Good afternoon everyone and welcome to the DHI Group Incorporated Second Quarter 2020 Financial Results Conference Call. All participants will be in a listen-only mode. [Operator Instructions] Please also note today's event is being recorded. At this time I'd like to turn the conference call over to Mr. Todd Kehrli of MKR Investor Relations. Please go ahead.

Thank you, operator. Good afternoon and welcome to DHI Group's Fiscal 2020 Second Quarter Financial Results Conference Call. With me on today's call are; DHI's CEO, Art Zeile; and Chief Financial Officer, Kevin Bostick. Before I turn the call over to Art I'd like to cover a few quick items. This afternoon, DHI issued a press release announcing its fiscal 2020 second quarter financial results. This release is available on the company's website at dhigroupinc.com. The 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 company's website. 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 21E of the Securities Exchange Act of 1934. When used the words anticipate, believe, expect, intend, future and other similar expressions identify forward-looking statements. These forward-looking statements reflect DHI 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 in any forward-looking statements. Factors that could cause these forward-looking statements to differ from actual results include delays in development, marketing or sales, the adverse impact of and uncertainties surrounding the COVID-19 pandemic and other risks and uncertainties discussed in the company's periodic reports on Form 10-K and 10-Q and other filings with the Securities and Exchange Commission. DHI undertakes no obligation to update or revise any forward-looking statements. Lastly during today's call management will be referring to specific financial measures which include adjusted EBITDA, adjusted EBITDA margin and net debt which 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 is available in our earnings press release and on our website at dhigroupinc.com in the Investor Relations section. I'll now turn the call over to Art Zeile, CEO of DHI Group.

Thank you, Todd. Good afternoon everyone and welcome to our fiscal 2020 second quarter earnings conference call. As always we appreciate your interest in DHI. I want to begin by saying a few words about COVID-19 and our response to this global pandemic. Our foremost concern at DHI is to ensure the health and safety of our DHI community. As such, when the pandemic began to unfold in mid-March we at DHI jumped into action to aid our communities by launching COVID-19 resource centers on each of our brand sites to assist both clients and candidates alike with information relevant to their needs in these challenging times. These sites provide information on virtual career fairs open remote job posts real time high re-trends industry insights, articles and hiring resources. We also launched a campaign to provide free recruitment services to U.S. hospitals to help them find technologists in fields like electronic medical records, healthcare administration and computer system processing. Also all our employees have been working from home using the best possible remote communication and collaboration tools and our team members including sales and support, marketing and product development continue to be highly effective. In fact our product development team actually gained efficiency working for home this quarter delivering dozens of new product releases. I'll dive more into these product releases later in the call, but first let me provide a quick update on the current market environment for tech jobs. The pandemic is certainly challenging the way we all live and work. We saw job postings drop in the early part of the quarter that come back to the trailing 12-month average levels in June and July as companies became more confident in their hiring strategies. Many firms serving highly impacted industries have paused, while reduced their hiring plans.…

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 second quarter, we reported total revenues of $33.8 million which was down 8% from the first quarter and down 9% year-over-year, when you exclude the impact of foreign exchange. Dice revenue was $20.5 million, in the second quarter, down 9% sequentially and down 12% year-over-year. We ended the second quarter with 5,450 Dice recruitment package customers, which is down 7% sequentially and 11% year-over-year. During the quarter, we did not see any notable changes to customers leaving the platform, relative to other quarters. However, we did see lower new customers being added. This gives us comfort that our core customers continue to see the value in our platform, even during these challenging times. We maintained our average monthly revenue per recruitment package customer versus the year ago quarter. at $1,131 or $13,572 on an annual basis. This is important, as over 90% of Dice revenue is recurring and comes from recruitment package customers. Our Dice customer renewal rate was 57% for the second quarter, down 13 percentage points, year-over-year and our revenue renewal rate was 61%, which was down 19 percentage points when compared to the same period last year. These lower renewal rates have a minimal impact on in-quarter revenues, but do impact contracted revenue and will result in lower revenue during the term of the related contracts. And while we did see lower in-period renewal rates, that is customers renewing prior to or at contract termination, we are maintaining an ongoing dialog with these non-renewal customers, with the expectation that they will re-sign when there is further recovery in the economy. In addition, we hired a new leader for our client success organization,…

Thanks, Kevin. I'd like to close by once again thanking all of our employees around the globe for their hard work this last quarter. It is a pleasure to be part of such a great team. With that, we're happy to take your questions.

Ladies and gentlemen, at this time we'll begin the question-and-answer session. [Operator Instructions] Our first question today comes from Kara Anderson from B. Riley. Please go ahead with your question.

Hey, Kara.

Good afternoon, guys. Hey, I'm just wondering if you could provide a little bit more color around the trend within the quarter, maybe comparing what you saw in April to what you saw in June? I know the whole quarter saw kind of a 10% decline on the top line. And if you could even throw in maybe what you realized in the month of July? That would be helpful.

Absolutely. So I would say that in April, we saw most companies our clients in a position where they were forced to work from home and therefore a lot of business activity just stopped a lot of communication stopped that was true across all of our brands. I would say that we saw bookings effectively hit a bottom in the mid-May time frame and then they rebounded in June and July and continue to do so kind of like what we've described as our checkmark-shaped recovery. I would say that the situation is different for each one of those brands, I believe that in the case of Dice, our largest brand obviously, a lot of people have recognized that they still need technologist maybe even more so now into the future than they did pre-pandemic. And we've seen that even independent views like the use of Burning Glass fee which scrapes all the technology positions across websites U.S. wide rebound to what they were projecting prior to the pandemic. So Dice feels like it is very relevant that we are seeing activity come back with our largest customers. The issue with Dice has always been to a certain extent true of our other brands associated with smaller customers and smaller customers are there was staffing and recruiting firms that can be like ten people and unfortunately they make a bad decision in any kind of an economic environment and they can be out of business. I would say ClearanceJobs has fundamentally gone through this period of time and reset itself to the same level of bookings that it had pre-pandemic. We just had a customer advisory board meeting last week where we asked all of the recruiters that are on our panel what the status is of their activity and…

Thanks. That's really helpful. Jumping back to the makeup of the customers not renewing at Dice. Are you getting a sense for those smaller customers, are they going out of business, are they just being impacted more greatly so there's just a little bit more uncertainty there? Just wondering if they have the potential to come back or there are customers that we are going to permanently say goodbye to?

So I'd say that in general, the customers that did not renew with us were of the smaller customers in size. And nevertheless we're still engaging in discussions, we call that a win-back if we essentially get that same customer back within 90 days. And so we believe that as the environment stabilizes and things become better for those particular customers that they will come back to Dice or other platforms. A great example is a customer that I just talked to a couple of days ago who said that his business roughly speaking about 50-person firm had lost 50% of its revenue in April. But they're back to about 85% of that revenue today. So I think as people feel more confident about the economy, quite frankly the number of cases of COVID-19 and geographies that they're servicing, they're going to be feeling more confident about how they engage with our platform.

Got it. And then one other question on the credit facility. I guess, just what is the plan there? You drew down last quarter, it seems like you still have it there its execution until kind of the clarity of the environment evolves, are you going to keep it that way or is there a plan to pay it back? Just curious on your thoughts.

Yeah, this is Kevin, Kara. For at least, the near-term we just envision keeping the cash on our balance sheet where we are today at 1.2 times leverage that incremental cost of borrowing is very low and we view it as an insurance policy that's worth keeping. We have evaluated whether we pay it back and I think for right now we just feel comfortable with the cash on the balance sheet.

Got it. Thank you very much guys.

Thanks Kara. Appreciate it.

And our next question comes from Josh Vogel from Sidoti. Please go ahead with your question.

Hey Josh.

Hey Art and Kevin, how are you guys?

Excellent. How about yourself?

Pretty good. Thank you. I've got a couple for you here. First one hopefully an easy one. You mentioned that the largest new business deal in the history of the company, did you say that was $270,000 annual contract value?

Yes that is correct $270,000.

Okay, great. And is that a multi-year or just it's going to be like an annual auto-renewals type thing hopefully?

I'm not sure if it is a multi-year.

It's a one-year.

Okay. Excellent. Okay, confirming, it’s one year.

Okay, great. So understanding some more flexible payment terms and whatnot and Kevin you had, or not I think Art you had a comment around the dip in renewals will be realized as lower revenue over the balance of the year. I was curious, how much revenue comes up for renewal in Q3?

I am not sure the answer to that one. That's a great question. I would tell you that our two largest quarters for revenue renewal are the fourth quarter and the first quarter, and it's always associated with really the budget cycle associated with larger staffing and recruiting firms. And so I would say that the third quarter would logically be kind of the lowest quarter for revenue renewal.

It is, yes, we do have Q1 and Q4 make up roughly 55% to 60% of the bookings and then the balance of that is somewhat close to being evenly split between Q2 and Q3 with a slightly higher amount in Q2 based on a lot of June 30 calendars and activity we see right around the end of the second quarter.

That's helpful. Thanks. Shifting a little bit, the majority of the, I guess, cost savings that we saw in the quarter came in sales and marketing with reduced digital spend. Now, you're saying overall rates have come down, but do you think that once we sort of get back to this new normal, do you think you can maintain this lower level of digital marketing spend or is that going to inherently have to pick up over time?

I would presume, it's going to pick up from where it is today, but what we found is that we can be more efficient in terms of that spend. So Kevin mentioned that the rates and sells for ad units have come down, as you'd suspect there's less demand, but we've also figured out how to be more efficient. So I'd say that the spend is going to go up, but not to the same degree that it has been historically.

Sure. Okay. And you had an interesting comment around ClearanceJobs and how it's kind of reset itself to the level of bookings pre-pandemic. And just kind of thinking, given the sensitive nature of the candidate or the security clearance needed, can you still virtually screen and eventually on-board a candidate for clients or get them into a client facility through all virtual means?

Yes, yes. They're doing right now that's confirmed. It creates more friction as I described in the sense that the process is generally longer for the recruitment cycle, but they are bringing on candidates right now to all these major military contractors.

That's great. All right another one here. You have a strong quarter product releases and enhancements and you talked about the automated recruiter workflow at ClearanceJobs and how it reduces the administrative burden there. I was just curious what are some other metrics or KPIs that you track on some of the bigger rollout to Dice like the Recruiter Profile and Remote jobs, can you share that?

Yes we actually track a tremendous number of our statistics we have a data team that's roughly a dozen people that's focused solely on making sure that we are collecting the right data necessary to understand, whether or not product as well as other functional areas of the company are working properly. And so, in the case of Recruiter Profile for example, we track the number of recruiter profiles that are created each day and then obviously trend that over the course of months and then we also track the depth to which the profile is complete. So a percentage of completion is another really super important statistic and these are you know it's relatively early rollout, but there are a number of different metrics and KPIs for every single product generally on the order of dozens that we track to make sure that we see the kind of success and engagement that we had hoped for. In fact, we always actually also put in targets for each one of those metrics, so we're not just tracking them blind, we're tracking them to a goal inherent in the product immune jurisdiction for that particular product.

All right, great. And actually just thinking about the number of Recruiter Profiles created each day, how did that trend us from rollout through the end of July?

It exceeded our expectations and we also kind of blew past the track record associated with eFC and the rollout of their Recruiter Profile and also even ironically for ClearanceJobs when it rolled out, its original Recruiter Profile. So, we think that it's something that people are drawn to because they recognize that by having a profile, the candidate gets a lot more knowledge of the interests associated with the company, the interest associated with that particular recruiter. It creates just a better relationship and more engagement in general. Recruiters are figuring out, if they put themselves out there, they provide more information about them. It's another reason for a candidate to apply to that job and feel more comfortable.

That's great. And just one last one kind of a housekeeping item maybe for Kevin. With the tax rate and you talked about the allocation of income amongst jurisdictions, should we expect this to be kind of the new rate going forward or should we kind of be expecting that deals statutory rate of 25%?

I think, we're better off thinking about the statutory rate of 25% for the full year.

Great. Well, thanks for taking my questions guys.

Thanks, Josh. We appreciate it.

And ladies and gentlemen, with that, we've reached the end of today's question-and-answer session. I'd like to turn the conference call back over to Mr. Kehrli for any closing remarks.

Thank you everyone for your interest in DHI Group. To schedule a meeting with Management, please email ir@DHIGroupInc.com or call 212-448-4181. Thanks for joining our call today and I hope you have a great day.

Ladies and gentlemen, with that we'll conclude today's conference call. We do thank you for attending. You may now disconnect your lines.