UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
(Rule 13d-101)
INFORMATION TO BE INCLUDED IN STATEMENTS FILED PURSUANT
TO § 240.13d-1(a) AND AMENDMENTS THERETO FILED PURSUANT TO
§ 240.13d-2(a)
(Amendment No. 1)1
DHI Group, Inc.
(Name of Issuer)
Common Stock, par value $0.01 per share
(Title of Class of Securities)
23331S100
(CUSIP Number)
EAMON SMITH
TCS CAPITAL MANAGEMENT, LLC
142 West 57th Street
11th Floor
New York, New York 10019
(212) 621-8771
STEVE WOLOSKY, ESQ.
ANDREW FREEDMAN, ESQ.
OLSHAN FROME WOLOSKY LLP
1325 Avenue of the Americas
New York, New York 10019
(212) 451-2300
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
August 23, 2018
(Date of Event Which Requires Filing of This Statement)
If the filing person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following box ¨.
Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See § 240.13d-7 for other parties to whom copies are to be sent.
1 The remainder of this cover page shall be filled out for a reporting person’s initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934 (“Act”) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes).
CUSIP NO. 23331S100
| 1 | NAME OF REPORTING PERSON | ||||||||||||||||||
| TCS CAPITAL ADVISORS, LLC | |||||||||||||||||||
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a) ☐ | |||||||||||||||||
| (b) ☐ | |||||||||||||||||||
| 3 | SEC USE ONLY | ||||||||||||||||||
| 4 | SOURCE OF FUNDS | ||||||||||||||||||
| WC | |||||||||||||||||||
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) | ☐ | |||||||||||||||||
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION | ||||||||||||||||||
| NEW YORK | |||||||||||||||||||
| NUMBER OF | 7 | SOLE VOTING POWER | |||||||||||||||||
| SHARES | |||||||||||||||||||
| BENEFICIALLY | - 0 - | ||||||||||||||||||
| OWNED BY | 8 | SHARED VOTING POWER | |||||||||||||||||
| EACH | |||||||||||||||||||
| REPORTING | 5,002,547 | ||||||||||||||||||
| PERSON WITH | 9 | SOLE DISPOSITIVE POWER | |||||||||||||||||
| - 0 - | |||||||||||||||||||
| 10 | SHARED DISPOSITIVE POWER | ||||||||||||||||||
| 5,002,547 | |||||||||||||||||||
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | ||||||||||||||||||
| 5,002,547 | |||||||||||||||||||
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | ☐ | |||||||||||||||||
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | ||||||||||||||||||
| 9.3% | |||||||||||||||||||
| 14 | TYPE OF REPORTING PERSON | ||||||||||||||||||
| OO | |||||||||||||||||||
| 2 |
CUSIP NO. 23331S100
| 1 | NAME OF REPORTING PERSON | ||||||||||||||||||
| TCS CAPITAL MANAGEMENT, LLC | |||||||||||||||||||
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a) ☐ | |||||||||||||||||
| (b) ☐ | |||||||||||||||||||
| 3 | SEC USE ONLY | ||||||||||||||||||
| 4 | SOURCE OF FUNDS | ||||||||||||||||||
| AF | |||||||||||||||||||
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) | ☐ | |||||||||||||||||
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION | ||||||||||||||||||
| DELAWARE | |||||||||||||||||||
| NUMBER OF | 7 | SOLE VOTING POWER | |||||||||||||||||
| SHARES | |||||||||||||||||||
| BENEFICIALLY | - 0 - | ||||||||||||||||||
| OWNED BY | 8 | SHARED VOTING POWER | |||||||||||||||||
| EACH | |||||||||||||||||||
| REPORTING | 5,002,547 | ||||||||||||||||||
| PERSON WITH | 9 | SOLE DISPOSITIVE POWER | |||||||||||||||||
| - 0 - | |||||||||||||||||||
| 10 | SHARED DISPOSITIVE POWER | ||||||||||||||||||
| 5,002,547 | |||||||||||||||||||
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | ||||||||||||||||||
| 5,002,547 | |||||||||||||||||||
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | ☐ | |||||||||||||||||
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | ||||||||||||||||||
| 9.3% | |||||||||||||||||||
| 14 | TYPE OF REPORTING PERSON | ||||||||||||||||||
| IA | |||||||||||||||||||
| 3 |
CUSIP NO. 23331S100
| 1 | NAME OF REPORTING PERSON | ||||||||||||||||||
| ERIC SEMLER | |||||||||||||||||||
| 2 | CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP | (a) ☐ | |||||||||||||||||
| (b) ☐ | |||||||||||||||||||
| 3 | SEC USE ONLY | ||||||||||||||||||
| 4 | SOURCE OF FUNDS | ||||||||||||||||||
| AF | |||||||||||||||||||
| 5 | CHECK BOX IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEM 2(d) OR 2(e) | ☐ | |||||||||||||||||
| 6 | CITIZENSHIP OR PLACE OF ORGANIZATION | ||||||||||||||||||
| USA | |||||||||||||||||||
| NUMBER OF | 7 | SOLE VOTING POWER | |||||||||||||||||
| SHARES | |||||||||||||||||||
| BENEFICIALLY | -0- | ||||||||||||||||||
| OWNED BY | 8 | SHARED VOTING POWER | |||||||||||||||||
| EACH | |||||||||||||||||||
| REPORTING | 5,002,547 | ||||||||||||||||||
| PERSON WITH | 9 | SOLE DISPOSITIVE POWER | |||||||||||||||||
| -0- | |||||||||||||||||||
| 10 | SHARED DISPOSITIVE POWER | ||||||||||||||||||
| 5,002,547 | |||||||||||||||||||
| 11 | AGGREGATE AMOUNT BENEFICIALLY OWNED BY EACH REPORTING PERSON | ||||||||||||||||||
| 5,002,547 | |||||||||||||||||||
| 12 | CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES | ☐ | |||||||||||||||||
| 13 | PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) | ||||||||||||||||||
| 9.3% | |||||||||||||||||||
| 14 | TYPE OF REPORTING PERSON | ||||||||||||||||||
| IN | |||||||||||||||||||
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CUSIP NO. 23331S100
The following constitutes Amendment No. 1 to the Schedule 13D filed by the undersigned (the “Amendment No. 1”). This Amendment No. 1 amends the Schedule 13D as specifically set forth herein.
| Item 4. | Purpose of Transaction. |
Item 4 is hereby amended to add the following:
On August 23, 2018, the Reporting Persons delivered a letter (the “August 23 Letter”) to the Issuer’s Board of Directors (the “Board”). In the August 23 Letter, the Reporting Persons expressed their disappointment with, and concern about the Issuer’s future under the continued control of, the Board and the Issuer’s existing management. Among other things, the Reporting Persons highlighted sharp declines in the Issuer’s stock price, revenues and EBITDA, low stock ownership levels among the Issuer’s non-executive directors, concerns regarding the Issuer’s growth strategy as communicated by the Issuer’s new CEO, and the Issuer’s apparent unwillingness to return significant capital to shareholders.
The Reporting Persons stated that in light of these developments and the Board’s refusal to seriously consider an earlier acquisition proposal made by the Reporting Persons to the Issuer in private, the Reporting Persons were publicly disclosing, for the benefit of their fellow shareholders, that the Reporting Persons are prepared to buy the Issuer for $2.50 per share in cash. This purchase price represents approximately 5x 2018 estimated EBITDA and a 25% premium to the current trading price.
The Reporting Persons stated that they have financing available and are prepared to proceed immediately to negotiating definitive acquisition documents with the Board. The Reporting Persons called on the Board, consistent with its fiduciary duties, to move swiftly at this critical moment to engage with the Reporting Persons in good faith on their proposal in order to maximize value for all shareholders of the Issuer. The Reporting Persons also cautioned the Board that if it is unwilling to engage with the Reporting Persons to maximize value for all shareholders, and instead chooses to continue down the Issuer’s current path, the Reporting Persons will view that as inconsistent with the Board’s fiduciary duties to shareholders and will be forced to take whatever steps are necessary to ensure the best interests of all shareholders are protected, including a proxy contest against the existing Board at the Issuer’s 2019 annual meeting of shareholders, when Messrs. Barter, Schipper and Goldfield are up for election.
The Reporting Persons requested a response from the Issuer on whether it is willing to pursue a transaction by the close of business on September 5, 2018.
A copy of the August 23 Letter is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
| Item 5. | Interest in Securities of the Issuer. |
Items 5(a)-(c) are hereby amended and restated as follows:
The aggregate percentage of Shares reported owned by each person named herein is based upon 53,722,553 Shares outstanding, as of July 27, 2018, which is the total number of Shares outstanding as reported in the Issuer’s Quarterly Report on Form 10-Q filed with the Securities and Exchange Commission on August 2, 2018.
| 5 |
CUSIP NO. 23331S100
| A. | TCS Advisors |
| (a) | As of the close of business on August 22, 2018, TCS Advisors directly owned 5,002,547 Shares. |
Percentage: Approximately 9.3%
| (b) | 1. Sole power to vote or direct vote: 0 2. Shared power to vote or direct vote: 5,002,547 3. Sole power to dispose or direct the disposition: 0 4. Shared power to dispose or direct the disposition: 5,002,547 |
| (c) | TCS Advisors has not entered into any transactions in the Shares during the past 60 days. |
| B. | TCS Management |
| (a) | TCS Management, as the investment manager of TCS Advisors, may be deemed the beneficial owner of the 5,002,547 Shares owned by TCS Advisors. |
Percentage: Approximately 9.3%
| (b) | 1. Sole power to vote or direct vote: 0 2. Shared power to vote or direct vote: 5,002,547 3. Sole power to dispose or direct the disposition: 0 4. Shared power to dispose or direct the disposition: 5,002,547 |
| (c) | TCS Management has not entered into any transactions in the Shares during the past 60 days. |
| C. | Mr. Semler |
| (a) | Mr. Semler, as the managing member of TCS Management, may be deemed the beneficial owner of the 5,002,547 Shares owned by TCS Advisors. |
Percentage: Approximately 9.3%
| (b) | 1. Sole power to vote or direct vote: 0 2. Shared power to vote or direct vote: 5,002,547 3. Sole power to dispose or direct the disposition: 0 4. Shared power to dispose or direct the disposition: 5,002,547 |
| (c) | Mr. Semler has not entered into any transactions in the Shares during the past 60 days. |
The Reporting Persons, as members of a “group” for the purposes of Section 13(d)(3) of the Securities Exchange Act of 1934, as amended, may be deemed the beneficial owner of the Shares directly owned by the other Reporting Persons. Each Reporting Person disclaims beneficial ownership of such Shares except to the extent of his or its pecuniary interest therein.
| Item 7. | Material to be Filed as Exhibits. |
Item 7 is hereby amended to add the following exhibit:
| 99.1 | Letter to the Board, dated August 23, 2018. |
| 6 |
CUSIP NO. 23331S100
SIGNATURES
After reasonable inquiry and to the best of his knowledge and belief, each of the undersigned certifies that the information set forth in this statement is true, complete and correct.
Dated: August 23, 2018
| TCS CAPITAL ADVISORS, LLC | ||||
| By: | TCS CAPITAL MANAGEMENT, LLC, its investment manager | |||
| By: | /s/ Eric Semler | |||
| Name: | Eric Semler | |||
| Title: | Managing Member | |||
| TCS Capital Management, LLC | ||||
| By: | /s/ Eric Semler | |||
| Name: | Eric Semler | |||
| Title: | Managing Member | |||
| /s/ Eric Semler | ||||
| Eric Semler | ||||
| 7 |
Exhibit 99.1
CONFIDENTIAL
John Barter
Chairman, Board of Directors
DHI Group, Inc.
1040 Avenue of the Americans, Floor 8
New York, NY 10018
August 23, 2018
Dear Chairman Barter,
As you know, we are the largest shareholder of DHI Group ("DHI" or the "Company") and have closely followed the Company for nearly two decades. We are writing this public letter to express our great disappointment with the Board’s rejection of our proposals to rapidly maximize shareholder value. We are also deeply concerned about DHI’s future under the continued control of your Board and senior management.
We believe that your Board has shown a complete disregard for the best interests of DHI shareholders and its fiduciary duty to maximize shareholder value. During your 11 years as a director of DHI, the Company’s stock price has sunk 85%, from $13 per share to today’s price of $2. Under your chairmanship, DHI’s revenue has dropped 44% from $260 million to $145 million of expected revenue this year. The Company’s core tech business began its current decline of nine consecutive quarters shortly after you were named chairman in 2016. During that same period, EBITDA plummeted from $75 million to an estimated $30 million today. EBITDA margins have declined from 29% to 19%. Ironically, this horrid performance has come during a golden age of tech hiring and recruiting. DHI’s decline was exacerbated by a major spending spree on costly acquisitions, most of which failed – on your watch.
Despite its sharp downturn, the Company has barely made a dent in its bloated cost structure, which includes 13 offices spanning the globe from Singapore to Dubai. Competition is getting tougher by the minute. Indeed.com, which was founded 14 years after DHI in 2004, posted revenue growth of 56% in its most recent quarter on annualized revenue of $2.6 billion. It has 200 million unique visitors and 100 million resumes. LinkedIn, another major competitor, grew 37% last quarter on a revenue base of $5.6 billion with 575 million members. On the other hand, DHI’s core tech revenue business declined 8% in the same period with only 2 million monthly unique visitors and only 2.2 million resumes. In addition, all of your major competitors (Indeed, LinkedIn, Monster and CareerBuilder) have recently been acquired by large, deep-pocketed companies. Nevertheless, based on our most recent discussions, you are determined to remain independent based on what appears to be your and your CEO’s shared delusion that DHI can regain market share from the competition.
| 1 |
Even more disturbing for DHI shareholders like us whose investment is underwater, you and your fellow directors have enriched yourselves during this period of abysmal execution and destruction of shareholder value. According to the Company’s proxy statement for its 2018 annual meeting of shareholders, DHI’s current non-executive directors received an average of $157,225 each in cash and stock compensation in 2017. DHI’s directors have been richly rewarded for many years, despite the Company’s poor performance. The average tenure of the current seven non-executive directors is five years. Over the last five years, DHI stock has declined 77%, from $8.59 per share to $2, yet DHI paid $5.1 million in director compensation during that period, according to the Company’s SEC filings.
Despite their long tenure, DHI’s seven non-executive directors own negligible amounts of DHI stock. According to your SEC filings, you only own 188,800 shares of DHI, which is less than 0.4% of the shares outstanding, even though you have been a director for 11 years! No other non-executive director owns more than you. As a result, while retail and institutional investors have suffered painful losses in DHI stock, you and your fellow directors have virtually no skin in the game and have continued to enrich yourselves.
The Company’s continuous losing streak, relentless spending on growth initiatives and acquisitions, and failed strategic process have exhausted investors. As the Company’s largest shareholder with nearly 10% ownership, we have repeatedly urged the Board and management to pursue a different tack: stop wastefully emphasizing growth for growth’s sake and instead run a leaner, more profitable company, focused on free cash flow generation and significant return of capital to shareholders.
During meetings and calls last fall and winter with you and senior management, we strongly urged you to consider our proposals to use the Company’s attractive balance sheet to conduct a tender offer to acquire up to 40% of the Company’s shares at a premium. We continue to believe that if the Company decides to focus on significantly shrinking its public float, driving free cash flow and paying special dividends, its equity value would increase quickly and substantially. Such actions would focus investors on the Company’s compelling free cash flow yield and shareholder value. We have tried ad nauseum to explain the benefits of our strategy to you and senior management, but you have made it clear that you unequivocally oppose our proposal to return capital to shareholders.
Once we realized that we could not convince the Board to adopt our shareholder return strategy, we decided that a change in control of the Company was necessary to protect our investment and to prevent the Company from continuing to waste money on foolhardy growth initiatives and acquisitions. In our discussions, you actually encouraged us to make an offer to buy the Company. As a result, last December, we privately submitted an all-cash offer to acquire a controlling stake in the Company at a premium, while proposing to keep 20% of the Company in the hands of existing shareholders to allow them to participate in any future upside. You rejected this offer and indicated that you intended to continue your search for a new CEO.
| 2 |
Meanwhile, as we did more work to see if we could sweeten our takeover offer, we pushed you to hire a CEO with strong turnaround, cost-cutting and financial engineering skills -- someone who would focus less on growth investing and more on margin enhancement and aggressive return of capital to shareholders. You rejected our appeal when you decided in April to hire Art Zeile as CEO. Zeile has no work experience in the online recruiting space or as a public company CEO. After extensive discussions with him, we believe he puts growth above all else and has virtually zero interest in returning capital to investors. In fact, at a recent meeting, Zeile told us that he opposed our shareholder return strategy because it would be a “distraction” to his growth-oriented strategy. He said he would rather use the Company’s pristine balance sheet to invest in research and development and to maintain “dry powder” for acquisitions. He went on to say that he was “happy” with the Company’s current stock price ($2.15 per share that day), because it was higher than when he became CEO in April and was granted 1.75 million shares. That is a slap in the face for shareholders like us who have watched, in pain, as our investment in DHI evaporates.
In May, after it became clear to us that the Company was moving in the wrong direction with the hiring of its new CEO, we decided to submit a higher all-cash offer for the Company at a significant premium. You refused to engage with us on this offer, even after urging us to bid for the Company and suggesting it was still for sale.
More recently, on the Company’s second quarter earnings call on August 2nd, Zeile announced that, after a 100-day review, the Company intended to focus on growth and investing in R&D – basically a decision to re-ignite the Company’s failed growth strategy from the last several years. In that second quarter earnings report, the Company posted significantly lower profit margins and issued disappointing margin guidance. At our meeting after the earnings announcement, Zeile inexplicably said he believes the Company’s core Dice business, which has been declining for several quarters by 8%-10%, “has really great growth prospects.”
Last week, you told us that the Board is fully committed to the new CEO’s growth strategy and wants the Company to remain independent in an effort to win market share from the likes of Indeed and LinkedIn. As the performance gap widens between DHI and its well-capitalized competitors, it is difficult to comprehend why the Board is determined to make yet another risky bet on spending for growth.
As a longtime observer of and investor in the Company, we have many times seen the Board get prematurely excited about a new growth investing plan, and, unfortunately, it never ends well. In virtually every instance, whether they have been acquisitions or new products, these plans have resulted in the destruction of shareholder value. Given the Company’s extended track record of dreadful execution -- re-confirmed by the disappointing second quarter -- it is clear to us that the Company remains on a perilous path.
In light of these developments and the Board’s refusal to seriously consider our latest acquisition proposal, we are publicly disclosing, for the benefit of our fellow shareholders, that we are prepared to buy the Company for $2.50 per share in cash. This purchase price represents approximately 5x 2018 estimated EBITDA and a 25% premium to the current trading price. The 5x EBITDA multiple equates to the same estimated multiple that was recently paid to acquire much larger competitors like Monster and CareerBuilder.
| 3 |
We have financing available and are prepared to proceed immediately to negotiate definitive acquisition documents with the Board. We call on the Board, consistent with its fiduciary duties, to move swiftly at this critical moment to engage with us in good faith on our proposal in order to maximize value for all DHI shareholders.
Our proposal provides a substantial premium to the market price of the Company. It is incumbent on all DHI directors to exercise their fiduciary obligations for all Company shareholders and seize on this opportunity.
We look forward to having productive discussions with you and your advisers on consummating a transaction. If you are unwilling to engage with us on a transaction that would maximize value for all shareholders and instead choose to continue down your current path of destroying shareholder value, we will view that as inconsistent with the Board’s fiduciary duties to shareholders and will be forced to take whatever steps are necessary to ensure that the best interests of all shareholders are protected, including a proxy contest against the existing Board at the Issuer’s 2019 annual meeting of shareholders, when Messrs. Barter, Schipper and Goldfield are up for election.
Please let us know whether you are willing to pursue a transaction by the close of business on September 5, 2018.
Sincerely,
Eric Semler
President
TCS Capital
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