What happened
DHI Group (DHX 2.01%) posted solid fourth-quarter results, but investors were more focused on the tepid guidance for 2023. Shares of the tech-focused staffing company traded down more than 20% on Wednesday following its earnings release.
So what
DHI provides software, online tools, and talent acquisition services with a heavy emphasis on the tech industry. The company has enjoyed rapid growth in recent years, with shares up more than 240% since 2018 heading into earnings season.
The most recent results are causing the stock to give back some of those gains. DHI Group reported fourth-quarter adjusted earnings per share of $0.01 on revenue of $39.8 million, basically in line with the breakeven earnings on revenue of $39 million analysts had expected.
But the outlook for the current year sounded the alarm among investors. DHI is expecting sales growth at a "low double digit percentage rate" in 2023. Last year, DHI grew revenue by 25% to $149.7 million, and analysts had been expecting revenue growth of about 15% in 2023 to $172 million.
Now what
There isn't anything wrong with DHI's business, but the company is facing a difficult operating environment. The headlines these days are mostly focused on big tech companies cutting jobs, not adding, which is reducing demand for staffing companies like DHI.
CEO Kevin Bostick said in a statement that DHI continues to see "steady demand" for government contractors, and a lot of business for DHI's unit that manages security clearances for government workers. DHI is also watching its costs.
"We are not limiting our investment in sales and marketing in the near term but will manage our hiring and expense structure accordingly during this challenging environment," Bostick said.
Whatever happens in the years to come, this is a tough business to get excited about in 2023. Investors are reacting by heading to the sidelines.
