared to six 6% nationally for all occupations.
And today there are over 3200 companies and the United States that have 20 or more open tech job postings compared to roughly 2000 and last quarter. These.
And these statistics give us great confidence that tech hiring is on the rebound and we will continue in 2021 and beyond.
As a result of this rebound and tech hiring we saw nice bookings and revenue renewal rates increased substantially in the first quarter.
While bookings take a couple of quarters to translate to GAAP revenue our sales team's strong performance over these past two quarters gives us great confidence and our ability to return to revenue growth starting in the second half of the year.
We also continued to innovate during the quarter with a successful launch of dice marketplace.
And the dice marketplace is a comprehensive and flexible platform through which recruiters and candidates can rapidly and confidently search match and communicate and real time.
There are three major components of the dice marketplace. The first is the recruiter profile significantly only five months since launch almost half of the jobs viewed on our platform now have a recruiter profile attached to them.
The second major component of the marketplace is and enhanced candidate profile that focuses deeply on exposing each candidates tech skill set.
Once a candidate has a profile completed we can use our patent pending technology skills data model to match the candidate with the right job for them and their skill set.
The third major component is the in platform instant messaging, we launched in November 2022.
To date over 60000 messages have incentives between recruiters and candidates with roughly one third of the messages having been initiated by the candidates themselves.
This shows excellent engagement by both sides of the dice community.
With our industry, leading product offerings and hand, we are now laser focused on driving revenue growth through increased sales and marketing efforts.
Our confidence and the economic expansion underway and our sales teams strong performance over the past two quarters has led us to add 16, new day sales positions. So far this year.
We have two large growth opportunities in front of us with dice.
Dice commercial accounts is our largest white space opportunity with tens of thousands of companies and the United States looking to hire high quality Tech professionals.
The staffing and recruiting market opportunity for dice also remains significant as there are over 18000, and staffing and recruiting firms and the United States alone and today, we only service 4000 of them.
Staffing industry analysts organization recently forecast that it staffing revenue will grow 9% this year exceeding even 2019 figures.
We continue to focus our marketing spend on generating more qualified leads to fuel our new business teams growth both for commercial and staffing accounts and we've seen good results from this investment over the past two quarters.
We also initiated a new client branding campaign for dice during the quarter with a tagline where tech connect.
Which was developed by and external AD agency is now in trial across multiple channels.
It is and several years since we actively marketed the dice brand and with the launch of dice marketplace. We are excited to make sure everyone knows about it.
As we've referenced before on Microsoft Survey released last summer expects worldwide digital jobs to grow from $41 million in 2000 $20 million to $190 million in 2025.
Companies and staffing and recruiting firms that service. These companies will need tools like does defined qualified candidates to fill these millions of new tech jobs.
As we look to capitalize on the explosion of hiring technologists over the next several years, we plan to increase our sales and marketing efforts and take advantage of this fast growing market segment.
Moving on to clearance jobs, while CJS first quarter revenue growth was lower than usual there new business team performed well during the quarter with bookings that outperformed the prior year and prior quarter levels.
We believe CJS first quarter revenue growth was impacted by the change in administration and the low and hiring associated with the initial leadership transition.
The strong bookings we saw on the first quarter gives us confidence that <unk> revenue growth will trend back up to historical levels and the second half of the year.
Also we continue to work hard on expanding <unk> addressable market by making direct sales to U S government agencies.
The market opportunity for C. J with these government agencies is largely untapped and we see it as a significant opportunity as we move forward.
T. J continues to lead our product innovation efforts this quarter with the release of two new features the.
The first was CJ meeting integration one of the most challenging aspects of the recruiter workflow is setting appointments to communicate with candidates.
This past quarter, we released CJ meetings, which allows recruiters and candidates to synchronize their Google or outlook calendars to efficiently schedule telephone calls video calls or in platform checks.
Tutors need only spend a few minutes setting their desired calendar parameters and send a scheduling linked to candidates.
No other competitor has this capability.
We also launched CJ video this quarter, which is the ability to deliver video messaging and platform for both recruiters and candidates.
This new video capability can be used per profile status updates group broadcasts and enhancing company profiles visit.
Videos are hosted and streamed and platform from CJ similar to what a user experiences on Instagram and Facebook Twitter or other social media networks.
Clearance jobs continues to be our testbed for innovation.
With our E financial careers brand, we spent most of the quarter working on separating software code and business systems from the rest of DHA as we continue the process of divesting the business sometime around mid year.
We believe this strategy will allow us to show the positive revenue growth, we expect to see with our remaining dice and CJ brands, and let FCB and nimbler more entrepreneurial competitor and its markets.
Before I turn the call over to Kevin I wanted to reiterate that we have created the industry, leading online marketplaces for matching companies with the highest quality tech professionals and we believe we can capitalize on the millions of new technologists jobs being created over the next several years.
And the success, we have had to date and executing on our business plan gives us confidence and our ability to return to sustainable revenue growth, which we believe will start and the second half of this year based on our strong bookings performance over the past two quarters.
We look forward to sharing our progress throughout the rest of 2021 with that let me turn the call over to Kevin who will take you through our financials and then we'll take any questions you may have Kevin.
Thank you art and good afternoon, everyone.
I'll start by going through the financial results, then add a few comments about the business.
For the first quarter, we reported total revenues of $32 6 million, which was down 2% compared to the fourth quarter and down 11% year over year.
Dice revenue was $19 $1 million and the first quarter down 2% sequentially and 15% year over year. We ended the first quarter with 5200 dice recruitment package customers, which is up 1% sequentially and down 11% year over.
A year on.
Our average monthly revenue per dice recruitment package customer was up slightly on a sequential basis, but down 2% versus the year ago quarter to $1128 or $13536 on an annual basis.
Over 90% of dice revenue is recurring and comes from annual contracts.
Our dice revenue renewal rate was 82% for the first quarter up seven percentage points from 75% last quarter and up two percentage points year over year, our dice customer count renewal rate was 71% up three percentage points from last quarter and <unk>.
<unk> four percentage points when compared to the same period last year.
On the tech job market continues to show signs of a rebound, especially as it relates to our staffing and recruiting business, which is driving the improvement and our dice renewal rates and.
In addition, our client success organization continues to focus on improving its processes around onboarding and ongoing touch points that we believe has positively impacted both our customer and revenue renewal rates.
Clearance jobs first quarter revenue was $7 $6 million, which was flat with the preceding fourth quarter and up 11% year over year.
As art mentioned, we attribute the flat sequential performance and the less than usual growth year over year to the change and the U S Presidential administration.
First quarter revenue for E financial careers was $6 million, which was down 4% sequentially and down 22% year over year, when excluding the impact of foreign exchange rates.
We continue to believe separating the <unk> business will allow <unk> to show the positive revenue growth, we expect to see with our dice and CJ brands and let FCB, a nimbler more entrepreneurial competitor and its markets.
Turning to operating expenses first quarter operating expenses were $32 1 million.
Resenting, a decrease of $9 $7 million or 23% year over year $7 $2 million of the decrease is related to an impairment charge and the first quarter of 2020.
During the quarter the company recorded an unrealized gain of $2 $5 million related to an equity investment and a company that completed an IPO and the first quarter.
The investment was obtained through one of <unk> predecessor companies and had previously been carried at zero value.
The company recorded income tax expense for the quarter of $147000 on income before taxes of $2 $8 million, resulting in an effective tax rate of 5%.
The effective tax rate differs from our expected 25% rates as a result of utilizing a capital loss carryforward to offset the gain on the equity security I just mentioned.
We reported net income for the first quarter of $2 7 million or <unk> <unk> per diluted share compared to net a net loss of $6 6 million or <unk> 13.
Per diluted share a year ago.
This quarter's net income was positively impacted by $1 $7 million.
Which consisted of the unrealized gain on the equity investment and discrete tax items, and partially offset by disposition and other charges net of tax.
Last years net income was negatively impacted by $8 $3 million and impairment charges and other charges net of tax and discrete tax items.
Adjusted diluted earnings per share for the quarter was <unk> <unk>.
<unk> <unk> last year.
Adjusted EBITDA for the first quarter was $7 3 million.
Our margin of 22% compared to a margin of 21% and both the preceding quarter and the first quarter of last year.
We generated $6 $4 million of operating cash flow and the first quarter compared to $2 9 million and the prior year quarter.
The improvement over the prior year quarter was driven by both more billings and more timely payments from customers during the quarter.
From a liquidity perspective at the end of the quarter. Our total debt was $20 million, we had $7 3 million of cash, resulting in net debt of $12 $7 million.
Deferred revenue at the end of the quarter was $52 8 million up 21% compared to $43 5 million at year end due to both the seasonality of our business and strong bookings performance.
Year over year deferred revenue declined by 5% due to lower billings and the second half of 2020.
When we add the unbilled portion of our contracts to deferred revenue our committed contract backlog at the end of the quarter was $84 million, which was up 5% from the end of the first quarter of last year the.
The increase and total contracted revenue is due to more contracts, having multiyear terms.
Short term contract backlog.
That is revenue to be recognized over the next 12 months was down 3% from the prior year.
During the quarter, we repurchased approximately 590000 shares for $1 $5 million or an average.
<unk> price of $2 62 per share.
During the quarter, we consumed the remainder of the $5 million buyback program, we put in place and May 2020.
The board approved a new $8 billion buyback program that is available from February of this year to February 2022.
We used $440000 of the new program during the quarter.
We continue to believe the buyback is a recognition of the long term prospects of our business and the undervalued price of our stock.
We will continue to evaluate investment opportunities and the business against buying back shares while also using the buyback program as an opportunity to offset the impacts of our employee equity incentive program.
Looking forward, we expect the strong bookings performance over the past two quarters to manifest itself and year over year total revenue growth beginning in the second half of 2021.
As companies continue to increase the use of technologists dice bookings continue to grow we.
We are seeing strength and both our staffing and recruiting business and with our commercial accounts as companies realize they need our technology to do their job effectively.
With regards to clearance jobs, the strong bookings performance, we saw for C. J and the first quarter gives us confidence that its revenue growth will continue.
Additionally, we continue to see and increased opportunity for growth as C. J further penetrates the direct government agency market.
From a profitability perspective, we will continue to operate the business to adjusted EBITDA margins and the 20% range as we continue to invest in sales marketing and product to drive revenue growth.
Let me sum up by saying that we're excited by the positive momentum, we're seeing and bookings and believe the investments. We are making will result, and a return to sustainable revenue growth starting in the second half of this year.
And with that let me turn the call back to art.
Yes.
Thank you Kevin I'd like to close by once again thanking all of our employees around the globe for their hard work over the past several quarters your determination and dedication to executing our growth plan is unmatched and is a pleasure to be part of such a great team with that we're happy to take your questions.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad. If you are using a speakerphone. Please pick up your handset before pressing the keys.
To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
Our first question is from them on gallant with B Riley. Please go ahead.
Hey, guys. Thanks for taking my question here.
Can you give us an idea of the go forward and margin profile for the business or a potential major changes to our model.
Divest.
And for careers.
Sure This is Kevin.
We believe that we will still be at a roughly 20% margin.
Throughout the balance of this year.
Yes.
Even with the divestiture of UFC that we're still evaluating and finalizing the cost structure. We think we will maintain that 20% adjusted EBITDA margins and.
And in addition, as we continue to see strong bookings performance and expect to see the revenue growth and the second half of this year, we will continue to invest and sales and marketing initiatives that do have an upfront cost associated with them that will ultimately drive improvement in bookings, which which to the point.
Art made.
And you start to see that benefit in revenue a quarter or two later so we do think that we will maintain the 20% margin throughout the year with or without Dfc.
Okay. Thank you and then.
And you've seen some positive momentum and bookings.
And with some positive.
Data points coming out and the labor market and the expectations for material job growth and.
April.
Have you seen the cadence.
Bookings accelerated sequentially into the second quarter from what you've seen so far.
Yes. The answer is absolutely in fact, we saw and accelerate during the quarter and my own personal view is that people feel much more confident about the state of the economy of the state of the United States and particular with regard to vaccines being rolled out so far.
<unk> January to March there was even a gradient and then it continues forward into Q2 as far as closing on April.
Got it okay. Thank you and then.
In terms of adoption for somebody and new features that you've rolled out for clearance jobs, such as P. J meetings and then also on the di side with the dice marketplace.
Do you think that's resonating with your customers.
And existing customers and then also.
How are your sales team and team.
<unk> able to leverage that when you're talking to new potential customers.
So I think that the sales team are able to leverage it by basically tell them the story that dice and C. J.
And our innovators and we're constantly tuned to making sure that we can improve their workflow and make them more efficient as recruiters. So it's a net positive in general when we roll out a new feature it takes about three to nine months for it to be recognized and fully understood.
Our different customer bases, whether it's day CJ or UFC. So I'd like to report the statistics roughly at about the six month point.
Point, because I think it's much more relevant and the case of CJ meetings and video we just roll those out at the very end of Q1, so adoption rate is pretty low, but with training and with.
A lot of marketing effort, we believe that the adoption rate should trend very nicely into the end of 2021, but again its a big deal to be able to talk about a new feature to talk about something that really tends to the recruiters needs. During the course of a sales conversation.
Again, if you have a question. Please press Star then one.
The next question is from Josh Vogel with Sidoti and company. Please go ahead.
Hi, good afternoon art and Kevin.
Hey.
Yeah.
First question are consistent with some of the data points, you provided and prepared remarks I'm starting to see very positive patterns emerge when I track the job openings across your sites, especially basin and C. J that have shown mid single digit increases on a year over year basis over the past two weeks. So I was just curious what I can extrapolate.
Late from that is that more openings being posted from existing clients or is that a mix of that and new clients that are now on the platform.
It's definitely a mix because we're seeing a lot of new bookings activities, meaning new clients, new logos as well.
I think it is a very healthy mix of existing customers that are now seeing.
Need for more job postings, because they feel better about the economy, but also a net.
Net add of customers to the platform.
Sure and you know as as a job postings inherently pick ups.
Does that aren't going to give you any more leverage on our success and on one side of it going on and attractive candidates and the platform and on the other side of it from potential pricing standpoint.
Absolutely and you picked up on a very important point, which is as a marketplace. We're trying to attend to the needs of both sides of the community, meaning the recruiters, but also the candidates and once the candidates believed that there are more and interesting job opportunities that are available and that's essentially.
Attracts them to our platform naturally.
And it does give us pricing leverage as we have a better candidate based on better pool of candidates that are engaged with our platform itself. So I would agree with both ideas.
Alright, great.
I think it was last quarter and I apologize if I missed it.
If you've been remarks on it this time around but.
And you're talking about the sales cycle on the commercial accounts front.
And we're seeing a little bit of delays there.
Since then and I'll have you seen any easing and the sales cycle.
Yes, I would tell you that my own personal view is that as we emerged from 2020, the staffing and recruiting agencies really surged.
It was the easiest way for most businesses to find talent quickly and now that most commercial accounts, meaning the vast majority of enterprises and the United States feel good about the economic recovery.
They themselves are ready to hire.
So we first saw kind of a wave of interest by staffing and recruiting and now we're seeing a wave of interest by the regulator population of enterprises and the United States.
Great.
I think you said that in the stats and recruiting market, you're only servicing I think it was less than 25% of the on the market opportunity I think 4000 of 18000, if that's right and I'm curious if you have internal targets and where you hope that to be by the end of the year also.
And how many of those 18000, where you're working with pre pandemic.
So.
We don't have internal targets per se our targets are really.
Predicated on.
Quotas and the total.
Budget that we have given to our staffing and recruiting new business and account management teams, but I can tell you that we do believe that there's a huge opportunity here again I referenced this statistic that came out of staffing industry analysts there and association for the staffing and recruiting industry at large they have.
And a survey that went out last year of revenue associated with the member.
Membership and that revenue has grown sequentially over the course of the back half of the year and they also had a forecast for revenue growth too.
2021 over 2020 that they just updated and March that's what I referenced 9% growth year over year, and you might say, well 2020, and as a base year. That's a hard one to compare to but what was really interesting is that it actually would mean that the revenue potential for the <unk> portion of staffing and recruiting wood.
Actually exceed what it was in 2019, so a really big rebound for staffing and recruiting agencies.
Yes for sure and.
I just have one more.
Just around net unrealized gains on equity securities, there's something that you're getting now on mark to market each quarter going forward that could add a little to the results or do you sell it and the open market.
Yeah.
Of course, we'll have to market a mark to market at the end of the quarter.
Based on the trading.
Trading value and the public markets, but it is our expectation we will evaluate.
Liquidating that if we're comfortable with where the stock prices.
Understood well art and Kevin and thank you for taking my questions and looking forward to watching your progress.
Greatly appreciate it Josh Lily Thanks, Josh.
The next question is a follow up from them on Gulati with B Riley. Please go ahead.
Hey, just wanted to ask one more question here I think you mentioned.
The increase and head count was at 16.
Net sales.
Sales guidance that you added during the quarter yes.
And does that.
Was that on the commercial side for the most part or.
On the standard was mostly on the commercial side. Although there were a couple of reps that were hired for our staffing and recruiting new business teams, but I'd say the majority were focused on commercial accounts kind of going back to our original strategy of saying our largest market by.
The Tam is commercial accounts, so we should really be putting our investment there. So it was mostly commercial accounts.
Okay and then just last question from me how should we think about.
Increasing your sales head count and for the commercial accounts side.
Throughout the call for 2021.
I would say.
Our plan is to roughly double the number of commercial accounts and new business reps over the course of this year and so we're back on track to really putting meaningful.
Investment dollars behind that initiative to go after what is basically the broad business base of the United States. Those folks that are again hiring technologists at some level of critical mass.
Got it thank you I'll jump back into queue.
Thanks, very much and really appreciate it.
This concludes our question and answer session I would like to turn the conference back over to art Daly for any closing remarks.
Thanks, Gary and thanks, everyone for your interest and DHA group. Thanks for joining our call today and hope you have yourself a great year to come.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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