Good day, ladies and gentlemen, and welcome to the Q3 2012 Dice Holdings Incorporated Earnings Conference Call. My name is Kathryn, and I will be your operator for today. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would like to turn the call over to Ms. Jennifer Bewley, Vice President of Investor Relations and Corporate Communications.

Thanks, Kathryn, and good morning, everyone. With me on the call today is Scot Melland, Chairman, President and CEO of Dice Holdings; along with Mike Durney, Senior Vice President of Finance and Chief Financial Officer. Please note, this morning, we issued a press release describing the company's results for the third quarter of 2012. A copy of that release can be viewed on the company's website at diceholdingsinc.com. We have one process note this morning. We typically filed our Form 10-Q with the SEC on the same morning as our earnings announcement. As we are finalizing the documentation for the purchase price allocation of Geeknet media, we expect that filing of Form 10-Q to be made in the next few days. Before I hand the call over to Scot, I'd like to note that today's call includes certain forward-looking statements, particularly statements regarding future financial and operating results of the company and its businesses. These statements are based on management's current expectations or beliefs and are subject to uncertainty and changes in circumstances. Actual results may vary materially from those expressed or implied by the statements herein, due to changes in economic, business, competitive, technological and/or regulatory factors. The principal risks that could cause our results to differ materially from our current expectations are detailed in the company's SEC filings, including our annual report on Form 10-K, in the sections entitled Risk Factors, forward-looking statements and management's discussion and analysis of financial condition and results of operation. The company is under no obligation to update any forward-looking statements, except as required by the Federal Securities laws. Today's call also includes certain non-GAAP financial measures, including adjusted EBITDA, adjusted EBITDA margin and free cash flow. For details on these measures, including why we use them and reconciliations to the most comparable GAAP measures, please refer to our earnings release and our Form 8-K that has been furnished to the SEC, both of which are available on our website. Now I'll turn the call over to Scot.

Thank you, Jennifer, and good morning, everyone. Let me welcome you to the Dice Holdings third quarter 2012 conference call. I'll start today by discussing our third quarter performance, including our thoughts on key trends and investments in our vertical services. Then I'll hand it over to Mike Durney, our CFO, to take you through our financial performance. Finally, I'll make a few closing remarks, and then we'll open it up for question. Since our last quarterly report, recruitment activity across our verticals has been generally stable, with the exception of European financial services, which has continued to soften. In the third quarter, worldwide revenues totaled $48 million, an increase of 3% year-over-year. Excluding the acquisition of the Geeknet media properties, revenues increased 1% to $47.3 million. As for profitability, adjusted EBITDA was 40% of revenue or $19.3 million, with no contribution from the acquisition. I know that you would like to have a little bit more color on what's happening in our market, so let's move on to some of our major brands. In the Dice business, the recruiting environment for technology professionals was relatively unchanged in the quarter. Tech continues to be a tight labor market. According to the BLS, the unemployment rate for technology professionals averaged 3.3% in Q3. But turnover in the Professional and Business services segment took a step back from the rates we saw in the previous quarter and remains below its long-term average. These trends are reflected in the Dice site where job postings were up slightly year-over-year, but have been essentially flat since February. On the sourcing side, the number of resumes viewed grew in mid-single digits compared to last year's levels. Importantly, we executed a bit better in the quarter. During Q3, we added to our recruitment package customer count, our…

Great. Thanks, Scot, and thanks, everyone for taking the time to join us today. In the third quarter, revenues totaled $48 million, and EBITDA totaled $19.3 million. If you exclude the Geeknet media acquisition impact, revenues were $47.3 million, and EBITDA was still $19.3 million as the same impact of the acquisition on EBITDA was effectively 0. Net income for the quarter was $11 million, helped in part by the reversal tax provisions, and earnings per diluted share was $0.17. So with that quick overview, let's start with the segments. Revenues in the Tech & Clearance segment increased 10% year-over-year to $33 million. SourceForge, Slashdot and Freecode are reported in the Tech & Clearance segment, and the contribution in the quarter from that acquisition was $761,000 for the 2 weeks or so that we own the business. Looking solely at the Dice.com business, revenues grew 7% year-over-year. At the end of the quarter, the Dice service had 8,650 recruitment package customers, up 50 from the 8,600 at the beginning of the quarter. On a year-over-year basis, average customer served by Dice grew nearly 6% or 450 recruitment package customers. We've reversed the trend we experienced in the second quarter in overall market conditions that are essentially unchanged, but where we put more focus on markets where demand is stronger and efficiency is important. The number of customers under annual contract grew again sequentially to 7,600, a record for the Dice.com service. That's a gain of 100 annual customers in the second quarter, and a year-over-year increase of 7%. During Q3, the renewal rate on annual contracts was 70%, and the renewal rate was relatively consistent each month of the quarter. The quarter had slightly more than 1,600 annual contracts up for renewal. As a reminder, the second and third quarters…

Thank you, Mike. As I mentioned earlier, recruitment activity across most of our verticals has been stable quarter-to-quarter as customers and prospects wait for a resolution of some of the big issues impacting the global economy and the labor markets. The good news here is that many of these issues will be sorted out soon. And we are well-positioned to capitalize in what we anticipate to be a continued gradual employment recovery with the recovery of the global economy as well. Let me take a moment to welcome Golnar Sheikholeslami to the Board of Directors. Golnar joined us at the end of September and comes to us from Everyday Health, a leading provider of online health information, where she is Executive Vice President and Chief Product Officer. She's a digital industry veteran, having held leadership positions at the Washington Post and Conde Nast earlier in her career. And she has considerable experience in product development and vertical content. We look forward to working with Golnar and the rest of the Board as we launch our next-generation of services. So thank you all for listening. Let's open up the call for some questions.

[Operator Instructions] Your first question is from the line of Jeff Silber from BMO Capital Markets.

The EBITDA margin you generated in the quarter was a bit higher than expected. You said that the acquisition really had nothing to do with that. Can you just walk through why that came in ahead of your expectations?

Sure. I think we've talked for a while about investing in product development. It's probably taking us a little bit longer than we thought it would. The impact -- you're right. The impact of the Geeknet media acquisition on EBITDA was 0, although the impact on the margin was probably 100 basis points or so for the short period of time that we owned it. But it's really the amount of time that's taken us to launch our product development initiatives, and there's a couple of other things that are relatively on the margin.

Right. Great. We can go through that off-line. In terms of leveraging your debt level, how much are you comfortable with? Do you expect to be paying down those debt levels over time? Or are you going to be using it for maybe further acquisitions, et cetera?

I think, historically, we've said, as a management team, we're comfortable operating the business with the leverage of 2x to 2.5x. We've done it before, we've done it at higher levels. But we think that's a pretty good range for us. It's not that we target that range, but we think it's a pretty good range to operate the business in. I think where the leverage is today, we're continuing to look for acquisition opportunities. We have a share repurchase plan in place that has $18 million left under it. So I think we generate sufficient cash flow that we could certainly pay it down over a relatively short period of time. But the main focus of cash flow, including our available credit facility, is to look for acquisition opportunities.

Great. And just a quick numbers question. You mentioned in your comments about Energy slowing a bit. I think you said it was an industry event that did not occur this quarter. Roughly, what was the impact of that?

So what is year-over-year revenue growth of 10%, but for that event that happened last year in the third quarter, the growth rate would probably be 16% or 17%.

You're next question is from the line of Craig Huber from Huber Research Partners.

My first question, could you sort of speak a little bit further in your Tech category? What you're seeing for your small customers, versus your large customers? I have a couple of follow-ups.

Sure. So we continue to see really the trends that we talked about earlier in the year. Our larger customers tend to be upgrading their services with us, faring a little bit better in this market environment. I think on the smaller side of things, you still have a lot of -- even with the tightness of the Tech labor market, if you look across the country, you still have areas that are not as strong in terms of demand. And so when things are slower, especially -- many small customers, especially the small recruiters tend to use their proprietary databases and other sources to help them feel rex [ph] on behalf of their customers. So the business there is a little bit softer than what we would expect it.

And also, can you talk a little bit further about what you've seen in the marketplace in terms of pricing from your major competitors out there? And how much has the pricing you say has generally changed versus a year ago, and trend versus the second quarter?

Well I think the pricing environment in Q3 was roughly the same as it's been in Q2 versus a year ago, though it's a more aggressive pricing environment. I think you're seeing some of the -- or we're seeing a bunch -- some of the larger players in the space, traditional players in the space that are more aggressive on pricing. And so, our philosophy is really not to match those prices because we've tried to be disciplined in our own pricing approach and believe in the value of our service. So pricing environment really hasn't changed over the last quarter or 2. But it is more aggressive than it was.

You mind if you can quantify that? You talked about roughly down to 10% some of the traditional guys year-over-year?

It's difficult to say because the way it impacts the market is the sales teams are given greater flexibility to close deals. And so the information that we have is anecdotal coming in through sales in terms of what pricing is out there. The rack rates or published prices are essentially the same as they have been. But definitely, a few percentage points.

Then my last question, back on Technology. I think you mentioned tech unemployment rate in the low 3.3% or so. Can you talk a little bit further about tech -- the lack of tech turnover among employees out there? And what's doing in your business, what date are you looking at there? Can you quantify what when say that statement?

When we look at turnover, I mean, I wish there were better third-party information out there on turnover. But unfortunately, there isn't. The best that's out there is really what's published by the Bureau of Labor Statistics in their Joles data. And so we focus in on the business services segment, our professional business services segment, since that has a large amount of tech consulting and tech services included in it. And what we've seen is that turnover rate or sort of the amount of people that are voluntarily leaving their jobs is still lower than it has been historically. And normally in a recovery we would have expected there to be a surge in turnover. Turnover is better today than it was 2 years ago, but it's not surging. And so, I think, as we look forward, what we would expect is that as the general economy gets better, there should be a surge in turnover because there is -- if you look at some of the surveys that have been done about employee satisfaction, employee satisfaction is quite low by historical standard. And so there's pent-up demand to try new things. But what seems to be holding people to their desks today is concern about the economy. They don't want to be the first person out, last person in at a new opportunity, and then also, flexibility to move since many people have situations with their housing that they may not be able to move.

I do have one more question. These items you mentioned about Washington, D.C. around the election, the fiscal cliff, you didn't mention that debt's [indiscernible] rate, perhaps we should think about that as well. Are you hearing directly from any of your customers that that's causing them to sit on their hands in terms of hiring these next several weeks, several few months?

Well, I think, what we're hearing is that they're slowing down. They don't want to be heroes in front of what could be a change in the marketplace. Sometimes, I think, some customers use it as a crutch, as an excuse, but I definitely think it's real in that as they're planning for 2013, it's just another set of elements that they have to consider as they're planning their businesses and planning their headcount and recruiting. And it's out there. And so I think what we are likely to see here is delayed decision-making until there's a little bit more clarity. In Financial Services, it's probably even more specific, though, because in Financial Services, there's still many large financial institutions who are trying to get clarity on the rules that they have to operate under so that they can properly plan the workforce.

Next question comes from the line of Tim McHugh from William Blair & Company.

Yes, first, just a numbers question to start. The billings decline of 6%, I think that was for the overall company. But I missed if you gave some of the segment level numbers like you historically have?

Yes. So 6% is the overall company. Dice was down slightly, about 2%. Energy was up slightly about 4%, and eFinancialCareers was down about 20%.

Okay. And then Scot, can you just elaborate maybe a bit more on you talked about a little bit moving some of your resources around geographically. But it sounded like there's some disappointment with kind of how you executed from a sales perspective as a company last quarter. But you feel more positive about that. Was that the main thing that you changed? And is that a fresh way to think about it?

Well, I think, going back to what we said last quarter, coming out of Q2, we were a little disappointed as to how we had executed. And I noted particularly that I thought we could do better in terms of sales and marketing, as well as speeding up our product development. And so we have made some organizational changes within the company, and we have switched some resources around to focus more of our sales and marketing on areas where we think the fish are biting. And so those are essentially the changes we've made.

Okay. And on the Energy sector, did the events movement or the movement of the event of the quarter impact the billings as well? Or is that not impacting that number?

Yes. It does impact billings. It's not all that it was billed last year in the third quarter. It does have an impact. I think Billings was impacted by a number of things, not dissimilar to Q4 of last year where you have some timing issues. So we have one big customer that last year was billed in the third quarter, this year was billed in the second quarter. We have one or two that have slipped out of Q3 into October. So I know you've heard us say this before from quarter-to-quarter, in a growth mode, you're going to have some lumpiness in terms of year-over-year Billings performance as we grow the business. And I would say that's what we saw in Q3.

Okay. And on the Geeknet assets that you bought and the lower-than-normal margin for -- in the near term, how long could that lower margin last? I mean, is it truly kind of a 1 quarter initial transaction expense or integration expenses? Or could those integration activities last for a couple of quarters?

Yes. So I would say that the meat of it will be in Q3 and Q4, and some will roll into Q1, but that should be it.

Okay. And then lastly, you get asked every quarter about LinkedIn and what you're seeing in it. So I'll ask that question this quarter. I think you -- last quarter, you said because of the slower environment, you saw clients are using it more often. Has there been any change, I guess, in how you would look at the competitor environment versus them?

I think there's really been no change in the competitive environment going into the third quarter from the second quarter. LinkedIn, specifically, has a lot of momentum in the business. And I think that this is -- this environment, as you mentioned, allows recruiters, especially smaller recruiters, more time for their -- for the execution of their sourcing assignment. And so what we've always seen in this business is that when they have more time, they use their proprietary networks first, and then they use -- once they've exhausted their proprietary networks, they go out to third parties like us and LinkedIn and others to help them. And so we're in that kind of environment right now in most of the market, and so it's not surprising that they're making that shift.

The next question comes from Randle Reece from Avondale Partners.

I'm wondering, first of all, what kind of P&L impact the Dow Jones deal had in the quarter?

So, it's small. There's some revenue that we generate from operating the FINS business in its existing form, offset by -- there are some cost we incur with Dow Jones to operate the site in the near-term until we finish the integration. So net-net, it's timing.

Okay. I guess I'm trying to get a better handle on the variance between my expectations and your guidance for the Energy segment in the fourth quarter. And I was wondering if you could kind of split the behavior of the online and job fair business.

Sure. So there are a handful of events in Q4. There were relatively few in Q3. So these are industry events, right? So we don't control when they happen and how they happen. From a timing standpoint, we continue to invest in the business and grow the sales and marketing infrastructure. I would view the growth opportunity as we build out, especially overseas, as kind of stairstep, so we're into the next phase of penetrating the market. I'm not sure I can respond to comparing what we're going to do to your expectations, but the business continues to grow. And so you should decent sequential growth from Q3 into Q4 in terms of revenue, certainly in Billings.

Your next question comes from the line of John Janedis from UBS.

You guys have historically talked about adjusted EBITDA margin in that sort of the 45% range. Does the Geeknet deal change that over the long-term? And can we, maybe, speak to any kind of revenue synergy opportunities from the deal?

So, if we look at the margin of the business going forward, one of the things that Mike highlighted in his points, as well as in some of the questions, is that in the near term, there are a number of things that we have going on, investment in product development, as well as the impact now of the Geeknet properties, and then the integration costs associated with the purchase of the Geeknet properties. So there's a short term impact on the profitability of those Geeknet properties because there's a lot of transitional things going on, which will then -- which will clear themselves up as we get into next year. On top of that, as we grow that business, the margin profile of that business will improve, and I think we can see that the company, overall, is a 40% EBITA business going forward. So we've got this investment today. We've got some transition that we're doing with Geeknet. But as we look out into the forward quarters and years, we see this coming out as 40% plus.

Keep in mind, Geeknet today is about 10% of the revenue, right? So the core business is 40% to 45%. We had 10% revenue business. That's a run rate 20% to 25% once we get through the transition. Geeknet media is a relatively fixed cost business today, and the majority of the costs are in personnel. There's not a lot of other spending outside of personnel. And so there's a fair amount of leverage in that which we expect to come. So you're going to average in 90% of the business is 40% to 45%. 10% is currently 25% or so and we expect to grow. So we're pretty confident that the overall profile of the company doesn't change very much.

Okay. And then just on Europe. You talked about Continental Europe being challenging. Can you remind us how much of eFC's revenue is from that region outside of the U.K? And from an acquisition perspective, would you consider increasing the exposure you have there currently? If assets for sale get cheaper, outside of financials?

Yes. So on eFinancialCareers, it's now slightly less than 20% of eFinancialCareers business. Rigzone, it's a relatively small percent. We don't really focus of the region so much from a revenue standpoint because a lot of the selling in those regions are to multinationals who have operations worldwide and are not necessarily impacted directly by what's going on the continent.

And so as a region, in the short term, it's a challenging area. But the Rigzone business has had great success in Europe. So it really somewhat depends on what line of business you're talking about. Long-term, the European market is, I think, is going to be a good one.

One related question, Scot. You talked about the region being down about 40% during the quarter. Could you just remind us on the size relative to the, I guess, where the bottom was back in '09. Was it down worse than 40% or better than 40%?

It was probably down about the same.

Next question comes Nath Brogadir from Stifel, Nicolaus.

If I just back out the Geeknet acquisition, it looks like 4Q revenue would be down both year-over-year and quarter-over-quarter. I mean, looking out to 2013, clearly the macro is someone of an unknown. But how should we think about organic growth? I mean, the industry has got 10% revenue growth built in. I mean, is there a reason to think that revenue could be flat organically, excluding the acquisitions next year? Or how should we think about that in 2013?

Yes. So I think, order of magnitude, it's relatively flat sequentially, probably down slightly year-over-year. So the Tech & Clearance business, we assume is roughly flat. Some of that is seasonality. So we have a drop off in short-term business around the Thanksgiving to New Year period. So that's how I would think about that business sequentially. Finance, we can -- we believe will be down, and Energy, we believe will be up sequentially. So you end up with roughly flat. And I would say, there's a lot of factors that go into 2013, which Scot described before, which will probably transcend what our business is going to do, Q3 to Q4.

All right. Then just on the free cash flow, it seems like you've had a couple -- well, free cash flow has been down year-over-year. A lot of this is clearly the change in deferred revenues. But should we see the conversion, which historically has been 70% positive EBITDA? Should that begin to normalize? Or should we continue to assume pre-cash kind of stays as deferred revenue and moderate the free cash flow generation should still be somewhat lesser than prior levels?

Yes. So deferred revenue -- the change in deferred revenue and the collection of the Billings that drive deferred revenue is the biggest driver of cash flow in the near term, measured in short periods of time. One thing I would say, and we've said this for a long time, is that the significant amount of free cash flow's generating Q1 because Q4 is a pretty big Billings period, which we end up collecting in Q1. And so I wouldn't look at one quarter versus another. I would try to look at it as trends over a period of time. I don't think anything has changed from a free cash flow standpoint. But as you pointed out, it is driven by the change in deferred revenue and the amount of billings.

[Operator Instructions] The next question is from the line of Doug Arthur from Evercore.

Yes. I'm wondering if you can just sort of talk longer-term about the Geek acquisition. I think, the press release mentioned $20 million in '11 revenues. I mean, what are you sort of broadly speaking see as kind of the target growth rate for this business over the next 3-plus years?

Well, I think when you look at the assets that are in that business, SourceForge and Slashdot and Freecode, these are huge traffic generators and global traffic generators. And I think we've seen the team there do a good job at monetization of that opportunity. I think, as we go forward, we'll see more monetization, especially outside the U.S., as we make the most of that media business. So long-term growth rate, if this is a $20 million business today, we feel pretty comfortable this could be a $30 million to $40 million business. I think the timeframe is something that we have to get our arms around as we work with the team to do the long-term planning.

And is that $30 million to $40 million includes, obviously, layering in more effectively integrating recruitment services?

That's the base -- that is the core advertising business of Geeknet. I think the other value that we're looking to generate out of this is to the core recruiting service that we have. And so, that benefit will, I think, show up in terms of lower marketing cost and better product performance for the Dice service. So to answer your question specifically, it's separate.

Your next question comes from the line of Youssef Squali from Cantor Fitzgerald.

Just two quick questions. One, Mike, can you go back and maybe just give us again what the revenue and EBITDA guidance at the end of Q2 was, versus what it would be at the end of Q3? I'm sorry, yes. Adjusted for the acquisition, I just want to see what the apples-to-apples comparison is. And then on the Geeknet media, content is obviously a different sale than what you're used to. You have a little bit of it in Rigzone, but you're going to have to do more of it with the new acquisitions. Can you maybe just walk us through, maybe, Scot, how you're thinking about the sales and marketing efforts? You guys need to double down on that investment. Is the structure already there so you won't need to do much to it to kind of optimize it? Maybe, just again, walk us through the investments required to get it to where you want it to be.

So Youssef, on the first question, the full year guidance on the revenue line is roughly the same as what we said in Q2. There's little roundings here in there. I think Dice is slightly -- I'm sorry Tech & Clearance, of which Dice is a majority, is slightly higher. Finances, slightly lower. Net-net, they're within a couple of hundred thousand dollars on the $189 million that we said at the end of Q2. On the EBITDA line, it's about $2 million higher because there's no impact from Geeknet media in the current projections that comes from the spending that we didn't get to in Q3. Some of it rolls into Q4. Not a lot of it, but some of it. And so, I think net-net, putting aside rounding, the revenue assumption for the full year is the same, and EBITDA is up $2 million.

And then on the Geeknet, the plans for Geeknet and how far along are we in terms of having the right pieces in place to execute on the opportunity, I think the great news here is that we have a very strong team of people at Geeknet, and I think, what we are looking to do is really let them do what they do well even better. And so, there's idea that we have in terms of new product that will be brought out to new advertising product that the market would like to see from us. And so, we plan to execute on that, as well as just taking better advantage of what we currently have across -- and selling that across the full range of the audience. So you're right that this is a different business for us, but we're actually -- we are in this businesses today with Rigzone and some of the other ad selling that we do across our network of sites. So it's not all that new.

How big do you think ad-driven revenues could become for you guys, say, I don't know, probably a year to 2 years from now?

Well, I think, specifically on Geeknet, I'll go back to what I said earlier which is that, I think -- we think the potential is sort of $30 million to $40 million here, and we just have to figure out the timeframe and the best way to execute on that. For our other businesses, as you know, we've been adding content to the Dice business. This will obviously help us there, and we've been focused on advertising sales at Dice, as well as eFinancialCareers as an opportunity in the eFinancialCareers network. So I think the focus right now is more on advertising sales coming through Geeknet than the over services, but the other services have a potential there as well.

I would now like to turn the call over to Jennifer for closing remarks. Thank you.

Thanks, Kathryn, and thanks to everyone for your time this morning and interest in Dice Holdings. Management will be available to answer any follow-up questions you may have. Please give me a call at Investor Relations at (212) 448-4181 to be placed in the queue. Have a good day.

Thank you for joining today's conference. This concludes the presentation. You may now disconnect. Have a good day.